Accounting

28. Recording an adjusting journal entry to recognize depreciation would cause which of the following? a. An increase in liabilities and expenses, and a decrease in stockholder's equity. b. A decrease in assets and stockholder's equity, and an increase in expenses. c. A decrease in assets, an increase in liabilities, and an increase in expenses. d. An increase in assets, an increase in liabilities, and a decrease in expenses

B. A decrease in assets and stockholders' equity, and an increase in expenses.

Deb Smiley, CPA, has billed her clients for services performed. She subsequently receives payments from her clients. What entry will she make upon receipt of the cash from the clients? a. Debit Unearned Revenue and credit Service Revenue b. Debit Cash and credit Accounts Receivable c. Debit Accounts Receivable and credit Service Revenue d. Debit Cash and credit Service Revenue e. Debit Cash and credit Unearned Revenue.

B. Debit Cash and credit Accounts Receivable

Quirk Company purchased office supplies costing $4,000 and debited an asset for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,600 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be a. Debit Office Supplies Expense, $1,600; Credit Office Supplies, $1,600. b. Debit Office Supplies, $2,400; Credit Office Supplies Expense, $2,400. c. Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400. d. Debit Office Supplies, $1,600; Credit Office Supplies Expense, $1,600.

C. Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400.

Maple Tree Inc. purchased a 12-month insurance policy on March 1, 2013 for $900 and recorded it properly as an asset. Coverage is effective immediately. At March 31, 2013, the adjusting journal entry needed will include a. a debit to Prepaid Insurance and a credit to Cash for $900. b. a debit to Prepaid Insurance and a credit to Insurance Expense for $825. c. a debit to Insurance Expense and a credit to Prepaid Insurance for $75 d. a debit to Insurance Expense and a credit to Cash for $75. e. a debit to Prepaid Insurance and a credit to Insurance Expense for $75.

C. a debit to Insurance Expense and a credit to Prepaid Insurance for $75

Southeastern Louisiana University sold season tickets for the 2013 football season for $160,000. A total of 8 games will be played during September, October and November. In September, three games were played. The receipt of cash was properly recorded as Unearned Ticket Revenue. The company issues financial statements on a monthly basis. The adjusting journal entry on September 30 a. is not required. No adjusting entries will be made until the end of the season in November. b. will include a debit to Cash and a credit to Ticket Revenue for $160,000. c. will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $60,000. d. will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $100,000. e. will include a debit to Ticket Revenue and a credit to Unearned Ticket Revenue for $60,000.

C. will include a debit to Unearned Ticket Revenue and a credit to Ticket Revenue for $60,000.

Which of the following correctly identifies normal balances of accounts?

Debit, Credit, Credit, Credit, Debit

The first year of operations for a company was 2010. The net income for the year 2010 was $20,000 and dividends of $12,000 were paid. In 2011, the company reported net income of $34,000 and paid dividends of $5,000. What was the balance in retained earnings for the year ended December 31, 2011 (the end of the second year)? a. $37,000 b. $54,000 c. $39,000 d. $32,000 e. $8,000

a. $37,000

Quick Frame Corporation had the following transactions during the month of August: 1. Owners started the company by investing $400,000 in cash. 2. Purchased $200,000 of equipment by making a $100,000 cash down payment and signed a 90-day note payable for the balance. 3. Purchased land for $20,000, signing a note payable for the full amount. 4. Earned $60,000 of services revenue and received cash. What are total assets for the Quick Frame Corporation at the end of August? a. $580,000 b. $680,000 c. $540,000 d. $560,000

a. $580,000

29. If a company uses $50,000 of its cash to buy an asset then: a. assets and liabilities will be unchanged. b. assets will rise $50,000 as will liabilities. c. assets will rise $50,000 as will stockholder's equity. d. assets will fall $50,000 and liabilities will rise $50,000.

a. a. assets and liabilities will be unchanged.

When a company performs the accounting cycle step known as closing the books, which of the following occurs? a. all revenue and expense accounts are reset to zero b. retained earnings is reset to zero c. all asset and liability accounts are reset to zero d. the company is liquidated e. all of the above

a. all revenue and expense accounts are reset to zero

Cathy Cline, an employee of Merlin Company, will not receive her paycheck until April 2, 2013. Based on services performed from March 16 to March 31, her salary was $900. The adjusting entry for Merlin Company on March 31 will result in a. an increase in liabilities and a decrease in stockholders' equity. b. a decrease in assets and a decrease in stockholder's equity. c. a decrease in assets and a decrease in liabilities. d. an increase in liabilities and an increase in stockholders' equity. e. a decrease in assets and an increase in liabilities.

a. an increase in liabilities and a decrease in stockholders' equity.

How is accumulated depreciation reported in the financial statements? On which statement? Under the category of a. balance sheet assets b. balance sheet liabilities c. income statement revenues d. income statement expenses

a. balance sheet, assets

Which of the following will affect a company's contributed capital? a. the issuance of stock b. the earning of net income c. the payment of dividends d. the purchase of another company's stock e. all of the above

a. the issuance of stock

The accounting equation for Eldorado Enterprises is: Assets $100,000 = Liabilities $40,000 + Stockholders' Equity $60,000. If Eldorado purchases equipment for $25,000 and signs a note payable for the same amount, the new accounting equation, after the transactions are recorded, will be: a. Assets $100,000 = Liabilities $40,000 + Stockholders' equity $60,000. b. Assets $125,000 = Liabilities $65,000 + Stockholders' equity $60,000. c. Assets $125,000 = Liabilities $40,000 + Stockholders' equity $85,000. d. Assets $75,000 = Liabilities $15,000 + Stockholders' equity $60,000.

b. Assets $125,000 = Liabilities $65,000 + Stockholders' equity $60,000.

27. If taxes payable were accrued on December 31, and these taxes were paid on the following January 5, the entry on January 5 would be: a. Debit to Income Tax Expense and Credit to Cash. b. Debit to Income Tax Payable and Credit to Cash. c. Debit to Cash and Credit to Income Tax Payable. d. Debit to Cash and Credit to Income Tax Expense. e. Debit to Income Tax Expense and Credit Income Tax Payable.

b. Debit to Income Tax Payable and Credit to Cash.

31. Which of the following would be reported on the income statement for the year? a. The amount of Cash at the end of the year. b. The amount of Supplies used up during the current year. c. The amount of dividends distributed to owners during the current year. d. The amount of unpaid employee wages at the end of the year. e. All of the above.

b. The amount of Supplies used up during the current year.

Which of the following transactions would cause a decrease in the Accounts Receivable account? a. a credit sale b. a collection of cash from a previous sale c. a cash sale d. a credit purchase e. the payment of cash on an account owed

b. a collection of cash from a previous sale

Stockholders' equity increases when a. owners receive money from a corporation b. an organizations profits are reinvested c. an organization borrows money d. an organization pays for equipment e. all of the above.

b. an organizations profits are reinvested

If an end-of-period adjusting entry is made to accrue wages, it means that a. the company pays its employees monthly b. employees have earned wages since the end of the last payroll period, but have not been paid c. the account Wages Payable will be decreased d. the company has already distributed payroll checks e. the company pays its workers ahead of time for the upcoming month

b. employees have earned wages since the end of the last payroll period, but have not been paid

Which of the following is not true about financial statements? a. the balance sheet reports the financial position of a business at a particular point in time b. the income statement reports the cash received during the period as a result of operating activities c. the statement of cash flows reports the inflows and outflows of cash for the period d. the statement of stockholder's equity includes information about net income and dividends for the period

b. the income statement reports the cash received during the period as a result of operating activities

30. Liabilities on the balance sheet would include which of the following? a. Accounts payable, notes payable and contributed capital b. Accounts receivable, supplies expense and retained earnings c. Accounts payable, notes payable and unearned revenue d. Contributed capital, retained earnings and notes payable

c. Accounts payable, notes payable and unearned revenue

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

c. November 30

32. In a T-account, debits appear in what manner? a. They are on the left under assets but on the right under liabilities and stockholder's equity. b. They are always listed on the right. c. They are always listed on the left. d. They are on the right under assets but on the left under liabilities and stockholder's equity.

c. They are always listed on the left.

Ending retained earnings from the statement of retained earnings is reported on the__________for the same date. a. unadjusted trial balance b. statement of cash flows c. balance sheet d. income statement

c. balance sheet

Which of the following requires the reduction (decrease) of a prepaid asset? a. rent is received in advance from a tenant b. interest has been incurred on a note payable c. insurance that has been paid for has been consumed during the period d. employee wages expense need to be accrued

c. insurance that has been paid for has been consumed during the period

At the end of an accounting period, the amount of net income earned by a company is transferred to the balance sheet and reported under which one of the following categories? a. assets b. liabilities c. stockholders equity d. none of the above; the amount of net income is NOT transferred to the balance sheet

c. stockholders equity

At January 31, 2013, the balance in Prieto Inc.'s supplies account was $250. During February, Prieto purchased supplies of $300 and used supplies of $400. At the end of February, the balance in the supplies account on the balance sheet should be a. $250 debit. b. $350 credit. c. $950 debit. d. $150 debit e. $150 credit

d. $150 debit

24. Which of the following is true about accrual basis accounting and cash basis accounting? a. Net Income is always larger under accrual basis accounting than cash basis accounting for every accounting period. b. GAAP does not require accrual basis accounting be used for external financial reports. c. Accrual basis accounting and cash basis accounting will always produce the same results for an accounting period. d. Accrual basis accounting provides a better measure of operating performance than does cash basis accounting. e. None of the above.

d. Accrual basis accounting provides a better measure of operating performance than does cash basis accounting.

On July 1, 2014, Smart Company purchased a six-year fire insurance policy for $7,200. Regarding this event, what amounts should be reported on the December 31, 2014 balance sheet and income statement for the year ending December 31, 2014 after adjustments are made? Prepaid Insurance Insurance Expense a. $1,200 $6,000 b. $6,000 $1,200 c. $6,600 $ 100 d. $7,200 $ 0 e. $6,600 $ 600

e. $6,600 Prepaid Insurance, $ 600 Insurance Expense