ACCT201 SDSU Deboskey Test 1
BACK EXAM: Consider the following transactions: 1. The company pays cash for supplies (but does not use them), $100 2. The company pays cash to workers for salaries earned in the current period, $200 3. The company pays cash for one year of rent in advance, $300 4. The company pays cash for dividends to shareholders, $400 Calculate the amount of accrual-basis expense.
$200
The following amounts are reported in the ledger of Mariah Company... Assets: $80,000 Liabilities: $36,000 Retained Earnings: $22,000 What is the balance in the Common Stock account?
$22,000
BACK EXAM: At the beginning of 2012, Dade Company has a balance for Retained Earnings of $500. For 2012, 2013, and 2014, the company has net income of $1,500, $2,000, and $2,500, and pays dividends of $500, $1,000, and $2,000. What is the balance of Retained Earnings at the end of 2014?
$3,000
BACK EXAM: The company has a beginning cash balance of $7,000. Using the following information, calculate the ending balance of cash: -Note receivable collected by the bank = $5,000 -Checks outstanding = $8,000 -Bank service fees = $1,000 -Non-sufficient funds (NSF) checks = $2,000 -Deposits Outstanding = $11,000
$9,000
BACK EXAM: How many of the following transactions would decrease net income? Purchased land with cash Paid cash for utilities received in the current period Paid employees for salaries earned in the current period Repaid money previously borrowed from the bank Purchased supplies for future use Paid rent for the current month (not in advance)
3
BACK EXAM: Which the following transactions are investing activities? 1. Borrowed $25,000 from the bank 2. Pay $4,000 in advertising in the current period 3. Provide services to customers for $14,000 4. Purchased a delivery truck for $50,000 5. Paid dividends of $2,000
4 only
Corporation
A business organization that issues shares of stock to its investors
Dividend
A distribution of net income to the stockholders of a corporation Distribution of cash to stockholders; NOT AN EXPENSE
Ethics
A term that refers to a code or moral system that provides criteria for evaluating right or wrong.
The accounting equation is defined as: A. Assets = Liabilities + Stockholders' Equity B. Liabilities + Revenues = Assets C. Assets = Liabilities - Stockholders' Equity D. Net Income = Revenues - Expenses
A. Assets = Liabilities + Stockholders' Equity
BACK EXAM: On September 1, 2012, Aesop borrows $10,000 from the bank, due in one year with 12% interest. What is the amount of interest expense that Aesop would report for 2012 using accrual-basis versus cash-basis accounting?
Accrual-basis = $400; Beg balance ($10,000) x Interest (.12) divided by 12 months x number of months (4) = $400 Cash-basis = $0
BACK EXAM: On May 1, 2012, Red's Basket Company purchased a one-year insurance policy for $12,000 ($1,000 per month). What is the amount of insurance expense in 2012 using accrual-basis versus cash-basis accounting?
Accrual-basis = $8,000; Cash-basis = $12,000
Cash's classification
Asset
BACK EXAM: The resources of a company are referred to as:
Assets
BACK EXAM: Which of the following represents an alternative form of the accounting equation?
Assets - Liabilities = Stockholders' Equity
Accounting equation
Assets = Liabilities + Stockholders' Equity
What type of information is contained in the balance sheet?
Assets, liabilities, and stockholders equity.
BACK EXAM: The following account balances were drawn from the records of Hatter's Tea Company on December 31, 2012: Cash $30,000 Expenses $17,000 Dividends $ 2,000 Retained Earnings, beginning $ 6,000 Accounts Payable $24,500 Accounts Receivable $15,000 Utilities Payable $ 5,500 Supplies $ 6,000 Common Stock $ 9,000 Revenues $25,000 What is net income for Hatter's Tea Company?
B. $8,000 (REV - EXP)
A list of all accounts and their balances after updating account balances for adjusting entries is referred to as: A. A trial balance B. An adjusted trial balance C. A post-closing trial balance D. An accounting trial balance
B. An adjusted trial balance
A company provided $1,500 of services to customers during the month of May. The customers paid in June. What would the impact of these transactions be during May on each of the following three items? A. Cash Balance Increases, Cash-Basis Net Income Increases, Accrual-Basis Net Income Increases. B. No Effect on Cash Balance, No Effect on Cash-Basis Net Income, Accrual-Basis Net Income Increases. C. No Effect on Cash Balance, No Effect on Cash-Basis Net Income, No Effect on Accrual-Basis Net Income. D. Cash Balance Increases, Cash-Basis Net Income Increases, No Effect on Accrual-Basis Net Income.
B. No Effect on Cash Balance, No Effect on Cash-Basis Net Income, Accrual-Basis Net Income Increases.
The revenue recognition principle states that: A. Revenue should be recognized in the period the cash is received. B. Revenue should be recognized in the period earned. C. Revenue is a component of common stock. D. Revenue should be recognized in the balance sheet.
B. Revenue should be recognized in the period earned.
BACK EXAM Geppetto Company owes Pinocchio Company $15,000. Geppetto would report this in its:
Balance Sheet
Making insurance payments in advance is an example of: A. An accrued expense B. An unearned revenue C. A prepaid expense D. An accrued revenue
C. A prepaid expense
The full set of procedures used to accomplish the FN Measurement/communication process of financial accounting is referred to as the: A Trial Balance B General Ledger C Accounting Cycle D Chart of Accounts
C. Accounting Cycle
Air France collected cash on February 4 from the sale of a ticket to a customer on January 26. The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue? A. January B. February C. April D. Evenly in each of the three months.
C. April
BACK EXAM: Operating cash flows in the statement of cash flows represent:
Cash flows from revenue and expense activities
The two main functions of accounting are to:
Communicate information to investors and creditors AND measure business activities
After considering the following transactions, the amount of accrual-basis expense is _____ while the amount of cash-basis expense is _____: 1. $1,500 of supplies purchased in previous period 2. $6,000 rent paid cash in advance 3. $10,000 loan repaid to bank (ignore interest) A. $6,000, $16,000 B. $6,000, $11,500 C. $1,500, $16,000 D. $1,500, $6,000
D. $1,500, $6,000
The primary purpose(s) of financial accounting is (are) to: A. Measure and record business transactions. B. Prepare federal and state tax returns. C. Communicate financial results to investors and creditors. D. Both measure and communicate financial information.
D. Both measure and communicate financial information
When a company makes an end-of-period adjusting entry, which includes a debit to Supplies Expense, the usual credit entry is made to: A. Retained Earnings B. Cash C. Accounts Payable D. Supplies
D. Supplies
BACK EXAM: On March 1, Granny Inc. purchases one year of rent for $6,000 ($500 per month). What is the appropriate adjusting entry for rent at the end of the year?
Debit Rent Expense $5,000; Credit Prepaid Rent $5,000
BACK EXAM: Which of the following is an example of a closing entry?
Debit Retained Earnings; Credit Supplies Expense
BACK EXAM: Huntsman Inc. hired six employees on Dec. 20. All employees worked through the end of the year, earning $6,000 in salaries. Payday is not until Jan. 5. What adjusting entry does Huntsman need to make on Dec. 31?
Debit Salaries Expense 6,000; Credit Salaries Payable 6,000
BACK EXAM: Suppose supplies at the beginning of the year equal $1,200. During the year, an additional $5,400 of supplies is purchased. At the end of the year, $1,400 of supplies remains. The adjusting entry for supplies would include:
Debit Supplies Expense for $5,200
Increase account with a debit
Dividends, Expenses, and Assets
BACK EXAM: The following account balances were drawn from the records of Hatter's Tea Company on December 31, 2012: Cash $30,000 Expenses $17,000 Dividends $ 2,000 Retained Earnings, beginning $ 6,000 Accounts Payable $24,500 Accounts Receivable $15,000 Utilities Payable $ 5,500 Supplies $ 6,000 Common Stock $ 9,000 Revenues $25,000 What is ending retained earnings for Hatter's Tea Company?
E. 12,000 Beg balance + net income (rev-expenses) - dividends
BACK EXAM: When obtaining cash from signing a note with the bank, which of the following would be recorded?
E. Debit Cash
When a company incurs employee salaries but does not pay them, how will the basic accounting equation be affected? A. Stockholders' equity decreases B. Revenues decrease C. Expenses increase D. Liabilities decrease E. Two of the answers are correct
E. Two of the answers are correct
Lake ERIE
Earned Revenue Incurred Expenses Revenues are ONLY RECORDED WHEN EARNED. Expenses are ONLY RECORDED WHEN INCURRED.
Shareholders' equity arises primarily from amounts invested by shareholders and amounts ________.
Earned by the corporation
BACK EXAM: Under accrual-basis accounting, revenues are recorded when __________. Under cash-basis accounting, revenues are recorded when _________.
Earned; Cash is received
Internal transactions
Events that affect the financial position of the company but do not exchange with a separate economic entity. Do not include an exchange with a separate economic entity.
True or False? After closing entries are posted to the accounts in the general ledger, all asset and liability accounts have a balance of zero.
False; Assets and liabilities are permanent accounts.
True or False? Cash, inventory, supplies, and buildings are examples of liabilities.
False; They are assets.
Generally accepted accounting principles are abbreviated as:
GAAP
"Orders"
Generally means no accounting entry needed.
BACK EXAM: Which financial statement reports the details of a company's profitability over the previous 12 months?
Income Statement
Revenue is earned:
Increase (credit) revenue. Performs/provides service/renders services, etc.
Expense is incurred:
Increase (debit) expense. Used/consumed/expired OR Pay part of bill for current period.
Asset is recognized:
Increase asset "prepaid asset" Pay cash in advance.
BACK EXAM: Recording salaries owed but not yet paid would have what effect on the accounting equation?
Increase liabilities; Decrease stockholders' equity
Liability is recognized:
Increase liability "deferred revenue" Receiving cash in advance.
BACK EXAM: Accountants are responsible for measuring various operating, investing and financing activities. Which of the following correctly matches the activity with its type?
Investing - purchase an office building
Operating Activities
Involves purchasing goods from suppliers, designing and manufacturing products, and selling products to customers. EX: Transactions related to revenues and expenses. EX: Sell goods to customers.
Investing activities
Involves the buying and selling of land, buildings, and equipment used in the business. EX: Transactions involving the purchase and sale of productive assets.
Creditor
Lends money to the company
Increase account with a credit
Liabilities, Stockholders' Equity, and Revenues
BACK EXAM: Which of the following accounts increase with a credit?
Liabilities, owners' equity, and revenues (DEALOR)
Notes payable's classification
Liability
"Borrow"
Liability is recognized (increase liability).
Financial accounting:
Maintains records of a company's operations and communicate information to external decision makers
What is included in the annual report?
Management discussion and analysis and note disclosures to the financial statements
Accountants' primary information-related roles are to:
Measure companies' activities AND communicate measurements of companies' activities to others
Revenues - Expenses =
Net income
What type of information is contained in the statement of cash flows?
Operating, investing, and financing activities.
Investor
Owns stock in the company
The two sources of stockholders' equity are amounts:
Paid in from shareholders AND earned by the corporation
Retained earnings
Profits earned by a company that have not been paid to stockholders
Financial accounting
Represents a company's primary means of communicating information to external users
Assets
Resources owned by a company
What type of information is contained in the income statement?
Revenues and expenses.
Revenues
Sales of goods or services to customers
BACK EXAM: Which of the following accounts is (are) considered to have a temporary balance?
Service Revenue
BACK EXAM: Which of the following transactions would cause an increase in both the assets and stockholders' equity of a company?
Services provided to a customer on account
The three most common forms of business organization are:
Sole proprietorship, partnership, and corporation
The financial statement that provides information about cash receipt and cash disbursements for the period is the:
Statement of cash flows
Retained earning's classification
Stockholders' equity
BACK EXAM: When preparing a bank reconciliation, a check outstanding would be:
Subtracted from the bank's cash balance.
BACK EXAM: At any given time, the amount of cash in the petty cash fund should equal:
The established balance of the fund less all vouchers written during the accounting period.
Income statement
The financial statement that summarizes revenues and expenses for a period of time. Reports revenue minus expenses Measures the profitability of the company.
Accounting equation is commonly referred to as
The fundamental model of business valuation
BACK EXAM: Which of the following best explains the meaning of stockholders' equity?
The resources owned by the company minus the amounts owed
Retained earnings represents:
The total net income earned over the life of the company that has not been distributed as dividends.
BACK EXAM: What is the primary importance of financial accounting?
To help investors and creditors to distinguish good companies from bad companies
BACK EXAM: What is one purpose for closing entries?
To transfer the balance of temporary accounts to Retained Earnings
External transactions
Transactions between the company and a separate company or individual. Transactions the firm conducts with a separate economic entity.
True or False? The Dividends account decreases with a credit and increases with a debit.
True.
Which of the following appears on the statement of stockholders' equity? (Select all that apply) a. Dividends b. Beginning balance of retained earnings c. Cash received during the accounting period d. Net income
a. Dividends b. Beginning balance of retained earnings d. Net income
Selling stock to an investor is a(n) a. Financing activity b. Operating activity c. Sales activity d. Investing activity
a. Financing activity
Which of the following items are reported on the balance sheet as liabilities? (Select all that apply). a. Wages and salaries payable b. notes payable c. supplies inventory d. cash received from a client
a. Wages and salaries payable b. notes payable
The two external users of financial accounting information that contribute financial resources to a company are: a. investors b. tax authorities c. creditors d. regulators
a. investors c. creditors
Which of these would be found on a company's balance sheet? Select all that apply. a. Sales revenue b. Equipment c. Notes payable d. Accounts receivable e. Depreciation expense
b. Equipment c. Notes payable d. Accounts receivable
Which of the following items are found on a balance sheet? (Select all that apply). a. Dividends b. Liabilities c. Revenue d. Assets e. Stockholders equity
b. Liabilities d. Assets e. Stockholders' equity
For a corporation, the owners' claims to the resources of a company are called: a. Assets b. Stockholders' equity c. Liabilities d. Revenues
b. Stockholders' equity
Which of the following financial statements shows a firm's financial position on a particular date? a. Statement of cash flows b. Statement of stockholders' equity c. Balance sheet d. Income statement
c. Balance sheet
Which of the following are operating activities? (Select all that apply). a. Purchasing plant and equipment b. Borrowing form creditors c. Paying salaries to employees d. Providing services to customers e. Paying advertising expenses
c. Paying salaries to employees d. Providing services to customers e. Paying advertising expenses
BACK EXAM: Which of the following is (are) a purpose of financial accounting? a. Calculate the taxes owed because of profitable business transactions b. Communicate business transactions to investors and creditors c. Measure business transactions d. Two of the above are correct e. All of the above are correct
d. Two of the above are correct
BACK EXAM: In an accounting journal entry: a. Total debits must equal total credits b. Debits are shown on top c. Credits are shown on bottom d. Two of the above are correct e. Answers a, b, and c are correct
e. Answers a, b, and c are correct
BACK EXAM Debits increase which of the following accounts: a. Assets b. Revenues c. Expenses d. Dividends e. Three of the above are correct
e. Three of the above are correct
BACK EXAM: What is a direct purpose of internal controls? a. Ensure a company will continue to exist for the foreseeable future b. Help managers determine which projects are likely to be more profitable. c. Improve the accuracy and reliability of accounting information d. Safeguard the company's assets e. Two of the above are correct
e. Two of the above are correct