Accounting Midterm 1

***Giving the following: Beginning RE $58,000 Ending RE $60,000 Liabilities $42,000 Net Income $75,000 What is the amount of Dividend paid?

$73

What are some Asset accounts?

-Cash -Land -Notes Receivable -Accounts Receivable -Supplies -Equipment -Prepaid Rent

What are some Stockholders' Equity accounts?

-Common Stock -Retained Earnings

What are some Liability accounts?

-Deferred Revenue -Notes Payable -Accounts Payable

What is "DEALOR"?

-Dividends -Expenses -Assets -Liabilities -Owners' Equity/ SE -Revenue

What are the types of financial statements?

-Income sheet -Statement of stockholders' equity -Balance sheet -Statement of cash flows

Put the following in order: -general ledger -journal -trial balance

-journal -general ledger -trial balance

1. - increase retained earnings 2. - decrease retained earnings 3. - decrease retained earnings

1. Revenue 2. Expenses 3. Dividends

Interest Revenue is a. An expense account b. An asset account c. A revenue account

A revenue account

Periodicity means per GAAP a. A year can be broken-up to monthly account periods b. Every year stands on its own c. One year follows the next

A year can be broken-up to monthly account periods

During the year, EcoWash has $120,000 in revenues, $50,000 in expenses, and $4000 in dividends. Retained Earnings is changed by A. +$66000 B. +$70000 C. -$66000 D. +$74000

A. +$66000 revenues- expenses-dividends = retained earnings change

On Oct. 1, Basher Company received $1,000 from a customer as advance payment for services to be rendered, and credited Unearned Revenues at the time of receipt. By Dec. 31, Basher had performed $750 of services. The adjusting journal entry at Dec.31 would include: A. A debit to unearned revenues for $750. B. A credit to unearned revenues for $750. C. A debit to unearned revenues for $250. D. A credit to unearned revenues for $250.

A. A debit to unearned revenues for $750

Those obligations of a firm that must be either paid in cash or settled by providing goods or services within one year are referred to as: A. Current liabilities. B. Accounts payable. C. Notes payable. D. Bonds payable. E. Current assets.

A. Current liabilities. (hint is obligations- obligations are never good)

In every transaction,

ASSETS= LIABILITIES+ STOCKHOLDERS' EQUITY

The language of buisness

Accounting

Does GAAP use Cash-basis accounting or Accrual-basis accounting?

Accrual

An example of a contra- asset account is: a. Prepaid insurance b. Income summary c. Accumulated depreciation d. Taxes payable e. Unearned revenue

Accumulated depreciation

What is used to prepare the Income Statement?

Adjusted Trial Balance

A characteristic feature of corporations is A. Limited liability for investors B. Ability to make contracts in its own name C. Ownership rights proportional to shares D. Articles of incorporation E. All of the above

All of the above

Accrual basis accounting (a) Includes accounts receivable and accounts payable for the year. (b) Includes depreciation expense (c) Does not include deferred revenue (no services rendered). (d) All of the above

All of the above

Cash basis accounting means (a) Cash receipts minus cash expenses (b) Does not include credit sales and expenses incurred on credit. (c) Does not involve depreciation expense (d) All of the above

All of the above

If a company debits depreciation expense and credits accumulated depreciation for $1,000 instead of $100 by mistake, then (a)Expense is overstated (b)Net income is understated (c)No effect on revenues (d)Assets are understated (e)No effect on Liabilities (f)Stockholders equity is overstated (g)All of the above except (f) (h)All of the above

All of the above except (f)

Basic Accounting Equation

Assets = Liabilities + Stockholders' Equity

What effect does the payment of dividends have on the accounting equation? a. Assets decrease and equity increases b. Assets decrease and equity decreases c. Assets decrease and liabilities increase d. Assets increase and equity increases

Assets decrease and equity decreases

26) On August 1, 2015, Xcel Auto Repair, Inc. paid $6,000 for six months rent. After adjusting entries are made, what will be the balance of Prepaid Rent on December 31, 2015? A) $6,000 B) $1,000 C) $2,000 D) $4,000

B) $1,000

***If net income is $80,000, dividend is $ 24,000, and ending RE balance is $105,000. How much is beginning RE? A) $81 B) $49 C) $1 D) $25

B) $49

If 1 year of rent paid in advance on January 1. 2015 was debited to prepaid rent, what adjusting entry is needed to adjust on 1/31/2015? A. Debit prepaid rent, credit cash. B. Debit rent expense, credit prepaid rent. C. Debit rent expense, credit unearned rent. D. Office supplies expense.

B. Debit rent expense, credit prepaid rent.

Which account is a permanent or 'Real' account? a. Cash b. Service Revenue c. Dividends

Cash

Which of the following journal entries would be recorded if a business received cash of $600 on account for services performed at an earlier date? A) Cash 600 Service Revenue 600 B) Accounts Receivable 600 Service Revenue 600 C) Cash 600 Accounts Receivable 600 D) Service Revenue 600 Accounts Receivable 600

Cash 600 Accounts Receivable 600

Dividends is a(n) a. Expense b. Revenue c. Cash payments to shareholders

Cash payments to shareholders

Which accounts appear on the Balance Sheet? A- Receivables, land, payables B- Cash, revenues, land C- Cash, receivables, payables D- Expenses, payables, cash

Cash, receivables, payables

Which balance sheet groups a company's assets and liabilities into current and long-term categories?

Classified Balance Sheets

Which of the following accounts would appear in the credit column of a trial balance? a. Prepaid Rent b. Dividends c. Common Stock d. Salaries Expense

Common Stock

Stockholders' Equity is made of

Common Stock and Retained Earnings

Accounts on the balance sheet are classified as?

Current and long-term

Which of the following accounts would appear in the Balance Sheet debit column? A) Unearned service revenue B) Depreciation expense C) Service revenue earned D) Prepaid insurance

D) Prepaid insurance

***During September, Amy's shop had revenue of $4,500 and expenses of $1,600, and $1,350 paid as dividends. If the Retained Earnings on September 30 was $9,000, the Retained Earnings on September 1 must have been: A. $10,550 B. $6,000 C. $11,000 D. $7,450.

D. $7,450.

An increase in an expense account could be balanced in a journal entry by: A. A decrease in a revenue account. B. A decrease in a liability account. C. A decrease in equity. D. A decrease in an asset account.

D. A decrease in an asset account.

Which accounts increase with debit and decrease with credit?

Dividends, Expenses, and Assets

Received $700 in advance for 14 1-hour lessons. a. Dr Revenue 700; Cr Cash 700 b. Dr Cash 700; Cr Revenue 700 c. Dr Cash 700; Cr Unearned Revenue 700

Dr Cash 700; Cr Unearned Revenue 700

Paid $12000 one-year's rent in advance. a. Dr Rent Expense 12,000; Credit Cash 12,000 b. Dr Rent Expense 1,000; Credit Cash 1,000 c. Dr Prepaid Rent 12,000; Credit Cash 12,000

Dr Prepaid Rent 12,000; Credit Cash 12,000

Debits increase a. Liabilities b. Stockholders' Equity accounts c. Expenses

Expenses

At the end of the month these accounts are zeroed-out a. Assets, Liabilities and Equity accounts b. Expenses Revenues and Dividends c. Retained Earnings

Expenses Revenues and Dividends

What is this an example of?

General Ledger

What is GAAP?

Generally Accepted Accounting Principles

Purchasing a building for $110,000 by paying cash of $15000 and signing a note payable for $95000 will A. Increase both total assets and total liabilities by $95,000. B. Increase both total assets and total liabilities by $110,000. C. Decrease both total assets and total liabilities by $15,000. D. Decrease total assets and increase total liabilities by $15,000.

Increase both total assets and total liabilities by $95,000.

The language of accountants

Journal Entries

What is this an example of?

Journal Entries

After initially recording a transaction, the data are then copied or posted to which of the following? a. Chart of Accounts b. Ledger c. Trial Balance d. Journal

Ledger

What does the word debit mean? a. Left side b. Right side c. Increase d. Decrease

Left side

Which accounts decrease with debit and increase with credit?

Liabilities, OE/SE, and Revenue

Periodicity

Measuring performance at different periodic intervals

If a company's expenses are overstated (a) Net income is understated (b) Net income is overstated (c) Neither is true

Net income is understated

When/how does the Financial Accounting Standards Board require financial statements to be presented?

On the accrual basis

Who are financial statements generally meant to be viewed by?

Outsiders

If a company forgets the adjusting entry of debit to rent expense and credit to prepaid rent then assets are (a) Understated (b) Overstated (c) No effect

Overstated

If a company forgets the adjusting entry of debit to rent expense and credit to prepaid rent then net income is (a) Understated (b) Overstated (c) No effect

Overstated

Which of the following accounts would be debited when a company pays $12,000 in advance for one year of rent? a. Cash b. Rent Expense c. Prepaid Rent d. Rental Income

Prepaid Rent

Which of the following accounts is increased with a debit? a. Unearned revenue b. Prepaid expense c. Service revenue d. Retained earnings

Prepaid expense

Income statements shows a. Profitability b. Assets c. Liabilities

Profitability

Posting is a. Recording transactions in journals b. Preparing a Trial Balance c. Recording journal entry amounts in general ledgers

Recording journal entry amounts in general ledgers

What account do Dividends get closed out to?

Retained Earnings

What account to Revenues and Expenses get closed out to?

Retained Earnings

all temporary accounts are closed out to which account?

Retained Earnings

How to prepare Income statement using Adjusted Trial Balance?

Revenue-Expenses= Net Income

Which accounts have zero balances at the end of each month? a. Assets b. Revenues c. Liabilities

Revenues

Which accounts appear on the Income Statement? A- Revenues, supplies B- Revenues, expenses C- Expenses, payables D- Revenues, receivables, land

Revenues, expenses

Retained Earnings is made of

Revenues-Expenses-Dividends

Which entity is part of the federal government? a. FASB b. SEC c. IASB

SEC

The biggest reason for incorporating? a. Reduced taxes b. Reduced paperwork c. Shareholders' personal assets are protected from bankruptcy

Shareholders' personal assets are protected from bankruptcy

Which of the following financial statements illustrates the fundamental accounting equation? a. The Balance Sheet b. The Income Statement c. The Statement of Cash Flows d. The Statement of Owners Equity e. The Statement of Retained Earnings

The Balance Sheet

Which of the following is used to provide a chronological record of all transactions affecting a firm? a. The general ledger b. The journal c. The trial balance d. The income statement

The journal

What must result if the revenues minus the expenses is less than the amount of the dividends paid? A) The retained earnings account increases. B) The company had positive net income. C) The company had a net loss. D) The retained earnings account decreases.

The retained earnings account decreases.

A journal entry for a $75 payment for rent expense was posted as a debit to salary expense and a credit to cash. No other mistake was made. This error will cause which of the following conditions on the trial balance? A) The sum of the credits will still equal the sum of the debits. B) The sum of the debits will exceed the sum of the credits by $75. C) The sum of the debits will exceed the sum of the credits by $150. D) The sum of the credits will exceed the sum of the debits

The sum of the credits will still equal the sum of the debits.

What would be the effect on total assets if a company purchased land for $200,000 cash? a. Total assets would go up by $200,000. b. Total assets would go down by $200,000. c. There would be zero effect on total assets. d. None of the above

There would be zero effect on total assets.

Total assets equals total a. Total liabilities and total equity b. Total current liabilities and total long-term liabilities c. Total contributed capital and total earned capital

Total liabilities and total equity

- are used in preparing adjusting entries

Trial Balance

- shows a list of all accounts' balances at a particular date, and shows total debits are equal to total credits at the bottom

Trial Balance

What is this an example of?

Trial Balance

If a company forgets the adjusting entry of debit to rent expense and credit to prepaid rent then expenses are (a) Understated (b) Overstated (c) No effect

Understated

In Accrual accounting, when is revenue recognized?

When it is earned

In Accrual accounting, when are expenses recorded?

When the occur

Deferred Revenue is a

a Liability account

A two year insurance policy in the amount of $2,400 was purchased on Feb 1, 2015 and was recorded by debiting the prepaid insurance account. At the end of its fiscal year at June 30, 2015, the firm will have to recognize insurance expense of: a. $2400 b. $500 c. $1900 d. $1100

b. $500

The Fundamental Accounting Equation is a. Assets = Account Payable + Retained Earnings b. Assets = Liabilities + Stockholders' Equity c. Assets = Retained Earnings + Common Stock

b. Assets = Liabilities + Stockholders' Equity

Journal entries always have balance between

debits and credits

If total assets -, then liabilities or stockholders' equity decreases by the same amount.

decrease

What does the Classified balance sheet have?

has Current Assets and Liabilities and Long Term Assets and Long Term Liabilities

If total assets - , then liabilities or stockholders' equity increases by the same amount.

increase

Debits on the

left

Revenue- Earnings

occur when the service has been provided or when title to goods has changed to the buyer

Balance sheets show only - accounts

real/permanent

Accrual Basis Accounting

reporting income when it is earned and expenses when they are incurred (cash or account receivable)

Credits on the

right

Revenue - Realized

when the seller has received cash, cash equivalents or something that can readily be converted into cash

Do Income Statements have both real/ temporary accounts?

yes