Accounting Exam 1 Review

12) If the cash is received before the related goods or services are delivered, which of the following will be recorded? A) Deferred Revenue, a liability. B) Accounts Receivable, an asset. C) Pre-earned Revenue, which increases Retained Earnings. D) Service Revenue, which increases Retained Earnings.

A

13) What type of account is Accounts Receivable? A) Asset B) Liability C) Expense D) Revenue

A

18) Which of the following items is reported on the income statement as an expense? A) This month's utility bill B) The purchase of supplies C) The purchase of land D) This month's cash sales

A

19) Which account is affected by recording the buying of goods on credit? A) Accounts Payable B) Common Stock C) Cash D) Retained Earnings

A

2) Amounts earned by selling goods or services to customers are called: A) revenues. B) expenses. C) dividends. D) common stocks.

A

22) The owner(s) of a business are not taxed on the profits of the business if the business is a: A) corporation. B) sole proprietorship. C) partnership. D) public partnership.

A

25) Eagle Company reported Salaries and Wages Payable of $1,500 at the beginning of the year and $5,000 at the end of the year. The income statement for the year reported Salaries and Wages Expense of $112,400. How much cash was paid for salaries and wages during the year? 25) ______ A) $108,900 B) $112,400 C) $107,400 D) $105,900

A

6) With a classified balance sheet, current assets are usually listed: A) in the order of liquidity. B) in alphabetical order. C) in the order of when the assets were acquired. D) from the largest to smallest dollar amount.

A

14) In its first year of operations, Jetway Airlines incurred and paid Salaries Expense of $40 million. On December 31, it accrued an additional Salaries Expense of $2 million. What should Jetway report in the income statement and balance sheet for its first year ended December 31? A) Income statement: Salaries and Wages Expense $40 million; Balance sheet: Salaries and Wages Payable $2 million B) Income statement: Salaries and Wages Expense $42 million; Balance sheet: Salaries and Wages Payable $2 million C) Income statement: Salaries and Wages Payable $2 million; Balance sheet: Salaries and Wages Expense $42 million D) Income statement: Salaries and Wages Expense $40 million; Balance sheet: Salaries and Wages Payable $0

B

3) The Accumulated Depreciation account is a(n): A) expense account. B) contra-asset account. C) liability account. D) asset account.

B

10) Net income is the amount: A) by which assets exceed liabilities. B) the company earned after subtracting expenses and dividends from revenue. C) by which revenues exceed expenses. D) by which assets exceed expenses.

C

26) On January 1, the Sleepy Monk Coffee Shop paid $24,000 for a full year of rent beginning on January 1. The rent payment was appropriately recorded in the Cash and Prepaid Rent accounts. If financial statements are prepared on January 31, the journal entry to record the adjustment would be: A) Debit Prepaid Rent and credit Rent Expense for $24,000. B) Debit Prepaid Rent and credit Rent Expense for $2,000. C) Debit Rent Expense and credit Prepaid Rent for $2,000. D) Debit Rent Expense and credit Prepaid Rent for $24,000.

C

27) At the end of last year, the company's assets totaled $430,000 and its liabilities totaled $370,000. During the current year, the company's total assets increased by $29,000 and its total liabilities increased by $12,000. At the end of the current year, stockholders' equity was: A) $17,000. B) $60,000. C) $77,000. D) $89,000.

C

4) How do debits appear in a T-account? A) They are always listed on the right side of the account. B) They are listed on the left side for asset accounts, but listed on the right side for liabilities and stockholders' equity accounts. C) They are always listed on the left side of the account. D) They are listed on the right side for asset accounts, but listed on the left side for liabilities and stockholders' equity accounts.

C

5) Managerial accounting reports prepared for internal use are used by the company's: A) bank. B) stockholders. C) employees. D) suppliers.

C

8) Debt financing is financing obtained from: A) stockholders. B) selling goods or services on credit. C) creditors. D) both creditors and stockholders.

C

1) When should supplies be recorded as an expense? A) In the period cash is paid for the supplies, regardless of when the supplies were received. B) In the period the supplies are purchased, regardless of when cash is paid. C) In the period the supplies are sold, regardless of when they were received. D) In the period the supplies are used, regardless of when they were purchased.

D

11) The income statement reports: A) the assets, liabilities, and stockholders' equity of a company. B) the amount of profit distributed to owners during the period. C) cumulative earnings that have not been distributed to stockholders. D) the amount of revenues earned and expenses incurred during the period.

D

15) If an apartment leasing company receives the rent for January 2018 from a tenant in December 2017, this will be reported by the leasing company as: A) stockholders' equity in 2017. B) an expense in 2017. C) revenue in 2017. D) a liability in 2017.

D

16) A company started the year with $3,750 of supplies on hand. During the year the company purchased additional supplies of $2,000 and recorded them as an increase to the supplies asset. At the end of the year the company determined that only $750 of supplies are still on hand. What is the adjusting journal entry to be made at the end of the period? A) Debit Supplies and credit Supplies Expense for $2,500 B) Debit Supplies and credit Supplies Expense for $750 C) Debit Supplies Expense and credit Supplies for $3,000 D) Debit Supplies Expense and credit Supplies for $5,000

D

17) A company uses $100,000 in cash to pay off $100,000 in notes payable. This would result in a: A) $100,000 debit to Cash and a $100,000 credit to Notes Payable. B) $100,000 credit to Cash and a $100,000 credit to Notes Payable. C) $100,000 debit to Cash and a $100,000 debit to Notes Payable. D) $100,000 debit to Notes Payable and a $100,000 credit to Cash.

D

20) Faithful representation is a characteristic of external financial reporting that means: A) financial information can be compared across businesses because similar accounting methods are applied. B) the financial reports of a business are assumed to include the results of only that business's activities. C) the results of business activities are reported using an appropriate monetary unit. D) financial information depicts the economic substance of business activities.

D

21) What is the purpose of the closing process? A) To record transactions for the period. B) To set all account balances to zero. C) To adjust for accrual and deferral transactions. D) To prepare the accounting records so they are ready to track results for the following year.

D

23) A) (a) and (b) are credits. B) if the sum of (a) and (b) is less than the sum of (c) through (g), the Cash account balance will increase. C) (c) through (g) are debits. D) (a) and (b) are increases.

D

24) Every transaction: A) affects only balance sheet accounts or only income statement accounts. B) increases one account and decreases another account. C) is analyzed from the standpoint of the business owners. D) has at least two effects on the basic accounting equation.

D

7) Cash activity with stockholders and creditors, such as banks, are reported as cash flows from ________ activities on the statement of cash flows. A) operating B) managing C) investing D) financing

D

9) The owner is not responsible for the entity's taxes and debts if the entity is organized as a(n): A) limited liability corporation. B) unlimited liability corporation. C) sole proprietorship. D) corporation

D