Accounting Exam 1

The usual steps in the recording process is to

analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts

Which of the following organizations issues accounting standards for countries outside the United States?

IASB

Which of the following accounts has a normal debit balance? Accounts Payable Prepaid Rent Retained Earnings Common Stock

Prepaid Rent

Which of the following is an example of a deferral adjusting entry? All of these choices are correct. Accrued expense. Prepaid expense. Accrued revenue.

Prepaid expense

An advantage of the corporate form of business is that

its ownership is easily transferable via the sale of shares of stock.

Which of the following financial statements is divided into major categories for operating, investing, and financing activities?

The statement of cash flows

In the first month of operations, the total of the debit entries to the Cash account amounted to $3180 and the total of the credit entries to the Cash account amounted to $1910. The Cash account has a

$1270 debit balance

For 2017 Windsor, Inc. reported net income of $36000; net sales $363500; and average share outstanding 15000. There were no preferred dividends. What was the 2017 earnings per share?

$2.40

Concord Corporation started the year with total assets of $306000 and total liabilities of $246000. During the year the business recorded $626000 in revenues, $329000 in expenses, and dividends of $61000. Stockholders' equity at the end of the year was

$296000

Splish Brothers Inc. had the following transactions during 2016: • Sales of $10800 on account • Collected $4800 for services to be performed in 2017 • Paid $4500 cash in salaries for 2016 • Purchased airline tickets for $600 in December for a trip to take place in 2017 What is Splish Brothers's 2016 net income using accrual accounting?

$6300

Coronado Industries began the year with retained earnings of $653000. During the year, the company recorded revenues of $604000, expenses of $382000, and paid dividends of $142000. What was Coronado retained earnings at the end of the year?

$733000

Suppose that Swifty Corporation produced and sold 4800 laptop computers during 2017. It reported $98800 cash provided by operating activities. In order to maintain production at 4800 laptops, Swifty invested in $6540 in equipment. Swifty paid $1060 in dividends. What is Swifty's free cash flow?

$91200

On a classified balance sheet, short-term investments are classified as

A current asset

When expenses exceed revenues, which of the following is true?

A net loss results

Which of the following is not a liability? Unearned Service Revenue Accounts Receivable Accounts Payable Interest Payable

Accounts Receivable

Resources owned by a business are referred to as

Assets

The accounting equation may be expressed as

Assets = Liabilities + Stockholders' Equity.

In the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results?

Auditor's Report

Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was recognized?

August 31

Common stock is reported on the

Balance Sheet

Which of the following financial statements is concerned with the company at a point in time? Income Statement Retained Earnings Statement Statement of Cash Flows Balance Sheet

Balance Sheet

Which of the following is not a current liability? Bonds Payable Accounts Payable Taxes Payable Salaries and Wages Payable

Bonds

Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt?

Both Jack and Jill are personally liable for the business debt

A company using the same accounting principles from year to year is an application of

Consistency

An accountant has debited an asset account for $920 and credited a liability account for $460. What can be done to complete the recording of the transaction?

Credit a different asset account for $460.

Which of the following would NOT be considered an internal user of accounting data for a company?

Creditor of a company

Equipment was purchased by Cheyenne Manufacturing on January 1, 2017, for $110000. Cheyenne's policy is to adjust its accounts at year-end. Which is the appropriate journal entry to record depreciation at year-end if the company expects to use equipment consistently for 5 years? In the choices below, as per convention, debits are listed first followed by credits.

Depreciation Expense - Equipment $22000 Accumulated Depreciation - Equipment $22000

On April 1, 2017, Sunland Company paid $46100 cash for equipment that will be used in business operations. The equipment will be used for four years. Sunland's records depreciation expense of $46100 for the calendar year ending December 31, 2017. Which accounting principle has been violated?

Expense recognition principle.

If a company fails to adjust for accrued expenses, what effect will this have on that month's financial statements?

Expenses will be understated and net income and stockholder's equity will be over stated

Which of the following activities involves collecting the necessary funds to support the business?

Financing

What type of corporate information is not available to investors?

Forecast of cash needs for the upcoming year

Which type of corporate information is not available to investors?

Forecast of cash needs for the upcoming year.

Unearned revenue is classified as a(n):

Liability

The relationship between current assets and current liabilities is important in evaluating a company's

Liquidity

Earnings per share formula

Net Income - Preferred Dividends / Average Common Shares Outstanding

Which of the following clarifies information presented in the financial statements, as well as expanding upon it where additional detail is needed?

Notes to the financial statement

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized?

November 30

Which activities involve putting the resources of the business into action to generate a profit?

Operating

Dividends are reported on the

Retained Earnings Statement

Ending retained earnings for a period is equal to beginning

Retained earnings + Net income - Dividends.

Which of the following accounts is increased with a credit? Sales Revenue Supplies Dividends Supplies expense

Sales Revenue

A debit is NOT the normal balance for which account listed below?

Service Revenue

debt to assets ratio formula

Total Liabilities/Total Assets

Information is _________ if independent measures, using the same methods, obtain similar results.

Verifiable

The right to receive money in the future is called a(n)

account receivable.

The general term employed to indicate an expense that has not been paid or revenue that has not been received ad has not been recognized in the accounts is:

accrued

If expenses are paid in cash, then

assets will decrease.

The primary different between prepaid and accrued expenses is that prepaid expenses have

been recorded and accrued expenses have not

The primary difference between prepaid and accrued expenses is that prepaid expenses have:

been recorded and accrued expenses have not.

Under the cash basis of accounting:

cash must be received before revenue is recognized.

Free Cash Flow formula

cash provided by operations - capital expenditures - cash dividends

current ratio formula

current assets - current liabilities

The balance in the prepaid rent account before adjustment at the end of the year is $8880 and represents three months rent paid on December 1. The adjusting entry required on December 31 is:

debit Rent Expense, $2960; credit Prepaid Rent, $2960.

Wildhorse Co. purchased office supplies costing $7560 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2700 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

debit Supplies Expense, $4860; credit Supplies, $4860.

When a company performs a service but has not yet received payment, it

debits Accounts Receivable and credits Service Revenue.

When a company receives a utility bill but will not pay it right away, it should

debut Utilities Expense and credit Accounts Payable

Borrowing money is an example of a(n)

financing activity.

The proprietorship form of business organization

generally receives favorable tax treatment relative to a corporation.

The double-entry system requires that each transaction must be recorded

in at least two different accounts.

On a classified balance sheet, companies usually list current assets

in the order in which they are expected to be converted into cash.

Debits

increase assets and decrease liabilities.

A revenue account

is increased with a credit.

Ratios that measure the income or operating success of a company for a given period of time are

profitability ratios

A journal

provides a chronological record of transactions.

The best definition of assets is the

resources belonging to a company that have future benefit to the company

Net income will result during a time period when

revenues exceed expenses

The normal balance of any account is the

side which increases that account.

Ratios that measure the ability of the company to survive over a long period of time

solvency ratios

At March 1, Sunland Company reported a balance in Supplies of $190. During March, the company purchased supplies for $910 and consumed supplies of $770. If no adjusting entry is made for supplies:

stockholders' equity will be overstated by $770.

If an individual asset is increased, then

there could be an equal decrease in another asset.

Under the expense recognition principle expenses are recognized when

they contribute to the production of revenue.

When collection is made on accounts receivable

total assets will remain the same

When collection is made on Accounts Receivable,

total assets will remain the same.

The revenue recognition principle dictates that revenue should be recognized in the accounting records:

when the performance obligation is satisfied.