Accounting Final Pt.1 Study Guide Exam 1

B

A classified balance sheet: A) Measures a company's ability to pay its bills on time. B) Organizes assets and liabilities into important subgroups. C) Presents revenues, expenses, and net income. D) Reports operating, investing, and financing activities. E) Reports the effect of profit and dividends on retained earnings.

B

An example of a financing activity is: A) Buying office supplies. B) Obtaining a long-term loan. C) Buying office equipment. D) Selling inventory. E) Buying land.

C

An example of an investing activity is: A) Paying wages of employees. B) Paying dividends. C) Purchasing land. D) Selling inventory. E) Contribution from owner.

accounts receivable

Assets created by selling goods and services on account are:

Dividends

Distributions of assets by a business to its stockholders are called:

B

If assets are $99,000 and liabilities are $32,000, then equity equals: A) $ 32,000. B) $ 67,000. C) $ 99,000. D) $131,000. E) $198,000.

D

Kader Co. paid a total of $35,000 in dividends during the current year. The entry needed to close the dividends account is: A) Debit Income Summary and credit Cash for $35,000. B) Debit Dividends and credit Cash for $35,000. C) Debit Income Summary and credit Dividends for $35,000. D) Debit Retained Earnings and credit Dividends for $35,000. E) Debit Dividends and credit Retained earnings for $35,000.

periodicity principle

A broad principle that requires identifying the activities of a business with specific time periods such as months, quarters, or years is the:

Cost principle

The Maximum Experience Company acquired a building for $500,000. Maximum Experience had an appraisal done, and found that the building was worth $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would prescribe that Maximum Experience record the building on its records at $500,000?

C

The Retained Earnings account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and dividends are $9,000, what is the ending balance in the Retained Earnings account after all closing entries are made? A) $ 8,000. B) $15,400. C) $23,400. D) $17,000. E) $32,400.

A

The accounting process begins with: A) Analysis of business transactions and events. B) Preparing financial statements and other reports. C) Summarizing the recorded effect of business transactions. D) Presentation of financial information to decision-makers. E) Preparation of the trial balance.

Accrual basis accounting

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:

balance sheet

Where does the office equipment appear?

income statement

Where does the rent expense appear?

balance sheet

Where does unearned fees revenue appear?

balance sheet

where does accounts payable appear?

balance sheet

where does cash appear?

balance sheet

where does common stock appear?

income statement

where does fees revenue appear?

balance sheet

where does notes receivable appear?

income statement

where does the insurance expense appear?

balance sheet

where does wages payable appear?

B

A company pays each of its two office employees each Friday at the rate of $100 per day each for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is: A) Debit Unpaid Salaries $600 and credit Salaries Payable $600. B) Debit Salaries Expense $400 and credit Salaries Payable $400. C) Debit Salaries Expense $600 and credit Salaries Payable $600. D) Debit Salaries Payable $400 and credit Salaries Expense $400. E) Debit Salaries Expense $400 and credit Cash $400.

A

A company purchased a new truck at a cost of $42,000 on July 1, 2014. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2014? A) $3,250. B) $3,500. C) $4,000. D) $6,500. E) $7,000.

A

A ledger is: A) A record containing increases and decreases in a specific asset, liability, equity, revenue, or expense item. B) A journal in which transactions are first recorded. C) A collection of documents that describe transactions and events entering the accounting process. D) A list of all accounts with their debit balances at a point in time. E) A list of all accounts a company uses and includes an identification number assigned to each account.

Adjusted trial balance

A trial balance prepared after adjustments have been recorded is called a(n)

Post-closing trial balance

A trial balance prepared after the closing entries have been journalized and posted is the:

A

Accounts payable appear on which of the following statements? A) Balance sheet. B) Income statement. C) Statement of retained earnings. D) Statement of cash flows. E) All of the above.

D

Financial statements are typically prepared in the following order: A) Balance sheet, statement of retained earnings, income statement. B) Statement of retained earnings, balance sheet, income statement. C) Income statement, balance sheet, statement of retained earnings. D) Income statement, statement of retained earnings, balance sheet. E) Balance sheet, income statement, statement of retained earnings.

A

For 2014 Kuhlman Corporation reported net income of $28,000; net sales $400,000; and average shares outstanding 16,000. There were no preferred dividends. What was the 2014 earnings per share? A) $1.75 B) $0.57 C) $25.00 D) $0.07

D

On January 1, a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: A) Debit Prepaid Insurance, $1,800; credit Cash, $1,800. B) Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440. C) Debit Prepaid Insurance, $360; credit Insurance Expense, $360. D) Debit Insurance Expense, $360; credit Prepaid Insurance, $360. E) Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.

B

On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of September? A) A $0 balance. B) A $4,300 debit balance. C) A $4,300 credit balance. D) A $5,700 debit balance. E) A $5,700 credit balance.

D

Prepaid expenses are: A) Payments made for products and services that do not ever expire. B) Classified as liabilities on the balance sheet. C) Decreases in retained earnings. D) Assets that represent prepayments of future expenses. E) Promises of payments by customers.

Items that require adjusting entries

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

C

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is: A) Debit Office Supplies $105 and credit Office Supplies Expense $105. B) Debit Office Supplies Expense $105 and credit Office Supplies $105. C) Debit Office Supplies Expense $254 and credit Office Supplies $254. D) Debit Office Supplies $254 and credit Office Supplies Expense $254. E) Debit Office Supplies $105 and credit Supplies Expense $254.

D

Revenue is properly recognized: A) When the customer's order is received. B) Only if the transaction creates an account receivable. C) At the end of the accounting period. D) Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price. E) When cash from a sale is received.

temporary accounts

Revenues, expenses, and dividends accounts, which are closed at the end of each accounting period are:

D

Stride Rite has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio. A) 38.6%. B) 13.4%. C) 34.9%. D) 25.9%. E) 14.9%.

Accounting Equation

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

An Income statement

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

Revenue recognition principle

The question of when revenue should be recognized on the income statement (according to GAAP) is addressed by the

journal

The record in which transactions are first recorded is the:

accounting cycle

The recurring steps performed each accounting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, are referred to as the:

Income Summary account

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the:

E

The statement of cash flows reports information on: A) Revenue activities. B) Operating activities. C) Financing activities. D) Investing activities. E) B, C, and D.

C

Which of the following groups of accounts are not balance sheet accounts? A) Assets. B) Liabilities. C) Revenues. D) Equity accounts. E) All of the above are balance sheet accounts.

D

Which of the following is a true statement regarding debits and credits? A) If a company earned a profit, debits will not equal credits. B) For a business, debits are better than credits. C) A company's books are not in balance if they have a current period loss. D) Assets and expenses are both increased with a debit. E) Liabilities and equity are both increased with a debit.

C

Which of the following is not a liability? A) Unearned Service Revenue B) Accounts Payable C) Accounts Receivable D) Interest Payable

B

Which of the following statements is true? A) Retained earnings must be closed each accounting period. B) A post-closing trial balance should include only permanent accounts. C) Information on the work sheet can be used in place of preparing financial statements. D) By using a work sheet to prepare adjusting entries you need not post these entries to the ledger accounts. E) Closing entries are only necessary if errors have been made.

E

Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on account for $75,000. The effects of this transaction include: A) Assets increase by $75,000 and expenses increase by $75,000. B) Assets increase by $75,000 and expenses decrease by $75,000. C) Liabilities increase by $75,000 and expenses decrease by $75,000. D) Assets decrease by $75,000 and expenses decrease by $75,000. E) Assets increase by $75,000 and liabilities increase by $75,000.