ACCT200 chapter 2

41) Which of the following financial statement elements is closed at the end of an accounting cycle?

A) Dividends

46) Which of the following is an asset source transaction?

A) Issued common stock.

6) Revenue on account amounted to $5,000. Cash collections of accounts receivable amounted to $2,300. Expenses for the period were $2,100. The company paid dividends of $450. Net income for the period was

B) $2,900.

23) Which of the following would cause net income on the accrual basis to be different from (either higher or lower than) "cash provided by operating activities" on the statement of cash flows?

B) Purchased supplies for cash.

18) In uncertain circumstances, the conservatism principle guides accountants to:

B) accelerate expense recognition and delay revenue recognition.

17) Jason Company paid $7,200 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

C) $1,800; $7,200

47) Which of the following is an asset use transaction?

B) Recorded insurance expense at the end of the period.

42) Which of the following accounts is not closed at the end of an accounting cycle?

B) Retained earnings

34) Gomez Company collected $9,000 on September 1, Year 1 from a customer for services to be provided over a one-year period beginning on that date. How much revenue would Gomez Company report related to this contract on its income statement for the year ended December 31, Year 1? How much would it report as cash flows from operating activities for Year 1?

C) $3,000; $9,000

11) Which of the following events would not require an end-of-year adjusting entry?

C) Providing services on account

24) Rushmore Company provided services for $45,000 cash during Year 1. Rushmore incurred $36,000 expenses on account during Year 1, and by the end of the year, $9,000 of that amount had been paid with cash. Assuming that these are the only accounting events that affected Rushmore during Year 1,

C) The amount of net income shown on the income statement is $9,000.

35) The matching concept refers to the "matching" of:

A) expenses and revenues.

43) The balance in a revenue account at the beginning of an accounting period will always be

A) zero.`

15) Prior to closing, Syracuse Company's accounting records showed the following balances: Retained earnings $ 16,800 Service revenue 21,750 Interest revenue 1,800 Salaries expense 12,300 Operating expense 3,450 Interest expense 900 Dividends 2,700 After closing, Syracuse's retained earnings balance would be

C) $21,000.

39) Which of the following correctly states the proper order of the accounting cycle?

C) Record transactions, adjust accounts, prepare statements, close temporary accounts.

27) The following accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: Cash $ 4,000 Accounts receivable $ 3,400 Dividends $ 2,000 Common stock $ 3,900 Land $ 3,200 Revenue $ 3,200 Accounts payable $ 1,800 Expense $ 2,200 The amount of Carolina's retained earnings after closing on December 31, Year 1 was:

D) $4,900.

20) Revenue on account amounted to $9,000. Cash collections of accounts receivable amounted to $8,100. Cash paid for expenses was $7,500. The amount of employee salaries accrued at the end of the year was $900. Cash flow from operating activities was

B) $600.

9) Recognition of revenue may be accompanied by which of the following?

D) An increase in an asset or a decrease in a liability.

40) The purpose of the accrual basis of accounting is to:

D) Match revenues and expenses in the proper period.

4) Which of the following transactions does not involve an accrual?

D) Recording the pre-payment of two years' worth of insurance.

29) Nelson Company experienced the following transactions during Year 1, its first year in operation. 1. Issued $12,000 of common stock to stockholders. 2. Provided $4,600 of services on account. 3. Paid $3,200 cash for operating expenses. 4. Collected $3,800 of cash from accounts receivable. 5. Paid a $200 cash dividend to stockholders. The amount of net cash flow from operating activities shown on Nelson Company's Year 1 statement of cash flows is

B) $600.

5) Jantzen Company recorded employee salaries earned but not yet paid. Which of the following represents the effect of this transaction on the financial statements? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow A. + = + + NA + - NA = + -OA B. NA = + + - NA - + = - -IA C. - = NA + - NA - + = - NA D. NA = + + - NA - + = - NA

D) Option D

7) The recognition of an expense may be accompanied by which of the following?

A) An increase in liabilities

21) Which of the following accounts would not appear on a balance sheet?

A) Service Revenue.

8) Which of the following statements is true in regard to accrual accounting?

D) Revenue is recorded in the period when it is earned and expenses are recorded when they are incurred.

31) Nelson Company experienced the following transactions during Year 1, its first year in operation. 1. Issued $12,000 of common stock to stockholders. 2. Provided $4,600 of services on account. 3. Paid $3,200 cash for operating expenses. 4. Collected $3,800 of cash from accounts receivable. 5. Paid a $200 cash dividend to stockholders. The amount of retained earnings appearing on Nelson Company's December 31, Year 1 balance sheet is:

A) $1,200.

28) Nelson Company experienced the following transactions during Year 1, its first year in operation. 1. Issued $12,000 of common stock to stockholders. 2. Provided $4,600 of services on account. 3. Paid $3,200 cash for operating expenses. 4. Collected $3,800 of cash from accounts receivable. 5. Paid a $200 cash dividend to stockholders. The amount of net income recognized on Nelson Company's Year 1 income statement is:

A) $1,400.

14) The following account balances were drawn from the financial statements of Grayson Company: Cash $ 8,800 Accounts payable $ 2,500 Accounts receivable $ 3,000 Common stock ? Land $ 16,000 Retained earnings, Jan. 1 $ 5,400 Revenue $ 19,000 Expenses $ 14,500 Based on the above information, what is the balance of Common Stock for Grayson Company?

A) $15,400

38) If retained earnings decreased during the year, and no dividends were paid, which of the following must be true?

A) Expenses for the year exceeded revenues

48) Which of the following is a claims exchange transaction?

A) Recognized revenue earned on a contract where the cash had been collected at an earlier date.

1) Bledsoe Company received $17,000 cash from the issue of stock on January 1, Year 1. During Year 1, Bledsoe earned $8,500 of revenue on account. The company collected $6,000 cash from accounts receivable and paid $5,400 cash for operating expenses. Based on this information alone, during Year 1,

A) Total assets increased by $20,100.

22) Warren Enterprises had the following events during Year 1: The business issued $40,000 of common stock to its stockholders. The business purchased land for $24,000 cash. Services were provided to customers for $32,000 cash. Services were provided to customers for $10,000 on account. The company borrowed $32,000 from the bank. Operating expenses of $24,000 were incurred and paid in cash. Salary expense of $1,600 was accrued. A dividend of $8,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, the amount of retained earnings as of December 31, Year 1 would be:

B) $8,400

2) Addison Company experienced an accounting event that affected its financial statements as indicated below: Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow + NA + + NA + NA Which of the following accounting events could have caused these effects on Addison's statements?

B) Earned revenue on account.

36) The matching concept most significantly influences which financial statement?

B) Income statement

32) On December 31, Year 1, Gaskins Co. owed $4,500 in salaries to employees who had worked during December but would be paid in January. If the year-end adjustment is properly recorded on December 31, Year 1, what will be the effect of this accrual on the following items for Gaskins? Net Income Cash Flow from Operating Activities a. No effect No effect b. Decrease No effect c. Increase Decrease d. No effect Decrease

B) Option B

13) Jack's Snow Removal Company received a cash advance of $6,000 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will

B) increase equity by $2,000

26) The following accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: Cash $ 4,000 Accounts receivable $ 3,400 Dividends $ 2,000 Common stock $ 3,900 Land $ 3,200 Revenue $ 3,200 Accounts payable $ 1,800 Expense $ 2,200 The amount of net income shown on Carolina's Year 1 income statement would amount to

C) $1,000.

16) Sheldon Company began Year 1 with $1,200 in its supplies account. During the year, the company purchased $3,400 of supplies on account. The company paid $3,000 on accounts payable by year end. At the end of Year 1, Sheldon counted $1,400 of supplies on hand. Sheldon's financial statements for Year 1 would show:

C) $1,400 of supplies; $3,200 of supplies expense

12) The adjusting entry to recognize work completed on unearned revenue involves which of the following?

C) A decrease in liabilities and an increase in equity

49) Which of the following is an asset exchange transaction?

C) Collected cash on accounts receivable.

33) Duluth Co. collected a $6,000 cash advance from a customer on November 1, Year 1 for work to be performed over a six-month period beginning on that date. If the year-end adjustment is properly recorded, what will be the effect of the adjusting entry on Duluth's Year 1 financial statements?

C) Decrease liabilities and increase revenues

3) Which of the following choices accurately reflects how the recording of accrued salary expense affects the financial statements of a business? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow A. NA = + + - - - + = NA NA B. NA = NA + +/- NA - NA = NA NA C. NA = + + - NA - + = - NA D. + = + + NA NA - + = - -OA

C) Option C

45) Which of the following describes the effects of a claims exchange transaction on a company's financial statements? Assets = Liab. + Equity Rev. - Exp. = Net Inc. Cash Flow A. NA = NA + NA NA - NA = NA +OA B. + = + + NA NA - NA = NA +OA C. NA = + + - NA - + = - NA D. All of these could represent the effects of a claims exchange transaction.

C) Option C

19) Purchasing prepaid rent is classified as a(n):

C) asset exchange transaction.

50) Earning revenue on account would be classified as a/an?

C) asset source transaction.

44) The accounting principle that guides accountants, when faced with a recognition dilemma, to choose the alternative that produces the lowest net income is referred to as:

C) conservatism.

37) Expenses that are matched with the period in which they are incurred are frequently called:

C) period costs.

25) The following accounts and balances were drawn from the records of Carolina Company on December 31, Year 1: Cash $ 4,000 Accounts receivable $ 3,400 Dividends $ 2,000 Common stock $ 3,900 Land $ 3,200 Revenue $ 3,200 Accounts payable $ 1,800 Expense $ 2,200 Total assets on Carolina's December 31, Year 1 balance sheet would amount to:

D) $10,600.

30) Nelson Company experienced the following transactions during Year 1, its first year in operation. 1. Issued $12,000 of common stock to stockholders. 2. Provided $4,600 of services on account. 3. Paid $3,200 cash for operating expenses. 4. Collected $3,800 of cash from accounts receivable. 5. Paid a $200 cash dividend to stockholders. The total amount of assets shown on Nelson Company's December 31, Year 1 balance sheet is:

D) $13,200.

10) Mize Company provided $45,500 of services on account, and collected $38,000 from customers during the year. The company also incurred $37,000 of expenses on account, and paid $32,400 against its payables. As a result of these events,

D) all of these answer choices are correct