Accounting final exam study guide

On September 1, 2018, Real Estate Professionals, Inc. paid $7,000 in advance for an eight-month rental space covering the period of September 1, 2018 through April 30, 2019. The deferred expense was initially recorded as an asset. The company makes adjusting entries once a year at year-end. The adjusting entry on December 31, 2018 would include a ________. debit of $3,500 to Rent Expense credit of $7,000 to Prepaid Rent debit of $7,000 to Cash credit of $3,500 to Rent Expense

a

Spring Company has assets and equity that amount to $220,000 and $20,000, respectively. Liabilities total _ a. 20,000 b. 240,000 c. 200,000 d.220,000

a

Which of the following is a current asset that is expected to be converted to cash, sold, or consumed during the next year (or the normal operating cycle, if longer)? Accounts Receivable Building Land Equipment

a

Which of the following is a liability account? a. prepaid rent b. unearned revenue c. service revenue d. building

a

Which of the following organizations is responsible for the creation and governance of accounting standards in the United States? a. Financial Accounting Standards Board b. Institute of Management Accountants c. Securities and Exchange of Commission d.American Institute of Certified Public Accountants

a

auditor

a person who formally examines and verifies financial accounts

certified management accountant

a professional designation issued by the Institute of Management Accountants signifying expertise in management accounting

A list of the accounts and their balances at the end of the period, after journalizing and posting the closing entries, is called ________. a. post-closing trial balance b. chart of accounts cpre-closing balance sheet c.adjusted trial balance

a.

The entry to record depreciation includes a credit to the ________ account. a.Accumulated Depreciation Depreciation Payable Depreciation Expense Cash

a. Accumulated Depreciation

Closing entries are journalized and posted ________. after preparing the financial statements before posting the adjusting entries after preparing the post-closing trial balance throughout the accounting period

a. after preparing the financial statements

An adjusting entry is completed ________. a.at the end of the accounting period b. when accounts need to be balanced in the ledger c.at the beginning of the accounting period d. after all performance obligations are satisfied

a.at the end of an acounting period

Certified Public Accountant (CPA)

an accountant who passes a series of examinations established by the American Institute of Certified Public Accountants (AICPA)

Common Stock is a separate account in the ________ category of the accounting equation. a. revenue b. asset c. liability d. equity

b

Lisa Smith decided to start her CPA practice as a professional corporation, Smith CPA, PC. The corporation purchased an office building for $35,000. The real estate agent said the building was worth $50,000 in the current market. The corporation recorded the building as a $50,000 asset because Lisa believes that is the real value of the building. Which of the following concepts or principles of accounting is being violated? a. cost principle b. monetary unit assumption c. economic entity assumption d. going concern assumption

b

On January 1, 2017, the Accounts Receivable of Martha, Inc. had a debit balance of $150,000. During January, the company provided services for $400,000 on account. The company collected $240,000 from its customers on account in January. What was the ending balance in the Accounts Receivable account at the end of January? $160,000 $310,000 $550,000 $400,000

b

When does a company account for revenue if it uses cash basis accounting? a. when the services are being performed b. when cash is received, either prior to, at the time of, or after the services are performed c. when services are performed, even though cash may be received at a later date d. before services are performed

b

Which of the following is NOT a balance sheet account? a. Accumulated b.Depreciation - Building c.Unearned Revenue d. Dividends e.Prepaid Rent

b

the earnings of sole propertiship are: a. subject to double taxation b. not combined with the propietor's personal income c. combined with the personal income of the propietors d. handled similarly to that of a corporation

b

When is a trial balance usually prepared? a.after the financial statements are prepared b.before the financial statements are prepared c.after each entry is journalizedb.d.at the beginning of an accounting period

b.

Advance cash payments of future expenses are called _ accrued expenses deferred expenses deferred revenues accrued revenues

b. defferred expenses

The accountant of Peyton Financial Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is true? The total revenue will be understated. The total expenses will be overstated. The total expenses will be understated. The total revenue will be overstated.

b. total expenses will be overstated

Dividends is a(n) ________ account that has a normal ________ balance. a. liabilities;credit b. equity; credit c. liability; debit d. equity;debit

c

Liquidity is a measure of how ________. a. quickly an asset appreciates in value b. easily an asset can be exchanged for another asset c.quickly an asset may be converted into cash d. long an asset can be used

c

Revenues and expenses may be transferred to the ________ account before their final transfer into the Retained Earnings account. a. Net Income b. Dividends c. Income Summary d. Assets

c

The ability of a company to pay its debts can be evaluated by using the ________. a. fully diluted earnings per share b.debt ratio c. return on assets ratio d. earnings per share

c

The accountant of Omega, Inc. failed to make an adjusting entry to record $6,000 of unearned service revenue that has now been earned. Assume the deferred revenue was initially recorded as a liability. Which of the following statements is true? The total expenses will be understated. The total revenue will be understated. The total revenue will be overstated. The total expenses will be overstated.

c

The matching principle states that ________. a.companies should record revenue when it has been earned b. a business's activities can be sliced into small time segments c. financial statements can be prepared for specific periods d. all expenses should be recorded when they are incurred during the period

c

The net income of Hendley, Inc. for the year is $35,000. The dividends declared during the year were $43,000. Which of the following statements is true? a. Retained Earnings account decreases by $35,000. b. Retained Earnings will remain the same. c. Retained Earnings account decreases by $8,000. d. Retained Earnings account increases by $43,000.

c

Woods, Inc. earned revenues of $11,000 and incurred expenses of $4,000. The company declared and paid cash dividends of $3,000. What is the balance in the Income Summary account after closing net income or loss to the Retained Earnings account? a. credit balance of $4,000 a. debit balance of $11,000 c. balance of $0 d. credit balance of $7,000

c

regarding generally accepted accounting principals(GAAP), which of the following is incorrect: a. relevant information is complete, neutral and free from error b. The primary objective of financial reporting is to provide information useful for making investments and lending decisions c. GAAP is currently formated by the accountant finance board d. GAAP rests on a conceptual framework that identifies the objects, characteristics, elements, and implementation of financial statements

c

A company that uses the perpetual inventory system purchases inventory for $62,000 on account, with terms of 2/10, n/30. Which of the following is the journal entry to record the payment made within 10 days? a. a debit to Accounts Payable for $60,760, a debit to Merchandise Inventory for $1,240, and a credit to Cash for $62,000 b. a debit to Merchandise Inventory for $1,240, a debit to Accounts Payable for $62,000, and a credit to Cash for $63,240 c. a debit to Accounts Payable for $62,000, a credit to Cash for $1,240, and a credit to Merchandise Inventory for $60,760 d. a debit to Accounts Payable for $62,000, a credit to Merchandise Inventory for $1,240, and a credit to Cash for $60,760

c.

Which of the following is NOT recorded in a modern perpetual inventory system? a. units purchased and cost amounts b. units sold and sales and cost amounts c. timeliness of vendor deliveries d.the quantity of merchandise inventory on hand and its cost

c.

The formula for computing the current ratio is ________. a.Current ratio = Total Current assets / Total assets b.Current ratio = Total Current assets / Total Stockholders' Equity c. Current ratio = Total Current assets / Total Current liabilities d. Current ratio = Total Current assets / Total liabilities

c. current ratio= total current assets/ total current liabilities

Which of the following are temporary accounts that are closed at the end of the year? a. revenues, expenses, and stockholders' equity b.assets, liabilities, and stockholders' equity c.revenues, expenses, and dividends d.assets, liabilities, and dividends

c. revenues, expenses, and dividends

In a perpetual inventory system, the physical count of inventory ________, captures transactions that are not recorded by the electronic system establishes the correct amount of ending inventory for the financial statements serves as a check of the perpetual records All statements are correct.

captures transactions, that are not recorded, establishes the correct amount of ending inventory for the financial statement, serves as a check of the perpetual records

All assets that will not be converted to cash or used up within the business's operating cycle or one year, whichever is greater, are called ________. current assets fully depreciated assets current liabilities long-term assets

d

As per the ________, the entity will remain in operation for the foreseeable future. a. going concern assumption b. monetary unit assumption c. cost principal d. economic entity concept

d

The Sarbanes-Oxley Act (SOX) _ a. ensures that financial scandals will no longer occur b. requires independent accountants to take responsibility for the accuracy and completeness of the financial reports c. created the SEC d. requires companies to take responsibility for the accuracy and completeness of their financial reports

d

The time period concept states that ________. a.financial statements can be prepared for specific periods b.expenses incurred during a period should be matched against the revenues of the period c.companies should record revenue when it has been earned d.all expenses should be recorded when they are incurred during the period

d

Which of the following statements is true of a trial balance? a. A trial balance is the first step in the accounting cycle. b. A trial balance is also known as a balance sheet. c.A trial balance is also known as the chart of accounts. d.A trial balance is a list of all accounts with their balances.

d

Which one of the following account groups will decrease with a debit? a.revenues and expenses b. assets and expenses c. liabilities and revenues d. assets and liabilities

d

which of the following is true of the corporate form of business a. it is easy for stockholders to lodge an effective protest against managment b. changes in the ownership of stock have a negative effect on the continuity of the corporation c. any stockholder may commit to the corporation to a contract d. the board of directors sets policy for the corporation and appoints the officers

d

Converse Florists & Co. reported assets of $1,000 and equity of $450. What is its debt ratio? (Round your percentage answer to two decimal places.) 100.00% 60.00% 55.00% 45.00%

d 45 percent

After closing entries have been posted ________. a.only permanent accounts carry balances b.the ending balance of Retained Earnings has been properly updated c.dividends have been closed into Retained Earnings d.All of the statements are correct.

d.

The main expense of a merchandiser is usually ________. a. merchandise inventory b.selling and administrative expenses c. purchasing expense d. cost of goods sold

d. cost of goods sold

controller

oversees taxes, cost accounting, financial accounting and data processing