Final ACC Study
Chpt 2 During 2018, its first year of operations, Bramble's Bakery had revenues of $59800 and expenses of $35300. The business paid dividends of $19200. What is the amount of stockholders' equity at December 31, 2018?
$59800 (credit) - $35300 (debit) - $19200 (debit) = $5300 (credit)
Match the following terms and definitions. (1) Amounts due from customers (2) Amounts owed to suppliers for goods and services purchased (3) Amounts owed to bank (4) Party to whom money is owed
(1) Accounts Receivable (2) Accounts Payable (3) Note Payable (4) Creditor
Indicate which of these items is an asset, liability or stockholders' equity account. (1) Supplies (2) Dividends (3) Buildings (4) Notes Payable (5) Salaries and Wages Payable
(1) Assets (2) Stockholders' Equity (3) Assets (4) Liability (5) Liability
Identify whether the following items would be reported on the income statement or balance sheet. 1. Cash 2. Service Revenue 3. Notes Payable 4. Interest Expense 5. Accounts Receivable
1. Balance Sheet 2. Income Statement 3. Balance Sheet 4. Income Statement 5. Balance Sheet
Below is a list of important abbreviations widely used in business. For each abbreviation give the full designation. 1. CPA 2. IRS 3. FBI 4. FASB 5. GAAP 6. SEC
1. Certified Public Accountant 2. Internal Revenue Service 3. Federal Bureau of Investigation 4. Financial Accounting Standards Board 5. Generally Accepted Accounting Principles 6. Securities and Exchange Commission
Which of the following statements about users of accounting information is incorrect? Taxing authorities are external users. Management is an internal user. Present creditors are external users. Regulatory authorities are internal users.
Correct! Regulatory authorities are external, not internal users of accounting information.
As of December 31, Stoneland Company has assets of $3,500 and stockholders' equity of $2,000. What are the liabilities for Stoneland Company as of December 31? $1,000. $2,500. $2,000. $1,500.
Correct! Using a variation of the basic accounting equation, Assets - Stockholders' Equity = Liabilities; $3,500 - $2,000 = $1,500.
Chpt 2 Indicate whether the following accounts generally will have debit entries only, credit entries only, or both debit and credit entries. Account (1) Cash (2) Accounts Receivable (3) Dividends (4) Accounts Payable (5) Salaries and Wages Expense (6) Service Revenue
Entries (1) Both Debits and Credits Entries (2) Both Debits and Credits Entries (3) Debit Entries Only (4) Both Debits and Credits Entries (5) Debit Entries Only (6) Credit Entries Only
At January 1, 2018, Sunland Industries reported retained earnings of $151900. During 2018, Sunland had a net loss of $30800 and paid dividends of $14400. At December 31, 2018, the amount of retained earnings is -$166300. -$106700. -$121100. -$137500.
ans: $106700 $151900 - $30800 - $14400 = $106700
The income statement and balance sheet columns of Iron and Cheyenne Company's worksheet reflect the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. Totals $72700 $45100 $59400 $87000 The net income (or loss) for the period is
ans: $27600 loss. sol: 72700-45100=27600 additional info:Hi, Please find the detailed answer as follows; Income Statement Dr. Balance = 72000 Less Income Statement Cr. Balance = 48000 Net Loss = 72000 - 48000 = $24000 (since expense is more than income) Option C ($24000 loss) is the correct answer.
SunlandCo. returned defective goods costing $4700 to Blossom Company on April 19, for credit. The goods were purchased April 10, on credit, terms 3/10, n/30. The entry by Sunland Co. on April 19, in receiving full credit is: Accounts Payable 4700 Purchase Discounts 111 Inventory 4559 Accounts Payable 4700 Inventory 111 Cash 4559 Accounts Payable 4700 Inventory 141 Cash 4841 Accounts Payable 4700 Inventory 4700
ans: Accounts Payable 4700 Inventory 4700
The journal entry to record a credit sale of merchandise is Cash Sales Revenue Accounts Receivable Sales Revenue Cash Service Revenue Accounts Receivable Service Revenue
ans: Accounts Receivable Sales Revenue
Which of the following statements is incorrect? -Expenses decrease stockholders' equity. -Expenses have normal debit balances. -Expenses are a negative factor in the computation of net income. -Expenses increase stockholders' equity.
ans: Expenses increase stockholders' equity.
Financial statements are prepared directly from the adjusted trial balance. general journal. ledger. trial balance.
ans: adjusted trial balance.
If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales allowance. discount. return. contra asset.
ans: allowance.
The information for preparing a trial balance on a worksheet is obtained from general journal entries. financial statements. general ledger accounts. business documents.
ans: general ledger accounts.
Sales revenue less cost of goods sold is called gross profit. marginal income. net income. net profit. Chpt 5
ans: gross profit.
A sales discount does not reduce the amount of cash received from a credit sale. increase an operating expense account. provide the purchaser with a cash saving. increase a contra-revenue account.
ans: increase an operating expense account.
The income summary account appears on the income statement. is a temporary account. is a permanent account. appears on the balance sheet.
ans: is a temporary account.
Sales revenue may be recorded before cash is collected. will always equal cash collections in a month. only results from credit sales. is only recorded after cash is collected.
ans: may be recorded before cash is collected.
Net income is gross profit less financing expenses. other expenses and losses. other expenses. operating expenses. Chpt 5
ans: operating expenses.
Chpt 2 The normal balance of any account is the side which increases that account. side which decreases that account. left side. right side.
ans: side which increases that account.
The primary source of revenue for a wholesaler is -service fees. -the sale of merchandise. -the sale of fixed assets the company owns. -investment income. Chpt 5
ans: the sale of merchandise.
Chpt2 For each of the following accounts indicate the effects of a debit and a credit on the accounts and the normal balance of the account. Debit Effect Credit Effect Normal Balance 1. Accounts Payable 2. Advertising Expense 3. Service Revenue 4. Accounts Receivable 5. Common Stock 6. Dividends
Debit Effect Credit Effect Normal Balance 1. Decrease Increase Credit 2. Increase Decrease Debit 3. Decrease Increase Credit 4. Increase Decrease Debit 5. Decrease Increase Credit 6. Increase Decrease Debit
On July 9, Marigold Company sells goods on credit to Ivanhoe Company for $4200, terms 2/10, n/60. Marigold receives payment on July 18. The entry by Marigold on July 18 is: Cash 4200 Accounts Receivable 4200 Cash 4200 Sales Discounts 84 Accounts Receivable 4116 Cash 4116 Sales Discounts 84 Accounts Receivable 4200 Cash 4284 Sales Discounts 84 Accounts Receivable 4200
ans: Cash 4116 Sales Discounts 84 Accounts Receivable 4200 sol: $4200 × 0.98 = $4116.
As a result of a thorough physical inventory, Coronado Company determined that it had inventory worth $319600 at December 31, 2018. This count did not take into consideration the following facts: Herschel Consignment currently has goods worth $48000 on its sales floor that belong to Coronado but are being sold on consignment by Herschel. The selling price of these goods is $74400. Coronado purchased $22500 of goods that were shipped on December 27, FOB destination, that will be received by Coronado on January 3. Determine the correct amount of inventory that Coronado should report. $319600. $339600. $367600. $387600.
ans: $367600. sol: $319600 + $48000 = $367600.
At December 1, 2018, Swifty Company's accounts receivable balance was $1780. During December, Swifty had credit revenues on account of $7260 and collected accounts receivable of $5900. At December 31, 2018, the accounts receivable balance is -$3140 debit. -$420 credit. -$3140 credit. -$420 debit.
ans: $420 credit. $1780 (debit) + $7260 (debit) - $5900 (credit) = $3140 (debit)
Bramble's Market recorded the following events involving a recent purchase of merchandise: Received goods for $72000, terms 2/10, n/30. Returned $1100 of the shipment for credit. Paid $300 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory increased by $69782. $71200. $69776. $69482.
ans: $69782. sol: [($72000 - $1100 × 0.98)] + 300 = $69782.
Fetherston Company's goods in transit at December 31 include: sales made purchases made (1) FOB destination (3) FOB destination (2) FOB shipping point (4) FOB shipping point Which items should be included in Fetherston's inventory at December 31? (2) and (3) (1) and (4) (2) and (4) (1) and (3)
ans: (1) and (4)
Sheridan Company purchased merchandise with an invoice price of $2400 and credit terms of 2/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms? 38% 48% 36% 72%
ans: 36% sol: [360 ÷ (30 - 10)] × 2% = 36%.
Pixies Inc. pays its rent of $54000 annually on January 1. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following will be true? Failure to make the adjustment does not affect the February financial statements. Expenses will be overstated by $4500 and net income and stockholders' equity will be understated by $4500. Assets will be overstated by $9000 and net income and stockholders' equity will be understated by $9000. Assets will be overstated by $4500 and net income and stockholders' equity will be overstated by $4500.
ans: Assets will be overstated by $4500 and net income and stockholders' equity will be overstated by $4500. sol: $54000 ÷ 12 = $4500.
On July 1, Runner's Sports Store paid $14000 to Corona Realty for 4 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by Runner's Sports Store is Debit Rent Expense, $14000; Credit Prepaid Rent, $3500. Debit Rent Expense, $3500; Credit Prepaid Rent, $3500. Debit Prepaid Rent, $3500; Credit Rent Expense, $3500. Debit Rent Expense, $14000; Credit Prepaid Rent, $14000.
ans: Debit Prepaid Rent, $3500; Credit Rent Expense, $3500. solution: $14000 ÷ 4 = $3500.
Each of the following accounts is closed to Income Summary except Expenses. Dividends. Revenues. All of these are closed to Income Summary.
ans: Dividends.
The private sector organization involved in developing accounting principles is the Financial Auditors' Standards Body. Feasible Accounting Standards Body. Financial Accounting Studies Board. Financial Accounting Standards Board.
ans: Financial Accounting Standards Board.
GAAP stands for Generally Accepted Auditing Principles. Generally Accepted Accounting Procedures. Generally Accepted Auditing Procedures. Generally Accepted Accounting Principles.
ans: Generally Accepted Accounting Principles.
Which of the following should be included in the physical inventory of a company? -Goods in transit from another company shipped FOB shipping point. -Goods in transit to another company shipped FOB shipping point. -Goods in transit to or from another company shipped FOB shipping point. -Goods held on consignment from another company. Chpt 6
ans: Goods in transit from another company shipped FOB shipping point.
Assuming that there is a net loss for the period, debits equal credits in all but which section of the worksheet? Trial balance columns Adjusted trial balance columns Income statement columns Adjustments columns
ans: Income statement columns
Under a perpetual inventory system, acquisition of merchandise for resale is debited to the Purchases account. Inventory account. Supplies account. Cost of Goods Sold account.
ans: Inventory account.
Which of the following is a true statement about closing the books of a corporation? Only revenues are closed to the Income Summary account. Revenues and expenses are closed to the Income Summary account. Expenses are closed to the Expense Summary account. Revenues, expenses, and the dividends account are closed to the Income Summary account.
ans: Revenues and expenses are closed to the Income Summary account.
Expenses sometimes make their contribution to revenue in a different period than when they are paid. When salaries and wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the time period? Due from Employees. Salaries and Wages Expense. Salaries and Wages Payable. Due to Employer.
ans: Salaries and Wages Payable.
The entire group of accounts maintained by a company is called the -chart of accounts. -general journal. -general ledger. -trial balance.
ans: general ledger.
The first step in solving an ethical dilemma is to -identify and analyze the principal elements in the situation. -identify the alternatives. -recognize an ethical situation and the ethical issues involved. -weigh the impact of each alternative on various stakeholders.
ans: recognize an ethical situation and the ethical issues involved.
Accrued revenues are -cash received and a liability recorded before services are performed. -revenue for services performed and recorded as liabilities before they are received. -revenue for services performed but not yet received in cash or recorded. -revenue for services performed and already received in cash and recorded.
ans: revenue for services performed but not yet received in cash or recorded.
Identify the impact on the accounting equation of each of the following transactions. 1. Purchase office supplies on account. 2. Paid secretary weekly salary. 3. Purchased office furniture for cash. 4. Received monthly utility bill to be paid at later time.
1. Increase assets and increase liabilities 2. Decrease assets and decrease stockholders' equity 3. Increase assets and decrease assets 4. Increase liabilities and decrease stockholders' equity
Chpt 2 Credits increase liabilities and decrease assets. decrease both assets and liabilities. increase both assets and liabilities. decrease both assets and equity.
Correct! Credits are used to increase liabilities and decrease assets. ans: increase liabilities and decrease assets.
Which of the following events is not recorded in the accounting records? The declaration of cash dividends. A cash investment is made into the business. An employee is terminated. Equipment is purchased on account.
Correct! If an employee is terminated, this represents an activity of a company, but does not represent a business transaction. Thus, there is no effect on the accounting equation. ans: an employee is terminated
Internal users of accounting information include all of the following except investors. company officers. marketing managers. production supervisors.
Correct! Investors (owners) are external users of accounting information.
Stockholders' equity is equal to assets minus revenues. assets plus liabilities. revenues minus expenses. assets minus liabilities.
Correct! The accounting equation states assets = liabilities + stockholders' equity. Therefore stockholders' equity = assets - liabilities.
Stockholders' equity is equal to revenues minus expenses. assets minus liabilities. assets minus revenues. assets plus liabilities.
Correct! The accounting equation states assets = liabilities + stockholders' equity. Therefore stockholders' equity = assets - liabilities. ans: assets minus liabilities.
Chpt 2 The expanded accounting equation is -Assets = Liabilities - Common Stock - Dividends - Revenues - Expenses. -Assets = Liabilities + Common Stock + Dividends + Revenues - Expenses. -Assets = Liabilities + Common Stock - Dividends + Revenues - Expenses. -Assets + Liabilities = Common Stock + Dividends + Revenues + Expenses.
Correct! The expanded accounting equation is: Assets = Liabilities + Common Stock - Dividends + Revenues - Expenses. ans: Assets = Liabilities + Common Stock - Dividends + Revenues - Expenses.
During 2015, Gibson Company's assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders' equity therefore increased $140,000. decreased $40,000. increased $40,000. decreased $140,000.
Correct! This transaction results in a decrease in assets of $50,000, a decrease in liabilities of $90,000, and increase in stockholders' equity of $40,000. The effect on the basic accounting equation is as follows: Assets = Liabilities + Stockholders' Equity; -$50,000 = -$90,000 + $40,000. ans: increased $40,000
Chpt 2 What is the normal balance for each of the following accounts? Accounts (a) Accounts Receivable (b) Cash (c) Dividends (d) Accounts Payable (e) Service Revenue (f) Salaries and Wages Expense (g) Common Stock
Normal Balance (a) Debit Balance (b) Debit Balance (c) Debit Balance (d) Credit Balance (e) Credit Balance (f) Debit Balance (g) Credit Balance
Chpt 2 What are the normal balances for Apple's following accounts: Accounts Cash Accounts Payable Interest Expense
Normal Balance Debit Credit Debit
Chpt 3 A company spends $15 million dollars for an office building. Over what period should the cost be written off? -Over the useful life of the building. -All in the first year. -After $15 million in revenue is recognized. -When the $15 million is expended in cash.
Over the useful life of the building.
On January 1, 2018, Concord Company reported stockholders' equity of $704800. During the year, the company paid dividends of $30800. At December 31, 2018, the amount of stockholders' equity was $825200. What amount of net income or net loss would the company report for 2015?
Sol: $704800 + X - $30800 = $825200; X = $151200.
Bonita Company compiled the following financial information as of December 31, 2018: Revenues $347000 Retained earnings (1/1/18) 59000 Equipment 80600 Expenses 250600 Cash 89800 Dividends 19700 Supplies 10500 Accounts payable 40000 Accounts receivable 69800 Common stock 80300 Bonita's assets on December 31, 2018 are
Sol: $80600 + $89800 + $10500 + $69800 = $250700.
Blossom's Computer Repair Shop started the year with total assets of $320000 and total liabilities of $200000. During the year, the business recorded $518000 in computer repair revenues, $306000 in expenses, and Blossom paid dividends of $51000. Stockholders' equity at the end of the year was
Sol: ($320000 - $200000) + ($518000 - $306000) - $51000 = $281000.
Chpt 2 Indicate whether each of the following accounts is an asset, a liability, or a stockholders' equity account and whether it has a normal debit or credit balance: Account (a) Accounts Receivable (b) Accounts Payable (c) Equipment (d) Dividends (e) Supplies
Type Normal Balance (a) Asset Debit balance (b) Liability Credit balance (c) Asset Debit balance (d) Stockholders'Equity Debit balance (e) Asset Debit balance
Crane Eyes Downtown Diner received a bill of $640 from the Grouper Wine Advertising Agency. The owner, A. A. Bondy, is postponing payment of the bill until a later date. The effect on specific items in the basic accounting equation is
an increase in Accounts Payable and a decrease in Retained Earnings.
Chpt 2 Which of the following correctly identifies normal balances of accounts? Entry field with correct answer Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Credit Expenses Credit Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Debit Expenses Credit Assets Credit Liabilities Debit Stockholders' Equity Debit Revenues Credit Expenses Debit Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Credit Expenses Debit
ans: Assets Debit Liabilities Credit Stockholders' Equity Credit Revenues Credit Expenses Debit
RiverbedCompany paid $920 on account to a creditor. The transaction was erroneously recorded as a debit to Cash of $290 and a credit to Accounts Receivable, $290. The correcting entry is Accounts Receivable 290 Cash 290 Accounts Receivable 290 Accounts Payable 290 Accounts Receivable 290 Accounts Payable 920 Cash 1210 Accounts Payable 920 Cash 920
ans: Accounts Receivable 290 Accounts Payable 920 Cash 1210 sol: $920 + $290 = $1210.
Sheridan Company sells merchandise on account for $3400 to Carla Vista Company with credit terms of 1/10, n/30. Carla Vista Company returns $800 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Sheridan Company make upon receipt of the check? Cash 3366 Sales Discounts 34 Sales Returns and Allowances 800 Accounts Receivable 2600 Cash 2574 Sales Returns and Allowances 826 Accounts Receivable 3400 Cash 2600 Accounts Receivable 2600 Cash 2574 Sales Returns and Allowances 800 Sales Discounts 26 Accounts Receivable 3400
ans: Cash 2574 Sales Returns and Allowances 800 Sales Discounts 26 Accounts Receivable 3400 sol: ($3400 - $800) × 0.99 = $2574.
An adjusted trial balance proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. is a required financial statement under generally accepted accounting principles. cannot be used to prepare financial statements. is prepared after the financial statements are completed.
ans: proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.
In the first month of operations for Sheridan Industries, the total of the debit entries to the cash account amounted to $35300 ($15200 investment by stockholders and revenues of $20100). The total of the credit entries to the cash account amounted to $22800 (purchase of equipment $7200 and payment of expenses $13600). At the end of the month, the cash account has a(n) -$12500 debit balance. -$7600 debit balance. -$12500 credit balance. -$7600 credit balance.
ans: $12500 debit balance. $35300 (debit) - $22800 (credit) = $12500 debit balance
Double Nickels Company purchased equipment for $9000 on January 1, 2018. The company expects to use the equipment for 3 years. It has no salvage value. Monthly depreciation expense on the asset is $250. $0. $3000. $9000.
ans: $250 ($9000 ÷ 3) ÷ 12 = $250.
On June 1, 2018, Bramble Inc. reported a cash balance of $14000. During June, Bramble made deposits of $5070 and made disbursements totalling $16200. What is the cash balance at the end of June? -$2200 credit balance -$2870 debit balance -$19070 debit balance -$2870 credit balance
ans: $2870 debit balance $14000 (debit) + $5070 (debit) - $16200 (credit) = $2870 debit balance
Bramble Company sells merchandise on account for $4800 to Cullumber Company with credit terms of 1/10, n/30. Cullumber Company returns $1100 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? $3663 $4752 $4663 $3700
ans: $3663 sol: ($4800 - $1100) × 0.99 = $3663.
An accountant has debited an asset account for $1210 and credited a liability account for $510. What can be done to complete the recording of the transaction? -Credit a different asset account for $700. -Debit a Stockholders' equity account for $700. -Nothing further must be done. -Debit another asset account for $700.
ans: Credit a different asset account for $700. $1,200 (debit) = $500 (credit) + X; X = $700 Credit
Sheridan Company uses a perpetual inventory system and purchased inventory from Pharoah Company. The shipping costs were $580 and the terms of the shipment were FOB shipping point. Sheridan would have the following entry regarding the shipping charges: Freight Expense 580 Cash 580 Freight-Out 580 Cash 580 Inventory 580 Cash 580 There is no entry on Sheridan's books for this transaction.
ans: Inventory 580 Cash 580
If a purchaser using a perpetual system agrees to freight terms of FOB shipping point, then the -Inventory account will not be affected. -seller will bear the freight cost. -carrier will bear the freight cost. -Inventory account will be increased.
ans: Inventory account will be increased.
A buyer would record a payment within the discount period under a perpetual inventory system by crediting Purchase Discounts. Sales Discounts. Accounts Payable. Inventory.
ans: Inventory.
The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit Accounts Payable. Purchase Returns and Allowances. Sales Revenue. Inventory.
ans: Inventory.
Under the perpetual system, freight costs incurred by the buyer for the transporting of goods is recorded in Freight - In. Inventory. Freight Expense. Freight - Out.
ans: Inventory.
Chpt 3 Live Wire Hot Rod Shop follows the revenue recognition principle. Live Wire services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Live Wire on August 5. Live Wire receives the check in the mail on August 6. When should Live Wire show that the revenue was recognized? July 31 August 6 August 5 August 1
ans: July 31
Which of the following expressions is incorrect? -Net income + operating expenses = gross profit -Sales revenue - cost of goods sold - operating expenses = net income -Operating expenses - cost of goods sold = gross profit -Gross profit - operating expenses = net income Chpt 5
ans: Operating expenses - cost of goods sold = gross profit
Which of the following is a true statement about inventory systems? -Periodic inventory systems require more detailed inventory records. -Perpetual inventory systems require more detailed inventory records. -A periodic system requires cost of goods sold be determined after each sale. -A perpetual system determines cost of goods sold only at the end of the accounting period.
ans: Perpetual inventory systems require more detailed inventory records.
Which of the following depicts the proper sequence of steps in the accounting cycle? Prepare a trial balance, post to ledger accounts, post adjusting entries Prepare a trial balance, prepare adjusting entries, prepare financial statements Journalize the transactions, analyze business transactions, prepare a trial balance Prepare a trial balance, prepare financial statements, prepare adjusting entries
ans: Prepare a trial balance, prepare adjusting entries, prepare financial statements
Which one of the following is an optional step in the accounting cycle of a business enterprise? Post to the ledger accounts Analyze business transactions Prepare a worksheet Prepare a trial balance
ans: Prepare a worksheet
Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process? Recording. Analysis. Communication. Identification.
ans: Recording.
A credit granted to a customer for returned goods requires a debit to Cash and a credit to Sales Returns and Allowances. Sales Revenue and a credit to Cash. Sales Returns and Allowances and a credit to Accounts Receivable. Accounts Receivable and a credit to a contra-revenue account.
ans: Sales Returns and Allowances and a credit to Accounts Receivable.
Chpt 2 A debit is not the normal balance for which account listed below? -Accounts Receivable -Dividends -Cash -Service Revenue
ans: Service Revenue
A journal provides -a chronological record of transactions. -a list of all accounts used in the business. -the balances for each account. -information about a transaction in several different places.
ans: a chronological record of transactions.
On January 14, Swifty Industries purchased supplies of $750 on account. The entry to record the purchase will include -a debit to Supplies Expense and a credit to Accounts Receivable. -a debit to Supplies and a credit to Accounts Payable. -a debit to Supplies and a credit to Cash. -a debit to Accounts Receivable and a credit to Supplies.
ans: a debit to Supplies and a credit to Accounts Payable. Dr Supplies $750 Cr Accounts Payable $750
Cost of goods sold is determined only at the end of the accounting period in -a perpetual inventory system. -a periodic inventory system. -both a perpetual and a periodic inventory system. -neither a perpetual nor a periodic inventory system. Chpt 5
ans: a periodic inventory system.
An adjusting entry -is always a compound entry. -affects a balance sheet account and an income statement account. -affects two balance sheet accounts. -affects two income statement accounts.
ans: affects a balance sheet account and an income statement account.
If a resource has been consumed but a bill has not been received at the end of the accounting period, then -it is optional whether to record the expense before the bill is received. -an expense should be recorded when the bill is received. -an expense should be recorded when the cash is paid out. -an adjusting entry should be made recognizing the expense.
ans: an adjusting entry should be made recognizing the expense.
A current asset is an asset that a company expects to convert to cash or use up within one year. the last asset purchased by a business. usually found as a separate classification in the income statement. an asset which is currently being used to produce a product or service.
ans: an asset that a company expects to convert to cash or use up within one year.
The usual sequence of steps in the transaction recording process is: -ledger → journal → analyze. -analyze → journal → ledger. -journal → ledger → analyze. -journal → analyze → ledger.
ans: analyze → journal → ledger.
The first required step in the accounting cycle is journalizing transactions in the book of original entry. reversing entries. analyzing transactions. posting transactions.
ans: analyzing transactions.
The Income Summary account is an important account that is used in preparing adjusting entries. during interim periods. annually in preparing closing entries. annually in preparing correcting entries.
ans: annually in preparing closing entries.
An account is an individual accounting record of increases and decreases in specific -expenses. -assets, liabilities, and stockholders' equity items. -liabilities. -assets.
ans: assets, liabilities, and stockholders' equity items.
Customarily, a trial balance is prepared only at the inception of the business. after each journal entry is posted. at the end of an accounting period. at the end of each day.
ans: at the end of an accounting period.
Cost of goods sold is computed from the following equation: -beginning inventory + cost of goods purchased - ending inventory. -sales + gross profit - ending inventory + beginning inventory. -sales - cost of goods purchased + beginning inventory - ending inventory. -beginning inventory - cost of goods purchased + ending inventory.
ans: beginning inventory + cost of goods purchased - ending inventory.
In recording business transactions, evidence that an accounting transaction has taken place is obtained from -the Internal Revenue Service. -the SEC. -the public relations department. -business documents.
ans: business documents.
Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the transportation company. seller. buyer. buyer and the seller.
ans: buyer.
Closing entries -cause the revenue and expense accounts to have zero balances. -summarize the activity in every account. -are prepared before the financial statements. -reduce the number of permanent accounts.
ans: cause the revenue and expense accounts to have zero balances.
Under a consignment arrangement, the -consignor has ownership until goods are sold to a customer. -consignor has ownership until goods are shipped to the consignee. -consignee has ownership when the goods are in the consignee's possession. -consigned goods are included in the inventory of the consignee.
ans: consignor has ownership until goods are sold to a customer
The Sales Returns and Allowances account is classified as a(n) expense account. asset account. contra revenue account. contra asset account.
ans: contra revenue account.
Beginning inventory plus the cost of goods purchased equals total goods purchased. cost of goods sold. net purchases. cost of goods available for sale.
ans: cost of goods available for sale.
Two categories of expenses for merchandising companies are -cost of goods sold and financing expenses. -operating expenses and financing expenses. -cost of goods sold and operating expenses. -sales and cost of goods sold. Chpt 5
ans: cost of goods sold and operating expenses.
The income statement for the month of June, 2018 of Blossom Enterprises contains the following information: Revenues $6670 Expenses: Salaries and Wages Expense $2940 Rent Expense 1480 Advertising Expense 750 Supplies Expense 320 Insurance Expense 100 Total expenses 5590 Net income $1080 The entry to close the revenue account includes a debit to Income Summary for $1080. credit to Income Summary for $1080. debit to Income Summary for $6670. credit to Income Summary for $6670.
ans: credit to Income Summary for $6670. hint: revenues
If Income Summary has a credit balance after revenues and expenses have been closed into it, the closing entry for Income Summary will include a credit to the retained earnings account. debit to the dividends account. credit to the dividends account. debit to the retained earnings account.
ans: credit to the retained earnings account.
Liabilities are generally classified on a balance sheet as present liabilities and future liabilities. current liabilities and long-term liabilities. small liabilities and large liabilities. tangible liabilities and intangible liabilities.
ans: current liabilities and long-term liabilities.
Merriweather Post Pavillion received a $820 check from a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $280 and a credit to Service Revenue $280. The correcting entry is debit Cash, $820; credit Accounts Receivable, $820. debit Accounts Receivable, $820; credit Cash, $540 and Service Revenue, $280. debit Cash, $540 and Service Revenue, $280; credit Accounts Receivable, $820. debit Cash, $540 and Accounts Receivable, $280; credit Service Revenue, $820.
ans: debit Cash, $540 and Service Revenue, $280; credit Accounts Receivable, $820. sol: $820 - $280 = $540.
Husker Du Supplies Inc. purchased a 12-month insurance policy on March 1, 2018 for $1800. At March 31, 2018, the adjusting journal entry to record expiration of this asset will include a debit to Prepaid Insurance and a credit to Cash for $1800. debit to Prepaid Insurance and a credit to Insurance Expense for $200. debit to Insurance Expense and a credit to Prepaid Insurance for $150. debit to Insurance Expense and a credit to Cash for $150.
ans: debit to Insurance Expense and a credit to Prepaid Insurance for $150 sol: $1800 ÷ 12 = $150.
The collection of a $7500 account within the 2 percent discount period will result in a -debit to Accounts Receivable for $7350. -credit to Accounts Receivable for $7350. -debit to Sales Discounts for $150. -credit to Cash for $7350.
ans: debit to Sales Discounts for $150. sol: $7500 × 0.02 = $150.
Payment of accounts payable affects the components of the accounting equation in the following way: - increases assets and decreases liabilities. - decreases assets and increases stockholders' equity. - decreases stockholders' equity and decreases liabilities. - decreases assets and decreases liabilities.
ans: decreases assets and decreases liabilities.
In preparing closing entries the retained earnings account will be debited if there is net income for the period. the dividends account will be debited. each revenue account will be credited. each expense account will be credited.
ans: each expense account will be credited.
The first step in posting involves -writing in the journal the account number to which the credit amount was posted. -writing in the journal the account number to which the debit amount was posted. -entering in the appropriate ledger account the date, journal page, and credit amount shown in the journal. -entering in the appropriate ledger account the date, journal page, and debit amount shown in the journal.
ans: entering in the appropriate ledger account the date, journal page, and debit amount shown in the journal.
A trial balance is a listing of the chart of accounts. transactions in a journal. the totals from the journal pages. general ledger accounts and balances.
ans: general ledger accounts and balances.
The information for preparing a trial balance on a worksheet is obtained from Chpt 4
ans: general ledger accounts.
Sales revenues are usually considered recognized when -cash is received from credit sales. -goods have been transferred from the seller to the buyer. -an order is received. -adjusting entries are made.
ans: goods have been transferred from the seller to the buyer.
Oriole Company purchased land in 2010 for $305000. In 2018, it purchased a nearly identical parcel of land for $458000. In its 2018 balance sheet, Martin valued these two parcels of land at a combined value of $933000. By reporting the land in this manner, Oriole Co. has violated the convergence monetary unit assumption historical cost principle economic entity assumption
ans: historical cost principle
The accounting process is correctly sequenced as recording, communication, identification. identification, recording, communication. identification, communication, recording. communication, recording, identification.
ans: identification, recording, communication.
Chpt 2 The double-entry system requires that each transaction must be recorded in a journal and in a ledger. in at least two different accounts. in two sets of books. first as a revenue and then as an expense
ans: in at least two different accounts.
Freight costs paid by a seller on merchandise sold to customers will cause an increase -to the cost of goods sold of the seller. -to a contra-revenue account of the seller. -in operating expenses for the seller. -in the selling expense of the buyer.
ans: in operating expenses for the seller.
Closing entries are made in order to terminate the business as an operating entity. in order to transfer net income (or loss) and dividends to the retained earnings account. so that financial statements can be prepared. so that all assets, liabilities, and stockholders' equity accounts will have zero balances when the next accounting period starts.
ans: in order to transfer net income (or loss) and dividends to the retained earnings account.
The net income (or loss) for the period is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet. is found by computing the difference between the trial balance totals and the adjusted trial balance totals. is found by computing the difference between the income statement columns of the worksheet. cannot be found on the worksheet.
ans: is found by computing the difference between the income statement columns of the worksheet.
The Dividends account -must show transactions every accounting period. -is increased with debits and decreased with credits. -appears on the income statement along with the expenses of the business. -is not a proper subdivision of retained earnings.
ans: is increased with debits and decreased with credits.
The final step in the recording process is to transfer the journal information to the -ledger. -file cabinets. -trial balance. -financial statements.
ans: ledger.
A chart of accounts for a business firm -indicates the amount of profit or loss for the period. -lists the accounts and account numbers that identify their location in the ledger. -shows the balance of each account in the general ledger. -is a graph.
ans: lists the accounts and account numbers that identify their location in the ledger.
Correcting entries affect balance sheet accounts only. may involve any combination of accounts in need of correction. always affect at least one balance sheet account and one income statement account. affect income statement accounts only.
ans: may involve any combination of accounts in need of correction.
After gross profit is calculated, operating expenses are deducted to determine gross profit on sales. net margin. gross margin. net income. Chpt 5
ans: net income.
A worksheet can be thought of as a(n) Chpt 4
ans: optional device used by accountants.
Prepaid expenses are paid and recorded in an asset account after they are used or consumed. paid and recorded in an asset account before they are used or consumed. incurred but not yet paid or recorded. incurred and already paid or recorded.
ans: paid and recorded in an asset account before they are used or consumed
If a company is given credit terms of 2/10, n/30, it should -pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill. -pay within the discount period and recognize a savings. -recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price. -hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time.
ans: pay within the discount period and recognize a savings.
The procedure of transferring journal entries to the ledger accounts is called reporting. posting. journalizing. analyzing.
ans: posting.
A worksheet is a multiple column form that facilitates the analysis process. identification of events. measurement process. preparation of financial statements.
ans: preparation of financial statements.
Equipment is classified in the balance sheet as a current asset. an intangible asset. a long-term investment. property, plant, and equipment.
ans: property, plant, and equipment.
A sales invoice is a source document that provides support for goods purchased for resale. provides evidence of incurred operating expenses. provides evidence of credit sales. serves only as a customer receipt.
ans: provides evidence of credit sales.
Gross profit will result if sales revenue is greater than operating expenses. sales revenue is greater than cost of goods sold. operating expenses are greater than cost of goods sold. operating expenses are less than net income.
ans: sales revenue is greater than cost of goods sold.
If errors occur in the recording process, they should be corrected as soon as they are discovered. should be corrected when preparing closing entries. cannot be corrected until the next accounting period. should be corrected as adjustments at the end of the period.
ans: should be corrected as soon as they are discovered.
Generally accepted accounting principles are -theories that are based on physical laws of the universe. -principles that have been proven correct by academic researchers. -income tax regulations of the Internal Revenue Service. -standards that indicate how to report economic events.
ans: standards that indicate how to report economic events.
If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has Chpt 4
ans: suffered a net loss for the period.
All of the following are property, plant, and equipment except land. buildings. machinery. supplies.
ans: supplies.
Closing entries are necessary for permanent accounts only. permanent or real accounts only. temporary accounts only. both permanent and temporary accounts.
ans: temporary accounts only.
The credit terms offered to a customer by a business firm are 2.8/10, n/30, which means that the customer can deduct a 2.8% discount if the bill is paid between the 10th and 30th day from the invoice date. the customer can deduct a 2.8% discount if the bill is paid within 10 days of the invoice date. two sales returns can be made within 10 days of the invoice date and no returns thereafter. the customer must pay the bill within 10 days.
ans: the customer can deduct a 2.8% discount if the bill is paid within 10 days of the invoice date.
Garth Dickinson, owner of Garth's Fine Wines, also owns a personal residence that costs $478000. The market value of his residence is $621000. During preparation of the financial statements for Garth's Fine Wines, the accounting concept most relevant to the presentation of Garth's home is convergence. the monetary unit assumption. the economic entity assumption. the fair value principle.
ans: the economic entity assumption.
Chpt2 In recording an accounting transaction in a double-entry system -there must always be entries made on both sides of the accounting equation. -the amount of the debits must equal the amount of the credits. -there must only be two accounts affected by any transaction. -the number of debit accounts must equal the number of credit accounts.
ans: there must only be two accounts affected by any transaction.
ConcordVan Company purchased equipment for $2670 cash. As a result of this event, -total assets remained unchanged. -stockholders' equity decreased and total assets increased by $2670. -stockholders' equity decreased by $2670. -total assets increased by $2670.
ans: total assets remained unchanged. Dr Equipment $2670 Cr Cash $2670
Fugazi City College sold season tickets for the 2018 football season for $240000. A total of 8 games will be played during September, October and November. In September, three games were played. The adjusting journal entry at September 30 will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $90000. will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $80000. will include a debit to Cash and a credit to Ticket Revenue for $60000. is not required. No adjusting entries will be made until the end of the season in November.
ans: will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $90000. sol: $240000 × 3/8 = $90000.
If the total debits exceed total credits in the balance sheet columns of the worksheet, stockholders' equity is in error because a mistake has occurred. will not be affected. will increase because net income has occurred. will decrease because a net loss has occurred.
ans: will increase because net income has occurred.
If the total debits exceed total credits in the balance sheet columns of the worksheet, stockholders' equity Chpt 4
ans: will increase because net income has occurred.
In a perpetual inventory system, cost of goods sold is recorded on a daily basis. on a monthly basis. with each sale. on an annual basis.
ans: with each sale.
Concord Company purchased merchandise inventory with an invoice price of $6200 and credit terms of 5/10, n/30. What is the net cost of the goods if Concord Company pays within the discount period? $6200 $5580 $4960 $5890
ans:$5890 sol: $6200 × (1 - 0.05) = $5890.
Crue Company had the following transactions during 2018: Sales of $4800 on account Collected $2000 for services to be performed in 2019 Paid $1625 cash in salaries Purchased airline tickets for $250 in December for a trip to take place in 2019 What is Crue's 2018 net income using accrual accounting-basis after accrual?
sol: $4800 - $1625 = $3175. ans: $3175.
(a) The following are users of financial statements. Identify the users as being either external users or internal users. 1. Customers 2. Internal Revenue Service 3. Labor unions 4. Marketing manager 5. Production supervisor 6. Securities and ExchangeCommission 7. Store manager 8. Suppliers 9. Vice president of finance (b) The following questions could be asked by an internal user or an external user. Identify each of the questions as being more likely asked by an internal user or an external user. 1. Can we afford to give our employees a pay raise? 2. Did the company earn a satisfactory income? 3. Do we need to borrow in the near future? 4. How does the company's profitability compare to other companies? 5. What does it cost us to manufacture each unit produced? 6. Which product should we emphasize? 7. Will the company be able to pay its short-term debts?
(a) 1. External users 2. External users 3. External users 4. Internal users 5. Internal users 6. External users 7. Internal users 8. External users 9. Internal users (b) 1. Internal users 2. External users 3. Internal users 4. External users 5. Internal users 6. Internal users 7. External users
Indicate whether each of the following items is an asset, liability, or part of stockholders' equity. (a) Accounts receivable (b) Salaries and wages payable (c) Equipment (d) Supplies (e) Owner's investment (f) Notes payable
(a) Assets (b) Liability (c) Assets (d) Assets (e) Stockholders' Equity (f) Liability
Presented below are three business transactions. For each column, indicate whether the transactions increased, decreased, or had no effect on assets, liabilities, and stockholders' equity. (a) Purchased supplies on account. (b) Received cash for performing a service. (c) Paid expenses in cash.
(a) Assets: Increased , Liabilities: Increased , Stockholder: No effect (b) Assets: Increased , Liabilities: No effect , Stockholder: Increased (c) Assets: Decreased , Liabilities: No effect , Stockholder: Decreased
Presented below are three business transactions. Determine the effect on assets, liabilities, and stockholders' equity of the following three transactions. For each column, indicate whether the transactions increased, decreased , or had no effect. (a) Stockholders invested cash in the business for common stock. (b) Paid a cash dividend. (c) Received cash from a customer who had previously been billed for services performed.
(a) Assets: Increased , Liabilities: No effect , Stockholder: Increased (b) Assets: Decreased , Liabilities: No effect , Stockholder: Decreased (c) Assets: No effect , Liabilities: No effect , Stockholder: No effect
Classify each of the following items as dividends, revenue, or expense. (a) Advertising expense (b) Service revenue (c) Insurance expense (d) Salaries and wages expense (e) Dividends (f) Rent revenue (g) Utilities expense
(a) Expense (b) Revenue (c) Expense (d) Expense (e) Dividends (f) Revenue (g) Expense
Chpt 2 State the rules of debit and credit as applied to: (a) Asset accounts (b) Liability accounts (c1) Revenues, Common Stock, and Retained Earnings (c2) Expenses and Dividends
(a) INCREASE by debits and DECREASE by credits. (b) DECREASE by debits and INCREASE by credits. (c1) INCREASE by credits and DECREASE by debits. (c2) INCREASE by debits and DECREASE by credits.
(a) The liabilities of Holland Company are $116,000 and its stockholders' equity is $229,500. What is the amount of Holland Company's total assets? Holland Company's total assets (b) The total assets of Holland Company are $194,000 and its stockholders' equity is $83,000. What is the amount of its total liabilities? Holland Company's total liabilities (c) The total assets of Holland Company are $833,000 and its liabilities are equal to one-half of its total assets. What is the amount of Holland Company's stockholders' equity? Holland Company's owner's equity
(a)Total assets (Liability + Stockholders equity) = $116,000 + $229,500 = $345,500 (b)Total liabilities (Assets - Stockholders equity)= $194,000 -$83,000 = $111,000 (c) Stockholders' equity (Assets - (0.5 x Assets)) = $833,000 - 0.5($833,000) = $416,500
Chpt 3 Hart Corporation encounters the following situations: Identify what type of adjusting entry (prepaid expense, unearned revenue, accrued expense, or accrued revenue) is needed in each situation at December 31, 2017. 1. Hart collects $1,300 from a customer in 2017 for services to be performed in 2018. 2. Hart incurs utility expense which is not yet paid in cash or recorded. 3. Hart's employees worked 3 days in 2017 but will not be paid until 2018. 4. Hart performs services for customers but has not yet received cash or recorded the transaction. 5. Hart paid $2,400 rent on December 1 for the 4 months starting December 1. 6. Hart received cash for future services and recorded a liability until the service was performed. 7. Hart performed consulting services for a client in December 2017. On December 31, it had not billed the client for services performed of $1,200. 8. Hart paid cash for an expense and recorded an asset until the item was used up. 9. Hart purchased $900 of supplies in 2017; at year-end, $400 of supplies remain unused. 10. Hart purchased equipment on January 1, 2017; the equipment will be used for 5 years. 11. Hart borrowed $10,000 on October 1, 2017, signing an 8% one-year note payable.
1. Unearned Revenue 2. Accrued Expense 3. Accrued Expense 4. Accrued Revenue 5. Prepaid Expense 6. Unearned Revenue 7. Accrued Revenue 8. Prepaid Expense 9. Prepaid Expense 10. Prepaid Expense 11. Accrued Expense
Chpt 2 For the following transactions, indicate the account debited and the account credited. Account (a) Supplies are purchased on account (b) Cash is received on signing a note payable (c) Employees are paid salaries in cash
Account Debited AccountCredited (a) Supplies Accounts Payable (b) Cash Notes Payable (c)Salaries and Wages Expense Cash
