accounting 1a exam 1

If a company is considering the purchase of a parcel of land that was acquired by the seller for $90,000, is offered for sale at $160,000, is assessed for tax purposes at $100,000, is recognized by the purchaser as easily being worth $150,000, and is purchased for $147,000, the land should be recorded in the purchaser's books at: a. $100,000. b. $147,000. c. $148,500. d. $150,000. e. $160,000.

$147,000.

A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year?

$175

Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and paid dividends of $18,000 during the current year. The retained earnings account before closing had a balance of $297,000. The ending retained earnings balance after closing is: a. $185,000 b. $63,300 c. $81,300 d. $360,300 e. $378,300

$360,300

On April 30, Victor Services had an Accounts Receivable balance of $26,800. During the month of May, total credits to Accounts Receivable were $61,600 from customer payments. The May 31 Accounts Receivable balance was $21,000. What was the amount of credit sales during May? a. $5,800. b. $55,800. c. $61,600. d. $67,400. e. $38,400.

$55,800.

fiscal year

12 consecutive months (52 weeks) period chosen as the organization's annual accounting period

If a company receives $12,000 from its sole stockholder to establish a corporation, the effect

Assets increase $12,000 and equity increases $12,000.

If a company purchases equipment costing $5,800 on credit, the effect on the accounting equation would be:

Assets increase $5,800 and liabilities increase $5,800.

A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n):

Balance sheet

Mary Martin, the sole stockholder of Martin Consulting, started the business by investing $57,000 cash. Identify the general journal entry below that Martin Consulting will make to record the transaction A:Cash 57000 |Common Stock | 57000 B:Common Stock 57000 |Cash | 57000 C:Investments 57000 |Cash | 57000 D:Investments 57000 |Common Stock | 57000 E:Cash 57000 |Increased Equity | 57000

Cash 57000 |Common Stock | 57000

Accrued Expenses

Costs incurred in a period that are both unpaid and unrecorded. Salaries, rent, interest. Expense increase, liability increase

If Accounts Payable increases

Credit

If Cash decreases

Credit

If Common Stock increases

Credit

If Revenue Increases

Credit

If Supplies decrease

Credit

Golddigger Services, Inc. provides services to clients. On May 1, a client prepaid Golddigger Services $81,000 for 6-months services in advance. Golddigger Services' general journal entry to record this transaction will include a: a. Debit to Unearned Management Fees for $81,000. b. Credit to Management Fees Earned for $81,000. c. Credit to Cash for $81,000. d. Credit to Unearned Management Fees for $81,000. e. Debit to Management Fees Earned for $81,000.

Credit to Unearned Management Fees for $81,000.

The assets section of a classified balance sheet usually includes the subgroups:

Current assets, long-term investments, plant assets, and intangible assets.

Two common subgroups for liabilities on a classified balance sheet are:

Current liabilities and long-term liabilities.

If Expense increases

Debit

A law firm billed a client $3,800 for work performed in the current month. Which of the following general journal entries will the firm make to record this transaction? a. Debit Accounts Receivable, $3,800; credit Unearned Legal Fees Revenue, $3,800. b. Debit Cash, $3,800; credit Unearned Legal Fees Revenue, $3,800. c. Debit Legal Fees Revenue, $3,800; credit Accounts Receivable, $3,800. d. Debit Accounts Receivable, $3,800; credit Legal Fees Revenue, $3,800. e. Debit Cash, $3,800; credit Accounts Receivable, $3,800.

Debit Accounts Receivable, $3,800; credit Legal Fees Revenue, $3,800.

A law firm collected $2,200 for work to be performed in the following month. Which of the following general journal entries will the firm make to record this transaction? a. Debit Accounts Receivable, $2,200; credit Unearned Legal Fees Revenue, $2,200. b. Debit Cash, $2,200; credit Unearned Legal Fees Revenue, $2,200. c. Debit Legal Fees Revenue, $2,200; credit Accounts Receivable, $2,200. d. Debit Accounts Receivable, $2,200; credit Legal Fees Revenue, $2,200 .e. Debit Cash, $2,200; credit Accounts Receivable, $2,200.

Debit Cash, $2,200; credit Unearned Legal Fees Revenue, $2,200.

A law firm collected $3,000 on account for work performed in the previous month. Which of the following general journal entries will the firm make to record this transaction? a. Debit Accounts Receivable, $3,000; credit Unearned Legal Fees Revenue, $3,000. b. Debit Cash, $3,000; credit Unearned Legal Fees Revenue, $3,000. c. Debit Legal Fees Revenue, $3,000; credit Accounts Receivable, $3,000. d. Debit Accounts Receivable, $3,000; credit Legal Fees Revenue, $3,000. e. Debit Cash, $3,000; credit Accounts Receivable, $3,000.

Debit Cash, $3,000; credit Accounts Receivable, $3,000.

Paul's Landscaping purchased $690 of office supplies on credit. The company's policy is to initially record prepaid and unearned items in balance sheet accounts. Which of the following general journal entries will Paul's Landscaping make to record this transaction? a. Debit Office supplies expense, $690; credit Cash, $690. b. Debit Cash, $690; credit Office supplies, $690. c. Debit Office supplies, $690; credit Cash, $690. d. Debit Office supplies, $690; credit Accounts payable, $690. e. Debit Accounts payable, $690; credit Office supplies, $690.

Debit Office supplies, $690; credit Accounts payable, $690

J. Brown Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record the cash payment. Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts.

Debit Prepaid Insurance 2500 Credit Cash 2500

The adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided is:

Debit Salaries Expense and credit Salaries Payable.

Richard Redden, the sole stockholder, contributed $73,000 in cash and land worth $136,000 in exchange for common stock to open a new business, RR Consulting. Which of the following general journal entries will RR Consulting make to record this transaction?

Debit cash $73,000; debit land $136,000; Credit Common Stock, $209,000.

Ralph Pine Consulting received its telephone bill in the amount of $300, and immediately paid it. Pine's general journal entry to record this transaction will include a

Debit to Telephone Expenses for $300.

On May 1, 2014, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2015. The cash receipt was recorded as unearned fees. At December 31, 2014, $500 of the fees had been earned. The adjusting entry on December 31, 2014, should include a:

Debit to Unearned Fees for $500.

Dividends

Decrease Equity

prepaid expenses

Deferred. Resources paid for prior to receiving the actual benefits (Prepaid insurance, prepaid rent, supplies) assets decrease, expense increase.

Permanent accounts include all of the following except: a. Accumulated Depreciation—Equipment b. Prepaid Insurance c. Unearned Revenue. d. Accounts Receivable. e. Depreciation Expense—Equipment.

Depreciation Expense—Equipment.

Accounting is an information and measurement system that does all of the following except:

Eliminates the need for interpreting financial data.

Revenue and Profit mean the same thing

False

Closing the temporary accounts at the end of each accounting period does all of the following except:

Has no effect on the retained earnings account.

The financial statement that reports whether the business earned a profit and also lists the revenues and expenses is called the:

Income statement.

Who gets to claim the money the business makes?

Investors

A debit:

Is the left-hand side of a T-account.

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of:

Items that require adjusting entries.

Which of the following is classified as a current asset? a. Office equipment. b. Patent c. Unearned revenue. d. Office supplies e. Land.

Land

Unearned revenues are generally:

Liabilities created when a customer pays in advance for products or services before the revenue is earned.

does land depreciate?

No, this is the only fixed asset that does not depreciate

If a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

One asset increases $1,300 and another asset decreases $1,300, causing no effect.

Which of the following is the usual final step in the accounting cycle?

Preparing a post-closing trial balance

Increases in equity from a company's sales of products or services are:

Revenue

What is net income?

Revenues - Expenses

Wiley Consulting purchased $8,200 worth of supplies and paid cash immediately. Which of the following general journal entries will Wiley Consulting make to record this transaction? Assume the company's policy is to initially record prepaid and unearned items in balance sheet accounts. A:Accounts Payable 8200 |Supplies | 8200 B:Cash 8200 |Supplies | 8200 C:Supplies 8200 |Cash | 8200 D:Supplies 8200 |Accounts Payable | 8200 E:Supplies Expense 8200 |Accounts Payable | 8200

Supplies 8200 Cash 8200

Revenue recognition principle

The revenue recognition principle states that we recognize revenue when the product or service is delivered to our customer.1. recognize revenue when it's earned 2. proceeds do not need to be in cash 3. measure revenue by cash received plus cash value of items received

Which of the following does not affect the equity of a business?

Unearned Revenue

J. Brown Consulting immediately paid $600 cash for utilities for the current month. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction. A:Utilities Expense 600 |Cash | 600 B:Cash 600 |Utilities Expense | 600 C:Cash 600 |Accounts Payable | 600 D:Utilities Expense 600 |Accounts Payable | 600 E:Prepaid Utilities 600 |Accounts Payable | 600

Utilities Expense 600 |Cash | 600

A credit is used to record an increase in all of the following accounts except:

Wages Expense

contra asset

account linked with another account and having an opposite normal balance; reported as a subtraction from the others account balance

temporary accounts

accumulate data related to one accounting period. they are ... because the accounts are opened at the beginning of a period, used to record transactions and events for that period, and then closed at the end of the period. The closing process applies only to these accounts

Which of the following assets is not depreciated

land

permanent accounts

report on activities related to one or more future accounting periods. They carry their ending balances into the next period and generally consist of all balance sheet accounts

accrual accounting

uses the adjusting process to recognize revenues when earned and expenses when incurred (matched with revenues).

in balance sheet

where is accumulated depreciation, unearned revenues and prepaid expenses

Which of the following accounts is a permanent (real) account?

Accounts payable

Resources a company owns or controls that are expected to yield future benefits are:

Assets

If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be:

Assets increase $4,500 and liabilities increase $4,500.

Assets

Cash, accounts receivable, notes receivable, prepaid account, supplies, equipment, building, land

If Equipment increases

Debit

The closing process is necessary in order to:

Ensure that net income or net loss and dividends for the period are closed into the retained earnings account.

permanent account

assets, liabilities, common stock, retained earnings

temporary account

revenues, expenses, dividends, income summary

Revenue is properly recognized:

upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price