ACC 231 Final Exam

If the Supplies account had a beginning balance of $1,000 and the actual count for the remaining supplies was $200 at the end of the period, what adjustment would be needed? Debit Supplies $200 Credit Supplies $200 Debit Supplies $800 Credit Supplies $800

Credit Supplies $200

Is an increase in the accounts payable account recorded as a debit or a credit? Debit Credit

Credit

What is the effect on the accounting equation if a company sells services on credit

assets increases, stockholders' equity increases

What is the effect on the accounting equation if a company sells stocks?

assets increases, stockholders' equity increases

What is included on a balance sheet?

assets, liabilities, owner's equity

Assume beginning retained earnings is $10,000, Net Income is $4,000, and Dividends are $2,000. What is the ending balance in retained earnings? $14,000 $16,000 $2,000 $12,000

$12,000

The trial balance for Star Corp. has the following information: Account Debt Credit Cash $85,000 Inventory Accounts Payable $30,000 Notes Payable $70,000 Total $100,000 $100,000 What is the missing amount? $15,000 debit $70,000 credit $30,000 credit $185,000 credit

$15,000 debit

At year-end, Flower Corp. has an accounts payable balance of $10,000, a notes payable balance of $7,000 due in 6 months, and a $20,000 notes payable balance due in 20 months. How much will be reported for current liabilities on the balance sheet? $17,000 $10,000 $27,000 $37,000

$17,000

Assume net sales of a company are $500,000, cost of goods sold is $300,000, and operating expenses are $75,000. Given this information, what is gross profit? $275,000 $200,000 $225,000 $125,000

$200,000 Gross profit is equal to sales revenue minus cost of goods sold

Cigma Insurance Company received $4,300 of insurance premiums in advance and appropriately set up an Unearned Revenue account. Of this amount, $1,200 was earned at the end of the period. What is the balance in the Unearned Revenue account after the adjusting entry is made at the end of the period? $1,200 $5,500 $3,100 $0

$3100 unearned revenue-earned revenue

Waterfall Inc. had revenues of $75,000 and expenses of $31,000. What is the company's net income? $31,000 $106,000 $44,000 $75,000

$44,000

Jaz Corporation has the following year end balances. Assume that amounts are listed at their normal balances. Accounts Receivable: $45,000 Allowance for Doubtful Accounts: $800 Credit Sales: $400,000 Given this information, what is the net realizable value of accounts receivable? $44,200 $354,200 $45,800 $339,200

$44,200

Bakers Inc. recently took out a bank loan of $30,000, repayable in annual installments of $6,000. Given this information, which of the following is true? $6,000 is classified as current (short-term), and $24,000 is classified as long-term $30,000 is classified as a short-term loan $30,000 is classified as a long-term loan

$6,000 is classified as current (short-term), and $24,000 is classified as long-term

During the year, Royal company earned revenues of $400 million. Expenses incurred totaled $320 million. The company collected all but $15 million of the revenues earned and paid $30 million of its expenses in cash. Under the accrual basis of accounting, what would the company report as net income? $80 million $110 million $95 million $400 million

$80 million

Joslyn Co. sold equipment for $2,000. The equipment was originally purchased for $15,000 and had an accumulated depreciation of $12,000 on the date of sale. What was the amount of loss or gain on the sale of the equipment? Loss or gain cannot be determined $1,000 $2,000 $3,000

1,000

The T-account for Cash has the following transactions: Debit for cash sales of $90,000, debit for the sale of equipment for $20,000, and credit for payment of rent for $3,000. Given this information, what is the ending balance in the Cash T-Account? $107,000 $113,000 $73,000 $67,000

107,000 add the debits subtract the credits

On January 1, Year 1, Tasty Bakes Co. purchased $20,000 of equipment. The equipment has a salvage value of $2,000 and an estimated useful life of 10 years. The company uses the double-declining balance method to calculate depreciation. What is depreciation expense for Year 1? $2,000 $8,000 $3,600 $4,000

4000

Assume a company has the following information: Note Receivable: $210,000 Interest Rate: 5% Start Date: July 1, Year 1 Maturity Date: March 1, Year 2 What is the total amount of interest earned on the entire term of the note (periods included in both Year 1 and Year 2)? $7,875 $10,500 $5,250 $7,000

7,000

Assume a company received cash in advance of providing services and appropriately set up an Unearned Revenue account. When those revenues have been earned, which of the following options would the adjusting journal entry include? A credit to Unearned Revenue A debit to Unearned Revenue A credit to Cash A debit to Service Revenue A debit to Cash

A debit to Unearned Revenue

Butterbraids Inc. has a current ratio of 2.3 and Ribbontrails Inc. has a current ratio of 1.2. Given this information, which statement is true? Butterbraids Inc. has better liquidity than Ribbontrails Inc. Butterbraids Inc. is more efficient than Ribbontrails Inc. Ribbontrails Inc. has better liquidity than Butterbraids Inc. Butterbraids Inc. is more profitable than Ribbontrails Inc.

Butterbraids Inc. is more efficient than Ribbontrails Inc.

Accounting Equation

Assets = Liabilities + Owner's Equity

In October, Evergreen Company collected $200 towards its accounts receivable. How does this transaction impact the accounting equation? Equity increases and equity decreases Assets increase and equity increases Assets increase and assets decrease Assets decrease and liabilities decrease Assets decrease and equity decreases

Assets increase and assets decrease

When a company journalizes the purchase of inventory with cash, which account is credited? Accounts Receivable Cash Inventory Expense Inventory

Cash

Assume a company has the following information: Note Payable: $100,000 Interest Rate: 12% Issue Date: September 1 Year-end: December 31 Assuming adjustments are made at year-end, which of the following statements is true at year-end? Interest Expense is credited for $4,000 Cash is credited for $4,000 Interest Payable is debited for $4,000 Interest Expense is debited for $4,000

Cash is credited for $4,000

The Statement of Stockholders' Equity presents information about changes in: Dividends, Stock Splits, Common Stock, Treasury Stock, Accounts Receivable Common Stock, Additional Paid in Capital, Retained Earnings, Treasury Stock Number of Shares, Cash, Retained Earnings, Treasury Stock, Additional Paid in Capital Stock Price Fluctuations, Number of Shares, Additional Paid in Capital, Dividends

Common Stock, Additional Paid in Capital, Retained Earnings, Treasury Stock

Assume Company A has a profit margin of 9% and Company B has a profit margin of 12%. If Company A and Company B both have the same asset turnover, what can we conclude? Company A will have a higher Return on Assets. Company B will have a lower Debt Ratio. Company B will have a higher Return on Assets. Company B will have a lower Return on Assets.

Company B will have a higher Return on Assets.

What is the journal entry to record depreciation expense? Debit Accumulated Depreciation; Credit Cash Debit Accumulated Depreciation; Credit Depreciation Expense Debit Depreciation Expense; Credit Cash Debit Depreciation Expense; Credit Accumulated Depreciation

Debit Depreciation Expense; Credit Accumulated Depreciation

Consider the following transaction: Purchase $500 of equipment with cash. What is the appropriate journal entry for this transaction? Debit Cash $500 and Credit Equipment $500 Debit Accounts Payable $500 and Credit Equipment $500 Debit Equipment $500 and Credit Cash $500 Debit Equipment $500 and Credit Accounts Payable $500

Debit Equipment $500 and Credit Cash $500

Which of the following options is not included in the calculation for Retained Earnings? Dividends Expenses Assets Revenues

Dividends

On November 1, Shoes Inc. prepays rent for 6 months for a total of $36,000. What journal entry will Shoes Inc. make on November 1 to record this transaction? Dr Rent Expense 6,000; Cr Rent Payable 6,000 Dr Prepaid Rent 36,000; Cr Rent Revenue 36,000 Dr Prepaid Rent 36,000; Cr Rent Expense 36,000 Dr Prepaid Rent 36,000; Cr Cash 36,000 Dr Rent Expense 6,000; Cr Cash 6,000

Dr Prepaid Rent 36,000; Cr Cash 36,000

Keri Co. had sales for the year totaling $60,000. Based on experience, management estimates 8% of sales will be refunded to customers. Management also estimates $1,800 of inventory will be returned. What is the adjusting journal entry to be recorded for the refund liability? Dr COGS 1,800; Cr Sales Refunds Payable 1,800 Dr Sales Refunds Payable 1,800; Cr Cash 1,800 Dr Sales Refunds Payable 1,800; Cr Sales Returns and Allowances 1,800 Dr Sales Returns and Allowances 4,800; Cr Sales Refunds Payable 4,800

Dr Sales Returns and Allowances 4,800; Cr Sales Refunds Payable 4,800

ABC Inc. entered into an agreement with a customer on April 1 to provide accounting services starting immediately. ABC Inc. charges $900 a month for these services, and the customer agrees to pay ABC Inc. on the 1st of each month for the past month's work, starting May 1. What adjusting journal entry is required by ABC Inc. on April 30? Dr. Cash 900; Cr. Service Revenue 900 Dr. Cash 900; Cr. Accounts Receivable 900 Dr. Accounts Receivable 900; Cr. Cash 900 Dr. Accounts Receivable 900; Cr. Service Revenue 900

Dr. Accounts Receivable 900; Cr. Service Revenue 900

Ruben Company has the following information at year-end before adjusting for bad debt. Assume amounts are at their normal balance. Credit Sales: $300,000 Accounts Receivable: $48,000 Allowance for Doubtful Accounts - beginning balance: $1,000 The company uses the aging of receivables method to report bad debt. Per the aging schedule, $3,000 is the total estimated uncollectible. Given this information, what is the journal entry to record bad debt expense? Dr. Bad Debt Expense 3,000; Cr. Accounts Receivable 3,000 Dr. Bad Debt Expense 2,000; Cr. Allowance for Doubtful Accounts 2,000 Dr. Bad Debt Expense 1,000; Cr. Allowance for Doubtful Accounts 1,000 Dr. Bad Debt Expense 3,000; Cr. Allowance for Doubtful Accounts 3,000

Dr. Bad Debt Expense 2,000; Cr. Allowance for Doubtful Accounts 2,000

Yellow Inc. pays a 1-year insurance premium of $7,200 upfront on October 1. Assume adjusting entries are recorded at the end of each month. What is the adjusting journal entry on October 31? Dr. Prepaid Insurance 7,200; Cr. Insurance Expense 7,200 Dr. Insurance Expense 7,200; Cr. Prepaid Insurance 7,200 Dr. Prepaid Insurance 600; Cr. Insurance Expense 600 Dr. Insurance Expense 600; Cr. Prepaid Insurance 600

Dr. Prepaid Insurance 600; Cr. Insurance Expense 600

R Inc. employed 10 employees during the month of December. Total wages earned by the employees for the month of December amounted to $32,000. R Inc. will pay these employees the next payday, which is January 1. Assuming adjusting entries are recorded at the end of each month, what adjusting journal entry is required on December 31, if any? No journal entry is required. Dr. Salaries Payable 32,000; Cr. Salaries Expense 32,000 Dr. Salaries Expense 32,000; Cr. Salaries Payable 32,000 Dr. Salaries Expense 32,000; Cr. Cash 32,000

Dr. Salaries Expense 32,000; Cr. Salaries Payable 32,000

Sports Illustrated sells two-year subscriptions for $240 on January 1st of each year. Subscription revenues are evenly earned over the two year period. On December 31st of year 1, what is the journal entry required? Dr. Cash 240; Cr. Unearned Subscription Revenue 240 Dr. Unearned Subscription Revenue 120; Cr. Subscription Revenue 120 Dr. Subscription Revenue 120 ; Cr. Unearned Subscription Revenue 120 Dr. Unearned Subscription Revenue 240; Cr. Subscription Revenue 240

Dr. Unearned Subscription Revenue 120; Cr. Subscription Revenue 120

Orange Inc. sells mobile phones and accessories. In the most recent period, the company had sales of $400,000. The company estimates warranty costs to be 4% of sales. What journal entry is recorded to estimate the warranty costs? Dr. Estimated Warranty Payable 16,000; Cr. Cash 16,000 Dr. Warranty Expense 16,000; Cr. Estimated Warranty Payable 16,000 Dr. Warranty Expense 16,000; Cr. Cash 16,000 Dr. Estimated Warranty Payable 16,000; Cr. Warranty Expense 16,000

Dr. Warranty Expense 16,000; Cr. Estimated Warranty Payable 16,000

Green Co. has a times interest earned ratio of 14, where Blue Co. has a times interest earned ratio of 10. Which of the following statements is true? Blue Co. has more total assets Blue Co. has a better ability to service its debt Green Co. has higher operating expenses Green Co. has a better ability to service its debt

Green Co. has a better ability to service its debt

Draper Co. sold services for $1,000 in cash. How would this transaction affect the accounting equation? Decrease Expenses by $1,000 Decrease Assets by $1,000 Increase Expenses by $1,000 Increase Assets by $1,000

Increase Assets by $1,000

A company had revenues of $45,000; expenses of $22,000 and dividends of $8,000. During the closing process, what was the net impact of all the closing entries on Retained Earnings? Increased by $45,000 Increased by $13,000 Decreased by $8,000 Increased by $15,000

Increased by $15,000

Which of the following options comes after closing entries are recorded and posted? Financial Statements Unadjusted Trial Balance Adjusted Trial Balance Post-Closing Trial Balance

Post-Closing Trial Balance

Sparky Co. sold pitchforks for $3,000 on account to one of its customers on October 15, with credit terms of 2/10, n/30. The inventory sold cost Sparky Co. $1,600. To account for the inventory sold, which of the following options is true? Cost of Goods Sold should decrease by $1,600 Inventory should increase by $3,000 Accounts Payable should increase by $3,000 Inventory should decrease by $1,600

Inventory should decrease by $1,600

If a contingent liability is probable and estimable, what is the appropriate accounting treatment? Nothing is required Note disclosure only Journalize only Journalize and note disclosure

Journalize and note disclosure

Joyful Co. purchases inventory costing $200 on February 1, with credit terms of 2/10, n/15. On February 14, Joyful Co. pays for this purchase. What does this information indicate? Joyful can pay within 15 days to receive a discount of 2%.Joyful will receive a discount of $4 if they pay on February 14th.Joyful will not receive a discount if they pay on February 14th.Joyful will receive a discount of 10% if they pay within 15 days. correct

Joyful will not receive a discount if they pay on February 14th.

Which financial statement shows the distributions to owners for the period, also known as dividends? Dividend Statement Statement of Operations Balance Sheet Income Statement Statement of Retained Earnings

Statement of Retained Earnings

Which of the following options is a characteristic of adjusting entries? Made at the end of the period Made at the beginning of the period Includes two balance sheet items Always includes cash

Made at the end of the period

Last-In, First-Out (LIFO)

Method for assigning cost to inventory that assumes costs for the most recent items purchased are sold first and charged to cost of goods sold.

First-In, First-Out (FIFO)

Method to assign cost to inventory that assumes items are sold in the order acquired; earliest items purchased are the first sold.

Which of the following components are used when analyzing Return on Equity (ROE) using the DuPont formula? Leverage ratio, debt ratio, and profit margin Profit margin, asset turnover, and leverage ratio Profit margin and leverage ratio only Profit margin, asset turnover, and times interest earned ratio

Profit margin, asset turnover, and leverage ratio

Financial statements must meet all of the following requirements except which one? Comparability Relevance Profitability Reliability Timely Consistency

Relevance

Which of the following options does not have a normal debit balance? Revenues Expenses Dividends Assets

Revenues

Which of the following options would increase Retained Earnings? Accounts Receivable Dividends Net Losses Revenues

Revenues

Which of the following accounts is not included in the post-closing trial balance? Cash Accounts Payable Retained Earnings Salaries Expense

Salaries Expense

At the end of the period, a company had salaries expense of $5,000. To close this account, which of the following statements is true? Dividends is debited for $5,000. Salaries Expense is debited for $5,000. Retained Earnings is credited for $5,000. Salaries Expense is credited for $5,000.

Salaries Expense is credited for $5,000.

Which of the following accounts belongs on the Income Statement? Service Revenue Notes Receivable Cash Inventory

Service Revenue

What is the effect on the accounting equation if a business buys a fixed asset on credit

assets increase, liability increases

On January 1, Year 1, Tasty Bakes Co. purchased $20,000 of equipment. The equipment has a salvage value of $2,000 and an estimated useful life of 8 years. The company uses the straight-line method to calculate depreciation. What is depreciation expense for Year 2? $2,250 $900 $3,600 $2,000

Subtract the asset's salvage value from its cost to determine the amount that can be depreciated. Divide this amount by the number of years in the asset's useful lifespan. Divide by 12 to tell you the monthly depreciation for the asset 20,000-2,000/8/12

All of the following statements are true except: The leverage ratio helps to analyze a company's debt A higher debt ratio indicates greater risk A higher debt ratio indicates a company is financed with more debt The times interest earned ratio measures the profitability of net income

The times interest earned ratio measures the profitability of net income

Which of the following statements is true about Expenses? They belong on the income statement and show what the company has earned by providing goods or services. They are earned by the company, not in the ordinary course of business. They belong on the balance sheet and show amounts that a company owes. They belong on the income statement and show what the company has incurred in the process of earning revenues.

They belong on the income statement and show what the company has incurred in the process of earning revenues.

What is the primary purpose of internal controls? To punish those who commit fraud To eliminate all errors from occurring To eliminate all fraud by employees To manage risk and reduce fraud

To manage risk and reduce fraud

When a company sells gift cards, it is considered to be: Expense Sales Revenue Asset Unearned revenue

Unearned revenue

In the prior year, Yellow Co. had an inventory turnover of 9 times. In the current year, the company's inventory turnover is 7.8 times. What does this information indicate? Yellow Co. is more profitable on their inventory. Yellow Co.'s inventory turnover improved. Yellow Co. became more efficient at selling inventory. Yellow Co. may be carrying too high of an inventory balance.

Yellow Co. became more efficient at selling inventory.

What is the effect on the accounting equation if a company buys inventory on credit

assets increases, liabilities increases

What is the effect on the accounting equation if a company pays dividends

assets decreases, stockholders' equity decreases

What is the effect on the accounting equation if a company pays rent

assets decreases, stockholders' equity decreases

What is the effect on the accounting equation if a company sells goods on credit

assets decreases, stockholders' equity increases

Closing the Income Summary account includes _______________. closing Dividends into Retained Earnings closing Income Summary into Retained Earnings closing Revenues into Income Summary closing Expenses into Income Summary

closing Expenses into Income Summary

Stockholders' Equity

common stock, retained earnings, dividends, revenues, expenses

how would you write a journal entry on reporting dividends?

dr retained earnings account and cr dividends payable account

How would you write a supplies journal entry?

dr supplies expense and cr supplies

What is included on a statement of cash flows?

operating activities, investing activities, financing activities and dividends

What are the elements of the fraud triangle?

opportunity, financial pressure, rationalization

What is included in an income statement

revenues, expenses, net income

When a company journalizes a sale of services on account, which account is credited? Accounts Receivable Net Income Cash Service Revenue Accounts Payable

service revenue

What is included in a statement of retained earnings?

the sum of earnings that a company has accumulated over time