Accounting Final

What does the phrase, "revenue is recognized when earned" mean?

Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer

What happens to the accounting equation when the adjustment is recorded to recognize earned revenue previously recorded as unearned revenue?

liabilities decrease and stockholders' equity increases

A company purchased equipment for $150,000 cash. What is the effect on total assets?

no net effect

All of the following accounts have normal debit balances except

service revenue

Income statement accounts are also known as which of the following?

temporary accounts

The principle of conservatism is concerned with

the avoidance of overstating assets or income in the preparation of financial statements.

The going concern assumption is concerned with

the company's ability to continue operations long enough to carry out its existing obligations.

When are revenues and expenses recognized in the same accounting period that cash receipts and payments occur?

under the cash basis of accounting

Which of the following accounts is decreased by a debit entry?

unearned revenue

Failure to record dividends paid would result in which of the following?

Stockholders' equity being overstated

The supplies account has a balance of $1,000 on January 1. During January, the company purchased $25,000 of supplies on account and the liability was appropriately recorded. A count of supplies at the end of January indicates a balance of $3,000. Which one of the following is a correct amount to be reported on the company's financial statements for the month ending January 31?

Supplies Expense - $23,000

An abbreviated version of an account, which is useful for analyzing the effects of business events, is the

T-account

Refer to Hesson Properties. What journal entry is required to record the utility bill?

Utilities Expense 300 Accounts Payable 300

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded?

assets decrease and stockholders' equity decreases

Refer to Hesson Properties. How much is still owed to the company by its customers at the end of the month?

$1,000

A particular company had $2,400 of supplies on hand at January 1. During the year, supplies with a cost of $4,000 were purchased. At December 31, the actual supplies on hand amounted to $2,000. After the adjustments are recorded and posted at December 31, what are the ending balances in the Supplies and Supplies Expense accounts?

$2,000; $4,400

Refer to HVAC Service. Based on these transactions, what is the total amount of expense that should be reported on the company's income statement for the month?

$2,850

A company borrowed $500,000 on a one-year, 10% note on October 1, 2018, with interest and principal to be paid at maturity. How much interest should be reported on the income statement for the year ending December 31, 2019?

$37,500

Carnegie Jewelers accepted a 9-month, 9% note for $100,000 from a customer on July 1, 2019. The note is due on March 31, 2020. Assuming the company's accounting period ends on December 31, 2019, how much interest revenue should be recognized during 2019 and 2020?

$4,500 $2,250

Refer to Hesson Properties. What journal entry is required to record the services provided to customers?

Accounts Receivable 1,500 Service Revenue 1,500

Two friends decide to launch a new business by investing $25,000 each in Hot Spot Tanning. They are given shares of stock as evidence of their ownership interest. What effect does this transaction have on the accounting equation?

Assets and contributed capital increase

Refer to Hesson Properties. What journal entry is required to record the collections on account from customers?

Cash 500 Accounts Receivable 500

Refer to Hesson Properties. What journal entry is required to record the cash collected in advance?

Cash 500 Unearned Revenue 500

A list of all asset, liability, stockholders' equity, revenue, expense, and dividend accounts which are used by the company is called a(n)

Chart of Accounts

Refer to Hesson Properties. What journal entry is required to record the purchase of the carts?

Equipment 1,500 Accounts Payable 1,500

A company rented office space to a tenant on January 1 and received a total of $90,000 for the first nine months of rent. The amount was recorded as Rent Collected in Advance when received. Adjustments are recorded only at the end of every quarter. What effect does the adjustment at March 31 have on the company's net income for the quarter ending March 31?

Increase by $30,000

Which of the following does not occur during the closing process?

Journal entries are made to return the balance in all real accounts to zero.

The chronological record in which transactions are initially recorded in the order in which they occur is called a(n)

Journal.

When should a shipping company recognize revenue from its delivery service?

On the date the customer's packages are delivered

When is revenue from the sale of merchandise normally recognized?

On the date the sale is made.

Which of the following transactions affects total liabilities?

Payment is made on a bank loan

Which one of the following is an example of a deferred revenue?

Payments are received prior to providing the services to customers

Which one of the following adjustments increases net income for the period?

Recognition revenue earned, but not recorded

Which one of the following is an example of an accrued liability?

Rent that has been incurred, but has not been paid at the end of the period.

A list of all active accounts and their balances at a particular date, which is used to prove the equality of debits and credits, is a

Trial Balance.

Under accrual accounting when is revenue recognized?

When earned, and expenses when incurred

Failure to record depreciation expense for the period results in which of the following?

a) Net income being overstated b) Stockholders' equity being overstated Both a and c

Refer to HVAC Service. The journal entry to record payment for the office equipment and supplies will include a debit to

accounts payable

Refer to HVAC Service. The journal entry to record the purchase of office equipment and supplies will include a credit to

accounts payable

Which of the following accounts is decreased by a debit entry?

accounts payable

Refer to HVAC Service. The journal entry to record the bills sent to clients will include a debit of $12,000 to

accounts receivable

Refer to HVAC Service. The journal entry to record the bill received from WKRP Radio will include a debit to

advertising expenses

Which of the following accounts is increased by a credit entry?

capital stock

Refer to HVAC Service. The journal entry to record payment of the salaries will include a credit to

cash

The system of accounting in which there are at least two accounts affected in every transaction so that the accounting equation stays in balance is called

double-entry.

Which of the following accounts is increased by a debit entry?

equipment

Expenses should be matched against revenue

in the same period as the revenue that they helped generate

Debit entries are used to

increase asset accounts

Credit entries are used to

increase liability accounts

Accumulated Depreciation

increases with a credit.

All of the following accounts have normal credit balances except

inventory