ACCT Exam 1

Below is the company's Cash T-account. The $3,100 amount could represent which of the following?

Payment for salaries.

The conceptual framework's qualitative characteristic of relevance includes:

Predictive value.

The International Accounting Standards Board:

Promotes the use of high-quality, understandable global accounting standards.

Financial accounting:

Provides information primarily for external decision makers.

A company paid $900 to workers during May. Of this amount, $600 was for work performed in April, while the other $300 was for work performed during May. What would the impact of this transaction be during May on (1) the balance of cash, (2) cash-basis net income, and (3) accrual-basis net income?

(1) Decrease, (2) Decrease, (3) Decrease.

Of the following six accounts, which ones have temporary balances: (1) Service Revenue (2) Dividends (3) Salaries Expense (4) Common Stock (5) Retained Earnings (6) Cash

(1), (2), and (3).

Stimpleton Company engages in the following cash payments: What is the total amount of cash paid for operating activities?

$1,375 675+700=1375

Emmitt had the following final balances after the first year of operations: assets, $35,500; stockholders' equity, $14,300; dividends, $3,800; and net income, $10,400. What is the amount of Emmitt's liabilities?

$21,200 (35500-14300)

The following financial information is from Bronco Company. All debt is due within one year unless stated otherwise.What is the amount of current liabilities?

$24,500 Deferred revenue + Accounts payable + Interest payable

The following table contains financial information for Trumpeter Inc. before closing entries: What is Trumpeter's net income?

$3,400 service revenues-all expenses

The ending Retained Earnings balance of Boomer Inc. decreased by $1.7 million from the beginning of the year. The company declared a dividend of $5.5 million during the year. What was the net income for the year?

$3.8 million 5.5-1.7=3.8

Nina Corp. had the following net income (loss) for the first three years of operations, respectively: $7,000, ($1,700), and $2,300. If the Retained Earnings balance at the end of year three is $1,200, what was the total amount of dividends paid over these three years?

$6,400 (7000-1700+2300-1200)

The following financial information is from Shovels Construction Company: What is the amount of current assets, assuming the accounts above reflect normal activity?

$63,300 Cash+Accounts Receivable+Supplies

The ending retained earnings balance of Juan's Mexican Restaurant chain increased by $7.5 million from the beginning of the year. The company declared a dividend of $1.5 million during the year. What was the amount of net income during the year?

$9.0 million (7.5+1.5)

The following transactions occur for Cardinal Music Academy during the month of October: 1. Provide music lessons to students for $12,000 cash. 2. Purchase prepaid insurance to protect musical equipment over the next year for $3,600 cash. 3. Purchase musical equipment for $15,000 cash. 4. Obtain a loan from a bank by signing a note for $20,000.

1. Cash: Debit 12000 Service rev: credit 12000 2. prepaid insurance: debit 3600 Cash: credit 3600 3. Equipment: debit 15000 Cash: credit 15000 4.Cash: debit 20000 Notes payable: credit 20000

The following transactions occur for the Panther Detective Agency during the month of July: 1. Purchase a truck and sign a note payable, $14,400. 2. Purchase office supplies for cash, $540. 3. Pay $740 in rent for the current month.

1. Equipment: debit 14400 Notes payable: credit 14400 2. supplies: debit 540 Cash: credit 540 3.rent expense: debit 740 Cash: credit 740

PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are required to pay for the subscription at the beginning of the subscription period. On April 1, 2021, total sales of one-year subscriptions are $12,000. What is the adjusted balance of Deferred Revenue on December 31, 2021?

3,000 $12,000 (April 1) − $9,000 (year-end adjustment)* = $3,000

Hoya Corporation reports the following amounts: Assets = $11,200; Liabilities = $1,200; Stockholders' equity = $10,000; Dividends = $1,200; Revenues = $13,400; and Expenses = $10,200. What amount is reported for net income?

3,200 (revenues - expenses)

In the statement of stockholders' equity, Retained Earnings had a beginning balance of $25,000. During the period, the company reports a net income of $10,000 and a dividend of $4,000. The ending balance in the Retained Earnings account is:

31,000

The adjusting entry required when goods and services are provided to customer for amounts previously recorded as deferred revenues includes:

A debit to a liability.

Which of the following statements regarding financial reports is not correct?

A statement of stockholders' equity reports revenues, net income, and dividends information.

A(n) _______________ summarizes all transactions related to a particular item over a period of time.

Account

Which of the following accounts would normally have a credit balance?

Accounts Payable, Service Revenue, Common Stock.

Which of the following items would not appear in an income statement?

Accounts payable

The accounting basis that helps to measure and report revenues and expenses in a way that clearly reflects the ability of a company to generate value for its owners is referred to as:

Accrual-basis.

The accounting basis that records revenues when goods or services are provided to customers and expenses with related revenues is referred to as:

Accrual-basis.

Which of the following trial balances shows account balances that incorporate current year deferrals and accruals?

Adjusted trial balance.

The basic principle involved with expense recognition is:

All costs that are used to generate revenue are recorded in the period the revenue is recognized.

Which of the following best describes a purpose of source documents?

All of the other answers provide a correct statement.

Borrowing cash from the bank would have what effect on the accounting equation?

Assets increase and liabilities increase.

Which of the accounts are increased with a debit and decreased with a credit?

Assets, dividends, and expenses.

The primary purpose(s) of financial accounting is(are) to:

Both measure and communicate financial information to external parties.

The closing process includes which of the following?

Closing the balances of revenue, expense and dividend accounts to zero.

The two categories of stockholders' equity usually found in the balance sheet of a corporation are:

Common stock and retained earnings.

Enhancing qualitative characteristics of accounting information include:

Comparability and consistency.

Tomlin & Company provides music for special occasions. On January 14, the Smith family hired Tomlin for an upcoming family wedding for an agreed-upon fee of $10,000. The wedding was scheduled for May 23. As part of the agreement, the Smiths paid Tomlin half of the fee at the end of April with the remaining amount due by the end of June. How would Tomlin record the receipt of the final payment in June?

Credit to Accounts Receivable.

During the year, Cheng Company paid salaries of $23,000. In addition, $8,500 in salaries has accrued by the end of the year but has not been paid. The year-end adjusting entry would include which one of the following?

Credit to salaries payable for $8,500

Clement Company paid an account payable related to a previous utility bill of $1,050. This transaction should be recorded as follows on the payment date:

Debit Accounts Payable $1,050, credit Cash $1,050.

A company received a bill for newspaper advertising services, $380. The bill will be paid in 10 days. How would the transaction be recorded today?

Debit Advertising Expense $380, credit Accounts Payable $380

When a company pays $2,800 dividends to its stockholders, the transaction should be recorded as:

Debit Dividends; Credit Cash.

On July 1, 2021, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2021 through December 2022. What adjusting entry should Charlie Co. record on December 31, 2021?

Debit Rent Expense and credit Prepaid Rent for $6,000.

When a company pays utilities of $1,710 in cash, the transaction is recorded as:

Debit Utilities Expense $1,710, credit Cash $1,710.

When a company pays utilities of $1,800 in cash, the transaction is recorded as:

Debit Utilities Expense $1,800, credit Cash $1,800.

Which one of the following accounts would NOT have a balance after closing entries?

Dividends

The costs associated with producing revenues are referred to as:

Expenses

Fundamental qualitative characteristics of accounting information are:

Faithful representation and relevance.

If the beginning balance of Retained Earnings equals $10,000, net income for the year equals $6,000, and dividends for the year equal $2,000, then the ending balance of Retained Earnings equals $18,000.

False

On November 1, 2021, a company receives $1,800 for services to be provided evenly over the next six months. The December 31, 2021, adjusting entry for the company would include a credit to Deferred Revenue for $600.

False

One of the differences between a partnership and a corporation is that owners of a partnership have limited liability.

False

The primary objective of financial accounting is to provide useful information to managers in making decisions.

False

Revenues have what effect on the accounting equation?

Increase stockholders' equity.

A post-closing trial balance:

Is a list of all accounts and their balances after closing entries.

The following events pertain to Bills Company: ~December 28, 2021 Bills was contacted by a customer for possible accounting and tax services. ~December 30, 2021 Bills signed a formal agreement with the customer to provide accounting and tax services in 2022. ~January 4, 2022 The customer paid $1,000 in advance for the services to be provided by Bills Company. ~January 11, 2022 Bills provided accounting and tax services to the customer. Using cash-basis accounting, on which date should Bills Company record revenue for the accounting and tax services?

January 4, 2022.

The following transactions occur for the Wolfpack Shoe Company during the month of June: 1. Provide services to customers for $28,000 and receive cash. 2. Purchase office supplies on account for $18,000. 3. Pay $6,600 in salaries to employees for work performed during the month.

Journal entries: a. Cash:28000 Service rev:28000 b.supplies:18000 accounts payable:18000 c.salaries expense:6600 cash:6600

Creditors' claims to a corporation's resources are referred to as:

Liabilities.

A trial balance represents the:

List of all accounts and their balances at a particular date to ensure that debits equal credits.

If a company incorrectly records a payment as an expense instead of an asset, how will this error affect net income in the current period?

Net income will be too low.

Which financial accounting number impacts stock prices more than any other single piece of information?

Net income.

Which of the following best represents value created for stockholders during the current period?

Net income.

On December 1, Bears Lawn Maintenance, Inc. signed a contract with a retailer to supply maintenance for the next calendar year. How should this transaction be recorded on December 1?

No transaction should be recorded on December 1.

On July 5, Harris Company purchased supplies from the hardware store for $600 on account. On July 10, Harris receives a bill from the hardware store as a reminder about the account balance. On July 17, Harris pays the account in full. How does Harris record the transaction on July 17?

Option D Debit accounts payable 600, credit cash 600

A company has the following transactions: 1. Pay employees' salaries for the current period. 2. Pay rent in advance. 3. Pay dividends to stockholders in the current period. 4. Receive (but do not pay) a utility bill. 5. Use supplies previously purchased. How many of these transactions result in an expense being reported in the current period using accrual-basis accounting?

Pay dividends to stockholders in the current period.

Which of the following transactions would cause a decrease in both assets and stockholders' equity?

Paying advertising for the current month.

Which of the following is an operating activity?

Paying electricity bills for the month.

Pawn Shops Unlimited recorded the following four transactions during April. Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual-basis or cash-basis accounting?

Purchased $500 of office supplies on account (supplies were used in May and paid for in May).

The revenue recognition principle states that:

Revenue should be recognized in the period goods and services are provided.

Below are the account balances for Cowboy Law Firm at the end of December. Use only the appropriate accounts to prepare an income statement.

Service revenue=credit 8700 Expenses: salaries expense=debit 1900 Utilities expense= debit 1200 total expenses=3100 net income=5600

A classified balance sheet ______.

Shows subtotals for current assets and current liabilities

Generally Accepted Accounting Principles (GAAP) are best defined as

Standards for presenting financial accounting information.

The ending balance of Retained Earnings can best be described as:

The amount of net income over the life of the company not paid to owners in the form of dividends.

Which of the following best describes the information reported in the income statement?

The amount recognized from providing goods and services to customers compared to the cost of doing so.

An account balance represents:

The net amount of all debits and credits posted to an account over a period of time.

Auditors are trained individuals hired by a company as an independent party to express a professional opinion of the fairness of that company's financial statements.

True

Borrowing cash from the bank causes assets to increase and liabilities to increase.

True

Common Stock increases with a credit and decreases with a debit.

True

Internal transactions are events that affect the financial position of the company but do not include an exchange with a separate economic entity.

True

Liability accounts increase with a credit and decrease with a debit.

True

The Financial Accounting Standards Board's conceptual framework does not prescribe Generally Accepted Accounting Principles. It provides an underlying foundation for the development of accounting standards and interpretation of accounting information.

True

The adjusting entry at the end of the period to recognize an accrued revenue includes a liability account and a revenue account.

fa;e

Investing cash flows generally include cash receipts and cash payments for transactions involving revenue and expense activities during the period.

false

Accounting information is used by investors to decide whether to invest in a company's stock.

true