Final Exam Review

Under a perpetual inventory system:

Cost of goods sold is recorded with each sale.

A long-term asset is recorded at the:

Cost of the asset plus all costs necessary to the asset ready for use.

Expenses represent:

Costs of providing products or services to customers.

Snow Company has the following inventory transactions for the year: Date Transaction Numbers of Units Unit Cost Jan.1 Beginning inventory 200 $4.00 Apr.20 Purchase 800 4.25 Sep.8 Purchase 400 4.50 Assuming Snow sells 1,000 units, calculate ending inventory under FIFO.

$1,800.

The Open Grill incurred the following costs in acquiring a new piece of land: Cost of the land$80,000 Commissions 4,800 Liability insurance for the first year 1,200 Cost of removing existing building 20,000 Sale of salvaged materials (4,000) Total costs$102,000 What is the total recorded cost of the land?

$100,800.

At the beginning of the year, Bennett Supply has inventory of $3,500. During the year, the company purchases an additional $12,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $4,000. What amount will Bennett report for cost of goods sold?

$11,500.

A company purchased land and building from a seller for $900,000. A separate appraisal reveals the fair value of the land to be $200,000 and the fair value of the building to be $800,000. For what amount would the company record land at the time of purchase?

$180,000.

A local Starbucks sells gift cards of $10,000 during the year. By the end of the year, customers have redeemed $8,000 of gift cards. What will be the year-end balance in the Deferred Revenue account?

$2,000.

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). Assuming Nelson Inc. has a December 31 year-end, on March 31, 20X2, Nelson Inc. will record interest revenue of:

$2,000.

Maxwell Corporation has the following inventory information at the end of the year: InventoryQuantity Unit Cost Unit NRV Item A 20 $20 $35 Item B 50 30 25 Item C 40 10 15 Using the lower of cost and net realizable method, for what amount would Maxwell report ending inventory?

$2,050.

Madison Outlet has the following inventory transactions for the year: Date Transaction Numbers of Units Unit Cost Totalcost Jan. 1 Beginning inventory 10 $200 $2,000 Mar. 14 Purchase 15 300 4,500 $6,500 Jan. 1 - Dec. 31 Total sales to customers 12 What amount would Madison report for cost of goods sold using FIFO?

$2,600.

Madison Outlet has the following inventory transactions for the year: Date Transaction Numbers of Units Unit Cost Totalcost Jan. 1 Beginning inventory 10 $200 $2,000 Mar. 14 Purchase 15 300 4,500 $6,500 Jan. 1 - Dec. 31 Total sales to customers 12 What amount would Madison report for ending inventory using weighted-average cost?

$3,380.

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 debit The company estimates future uncollectible accounts to be 4% of accounts receivable. At what amount would Bad Debt Expense be reported in the current year's income statement?

$3,600.

Madison Outlet has the following inventory transactions for the year: Date Transaction Numbers of Units Unit Cost Totalcost Jan. 1 Beginning inventory 10 $200 $2,000 Mar. 14 Purchase 15 300 4,500 $6,500 Jan. 1 - Dec. 31 Total sales to customers 12 What amount would Madison report for ending inventory using FIFO?

$3,900.

Snow Company has the following inventory transactions for the year: Date Transaction Numbers of Units Unit Cost Jan.1 Beginning inventory 200 $4.00 Apr.20 Purchase 800 4.25 Sep.8 Purchase 400 4.50 Assuming Snow sells 1,000 units, calculate cost of goods sold under LIFO.

$4,350.

A company has the following account balances at the end of the year: Credit Sales = $400,000 Accounts receivable = $80,000 Allowance for Uncollectible Accounts = $400 credit The company estimates 1% of credit sales will be uncollectible. At what amount would Allowance for Uncollectible Accounts be reported in the current year's balance sheet?

$4,400.

A company's own cash records show a balance of $3,200. After examining the bank statement, the following information is revealed: Bank's balance for cash$4,000 Deposits outstanding$2,300 NSF check$600 Checks outstanding$1,800 Note collected by the bank$2,000 Service fee charged by the bank$100 After reconciliation, the correct balance of cash is

$4,500

Suppose the balance of the allowance for uncollectible accounts at the end of the current year is $800 (credit) before any adjustment entry. The company estimates future uncollectible accounts to be $5,600. At what amount would bad debt expense be reported in the current year's income statement?

$4,800.

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What is the amount of net revenues (total revenue minus sales discounts) as of August 12?

$4,850.

Pizza Shop sells toaster ovens with a one-year warranty to fix any defects. For the current year, 100 toaster ovens have been sold. By the end of the year 4 ovens have been fixed for an average of $80 each. Management estimates that 5 more of the 100 sold will need to be fixed next year for an estimated $80 each. For how much should Pizza Shop report warranty liability at the end of the current year?

$400.

If Executive Airways borrows $10 million on April 1, 20X1, for one year at 6% interest, how much interest expense does it record for the year ended December 31, 20X1?

$450,000

On August 4, Sanders provides services to Frederickson for $5,000, terms 3/10, n/30. Frederickson pays for the services on August 12. What amount would Sanders record as revenue on August 4?

$5,000.

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a credit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be:

$5,100.

At the end of its first year of operations, a company establishes an allowance for future uncollectible accounts for $5,600. At what amount would bad debt expense be reported in the current year's income statement?

$5,600.

On October 1, a franchise was purchased for $2,000,000. The franchise agreement is for 10 years. What is the amount of amortization expense by the end of the first year, December 31 (using partial year straight-line amortization)? (Do not round intermediate calculations.)

$50,000.

The Cheese Factory incurred the following costs related to acquiring a new piece of equipment: Cost of the equipment$50,000 Sales tax (8%) 4,000 Shipping 3,000 Installation 2,000 Depreciation during the first month 1,000 Total costs$60,000 What is the total recorded cost of the equipment?

$59,000.

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). On December 31, 20X1, Nelsen will accrue interest revenue of:

$6,000.

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be:

$6,100.

The original cost of a piece of equipment was $100,000. The equipment was depreciated using the straight-line method with annual depreciation of $20,000. After two years, the fair value of the equipment is $82,000. How much is the book value of the equipment at the end of the second year?

$60,000.

Bryer Co. purchases all of the assets and liabilities of Stellar Co. for $1,500,000. The fair value of Stellar's assets is $2,000,000, and its liabilities have a fair value of $1,200,000. The book value of Stellar's assets and liabilities are not known. For what amount would Bryer record goodwill associated with the purchase?

$700,000.

Equipment was purchased for $50,000. At that time, the equipment was expected to be used eight years and have a residual value of $10,000. The company uses straight-line depreciation. At the beginning of the third year, the company changed its estimated useful life to a total of six years (four years remaining) and the residual value to $8,000. What is depreciation expense in the third year?

$8,000

Use the information below to calculate net revenues. Service Revenue$100,000 Sales Discounts$2,000 Accounts Receivable$15,000 Sales Allowances$7,000 Cash$18,000

$91,000.

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is:

$96,000.

Which of the following is an example of an accrued revenue? - Prepaying insurance coverage for the next 12 months. - Delaying the payment of interest on an outstanding loan until next year. - Receiving cash in advance of a service to be provided to a customer. - Providing services to a customer without having yet collected the cash.

- Providing services to a customer without having yet collected the cash.

For the year, Sealy Incorporated reports net sales of $50,000, cost of goods sold of $40,000, and an average inventory balance of $5,000. What is Sealy's gross profit ratio?

20%

On May 1, 2021, Nees Manufacturing lends $10,000 to Roberson Supply using a 9% note due in 12 months. Nees has a December 31 year-end. Calculate the amount of interest revenue Nees will report in its 2021 and 2022 income statements.

2021 = $600; 2022 = $300.

Which of following best describes a merchandising company? - A company whose revenues exceed expenses. - A company that produces products from raw materials, labor, and overhead. - A company that provides services to its customers. - A company that purchases products that are primarily in finished form for resale to customers.

A company that purchases products that are primarily in finished form for resale to customers.

Accumulated depreciation is:

A contra-asset.

The entry to record the estimate for uncollectible accounts includes:

A debit to Bad Debt Expense.

When a customer pays in advance for a product or service, the advance payment received by the company is recorded as:

A debit to an asset and a credit to a liability account

Equipment originally costing $100,000 has accumulated depreciation of $65,000. If it is sold for $40,000, the company should record:

A gain of $5,000.

Equipment originally costing $65,000 has accumulated depreciation of $25,000. If the equipment is sold for $30,000, the company should record:

A loss of $10,000.

Equipment originally costing $95,000 has accumulated depreciation of $30,000. If the equipment is sold for $55,000, the company should record

A loss of $10,000.

The effect of writing off a specific account receivable is:

A reduction in the Allowance for Uncollectible Accounts.

All transactions related to a particular item over a period of time are summarized in a(n):

Account

When a company provides services on account, which of the following accounts is debited?

Accounts Receivable

If equipment is retired, which of the following accounts would be debited?

Accumulated depreciation.

An adjusted trial balance - Lists all accounts and their balances at a particular date after updating account balances for adjusting entries. - Is used to prepare the financial statements. - Includes balances for revenues, expenses, and dividends. - All of the answer choices are correct.

All of the answer choices are correct.

The allowance method for uncollectible accounts - Is required by Generally Accepted Accounting Principles. - Allows for the possibility that some accounts will not be collected. - Reports net accounts receivable for the amount of cash expected to be collected. - All of the answer choices are correct.

All of the answer choices are correct.

he Sarbanes-Oxley Act (SOX) mandates which of the following? - Increased regulations related to auditor-client relations. - Increased regulations related to internal control. - Increased regulations related to corporate executive accountability. - All of the answer choices are correct.

All of the answer choices are correct.

Fan Company sells inventory on account. The entry or entries to record this sale using a perpetual inventory system would include a: - Debit to Accounts Receivable. -Credit to Sales Revenue - Debit to Cost of Goods Sold. - All of the these are included to record the sale.

All of the these are included to record the sale.

Which of the following represents a characteristic of a liability? - A probable future sacrifice of economic benefits. - Arising from present obligations to other entities. - Resulting from past transactions or events. - All of these are characteristics of a liability.

All of these are characteristics of a liability.

Net income is defined as:

All revenues minus all expenses.

Which of the following expenditures should be recorded as an asset? - An addition which increases future benefit. - Repairs that maintain current benefits. - Maintenance that maintain current benefits. - Unsuccessful legal defense of an intangible asset.

An addition which increases future benefit.

Which of the following is not a current liability? - Notes payable due in six months. - Current portion of long-term debt. - An unused line of credit. - Deferred revenue to be earned in nine months.

An unused line of credit.

Which of the following represents a resource of the company? - Expense - Dividend - Asset - Liability

Asset

Which of the following equations correctly represents the fundamental accounting equation? - Assets + Stockholders' Equity = Liabilities. - Liabilities - Assets = Stockholders' Equity. - Assets + Liabilities = Stockholders' Equity. - Assets = Liabilities + Stockholders' Equity.

Assets = Liabilities + Stockholders' Equity.

Accounts receivable are best described as

Assets of the company representing the amount owed by customers.

The financial statement that shows the financial position of a company at a specific point in time is called the:

Balance Sheet

Which financial statement shows that a company's resources equal claims to those resources?

Balance sheet.

The asset's cost less accumulated depreciation is called:

Book value.

Which of following companies record revenues when selling inventory? - Service companies. - Manufacturing companies. -Merchandising companies. - Both manufacturing and merchandising companies.

Both manufacturing and merchandising companies.

Operating cash flows include which of the following? - Cash received from a bank loan. - Cash paid for supplies. - Cash received from the sale of a used company truck. - Cash received from the issuance of common stock.

Cash paid for supplies.

Financing cash flows include which of the following? - Cash received from a customer. - Cash paid for supplies. - Cash received from the sale of a used company truck. - Cash received from the issuance of common stock.

Cash received from the issuance of common stock.

Investing cash flows include which of the following? - Cash received from a customer. - Cash paid for supplies. - Cash received from the sale of a used company truck. - Cash received from the issuance of common stock.

Cash received from the sale of a used company truck.

The acid-test ratio is

Cash, current investments, and accounts receivable divided by current liabilities.

Which of the following describes the information reported in the statement of stockholders' equity? - Net income for the period calculated as revenues minus expenses. - Total assets equal total liabilities plus stockholders' equity. - Change in stockholders' equity through changes in common stock and retained earnings. - Net cash flows from operating, investing, and financing activities.

Change in stockholders' equity through changes in common stock and retained earnings.

A list of all account names used to record transactions of a company is referred to as a:

Chart of accounts.

A sales discount is recorded by the seller as a(n):

Contra Revenue

The current ratio is:

Current assets divided by current liabilities.

Which of the following is reported as a current liability?

Current portion of long-term debt.

Travel Planners, Inc. borrowed $5,000 from First State Bank and signed a promissory note. What entry should Travel Planners record?

Debit Cash, $5,000; Credit Notes Payable, $5,000.

On November 1, 2021, a company receives cash of $6,000 from a customer for services to be provided evenly over the next six months. Deferred revenue is recorded at that time. Which of the following adjusting entries is needed on December 31, 2021?

Debit Deferred Revenue for $2,000; Credit Service Revenue for $2,000.

Using a perpetual inventory system, the purchase of inventory on account would be recorded as

Debit Inventory; credit Accounts Payable.

A company owes employee salaries of $5,000 on December 31 for work completed in the current year, but the company doesn't plan to pay those salaries until the following year. What adjusting entry, if any, is needed on December 31?

Debit Salaries Expense for $5,000; Credit Salaries Payable for $5,000.

On January 18, a company provides services to a customer for $500 and offers the customer terms 2/10, n/30. Which of the following would be recorded when the customer remits payment on January 25? - Debit Cash for $500. - Credit Accounts Receivable for $490. - Credit Service Revenue for $500. - Debit Sales Discount for $10.

Debit Sales Discount for $10.

The payment for utilities of the current month would be recorded as - Debit Cash; Credit Utilities Payable. - Debit Utilities Expense; Credit Utilities Payable. - Debit Utilities Expense; Credit Cash. - Debit Utilities Payable; Credit Cash.

Debit Utilities Expense; Credit Cash.

On November 1, 20X1, a company signed a $200,000, 12%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 20X2. The company should report the following adjusting entry at December 31, 20X1:

Debit interest expense and credit interest payable, $4,000.

A company's own cash records show a balance of $3,200. After examining the bank statement, the following information is revealed: Bank's balance for cash$4,000 Deposits outstanding$2,300 NSF check$600 Checks outstanding$1,800 Note collected by the bank$2,000 Service fee charged by the bank$100 The entry to update the company's cash balance after the bank reconciliation is prepared would include a:

Debit to Accounts Receivable.

The entry to write down inventory from cost to net realizable value at the end of the year includes a:

Debit to Cost of Goods Sold.

On December 10, a company pays $500 for advertising to appear on December 20. On which date should the expense be recorded under accrual-basis accounting? - December 10 - December 20 - One-half on each date. - Neither

December 20

At the end of the year, Marline Corporation determines that its ending inventory has a cost of $2,000 and a net realizable value of $1,900. What would be the effect of the adjustment to write down inventory to net realizable value?

Decrease in net income.

Which of the following adjusts the bank's balance of cash in a bank reconciliation? - Interest on bank deposit. - NSF check. - Deposits outstanding - Bank service fees.

Deposits outstanding

Which of the following correctly describes the nature of depreciation? - Depreciation represents the valuation of property, plant, and equipment over its service life. - Depreciation represents the valuation of an intangible asset over its service life. - Depreciation represents the allocation of the cost of property, plant, and equipment over its service life. - Depreciation represents the allocation of the cost of an intangible asset over its service life.

Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.

Management can estimate the amount of loss that will occur due to litigation against the company. If the likelihood of loss is reasonably possible, a contingent liability should be

Disclosed but not reported as a liability.

Section 404 of the Sarbanes-Oxley Act requires companies to:

Document and assess internal controls.

What is the concept behind separation of duties in establishing internal control?

Employee fraud is less likely to occur when access to assets and access to accounting records are separated

Which of the following increases an employer's payroll costs? - FICA withholding from the employee. - State income tax. - Federal income tax. - Employer's FICA contribution.

Employer's FICA contribution.

Which of the following generally would be considered a good internal control over cash payments?

Ensure checks are serially numbered and signed only by authorized employees

The balance of retained earnings in the adjusted trial balance:

Equals the balance of retained earnings at the beginning of the accounting period.

Which of the following describes the cost of selling to customers? - Assets - Liabilities - Expenses - Dividends

Expenses

Which of the following is paid by both the employee and the employer? - FICA taxes. - Federal unemployment taxes. - State unemployment taxes. - Personal income taxes.

FICA taxes

Which cost flow assumption generally results in the highest reported amount of net income in periods of rising inventory costs?

FIFO.

On January 17, Papa's Pizza signs a contract with Bug Zappers for exterminating services related to a recent sighting of cockroaches in the restaurant. Papa's pays for the extermination service on January 29, and Bug Zappers sprays for bugs on February 7. On which date should Papa's Pizza record the extermination expense? - January 17 (date of the contract). - January 29 (date of cash payment). - February 7 (date of extermination service). - Evenly over the three dates.

February 7 (date of extermination service).

The Sarbanes-Oxley Act of 2002 applies to all companies that:

File reports with the Securities and Exchange Commission.

Under the allowance method for uncollectible accounts, the balance of Allowance for Uncollectible Accounts increases when:

Future bad debts are estimated.

After transactions are recorded in the journal, they are posted to the:

General ledger.

Which of the following intangible assets are not amortized?

Goodwill

Operating income is defined as

Gross Profit minus Operating Expenses.

Financial accounting serves which primary function(s)? I. Measures business activities. II. Communicates business activities to interested parties. III. Makes business decisions on behalf of interested parties.

I and II

Using a perpetual inventory system, the sale of inventory on account would be recorded as I. Debit Cost of Goods Sold; credit Inventory. II. Debit Inventory; credit Sales Revenue. III. Debit Accounts Receivable; credit Sales Revenue.

I and III

If a company has an increase in total revenues of $10,000, which of the following is possible? I. Total assets increase by $10,000. II. Total liabilities increase by $10,000. III. Total stockholders' equity decreases by $10,000.

I only

Which of the following describes the purpose(s) of closing entries? I. Adjust the balances of asset and liability accounts for unrecorded activity during the period. II. Transfer the balances of temporary accounts (revenues, expenses, and dividends) to Retained Earnings. III. Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

II and III

The revenue recognition principle states that companies typically record revenue:

In the period in which we provide goods and services to customers.

Under accrual-basis accounting, companies typically report expenses: - In the same period in which an asset is purchased. - In the same period in which cash is paid. - In the same period as the revenue they help to generate. - In the same period in which a liability is paid.

In the same period as the revenue they help to generate.

Which financial statement shows a company's revenues and expenses?

Income Statement

In which financial statement does a company report its revenues?

Income Statement.

Which financial statement conveys a company's ability to generate profits in the current period?

Income statement.

Which of the following causes the accounting equation not to balance? - Increase assets; increase liabilities. - Increase assets; increase liabilities. - Increase assets; increase dividends. - Decrease liabilities; increase revenues.

Increase assets; increase dividends.

Which of the following adjusts the company's balance of cash in a bank reconciliation? - Interest on bank deposit. - Checks outstanding. - An error by the bank. - Deposits outstanding.

Interest on bank deposit.

Fan Company purchases inventory on account. The entry to record this purchase using a perpetual inventory system would include a debit to:

Inventory.

Which of the following is not included in calculating the acid-test ratio?

Inventory.

Financial accounting provides information primarily to:

Investors and creditors.

Transactions are recorded using debits and credits in a(n):

Journal

Which inventory cost flow assumption generally results in the lowest reported amount for inventory when inventory costs are rising?

LIFO

Amounts owed to creditors are reported as:

Liabilities

Which of the following represents an obligation of the company? - Assets - Liabilities - Expenses - Dividends

Liabilities

Which of the following statements regarding liabilities is not true?

Liabilities result from future transactions.

Federal and state income taxes withheld by employers from their employees' payroll are initially recorded with a credit to a(n):

Liability.

Which of the following will maximize net income by minimizing depreciation expense in the first year of the asset's life?

Long service life, high residual value, and straight-line depreciation.

Who ultimately is responsible for properly applying GAAP? The company's: - Management - Auditors - Stockholders - Creditors

Management

Current liabilities

May include contingent liabilities.

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

Measure business activities of a company and communicate information about business activities to outside users.

Which definition best describes financial accounting? - A process of measuring income taxes owed to the government. - A system of maintaining communication with a company's customers and suppliers. - Procedures designed to enhance the company's image to potential investors. - Measuring a company's business activities and communicating those measurements to external parties.

Measuring a company's business activities and communicating those measurements to external parties.

Using the allowance method, the effect on the current year's financial statements of writing off an account receivable generally is to I. Decrease total assets. II.Decrease net income.

Neither I nor II

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account:

Net accounts receivable do not change.

Which of the following describes the information reported in the statement of cash flows? - Net cash flows from operating, investing, and financing activities. - Changes in stockholders' equity through changes in common stock and retained earnings. - Net income for the period calculated as revenues minus expenses. - Equality of total assets with total liabilities plus stockholders' equity.

Net cash flows from operating, investing, and financing activities.

A company reports the following in its income statement: Total revenues of $500,000 and total expenses of $300,000. Which of the following is true? - Net income equals $200,000. - Total dividends equal $200,000. - Total assets equal $200,000. - Total stockholders' equity equals $200,000.

Net income equals $200,000.

Smith Co. filed suit against Western, Inc., seeking damages for patent infringement. Smith's legal counsel believes it is probable that Western will have to pay $125,000, although no final settlement has yet been reached. How should Smith report this litigation?

No asset or gain is reported.

Assuming a current ratio of 1.00 and an acid-test ratio of 0.75, how will the purchase of inventory with cash affect each ratio?

No change to the current ratio and decrease the acid-test ratio.

Purchasing land with cash would have what effect on the accounting equation? - Total assets decrease. - Total liabilities increase. - Total assets increase. - No effect.

No effect.

On November 15, Meier Company received $3,000 cash from a customer for services that were performed on November 1. According to the Revenue Recognition Principle, on which date should the revenue be recorded? - November 1. - November 15. - One-half on each date. - Neither

November 1

Providing services to customers on account for $100 is recorded as a. Accounts Receivable 100 Service Revenue 100 b. Cash 100 Accounts Receivable 100 c. Service Revenue 100 Accounts Receivable 100 d. Service Expense 100 Accounts Payable 100

Option a

Which of the following expenditures should be recorded as an expense? - An addition which increases future benefit. - An improvement. - Ordinary repairs and maintenance. - Successful legal defense of an intangible asset.

Ordinary repairs and maintenance.

In response to widespread fraudulent reporting in the late 1990's and early 2000's, Congress: - Enacted the Securities and Exchange Commission. - Established the Financial Accounting Standards Board. - Passed the Sarbanes-Oxley Act. - Organized the Internal Revenue Service.

Passed the Sarbanes-Oxley Act.

An exclusive 20-year right to manufacture a product or to use a process is a:

Patent

Which of the following transactions decreases total assets? - Purchase supplies on account. - Receive a utility bill but do not pay it. - Pay dividends to stockholders. - Receive cash from customers for sales in the current period.

Pay dividends to stockholders.

Which of the following represents an external transaction? - Lapse of insurance due to passage of time. - Use of office supplies by employees over time. - Payment of utility bill. - Salaries earned by employees but not yet paid.

Payment of utility bill.

Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits? - Use source documents to determine accounts affected by the transaction. - Prepare a trial balance. - Analyze the impact of the transaction on the accounting equation. - Post the transaction to the T-account in the general ledger.

Prepare a trial balance.

In a classified balance sheet, long-term physical assets used in the normal course of business are known as

Property, plant, and equipment.

Which of the following transactions causes an increase in stockholders' equity? - Pay dividends to stockholders. - Obtain cash by borrowing from a local bank. - Provide services to customers on account. - Purchase advertising on a local radio station.

Provide services to customers on account.

Which of the following transactions increases total assets? - Provide services to customers on account. - Purchase supplies for cash. - Collect cash from customer for services provided on account last month. - Pay dividends to current stockholders.

Provide services to customers on account.

Which of the following transactions increases total liabilities? - Pay for rent in the current period. - Purchase equipment with cash. - Pay dividends to stockholders. - Purchase office supplies on account.

Purchase office supplies on account.

Which of the following is not a characteristic of adjusting entries? - Reduce the balances of revenue, expense, and dividend accounts to zero. - Allow for proper recognition of revenues and expenses. - Are part of accrual-basis accounting. - Are recorded at the end of the accounting period.

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

Chan Sports purchases one year of rent on November 1 for $12,000 ($1,000 per month), debiting Prepaid Rent. On December 31, Chan Sports would record the following year-end adjusting entry: - Rent Expense 2,000 Prepaid Rent 2,000 - Rent Expense 10,000 Prepaid Rent 10,000 - Rent Expense 12,000 Prepaid Rent 12,000 - No entry is required on December 31 because full cash payment was made on November 1.

Rent Expense 2,000 Prepaid Rent2,000

Which of the following transactions causes a decrease in total liabilities? - Paying maintenance expenses for the current month. - Providing services to customers on account. - Paying dividends to stockholders. - Repay amounts previously borrowed from the bank.

Repay amounts previously borrowed from the bank.

Which of the following is not recorded as an intangible asset in the balance sheet? - Patents. - Research and development. - Trademarks. - Goodwill.

Research and development.

Sales of products or services are referred to as

Revenues

Which of the following accounts is not listed in a post-closing trial balance? - Prepaid Rent. - Accounts Payable. - Salaries Expense. - Retained Earnings.

Salaries Expense.

Which of the following accounts is listed in a post-closing trial balance? - Salaries Payable. - Dividends. - Advertising Expense. - Service Revenue.

Salaries Payable.

Which of the following refers to the seller reducing the customer's balance owed because of some deficiency in the company's product or service? - Sales Allowance. - Sales Discount. - Trade Discount. - Allowance for Uncollectible Accounts.

Sales Allowance.

Gross profit is defined as:

Sales Revenue minus Cost of Goods Sold.

The seller collects sales taxes from the customer at the time of sale and reports the sales taxes as

Sales tax payable.

A multiple-step income statement provides the advantage of:

Separating revenues and expenses based on their different types of activities.

A credit is used to increase which of the following accounts? - Dividends. - Insurance Expense - Cash - Service Revenue

Service Revenue

Which of the following accounts is not listed in a post-closing trial balance? - Service Revenue. - Accounts Receivable. - Equipment. Interest Payable.

Service Revenue.

Which of the following will result in higher depreciation expense in the first year of the asset's life?

Short service life and low residual value.

When preparing a bank reconciliation, outstanding checks would be:

Subtracted from the bank's cash balance.

When preparing a bank reconciliation, nonsufficient funds (NSF) checks would be:

Subtracted from the company's cash balance.

The balance in retained earnings represents:

The amount of income earned over the company's life minus the dividends paid to shareholders over the company's life.

Who is ultimately responsible for the establishment and success of a company's internal control system?

The company's top executives.

Which of the following represents the balance of Cost of Goods Sold at the end of the year? - The cost of inventory not yet sold by the end of the year. - The cost of inventory purchased during the year. - The cost of inventory at the beginning of the year. - The cost of inventory sold during the year.

The cost of inventory sold during the year.

Which of the following is true in comparing the current ratio with the acid-test ratio?

The current ratio will always be at least as large as the acid-test ratio.

Consistent with the COSO framework, an effective internal control system includes the control environment. The control environment refers to:

The ethical tone set by top management.

The amount of the gain on the sale of equipment equals:

The selling price minus the book value of the equipment.

Which of the following statements is false regarding the amortization of intangible assets?

The service life of an intangible asset is always equal to its legal life.

If a company uses the allowance method of accounting for uncollectible accounts and collects cash on an account receivable previously written off:

There is no change in total assets.

The primary reason the balance of cash in the company's records will differ from the balance of cash in the bank's records includes:

Timing differences of recording cash transactions by the company and by the bank.

What is a direct purpose of internal controls?

To improve the accuracy and reliability of accounting information.

If a company has an increase in total expenses of $10,000, which of the following is possible? - Total liabilities decrease by $10,000. - Total assets increase by $10,000. - Total stockholders' equity increases by $10,000. - Total assets decrease by $10,000.

Total assets decrease by $10,000.

A company reports the following in its balance sheet: Total assets of $800,000 and total liabilities of $700,000. Which of the following is true? - Net income equals $100,000. - Total expenses equal $1,500,000. - Total revenues equal $1,500,000. - Total stockholders' equity equals $100,000.

Total stockholders' equity equals $100,000.

Posting is the process of

Transferring the debit and credit information from the journal to individual accounts in the general ledger.

Suppose Windell Corporation understates its ending inventory amount. What effect will this have on the reported amount of net income in the year of the error?

Understate net income.

Which of the following is not deducted from an employee's salary?

Unemployment taxes.

A debit is used to increase which of the following accounts? - Utilities Expense - Accounts Payable - Service Revenue - Common Stock

Utilities Expense

In most cases, current liabilities are payable within ____ year(s), and long-term liabilities are payable more than ____ year(s) from now.

one; one

Ambassador Hotels purchases one year of fire insurance coverage on December 1 for $24,000 ($2,000 per month), debiting Prepaid Insurance. On December 31, Ambassador would record the following year-end adjusting entry: a.Insurance Expense24,000 Prepaid Insurance 24,000b.Insurance Expense2,000 Prepaid Insurance 2,000c.Insurance Expense22,000 Prepaid Insurance 22,000

option b