ACC 210 Exam 1

Stimpleton Company engages in the following cash payments: Purchase equipment $2,000 Pay rent 500 Repay loan to the bank 5,000 Pay worker's salaries 1,000 What is the total amount of cash paid for operating activities?

$1,500.

DW has an ending Retained Earnings balance of $52,500. If during the year DW paid dividends of $2,900 and had net income of $22,500, then what was the beginning Retained Earnings balance?

$32,900

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much?

$34,000 increase

Using the information below from the accounting records of Thomas Corporation, stockholders' claims to the company's resources amount to: Assets $1,200,000 Liabilities $800,000 Net income $100,000 Retained earnings $250,000

$400,000

The following amounts are reported in the general ledger of Cavalier Company: Assets $80,000 Liabilities 26,000 Retained Earnings 12,000 What is the balance in the Common Stock account?

$42,000

Allen Inc. took out a 1-year, 8%, $100,000 loan on March 31, 2018. Interest is due upon maturity of the loan. The loan and interest must be paid back on March 31, 2019. As of December 31, 2018, what amount, if any, should Allen Inc. report for interest payable?

$6,000.

ClemCorp (CC) has an ending Retained Earnings balance of $70,000. If during the year CC paid dividends of $15,000 and had net income of $22,500, then what was the beginning Retained Earnings balance?

$62,500.

The adjusting entry required when amounts previously recorded as unearned (deferred) revenues are earned by providing goods or services to customers includes:

A debit to a liability.

The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the:

Accounting cycle

Which of the following regarding adjusting entries is correct?

Adjusting entries are needed because we use accrual-basis accounting

The matching principle in financial accounting refers to:

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

Which of the following is true about an income statement? A. It reports activity for a period of time. B. It does not include dividends paid to stockholders. C. It reports revenues and expenses. D. All of the other answers are true.

All of the other answers are true.

Adjusting entries:

Always involve at least one income statement account and one balance sheet account

Adjusting entries:

Always involve at least one income statement account and one balance sheet account.

The fundamental accounting equation is defined as:

Assets = Liabilities + Stockholders' Equity

A company orders office supplies in June. Those supplies are received and paid for in July. The supplies are used in August. Under accrual accounting rules, in which month should the company record supplies expense?

August

How many of the following transactions would affect operating cash flows reported in the statement of cash flows (all transaction involve cash)? Borrowed $50,000 from the bank Purchased $12,000 in supplies Provide services to customers for $27,000 Paid the utility bill of $750 Purchased a delivery truck for $12,000 Received $25,000 from issuing common stock Paid employee salaries of $15,000

Buying supplies, selling services, paying the light bill and paying employees are all operating activities

When cash payments are made to stockholders, what is the effect on the company's accounts?

Cash decreases and dividends increases.

Dividends represent:

Cash payments to stockholders

On July 1, 2019, Rents-A-Lot Inc. paid $72,000 for 36 months of advance rent on its warehouse. What would be the amount of rent expense in the 2020 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

Cash-basis = $0; Accrual-basis = $24,000

On July 1, 2018, Rents-A-Lot Inc. paid $72,000 for 36 months of rent in advance on its warehouse. What would be the amount of rent expense in the 2018 financial statements for Rents-A-Lot under both cash-basis and accrual-basis accounting?

Cash-basis = $72,000; Accrual-basis = $12,000.

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

Chart of Accounts

Consider the following accounts: Dividends Insurance Expense Cash Service Revenue Note Payable Common Stock How many of these accounts are increased with credits?

Common Stock Service Revenue Note Payable would be increased with credits

Childers Service Company provides services to customers totaling $3,000, on account. How would the transaction be recorded?

Debit Accounts Receivable $3,000, credit Service Revenue $3,000.

. A company received a bill for newspaper advertising services, $400. The bill will be paid in 10 days. How would the transaction be recorded today?

Debit Advertising Expense $400, credit Accounts Payable $400

Assume that $18,000 cash is paid today for insurance to cover the next two years. The appropriate debit and credit are:

Debit Prepaid Insurance $18,000, credit Cash $18,000.

At the beginning of December, Global Corporation had $2,000 in supplies on hand. During the month, supplies purchased amounted to $3,000, but by the end of the month the actual supplies on hand balance was only $800 (from a physical count). What is the appropriate month-end adjusting entry?

Debit Supplies Expense $4,200, credit Supplies $4,200

At the beginning of December, Global Corporation had $3,000 in supplies on hand. During the month, supplies purchased amounted to $5,000, but by the end of the month the supplies balance was only $1,200. At the time of purchase, the Supplies account was debited. What is the appropriate month-end adjusting entry?

Debit Supplies Expense $6,800, credit Supplies $6,800

Assets normally carry a _______ balance and are shown in the ______________.

Debit; Balance sheet

Dividends normally carry a _______ balance and are shown in the ______________

Debit; Statement of stockholders' equity

In November, a company hires three temporary employees that are scheduled to work only the month of December. Those employees work during December, and they are then paid their full salaries in January. Under accrual accounting, in which month should the company record salaries expense?

December

One disadvantage of the corporate form of business is:

Double taxation.

Fundamental qualitative characteristics of accounting information are:

Faithful representation and relevance

Consider the following list of accounts: Accounts Payable Cash Prepaid Rent Common Stock Salaries Payable Equipment Supplies Rent Expense Unearned Rent How many of these accounts have a normal credit balance?

Four. Accounts payable, common stock, salaries payable and unearned rent (a liability) have normal credit balances.

The following statements are about recording transactions. Which of them are true? I. Total debits should equal total credits. II. It is possible to have multiple debits or credits in one journal entry. III. Assets are always listed first in journal entries. IV. Some journal entries will have debits only.

I and II

Which of the following is NOT possible for a business transaction?

Increase liabilities and increase revenue.

Frosty Inc. has the following balances on December 31 prior to closing entries: Revenues $36,000 Retained Earnings, Jan. 1, 10,000 Cash 7,000 Expenses 23,000 Accounts Payable 4,000 Dividends 1,000 Supplies 18,000

Increase of $12,000

On April 1, a $4,800 premium on a one-year insurance policy on equipment was paid and debited to Prepaid Insurance. Under accrual accounting rules, at the end of the year the financial statements would report:

Insurance Expense, $3,600; Prepaid Insurance $1,200

Consider the following transactions for TH company: Issued common stock for cash. Purchased equipment by signing a note payable. Sold services to a customer on account. Paid rent for the current month. Collected cash from customers on account. Received cash from a customer for future services How many of these transactions increased TH company's total assets?

Issuing common stock Purchasing the equipment Selling services on account Receiving cash for future services Paying rent involves a decrease in cash (rent payment) and collecting a receivable causes no change (cash goes up but another asset, accounts receivable, goes down)

A company received an order from a customer in June for services to be provided. Those services were provided in July, and the customer paid the full amount in August. According to the accrual accounting revenue recognition principle, in which month should the company record revenue?

July

The major underlying assumptions of financial accounting include all of the following except:

Limited liability

Which definition below best describes financial accounting?

Measuring business activities and communicating them to external parties.

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect net income for the current period?

Net income will be too high.

Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11, Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash?

No net effect to the accounting equation.

On December 1, 2019 Bulls Inc. signed a contract with a retailer to supply maintenance services for 2020. How should this transaction be recorded on December 1?

No transaction should be recorded on December 1

Financial accounting:

Provides information primarily for external decision makers

Which of the following would increase assets and increase liabilities?

Purchase office supplies on account

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

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

On July 1, 2019, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2019 through December 2020. What adjusting entry should Charlie Co. record on December 31, 2019? A. Rent Expense 18,000 Cash 18,000 B. Rent Expense 12,000 Prepaid Rent 12,000 C. Prepaid Rent 6,000 Rent Expense 6,000 D. Rent Expense 6,000 Prepaid Rent 6,000

Rent expense will be $1,000/mo ($18,000/18 months). We occupied the space for six months in 2019

Which statement below best describes the accounting equation?

Resources of the company equal creditors' and owners' claims to those resources.

Limited liability means:

Stockholders of a corporation are not obligated to pay the corporation's debts with personal assets

If a company has stockholders' equity of $100,000 at the end of the year, which of the following statements must be true?

The company's assets exceed liabilities by $100,000.

If a company has stockholders' equity of $45,000 at the end of the year, which of the following statements must be true?

The company's assets exceed liabilities by $45,000.

Consider the following account balances of WP, Inc. at the end of the year: Accounts Payable $ 4,400 Salaries Expense 12,800 Cash 1,700 Common Stock 2,400 Service Revenue 28,300 Supplies Expense 4,300 Retained Earnings 1,100 Utilities Expense 5,000 How many of these accounts would appear in WP's year-end income statement?

The one revenue account and the three expense accounts will appear in the income statement

Which of the following statements is true regarding the post-closing trial balance?

The post-closing trial balance is an internal report prepared as the last step in the accounting cycle.

How many of the following transactions are classified as operating activities? Borrowed $50,000 from the bank Purchased $12,000 in office supplies Provide services to customers for $27,000 Paid the utility bill of $750 Purchased a delivery truck for $12,000 Received $2,500 from a client for future services

The purchase of office supplies The provision of services to customers The utility bill payment The $2,500 deferred revenue

Which one of the following statements regarding financial reports is correct?

The statement of stockholders' equity updates the balances of common stock and retained earnings for transactions during the year.

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

Three. Paying salaries for current period work, receiving the light bill (burning electricity in the current period) and using supplies are all expenses of the current accounting period.

Consider the following transactions: Issued common stock for cash. Purchased equipment by signing a note payable. Paid rent for the current month. Collected cash from customers on account. Received cash from a customer for future services. How many of these transactions increased the given company's total assets?

Three. Transactions 1), 2), and 5) above increase assets. Transaction 4) is a wash

Financing activities include:

Transactions involving external sources of funding.

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

Two. Just the first two involve a cash payment in the current period. Dividends are not expenses.

Consider the following transactions: Issued common stock for cash. Purchased equipment by signing a note payable. Provided services to customers on account. Collected cash from customers on account. Received cash from a customer for future services. How many of these transactions increased the given company's total liabilities?

Two. Signing the note payable and receiving cash for future services (unearned revenue) increase liabilities

How many of the following events would require an expense to be recorded at the time of the transaction (assume accrual accounting is employed)? Ordering office supplies Hiring a receptionist Paying employees' salaries for the current month Receiving but not paying a current utility bill Paying for insurance in advance.

Two: Paying salaries and receiving the utility bill represent expenses for the current accounting period

The primary purpose of closing entries is to:

Update the balance of Retained Earnings and prepare revenue, expense, and dividend accounts for next period's transactions

The primary purpose of closing entries is to:

Update the balance of Retained Earnings and prepare revenue, expense, and dividend accounts for next period's transactions.

WP company receives a $50,000 cash deposit from a customer on October 15 but will not provide services until November 20. Which of the following statements is true?

WP company records unearned (or deferred) revenue on October 15.