Accounting - Midterm exam

In recording an accounting transaction in a double-entry system

the amount of the debits must equal the amount of the credits

The classification and normal balance of the dividends account is

stockholders' equity with a debit balance

If a company fails to make an adjusting entry to record supplies expense, then:

expense will be understated

Concord Corporation started the year with $48000 in its Common Stock account and a credit balance in Retained Earnings of $35200. During the year, the company earned net income of $38400 and declared and paid $16000 of dividends. In addition, the company sold additional common stock amounting to $22400. As a result, the amount of its retained earnings at the end of the year would be

$128,000

Marigold Corp. purchased equipment for $7020 on January 1, 2017. The company expects to use the equipment for 3 years. It has no salvage value. Monthly depreciation expense on the asset is:

$2,340 Cost - salvage value = depreciable cost; depreciable cost divided by useful life (in years) = depreciation expense. 7020-0=7020/3=2340

Wildhorse Co. showed the following balances at the end of its first year: Cash $15120 Prepaid insurance 760 Accounts receivable 3780 Accounts payable 3020 Notes payable 4540 Common stock 5830 Dividends 760 Revenues 31320 Expenses 18900 What amount did Wildhorse Co. show as total credits?

$44,710 (notes payable + accounts payable + revenue + common stock)

At December 31, 2017, before any year-end adjustments, Pharoah Company's Prepaid Insurance account had a balance of $5210. It was determined that $2230 of the Prepaid Insurance had expired. The adjusted balance for Prepaid Insurance for the year would be:

?5210?

If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?

Assets will be overstated and net income and stockholders' equity will be understated

An accountant has debited an asset account for $1080 and credited a liability account for $540. What can be done to complete the recording of the transaction?

Credit a different asset account for $540

Which of the following describes an accrued expense?

Incurred but not yet paid or recorded

Which of the following describes the classification and normal balance of the Unearned Rent Revenue account?

Liability, credit

On March 1, 2017, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not?

No, hiring an employee is an important event; however it is not an economic event that should be recorded

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not?

No, revenue cannot be recognized until the work is performed

Which statement is incorrect concerning the adjusted trial balance?

The adjusted trial balance lists the account balances in order of their magnitude

Which statement is correct?

The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles

A T-account is

a way of depicting the basic form of an account

The principal purpose of posting is to

accumulate the effects of journalized transactions in the individual accounts

If a company buys a $520 machine on credit, this transaction will affect the

balance sheet only

Each of the following is a major type (or category) of adjusting entry except:

earned expenses

The following information is from the Income Statement of the Swifty Laundry Service: Revenues Service Revenues $4940 Expenses Salaries and wages expense $ 1860 Advertising expense 380 Rent expense 230 Supplies expense 150 Insurance expense 80 Total expenses 2700 Net income $2240 The entry to close the Income Summary includes a:

debit to Income Summary for $2240

The following information is from the Income Statement of the Concord Laundry Service: Revenues Service Revenues $5200 Expenses Salaries and wages expense $ 1960 Advertising expense 400 Rent expense 240 Supplies expense 160 Insurance expense 80 Total expenses 2840 Net income $2360 The entry to close the Laundry Service Revenue account includes a:

debit to Income Summary for $5200

A paid dividend

decreases assets and stockholders' equity

Debits

increase assets and decrease liabilities

A revenue generally

increases assets and stockholders' equity

A post-closing trial balance will show

only balance sheet accounts

The procedure of transferring journal entries to the ledger accounts is called

posting

All of the following are required steps in the accounting cycle except:

preparing a work sheet

The primary purpose of the trial balance is to

prove that the debits equal the credits after posting

Accrued revenues are:

recognized but not yet received or recorded

Kingbird, Inc. earned $2280 for architecture services provided with the fee to be paid in the future. No entry was made at the time the service was provided. If the fee has not been paid by the end of the accounting period and no adjusting entry is made, this would cause:

revenues to be understated

Under the expense recognition principle expenses are recognized when

they contribute to the production of revenue

When collection is made on Accounts Receivable

total assets will remain the same

An accounting record that includes a list of accounts and their balances at a given time is called a

trial balance

Adjusting entries are:

usually required before financial statements are prepared