ACC 202 EXAM 1

Resources owned by a company are called

Asset

Accounting professionals:

are in high demand

What effect does revenue have on retained earnings?

increases

Expenses are:

the costs of doing business that are necessary to produce revenue

A transaction will always affect at least ______ accounts.

two

In May, Sea the World Cruises, Inc. collected $1,000 cash in advance from a customer for services to be performed in June. Which of the following is true assuming accrual accounting? - $1000 of revenue should be recorded in May - $500 of revenue should be recorded in May and $500 in June. - $1,000 of revenue should be recorded in June.

$1,000 of revenue should be recorded in June.

In May, Just In Thyme, Inc. billed a customer $1,000 for services performed in May. In June, Just In Thyme collected the $1,000. Which of the following is true assuming accrual accounting? $1,000 of revenue should be recorded in June. $500 of revenue should be recorded in May and $500 in June. $1,000 of revenue should be recorded in May.

$1,000 of revenue should be recorded in May.

Place the three steps for analyzing the effect of transactions in the correct order. 1. Confirm that assets are equal to liabilities plus stockholders' equity 2. Determine one account in the accounting equation that will increase or decrease 3. Determine a second account in the accounting equation that will increase or decrease

2. Determine one account in the accounting equation that will increase or decrease 3. Determine a second account in the accounting equation that will increase or decrease 1. Confirm that assets are equal to liabilities plus stockholders' equity

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs? (Select all that apply) - A liability is decreased - Another asset is increased -Stockholders' equity is increased -Revenue is increased

A liability is decreased Another asset is increased

Using the accounting equation, stockholders' claims on the resources of the corporation can be expressed as

ASSETS - LIABILITIES

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as .

Accounting

What is the accounting equation?

Assets = Liabilities + Stockholders' Equity

What are current assets? Assets that will be used for many years. Assets that must be paid for within 12 months. Assets that provide benefits within the next year. Any assets that were purchased for cash

Assets that provide benefits within the next year.

Which financial statement presents the financial position of a company on a particular date?

Balance sheet

Which of the following are financial statements? (Select all that apply.)

Balance sheet Income statement Statement of stockholders' equity

Accounting is the language of ___

Business

What is deferred revenue?

Cash received from customers for services to be performed in the future

When Pizza Company sells three $100 gift cards at the beginning of the month, it should record a $300 debit to ______ and a $300 credit to ______. Deferred Revenue; Cash Cash; Service Revenue Cash; Deferred Revenue Accounts Receivable; Revenue

Cash; Deferred Revenue

Identify the three most common forms of business organization.

Corporation Sole proprietorship Partnership

Farmer, Inc. purchases a tractor for $80,000 cash. Recording this transaction will require which of the following? (select 2 that apply) - Debit equipment - Debit cash - Credit cash - Credit equipment

Debit equipment Credit cash

_____ revenue arises when a business receives cash in one period, but does not provide all of the related goods or services until a later period.

Deferred

A distribution of net income to owners is called a(n)

Dividends

The acronym DEALOR can be used to remember how debits and credits affect different accounts. The three types of accounts that are increased with debits are

Dividends Expenses Assets

True or false: A ledger provides a chronological record of all transactions affecting the firm.

False

True or false: Total assets must always be equal to total liabilities less stockholders' equity

False

On February 1, Domino Corporation ordered inventory. The inventory was received on February 15. Domino paid for the inventory on February 27. On which of the following dates will Domino record a transaction? (Select all that apply) - February 1 - February 15 - February 27

February 15 February 27

Which of the following contains a list of transactions affecting each account and the account's balance? - General ledger - General journal - Account

General Ledger

Which of the following situations matches a journal entry that debits Deferred Revenue and credits Service Revenue? Cash was collected for goods or services provided during the current period. Goods or services, for which cash was collected in advance, were provided during the current period. Cash was collected for goods or services to be provided next period.

Goods or services, for which cash was collected in advance, were provided during the current period.

Which of the following situations matches a journal entry that debits Deferred Revenue and credits Service Revenue? Cash was collected for goods or services provided during the current period. Cash was collected for goods or services to be provided next period. Goods or services, for which cash was collected in advance, were provided during the current period.

Goods or services, for which cash was collected in advance, were provided during the current period.

When should supplies be recorded as an expense? - In the period cash is paid for the supplies, regardless of when the supplies were received - In the period the supplies are purchased, regardless of when cash is paid - In the period the supplies are used, regardless of when they were purchased

In the period the supplies are used, regardless of when they were purchased

On May 1, Ace Electronics ordered office equipment. The equipment was delivered to Ace on May 15, and Ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will Ace make the first entry in its accounting system for this purchase?

May 15

Which of the following are key characteristics of a partnership?

Owners are personally responsible for the debts of the business. Partnerships have more than one owner.

Which business organizations' owners have unlimited liability?

Partnership Sole proprietorship *owners & shareholders share equal responsibility for all debt & liabilities accrued by the business*

Revenues are:

Sales of goods or services to customers OR is the amount recorded as a result of the sale of products or services to customers.

Which financial statement would report all of the following information: beginning balances for common stock and retained earnings; current period net income or loss; current period dividends; common stock issued during the year; ending balances of common stock and retained earnings?

Statement of Stockholders Equity

For a corporation, the owners' claims to the resources of a company are called

Stockholders Equity

Which of the following item(s) is (are) assets?

Supplies Inventory

True or false: A trial balance is used for internal purpose to check that debits equal credits.

True

True or false: Revenue is recorded when services are performed, whereas deferred revenue is recorded when cash is received from customers in advance before services are performed.

True

Which of the following items are liabilities? (Select all that apply) - Wages and salaries payable - Cash held in a checking account - Notes payable - Supplies inventory

Wages and salaries payable Notes payable

Utility costs that relate to current year's operations but are not paid until the following year require: (Select all that apply.) a debit to Prepaid Expense - Utilities a credit to Utilities Payable a debit to Utilities Expense no journal entry a credit to Cash

a credit to Utilities Payable a debit to Utilities Expense

A(n) ____ is maintained for each financial statement item, whereas a(n) ______ contains all of the accounts of the company.

account; general ledger

To complete the measurement process, companies need to update balances of assets, liabilities, revenues and expenses for changes created by ___ entries

adjusting

Neumann Corporation purchases supplies that will be used during the following quarter. At the time of purchase, the supplies should be recorded as a(n)

asset

Supplies that are not used immediately are recorded as a(n) _____ when purchased.

asset

Prepaid insurance is a(n)

asset in the balance sheet

Accounts receivable are

assets

A classified balance sheet shows subtotals for current ____ and current ____ .

assets & liabilities

The financial statement that reflects the accounting equation is referred to as the

balance sheet

Prepaid rent appears in the

balance sheet because it is an asset

Crane purchases equipment by paying cash with the equipment dealer for $10,000. The accounts affected for Crane are

cash & equipment

The entries that transfer the balances of all temporary accounts to retained earnings are referred to as

closing

Which of the following are stockholder equity accounts? - Accounts receivable - Notes payable - Inventory - Common stock - Retained earnings

common stock & retained earnings

In our society, the two main functions of accounting are to

communicate information to investors and creditors measure business activities

The adjusting entry for supplies used requires a ____ to supplies and a ____ to supplies expense

credit; decrease debit; increase

The accounting equation is Assets = Liabilities + Stockholders' Equity. Accounts on the right side of the equal sign in this equation are increased with

credits

In a double-entry accounting system, a(n) _____ represents the left side of the account

debit

At the end of December, Berber Company receives a utility bill for $920 associated with its December operations. Berber will pay the bill on January 5. On December 31, Berber should debit Prepaid Expense and credit Utilities Payable debit Utilities Expense and credit Utilities Payable not make any journal entry since the bill will not be paid until January debit Utilities Payable and credit Utilities Expense debit Utilities Expense and credit Cash

debit Utilities Expense and credit Utilities Payable

Lassiter Industries purchased equipment for $140,000. Lassiter expects to use the equipment over the next 10 years. Recording this transaction would include which of the following ? - debit to equipment expense $140,000. - debit to equipment $140,000. - debit to cash $140,000. - credit to equipment $140,000.

debit to equipment $140,000.

The accounting equation is Assets = Liabilities + Stockholders' Equity. Accounts on the left side of the equal sign in this equation are increased with

debits

For every journal entry, total _____ must be equal to total _____.

debits; credits

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ______ in the asset account and a(n) ______ in the expense account.

decrease; increase

A prepayment is originally recorded as an asset. An adjusting entry at the end of the accounting period results in a(n) ______ in the asset account and a(n) ______ in the expense account. decrease; decrease decrease; increase increase; increase increase; decrease

decrease; increase

Prepaid expenses should be ______ by the cost of the asset used during the accounting period.

decreased

A(n) _____ is a distribution of net income to the stockholders of a corporation.

dividend

Temporary accounts include ______, ______, and ______. dividends cash retained earnings expenses revenues

dividends expenses revenues

Adjusting entries are made at the ____ of the accounting period, while daily transactions are made throughout the accounting period.

end

_____ is a term that refers to a code or moral system that provides criteria for evaluating right or wrong.

ethics

Initially a prepayment for items such as rent or insurance are recorded as assets and later are recorded as a(n) ______ in the period the benefit expires.

expense

Salaries already paid to employees for the month is a(n) _____ account that appears on the ______.

expense; income statement

______ is a cost of doing business that is necessary to produce ____

expense; revenue

Companies communicate information about their business activities primarily through

financial statements

A transaction is initially recorded in the journal, and then subsequently posted to the ______

general ledger

A classified balance sheet Blank______. shows only current assets and current liabilities contains confidential information shows changes in assets, liabilities, revenues and expenses groups asset and liabilities into current and long-term categories

groups asset and liabilities into current and long-term categories

A primary purpose of adjusting entries is to record events that

have occurred but that have not yet been recorded.

Temporary accounts are found in:

income statement

The financial statement that reports the company's revenues and expenses over an interval of time is the

income statement

A ____ entry describes the format for recording a transaction.

journal

A balance sheet lists the assets, ______, and stockholders' equity as of a specific date.

liabilities

Any amount owed to a creditor is classified in the balance sheet as a/an

liability

An asset that can quickly be turned into cash has the characteristic of

liquidity

With respect to current assets, ____ refers to how quickly an asset can be converted to cash

liquidity

Revenues minus expenses equals

net income

The statement of stockholders' equity includes these amounts: (Select all that apply.) cash net income total revenues for the period dividends for the period ending balance retained earnings

net income dividends for the period ending balance retained earnings

The two main career paths in accounting are referred to as:

public & private

At year-end, companies that utilize accrual-based accounting systems complete the measurement process through

recording adjusted entries

The hierarchy of qualitative characteristics of financial information require that, in order to be useful for decision making, information should possess the fundamental characteristics of

relevance and faithful representation.

The accumulated net amount of revenue less expenses and dividends is reflected in the balance of

retained earnings

An income statement reports:

revenues expenses net income or loss

The purpose of an account is to

summarize all transactions for that item.

The adjusting entry for supplies used during the period will result in a debit to the ______ account and a credit to the ______ account.

supplies expense; supplies

Closing entries move the balances from the Blank______ accounts into the Retained Earnings account. balance sheet permanent temporary

temporary

The balance in retained earnings represents - the total amount of cash the company has earned and accumulated over its lifetime. - the accumulated net amount of revenue minus expenses and dividends over the company's lifetime. - the total assets purchased by the company over its lifetime. - the total amount invested by stockholders over the company's lifetime.

the accumulated net amount of revenue minus expenses and dividends over the company's lifetime.

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents:

the amount of sales of services still owed to the customer

Claire purchases equipment for $10,000 by paying $3,000 in cash and borrowing $7,000 from the bank. The number of accounts affected by this transaction is

three

True or false: The accounting equation must always remain in balance.

true

After the adjusting entries have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies: purchased, but not yet paid for, at the end of the accounting period purchased during the accounting period used during the accounting period on hand at the end of the accounting period

used during the accounting period