Accounting Review

Nickel Corp's cash and cash equivalents balances for the current and prior year are presented below current year $22,500 prior year $19,350 Perform a horizontal analysis of Nickel's cash and cash equivalents

16.3% (22500-19350=3150, 3150/19350)

the assessment of the quality of an organization's internal control. Can be accomplished in 2 ways: 1) through ongoing activities 2) through a separate evaluation

monitoring

The difference between accrual based revenue and accrual based expenses in the period the activity occurred is called _____ _____

net income

a check written by a company but NOT yet presented to the bank for payment

outstanding check

the identification and analysis of these risks, with the goal of effectively managing them. Because business conditions change throughout time, it's an ongoing organizational activity

risk assessment

Match Incorporation recorded salary expense of $120,000 in 2012. However, additional salaries of $9,000 had been earned, but not paid or recorded at 12-31-12. After the adjustments are recorded and posted at 12-31-12, the balances in the salaries expense and salaries payable accounts will be

salaries expense= $129,000 (9,000 + 120,000 = 129,000) salaries payable= $9,000

under the _____ _____ act, management of publicly traded corps has increased responsibility for a system of internal controls that ensures reliability of financial statements

sarbanes-oxley

an internal control activity that separates responsibilities so that no one person handles all the tasks for a particular activity

segregation of duties

Suppose that a business sells 6 month subscriptions to its monthly magazine. On January 1, the company receives a total of $600 for 10 subscriptions. To record this transaction, the company debits "Cash" for $600 and credits "Unearned Subscription Revenue" for $600. As of January 31, the company has provided 1 month of magazines and has earned 1 month of revenue. What adjusting entry is necessary at January 31?

Unearned Subscription Revenue 100 Subscription Revenue 100

Ciao, Inc had $962 in its cash account per the company's records as of June 30th. This included a deposit of $87 that was in transit on June 30th. The June 30th bank statement contained the following info: Bank statement balance $1,089 Bank service charge 7 Collection of notes receivable 68 NSF check 16 Ciao also had outstanding checks of $169. What's Ciao's adjusted cash balance at June 30th?

$1,007 (1,089 + 87 - 169)

Tom and Judy's Bed and Breakfast received the following bills for December utilities i. electricity- $500 on 12-31-11 ii. water- $750 on 12-29-11 iii. telephone- $375 on 1-1-12 on the 12-31-11, financial statements, Tom and Judy's should show accrued expenses of

$1,625 (500+750+375)

Buster Corp. purchased supplies at a cost of $20,000 during 2012. At 1-1-12, the beginning balance in the supplies account was $1,300. For 2012, supplies expense was $11,200. How much "supplies" are on hand as of 12-31-12?

$10,100 (1,300 + 20,000 - 11,200 = 10,100)

Point Corp. purchased supplies at a cost of $14,500 during the year. At january 1, supplies on hand were $1,000. At December 31, supplies on hand are $3,500. Determine the amount of supplies expense for the year

$12,000 (1,000 + 14,500 - 3,500 = 12,000)

Austin Corp's ending cash book balance was $14,560. The bank statement showed the following reconciliation items bank service fee $150 NSF check from customer $180 collection of receivable $500 What's Austin's actual cash balance?

$14,730 (14560-150-180+500)

While preparing the April 30th bank reconciliation for the checking account for Calvin Corp, the accountant identified the following items: Balance per Willow's company records $15,000 Outstanding checks 2,500 Interest earned on the checking account 15 A customer's NSF check returned by the bank 100 What amount will calvin report as its actual balance at april 30th?

$14,885 (15,000 - 100 - 15)

The items listed below were identified while preparing a bank reconciliation for the checking account of Sparrow Corp as of 3-31-12 Sparrow's balance according to the general ledger ? Bank statement balance $18,500 Outstanding checks 2,700 A customer's NSF check returned by the bank 350 Bank service charges 100 Deposits in transit 1,000 Interest earned on the checking account 60 Refer to the info presented for Sparrow Corp. Determine the amount of the balance per Sparrow's records before adjustment

$17,190 (18,500 + 1,000 - 2,700 = 16,800, 16,800 + 350 + 100 - 60)

Thompson company borrowed $100,000 on a 1 year, 10% note on 9-1-12, with interest and principal to be paid at maturity. How much interest payable will be reported on Thompson's balance sheet as of 11-30-12?

$2,500 (100,000 X 10% X 3/12)

Honey Hut's unadjusted bank balance is $3,000. Outstanding checks amount to $500 and deposits in transit total $300. Based on this info alone, Honey Hut's adjusted cash balance is

$2,800 (3,000 + 300 - 500)

Game systems corp. has grown significantly over the past year. The end of year supplies on hand totaled $200, and purchases totaled $3,000, and supplies on hand at the beginning of the year amounted to $180. How much will game systems report as supplies expense for the current year?

$2,980 (180 + 3,000 - 200 = 2,980)

Madrid Consulting, Inc prepared a bank reconciliation as of 3-31-11. The following items were identified Madrid's bank statement balance $31,400 Unadjusted cash balance from Madrid's records ? Deposit in transit 1,800 Outstanding checks 4,500 Bank service charges 100 Interest earned on the bank account 85 Customer's NSF check returned by the bank 450 Refer to the info provided for Madrid Consulting, inc. What's Madrid's adjusted cash balance at March 31st?

$28,700 (31,400 + 1,800 - 4,500)

Madrid Consulting, Inc prepared a bank reconciliation as of 3-31-11. The following items were identified Madrid's bank statement balance $31,400 Unadjusted cash balance from Madrid's records ? Deposit in transit 1,800 Outstanding checks 4,500 Bank service charges 100 Interest earned on the bank account 85 Customer's NSF check returned by the bank 450 Refer to the info provided for Madrid Consulting, Inc. What's Madrid's unadjusted cash balance in its accounting records at March 31st before the reconciliation was completed?

$29,165 (31,400 + 1,800 - 4,500 = 28,700, 28,700 + 100 + 450 - 85)

The treasurer for Kent Enterprises was preparing a bank reconciliation as of 10-31-12, when the following items were identified: Balance per Kent's company records $32,800 Deposits in transit 4,300 Outstanding checks 2,200 Interest earned on the checking account 100 NSF check from Kent's customer 400 Kent's adjusted cash balance at 10-31-12 is

$32,500 (32,800 + 100 - 400)

The month end bank statement showed a $42,600 ending balance for Hurry Corp's cash balance. Use the following items to calculate Hurry's actual ending cash balance outstanding checks $4,240 bank service fee $150 deposit in transit $780

$39,140 (42600-4240+780)

Using the following info from Walker Enterprises, calculate the free cash flow cash flows from operating activities $75,200 cash flows from investing activities $43,550 dividends paid $7,500 capital expenditures $25,320 costs of goods sold $45,300

$42,380 (75200-7500-25320)

While preparing the February 28th bank reconciliation for the checking account for Willow, Inc, the accountant identified the following items: Balance per Willow's company records $46,200 Outstanding checks 1,100 Interest earned on the checking account 50 A customer's NSF check returned by the bank 500 In addition, Willow made an error in recording a customer's check; the amount was recorded in cash receipts as $150, while the bank correctly recorded the amount as $510. What amount will Willow report as its actual cash balance on February 28th?

$46,110 (46,200 + 50 - 500 + 360)

Staple Corp. purchased supplies at a cost of $2,581 during the year. At December 31, supplies on hand are $1,492. Supplies expense for the year was $6,213. How much were supplies on hand at january 1?

$5,124 (a + 2,581 - 6,213 = 1,492. x=5,124)

On 10-1-12, Glower company borrowed $200,000 on a 2 year, 12% note, with interest and principal to be paid at maturity. How much interest expense will Glower report on its income statement for the year ending 12-31-12

$6,000 (200,000 X 12% X 3/12 = 6,000)

A company has $3,000 of supplies on hand at the beginning of the year. During the year, the company buys $7,500 of supplies. At the end of the year, supplies on hand total $4,000. What's the amount of supplies expense reported on the company's income statement?

$6,500 (3000+7500-4000)

Youngblood company borrowed $100,000 on a 1 year, 10% not on 10-1-12, with interest and principal to be paid at maturity. How much interest should stone company report on its income statement for the year ending 12-31-13?

$7,500 (100,000 x 10% x 9/12)

Peckham Corp. received a 9 month, 9% note for $100,000 from its agent on 7-1-12. The note is due on 3-31-13. If Peckham's accounting period ends on 12-31-12, how much interest revenue should Peckham recognize during 2012 and 2013?

2012= $4,500 (100,000 X 9% X 6/12) 2013= $2,250 (100,000 X 9% X 3/12)

Court Corp. purchased supplies at a cost of $24,000 during 2012. At 1-1-12, supplies on hand were $2,000. At 12-31-12, supplies on hand are $2,100. Calculate supplies expense for 2012

23,900 (2,000 + 24,000 - 2,100 = 23,900)

Some of the steps in the accounting cycle are listed below. Select the choice that places these steps in the correct order 1. Prepare a post closing trial balance 2. Prepare a trial balance 3. Journalize and post accounting transactions 4. Journalize and post adjusting entries 5. Prepare financial statements

3 2 4 5 1

Using the following info taken from Reebals Incorporated's balance sheet, prepare a vertical analysis of Reebals' cash balance cash and cash equivalents, current year $1,345 cash and cash equivalents, prior year $1,267 total assets, current year $38,500

3.5% (1345/38500)

a company's bank statement balance shows that there's $4,190 in the checking account at the end of the month. Comparing the company's records with the bank statement reveals several additional items, such as outstanding checks of $1,860, deposits in transit of $2,080, an NSF check of $209, interest earned $21.50, a bank service charge of $40, and a check for $120 recorded twice by the company. Calculate the adjusted cash balance for this checking account

4,190-1,860+2,080=4,410

a company's bank statement balance shows that there's $6,330 in the checking account at the end of the month. Comparing the company's records with the bank statement reveals several additional items, such as outstanding checks of $1,200, deposits in transit of $4,300, an NSF check of $250, and a bank service charge of $55. Calculate the adjusted cash balance for this checking account

6,330-1,200+4,300=9,430

"Tone at the Top" is a phrase used to describe which component of internal control? A) control environment B) monitoring C) control activities D) info and communication

A

2 years insurance premium was paid in advance A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

A

A company fails to record the expiration of insurance that's purchased previously. Because of this error, the company's assets and equity are A) overstated B) understated C) unaffected D) cannot tell from the given info

A

A company forgot to record 4 adjustments during 2012. Which one of the following omissions of adjustments will UNDERSTATE income? A) unearned revenue is not reduced for the portion that has been earned B) interest on money borrowed has not yet been recorded C) prepaid insurance is not reduced for the portion of the policy that has been expired during the period D) income taxes owed but not yet paid are ignored

A

Rent revenue A) temporary account B) permanent account

A

Selected data from the financial statements of Max's Tire Center are provided below 2012 2011 cash and cash equivalents $120,000 $104,000 inventory 85,000 68,000 total assets 1,400,000 1,230,000 cash flow from operations 550,000 449,000 dividends 315,000 300,000 capital expenditures 200,000 142,000 Refer to the selected data provided for Max's Tire Center. What's Max's Free Cash Flow in 2012? A) the free cash flow is $35,000 in 2012 B) the free cash flow is $40,000 in 2012 C) the free cash flow is $27,300 in 2012 D) the free cash flow is $33,600 in 2012

A (550,000-200,000-315,000=35,000)

Selected data from the financial statements of Bloom's Garden Center are provided below 2012 2011 cash and cash equivalents $75,000 $62,000 inventory 28,000 32,000 total assets 680,000 565,000 cash flow from operations 850,000 639,000 dividends 84,000 70,000 capital expenditures 112,000 95,000 Refer to the selected data provided for Bloom's Garden Center Company. Which of the following would result from a horizontal analysis of Bloom's cash and cash equivalents A) cash and cash equivalents increased by $13,000 or 20.97% during 2012 B) cash and cash equivalents increased by $13,000 or 30.79% during 2012 C) cash and cash equivalents are 11.03% of total assets in 2012 D) the free cash flow is $653,800 in 2012

A (change in cash and cash equivalents: 75,000-62,000=13,000 increase) (% change: 13,000/62,000=.20968 or 20.98%)

A company forgot to record 4 adjustments during 2012. Which one of the following omissions of adjustments will UNDERSTATE assets? A) unearned revenue is not reduced for the portion that has been earned B) interest on money borrowed has not yet been recorded C) prepaid insurance is not reduced for the portion of the policy that has been expired during the period D) income taxes owed but not yet paid are ignored

B

Free cash flow is not affected by A) dividends B) purchase of an office building C) purchase of a warehouse D) purchase of raw materials

D

Which of the following would you most likely see on a reconciliation of the book balance to the actual cash balance? A) deposit in transit B) collection of interest C) outstanding check D) none of the above

B

While preparing a bank reconciliation, which of the following items would be added to the bank statement balance? A) outstanding checks B) deposits in transit C) bank service charges D) interest earned on the bank account

B

A company has a $4,000 balance in unearned revenue on its unadjusted trial balance. At the end of the year, the company has earned all but 1/4 of the revenue. The adjusting journal entry necessary at the year end would include A) a debit to service revenue of $4,000 B) a credit to unearned revenue for $3,o00 C) a debit to unearned revenue for $3,000 D) a credit to service revenue of $1,000

C

A company's control environment is primarily influenced by the Tone at the Top. This refers to each of the following EXCEPT: A) the philosophy and operating style of management B) the policies and practices that are promoted within the company C) the experiential background of management D) the priority placed upon the company's internal control system

C

Which one of the following is an example of a deferred revenue? A) Sales are made to customers on credit B) Revenue has been earned but not yet recorded C) Payments are received prior to providing the services to customers D) Cash sales are made to customers

C

Which one of the following is the last step in the accounting cycle? A) journalizing and posting accounting transactions B) journalizing and posting adjusting entries C) preparing a post closing trial balance D) preparing financial statements

C

While preparing a bank reconciliation, which of the following items would be subtracted form the balance per the company records? A) outstanding checks B) deposits in transit C) bank service charges D) interest earned on the bank account

C

On December 1, Smiles, Inc. prepays $2,400 for 3 months of rent. On December 31, Smiles prepares financial statements. After the appropriate adjusting entry for rent, Smiles' balance sheet would show A) prepaid rent of $2,400 B) rent expense of $800 C) prepaid rent of $1,600 D) prepaid rent of $800

C (2400/3=800, 800(2))

Which of the following is not a step in the accounting cycle? A) prepare an adjusted trial balance B) prepare and post closing entries C) prepare financial statements D) each of the above is a step in the accounting cycle

D

A business purchased a 6 month general liability insurance policy for $24,000 on January 1st. The purchase was recorded as a debit to prepaid insurance and a credit to cash, both in the amount of $24,000. At January 31st, the business needs to make an adjustment for the one month of insurance consumed. Which is the correct adjusting entry? A) debit insurance expense for $24,000; credit prepaid insurance for $24,000 B) debit insurance expense for $4,000; credit cash for $4,000 C) debit prepaid insurance for $24,000; credit insurance expense for $24,000 D) debit insurance expense for $4,000; credit prepaid insurance for $4,000

D

A check returned by a bank because the issuer's cash account balance could NOT cover the check is called a A) outstanding check B) canceled check C) certified check D) NSF check

D

A necessary element of internal control is: A) database B) systems design C) systems analysis D) info and communication

D

Interest is earned but not yet collected A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

D

Which of the following is not normally included in an internal control report? A) an assessment of the effectiveness of internal control B) a statement that it's management's responsibility to ESTABLISH the internal control structure and procedures for financial reporting C) a statement that it's management's responsibility to MAINTAIN the internal control structure and procedures for financial reporting D) suggestions on how the company can improve the internal control structure

D

Which of the following is not true of the Sarbanes Oxley Act? A) it required an internal control report B) it was passed after many major corps failed as a result of fraudulent activity C) it required tat management obtain an audit of internal control D) it sought to restore management's confidence over financial reporting

D

Suppose that a business purchases a 6 month general liability insurance policy for $24,000 on January 1. To record this transaction, the company debits "prepaid insurance" for $24,000 and credits "cash" for $24,000. As of January 31, the company has consumed 1 month of insurance. What adjusting entry is necessary at January 31?

Insurance expense 4000 Prepaid insurance 4000

Pine Corp. makes adjusting entries monthly. As of March 31, the general lodger shows prepaid rent to have a debit balance of $6,000. Rent expires at a rate of $1,200 per month. No entry for rent has been recorded in the month of March. What adjusting entry is necessary at March 31?

Rent expenses 1200 Prepaid rent 1200

the policies and procedures management establishes to address the risks that might prevent the organization from achieving its objectives

control activities

Under the _____ basis of accounting, revenues are recognized when earned and expenses when incurred

accrual

The adjustment necessary to record the expense and the associated increase in the company's liabilities is classified as _____ _____

accrued expenses

The names of the 4 major classifications of adjusting entries are _____, _____, _____, and _____

accrued revenue, accrued expense, deferred revenue, and deferred expense

the account used to record the discrepancies that will occasionally occur between the amounts deposited and amounts shown on cash register tapes

cash over and short

a _____ _____ is the process used by an accountant to ensure consistency between the balance shown on the bank statement for a particular account and the balance shown on the accounting records

bank reconciliation

The _____ _____ of accounting is a system in which revenues are recognized when payments are received and expenses are recognized when payments are made

cash basis

the atmosphere in which the members of an organization conduct their activities and carry out their responsibilities. Often called the "tone at the top" because it reflects the overall control consciousness of an organization

control environment

5 elements of internal control

control environment, control activities, info and communication, monitoring, and risk assessment

items that are included on a bank statement and increase the bank account balance

credit memorandums

items that are included on a bank statement and decrease the bank account balance

debit memorandums

an amount recorded as an increase in the company's cash account at the end of the period, but which has NOT yet been reflected on the bank statement

deposit in transit

_____ is the allocation of the cost of a tangible, long term asset over its useful life to expense

depreciation

Axis Corp. purchased equipment at a cost of $100,000 in January, 2003. As of 1-1-12, depreciation of $45,000 had been recorded on this asset. Depreciation expense for 2012 is $5,000. After the adjustments are recorded and posted at 12-31-12, what are the balances for the depreciation expense and accumulated depreciation?

depreciation expense= $5,000 accumulated depreciation= $45,000+$5,000= $50,000

Sharp Inc. purchased equipment at a cost of $700,000 in January, 2003. As of 1-1-12, depreciation of $315,000 had been recorded on this asset. Depreciation expense for 2012 is $35,000. After the adjustments are recorded and posted at 12-31-13, what are the balances of equipment and accumulated depreciation?

equipment= $700,000 accumulated depreciation=$350,000 $315,000 (accumulated depreciation at 1-1-12) + $35,000 (depreciation expense for 2012) = $350,000 (accumulated depreciation at 12-31-12)

_____ _____ _____ represents the cash flow that a company is able to generate after considering the maintenance or expansion of its assets (capital expenditures) and payment of dividends

free cash flow

to management about the control environment, risk assessment, control procedures, and monitoring elements of internal control are needed by management to guide operations and ensure compliance with reporting, legal, and regulatory requirements. It leads to open flow of relevant info throughout an organization

info and communication

annual report in which management states its responsibility for internal control and provides an assessment of its internal control

internal control report

the financial statement that summarizes the operating, investing, and financing activities of a business over a period of time

statement of cash flows

Federer Corp. had $12,400 of supplies on hand at January 1. During the year, supplies with a cost of $24,000 were purchased. At December 31, the actual supplies on hand amount to $8,000. After the adjustments are recorded and posted at December 31, determine the balances in the supplies and supplies expense accounts

supplies= $8,000 supplies expense= $28,400 (12,400 + 24,000 - 8,000 = 28,400)

_____ _____ is the name given to revenue, expense, and dividend accounts because they are closed at the end of the period

temporary accounts

Duck insurance company received advance payments from customers during 2012 of $100,000. At 12-31-12, $15,000 of the advance payments still had not been earned. After the adjustments are recorded and posted at 12-31-12, what will the balances be in the unearned insurance revenue and insurance revenue accounts?

unearned service revenue= $15,000 insurance revenue= $85,000

Timberland Company received advance payments from customers during 2012 of $240,000. At 12-31-12, $20,000 of the advance payments still had not been earned. After the adjustments are recorded and posted at 12-31-12, what will the balances be in the unearned service revenue and service revenue accounts?

unearned service revenue= $20,000 service revenue= $220,000

Depreciation expense A) temporary account B) permanent account

A

The items listed below were identified while preparing a bank reconciliation for the checking account of Sparrow Corp as of 3-31-12 Sparrow's balance according to the general ledger ? Bank statement balance $18,500 Outstanding checks 2,700 A customer's NSF check returned by the bank 350 Bank service charges 100 Deposits in transit 1,000 Interest earned on the checking account 60 Refer to the info presented for Sparrow Corp. Determine the amount of Sparrow's actual cash balance

$16,800 (18,500 + 1,000 - 2,700)

Blackrock Company received a 6 month, 15% note for $100,000 from its president on 11-1-12. The note is due on 4-30-13. If blackrock's accounting period ends on december 31, how much interest revenue should blackrock recognize during 2012 and 2013?

2012= $2,500 (100,000 X 15% X 2/12) 2013= $5,000 (100,000 X 15% X 4/12)

A component of internal control is: A) risk assessment B) journals C) subsidiary ledgers D) controlling accounts

A

A credit memorandum appeared on Arthur's September bank statement. How will Arthur treat this amount on the September bank reconciliation? A) add it to the company's balance B) add it to the bank balance C) deduct it from the company's balance D) deduct it from the bank balance

A

A petty cash custodian should always A) maintain supporting documentation for any payment made from the petty cash fund B) record petty cash expenditures in the company's accounting records C) prepare the bank reconciliation for the petty cash account D) sign the checks for items paid from the petty cash fund

A

According to the Sarbanes-Oxley Act of 2002, who's primarily responsible for establishing and maintaining a system of internal control over the company's financial reporting? A) management of the company B) the company's auditors C) the company's internal auditors D) the audit committee of the company's board of directors

A

Accrued expenses originate from: A) previously unrecorded expenses that have been incurred but not yet paid in cash B) items paid in advance, but not incurred C) collecting cash from customers D) paying off liabilities

A

All supporting documents attached to an invoice are canceled when the check is signed A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

A

Although department supervisors can request a preferred supplier or vendor, the purchasing department has the responsibility for making the final decisions on a vendor A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

A

An employee from the accounting department compares the cash register tapes with the bank deposits A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

A

An office building was acquired for cash A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

A

Andre's tennis club sells season memberships for $1,500 each. During January of 2012, 50 season memberships were sold. As of March 31, 2012, only $45,000 of season membership fees had been collected from customers. The tennis season runs for 6 months starting April 1, 2012. Which one of the following is an amount reported on the balance sheet dated March 31, 2012? A) unearned tennis membership revenue of $45,000 B) unearned tennis membership revenue of $37,500 C) accounts receivable $75,000 D) tennis membership revenue of $45,000

A

Brooks Company sells merchandise to customers. Under the accrual basis of accounting. Brooks should normally recognize A) revenue and the related expenses in the same accounting period as earned, whether payment is received or not B) revenue when cash is collected and expenses when Brooks pays its creditor for the merchandise C) revenue and expenses after all payments are made D) expenses in the period the merchandise is sold and defer revenue recognition unit the customer pays for the merchandise

A

Cash register tapes are recorded daily by an employee from the accounting department A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

A

Customer's check was deposited on June 30 but isn't included on the bank statement A) addition to bank balance B) subtraction from bank balance C) addition to company's book balance D) subtraction from company's book balance E) not included on the reconciliation

A

Depreciation on a building is recorded A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

A

During the bank reconciliation process, an accountant identified an error. This error involved a company check written for $200 to pay a supplier for goods purchased on credit by the company. The check was erroneously recorded in the company's records for $2,000. Which of the following entries would correct this error in the company's records? A) cash 1,800 accounts payable 1,800 B) cash 1,800 accounts receivable 1,800 C) accounts receivable 1,800 accounts payable 1,800 D) none of these, as the error should be corrected by the supplier's personnel

A

Failure to record the earned portion of unearned revenue would result in which of the following? A) net income being understated B) no effect on total liabilities C) stockholders' equity being overstated D) total assets being understated

A

Having one employee prepare company checks and sign those checks is: A) a violation of proper segregation of duties B) a violation of adequate documentation C) a good example of independent verification D) a good example of establishing responsibility

A

How are cash equivalents reported or disclosed in the financial statements? A) they're included with cash as a current asset on the balance sheet B) they're only reported on the statement of cash flows C) they're only disclosed in the notes to the financial statements D) they're included with short term investments as a current asset on the balance sheet

A

Income statement accounts are also known as which of the following? A) temporary accounts B) real accounts C) permanent accounts D) asset accounts

A

Mathematical extensions and footings on purchase invoices are verified before the invoices are paid A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

A

Monthly statements are mailed to customers to indicate the current balance due A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

A

On 10-1-12, Zane Corp. paid $18,000 rent in advance. The rent per month is $1,500. If Zane's accounting period ends on 12-31-12, what will be reported on the financial statements? A) prepaid rent of $13,500 on its balance sheet at 12-31-12 B) prepaid rent of $18,000 on its balance sheet at 12-31-12 C) rent expense of $18,000 on its 2012 income statement D) rent revenue of $13,500 on its 2012 income statement

A

Supplies expense A) temporary account B) permanent account

A

The cash basis of accounting A) is a basis for when to record revenues and expenses B) is required by GAAP C) records expenses when they're incurred D) records revenues only when they've been earned

A

The cost of supplies used during the year is recorded A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

A

The dividend account is a(n) A) temporary account B) asset account C) real account D) liability account

A

The items listed below were identified while preparing a bank reconciliation for the checking account of Sparrow Corp as of 3-31-12 Sparrow's balance according to the general ledger ? Bank statement balance $18,500 Outstanding checks 2,700 A customer's NSF check returned by the bank 350 Bank service charges 100 Deposits in transit 1,000 Interest earned on the checking account 60 Refer to the info presented for Sparrow Corp. How will the interest earned on the checking account be handled within a bank reconciliation? A) add to the balance from the company records B) subtract from the balance from the company records C) add to the bank statement balance D) subtract from the bank statement balance

A

The practice of monitoring activities within the internal control system is likely to be carried out by each of the following groups EXCEPT: A) the board of directors B) internal auditors C) supervisors D) managers

A

The receiving department compares the quantity of merchandise received with the quantity ordered A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

A

There are 3 closing entries. The 1st one to close _____, the 2nd one to close _____, and the last one to close _____ A) revenues, expenses, dividends B) expenses, assets, capital stock C) capital stock, dividends, assets D) dividends, expenses, assets

A

Under which accounting method are revenues and expenses recognized in the same accounting period that cash receipts and payments occur? A) Under the cash basis of accounting B) Under the accrual basis of accounting C) Under the % of sales method of accounting D) Under the direct write off method of accounting

A

Upon review of Mark's statement of cash flows, the following was noted Cash flows from operating activities $15,000 Cash flows from investing activities 40,000 Cash flows from financing activities (50,000) From this info, the most likely explanation is that mack is A) using cash from operations and selling long term assets to pay back debt B) using cash from operations and borrowing to purchase long term assets C) using its profits to expand growth D) using cash from investors to provide for operations

A

Upon review of Roeper's statement of cash flows, the following was noted: Cash flows from operating activities $60,000 Cash flows from investing activities 80,000 Cash flows from financing activities (130,000) From this info, the most likely explanation is that Roeper is A) using cash from operations and selling long term assets to pay back debt B) using cash from operations and borrowing to purchase long term assets C) using its profits to expand growth D) using cash from investors to provide for operations

A

Using the accrual basis of accounting, when is revenue from the sale of merchandise normally recognized? A) On the date the sale is made B) On the date the customer pays for the merchandise C) Either on the date on which the sale occurs, or the date on which the customer pays D) When the merchandise is sold, if sold for cash, or when payment is received, if sold on credit

A

What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded? A) assets and stockholders equity decrease B) assets and stockholders equity increase C) assets and liabilities decrease D) liabilities increase and stockholders' equity decreases

A

Which component of internal control relates to the policies and procedures that management establishes to address the risks that might prevent the organization from achieving its objectives? A) control activities B) monitoring C) risk assessment D) info and communication

A

Which internal control activity is violated when the cashier at a cash register in a retail store also records the daily receipts in a journal? A) segregation of duties B) adequate documentation C) independent verification D) physical security

A

Which of the following best summarizes the order of the accounting cycle? A) journalize, post, adjust, close B) journalize, adjust, post, close C) journalize, close, adjust, post D) journalize, post, close, adjust

A

Which of the following concepts is important to accrual accounting? A) Time period, because accrual accounting divides earnings into time periods B) Market basis, because inflation is a big factor in the environment C) Cash basis, because if cash is not received, revenue is not accrued D) Entity concept, because personal transactions must be separated from business transactions

A

Which of the following entries properly closes a temporary account? A) Service revenue 20,000 Retained earnings 20,000 B) Unearned revenue 10,200 Retained earnings 10,200 C) Accumulated depreciation 1,600 Retained earnings 1,600 D) Dividends 400 Retained earnings 400

A

Which of the following is an example of a debit memorandum? A) notice of a bank service charge B) notice of interest earned on a checking account C) outstanding checks D) a company's transposition error in the recording of a deposit

A

Which of the following would you see on a reconciliation of the bank balance to the actual cash balance? A) outstanding check B) NSF check C) bank service fee D) collection of a receivable

A

Which one of the following adjustments decreases net income for the period? A) recognition of depreciation on plant assets B) recognition of interest earned on a note receivable C) recognition of services that had been provided to customers but the cash has not yet been received D) recognition of rent earned that had been received in advance from customers

A

Which one of the following is an example of an accrued liability A) rent that has been incurred, but have not been paid at the end of the period B) equipment that will benefit several periods has been purchased C) an insurance policy that expires in a future period has been acquired D) supplies are purchased and used over several months

A

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the bank statement? A) outstanding checks B) deposits in transit C) bank service charges D) interest earned on the bank account

A

The supplies account has a balance of $1,000 on january 1. During january, the company purchased $25,000 of supplies on account and the liability was appropriately recorded. A court of supplies at the end of january indicates a balance of $3,000. Which one of the following is a correct amount to be reported on the company's financial statements for the month ending january 31? A) supplies expense- $23,000 B) supplies on hand- $1,000 C) accounts payable- $28,000 D) supplies expense- $26,000

A (1,000 + 25,000 - 3,000)

A company forgot to record 4 adjustments during 2012. Which one of the following omissions of adjustments will UNDERSTATE income A) unearned revenue is not reduced for the portion that's been earned B) interest on money borrowed has not yet been recorded C) prepaid insurance is not reduced for the portion of the policy that's expired during the period D) income taxes owed but not yet paid are ignored

B

A mailroom employee opens the mail, courts the money received, and updates the accounting records or the amount received A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

B

Adjusting journal entries are made at the end of the period when A) the cash basis of accounting is used for all accounting periods B) cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting C) management reports its adjustments on the statement of cash flows D) the company reports revenue in the same period cash is collected

B

An accounting department employee records cash receipts from customers and prepares the bank deposit slips A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

B

Based on its income for the month, Bates company estimates that it will owe $23,000 of federal income taxes for the month of May. What's the effect of the adjustment on the financial statements? A) increase stockholders' equity B) increase income taxes expense C) increase retained earnings D) decrease income taxes payable

B

Cash A) temporary account B) permanent account

B

Cash was collected from customers for services to be performed next year A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

B

Check written on Votto's account in june that does not appear on the bank statement A) addition to bank balance B) subtraction from bank balance C) addition to company's book balance D) subtraction from company's book balance E) not included on the reconciliation

B

Checks are signed by the clerk in the accounting department A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

B

Donnay Corp established a petty cash fund in the amount of $300. Which of the following is the correct entry for Donnay to record this event? A) cash 300 petty cash fund 300 B) petty cash fund 300 cash 300 C) miscellaneous expense 300 petty cash fund 300 D) none of these, as no entry is necessary to record an exchange of cash

B

Fed X is a local package delivery service. Fed X uses accrual basis of accounting, when should it recognize revenue from its package delivery service? A) At the date the customer places the order B) At the date the packages are delivered C) At the date the invoice is mailed to the customer D) At the date the customer's payment is received

B

GMC sells cars and pays each salesperson a commission of $800 for each car sold. During the month of December, a salesperson, Tom, sold 3 new cars. GMC pays commissions on the 5th day of the month following the sale. Tom operates on the cash basis; the car dealer operates on the accrual basis. Which of the following statements is true? A) Tom will recognize commission revenue earned in the amount of $2,400 in December B) GMC will recognize commission expense in the amount of $2,400 in December C) Tom will recognize commission expense in the amount of $2,400 in January D) Tom will recognize revenue in the same month that the car dealer recognizes expense

B

If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement? A) the company must increase the balance per its records by $500 B) the company must increase the balance per its records by $450 C) the company must decrease the balance per its records by $500 D) the company must decrease the balance per its records by $450

B

Joe's Auto Company uses the accrual basis of accounting. Which situation VIOLATES the matching principle during 2012? A) Sales commissions are charged to expense in 2012 on all sales revenue recognized in 2012 even though some of the commissions have not been paid B) Insurance expense is recognized for the total cost of a 1 year policy purchased in May, 2012 C) Rent expenses are recognized as expenses in 2012 even though the last bill received in 2012 will not be paid until 20133 D) Sales commissions paid in 2012 for 2013 commissions are recorded as prepaid expenses for 2012

B

Land A) temporary account B) permanent account

B

On December 31, a company receives a $5,000 payment for services not yet rendered and a $500 electric bill for the month of December. Under the cash basis of accounting, this company would recognize A) $4,500 of revenue and $500 of expense B) $5,000 of revenue and $0 of expense C) $5,000 of revenue and $500 of expense D) $0 of revenue and $500 of expense

B

Prepaid insurance A) temporary account B) permanent account

B

Revenue is earned for previously received advance cash collections A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

B

Salaries payable A) temporary account B) permanent account

B

Suppose that company noted a discrepancy whereby the amount of cash deposited in the bank account exceeded the amount included as cash sales on the cash register tapes. This overage should be recorded as a A) debit to cash over and short B) credit to cash over and short C) increase in petty cash D) increase in accounts receivable

B

The account which records the difference between the cash needed for replenishment and amount of receipts is called A) petty cash B) cash over and short C) cash equivalents D) discrepancy expense

B

The clerk in the accounting department records both purchases and payments of invoices A) adheres to sound internal controls B) violates sound internal controls C) neither strengthens nor violates internal controls

B

The items listed below were identified while preparing a bank reconciliation for the checking account of Sparrow Corp as of 3-31-12 Sparrow's balance according to the general ledger ? Bank statement balance $18,500 Outstanding checks 2,700 A customer's NSF check returned by the bank 350 Bank service charges 100 Deposits in transit 1,000 Interest earned on the checking account 60 Refer to the info presented for Sparrow Corp. How will the bank services charges be handled within a bank reconciliation? A) add to the balance from the company records B) subtract from the balance from the company records C) add to the bank statement balance D) subtract from the bank statement balance

B

The items listed below were identified while preparing a bank reconciliation for the checking account of Sparrow Corp as of 3-31-12 Sparrow's balance according to the general ledger ? Bank statement balance $18,500 Outstanding checks 2,700 A customer's NSF check returned by the bank 350 Bank service charges 100 Deposits in transit 1,000 Interest earned on the checking account 60 Refer to the info presented for Sparrow Corp. How will the customer's bounced checks be handled within a bank reconciliation? A) add to the balance from the company records B) subtract from the balance from the company records C) add to the bank statement balance D) subtract from the bank statement balance

B

Unearned revenue A) temporary account B) permanent account

B

Upon review of Bert's statement of cash flows, the following was noted: Cash flows from operating activities $60,000 Cash flows from investing activities (125,000) Cash flows from financing activities 115,000 From this info, the most likely explanation is that Bert is A) using cash from operations and selling long term assets to pay back debt B) using cash from operations and borrowing to purchase long term assets C) using its profits to expand growth D) using cash from investors to provide for operations

B

What effect does "recognizing accrued interest revenue at the end of the accounting period" have on the accounting equation? A) assets increase and stockholders' equity decreases B) assets increase and stockholders equity increases C) assets decrease and liabilities decrease D) liabilities increase and stockholders equity decreases

B

What happens to the accounting equation when the adjustment is recorded to recognize earned revenue previously recorded as unearned revenue? A) assets and liabilities increase B) liabilities decrease and stockholders equity increases C) assets and liabilities decrease D) stockholders equity increases and decreases by the same amount

B

When a firm uses internal auditors, it's adhering to which one of the following internal control elements? A) risk assessment B) monitoring C) proofs and security measures D) separating responsibilities for related operations

B

Which internal control activity followed when inventory storage areas are secured with limited access? A) segregation of duties B) physical security C) independent verification D) establishing responsibility

B

Which internal control activity is followed when a physical court of inventory is performed under a perpetual inventory system? A) segregation of duties B) physical security C) independent verification D) establishing responsibility

B

Which of the following accounts is most likely associated with an accrued expense? A) depreciation expense B) salaries payable C) unearned revenue D) accounts receivable

B

Which of the following accounts will appear in a post closing trial balance? A) dividends B) retained earnings C) operating expense D) fees earned

B

Which of the following is NOT a generally recognized internal control activity? A) limiting access to computerized accounting records B) reducing the cost of hiring seasonal employees C) establishment of clear lines of authority to carry out specific tasks D) preparations of a bank reconciliation on a monthly basis

B

Which of the following is NOT considered to be a cash equivalent? A) corporate commercial paper due in 60 days after purchase B) U.S. treasury bills with an original maturity of 6 months C) a money market account with a stock brokerage firm D) a certificate of deposit with a term of 75 days when acquired

B

Which of the following is NOT generally recognized internal control activity? A) separation of the custody and record keeping responsibilities for any business activity B) destroying all documentation as soon as possible to avoid their misuse C) internal review of business transactions by the internal auditors D) independent verification of the work of one employee by another employee

B

Which of the following is a reconciling item when reconciling the bank balance to the correct balance? A) canceled checks B) outstanding checks C) NSF checks D) error in the company record

B

Which of the following is an example of a credit memorandum? A) notice of a bank service charge B) notice of interest earned on a checking account C) outstanding checks D) a company's transposition error in the recording of a deposit

B

Which of the following statements best describes the act of collusion? A) collusion is caused by an overstatement of ending inventory B) collusion is an intentional act of 2 or more employees to accomplish theft of company assets C) collusion is one of the necessary outcomes of a system of internal control over financial reporting D) collusion is enhanced by an effective system of independent reconciliations and other checks on recorded amounts

B

Which of the following statements best describes the term "outstanding check" from a company's point of view? A) a check written by the company and presented to the bank for payment B) a check written by the company but not yet presented to the bank for payment C) a check written by a customer to the company, and the check has been presented to the bank for payment D) a check written by a customer to the company, but it has not yet been presented to the bank for payment

B

Which of the following steps in the accounting cycle is completed only at the end of an accounting period? A) business transactions are analyzed B) adjustments are recorded C) transactions are journalized D) journal entries are posted to the lodger

B

Which of the following would NOT appear on a bank statement for a checking account? A) service charges B) outstanding checks C) credit memos D) interest earned

B

Which one of the following adjustments increases net income for the period? A) recognition of the amount of supplies used B) recognition of the revenue earned, but not yet received C) recognition of the wages earned, but not paid to employees D) recognition of rent costs that had been paid to the landlord in advance

B

Which one of the following adjustments will increase assets? A) interest incurred on money borrowed during the period but not yet paid to the bank B) rent revenue is recorded for amounts owed by a tenant but not yet paid C) the use of supplies is recorded D) depreciation for the period is recorded

B

While reconciling the checking account, an accountant with Elliter, Inc noticed that an error had been made in recording a check received by the company. Elliter recorded the receipt as $729 and the correct amount of the check was $279. Which of the following reconciling adjustments is necessary? A) add $450 to the company's records B) deduct $450 from the company's records C) add $450 to the bank statement balance D) deduct $450 from the bank statement balance

B

Madrid Consulting, Inc prepared a bank reconciliation as of 3-31-11. The following items were identified Madrid's bank statement balance $31,400 Unadjusted cash balance from Madrid's records ? Deposit in transit 1,800 Outstanding checks 4,500 Bank service charges 100 Interest earned on the bank account 85 Customer's NSF check returned by the bank 450 Refer to the info provided for Madrid Consulting, Inc. What's the net amount of the adjustments to Madrid's cash balance as a result of the bank reconciliation? A) $465 increase B) $465 decrease C) $2,700 decrease D) $2,700 increase

B (85 - 100 - 450=400)

The current assets section of the balance sheets of Drucker Dynamics as of 12-31-12 and 2011, is presented below 2012 2011 cash and cash equivalents $87,000 $66,560 accounts receivable, net 189,000 231,840 inventory 249,040 304,080 other current assets 26,000 21,000 total current assets 551,040 623,480 total assets 3,490,000 4,450,000 Refer to the selected data provided for Bloom's Garden Center. What is Bloom's free cash flow in 2012? A) the free cash flow is $744,000 in 2012 B) the free cash flow is $653,800 in 2012 C) the free cash flow is $635,800 in 2012 D) the free cash flow is $474,000 in 2012

B (850,000-112,000-84,200=653,800)

Selected data from the financial statements of Max's Tire Center are provided below 2012 2011 cash and cash equivalents $120,000 $104,000 inventory 85,000 68,000 total assets 1,400,000 1,230,000 cash flow from operations 550,000 449,000 dividends 315,000 300,000 capital expenditures 200,000 142,000 Refer to the selected data provided for Max's Tire Center. Which of the following would result from a horizontal analysis of Max's cash and cash equivalents in 2012? A) cash and cash equivalents increased by $16,000 or 15.80% during 2012 B) cash and cash equivalents increased by $16,000 or 15.38% during 2012 C) cash and cash equivalents are 8.57% of total assets in 2012 D) the free cash flow is $35,000 in 2012

B (change in cash equivalents: 120,000-104,000=16,000 increase) (% change: 16,000/104,000=.1538 or 15.38%)

A debit memorandum appeared on Mallory's bank statement for the month of May. How will Mallory treat this amount on the May bank reconciliation? A) add it to the company's balance B) add it to the bank balance C) deduct it from the company's balance D) deduct it from the bank balance

C

Acceptance insurance company received advance payments from customers during 2012 of $100,000. At 12-31-12, $15,000 of the advance payments still had not ye been earned. After the adjustment is made to recognize earned revenue, what are the correct balances in the unearned insurance revenue and insurance revenue accounts? A) unearned insurance revenue- $85,000; insurance revenue- $15,000 B) unearned insurance revenue- $0; insurance revenue- $100,000 C) unearned insurance revenue- $15,000; insurance revenue- $85,000 D) unearned insurance revenue- $15,000; insurance revenue- $15,000

C

Accumulated depreciation A) increases with a debit B) decreases with a credit C) increases with a credit D) is an adjunct account

C

Cash equivalents include A) treasury bills B) equity investments C) money market accounts and commercial paper D) certificates of deposit

C

Claw's Irrigation, Inc. paid $2,000 of dividends in the prior year and $4,500 of dividends in the current year. The closing entry for the current year would include A) a debit to retained earnings for $6,500 B) a credit to dividends for $6,500 C) a credit to dividends for $4,500 D) a credit to retained earnings for $4,500

C

Failure to record dividends paid would result in which of the following? A) net income being understated B) an increase in total liabilities C) stockholders' equity being overstated D) net income being overstated

C

Failure to record the supplies used during the year would result in which of the following? A) net income being understated B) an overstatement of liabilities C) assets and stockholders' equity being overstated D) total assets being understated

C

In the reconciliation of a bank statement, deposits in transit should be A) added to the unadjusted balance per the company's records B) subtracted form the unadjusted balance per the company's records C) added to the unadjusted bank statement balance D) subtracted from the unadjusted bank statement balance

C

Interest earned on the checking account for june A) addition to bank balance B) subtraction from bank balance C) addition to company's book balance D) subtraction from company's book balance E) not included on the reconciliation

C

Internal control systems are limited in their effectiveness by A) the human element B) cost benefit analysis C) both A and B D) neither A or B

C

Internal control systems provide assurance in each of the following areas EXCEPT A) effectiveness and efficiency of the company's operations B) compliance with applicable laws and regulations C) consolidation of departments within the accounting function D) reliability of financial reporting

C

On 12-31-12, Bosco Corp. signed a 1 year contract to provide services to Cosco Company for $120,000. Cosco will pay for the services on 1-1-13. Using the accrual basis of accounting, when should Cosco Corp. recognize revenue? A) on 1-1-13 when the cash is received from Cosco B) on 12-31-13 (the end of the next year), when all services have been provided C) equally throughout the year 2013, as the revenue is earned D) on 12-31-12, when the contract is signed

C

Pro incorporated operates 5 days per week with a daily payroll of $5,000. Employees are paid every saturday for the workweek just completed (monday-friday). The last day of the month is wednesday, october 31. What's the effect of the correct adjustment at october 31? A) increases stockholders' equity and wages payable by $15,000 B) increases wages payable and decreases cash by $10,000 C) decreases stockholders' equity and increases wages payable by 15,000 D) increases wages payable and increases wages expense by $25,000

C

Segregation of duties is most effective in: A) increasing cost of sales B) assisting employees in performing risk assessment procedures C) preventing collusion D) increasing the likelihood of embezzlement

C

The accounting cycle requires 3 trial balances be prepared. In what order are they prepared? A) post closing, unadjusted, and adjusted B) unadjusted, post closing, and adjusted C) unadjusted, adjusted, and post closing D) post closing, adjusted, and unadjusted

C

The asset account, supplies, has a balance of $10,000 on January 1. During january, $22,000 of supplies were purchased on account and the liability was appropriately recorded. A court of supplies at the end of january indicates a balance of $2,000. What adjusting entry is necessary at january 31? A) supplies expense 22,000 supplies 20,000 accounts payable 2,000 B) supplies expense 24,000 supplies 24,000 C) supplies expense 30,000 supplies 30,000 D) supplies 30,000 accounts payable 30,000

C

The cost of salaries earned by employees, but not paid at the end of the accounting period, is recorded A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

C

The items listed below were identified while preparing a bank reconciliation for the checking account of Sparrow Corp as of 3-31-12 Sparrow's balance according to the general ledger ? Bank statement balance $18,500 Outstanding checks 2,700 A customer's NSF check returned by the bank 350 Bank service charges 100 Deposits in transit 1,000 Interest earned on the checking account 60 Refer to the info presented for Sparrow Corp. How will the deposits in transit be handled within a bank reconciliation? A) add to the balance from the company records B) subtract from the balance from the company records C) add to the bank statement balance D) subtract from the bank statement balance

C

Under accrual accounting, revenue is recognized: A) when cash is received, and expenses, when cash is paid B) when cash is received, and expenses, when they are incurred C) when it's earned, and expenses, when the costs are incurred D) when it's earned, and expenses when cash is paid

C

Under accrual basis of accounting, expenses are be matched against revenue: A) if the earnings process is not complete B) when cash is collected from the sale of products C) in the same period as the revenue that it helped to generate D) when payment is made for costs related to revenue

C

Utility expense was incurred, but not paid at the end of the year A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

C

Which internal control activity i followed when the work of one department acts as a check on the work of another? A) segregation of duties B) physical security C) independent verification D) establishing responsibility

C

Which of the following accounts is most likely associated with a deferred revenue? A) depreciation expense B) salaries payable C) unearned revenue D) accounts receivable

C

Which of the following does NOT occur during the closing process? A) journal entries are made to return the balance in all temporary accounts to 0 B) journal entries are made to transfer the net income or loss to retained earnings C) journal entries are made to return the balance in all permanent accounts to 0 D) journal entries are made to transfer the dividends to retained earnings

C

Which of the following is NOT a requirement of the Sarbanes-Oxley Act? A) internal audit outsourcing can no longer be provided by a publicly traded corp's external auditors B) all publicly traded corp's must have an internal audit function C) all publicly traded corp's must provide internal controls over financial reporting that guarantees financial accuracy D) the audit committee of a publicly traded corp must report to the company's board of directors

C

Which of the following is NOT generally recognized internal control activity? A) establishment of clear lines of authority to carry out specific tasks B) preparation of bank reconciliation on a monthly basis C) reducing the cost of hiring seasonal employees D) limiting access to computerized accounting records

C

Which of the following is NOT included in cash and cash equivalents on a company's balance sheet? A) a savings account at the bank B) a checking account at the bank C) a bank certificate of deposit for 1 year D) petty cash

C

Which of the following is an essential element of internal control? A) computerized accounting systems B) an outsourced internal audit function C) procedures for proper authorization of transactions D) verification by gov agencies

C

Which of the following is false? A) adjusting entries are made at the end of an accounting period B) adjusting entries are not necessary under the cash basis of accounting C) the cash account will always be affected by adjusting journal entries D) adjusting journal entries always affect at least one revenue or expense account and at least one asset or liability account

C

Which of the following is not an example of a good control activity? A) establishing responsibility for the performance of a give task B) using computer passwords and encryption C) having the same employee receive and pay for merchandise D) using sequentially numbered sales invoices

C

Which of the following journal entries is recorded as a result of the bank reconciliation process to record a NSF check for $250? A) cash 250 accounts receivable 250 B) cash 250 accounts payable 250 C) account receivable 250 cash 250 D) accounts receivable 250 petty cash 250

C

Which of the following represents an item that would likely be paid from petty cash? A) a manager's salary B) utilities for a warehouse C) miscellaneous office supplies D) insurance

C

Graystone Company's plant operates 5 days per week with a daily payroll of $100,000. Employees are paid every tuesday for the prior week's work (monday-friday). The last day of the month is tuesday, april 30. What effect does the accrual at april 30 have on Greystone's net income? A) increase by $200,000 B) decrease by $300,000 C) decrease by $200,000 D) increase by $300,000

C (100,000 X 2)

Collins Construction Co. uses the accrual basis of accounting. During the year, Collins reported $45,000 of revenue, $12,500 of expenses, and $1,200 of dividends. On December 31, Collins prepares all closing entries. The net effect on retained earnings is a A) decrease of $1,200 B) increase of $42,500 C) increase of $31,300 D) decrease of $13,700

C (45000-12500-1200)

Selected data from the financial statements of Max's Tire Center are provided below 2012 2011 cash and cash equivalents $120,000 $104,000 inventory 85,000 68,000 total assets 1,400,000 1,230,000 cash flow from operations 550,000 449,000 dividends 315,000 300,000 capital expenditures 200,000 142,000 Refer to the selected data provided for Max's Tire Center. Which of the following would result from a vertical analysis of Max's cash and cash equivalents in 2012? A) cash and cash equivalents increased by $16,000 or 15.80% during 2012 B) cash and cash equivalents increased by $16,000 or 15.38% during 2012 C) cash and cash equivalents are 8.57% of total assets in 2012 D) the free cash flow is $35,000 in 2012

C (cash and cash equivalents/total assets: 120,000/1,400,000= .857 or 8.57%)

Selected data from the financial statements of Bloom's Garden Center are provided below 2012 2011 cash and cash equivalents $75,000 $62,000 inventory 28,000 32,000 total assets 680,000 565,000 cash flow from operations 850,000 639,000 dividends 84,000 70,000 capital expenditures 112,000 95,000 Refer to the selected data provided for Bloom's Garden Center Company. Which of the following would result from a vertical analysis of Bloom's cash and cash equivalents A) cash and cash equivalents increased by $13,000 or 20.97% during 2012 B) cash and cash equivalents increased by $13,000 or 30.79% during 2012 C) cash and cash equivalents are 11.03% of total assets in 2012 D) the free cash flow is $653,800 in 2012

C (cash and cash equivalents/total assets: 75,000/680,000=.1103 or 11.03%

A company prepays rent of $500 and receives a $3,000 payment for services not yet rendered. Under the accrual basis of accounting, these 2 transactions will A) increase net income $2,500 B) increase net income $3,000 C) decrease net income $500 D) have no effect on net income

D

A company's unadjusted trial balance shows a $12,000 balance in salaries expense while the adjusted trial balance shows a balance of $13,000. Which of the following best describes the reason for the difference? A) an adjusting entry to reduce salaries expense by $1,000 was prepared B) an adjusting entry to reduce salaries payable by $1,000 was prepared C) an adjusting entry to record the payment of $1,000 of salaries was prepared D) an adjusting entry to increase salaries expense by $1,000 was prepared

D

Adjustments for which of the following involves the cash account A) deferred revenues B) accrued expenses C) deferred liabilities D) none of the above

D

Allowing only certain employees to order goods and services on behalf of the company is an example of what internal control activity? A) segregation of duties B) physical security C) independent verification D) establishing responsibility

D

Assets become expenses when A) purchased for cash or on credit B) asset is delivered C) they're paid for in cash D) their economic benefits expire

D

Bank service charge on the bank statement for new checks A) addition to bank balance B) subtraction from bank balance C) addition to company's book balance D) subtraction from company's book balance E) not included on the reconciliation

D

Cash collected and recorded by a company but NOT yet reflected in a bank statement are known as: A) debit memos B) credit memos C) outstanding checks D) deposits in transit

D

Customer's NSF check returned with the bank statement A) addition to bank balance B) subtraction from bank balance C) addition to company's book balance D) subtraction from company's book balance E) not included on the reconciliation

D

Each of the following items is considered a cash equivalent EXCEPT A) a 30 day certificate of deposit B) a 60 day corporate commercial paper C) a 75 day US treasury bill D) a 180 day note issued by a local gov

D

Failure to record accrued interest expense would result in which of the following? A) assets being overstated B) assets being understated C) liabilities being overstated D) liabilities being understated

D

Failure to record amounts earned for services provided to customers but cash NOT yet received results in which of the following? A) net income being overstated B) no effect on total assets C) stockholders' equity being overstated D) total assets being understated

D

Failure to record depreciation expense for the period results in which of the following? A) net income being overstated B) no effect on total assets C) stockholders' equity being overstated D) total assets being understated

D

Glass Corp. sold merchandise to a customer for $30,000 on credit on July 15. The customer paid Glass the amount due on July 31. Under the accrual basis of accounting, how should Glass record the transaction? A) glass should recognize the revenue on July 31 B) The July 15th transaction increases revenue, but has no effect on assets because cash has not been received C) Revenue is recognized after the cost of the merchandise sold has been paid by Glass corp D) Revenue is recognized on July 15. The July 31st transaction has no effect on total assets under the accrual basis

D

If a company erroneously records a $50 check received from a customer as $500 in its records, which of the following must occur when reconciling its bank statement? A) the company must increase the balance per its records by $500 B) the company must increase the balance per its records by $450 C) the company must decrease the balance per its records by $500 D) the company must decrease the balance per its records by $450

D

If the balance on the bank statement does NOT equal the balance per the company's records, then it can be assumed that: A) the company has no errors in its records concerning the cash account B) the bank has made errors in preparing the bank statement C) the company has made errors in its records concerning the cash account D) there will be items reconciling the difference

D

Interest is earned on notes receivable but not yet received A) a deferred (prepaid) expense B) A deferred (unearned) expense C) an accrued expense D) accrued revenue

D

On December 31, a company receives a $5,000 payment for services not yet rendered and a $500 electric bill for the month of December. Under the accrual basis of accounting, this company would recognize A) $4,500 of revenue and $500 of expense B) $5,000 of revenue and $0 of expense C) $5,000 of revenue and $500 of expense D) $0 of revenue and $500 of expense

D

The closing process A) updates the retained earnings account B) prepares all revenue and expense accounts for the next period C) puts any dividends account to 0 D) all of the above

D

The entry to close the insurance expense account at the end of the accounting period is to A) debit retained earnings and credit prepaid insurance B) debit prepaid insurance and credit retained earnings C) debit insurance expense and credit retained earnings D) debit retained earnings and credit insurance expenses

D

The financial statements are prepared immediately after A) business transactions are recorded B) adjustments are recorded C) the accounts are closed D) the adjusted trial balance is prepared

D

The items listed below were identified while preparing a bank reconciliation for the checking account of Sparrow Corp as of 3-31-12 Sparrow's balance according to the general ledger ? Bank statement balance $18,500 Outstanding checks 2,700 A customer's NSF check returned by the bank 350 Bank service charges 100 Deposits in transit 1,000 Interest earned on the checking account 60 Refer to the info presented for Sparrow Corp. How will the outstanding checks be handled within a bank reconciliation? A) add to the balance from the company records B) subtract from the balance from the company records C) add to the bank statement balance D) subtract from the bank statement balance

D

The post closing trial balance differs from the adjusted trial balance in that it A) does not take into account closing entries B) does not take into account adjusting entries C) does not include balance sheet accounts D) does not include income statement accounts

D

The primary purpose of the statement of cash flows is to provide info about A) the financial position of the company B) the profitability of the company C) the investing and financing activities of the company D) the cash inflows and outflows of the company

D

What does the phrase, "Revenue is recognized when earned" mean? A) Revenue is recorded in the accounting record when the goods are received from a supplier, and reported on the income statement when sold to the customer B) Revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer C) Revenue is recorded in the accounting records when the goods are sold to a customer, and reported on the income statement when the cash payment is received from the customer D) Revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer

D

What effect does "recognizing revenue at the end of the accounting period for rent previously received in advance" have on the accounting equation for the insurance company? A) assets increase and stockholders' equity decreases B) assets increase and stockholders equity increases C) assets decrease and liabilities decrease D) liabilities decrease and stockholders equity increases

D

What's the effect on the accounting equation when a company recognizes rent as earned that had previously been received in advance from customers? A) assets increase B) assets decrease C) liabilities increase D) equity increases

D

Which internal control activity if followed when management authorizes the purchasing department to order goods and services for the company? A) segregation of duties B) physical security C) independent verification D) establishing responsibility

D

Which of the following entries properly closes a temporary account? A) Retained earnings 20,000 Service revenue 20,000 B) Dividends 200 Retained earnings 200 C) Accumulated depreciation 1600 Retained earnings 1600 D) Retained earnings 400 Salaries Expense 400

D

Which of the following is NOT a requirement of a company's top managers under the Sarbanes-Oxley Act? A) they must give an opinion about the difference of the company's internal control over financial reporting B) they must certify that they're primarily responsible for the company's internal controls over financial reporting C) they must certify that the company's financial statements are fairly presented D) they may deny responsibility for certain financial reporting matters if they're not knowledgeable about the proper accounting procedures for those transactions

D

Which of the following is not a possible closing entry A) a debit to retained earnings and a credit to dividends B) a debit to revenue and a credit to retained earnings C) a debit to retained earnings and a credit to expense D) a debit to expense and a credit to retained earnings

D

Which of the following procedures is INCORRECT for establishing and maintaining a petty cash fund? A) a check is prepared for a small, fixed amount; when the check is cashed, the money is entrusted to a petty cash custodian B) the company must obtain the cash needed for the fund and record an entry for the establishment of the fund C) when appropriate documentation is presented, cash payments are made from the fund, the petty cash custodian retains the documentation D) when the petty cash fund needs to be replenished, an entry is recorded to recognize an increase in the petty cash account

D

Which of the following procedures is NOT part of the preparation of a bank reconciliation for a checking account? A) comparing deposits listed on the bank statement to the cash account to identify deposits in transit B) comparing cancelled checks returned with the bank statement to the cash account to identify outstanding checks C) looking for bank services charges and other items on the bank statement that have not yet been included in the cash account D) reversing all the transactions recorded on the company's records that do not yet appear on the bank statement

D

Which of the following situations would likely not require an adjusting entry? A) revenue is earned before cash is received B) expense is incurred before cash is paid C) cash is received before revenue is earned D) cash is paid before equipment is received

D

Which of the following statements is true regarding a credit memorandum and its relationship to a company's bank reconciliation procedures? A) it must be added to the balance per the customer's records B) it's issued to notify a company of bank service charges which need to be recorded on the company's records C) it's issued when a customer gives the company an NSF check which needs to be recorded on the company's records D) it must be recorded as a debit to the balance per the company's records

D

Which of the following statements present financial info based on the cash basis of accounting? A) Balance sheet B) Income statement C) Statement of retained earnings D) Statement of cash flows

D

Which of the following would least likely qualify as a cash equivalent? A) treasury bills B) commercial paper C) certificate of deposit D) US savings bond

D

Which one of the following would NEVER be considered a cash equivalent? A) U.S. treasury bills B) corporate commercial pape C) money market funds D) common stock issued by a corporation

D

Wolf industries plant operates 5 days per week with a daily payroll of $50,000. Employees are paid every saturday for the work week just completed (monday-friday). The last day of the month is wednesday, may 31. The correct adjusting entry at May 31 is A) wages expense 50,000 wages payable 50,000 B) wages payable 50,000 cash 50,000 C) wages expense 150,000 cash 150,000 D) wages expense 150,000 wages payable 150,000

D

Satum Co. rented out office space to a tenant on january 1 and received a total of $90,000 for the 1st 9 months of rent. The amount was recorded as rent collected in advance when received. Adjustments are recorded only at the end of every quarter. What effect does the adjustment at March 31 have on Saturn's net income for the quarter ending March 31? A) increase by $90,000 B) decrease by $60,000 C) decrease by $30,000 D) increase by $30,000

D (90,000 X 3/9)

Pine Corporation makes adjusting entries monthly. Property, plant, and equipment depreciates at a rate of $9,000 per month. No entry for depreciation has been recorded in the month of March. What adjusting entry is necessary at March 31?

Depreciation expense 9000 Accumulated depreciation 9000

Check written on Votto's account in June and paid by the bank A) addition to bank balance B) subtraction from bank balance C) addition to company's book balance D) subtraction from company's book balance E) not included on the reconciliation

E

Suppose a company received a $2,500 utility bill for the month of March but has NOT yet recorded the transaction or paid the bill. What adjusting entry is necessary at March 31?

Utilities expense 2500 Utilities payable 2500

_____ _____ are those investments and deposits with financial institutions that are readily convertible into known amounts of cash and that have original maturities of 3 months or less

cash equivalents

any investment that 1) is readily convertible into a known amount of cash and 2) has an original maturity of 3 months or less. Examples can include treasury bills, certificates of deposit, money market accounts, and commercial paper, as long as they mature in 3 months or less. So much like cash that they're combined with cash for reporting purposes

cash equivalents

____ ____ are the journal entries made at the end of the accounting period to return the balance in all temporary accounts to zero

closing entries

in _____ analysis, cash balance is expressed as a % of the total assets

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