ACC MIDTERM 1

On June 1, 2018, Portugal Inc. reported a cash balance of $12000. During June, Portugal made deposits of $5000 and made disbursements totalling $14000. What is the cash balance at the end of June? a. $2000 credit balance b. $17000 debit balance c. $3000 credit balance d. $3000 debit balance

d

If total assets equal $345000 and total stockholders' equity equal $140000, then total liabilities must equal a. $205000. b. $140000. c. $485000. d. There is not enough information given to determine this.

a

A debit to an asset account indicates a. an error. b. a decrease in the asset. c. an increase in the asset. d. a credit was made to a liability account.

c

The accounting process is correctly sequenced as a. identification, communication, recording. b. recording, communication, identification. c. identification, recording, communication. d. communication, recording, identification.

c

The basic accounting equation may be expressed as a. Assets = Equities. b. Assets - Liabilities = Stockholders' Equity. c. Assets = Liabilities + Stockholders' Equity. d. All of these answers are correct.

c

The historical cost principle requires that when assets are acquired, they be recorded at a. market price. b. book value. c. cost. d. appraisal value.

c

*Question 26 TransAm Mail Service purchased equipment for $2500. TransAm paid $400 in cash and signed a note for the balance. TransAm debited the Equipment account, credited Cash and a. credited a liability account for $2100. b. nothing further must be done. c. debited the retained earnings account for $2100. d. credited another asset account for $400.

a

Accumulated Depreciation is a. a contra asset account. b. an expense account. c. a stockholders' equity account. d. a liability account.

a

Assets normally show a. debit balances. b. debit and credit balances. c. debit or credit balances. d. credit balances.

a

At January 1, 2018, Alligator Industries reported retained earnings of $150000. During 2018, Alligator had a net loss of $30000 and paid dividends of $15000. At December 31, 2018, the amount of retained earnings is a. $105000. b. $135000. c. $120000. d. $165000.

a

Credits a. decrease assets and increase liabilities. b. increase both assets and liabilities. c. increase assets and decrease liabilities. d. decrease both assets and liabilities.

a

If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a a. credit to the retained earnings account. b. debit to the retained earnings account. c. credit to the dividends account. d. debit to the dividends account.

a

Meat Puppets Company purchased equipment for $7200 on December 1. It is estimated that annual depreciation on the equipment will be $1800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: a. Debit Depreciation Expense, $150; Credit Accumulated Depreciation, $150. b. Debit Depreciation Expense, $5400; Credit Accumulated Depreciation, $5400. c. Debit Equipment, $7200; Credit Accumulated Depreciation, $7200. d. Debit Depreciation Expense, $1800; Credit Accumulated Depreciation, $1800.

a

Retained earnings at the end of the period is equal to a. retained earnings at the beginning of the period plus net income minus dividends. b. net income. c. retained earnings at the beginning of the period plus net income minus liabilities. d. assets plus liabilities.

a

Revenues would not result from a. issuance of common stock. b. sale of merchandise. c. performance of services. d. rental of property.

a

Stone Roses Candies paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29-31). Employees work 5 days a week and the company pays $1500 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January? a. Salaries and Wages Expense 4500 Salaries and Wages Payable 4500 b. Salaries and Wages Expense 7500 Salaries and Wages Payable 7500 c. No adjusting entry is required. d. Salaries and Wages Expense 1500 Salaries and Wages Payable 1500

a

The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the a. book value of the asset. b. blue book value of the asset. c. depreciated difference of the asset. d. market value of the asset.

a

A dividend is a. equal to revenues less expenses. b. a distribution of the company's earnings to its stockholders. c. equal to liabilities minus stockholders' equity. d. equal to assets minus stockholders' equity.

b

A net loss will result during a time period when a. dividends exceed investments. b. expenses exceed revenues. c. liabilities exceed assets. d. revenues exceed expenses.

b

Accrued revenues are a. cash received and a liability recorded before services are performed. b. revenue for services performed but not yet received in cash or recorded. c. revenue for services performed and already received in cash and recorded. d. revenue for services performed and recorded as liabilities before they are received.

b

Depreciation expense for a period is the a. book value of the asset ÷ useful life. b. portion of an asset's cost that expired during the period. c. market value of the asset ÷ useful life. d. original cost of an asset - accumulated depreciation.

b

An accountant has debited an asset account for $1200 and credited a liability account for $500. What can be done to complete the recording of the transaction? a. Debit a Stockholders' equity account for $700. b. Credit a different asset account for $700. c. Nothing further must be done. d. Debit another asset account for $700.

b

Closing entries are made a. so that financial statements can be prepared. b. in order to transfer net income (or loss) and dividends to the retained earnings account. c. so that all assets, liabilities, and stockholders' equity accounts will have zero balances when the next accounting period starts. d. in order to terminate the business as an operating entity.

b

Closing entries are necessary for a. permanent accounts only. b. temporary accounts only. c. permanent or real accounts only. d. both permanent and temporary accounts.

b

Each of the following accounts is closed to Income Summary except a. Expenses. b. Dividends. c. Revenues. d. All of these are closed to Income Summary.

b

If total liabilities increased by $30000 and stockholders' equity increased by $20000 during a period of time, then total assets must change by what amount and direction during that same period? a. $10000 increase b. $50000 increase c. $10000 decrease d. $50000 decrease

b

In a service-type business, revenue is considered recognized a. when cash is received. b. when the service is performed. c. at the end of the month. d. at the end of the year.

b

In order to close the dividends account, the a. retained earnings account should be credited. b. retained earnings account should be debited. c. income summary account should be debited. d. income summary account should be credited.

b

In the first month of operations, the total of the debit entries to the cash account amounted to $1200 and the total of the credit entries to the cash account amounted to $800. The cash account has a(n) a. $800 credit balance. b. $400 debit balance. c. $400 credit balance. d. $1200 debit balance.

b

Lake of Fire Company purchased supplies costing $7000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of supplies revealed $1900 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be a. Debit Supplies, $1900; Credit Supplies Expense, $1900. b. Debit Supplies Expense, $5100; Credit Supplies, $5100. c. Debit Supplies Expense, $1900; Credit Supplies, $1900. d. Debit Supplies, $5100; Credit Supplies Expense, $5100.

b

Owner's equity is best depicted by the following: a. Liabilities + Assets. b. Assets - Liabilities. c. Assets = Liabilities. d. Residual equity + Assets.

b

The closing entry process consists of closing a. all asset and liability accounts. b. all temporary accounts. c. all permanent accounts. d. out the retained earnings account.

b

The expense recognition principle matches a. assets with liabilities. b. expenses with revenues. c. creditors with businesses. d. customers with businesses.

b

The normal balance of any account is the a. side which decreases that account. b. side which increases that account. c. right side. d. left side.

b

Unearned revenue is classified as a. a contra-revenue account. b. a liability account. c. a revenue account. d. an asset account.

b

Which of the following correctly identifies normal balances of accounts? a. Assets Credit Liabilities Debit Stockholders' Equity Debit Revenues Credit Expenses Debit b. Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Credit Expenses Debit c. Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Debit Expenses Credit d. Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Credit Expenses Credit

b

A balance sheet shows a. revenues, liabilities, and stockholders' equity. b. expenses, dividends, and stockholders' equity. c. assets, liabilities, and stockholders' equity. d. revenues, expenses, and dividends.

c

A debit is not the normal balance for which account listed below? a. Cash b. Accounts Receivable c. Service Revenue d. Dividends

c

Accrued expenses are a. paid and recorded in an asset account before they are used or consumed. b. incurred and already paid or recorded. c. incurred but not yet paid or recorded. d. paid and recorded in an asset account after they are used or consumed.

c

Adjusting entries are required a. when revenues are recorded in the period in which services are performed. b. when the company's profits are below the budget. c. because some costs expire with the passage of time and have not yet been journalized. d. when expenses are recorded in the period in which they are incurred.

c

Adjusting entries can be classified as a. deferrals and postponements. b. postponements and advances. c. accruals and deferrals. d. accruals and advances.

c

An accumulated depreciation account a. increases on the debit side. b. is offset against total assets on the balance sheet. c. has a normal credit balance. d. is a contra-liability account.

c

An adjusting entry a. affects two balance sheet accounts. b. affects two income statement accounts. c. affects a balance sheet account and an income statement account. d. is always a compound entry.

c

An income statement a. reports the changes in assets, liabilities, and stockholders' equity over a period of time. b. reports the assets, liabilities, and stockholders' equity at a specific date. c. presents the revenues and expenses for a specific period of time. d. summarizes the changes in retained earnings for a specific period of time.

c

At October 1, 2018, Padilla Industries had an accounts payable balance of $40000. During the month, the company made purchases on account of $33000 and made payments on account of $48000. At October 31, 2018, the accounts payable balance is a. $121000. b. $41000. c. $25000. d. $55000.

c

Expenses sometimes make their contribution to revenue in a different period than when they are paid. When salaries and wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the time period? a. Due from Employees. b. Due to Employer. c. Salaries and Wages Payable. d. Salaries and Wages Expense.

c

If expenses are paid in cash, then a. stockholders' equity will increase. b. liabilities will decrease. c. assets will decrease. d. assets will increase.

c

Liabilities a. are things of value used by the business in its operation. b. possess service potential. c. are existing debts and obligations. d. are future economic benefits.

c

NWA Air Charter signed a four-month note payable in the amount of $20000 on September 1. The note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of September is a. $600. b. $1800. c. $150. d. $200.

c

Net income results when a. Revenues < Expenses. b. Assets > Liabilities. c. Revenues > Expenses. d. Revenues = Expenses.

c

On March 8, Black Candy Company bought supplies on account from the Arcade Fire Company for $550. Black Candy Company incorrectly debited Equipment for $500 and credited Accounts Payable for $500. The entries have been posted to the ledger. the correcting entry should be: a. Supplies 550 Accounts Payable 550 b. Supplies 550 Equipment 550 c. Supplies 550 Equipment 500 Accounts Payable 50 d. Supplies 550 Accounts Payable 500 Equipment 50

c

Unearned revenues are a. revenue for services performed but not yet received in cash or recorded. b. revenue for services performed and recorded as liabilities before they are received. c. cash received and a liability recorded before services are performed. d. revenue for services performed and already received in cash and recorded.

c

At December 1, 2018, Cursive Company's accounts receivable balance was $1800. During December, Cursive had credit revenues on account of $7200 and collected accounts receivable of $6000. At December 31, 2018, the accounts receivable balance is a. $600 debit. b. $3000 credit. c. $600 credit. d. $3000 debit.

d

Closing entries a. summarize the activity in every account. b. reduce the number of permanent accounts. c. are prepared before the financial statements. d. cause the revenue and expense accounts to have zero balances.

d

Closing entries are journalized and posted a. at management's discretion. b. at the end of each interim accounting period. c. before the financial statements are prepared. d. after the financial statements are prepared.

d

Expenses incurred but not yet paid or recorded are called a. prepaid expenses. b. unearned expenses. c. interim expenses. d. accrued expenses.

d

Prepaid expenses are a. paid and recorded in an asset account after they are used or consumed. b. incurred but not yet paid or recorded. c. incurred and already paid or recorded. d. paid and recorded in an asset account before they are used or consumed.

d

The balance in the Prepaid Rent account before adjustment at the end of the year is $21000, which represents three months' rent paid on December 1. The adjusting entry required on December 31 is to a. debit Prepaid Rent, $7000; credit Rent Expense, $7000. b. debit Prepaid Rent, $14000; credit Rent Expense, $14000. c. debit Rent Expense, $14000; credit Prepaid Rent $14000. d. debit Rent Expense, $7000; credit Prepaid Rent, $7000.

d

The left side of an account is a. the balance of the account. b. blank. c. a description of the account. d. the debit side.

d

The right side of an account a. is the correct side. b. reflects all transactions for the accounting period. c. shows all the balances of the accounts in the system. d. is the credit side.

d