Principles of Acc Final Exam

On April 1, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31?

$337.50.

If equity is $300,000 and liabilities are $192,000, then assets equal:

$492,000.

How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed?

+$10,000 accounts receivable, +$10,000 revenue.

Capital account

An account used to record the owner's investments in the business is called a(n):

Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

Assets increase by $75,000 and liabilities increase by $75,000.

Prepaid expenses are

Assets that represent prepayments of future expenses

Photometer Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect.

The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

Business entity assumption

To include the personal assets and transactions of a business's owner in the records and reports of the business would be in conflict with the

Business entity assumption.

Journal entries recorded at the end of each accounting period to prepare the revenue, expense, and withdrawals accounts for the upcoming period and to update the owner's capital account for the events of the period just finished are referred to as:

Closing entries

Robert Haddon contributed $70,000 in cash and land worth $130,000 to open a new business, RH Consulting. Which of the following general journal entries will RH Consulting make to record this transaction?

Debit Cash $70,000; debit Land $130,000; credit Haddon, Capital, $200,000.

The private group that currently has the authority to establish generally accepted accounting principles in the United States is the:

FASB.

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the:

Going-concern assumption

Net Income:

Is the excess of revenues over expenses.

Creditors' claims on the assets of a company are called

Liabilities

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the:

Matching principle

Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported?

Matching principle.

Sales returns

Refer to merchandise that customers return to the seller after the sale.

The accounting principle that requires revenue to be recorded when earned is the:

Revenue recognition principle

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the:

Revenue recognition principle.

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:

Debit Salaries Expense and credit Salaries Payable

On May 1, Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. The adjusting entry on December 31 would include:

A credit to Earned Fees for $1,000

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

Cost principle.

Wisconsin Rentals purchased office supplies on credit. The general journal entry made by Wisconsin Rentals will include a:

Credit to Accounts Payable.

Management Services, Inc. provides services to clients. On May 1, a client prepaid Management Services $60,000 for 6-months services in advance. Management Services' general journal entry to record this transaction will include a:

Credit to Unearned Management Fees for $60,000.

A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The owner withdrew $8,000 in cash during the same period. Which of the following entries could not be a closing entry?

Debit Income Summary $75,000; credit Revenues $75,000

J. Awn, the proprietor of Awn Services, withdrew $8,700 from the business during the current year. The entry to close the withdrawals account at the end of the year is:

Debit J. Awn, Capital $8,700; credit J. Awn, Withdrawals $8,700

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

Debit Office Supplies Expense $254 and credit Office Supplies $254.

A company pays each of its two office employees each Friday at the rate of $100 per day for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

Debit Salaries Expense $400 and credit Salaries Payable $400.

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

Debit Unearned Legal Fees and credit Legal Fees Earned.

Rocky Industries received its telephone bill in the amount of $300, and immediately paid it. Rocky's general journal entry to record this transaction will include a

Debit to Telephone Expense for $300.

A credit entry

Decreases asset and expense accounts, and increases liability, owner's capital, and revenue accounts.

The periodic expense created by allocating the cost of plant and equipment to the periods in which they are used, representing the expense of using the assets, is called

Depreciation expense

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

Income Summary account

A company made no adjusting entry for accrued and unpaid employee salaries of $9,000 on December 31. Which of the following statements is true?

It will understate expenses and overstate net income by $9,000.

Unearned revenues are:

Liabilities created when a customer pays in advance for products or services before the revenue is earned.

After preparing and posting the closing entries to close revenues (and gains) and expenses (and losses), the income summary account has a debit balance of $33,000. The entry to close the income summary account will include:

a debit of $33,000 to owner capital.

A company's ledger accounts and their end-of-period balances before closing entries are posted are shown below. What amount will be posted to Tricia DeBarre, Capital in the process of closing the Income Summary account? (Assume all accounts have normal balances.)

$16,780 credit.

A company had sales of $375,000 and its gross profit was $157,500. Its cost of goods sold equals

$217,500

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

Accounting equation.

Assets created by selling goods and services on credit are

Accounts receivable

Of the following accounts, the one that normally has a credit balance is:

Sales Salaries Expense

Viscount Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:

Total assets, total liabilities, and equity are unchanged.

On June 30 of the current calendar year, Apricot Co. paid $7,500 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31 for Apricot would include

A debit to a prepaid expense for $1,875.

Unearned revenue is reported in the financial statements as:

A liability on the balance sheet.

A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 equals:

$1,568

Herald Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Herald Company's net sales equals:

$129,800.

If a parcel of land that was originally acquired for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land should be recorded in the purchaser's books at:

$137,000.