Acct exam 1 review

During the​ year, Greenwash Corporation has $270,000 in​ revenues, $145,000 in​ expenses, and $3,000 in dividend declarations and payments. Net income for the year​ was: A. $ 270,000 B. $ 148,000 C. $ 128,000 D. $ 125,000

$ 125,000

A​ company's balance of retained earnings on January 1 was $ 20 million. During the​ year, sales revenue was $ 75 ​million, while expenses totaled $ 40 million. The company declared and paid $ 10 million in cash dividends during the year. What was the balance of retained earnings at the end of the​ year? A. $ 45 million B. $ 145 million C. $ 65 million D. $ 55 million

$ 45 million

White Instruments had retained earnings of $380,000 at December​ 31, 2017. Net income for 2018 totaled $210,000​, and dividends declared for 2018 were $ 75,000. How much retained earnings should White report at December​ 31, 2018​? A. $ 515,000 B. $ 380,000 C. $ 455,000 D. $ 590,000

$ 515,000

Frost Enterprises buys a warehouse for $ 570,000 to use for its East Coast distribution operations. On the date of the​ purchase, a professional appraisal shows a value of $620,000 for the warehouse. The seller had originally purchased the building for $525,000. Frost has a similar warehouse on the West Coast that has a book value of $586,000. Under the historical cost​ principle, Frost should record the building for A. $ 525,000. B. $ 620,000. C. $ 570,000. D. $ 586,000.

$ 570,000.

Terry Corporation began the year with cash of $147,000 and land that cost $47,000. During the year Terry earned service revenue of $240,000 and had the following​ expenses: salaries, $185,000​; ​rent, $87,000​; and​ utilities, $20,000. At​ year-end Terry​'s cash balance was down to $43,000. How much net income​ (or net​ loss) did Terry experience for the​ year? A. $(32,000) B. $ 55,000 C. $(156,000) D. $(52,000)

$(52,000)

Martex, a new​ company, completed these transactions. 1. Stockholders invested $57,000 cash and inventory with a fair value of $25,000. 2. Sales on​ account, $19,000. What will Martex​'s total assets​ equal? A. $57,000 B. $82,000 C. $101,000 D. $76,000

$101,000

Accounts Payable had a normal beginning balance of $1,800. During the​ period, there were debit postings of $200 and credit postings of $700. What was the ending​ balance? A. $2,300 debit B. $1,300 debit C. $1,300 credit D. $2,300 credit

$2,300 credit

A​ firm's beginning Cash balance was $10,000. At the end of the​ period, the balance was $8,000. If total cash paid out during the period was $23,000​, the amount of cash receipts was A. $31,000. B. $33,000. C. $21,000. D. $25,000.

$21,000.

Aster Corporation had a balance of $1,200 in Prepaid Supplies at the beginning of the year. The company purchased $850 of supplies during the year. At year​ end, Prepaid Supplies had a balance of $1,700. What is the amount of Supplies Expense that Aster Corporation will recognize for the​ year? A. $1,350 B. $1,700 C. $850 D. $350

$350

Sebastopol Corporation holds cash of $ 2,000 and owes $ 28,000 on accounts payable. Sebastapol has accounts receivable of $ 35,000, inventory of $ 18,000​, and land that cost $ 60,000. How much are Sebastopol​'s total assets and​ liabilities? Total assets Liabilities A. $115,000 $ 28,000 B. $115,000 $46,000 C. $97,000 $46,000 D. $55,000 $88,000

A: $115,000 L: $ 28,000

Amounts owed to a company by its customers would​ be: A. Accounts Receivable. B. Accounts Payable. C. Inventory. D. Prepaid Expenses.

Accounts Receivable.

Which of the following accounts would not be included in the closing​ entries? A. Retained Earnings B. Accumulated Depreciation C. Depreciation Expense D. Service Revenue

Accumulated Depreciation

Financial statements can be used by which of the following​ groups? A. Regulatory bodies B. Individuals C. Investors and creditors D. All of the above.

All of the above.

Purchasing a laptop computer on account will A. increase total liabilities. B. increase total assets. C. have no effect on​ stockholders' equity. D. All of the listed choices are correct.

All of the listed choices are correct.

The following accounts have normal debit​ balances: A. Liabilities B. Revenues C. Assets D. All of the listed accounts have a normal debit balance.

Assets

balance sheet formula

Assets = Liabilities + Equity

The accounting equation can be expressed as A. Assets​ = Liabilities-Equity. B. Assets-Liabilities ​= Equity. C. Assets​ + Liabilities​ = Equity. D. Equity-Assets ​= Liabilities.

Assets-Liabilities ​= Equity.

Jenna Newbury began a music business in July 2018. Newbury prepares monthly financial statements and uses the accrual basis of accounting. The following transactions are Newbury ​Company's only activities during July through​ October: Jul 14 Bought music on account for $ 65​, with payment to the supplier due in 90 days. Aug 3 Performed a job on account for Alanna Turner for $ 55​, collectible from her in 30 days, and used up all the music purchased on July 14. Sep 16 Collected the $ 55 receivable from Turner. Oct 22 Paid the $ 65 owed to the supplier from the July 14 transaction. In which month should Newbury record the cost of the music as an​ expense? A. October B. July C. August D. September

August

A doctor purchases medical supplies of​ $640 and pays​ $290 cash with the remainder on account. The journal entry for this transaction would be which of the​ following? A. Debit Supplies Credit Accounts Receivable Credit Cash B. Debit Supplies Credit Accounts Payable Credit Cash C. Debit Supplies Debit Accounts Receivable Credit Cash D. Debit Supplies Debit Accounts Payable Credit Cash

Debit Supplies Credit Accounts Payable Credit Cash

What data flows from the statement of retained earnings to the balance​ sheet? A. Cash B. Net income C. Assets D. Ending retained earnings

Ending retained earnings

Accrual Accounting

GAAP; records impact of transaction when they occur; revenue when earned and expenses when incomed; cash & noncash

Which financial statement would show how well a company performed over the past​ year? A. Balance sheet B. Income statement C. Statement of retained earnings D. Statement of cash flows

Income statement

How would the issuance of common stock for cash affect the accounting​ equation? A. Decrease assets and decrease liabilities B. Increase liabilities and decrease​ stockholders' equity C. Increase assets and increase liabilities D. Increase assets and increase​ stockholders' equity

Increase assets and increase​ stockholders' equity

Which of the following debit and credit rules is​ correct? A. Increases in liabilities and​ stockholders' equity are debited. B. Increases in liabilities and​ stockholders' equity are credited. C. Increases in assets and liabilities are debited. D. Decreases in assets and liabilities are credited.

Increases in liabilities and​ stockholders' equity are credited.

Identify the asset from the following list of​ accounts: A. Inventory B. Common Stock C. Retained Earnings D. Notes Payable

Inventory

income statement formula

Net Income = Revenue - Expenses

What item flows from the income statement to the statement of retained​ earnings? A. Dividends B. Inventory C. Cash D. Net income

Net income

Which of the following is an​ asset? A. Common Stock B. Salary Expense C. Service Revenue D. None of the listed accounts is an asset.

None of the listed accounts is an asset.

entity assumption

Organization stands apart from other organizations and individuals as a separate economic unit

Which of the following transactions would be recorded if using the accrual basis of accounting but not if using the cash basis of​ accounting? A. Purchasing inventory on account B. Paying off loans C. Borrowing money D. Collecting customer payments

Purchasing inventory on account

To be​ useful, information must have which of the following fundamental qualitative​ characteristics? A. Faithful representation and diversity B. Timeliness and affordability C. Relevance and faithful representation D. Expediency and relevance

Relevance and faithful representation

For 2018​, Broadview Company had revenues in excess of expenses. Which statement describes Broadview​'s closing entries at the end of 2018​? ​(Assume there is only one closing entry for both revenue and​ expenses.) A. Revenues will be​ credited, expenses will be​ debited, and retained earnings will be debited. B. Revenues will be​ debited, expenses will be​ credited, and retained earnings will be debited. C. Revenues will be​ credited, expenses will be​ debited, and retained earnings will be credited. D. Revenues will be​ debited, expenses will be​ credited, and retained earnings will be credited.

Revenues will be​ debited, expenses will be​ credited, and retained earnings will be credited.

Which of the following accounts would need to be closed at the end of the​ period? A. Supplies expense B. Accounts receivable C. Cash D. Unearned revenue

Supplies expense

According to U.S.​ GAAP, when should revenue be​ recognized? A. When the service is performed or the goods have been delivered to the customer B. When the goods or services have been priced and offered for sale C. At the stated date in the contract D. When cash is received from the customer

When the service is performed or the goods have been delivered to the customer

Income statement definition

a company's performance over the year

On January 1 of the current​ year, Jasmine Company paid $1,500 in rent to cover six months ​(January- ​June). Jasmine recorded this transaction as​ follows: Jan 1 Prepaid Rent 1,500 Cash 1,500 Jasmine adjusts the accounts at the end of each month. Based on these​ facts, the adjusting entry at the end of January should include A. a debit to Prepaid Rent for $ 250. B. a credit to Prepaid Rent for $ 250. C. a debit to Prepaid Rent for $ 1250. D. a credit to Prepaid Rent for $ 1250.

a credit to Prepaid Rent for $ 250.

In a​ double-entry accounting​ system, A. half of all the accounts have a normal credit balance. B. a debit entry is recorded on the left side of a​ T-account. C. liabilities, stockholders'​ equity, and revenue accounts all have normal debit balances. D. both a and b are correct.

a debit entry is recorded on the left side of a​ T-account.

accrued revenue

a revenue that has been earned but not yet received in cash

types of liabilities

accounts payable, income tax payable, unearned revenue, longterm debt

types of current liabilities

accounts payable, salary, short term notes, accrued liabilities

All of the following are current assets except A. accounts receivable. B. prepaid expenses. C. inventory. D. accounts payable.

accounts payable.

relatively liquid assets

accounts receivable

depreciation

allocation of the cost of a tangible asset over its service life; decline in usefulness besides land

If revenue is greater than expenses, then ...

assets go up (more income)

historical cost principle

assets should be recorded of their actual cost on the date of purchase

plant assets

assets that will be used for a number of years in the operation of a business; land, buildings, furniture, equipment

stable monetary unit

assume that the dollar's purchasing power is stable

most liquid assets

cash

deferrals

cash received or paid before revenues have been earned or expenses have been incurred

If the credit to record the payment of an account payable is not​ posted, A. cash will be overstated. B. liabilities will be understated. C. cash will be understated. D. expenses will be understated.

cash will be overstated.

types of assets

cash, inventory, property, plant, equipment

types of current assets

cash, receivables, inventory, prepaid expenses

Balance Sheet Definition

company's financial condition at the end of the year

working capital formula

current assets - current liabilities

Liabilities (Debit/Credit)

debit decrease, credit increases

Equity (debit/credit)

debit decreases, credit increases

Revenue (debit/credit)

debit decreases, credit increases

Assets (Debit/Credit)

debit increases, credit decreases

Expenses (Debit/Credit)

debit increases, credit decreases

dividends (debit/credit)

debit increases, credit decreases

The journal entry to record the acquisition of land and a building by issuing common stock A. debits Land and credits Common Stock. B. debits​ Land, Building, and Common Stock. C. debits Common Stock and credits Land and Building. D. debits Land and Building and credits Common Stock.

debits Land and Building and credits Common Stock.

An attorney performs services of​ $1,100 for a client and receives​ $400 cash with the remainder on account. The journal entry for this transaction would A. debit​ Cash, debit Accounts​ Receivable, credit Service Revenue. B. debit​ Cash, debit Service​ Revenue, credit Accounts Receivable. C. debit​ Cash, credit Accounts​ Receivable, credit Service Revenue. D. debit​ Cash, credit Service Revenue

debit​ Cash, debit Accounts​ Receivable, credit Service Revenue.

types of longterm liabilities

debts payable after 1 year, longterm notes payable, longterm bonds payable

continuity

entity will continue to operate for the foreseeable future

even less liquid assets

equipment and buildings

Transaction Analysis

event with financial impact on business and can be measured from something given and something received in return; records both sides

accrued expenses

expenses incurred but not yet paid in cash or recorded

The costs of doing business are classified​ as: A. revenues. B. assets. C. expenses. D. liabilities.

expenses.

Thorpe Corporation purchases a new delivery truck and signs a note payable at the truck dealership for the total cost. The impact of this transaction on Thorpe Corporation A. decreases assets and increases liabilities. B. increases assets and increases liabilities. C. increases assets and decreases​ stockholders' equity. D. increases assets and increases​ stockholders' equity.

increases assets and increases liabilities.

Revenues are A. decreases in liabilities resulting from paying off loans. B. increases in retained earnings resulting from selling products or performing services. C. increases in​ paid-in capital resulting from the owners investing in the business. D. all of the above.

increases in retained earnings resulting from selling products or performing services.

less liquid assets

inventory

If the credit to record the purchase of supplies on account is not​ posted, A. expenses will be overstated. B. liabilities will be understated. C. ​stockholders' equity will be understated. D. assets will be understated.

liabilities will be understated.

unearned service revenue

liability created when a company receives of cash before earning revenue

Expense recognition principle

measure expenses & recognize them in same period in which any related revenues are earned; identify all expenses incurred during period

debt ratio definition

measures debt- paying ability; low better than high

permanent accounts

not closed: assets, liabilities, stockholders equity

prepaid expense

paid cash but have not yet received the goods and services; assets because they provide further benefits

types of stockholders equity

paid in capital, retained earnings, common stock

closing the books

prepares the accounts for the next period's transactions

types of longterm assets

property, plant, equipment, longterm investments, intangible assets

accruals

recognize revenue/ expenses prior to cash exchange; opposite of deferral

Cash Basis Accounting

record revenues at the time cash is received and expenses at the time cash is paid; results in incomplete financial statements & ignores important info; only cash

temporary accounts

related to a limited period of time: revenue, expense, dividend

time-period concept

reported at regular intervals; generally 1 year however company can end at any point within the year

current ratio definition

represents operating liquidy; higher is better

closing entries

set temporary accounts back to zero

liquidy

the ease with which an asset can be converted into cash

An​ organization's investors and creditors will primarily use information provided​ by: A. the​ organization's managerial accounting system. B. the Financial Accounting Standards Board. C. the Internal Revenue Service. D. the​ organization's financial accounting system.

the​ organization's financial accounting system.

current ratio formula

total current assets divided by total current liabilities

debt ratio formula

total liabilities divided by total assets

All of the following are types of adjusting entries except A. transactions. B. depreciation. C. accruals. D. deferrals.

transactions.

The primary objective of financial reporting is to provide information A. on the cash flows of the company. B. about the profitability of the enterprise. C. to the federal government. D. useful for making investment and credit decisions.

useful for making investment and credit decisions.

revenue principle

when to record/ recognize revenue; what amount to record

A physician performs medical services for a patient on October​ 20; the total bill for the medical services was​ $200. The patient makes a​ co-pay of​ $20 on October​ 20, and the insurance company pays the remaining balance of​ $180 on November 19. On what​ date(s) will the physician record the revenue for those medical services provided on October​ 20? ​(Assume the accrual basis of accounting is​ used.) A. ​$200 of revenue on November 19 B. ​$20 of revenue on October 20 and​ $180 of revenue on November 19 C. ​$200 of revenue on October 20 D. ​$180 of revenue on October 20 and the remaining​ $20 on November 19

​$200 of revenue on October 20

Which financial statement reports​ assets, liabilities, and​ equity? A. Balance sheet B. Statement of retained earnings C. Income statement D. Statement of cash flows

Balance sheet

How are the assets and liabilities ordered on the balance​ sheet? A. Alphabetical order B. Random order C. Based on liquidity​ (most liquid to least​ liquid) D. Based on liquidity​ (least liquid to most​ liquid)

Based on liquidity​ (most liquid to least​ liquid)

retained earnings formula

Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings

The method of accounting that recognizes revenue when money is received and expenses when bills are paid is called: Managerial Accounting Accrual Basis Forensic Accounting Cash Basis

Cash Basis

Assume that a business is headed for certain bankruptcy and it is evident that its liabilities greatly exceed its assets. Which principle would be violated if its financial statements were prepared using standard U.S.​ GAAP? A. Entity assumption B. Continuity assumption C. ​Stable-monetary-unit assumption D. Historical cost principle

Continuity assumption