Accounting Exam 1 Review
On the worksheet, the Service Revenue account has a credit balance of $20,000 on the Unadjusted Trial Balance. In the Adjustments there is a credit of $2,000. What is the amount for Service Revenue in the Adjusted Trial Balance?
$22,000 When you have a debit balance and a debit adjustment, you add the amounts together (20,000 + 2,000 = $22,000) for the Adjusted Trial Balance. ecker Company purchased a piece of equipment for $15,000. It has accumulated depreciation at the end of three years of $4,000. What is the book value of the equipment at the end of year 3?
On the worksheet, the Office Supplies account has a debit balance of $9,000 on the Unadjusted Trial Balance. In the Adjustments there is a credit of $2,000. What is the amount for Office Supplies in the Adjusted Trial Balance?
$7,000 When you have a debit balance and a credit adjustment, you subtract the amounts (9,000 - 2,000 = $7,000) for the Adjusted Trial Balance.
Which of the following accounts is part of EQUITY?
-Dividends -Accounts Payable -Accounts Receivable -Cash DIVIDENDS
The following are types of business organizations EXCEPT:
-Sole Proprietorship -Partnership -Corporations -Stockholders STOCKHOLDERS are NOT a type of business organization Sole Proprietorship, Partnerships, Corporations, and limited liability companies are all ways a business can be organized. STOCKHOLDERS are owners of a corporation
Which of the following accounts is a LIABILITY?
-retained earnings -service revenue -accounts receivable -accounts payable ACCOUNTS PAYABLE
The Tanger Company has the following data: Service Revenue = $10,000 Rent Expense = $2,000 Salaries Expense = $1,200 Utilities Expense = $800 What is the Net Income?
6,000 BECAUSE the net income is revenue loss expenses so, 10,000-2,000-1,200-800= 6,000 in net income
William Travel Service purchased land for cash How would this effect the accounting equation?
ASSETS would INCREASE (land increases) and ASSETS would DECREASE (cash decreases)
Accounts Payable
Amounts to be paid in the future for goods or services already acquired Liability, credit
The Pack Company had the following data Service Revenue = $10,000 Cash = $12,000 Accounts Receivable= $3,000 Office Supplies = $4,000 Rent Expense = $2,000 Salaries Expense = $1,200 Utilities Expense = $800 Accounts Payable = $3,200 What is the amount of total assets to report on the balance sheet for the Pack Company?
Assets are cash, accounts receivable, and office supplies 12,000+3,000+4,000= $19,000 in assets
Williams Travel Services pays $100 cash for salaries expense, how would this affect the accounting equation?
Assets decrease (cash decreases) and Equity decreases (expenses, salaries expenses in this case, causing retained earnings to decrease)
Assuming normal account balances, the following statement is true when balancing a T-account or Ledger?
Assets normally have debit balances
When accounts have normal balances, which of the following accounts does not have a credit balance on the Adjusted Trial balance?
Cash Assets, Expenses, and Dividends would have normal debit balances on the Adjusted Trial Balance. Liabilities, Retained Earnings, and Revenues would have normal credit balances on the Adjusted Trial Balance. Cash is an asset and would have a debit balance, so it is the only account listed that would not have a credit balance.
T or F
Cash increases with a debit entry TRUE
Financial Accounting
Focuses on providing information for external purposes (those outside of the organization), such as investors, creditors, and customers
Managerial Accounting
Focuses on providing information for internal purposes (those who work for the organization), such as managers and employees
FASB (Financial Accounting Standards Board)
In the United States, the privately funded organization that oversees the creation and governance of accounting standards is called..
Which financial statement is prepared first?
Income Statement because you need to find the net income (or loss) to prepare the statement of retained earnings
What is the purpose of the worksheet?
It summarizes data for the preparation of the financial statements.
Assuming normal account balances, the following statement is TRUE when balancing a T-account or Ledger
Liabilities normally have credit balances. Assets, Expenses, and the Dividends account, normally have debit balances.
If a journal entry and posting for the use of one month of rent from the prepaid rent account during the year is accidently omitted, what would be the impact on the financial statements?
Net Income would be overstated (Expenses understated) and Balance Sheet assets would be overstated.
If a journal entry and posting for the use of office supplies during the year is accidentally omitted, what would be the impact on the financial statements?
Net Income would be overstated (Expenses understated) and Balance Sheet assets would be overstated. By accidentally omitting an adjusting entry for the use of supplies, you would be omitting a debit to Supplies Expense (which if omitted Net Income would be overstated and Expenses would be understated) and you would be omitting a credit to Office Supplies (which if omitted the Balance Sheet Assets would be overstated).
If a journal entry and posting for Salaries Expense that incurred during this year but will be paid until next year is accidentally omitted, what would be the impact on the financial statements?
Net Income would be overstated (Expenses understated) and Balance Sheet liabilities would be understated.
If a journal entry and posting for accrued interest that incurred during this year but will be paid until next year is accidently omitted, what would be the impact on the financial statements?
Net Income would be overstated (Expenses understated) and Balance Sheet liabilities would be understated.
Jones Company had a net income of $10,000 for the year, beginning total assets were $150,000 and ending were $200,000 What is Jones Company Return on Assets (ROA) for the year?
ROA= Net Income/ average total assets 10,000/(150,000+200,000/2) 10,000/175,000= 0.057 = 5.7% Return on Assets for the year
Which of the following is an example of an accrued expense adjusting entry?
Recording the amount of Salaries Expense for employees that is not paid yet
Donler Tax Service performed services on account for $10,200 and paid expenses totaling $5,400 What is Donler's Net income or net loss?
Service Revenue - Expenses 10,200-5,200= $4,800 Net Income
Complete Computer Services reports Total Assets of $1,000, Total Liabilities of $200, and Total Equity of $800. What is Complete Computer Services debt ratio?
Total liabilities/total assets 200/1000= 20%
Service Revenue
earnings made by any business that is into rendering services Equity, credit
Retained Earnings
the stockholders' EQUITY created from business operations through revenue and expense transactions
Thompson Company had $1,000 in office supplies at the beginning of the fiscal year. At the end of the fiscal year, Thompson Company did an inventory of the office supplies and determined that $300 of supplies remained in the supply room unused. What is the amount of Supplies Expense at the end of the fiscal year?
$700 To determine the amount of adjustment, you need to determine the amount of supplies that were used during the period. From the $1,000 worth of supplies at the beginning of the year, subtract the amount of supplies that are still left at the end of the year to get supplies used ($1,000 - $300 = $700 supplies used). Debit Supplies Expense and credit Supplies for this amount.
Sam's taxi cab service performed transportation services for a customer on account for $1,200 How would this transaction affect the accounting equation?
ASSETS would increase (accounts receivable increase) and EQUITY would increase (Retained Earnings increase for service revenue)
A piece of equipment purchased cost $10,000 and has depreciation expense of $2,000 for this year. What is the journal entry to record the depreciation expense for the year?
Account DR CR Depreciation expense- equipment $2,000 Accumulated depreciation- equipment $2,000
On March 3, Complete Computer Service made a $300 payment on the Accounts Payable for a previous purchase on the account. The journal entry to record this transaction would be:
Accounts DR CR Accounts Payable $300 Cash $300
Software Solutions was hired by Jones Company on December 1 to install and updated software. The total entire amount of $1,800 in revenues is to be paid to us by Jones Company when the job is completed the following January 31. As of December 31, we have completed one half of the software installation and updates. On December 31, Software Solutions makes the following entry to adjust for the revenues earned during December:
Accounts DR CR Accounts Receivable 900 Service Revenue 900 Only half of the revenue has actually been earned but we do not get any cash payment until it is completed on January 31. To make sure that revenues that have been earned are reflected on the company's current financial statements, we record half of the total ($900) as a debit to Accounts Receivable and a credit to Service Revenue.
On March 1, Jones Repair Services received cash of $1.200 for service revenue earned The Journal entry to record this transaction would be:
Accounts DR CR Cash $1,200 Service Revenue $1,200
Jones Company received $2,200 in cash during March for Service Revenue for a job that will be completed in May. This job would be completed before the end of the year when the finance's are prepared. Since it is short lived and will be earned during this accounting period, Jones Company decided to record it as revenue instead of a liability at the time the cash was received in March. The journal entry to record this transaction when we received the cash in March would be:
Accounts DR CR Cash 2,200 Service Revenue 2,200 When receiving cash in advanced for future revenues, but the revenues will be earned within the same accounting period, you can record the transaction as a credit to Service Revenue at the time the cash is received instead of as a liability (unearned).
On March 17, Complete Computer Services paid $1,000 cash for dividends The journal entry to record this transaction would be:
Accounts DR CR Dividends $1,000 Cash $1,000 Dividends would be debited when paid, and cash, an asset, decreases (credited) as dividends are paid out in cash. Dividends, although an equity account, are increased by a debit
Interest of $100 is accumulated on a notes payable, although the company will not pay the interest until next year. What is the adjusting journal entry at the end of the year for the accrued interest?
Accounts DR CR Interest Expense 100 Interest Payable 100 Interest that has been accumulated on a notes payable but not paid yet, needs an adjusting entry to debit Interest Expense (which appears on the income statement) and credit Interest Payable (which appears as a liability on the Balance Sheet).
Interest of $100 is accumulated on a notes payable, although the company will not pay the interest until next year. What is the adjusting journal entry at the end of the year for accrued interest
Accounts DR CR Interest expense $100 Interest payable $100
Assume the weekly payroll of the Abbott Company is $5,000. December 31, the end of the year, falls on a Wednesday and Abbott will pay its employee on Friday for the full week. What adjusting entry will Abbott make on Wednesday, December 31 (Use five days as a full work week)?
Accounts DR CR Salaries Expense 3,000 Salaries Payable 3,000 Salaries earned are $1,000 per day ($5,000 / 5 day work week = $1,000 per day). If December 31 is on a Wednesday, then three days' worth of salaries are an expense as of that date, but not paid yet. Therefore, three days' worth of salaries, which is $3,000 (3 days * $1,000 = $3,000), needs to be recorded as a Salaries Expense (debit) and Salaries Payable (credit) on December 31.
On January 20, Complete Computer Service purchases $200 of office supplies on account. The journal entry to record this transaction would be:
Accounts DR CR office supplies $200 accounts payable $200
Jones Company paid $1,200 with cash this year in January for six months rent. Therefore, it will be used up before the end of the year when the financials are prepared. Since it is short lived and will be used up during this accounting period, Jones Company decided to record it as an expense instead of an asset at the time of payment. The journal entry to record this transaction when Jones Company pays the cash for the six months rent would be:
Accounts DR CR Rent Expense 1,200 Cash 1,200 When the prepaid rent is used within the same accounting period, you can record the transaction as a debit to Rent Expense at the time the cash is paid instead of as an Asset to Prepaid Rent. Since it was paid in cash, the credit entry is to cash (cash decreases).
When accounts have normal balances, which of the following accounts does not have a debit balance on the Adjusted Trial balance?
Accounts Payable Assets, Expenses, and Dividends would have normal debit balances on the Adjusted Trial Balance. Liabilities, Retained Earnings, and Revenues would have normal credit balances on the Adjusted Trial Balance. Accounts Payable is a liability and would have a credit balance, so it is the only account listed that would not have a debit balance.
T or F
Accounts Payable increase with a credit entry
Accounts Receivable
Asset, debit
Smith's Decorating Service pays $200 cash for rent expense How would this transaction affect the accounting equation?
Assets would decrease (cash decreases) and Equity would decrease (expenses, rent expenses in this case, causing retained earnings to decrease)
Smith Decorators purchased office supplies on account for $500. How would this transaction affect the accounting equation?
Assets would increase (Office Supplies increases) and Liabilities would increase (Accounts Payable increases).
Williams Travel Service performed travel booking service for customer on account for $1,200 How would this transaction affect the accounting equation?
Assets would increase (accounts receivable increase) and Equity would increase (Retained earnings increases for service revenue)
Williams Travel Service purchased office supplies on account for $300 How would this transaction affect the accounting equation?
Assets would increase (office supplies increase) and Liabilities increase (accounts payable increase
Assets for Smith Company are $30,000. Liabilities are $20,000. What is the Equity for Smith Company?
Assets= Liabilities+Equity 30,000= 20,000 + x Equity= $10,000
Graff Company had the following data for the month of November Retained Earnings Nov 1= $10,000 Net Income= $2000 Dividends= $1200 What is the amount of retained earnings on November 30 for Graff Company?
End retained earnings= beginning Retained Earnings + Net Income - Dividends =10,000+2,000-1,200 = $10.800
If a journal entry and posting for Salaries Expense that incurred during this year but will be paid until next year is accidentally omitted, what would be the impact on the financial statements?
Net Income would be overstated (Expenses understated) and Balance Sheet liabilities would be understated. By accidentally omitting an adjusting entry for salaries incurred but not paid, you would be omitting a debit to Salaries Expense (which if omitted Net Income would be overstated and expenses would be understated) and you would be omitting a credit to Salaries Payable (which if omitted the Balance Sheet liabilities would be understated)
Uptown Theatre has customers who prepay a total of $1,000 for season tickets to attend five upcoming shows. Uptown Dinner Theatre collects the $1,000 in advance before the shows are performed. After three shows are performed, what should Uptown Theatre report on its income statement assuming it used the accrual basis accounting method?
Service Revenue of $600 Each show earns $200 of Service Revenue ($1,000 / 5 shows = $200 per show). Three shows have been performed so $600 has been earned as Service Revenue ($200 * 3 shows = $600). Therefore, $600 is earned and Service Revenue is on the income statement. Cash is not on the Income Statement, but rather the Balance Sheet. The $1,000 of cash that is received is recorded on the balance sheet as Unearned Service Revenue when received. As the revenue is earned, this account is debited and Service Revenue is credited.
Pack Company had the following data: Service Revenue= $10,000 Cash= $12,000 Accounts Receivable= $3,000 Office Supplies= $4,000 Rent Expense= $2,000 Salaries Expense= $1,200 Utilities Expense= $800 Accounts Payable= $3,200 What is the amount of total Liabilities to report on the Balance Sheet for Pack Company?
The Total Liability is $3,200 because Accounts payable is the only liability listed
Awesome Sweets sells different kinds of cookies, candies, and other sweets. Awesome Sweets has a return on assets (ROA) of 6.9% How does Awesome Sweets know if the 6.9% ROA is a good return to attract possible investors?
The return on assets (ROA) would have to be compared to the ROA's of competing business that sell the same type of products. If 6.9% is higher than other companies in the same type of business, then it would be a good investment.
the purpose of adjusting entries is to __________.
update the account balances at the end of each period to match revenues and expenses to the appropriate period
