acct 2110 test 1
A useful measure of a company's ability to generate profit is the net profit margin. Which of the following correctly shows how the net profit margin is calculated?
net income/sales revenue
The multiple-step income statement provides classifications of revenues and expenses. The statement contains three important subtotals. Which of the following is NOT a subtotal?
net sales
A credit balance is the normal balance for which of the following accounts?
notes payable
Each transaction will impact
only one or multiple financial statements
Building Classifications
property, plant, equipment
Companies, nonprofit organizations, and business entities may focus on
providing services for others, providing goods for others to purchase, providing benefits to society in lieu of earning a profit.
The fundamental qualitative characteristics of accounting information are
relevance and faithful representation
Accounting information that is capable of making a difference in a business decision by helping users predict future events or providing feedback about prior expectations is said to be
relevant
Liabilities may include all but which of the following?
retained earnings
Owners of a company contribute capital in one of two ways: (1) directly, by contributions to the company and (2) indirectly, by the company retaining some or all of the net income. In a corporation, income earned but not paid out in the form of dividends is called
retained earnings
The __________ principle is used to determine when revenue is recorded and reported.
revenue recognition
Dividend are reported on
statement of retained earnings
Which of the four financial statements starts with the balance of an account at the beginning of the year and ends with the balance of that same account at the end of the year?
statement of retained earnings
Posting occurs in which step of the accounting cycle?
step 3
A trial balance is prepared in which step of the accounting cycle?
step 4
The purpose of the balance sheet is to report the financial position of a company at a specific point in time. The classified balance sheet divides two of the classifications into current and long term. Which section of the balance is NOT divided into current and long term?
stockholders equity
The four basic financial statements include all but which of the following?
tax return
A trial balance is prepared from
the account balances in the ledger
A company's chart of accounts is determined by
the activities of the business
The accounting period begins with which of the following financial statements
the balance sheet
An independent auditor is hired to conduct an examination of a company's financial statements. The objective of this examination is to gather evidence that will enable the auditor to form an opinion as to whether
the financial statements fairly present the company's financial position and results of operations
While different businesses have different purposes, they all want to generate revenue. Revenue can best be described as a. the decrease in assets that results from the sale of products or services.
the increase in assets that results from the sale of products or services.
The income earned by the company but not paid out in the form of dividends is called retained earnings. An important purpose of retained earnings is
to provide profit to be used for future growth
To aid in the preparation of financial statements, some companies will prepare a
trial balance
Which of the following describes the economic entity assumption—one of the basic assumptions underlying accounting?
Each company is accounted for separately from its owners
On June 1, Techie Toys had a $500 credit balance in Accounts Payable. During the month, the company purchased office supplies for $1,750. On June 20, it had an ending credit balance of $300 in Accounts Payable. What amount did Techie Toys pay to its suppliers during June?
$1,950 was paid to suppliers during the month of June
If retained earnings at the end of the year were $20,000, net income for the year was $15,000, sales revenues for the year were $50,000, and dividends paid during the year were $1,000, what was the retained earnings balance at the beginning of the year?
6000
Using the following information, determine the amount of liabilities on the balance sheet. Cash equals $3,000; stockholders' equity equals $25,000; inventories equal $1,000; and land equals $22,000.
1000
If Duke Company has $33,000 in net sales, $20,000 in cost of goods sold, and $5,000 in selling expenses, what is Duke's gross margin?
13000
Assets and liabilities of a company are $160,000 and $30,000, respectively. Determine stockholders' equity using the accounting equation.
130000
At the beginning of June, Window Washers, Inc., received $2,500 cash from inventors in exchange for common stock. During June, Window Washers, Inc., washes all of the windows on the Crystal Office Building and receives $1,750 cash for the service. What is the amount of retained earnings after these transactions?
1750
Liabilities and stockholders' equity of a company are $160,000 and $30,000, respectively. Determine assets using the accounting equation.
190,000
The Flour Shoppe is purchasing a delivery van to deliver fresh-baked bread to its customers. The sticker price of the van is $20,000. Similar vans are selling for $19,600. The dealer agrees to a price of $19,200. Three months later, the dealer has a sale and sells the same model van for $18,900. At which cost will The Flour Shoppe record the van?
19200
If retained earnings at the beginning of the year were $30,000, retained earnings at the end of the year were $50,000, and dividends paid during the year were $1,000, what was the net income earned for the year?
21000
Using the following information, determine the amount of liabilities on the balance sheet. Cash equals $3,000; liabilities equal $2,000; inventories equal $1,000; and land equals $22,000.
24000
On June 1, Techie Toys had a $500 credit balance in Accounts Payable. During the month, the company purchased office supplies for $1,750. Techie Toys paid $1,950 to its suppliers during the month. What is the balance of Accounts Payable at the end of June?
300 credit
On June 1, Morgan & Morgan performed services for Ross Jergens on account, $20,000. Morgan & Morgan performed services for Mike Geiss on account, $16,800, on June 5. On June 15, Ross paid one-half of the amount owed to Morgan & Morgan. Mike Geiss paid the entire amount that he owed to Morgan & Morgan on June 25. What is the balance in Service Revenue on June 30?
36,800 credit
At the beginning of June, Window Washers, Inc., received $2,500 cash from inventors in exchange for common stock. During June, Window Washers, Inc., washes all of the windows on the Crystal Office Building and receives $1,750 cash for the service. What is the amount of assets after these transactions?
4250
On June 8, Morgan & Morgan purchased office supplies from Office Works on account, $750. Morgan & Morgan purchased bottled water, coffee and tea from Hydration Experts on account, $500, on June 15. On June 20, Morgan & Morgan paid the amount owed to Office Works. What is the balance in Accounts Payable on June 30?
500 credit
If Duke Company has $33,000 in net sales, $20,000 in cost of goods sold, $5,000 in selling expenses, and $500 in other expenses, what is Duke's net income?
7500
Which of the following are considered to be current liabilities?
Accounts Payable and Salaries Payable
For the economy to function effectively and efficiently, users must have faith that the information reported in financial statements is accurate and dependable. Which organization within the accounting profession has adopted a code of professional conduct that provides ethical guidelines for accountants?
American Institute of Certified Public Accountants (AICPA)
Which of the following statements best describes an independent accountant?
An accounting professional who conducts an examination of a company's financial statements
During June, Window Washers, Inc., washes all of the windows on the Crystal Office Building and receives cash for the service. What effect does this transaction have on the accounting equation?
An asset increases and stockholders' equity increases
The accounts are listed in a trial balance in which of the following orders?
Assets first, followed by liabilities, stockholders' equity, revenues, and expenses
The preparation of an income statement includes four steps. Which of the following is NOT one of those steps?
Calculate the total current assets.
The balance sheet conveys important information about the structure of assets, liabilities, and stockholders' equity to users of financial statements. Two useful measures that can be found by using the balance sheet are working capital and the current ratio. Which of the following describes the calculation for the current ratio?
Current Assets/Current Liabilities
Z-Co purchased a computer, on credit, for $3,000 and full payment is due in 60 days. Which is the proper journal entry to record the transaction on the day it was purchased?
Debit Equipment, $3,000; credit Accounts Payable, $3,00
Which of the following is NOT true of journal entries?
If debits equal credits for each journal entry, then all journal entries must be correct.
In which section of the annual report would one find Management's Discussion and Analysis?
In a separate report included in the annual report
Owners of a company contribute capital in one of two ways. Which of the following is one of those ways?
Indirectly, by the company retaining some or all of the net income
Which of the following statements is FALSE?
Issuance of common stock increases retained earnings.
The retained earnings statement summarizes and explains changes in retained earnings during an accounting period. Which of the following is the correct sequence for the presentation of the statement of retained earnings at the end of a year ending on December 31, 2019?
Retained Earnings, January 1, 2019, + Net Income - Dividends = Retained Earnings, December 31, 2019
The preparation of an income statement includes four steps. Which of the following shows the incorrect step with the item?
Step 1 List the revenues of the company.
Which of the following statements is true about the posting process?
The account number is recorded in the Posting Reference column of the journal, and the journal page number is recorded in the Posting Reference column of the ledger.
Which of the following best describes a company's investing activities?
The acquisition or sale of investments and long-term assets
Cash is reported on which two statements?
The balance sheet and the statement of cash flows
Liabilities are reported on which two statements?
The balance sheet and the statement of retained earnings
Retained earnings are reported on which two statements?
The balance sheet and the statement of retained earnings
Economic events are both internal and external. Which of the following events is an external event?
The company purchases inventory to replace that damaged in the fire
Which of the following is an example of the cost constraint?
The cost of providing information about a certain transaction exceeds the benefit of reporting the information.
A journal entry consists of three parts. Which of the following is NOT one of those parts?
The effect that the debits and credits will have on the account
Net income is reported on which two statements?
The income statement and the statement of retained earnings
Which of the following statements is NOT true?
The statement of cash flows is the least important statement of the major financial statements, because this statement does not have a balance that can be traced to any of the other statements
Rhyno Inc. has Accounts Payable with a normal balance of $21,000. On the trial balance, Rhyno reported Accounts Payable with a credit balance of $12,000. Which of the following is true?
The total credits on the trial balance will be understated
The balance sheet conveys important information about the company. Which of the following is NOT an item or information that can be found on the balance sheet?
What amount of revenue was earned from specific customers throughout the year?
A group of T-accounts best represents
a companies ledger
Generally, the first note to the financial statements contains
a summary of significant accounting policies and rules used in the statements
A trial balance is a list of all of the active accounts and each account's debit or credit balance. All of the following statements about the trial balance are correct EXCEPT
a trial balance whose debits equal credits proves that all transactions were recorded correctly.
issuing stock in exchange for cash has which of the following effects on the accounting equation?
a. Increase assets and increase contributed capital
A compound journal entry is a journal entry that
affects more than two accounts.
The normal balance of an account
determines which side of the account increases that account
Accounting can be viewed as
an information system that communicates the business activities to interested parties.
The left side of the fundamental accounting equation shows the
assets
Balance sheets are prepared
at the beginning and end of a period.
The demand for accounting information comes from
both inside and outside of the business.
Each transaction has a dual effect on the accounting equation. This means that
both sides of the equation will increase.
Investors rely on income statement information to __________ and creditors rely on it to __________.
buy stock and make loans
The right side of the fundamental accounting equation represents
claims on the companies assets
The Financial Accounting Standards Board (FASB) has developed four enhancing characteristics that support the fundamental characteristics of accounting information. Which of the following is NOT one of the enhancing characteristics?
conservatism
Owners of a company may contribute capital by
contributing cash, contributing noncash assets, contributing liabilities.
Which group would use accounting information to decide whether to lend money to a company?
creditors
Accounts Receivable classification
current asset
Allowance for Doubtful Accounts classification
current asset
supplies classification
current asset
prepaid insurance classification
current assets
Unearned Service Revenue classification
current liabilities
rent payable classification
current liabilities
R & J Equipment Manufacturers began negotiations to build specialized equipment for Clermont Excavating on October 31, 2019. A contract was signed on November 15, 2019, and work began the next day. The equipment was completed and delivered on December 29, 2019. Clermont Excavating paid for the equipment on January 15, 2020. In which period should R & J record the revenue for the equipment?
december 2019
Regardless of the form of business, all businesses engage in various activities. When a business issues stock or borrows money, it is engaging in which of the following activities?
financing
On an ongoing basis, publicly traded corporations must file a variety of financial information, including audited financial statements, with the Securities and Exchange Commission (SEC). On which form is the annual report filed?
form 10-k
Rules and conventions that are developed to guide the preparation of financial statements are called
generally accepted accounting principles
The __________ principle requires that a company record its activities at their cost.
historical cost
In order for an event to be recorded, or recognized, in the accounting system, the items making up the event must
impact a financial statement element
Signing a note payable to borrow cash will
increase assets and increase liabilities.
copyright classification
intangible assets
Financial accounting focuses on information provided to
internal decision makers
Regardless of the form of business, all businesses engage in various activities. What type of activity is a business engaged in when it purchases assets that are used in to generate revenues?
investing activity
Which of the following is often referred to as the book of original entry?
journal
Companies use a general ledger to
keep track of the balances of specific accounts.
bonds payable classification
long term liability
If the omission or misstatement of information could influence a decision, the information is said to be
material