acc ASP questions CH 1-3

On June 1, the business had total assets of $42,500 and no ($0) liabilities. During June, the company received $15,000 cash from the owner as an investment, purchased a forklift for $7,300 on account, bought $600 of supplies for cash, and paid $2,500 on account. At the end of June, the total assets of the business are $62,300. What is the total owner's equity?

Assets: $42,500 (assets on June 1) + $15,000 + $7,300 + $600 - $600 - $2,500 = $62,300 (assets on June 30). Liabilities: $7,300 - $2,500 = $4,800 (liabilities on June 30). Assets = Liabilities + Owner's Equity. If you know two accounting elements, you can calculate the third. $62,300 - $4,800 = $57,500 Total Owner's Equity.

In December, Express Delivery earned revenues of $5,200, for which $1,300 was received and the rest is on account. In January, $3,500 is collected from customers and $4,900 is earned with $1,900 received and the rest on account. At the end of January, Express Delivery used T accounts to determine the balances of Cash, Accounts Receivable, and Service Revenue to be

Cash, $6,700; Accounts Receivable, $3,400; Service Revenue, $10,100.

When a payment is made on account, how is the transaction recorded?

Debit Accounts Payable and credit Cash (The payment decreases the liability, Accounts Payable, with a debit and decreases the asset, Cash, with a credit.)

A service offered by public accountants that involves the application of standard review and testing procedures to ensure that proper accounting policies and practices have been followed is:

auditing

The difference between the footings on the debit and credit sides of the T account is known as the

balance

When the business acquires cash from the owner as an investment, the owner's capital account is

increased with a credit

Which of the following statements regarding the cash account is true?

it increases with debits

Assets are on which side of the accounting equation?

left side

Owners of a company use accounting information to

make decisions regarding additional investments

A car dealer is a

merchandising business

To credit an account means to enter an amount on the

right side

liability usually includes ________ in the name?

"payable"

When the accountant was preparing the trial balance, he didn't realize he recorded a $250 debit to Cash as a credit to Cash instead. How much will this error cause the trial balance columns to be "off" by?

$500 (When an amount is recorded on the wrong side, debit vs. credit, the result is an error in the amount that is double the transaction amount. Therefore, the $250 debit that got recorded as a $250 credit creates a deficit because now two accounts (the account deserving of a $250 credit and now the erroneous $250 credit) have likely both been credited $250, resulting in a $500 difference between the debit and credit columns)

Given these data, what is the company's net income for the month ended July 31? Advertising expense $10,600 Income tax expense $6,030 Accounts payable $3,750 Service fees revenue $92,100 Rent expense $5,400 Supplies expense $750

-Revenue - Expenses = Net Income (or Loss); $92,100 - $10,600 - $6,030 - $5,400 - $750 = $69,320 Net Income. -Accounts Payable is a liability and does not appear on the income statement.

What is the ending balance of the Mr. Orbit, capital account on July 31? -Mr orbit capital: 14,000 July data: -Galaxy had net income of $6,975 for the month ended July 31. -There was no additional investment by the owner in July. -The owner had a total of $1,800 cash withdrawals for personal use during the month.

19,175

Rosewell Florist received a utility bill from Staygreen Electric Company for $325, which it paid right away. This transaction would include which of the following entries to Rosewell's accounts?

A debit to Utility Expense of $325

Which of the following statements about a trial balance is not true?

A trial balance and balance sheet are interchangeable; companies can report using either.

Which of the following amends the FASB Accounting Standards Codification?

Accounting Standards Update

Accountants provide information to owners of which type of ownership structure?

All of the above a.Sole proprietorship b.Partnership c.Corporation

Which of the following correctly expresses the accounting equation?

Assets = Liabilities + Owner's Equity

The company's cash balance at the beginning of the month was $2,600. Insurance for the year was purchased for $1,200 and rent of $800 for the month was paid. What is the cash balance at the end of the month if total service revenues were $3,700, but only $500 was collected and the rest was on account?

Cash beginning balance $2,600 - $1,200 - $800 + $500 = $1,100 Cash ending balance.

When a payment is made on account, how is the transaction recorded?

Debit Accounts Payable and credit Cash

Which of the following is the first step of the accounting process?

Deciding if a business transaction should result in an accounting entry

n which step of the accounting process does reporting occur?

Fifth stage

The total dollar amounts of the debit and credit sides of a T account are known as

Footings

Which of the following uses accounting information to enforce U.S. tax laws?

IRS

What are the three basic phases of the accounting process?

Imput, process, output

How does the purchase of $400 of supplies on account affect the business's accounting equation?

Increases assets $400 and increases liabilities $400

Which is the debit side of a T account?

Left

Which of the following renders the accounting equation as true by definition?

Liabilities and owner's equity represent the funds that purchase the assets.

Under which ownership structures are the owners' personal assets at risk of being taken by creditors?

Partnerships and sole proprietorships

Which of the following discusses various accounting treatments after FASB has researched an issue?

Preliminary Views document

Under which ownership structure does an owner enjoy the most decision-making power?

Sole proprietorship

What is the effect on the accounting equation when cash is paid on account?

When cash is paid on account, both Cash (asset) and Accounts Payable (liability) decrease

a note payable is:

a formal written promise to pay suppliers or lenders a specified sum of money at a definite future time.

Which of the following is an example of a merchandising business?

a retailer, such as walmart

Businesses use a separate __________ to record the increases and decreases in each type of asset, liability, owner's equity, revenue, and expense?

account

Which of the following is the accounting concept that allows the business owner to determine the time period for income determination to be made on a periodic basis such as a month, quarter, or year?

accounting period concept

Which of the following is considered a liability?

accounts payable

a business transaction is:

an economic event that has a direct impact on the business and almost always requires an exchange between it and an outside entity measured in dollars.

account payable is:

an unwritten promise to pay a supplier for assets purchased or services received "on account" or "on credit

What effect does purchasing an asset on account have on the assets element?

assets increase

The purpose of producing a trial balance is to

check that the debit and credit totals are equal.

Owners assume the least risk in a

corporation

The highest amount of revenue is earned by

corporations

The cost of producing specific products or services is measured by accountants in which of the following services?

cost accounting

Withdrawals of cash and other assets by the owner for personal use are __________ to a separate account called Drawing.

debited for increases

Which of the following explains the rules that FASB recommends for treatment of an accounting event?

exposure draft

The debits equal credits and the accounting equation is in balance

in all transactions

Which of the following reports the profitability of business operations for a specific period of time?

income statement

A normal balance is the side of an account that is used to __________ the account.

increase

This week, the business earned $4,000 of service fees for which payment will be received from clients later. How is revenue that is earned "on account" recorded, even though payment has not yet been received?

Debit Accounts Receivable for $4,000 and credit Service Fees (Revenues) for $4,000 (Instead of receiving cash at the time of service, the business receives a promise that its customers will pay cash in the future. Therefore, the asset, Accounts Receivable, increases with a debit of $4,000. Since revenues are recognized when earned, Service Fees increases with a credit of $4,000)

On November 7, Boyd Company borrowed $12,000 from Federal City Bank. On February 5, Boyd Company paid back the loan plus $60 interest. What are the correct debit and credit entries to record the borrowing transaction on November 7?

Debit Cash for $12,000 and credit Notes Payable for $12,000 (The asset, Cash, is increased with a debit of $12,000 because the company receives cash when it borrows money from the bank. The liability, Notes Payable, is increased with a credit of $12,000 because the company now owes $12,000 plus interest to Federal City Bank.)

Blythe Company bought equipment on account. Which of the following is the correct entry to record the purchase of the asset on account?

Debit Equipment and credit Accounts Payable