accounting 131 final
The interest on a 3 month, 12%, $6,000 note receivable is
$180
Which of the following is not included in cash and cash equivalents on a company's balance sheet
A bank certificate of deposit for one year
Proprietorship
A business by a single owner
Corporation
A business owned by stockholders
Under the allowance method, the entry to write-off a $1,425 uncollectable account includes
A debit to allowance for doubtful account for $1,425
The entry made to close service revenue would include:
A debit to service revenue and a credit to Income Summary
Balance sheet
A formal listing of accounting equation on a specific dates
Income Statement
A statement summarizing the revenues and expenses for a given period
Which of the following accounts are most likely to INCREASE as a result of adjusting entries?
Accounts Receivable
Which of the following statements is true regarding the 2 allowance procedures used to estimate bad debts
Aging of accounts receivable method takes into account the existing balance in the allowance for doubtful accounts account
What type of account is prepaid rent?
An asset
All of the following will affect retained earning except:
An equipment purchase
Accounts Payable
Balance Sheet
Equipment
Balance Sheet
Inventory
Balance Sheet
Prepaid insurance
Balance Sheet
Unearned revenue
Balance Sheet
In order for accounting information to be useful in making informed decisions, it must be:
Both relevant and faithful representation
Which of the following is NOT one of the activities on the Statemet of Cash Flow?
Business Activities
Current assets
Cash and other assets that are reasonably expected to be converted into cash within one year or one operating cycle, whichever is longer
Potential liabilities on short-term note payable is recorded by:
Contingent liabilities
Which of the following business structures offer limited liability to its owners?
Corporation
The book value or carrying value of an asset is defined as:
Cost less accumulated depreciation
Computing Magazine receives $90 in advance from a customer for 3 year subscription. Computing Magazine's entry to record the receipt of funds would include a:
Credit to unearned subscription revenue for $90
Retained earning
Cumulative earnings that have not been distributed to the stockholders
An asset that cost 24,000 and has accumulated depreciation of 18,000 is sold for 5,200. The entry to record the sale would include a
Debit to Loss on Sale of Asset for $800
Receiving a check from a customer on account would be:
Debit to cash and a credit to Accounts Receivable
The normal balance of Accounts Receivable is a ______ because it is a ______.
Debit; asset
The normal balance of a Expense account is a _______ because expenses decrease with_______.
Debit; stock holder's equity
Accrued interest on a short-term note payable is recorded by
Debiting Interest Expense and Crediting Interest Payable
Under the revenue recognition principle, a business should record revenue when the business:
Delivers goods or services to a customer
Which of the following statements regarding accounts is false?
Dividends are increased with credits and decreased with debits
Which of the following terms does not describe the interest rate printed on the bond certificate?
Effective Rate
Depreciation is normally associated with which asset on the balance sheet?
Equipment
Which of the following is irreverent in computing a machine's depreciation expense using the units-of- production method?
Estimated useful life in years
A revenue expenditure usually results in debit to a(n):
Expense account
GAAP requires that research and development costs to develop a new product be
Expense in the period incurred
The matching rule related to credit losses by stating the bad debt expense should be recorded
In the period of the sale
Salary expense
Income Statement
Service revenue
Income Statement
In what order are financial statements generally prepaired?
Income Statement, Statement of Retained Earnings, and Balance Sheet
Cost of goods sold
Income statement
If bonds were initially issued at a discount, the carrying value of the bond on the issuer's books will
Increase as the bonds approach their maturity date
Under the perpetual inventory system, in addition to making the entry to record a sale, a company would
Increase cost of goods sold and decrease merchandise inventory
Stasia, Inc. has a weekly payroll of $8,000 for 5-day work week beginning each Monday and ending each Friday. Stasia's year-end is December 31 st. If December 31 st falls on a Wednesday, Stasia would make an adjustment entry to
Increase wages expense by 4,800
In a period of rising prices, which inventory method is best to use to reduce income taxes by refunding net income
LIFO
A traditional definition of internal control specifically includes all of the following features except
Maintenance of a clean and safe workplace
Recording estimated product warranty expense in the year of the sale best follows which of the following accounting principles?
Matching
Which of the following does not represent a sales
Merchandise placed aside for a customer who plans to come in next week and pay with cash
Long-term debt generally includes:
Obligations that extend beyond one year
The depreciable cost of an asset is
Original cost minus accumulated depreciation
The process of transferring journal entry information from the journal to the general ledger is called:
Posting
When a business records revenue before it is earned, it has violated the measurement issue:
Recognition
The adjusting entry made to record repaid rent which as been expired during the period would include debit to:
Rent Expense
Assets
Resources which provide future economic benefits to a business
Beginning retained earnings
Retained Earnings
Dividends
Retained Earnings
Formal closing entries will ultimately affect what accounts?
Retained Earnings
Net Income
Revenues less expense
Which internal control activity is followed when inventory storage areas are secured with limited access
Safeguarding of assets and records
Which of the following most likely would be classified as a current liability?
Salaries payable
Which of the accounts listed below are NOT a temporary (or normal) account?
Salary Payable
Jane manages the physical inventory in the warehouse and she also maintains the accounting records of the inventory held there. Which of the following internal control activities have been violated?
Segregation of duties
Statement of Cash Flow
Shows the net change in the cash account for a given period
Which of the following is a tax paid by the employee but not the employer?
State income tax
An expense incurred in 2010 is not paid until 2011. Using the accrual basis of accounting, the expense should appear on:
The 2010 income statement
Which one of the approaches for the allowance procedure emphasizes the net realizable value of accounts receivable on the balance sheet
The aging of accounts receivable method
A gain is recorded on the sale of a plant asset when:
The asset is sold for price greater than the asset's book value
A credit means:
The event had an effect on the right side of the T-account
If a company's bonds are callable,
The issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest is 4%
When the FIFO method is used, ending inventory is assumed to consist of..
The most recently purchased units
Which of the following is not an advantage of issuing long-term debt?
The risk of becoming bankrupt is reduced
When will bonds sell at discount?
The started rate of interest is less than yield/market rate of interest at the time of issue
A trial balance is a useful device because it provides a check on accuracy by showing whether:
Total debits equal total credits
A repair to an appliance under warranty occurs within the warranty period. What adjustment is made?
Warranty Liability is debited
An Accrual refers to an event:
Where cash has not yet been exchanged between the two parties
On the bank reconciliation, interests earned on a checking account should be
added to the balance per books
The term used for allocating the cost of an intangible asset to the periods it benefits is:
amortization
Which of the following items on a bank reconciliation would require a journal entry on the company's books?
bank service charge
The lower of cost or market method of accounting for inventories follows the convention of
conservatism
The account allowance for uncollectable accounts is classified as a(n)
contra-account to accounts receivable
The bondholder can convert the bond into common stock at a future time
convertible bond
The Collins Company sold $200,000 of 10-year bonds for $190,000. The stated rate on the bonds was 8% and interest is paid annually on Dec. 31. What entry would be made on Dec 31 when the interest is paid? (numbers are omitted)
debit interest expense credit discount on bonds payable
Which of the following journal entries is recorded as a result of the bank reconciliation process to record a NSF check for $250
debit to accounts receivable for 250 credit to cash receivable for 250
The collection of $1,000 account after the 2% discount. Would result in a(n)
decrease to accounts receivable for $1000
A contingent liability is recorded as a journal entry in the accounting records
if it is probable that is will become an actual liability and the amount can be reasonably estimated
The collection of a $400 account within the 2% discount period would result in a
increase to sales discounts for $8
Which of the following assets is not subject to depreciation, depletion, and amortization?
land
Obligations that will be satisfied within one year or operating cycle, whichever is longer
liabilities
helps produce an accurate measurement of a company's performance by recording an expense in the same period as the revenue it helped generate
matching principle
Which of the following would be deducted from the balance per bank
outstanding checks
All of the following are inventory costing methods except
periodic
Which of the following is not an internal control activity for cash?
record keeping and physical custody of cash should be performed by the same person
When applying the lower of cost or market rule to inventory valuation, market generally means
replacement cost
The accumulated net income of a company that has been distributed to owners in the form of dividends
retained earnings
Merchandise inventory becomes part of cost of goods sold when a company
sells the inventory
If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement
the company must increase the balance per its records by $450
