Accounting Exam 1
2 Factors of Accounting
-Measure buss. activity -Communicate those measurements to external parties for decision making purposes
Sole Proprietorship
1 Person
An example of an adjusting entry would not include: A) Recording unpaid salaries. B) Recording the use of office supplies. C) Paying salaries to company employees. D) Recording the expiration of prepaid insurance
Answer: C
Revenues have what effect on the accounting equation? A) No effect. B) Increase liabilities. C) Increase stockholders' equity. D) Decrease assets.
Answer: C
A company purchased $400 of office supplies on account during May. All the supplies were used in May, and the account was paid during June. What would the impact of these transactions be during May on (1) the balance of cash, (2) cash-basis net income, and (3) accrual-basis net income? A) (1) No effect, (2) No effect, (3) Decrease. B) (1) Decrease, (2) Decrease, (3) Decrease. C) (1) Decrease, (2) No effect, (3) No effect. D) (1) Decrease, (2) Decrease, (3) No effect.
Answer: A
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 A) Three. B) Four. C) Two. D) One.
Answer: A
If a company provides services on account, which of the following is true? A) Stockholders' equity increases. B) Expenses increase. C) Liabilities increase. D) Assets decrease.
Answer: A
The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year. The company declared a dividend of $1.3 million during the year. What was the net income earned during the year? A) $4.5 million. B) $1.3 million. C) $3.2 million. D) $1.9 million.
Answer: A
Amounts owed to suppliers for supplies purchased on account are defined as a(n): A) Asset. B) Liability. C) Expense. D) Revenue.
Answer: B
Below is the company's Cash T-account. Cash Beg. 1,200 5,200 3,100 End. 3,300 The $5,200 amount could represent which of the following? A) Purchase of supplies on account. B) Collection from customers. C) Payment for salaries. D) Ending balance of cash.
Answer: B
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. How many of these four transactions increased the given company's total assets? A) One. B) Two. C) Four. D) Three.
Answer: B
In the statement of stockholders' equity, Retained Earnings had a beginning balance of $25,000. During the period, the company reports a net income of $10,000 and a dividend of $4,000. The ending balance in the Retained Earnings account is: A) $39,000. B) $31,000. C) $10,000. D) $35,000
Answer: B
The following amounts are reported in the ledger of Mariah Company: Assets $80,000 Liabilities 36,000 Retained Earnings 12,000 What is the balance in the Common Stock account? A) $42,000. B) $32,000. C) $44,000. D) $48,000.
Answer: B
Which business form has the advantage of limited liability? A) All business forms share equal limited liability. B) Corporation. C) Partnership. D) Sole proprietorship.
Answer: B
Which of the following accounts would normally have a debit balance and appear in the balance sheet? A) Deferred Revenue. B) Accounts Receivable. C) Dividends. D) Salaries Expense.
Answer: B
Aikman Company has paid dividends of $2,410, $0, $1,570 and $1,060 over the first four years of the company's existence. If Retained Earnings after year four has an ending balance of $9,700, what is the average annual amount of net income (loss) over the past four years for Aikman? A) $14,740. B) $1,260. C) $3,685. D) $840.
Answer: C
The following financial information is from Shovels Construction Company: Accounts Payable $15,000 Buildings 80,000 Cash 10,500 Accounts Receivable 9,500 Sales Tax Payable 4,500 Retained Earnings 47,500 Supplies 40,000 Notes Payable (due in 18 months) 35,000 Interest Payable 3,000 Common Stock 35,000 What is the amount of current assets, assuming the accounts above reflect normal activity? A) $20,000. B) $140,000. C) $60,000. D) $175,000.
Answer: C
When a company makes an end-of-period adjusting entry, which includes a debit to Supplies Expense, the usual credit entry is made to: A) Accounts Payable. B) Retained Earnings. C) Supplies. D) Cash.
Answer: C
Which of the accounts are decreased on the debit side and increased on the credit side? A) Dividends, liabilities, and assets. B) Assets, dividends, and expenses. C) Liabilities, stockholders' equity, and revenues. D) Expenses, dividends, and stockholders' equity.
Answer: C
Which of the following transactions would cause an increase in both the assets and liabilities of a company? A) Pay for inventory purchased 90 days ago. B) Services received on account. C) Purchase of a building by issuing a note payable.
Answer: C
8) Which of the following statements is NOT correct about the financial statements? A) The statement of stockholders' equity presents common stock, dividends, and retained earnings information. B) An income statement reports revenues, expenses, and net income information. C) The statement of cash flows shows cash inflows and outflows from operating, financing, and investing activities. D) A balance sheet reports assets, liabilities, revenues, and expenses.
Answer: D
Which of the following describes the purpose(s) of closing entries? A) Transfer the balances of temporary accounts to common stock. B) Transfer the balances of temporary accounts to common stock; reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period. C) Adjust the balances of asset and liability accounts for unrecorded activity during the period. D) Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.
Answer: D
Which of the following items is reported in the statement of stockholders' equity? A) Operating cash flows. B) Total expenses. C) Total assets. D) Net income.
Answer: D
Which of the following items would not appear in an income statement? A) Advertising expense. B) Salaries expense. C) Service revenue. D) Cash.
Answer: D
Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the $4,200 premium to prepaid insurance. At its December 31 year-end, Yummy Foods would record which of the following adjusting entries? A. Insurance Expense 1,750 Prepaid Insurance 1,750 B. Prepaid Insurance 1,750 Insurance Expense 1,750 C. Insurance Expense 1,750 Prepaid Insurance 2,450 Accounts Payable 4,200 D. Insurance Expense 2,450 Prepaid Insurance 2,450 Answers: A) Option D B) Option C C) Option B D) Option A
Answer: D
he major underlying assumptions of accounting include all of the following except: A) Monetary unit. B) Going concern. C) Economic entity. D) Legal liability.
Answer: D
What is the equation of the balance sheet?
Assets = Liabilities + Stockholders' Equity
The form of business organization that is legally separate from its owner is a:
Corporation
Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as: A) Investing activities. B) Financing activities. C) Management activities. D) Operating activities.
D
Disadvantage
Double taxation
With respect to current assets, liquidity refers to:
How quickly the assets can be converted to cash0
What is the correct order for preparing the financial statement?
Income statement, Stockholder's equity, Balance Sheet
Advantage to Corporations
Legally separate, stockholder's have limited liability
Partnership
Owned by 1 or 2 people
Define Financial Accounting
Provide to external referred to financial account
What accounting principle states a company should "record revenues when they provide goods and services to customers?"
Revenue Recognition
Revenue
The amount the company sells products or provides service to customers
Investing Activites
Transactions involving the purchase and sale of resources that provide benefit for several years
Financial Activities
Transactions the company has with investors and creditors
Operating Activities
Transactions to the primary operation of the company