Accounting 1 final exam
a debt that a business owes is called?
A liability
Which of the following accounts will be closed by crediting the income summary account?
Service revenue
Which of the following inventory valuation methods should be used for unique items?
Specific identification
A shortened form of the ledger is called?
T-account
Which of the following statements is true of the accounting cycle?
IT is a process by which financial statements for a period are produced
Operating expenses include ______
Loss on sale of plant asset
Which of the following is not an inventory costing method
Lower of cost or market
Which of the following states that a company must perform strict proper accounting only. for items tat are significant to the business's financial statements?
Materiality concept
The date on which the principal amount is repaid to the bondholder is known as the
Maturity date
A business renders services to a client and issues a sales invoice. the amount will be collected from the customer at a later time. Which of the following is true at the time the invoice is issued?
Net income will increase
The account title used for recording a written promise that a customer will pay the business a fixed amount of money and interest by a certain date in the future is?
Notes Receivable
Which of the following should be classified as a long-term asset?
Notes revival, due in 5 years
Regarding a classified balance sheet, which of the following statements is correct?
Assets are listed in the order of their liquidity
Which of the following is true of assets?
Assets are something of value the business owns or controls.
a company's accountant capitalized a payment that should have been recorded as a revenue expenditure. How will this error affect the company's financial statements?
Assets will be overstated
A business makes a cash payment of $12,000 to a creditor. Which fo the following accounts is credited?
Cash
Which of the following is the most liquid asset?
Cash
Which of the following illustrates the internal control procedure-separation of duties?
Cashiers must not have access to accounting records
Liability account
Payable
The cash basis of accounting ignores?
Payable
some Credit accounts
Payable, Revenue, common stock
The account title used for recording the payment of rent in advance for an office building is?
Prepaid rent
Which of the following remains the same regardless of the inventory costing method used by a company? Assume the cost of inventory is rising
Purchases
Saturn, Inc paid the rent for the current month in cash. What account will be used to record the transaction
Rent Expense
Paid rent expense for the month affects what?
Retained Earnings
To which of the following accounts should the balance in the income summary account be closed?
Retained Earnings
___________ is the equity earned by profitable operations that is not distributed to stockholders.
Retained Earnings
What is the net result if the amount of net income for the year is less than the amount of the Dividends?
Retained Earnings decreases
Maxwell plumbing services earned $500 by completing a job for smith company. The $500 earned by Maxwell plumbing services is its?
Revenue
Amounts earned from delivering goods or services to customers are called
Revenues
Which of the following are not included in a post-closing trial balance?
Revenues and expenses
Which of the following are temporary accounts that are closed at the end of the year?
Revenues, Expenses, and dividends
which of the following statements regarding corporations is incorrect?
Corporations are businesses organized under state law and do not have an existence that is separate from their owners
Gross profit is calculated as the difference between net sales revenue and ________
Cost of good sold
Which of the following line items will appear on the income statement of a merchandiser but not of a service company?
Cost of goods sold
According to the _______, acquired assets should be recorded at the amount actually paid rather than at the estimated market value
Cost principle
Which of the following inventory costing methods requires the calculation of a new average cost after each purchase?
Weighted average
which of the following describes a secured bond
a bond that is backed by issuer's specific assets
Which of the following would be included in the entry by the payee to record a dishonored not receivable
a debit to accounts receivable
The journal entry for accrued interest on a note payable includes
a debit to interest expense and credit to interest payable
Which of the following entries would be made to record the purchase of inventory on account, if a company uses the perpetual inventory system?
a debit to merchandise inventory and a credit to accounts payable
What does "2/10' mean, with respect to "credit terms of 2/10, n/30?"
a discount of 2 percent will be allowed if the invoice is paid within 10 days of the invoice date
The entries that transfer revenue, expenses, and dividends balances to the retained earnings account to prepare the company books for the next period are called ________ entries
closing
two or more people working together to circumvent internal controls and defraud a company is known as __________
collusion
Changing the method of valuing inventory ignores the principle of
consistency
On a multi-step income statement, the operating expenses are subtracted from_____ to arrive at operating income.
gross profit
The entry to write off an account receivable under the allowance method will
have no effect on net income
The matching principle requires businesses to report warranty expense
in the same period that the company records the revenue related to that warranty
Which of the folioing is true of the direct write of method
it is only suitable for small companies that have very few uncollectible receivables
Fir a company with significant uncollectible receivables, the direct write off method is unsuitable because
it violates the matching principle
Transactions are first record in?
journal
which of the following requires businesses to record depreciation
matching principle
which of the following is true of a stock split and a stock dividend
neither a stock split nor a stock dividend will increase total stockholders equity
A company's accountant capitalized a payment that should have been recorded as a revenue expenditure.How will this error affect the company's financial statements?
net income will be overstated
Gross profit is calculated as_________
net sales revenue less cost of goods sold
Westin Delivery service inc owns a delivery truck. Which of the following costs, are associated with the truck, will be treated as a revenue expenditure?
oil change and lubrication
Which of the following is true of internal control?
one of the major purposes of internal control is to ensure that the assets are safeguarded
The time span during which cash is paid for goods and services, which are then sold to customers from whom the business collects cash, is called the __________
operating cycle
if goods are sold on terms of FOB shipping point, the ________
seller normally pays the transportation cost
To match expenses against revenues means to?
subtract expenses incurred during one period from revenues earned during that same period
preferred stock is stock
that gives its owners certain advantages over common stockholders
The two methods of accounting for uncollectible accounts receivable are_______
the allowance method and the direct write-off method
the par value of stock is
the amount assigned by a company to a share of its stock
which of the following statements is true of a bond that is issued at a discount
the bond will be issued for an amount less than the face value
unearned revenue is recorded when________
the business has collected cash but has not earned the revenue
when bonds are retired at maturity
the carrying value always equals the face value
Once an accounts receivable is written off
the customer's accounts receivable is removed from the books
A restaurant is being sued because a customer claims to have found a bug in her chili. The company lawyers believe there is only a remote possibility that the lawsuit will result in an actual liability.
the possible liability should not be shown in the financial statements
At the maturity of a note payable, a borrower will pay
the principal plus interest
which of the following depreciation methods allocate a varying amount of depreciation to expense each year based on an asset's usage
the units of production method
journal entries are required for the reconciling items on the book side because
those transactions have not yet been recorded on the company books
correct flow of accounting data?
transactions occur; source documents are prepared; transactions are analyzed; transactions are journalized and posted
Which of the following is an example of an estimable probable contingency
warranty payable
a bond is issued at premium
when a bond's stated interest rate is higher than the market interest rate
If a company is using accrual basis accounting, when should it record revenue?
when services are performed, even though cash may be received at a later date
When comparing the direct write off and allowance methods, the major difference is
when to record bad debts expense
Lamar corporation originally purchased land for $20,000. It later sold the land for $20,000 in cash. Which fo the following is true of the effect of the sale of land on the accounting equation?
The amount of total assets remains the same
Which of the following inventory costing methods uses the cost of the oldest purchases to compute the cost of goods sold?
first in, first out
Which of the following inventory costing methods yields the higher net income during a period of rising inventory costs?
first in, first out
The equity of Alliance Company is $170,000 and the total liabilities are $30,000. The total assets are?
$140,000
The net income of Hollywood talent services is 26,000. The beginning and ending stockholders equity balances were 35,000 and 56,000 respectively. The company issued no common stock. Calculate the dividends.
5,000
a company made net sales revenue of $500,00 and cost of goods sold totaled $300,000. Calculate its gross profit percentage.
40%
Which of the following would be include dint he journal to record an NSF check?
A debit to accounts receivable and a credit to cash
Green lawns corporation earned $500 for landscaping services rendered. The customer promised to pay at a later time. Which of the following accounts increased as a result of the transaction.
Accounts receivable
The bank statement reveals an EFT received from a customer that has not yet been recorded in the journal. How would this information be included on the bank reconciliation?
An addition on the book side
The revenue recognition principle guides accountants in?
Determining when to record revenues
What Includes a specific date in its heading
Balance Sheet
Which of the following is not a balance sheet account?
dividends
Which of the following entries will be necessary to close the insurance expense account at the end of the year?
Debit income summary and credit insurance expense
It is mandatory for both the employer and employee to pay
FICA
which of the following taxes has a ceiling on the amount o learning s subject to tax
FICA-OASDI taxes
Which organization is responsible for the creation and governance of accounting standards in the United States?
Financial Accounting Standards Board
GAAP refers to guidelines for accounting information in the United States. GAAP stand for what?
Generally Accepted Accounting Principles
As per the __________, the entity will remain in operation for the foreseeable future.
Going concern assumption
Regarding gross and net pay, which of the following statements is correct
Gross pay minus all deduction such as income tax withheld equals net pay
There is net income when total revenues are greater than total expenses
Income Statement
Correcto order of preparation financial statements
Income Statement, Statement of retained earnings, balance sheet
Jackson Electric Services incurred $800 as a repair expense and paid for it in cash. This transaction will?
Increase liabilities of the the business
Primary objective of financial reporting
Information that is faithfully represented is complete, neutral, and free from error.
Which of the following is true of a contingent liability
It is a potential liability that depends on a future event
Which of the following is true of the balance sheet presentation of the allowance for bad debts
It is shown as a contra account related to accounts receivable
Which of the following would be considered a long-term asset?
Land
Which of the following account groups will decrease with a debit?
Liabilities and revenues
what account group normally has a credit balance?
Liabilities and revenues
Which of the following is a measure of how quickly an item can be converted to cash?
Liquidity
The field of accounting that focuses on providing information for external decision makers
financial accounting
Which of the following costs related to a business care would be capitalized
The cost to install an engine with higher horsepower
Which of the following is included in the internal control procedures documents?
The invoices and orders must be pre-numbered
What accounting terms assumes that a business's activates can be divided into small segments and that financial statements can be prepared fo specific periods, such as a month, quarter, or year?
Time period concept
which of the following occurs when a corporation distributes a stock dividend
Total stockholders equity would be unchanged
a corporation originally issued $13 par value common stock for $15 per share. Which of the following is included in the entry to record the purchase of 300 shares of treasury stock for $11 per share
Treasury stock-- common is debited $3300
A business recieves $40,000 for services that it will perform over the next four months. Which of the following accounts is credited?
Unearned Revenue
a liability created when a business receives cash from customers in advance of providing services or delivering goods is called ______
Unearned revenue
GAAP (Generally Accepted Accounting Principles) requires companies to __________ method to record bad debts expense
Use the allowance
A company with significant amounts of accounts receivable experiences uncollectible accounts from time to time. If the company uses the direct write-off method, the affect of writing off an uncollectible receivable will be
a reduction in net income
The adjusted trial balance shows ________
account balances after adjustments
A modern perpetual inventory system
achieves better control over inventory
the distribution of a stock dividend
affects only stockholders' equity accounts
The two methods of estimating uncollectible receivables are the:
aging of accounts receivable method and the precent of sales method
the matching principle states that?
all expenses should be recorded when they are incurred during the period
Property, plant and equipment are_____________
also called fixed or plant assets
Which of the following is included in the cost of a plant asset?
amounts paid to make the asset ready for its intended use
what type of account is prepaid rent, and what is its normal balance?
asset account and debit balance
an adjusting entry is completed _______
at the end of the accounting period
Which of the following is representative of safeguarding asstes
attaching electronic sensors to merchandise inventory
What financial statement is prepared last?
balance sheet
When is a trial balance usually prepared?
before the financial statements are prepared
the gain or loss on the sale of a plant asset is determined by comparing the market value of assets received with the _______ of assets sold
book value
Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year, are called_______ assets
current
When a company uses the perpetual inventory method, which of the following would be the entry to adjust inventory to lower-of-cost-or-market?
debit cost of goods sold and credit merchandise inventory
Treasury stock
decreases the number of shares outstanding
which of the following is an expense that results from the usage of a natural resource
depletion
Which of the following principles states that a business's financial statements must report enough information for outsiders to make knowledgeable decisions about the company?
disclosure principle
the two basic sources of stockholders equity are
paid in capital and retained earnings
Ballpark has 61000 shares of $16.00 par common stock outstanding. Ballpark announces a stock split of 4-for-1. What is the effect of the split?
par drops to $4.00; total shares increase to 244,000 (61,000 shares x 4=244,000 shares) (16.00/4=$4.00)
Dividends in arrears are
passed dividends on cumulative preferred stock
When the corporation declares a stock dividend, a stockholder's percentage ownership in the stock
remains unchanged
Which of the following is an application of conservatism
reporting inventory at the lower of cost or market
The sales discount forfeited account _______
represents the discount lost when a customer does not pay with the discount period
the expected value of an asset at the end of its useful life is known as
residual value