Accounting 1 Test 1

Tatum Enterprises' total assets decreased by $11,000 during the year. Its stockholders' equity increased by $12,000 during the same period. Net income totaled $8,000 during the year. What occurred to the company's total liabilities during the year?

$23,000 decrease

Wise Company purchased 10 calculators for $20 each, one-half on May 14, and the other half on May 22, all on account. Wise sold 8 of the calculators on May 25 for $30 each. It received payment for 6 of them on May 30 and payment for the other 2 on June 4. Wise paid the supplier for 5 of the calculators on May 21. How much revenue should Wise recognize during May?

$240

A company sold a delivery truck for $3,000 that had originally cost $42,000, and had a book value of $4,200. Which of the following is the correct reporting of the respective amounts?

$3,000 as an investing cash flow on the statement of cash flows, and $1,200 as a loss on the income statement

A company sold a delivery truck for 3000 that had originally cost 42000, and had a book value of 4200. which of the following is the correct reporting of the respective amounts

$3,000 as an investing cash flow on the statement of cash flows, and $1,200 as a loss on the income statement

which of the following amounts is capitalized and depreciated?

$65,000 paid to construct a parking lot adjacent to the company's building

On July 1, 2014, Linden Company purchased the copyright to Norman Computer Tutorials for $140,000. It is estimated that the copyright will have a useful life of 5 years. The amount of amortization expense recognized for the year 2014 would be

14000

A corporation began the month of May with $58,000 of obligations and $180,000 of economic resources. Stockholders' equity increased by $22,000 during May. The company paid $11,000 of dividends and generated revenue totaling $145,000. How much is total stockholders' equity at the end of May?

144000

Peninsula Company reported net income of $260,000 for the year. During the year, accounts receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expense of $45,000 was recorded. Net cash provided by operating activities for the year is

275,000

Barnes company trial balance total credits

36400

Accounts receivable arising from sales to customers amounted to $120,000 and $105,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $407,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is

422000

Arnold Company purchases a new delivery truck for $40,000. The sales taxes are $2,500. The logo of the company is painted on the side of the truck for $1,200. The truck's annual license is $120. The truck undergoes safety testing for $220. What does Arnold record as the cost of the new truck?

43920

A factory machine was purchased for $70,000 on January 1, 2014. It was estimated that it would have a $14,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. If the actual number of machine hours ran in 2014 was 4,000 hours and the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2014 would be

5600

Which of the following statements reflects the transferability of ownership rights in a corporation?

A stockholder may dispose of part or all of his shares.

What type of accounts can be found on a post-closing trial balance?

All accounts that have balances after the closing process is complete

Which of the following items will be reported on the statement of retained earnings?

Amounts earned by a company but not distributed as dividends

Marsh Company purchased a factory building by issuing long-term notes payable. How will Marsh report this purchase?

As a significant noncash activity

Which one of the following indicates when Bad Debt Expense should be recorded?

At the end of an accounting period during the adjusting process

Wilson Inc. issued bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer. What are these bonds called?

Callable Bonds

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. The entry made by Sadowski Brick Company on January 1 to record the proceeds and issuance of the note is

Cash 300,000 Notes Payable 300,000

A company returned goods for credit to the supplier. Which one of the following is a portion of the journal entry required if a perpetual inventory system is used?

Credit Inventory

Days of Slumber sells mattress for cash and on credit. At the end of 2014, the following appeared in the company's balance sheet: Accounts receivable, net of $2,460 allowance........................$166,200 Which one of the following statements for Days of Slumber is correct?

Customers owe 168,660 to Days of Slumber.

Which of the following transactions affects the Retained Earnings Account?

Declare a cash dividend

Which of the following transactions does not affect cash?

Declaring Cash dividends

Which of the following would be added to the balance per bank on a bank reconciliation?

Deposits in transit

In calculating net cash provided by operating activities using the indirect method, why is there an adjustment to net income for the amount of depreciation expense?

Depreciation is not a cash amount and was deducted to determine net income, so it must be added back to determine the net cash flows.

Which of the following accounts is closed at the end of an accounting period?

Dividends

Lansing Company paid $1,500 for a 12-month insurance policy and increased the Prepaid Insurance account upon payment on November 1, 2014. Lansing forgot to make an adjusting entry at the end of its fiscal year on December 31, 2014. Which of the following is an effect of the error?

Expenses will be understated and assets will be overstated

Which of the following is not considered an external user of accounting information?

Finance Directors

Which entity(ies) is/are responsible for establishing accounting standards?

Financial Accounting Standards Board and the International Accounting Standards Board

Which of the following items will increase inventoriable costs for the buyer of goods?

Freight charges paid by the purchaser

A company began operations on January 1. It purchased three shredders as part of its inventory. The first shredder had a cost of $45; the second one cost $52; and the third shredder cost $58. The company decided to use LIFO and sold two shredders in January. If the company had used FIFO, by how much would gross profit for the period be greater or less than using the LIFO method?

Gross profit would be $13 greater

A company began operations on January 1. It purchased three shredders as part of its inventory. The first shredder had a cost of $45; the second one cost $52; and the third shredder cost $58. The company decided to use LIFO and sold two shredders in January. If the company had used FIFO, by how much would gross profit for the period be greater or less than using the LIFO method?

Gross profit would be $13 greater.

What does the inventory turnover measure?

How quickly a company sells its goods

Which statement below is true concerning a perpetual inventory system?

It allows for the determination of cost of goods sold after each sale.

Which of the following relationships is true concerning the Sales Returns and Allowances account?

It can flag problems of inferior merchandise, inefficiencies in filling orders, and other mistakes.

Which one of the following is true as it related to the Accumulated Depreciation account?

It is a contra account

To be relevant, what characteristic must accounting information exhibit?

It must be capable of making a difference in a decision.

In periods of rising prices, what will LIFO produce?

Lower income taxes than FIFO

In periods of rising prices, what will LIFO produce?

Lower income taxes that FIFO.

Which of the following is the best definition of an internal user accounting information?

Managers who use accounting information to plan, organize, and run a business.

Where can an investor find operating activities in a company's financial statements?

On the statement of cash flows and the income statement

Which of the following sets of transactions contain only operating activities?

Received cash for services provided; paid cash for employee salaries.

Which of the following is an advantage of corporations relative to partnership and sole proprietorships?

Reduced legal liability for investors

For which of the following pairs of costs will a company record no amortization expense?

Research and development costs and goodwill

Adams Company is a retailer and uses a perpetual inventory system. Which statement is correct?

Returns of merchandise by Adams Company to a manufacturer are credited to Inventory.

Which of the following is a contra account with a debit balance?

Sales Discounts

Which one of the following is a contra account with a debit balance?

Sales Discounts

Which of the following is a principle of internal control that requires that different individuals should be responsible for related activities?

Segregation of Duties

Which one of the following statements is true concerning the interrelationships of financial statements?

The amount of net income on the income statement is added to the beginning retained earnings balance on the statement of retained earnings.

What happens when a company writes off an uncollectible account under the allowance method?

The cash realizable value stays the same.

A company uses LIFO to cost its inventory. Which statement is true?

The company will pay less income taxes in periods of rising prices compared to FIFO.

A company uses LIFO to cost its inventory. Which statement is true?

The company will pay less income taxes in periods of rising prices compared to using FIFO.

An analyst calculated the quality of earnings ratio for a company and determined it to be 2.7. What does this measure indicate?

The company's net cash provided by operating activities significantly exceeds its net income.

With regard to accounting for merchandising company versus a service company, which of the following is true?

The operating cycle of a merchandising company is longer than that of a service company.

What effect occurs when a stock split is declared?

The par value decreases and the number of shares increase.

What do freight terms of FOB shipping point indicate?

The seller places the goods free on board the carrier, and the buyer pays for freight costs.

Which of the following is a rue statement as it relates to impairments of plant assets?

They are written down to the new fair value during the year in which the decline occurs?

Which of the following items may cause the cash balance per bank to differ from the cash balance per books?

Time lags and bank errors

What is the purpose of recording depreciation?

To allocate the cost of the assets to the accounting periods with the assets are used to produce benefits

What is the role of the FASB

To establish accounting standards in the U.S.

What is the goal when a company is selecting a depreciation method?

To select a method that best measures an asset's contribution to revenue over its life

What occurs to stockholders' equity when a company incurs a net loss for the current period?

Total retained earnings is reduced before reporting the ending balance on the balance sheet

Advantage Company's ending inventory is overstated by $2000. What is the effect of this error on the current year's cost of goods sold and net income respectively?

Understated and Overstated

treasury stock is

a corporations own stock which has been reacquired and held for future use

On January 14, Decker industries purchased supplies of $500 on account. The entry to record the purchase will include

a debit to Supplies and a credit to Accounts Payable

what type of transaction is the acquisition of equipment by the issuance of a note payable

a noncash investing and financing activity

The closing entry process consists of closing:

all temporary accounts

which of the following would be subtracted from net income using the indirect method

an increase in accounts receivable

marsh company purchased a factory building by issuing long term notes payable. How will marsh report this purchase?

as a significant noncash activity

in computing depreciation, salvage value is

as estimate of a plant asset's value at the end of its useful life

The usual ordering of accounts in the general ledger is

assets, liabilities, stockholder equity, revenues, expenses

A perpetual inventory system would most likely be used by a(n)

automobile dealership

Wilson Inc. issued bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer. What are these bonds called?

callable bonds

which one of the following items is not a consideration when recording periodic depreciation expense on plant assets

cash needed to replace the plant asset

On July 1 the Fisher Shoe Store paid $18,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is:

debit Rent Expense, $3,000; credit Prepaid Rent, $3,000.

Gomez Corporation issues 600, 10-year, 8%, $1,000 bonds dated January 1, 2014, at 96. The journal entry to record the issuance will show a

debit to Cash for $576,000.

which of the following transactions affects the retained earnings account

declare a cash dividend

which one of the following transactions does not affect cash

declaring cash dividends

which of the following would not be included in the equipment account

electricity used by the machine

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, long-term debt retired with cash would be classified on the statement of cash flows.

financing investing section

Reporting a net income of $95,000 will

increase retained earnings

Assume that the E-Zip Corporation uses the indirect method to depict cash flows. Indicate where, if at all, land purchased for cash would be classified on the statement of cash flows.

investing activities section

mack pharmaceutical issued bonds at a premium. which of the statements below is true of the premium

it represents a reduction in the cost of borrowing

A truck costing $48,000 and on which $40,000 of accumulated depreciation has been recorded was discarded as having no value. The entry to record this event would include a

loss of 8000

For which of the following pairs of costs will a company record no amortization expense

research and development costs and goodwill

An income statement shows

revenues, expenses, and net income

Which of the following accounts has a normal credit balance?

sales revenue

the contractual interest rate on a bond is often referred to as the

stated rate

Harvey food store issued common stock with a par value of 1 per share. what is par value

the amount assigned to each share of stock in a company's corporate charter

which one of the following is not one of the functions that impact the market value of bonds

the method of amortizing the bond interest

which of the following is a correct statement concerning the reporting of stockholders' equity on the balance sheet?

the paid in capital section includes capital stock and additional paid in capital

what effect occurs when a split is declared

the par value decreases as the number of shares increases

Which of the following describes the timing of when revenue is recognized?

the period in with the performance obligation is satisfied

which of the following is a true statement as it relates to impairments of plant assets?

they are written down to the new fair value during the year in which the decline occurs

what is the purpose of recording depreciation

to allocate the cost of the assets to the accounting periods which the assets are used to produce benefits

what is the goal when a company is selecting a depreciation method

to select a best method that best measures an asset's contribution to revenue over its life

what occurs to stockholders' equity when a company incurs a net loss for the current period?

total retained earnings is reduced before reporting the ending balance on the balance sheet