Accounting 4A Final
Mia Hero Shop sold its table with a book value of $1,000 for $800. Mia Hero will record:
a loss on the sale
Every transaction:
has at least 2 effects on the the basic accounting equation
goods in transit are:
inventory items being transported from a seller to a buyer
An invoice ______.
is the bill that the purchaser receives from the vendor
A chart of accounts is a:
list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named
Generally accepted accounting principles (GAAP) require that the inventory be reported at:
lower of cost or market
Expenses do not include...
making a payment on account
If the allowance for doubtful accounts on January 1 equals $10,000 and during the year $9,000 of specific customers' accounts were written off, then its allowance for doubtful accounts will have an unadjusted balance of:
$1,000 credit
An accounting system is referred to as a double-entry system because:
Both what is received and what is given in exchange are recorded
Under which of the terms will the buyer be required to pay transportation costs?
FOB shipping point
The accounts payable account is a temporary account
False
The common stock account is a temporary account
False
Which statement about financial accounting is correct?
Financial accounting reports are primarily prepared to provide information for external decision makers.
Salaries and Wages Expense appears on the ____, while Salaries and Wages Payable is a(n):
Income Statement: liability on the balance sheet
On February 28, AppGame paid for a one-year insurance policy that begins March 1. AppGame Company's entry to record this transaction includes a:
Prepaid Insurance
To which of the accounts should the balance in the income summary account be closed?
Retained earnings
The inventory turnover ratio directly measures:
The times per period the average inventory balance is sold
Which natural resources are depleted over time?
Timber
The salaries payable account is a permanent account
True
The separate entity assumption means:
a company's financial statements reflect only the business activities of that company
A merchandiser purchased inventory on account for $17,000. In a periodic inventory system, the journal entry to record the purchase would include _________.
a debit to purchases for $17,000 and a credit to accounts payable for $17,000
Which would be listed as a current liability?
accounts payable
Reporting revenues when they are earned and expenses when they are incurred is called ___ basis accounting.
accrual
Generally, freight costs incurred when a long-lived asset is purchased should be:
added to the cost of the asset
Accounts receivable, net (or net accounts receivable) equal accounts receivable (gross) minus:
allowance for doubtful accounts
Property, Plant, and Equipment are ___
also called fixed or plant assets
An economic resource that is owned by a company and will provide future benefits is referred to as:
an asset
accounts receivable
asset, debit
cash
asset, debit
equipment
asset, debit
land
asset, debit
supplies
asset, debit
The financial statement that reports assets, liabilities, and stockholders' equity as of the last day of the period is called the ____.
balance sheet
Net income is the amount:
by which revenues exceed expenses
The goals of reporting realistic figures and never overstating assets or net income applies to the _________.
conservatism principle
Which of the following states that the business should use the same accounting methods from period to period?
consistency principle
Which is an example of an intangible asset?
copyright
Gross profit is calculated as the difference between net sales revenue and ___.
cost of goods sold
The requirement that transactions be recorded at their exchange price at the transaction date is called the:
cost principle
The main expense of a merchandiser is usually ________.
costs of good sold
Your company has 100 units in inventory, purchased at $16 per unit. These units have a current market value of $14. The entry to write-down the inventory will include a:
credit to inventory for $200
under the perpetual inventory system, discounts taken on an invoice by the buyer would be ______.
credited to merchandise inventory
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
On a balance sheet for a merchandiser, merchandise inventory is listed as a(n) _______.
current asset
Salaries Payable, Accounts Payable, and Unearned Revenue are examples of ____
current liabilities
Recording a lower of cost or market (LCM) adjustment involves which of the generic journal entries?
debit cost of goods sold and credit inventory
Which of the entries will be necessary to close the insurance expense account at the end of the year?
debit income summary and credit insurance expense
Kata company uses the allowance method. On May 1, Kata wrote off a $22,000 customer account balance when it becomes clear that the particular customer will never pay. The journal entry to record write-off in May 1 would include what...
debit to allowance for doubtful accounts and credit to accounts receivable
When the direct write-off method is used, the entry to write-off a specific account would:
decrease accounts receivable and decrease net income
Which of the accounts will be closed by debiting the Income Summary account?
depreciation expense
Revenues are:
earned by selling goods or services to customers
Which item does not affect the calculation of depreciation expense?
economic benefits generate by the asset.
The office supplies account is a temporary account
false
The service revenue account is a permanent account
false
Which of the inventory costing methods yields the highest net income during a period of rising inventory costs?
first-in, first-out
The Sales discounts account _________.
is a contra sales revenue account
All other things being equal, a company is better off when its receivable turnover ratio:
is high and its days-to-collect measure is low
Why is the direct write-off method not allowed under GAAP to account for doubtful accounts?
it violates the expense recognition principle ("matching")
Which of the following would be considered a long-term asset?
land
For a manufacturer, inventory turnover refers to how many times:
the company produces its goods and delivers the inventory to customers
The financial reports of a business include only the results of that business's activities. This is:
the separate entity assumption
A legal document called a stock certificate is used to indicate ownership in a:
Corporation
A business can obtain financing by issuing stock or borrowing from third parties, such as banks. What are the balance sheet effects of issuing stock to obtain cash?
Increase assets; No effect on liabilities; Increase stockholders' equity
If supplies are purchased for cash:
total assets will remain the same
The accumulated depreciation account is a permanent account
true
The depreciation expense account is a temporary account
true
The supplies expense account is a temporary account
true
Which accounts would appear in the balance sheet credit column of the worksheet?
unearned revenue
What is the inventory costing method that adds together the total cost of all goods available for sale during the period, and then divides that by the number of units available for sale to get a value to assign to all goods sold and all goods remaining in inventory?
weighted average
If total liabilities decreased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during the same time period?
$20,000 decrease
A company buys equipment for $48,000, expects to use it for ten years, and then sell it for $6,000. Using the straight-line method, the company should report annual depreciation for the equipment of:
$4,200
Shenandoah Skies bought land to be used for a new ski resort. Which costs should not be capitalized?
$7,500 paid for a party to celebrate the grand opening
Baldini's Restaurant purchased a new building with the surrounding land. The price paid was $1,200,000, including the commission charged on the sale. An appraisal of the land and building at the time of purchase indicated that the market value of land was $1,000,000 and the market value of the building was $500,000. What amounts would be recorded for the purchase of the 2 assets?
land $800,000 and building $400,000
A company bought land and a building for $128,000. The building has a useful life of 20 years. Why should the company split the $128,000 cost between the land and the building?
land is not depreciated, while the building will be depreciated over its 20 year useful life.
Which of the inventory costing methods yields the highest cost of goods sold during a period of rising inventory costs?
last-in, first-out
Which of the inventory valuation methods minimizes income tax expense during a period of riding inventory costs?
last-in, first-out
The obligations and debts of a business are referred to as:
liabilities
Unearned revenue is a(n):
liability
Accounts Payable
liability, credit
income tax payable
liability, credit
notes payable
liability, credit
Assets are listed in the order of their ___ on the balance sheet.
liquidity
When a company has inventory which is subject to gradually increasing prices, the use of the LIFO method of valuing inventory will result in the:
lowest amount of assets and the lowest amount of net income
The primary goal of most companies is to:
make a profit
Acme Company's balance sheet shows three inventory accounts—raw materials, work in process, and finished goods. Acme Company must be a:
manufacturer
What is not a primary goals of inventory management?
minimize the quantity if ending inventory
Financial statements are most commonly prepared
monthly, quarterly, annually
In April, Pizza Aroma hired a new employee at a rate of $1,000 per month to start work at the beginning of May. In April, Pizza Aroma should record:
nothing, because an exchange of promises is not a transaction
The characteristic shared by all liabilities is that they:
obligate the company to do something in the future
Merchandise inventory and cost of goods sold appear ______.
on the balance sheet and income statement, respectively
The primary difference between ordinary repairs and extraordinary repairs is:
ordinary repairs are expenditures for routine maintenance and upkeep, whereas extraordinary repairs increase an assets economic usefulness in the future through increased efficiency, capacity or longer life.
Under a periodic inventory system, which is correct?
purchase returns and allowances and purchase discounts are contra expense accounts
Which account does not have a normal credit balance?
rent expense
The net cost of merchandise inventory purchased ______.
represents the actual cost of merchandise purchased
Which is a temporary account and is closed at the end of the year?
revenues, expenses, and dividends
Revenues are recognized when ___, even when cash is collected in a different accounting period than the revenue is earned.
services are performed
Which of the following business organizations has only one owner?
sole proprietorship
common stock
stockholders equity, credit
retained earnings
stockholders equity, credit
If a company receives payment when it provides a service:
stockholders' equity will increase
