ACG 2021 exam one quiz questions

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Stonebrook Corporation reported net income of $20,000, net sales of $360,000, and average shares outstanding of 10,000. There were $4,000 of preferred stock dividends. How much was its earnings per share?

$1.60 Earnings per share = ($20,000 - $4,000)/10,000 shares = $1.60/share.

Which of the following did not result from the Sarbanes-Oxley Act (SOX)?

Tax rates on corporations increased.

Which statement about users of accounting information is correct?

Taxing authorities are considered external users.

The year-end trial balance for Beltway Corporation appears as follows: Beltway Corporation Trial Balance December 31 Debit Credit Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Equipment 4,000 Accumulated Depreciation, Equipment $ 800 Accounts Payable 300 Common Stock 1,000 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $6,500 $6,500 If the current year depreciation on the equipment were $200, the company should record an adjusting entry that A) debits Depreciation Expense for $200 and credits Accumulated Depreciation for $200. B) debits Depreciation Expense for $200 and credits Equipment for $200. C) debits Accumulated Depreciation for $200 and credits Equipment for $200. D) debits Equipment for $200 and credits Accumulated Depreciation for $200. E) debits Depreciation Expense for $200 and credits Cash for $200.

A) debits Depreciation Expense for $200 and credits Accumulated Depreciation for $200.

Accounts with normal debit balances include A) expenses and assets. B) liabilities and expenses. C) assets and liabilities. D) expenses and liabilities. E) stockholders' equity and revenues.

A) expenses and assets.

Adjusting entries are recorded to ensure that A) expenses are recognized in the period in which they are incurred. B) income statement accounts have zero balances at the end of an accounting period. C) revenues are partitioned between revenue from sales to customers and revenue from other sources (e.g., interest revenue). D) None of the choices are correct. E) All of these choices are correct.

A) expenses are recognized in the period in which they are incurred.

During the adjusting process two transactions were neglected or omitted. The first is for unearned rent revenue of which $415 was earned during the period, the second was for accrued interest payable of which $275 is owed for the period. As a result of these omissions A) expenses are understated by $275. B) These omissions would not affect the financial statements; the financial statements will be correct. C) revenue is overstated by $690. D) net income is overstated by $140. E) liabilities are overstated by $690.

A) expenses are understated by $275.

Retained earnings is decreased by A) expenses. B) cash payments. C) revenues. D) contributions from owners. E) cash payments for assets.

A) expenses.

In the closing process total revenues are determined to be $5,750 while total expenses are determined to be $3,875 and total dividends are $1,350. The retained earnings account will A) increase by $1,875. B) decrease by $1,875. C) increase by $525. D) decrease by $525. E) Retained earnings does not change.

C) increase by $525.

If a previously unrecorded expense is recorded when it is paid with cash recording the the transaction will A) increase expenses and decrease expenses by an equal amount. B) increase expenses and increase liabilities. C) increase expenses and decrease assets. D) increase expenses and increase retained earnings. E) decrease expenses and increase liabilities.

C) increase expenses and decrease assets.

Issuing a 3-month, 10%, $10,000 note A) decreases stockholders' equity and increases liabilities. B) decreases assets and decreases liabilities. C) increases assets and increases liabilities. D) decreases liabilities and increases assets. E) decreases retained earnings and increases assets.

C) increases assets and increases liabilities.

What is the primary criterion by which accounting information can be judged?

Usefulness for decision making

Resources owned by a business are referred to as

assets

The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the

auditor's opinion.

Which of the following is an internal user of accounting data?

The company's finance personnel

Which of the following are advantages of partnerships relative to corporations?

The ease of creating the business and low taxes

Which of the following is required as a result of the Sarbanes-Oxley Act (SOX) passed into law in 2002?

The independence of outsides auditors increased.

Which of the following is the most appropriate definition of accounting information?

The information system that identifies, records, and communicates the economic events of an organization to interested users

An annual report includes all of the following except

a listing of all of the stockholders.

Hans Company purchased bonds of Zimmer Corporation. Hans Company expects to hold the Zimmer Corporation bonds for more than one year. On its classified balance sheet, Hans Company should report the Zimmer Corporation bonds as

a long-term investment.

The following ratios are available for Leer Inc. and Stable Inc. Leer Inc. Stable Inc. Current Ratio 1.2 1.5 Compared to Stable Inc., Leer Inc. has

lower liquidity Higher current ratios mean the company is more liquid (i.e., better able to pay is short-term liabilities), and lower current ratios mean the company is less liquid.

The financial records for Harold Corporation included the following information: Accounts receivable, $60,000 Accounts payable, $5,000 Cash, $30,000 Common stock, $5,000 Dividends, $20,000 Insurance expense, $10,000 Salaries and wages expense, $40,000 Sales revenue, $150,000 Based on this information, how much was its net income?

$100,000 -Net income equals the revenues earned during the year minus the expenses incurred during the year. Use the balances of the revenue and expense accounts to measure revenues and expenses. Net income = Revenue - expenses Net income = $150,000 - 40,000 - 10,000 = $100,000

For a given company, total assets are $160,000, current liabilities are $10,000, long-term liabilities are $40,000, common stock is $50,000, and retained earnings is $60,000. How much is total stockholders' equity?

$110,000 Stockholders' equity equals common stock plus retained earnings. Common stock of $50,000 plus retained earnings of $60,000 equals $110,000 in stockholders' equity. Assets equals liabilities plus stockholders' equity. $160,000 = $10,000 + $40,000 + X Solving for X: Stockholders' equity = $110,000

Bombay Corporation had $24,000 of cash at the beginning of the year and it had cash receipts of $21,000 during the year. At the end of the year, Bombay Company had $33,000 of cash. What was Bombay Corporation's cash disbusements for the year?

$12,000 The ending balance equals beginning cash minus cash disbursements plus cash receipts $33,000 = $24,000 + $21,000 - X Solve for X: Cash disbursements = $12,000.

Pilgrim Corporation reports the following on its financial statements. Cash paid for new equipment, $55,000 Cash collected from customers, $90,000 Paid a note payable, $10,000 Cash collected in exchange for issuing additional shares of Pilgrim stock to stockholders, $20,000 Cash dividends paid, $20,000 The company reports $80,000 of net income for the year and it has $100,000 of cash at year-end. What is the company's free cash flow?

$15,000 Free cash flow is computed by subtracting capital expenditures and cash dividends from cash provided by operations. The company has only one cash inflow or outflow from operating activities (i.e., cash collected from customers) and it has only one capital expenditure (cash paid for new equipment). Free cash flow = $90,000 - $55,000 - $20,000 = $15,000.

Jeremiah Company recorded the following cash transactions for the year: Collected $350,000 from customers Collected $40,000 from lenders Paid $20,000 to purchase office equipment. Paid $100,000 for salaries. Paid $10,000 in dividends. Paid $80,000 of goods and services What was the company's net cash provided by operating activities for the year?

$170,000

$170,000 -A company's activities are divided into three categories: (1) operating activities, (2) investing activities, and (3) financing activities. Operating activities include selling products and/or services, paying suppliers (e.g., buying inventory), employees workers, etc. Cash flows from operating activities are increases by collecting cash for operating activities (e.g., collecting cas from customers) and decreased by paying cash for operating activities (e.g., paying cash to employees for hours worked, paying cash to suppliers for inventory, etc.). This company's net cash provided by operating activities include (i) cash collected from customers, (ii) salaries paid for salaries, and (iii) cash paid for goods and services Net cash flow provided by operating activities = $350,000 - 100,000 - 80,000 = $170,000 Note: Not all cash collections and/or cash payments are operating activities. Some are investing activity cash flows (e.g., paying for property, plant, and equipment, etc.) and others are financing activity cash flows (e.g., paying dividends to shareholders, collecting cash from lenders [e.g., borrowing from banks], etc.). Chapter 1, Learning objective 4, Pool 10

Jose Inc. reports the following balances and amounts. The following information is presented in random order (amounts are in dollars). Accounts payable, 35,000 Cash provided by operations, 90,000 Accounts receivable, 37,500 Net income, 36,000 Average common shares, 20,000 Salaries and wages payable, 8,000 Average current liabilities, 110,000 Stockholders' equity, 240,000 Average and total assets, 600,000 Total current assets, 300,000 Average total liabilities, 320,000 Total current liabilities, 120,000 Cash, 100,000 How much is its working capital?

$180,000 Working capital is current assets minus current liabilities. Working capital = $300,000 - $120,000 = $180,000

Valley Corporation began the year with retained earnings of $590,000. During the year, the company issued $840,000 of common stock, recorded expenses of $2,100,000, and paid dividends of $50,000. If Valley's ending retained earnings was $760,000, what was the company's revenue for the year?

$2,320,000

At the end of the year, Blue Company had retained earnings of $2,840,000. During the year, the company issued stock for $108,000 and paid dividends of $43,000. Net income for the year was $402,000. How much was the retained earnings balance at the beginning of the same year?

$2,481,000 Ending retained earnings equals beginning retained earnings plus net income minus dividends. $2,840,000 = X + $402,000 - $43,000 Solve for X: Beginning retained earnings = $2,481,000.

Kilmer Corporation began the year with retained earnings of $620,000. During the year, the company issued $840,000 of common stock, recorded expenses of $2,400,000, and paid dividends of $160,000. If Kilmer's ending retained earnings was $660,000, what was the company's revenue for the year?

$2,600,000

Riverview Inc. reports the following balances and amounts. The following information is presented in random order. Accounts payable, $50,000 Cash provided by operations, 100,000 Accounts receivable, 35,000 Net income, 40,000 Average common shares, 15,000 Salaries and wages payable, 40,000 Average current liabilities, 225,000 Stockholders' equity, 200,000 Average total assets, 600,000 Current assets, 300,000 Average total liabilities, 320,000 Current liabilities, 250,000 Dividends paid to preferred shareholders, 5,000 How much is earnings per share?

$2.33 Earnings per share equals net income earned on each share of common stock. Earnings per share equals net income minus preferred dividends divided by the average number of shares outstanding. This company has no preferred dividends. Earnings per share = ($40,000 - 5,000)/15,000 shares = $2.33/share.

If total liabilities increased by $15,000 and total stockholders' equity increased by $5,000 during a period of time, then total assets must have changed by what amount and direction during that same period?

$20,000 increase

Jose Inc. reports the following balances and amounts. The following information is presented in random order (amounts are in dollars). Accounts payable, 125,000 Accounts receivable, 140,000 Accumulated depreciation—Equipment, 60,000 Cash, 100,000 Equipment, 400,000 Intangible assets, 20,000 Inventory, 200,000 Long-term investments, 80,000 Long-term liabilities, 200,000 Notes payable (short-term), 56,000 Prepaid insurance, 2,000 Salaries and wages payable, 8,000 Short-term investments, 80,000 Stockholders' equity, 493,000 How much is its working capital?

$333,000 Working capital is current assets minus current liabilities. Current assets = $140,000 + 100,000 + 200,000 + 2,000 + 80,000 = $522,000 Current liabilities = $125,000 + 56,000 + 8,000 = $189,000 Working capital = $522,000 - $189,000 = $333,000

During the year, Finney Company recorded revenues of $370,000, recorded expenses of $320,000, issued an additional $10,000 of common stock, and paid dividends of $40,000. Its ending retained earnings is 400,000. What was the company beginning retained earnings?

$390,000

At the end of the year, Stoneland Corporation has assets of $6,500 and liabilities of $2,000. How much is the company's equity at the end of the year?

$4,500

Riverview Inc. reports the following balances and amounts. The following information is presented in random order. Accounts payable, $60,000 Cash provided by operations, 150,000 Accounts receivable, 25,000 Net income, 50,000 Average common shares, 12,000 Salaries and wages payable, 45,000 Average current liabilities, 220,000 Stockholders' equity, 200,000 Average total assets, 500,000 Current assets, 200,000 Average total liabilities, 320,000 Current liabilities, 150,000 Dividends paid to preferred shareholders, 2,000 How much is earnings per share?

$4.00 Earnings per share equals net income earned on each share of common stock. Earnings per share equals net income minus preferred dividends divided by the average number of shares outstanding. This company has no preferred dividends. Earnings per share = ($50,000 - 2,000)/12,000 shares = $4.00/share.

Rose Company has the following accounts and balances: Accounts payable.......................................... $ 40,000 Accounts receivable....................................... 70,000 Accumulated depreciation............................. 50,000 Buildings...........................................................500,000 Cash.................................................................100,000 Common stock................................................ 690,000 Equipment........................................................... 120,000 Inventory........................................................ 200,000 Investments in securities (long-term)......... 20,000 Land.................................................................. 150,000 Notes payable..................................................... 300,000 Patents................................................................ 10,000 Prepaid insurance......................................... 20,000 Retained earnings........................................ 150,000 Trademarks................................................. 40,000 What is Rose Company's (i) current assets and (ii) property, plant & equipment?

$480,000 aka (i) $390,000 and (ii) $720,000 Rose's current assets include accounts receivable, cash, inventory, and prepaid insurance. Current assets = 70,000 + 100,000 + 200,000 + 20,000 = 390,000 Rose's property, plant, and equipment includes buildings, equipment and land minus accumulated depreciation. Property, plant and equipment = 500,000 + 120,000 + 150,000 - 50,000 720,000

At the end of the year, Stoneland Corporation has liabilities of $2,000 and equity of $3,000. How much are the company's assets at the end of the year?

$5,000

If total liabilities decreased by $10,000 and total assets decreased by $5,000 during a period of time, then total stockholders' equity must have changed by what amount and direction during that same period?

$5,000 increase

The financial records for Harold Corporation included the following information: Accounts receivable, $60,000 Accounts payable, $25,000 Cash, $15,000 Common stock, $5,000 Dividends, $10,000 Insurance expense, $10,000 Sales revenue, $90,000 Salaries and wages expense, $25,000 Based on this information, how much was its net income?

$55,000

Chris's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company earned $120,000 in net income and paid $15,000 in dividends. Total assets at the end of the year were $225,000. How much are total liabilities at the end of the year?

$80,000

The net cash inflow from operating activities is $200,000; cash received from issuing stock is $150,000; cash paid for capital expenditures is $90,000; cash paid for bonds held as an investment is $50,000; and cash paid for dividends is $20,000. How much is free cash flow?

$90,000 Free cash flow is cash provided by operating activities minus cash paid for capital expenditures and dividends paid. Free cash flow = $200,000 - $90,000 -$20,000 = $90,000.

Chris's Maid Service began the year with total assets of $100,000 and stockholders' equity of $40,000. During the year the company earned $110,000 in net income and paid $5,000 in dividends. Total assets at the end of the year were $240,000. How much are total liabilities at the end of the year?

$95,000 -Solution: Learning objective 5 First, determine the ending balance of stockholders' equity. Ending stockholders' equity = beginning stockholders' equity + net income - dividends. Ending stockholders' equity = $40,000 + 110,000 - 5,000 = $145,000. Second, determine total liabilities. (i.e., Assets = Liabilities + Stockholders' equity) Liabilities = $240,000 - 145,000 = $95,000.

Clawson Corporation has current assets of $3,010,000 and current liabilities of 2,150,000. If Clawson Corporation pays $200,000 of its accounts payable what will its new current ratio be?

1.44 Current ratio equals current assets divided by current liabilities. Accounts payable is a current liability. Paying accounts payable reduces cash (i.e., current assets) and reduces accounts payable (i.e., current liabilities). Current ratio = ($3,010,000 - $200,000) / ($2,150,000 - $200,000) Current ratio = 1.44 (i.e., 1.44 to 1 or 1.44:1)

A company purchased a tract of land on which it expects to build a factory in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported?

A long-term investment Land or a building which is currently not used in operation is considered to be a long-term investment

What are generally accepted accounting principles?

A set of accounting rules and practices that have authoritative support

At the start of the month, Hawaii Inc. reported retained earnings of $136,000. During the month, Hawaii generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained earnings at the end of the month? A) $142,000 credit B) $8,000 credit C) $184,000 credit D) $136,000 debit E) $137,000 credit

A) $142,000 credit

At the start of the month, Hawaii Inc. reported retained earnings of $154,000. During the month, Hawaii generated revenues of $35,000, incurred expenses of $20,000, received $25,000 of cash from stockholders in exchange for additional common stock, and paid dividends of $3,000. What is the balance in retained earnings at the end of the month? A) $166,000 credit B) $142,000 credit C) $189,000 credit D) $184,000 credit E) $136,000 debit

A) $166,000 credit

Barnes Company's financial records report the following accounts and balances at the end of the year: Accounts Payable..................... $ 2,800 Accounts Receivable................. 3,500 Cash............................................. 14,000 Common Stock........................... 4,400 Dividends.................................... 700 Interest expense........................ 17,500 Notes Payable............................ 4,200 Prepaid Insurance....................... 700 Retained earnings....................... 1,000 Service revenue....................... 24,000 What would the company show as its total credits on its trial balance? A) $36,400 B) $37,100 C) $35,700 D) $29,900 E) $37,800

A) $36,400

Peak Corporation Adjusted Trial Balance As of December 31, 2018 Debit Credit Cash $ 800 Accounts Receivable 200 Inventory 2,500 Building 30,000 Accumulated Depreciation $ 3,000 Notes Payable 500 Common Stock 21,000 Retained Earnings 5,000 Dividends 1,000 Revenues 7,000 Selling and Administrative Expense 1,000 Insurance Expense 1,000 $ 36,500 $ 36,500 Determine the amount that will be reported as retained earnings on the post-closing trial balance. A) $9,000 B) $14,000 C) $6,000 D) $10,000 E) $2,000

A) $9,000

Bonita Realty Management Co. received a check for $36,000 on October 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rent Revenue was credited when the realty company collected the rent. Financial statements are prepared on December 31. The appropriate year-end adjusting journal entry that the realty company must record for the first year would be a A) $9,000 debit to Unearned Rent Revenue and a $9,000 credit to Rent Revenue. B) $27,000 debit to Unearned Rent Revenue and a $27,000 credit to Rent Revenue. C) $27,000 debit to Rent Revenue and a $27,000 credit to Unearned Rent Revenue. D) $9,000 debit to Rent Revenue and a $9,000 credit to Unearned Rent Revenue. E) No adjusting entry is necessary.

A) $9,000 debit to Unearned Rent Revenue and a $9,000 credit to Rent Revenue.

The following is information is from Clark Corporation's financial records for the current fiscal year. i. Cash received from customers, $150,000 ii. Revenue earned, $195,000 iii. Cash paid for wages, $85,000 iv. Wage expense incurred, $90,000 v. Cash paid during the current year for computers that will be used for 3 years, $24,000 vi. Depreciation expense, $8,000 vii. Proceeds from issuing debt, $50,000 viii. Interest incurred on debt, $5,000 ix. Cash paid for supplies, $3,000 x. Supplies expense incurred, $2,000 What is the company's net income for the current year using the accrual basis of accounting? A) $90,000 B) $98,000 C) $97,000 D) $138,000 E) $125,000

A) $90,000

At December 31, but before any year-end adjustments, McCarthy Company's Prepaid Insurance account had a balance of $2,400. It was determined that $900 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be A) $900. B) $1,900. C) $1,200. D) $3,300. E) $2,400.

A) $900.

FastAct Company pays its employee his wage each Friday. The most recent payment occurred on Friday, December 27. The next payroll will be paid on January 3. There are two more working days in December after December 27. The employee works 5 days a week and the company pays $2,500 per week in wages. What will be the adjusting entry to accrue wages expense at the end of December? A) A debit to Salaries and Wages Expense for $1,000 B) A debit to Salaries and Wages Expense for $2,500 C) A credit to Salaries and Wages Expense for $1,000 D) A credit to Salaries and Wages Expense for $2,500 E) No adjusting entry would be required.

A) A debit to Salaries and Wages Expense for $1,000

Which of the following events is not recorded in a company's accounting records? A) A decision to offer a company's services in a new geographic area. B) A collection of cash in advance from a customer. C) The owner withdraws cash for personal use. D) Equipment is purchased on account. E) A company prepays one year's insurance.

A) A decision to offer a company's services in a new geographic area.

An account is a part of a company's financial information system and is described by all except which one of the following? A) An account is a source document. B) An account has a debit and credit side. C) The debit side is the left side of the account's T-account. D) The credit side is the right side of the account's T-account. E) An account consists of three parts with one part being the account's title.

A) An account is a source document.

Which of the following is the correct sequence of events in the recording process? A) Analyze a transaction; record it in the journal; post it to the ledger B) Post to the ledger; analyze a transaction; record it in the journal C) Record a transaction in the journal; analyze the transaction; post it to the ledger D) None of the answer choices provides the correct sequence E) Analyze a transaction; post it to the ledger; record it in the journal

A) Analyze a transaction; record it in the journal; post it to the ledger

Which pair of accounts follows the rules of debits and credits in relation to increases and decreases in the same manner? A) Cash and Income Tax Expense B) Common Stock and Rent Expense C) Interest Expense and Accounts Payable D) Retained Earnings and Supplies E) Dividends and Accumulated Depreciation--Equipment

A) Cash and Income Tax Expense

Which principle dictates that efforts (i.e., expenses) be matched with results (i.e., revenues)? A) Expense recognition principle B) Historical cost principle C) Monetary unit assumption D) Revenue recognition principle E) Periodicity principle

A) Expense recognition principle

Which of the following is not included in the computation of net cash provided by operating activities? A) Supplies Used B) Payment of rent C) Purchase of insurance D) Cash received from customers

A) Supplies Used

The accounting cycle is a series of certain steps that businesses, such as corporations, perform in sequence and repeat in each accounting period. Although steps may be missing among the options listed below, which of the following lists steps of the accounting cycle in their correct order? A) Journalize the transactions, journalize the adjusting entries, and prepare a post-closing trial balance. B) Post the transactions, prepare a post-closing trial balance, and journalize and post the adjusting entries. C) Prepare the financial statements, prepare the trial balance, and post the closing entries. D) Post the closing entries, prepare the adjusted trial balance, and prepare the financial statements, E) Post the transactions, post the closing entries, and prepare the adjusted trial balance.

A) Journalize the transactions, journalize the adjusting entries, and prepare a post-closing trial balance.

Which of the following is not based on accrual accounting? A) Net cash provided by operating activities B) Net income C) Total assets D) Retained earnings

A) Net cash provided by operating activities

A company accepts a customer's order on November 30 and immediately delivers the goods to the customer. On December 1, the company sends the customer an invoice stating payment is due no later than January 1. The company receives a check from the customer for the full amount due on December 22. The company follows the revenue recognition principle and accrual-basis accounting. On what day should the company recognize revenue for this order? A) November 30 B) January 1 C) December 31 D) December 22 E) December 1

A) November 30

A trial balance will not balance if A) a $500 payment of an account payable was debited to Accounts Payable for $50 and credited to Cash for $500. B) a $50 cash dividend was debited to Dividends for $500 and credited to cash for $500. C) a $50 cash purchase of supplies was posted twice. D) a $500 collection of cash was not posted. E) a $500 receipt of a customer's advance payment for services was recorded as a $500 debit to Cash and a $500 credit to Service Revenue.

A) a $500 payment of an account payable was debited to Accounts Payable for $50 and credited to Cash for $500.

Under the cash basis of accounting, an amount received from a customer in advance of providing the services would be reported as a(n): A) an increase to assets and an increase to revenue. B) none of these. C) an increase to assets and an increase to liabilities. D) an increase to assets and an increase to expenses. E) an increase to an asset and a decrease to a different asset.

A) an increase to assets and an increase to revenue.

Employees have worked for one week and have earned $5,000 in wages. The company does not record wages until they are paid. Recording the payment of wages A) decreases assets and decreases stockholders' equity. B) decreases liabilities and decreases stockholders' equity. C) increases stockholders' equity and decreases stockholders' equity. D) increases liabilities and decreases liabilities. E) decreases assets and increases liabilities.

A) decreases assets and decreases stockholders' equity.

The effects of paying for a one-year insurance policy that will expire next year on the basic accounting equation are to A) increase assets and decrease assets by the same amount. Total assets do not change. B) decrease assets and decrease stockholders' equity. C) increase liabilities and increase stockholders' equity. D) decrease assets and decrease liabilities. E) increase assets and increase liabilities.

A) increase assets and decrease assets by the same amount. Total assets do not change

The purchase of an asset, such as supplies, on account A) increases the purchaser's assets and liabilities. B) decreases the purchaser's assets and increases liabilities. C) leaves the purchaser's total assets unchanged. D) increases the purchaser's assets and stockholders' equity. E) increases the purchaser's assets and decreases stockholders' equity

A) increases the purchaser's assets and liabilities.

If a year-end adjusting entry is not recorded for unearned revenues the result will be to A) overstate liabilities and understate revenues. B) understate retained earnings and overstate revenues. C) Not recording such a journal entry would not affect the financial statements; the financial statements will be correct. D) overstate assets and understate liabilities. E) understate net income and overstate retained earnings.

A) overstate liabilities and understate revenues.

In Year 1, Costello Company performed work for a customer and billed the customer $14,000. In Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the company incurred and paid $6,000 of wage expense. If Costello Company uses the accrual-basis of accounting, then it will report A) revenue of $14,000 and expense of $6,000 in Year 1. B) revenue of $14,000 and expense of $6,000 in Year 2. C) revenue of $14,000 in Year 1 and expense of $6,000 in Year 2. D) revenue of $14,000 in Year 2 and expense of $6,000 in Year 1. E) no revenue and no expense in either year.

A) revenue of $14,000 and expense of $6,000 in Year 1.

Which of the following is an asset?

Accounts receivable

Which of the following is not an example of an intangible asset?

Accounts receivable

Which of the following would appear on a balance sheet?

Accounts receivable

Which of the following is not one of the three primary business activities listed on the statement of cash flows?

Advertising activities

Based on the following adjusted trial balance: Peak Corporation Adjusted Trial Balance As of December 31, 2018 Debit Credit Cash $ 800 Accounts Receivable 200 Inventory 3,000 Building 30,000 Accumulated Depreciation $ 2,000 Notes Payable 1,000 Common Stock 21,000 Retained Earnings 6,000 Dividends 2,000 Revenues 8,000 Selling and Administrative Expense 1,000 Insurance Expense 1,000 $ 38,000 $ 38,000 Determine the amount that will be reported as retained earnings on the post-closing trial balance. A) $9,000 B) $10,000 C) $6,000 D) $2,000 E) $14,000

B) $10,000

Barnes Company's financial records report the following accounts and balances at the end of the year: Accounts Payable..................... $ 3,000 Accounts Receivable................. 3,700 Cash............................................. 13,100 Common Stock........................... 4,600 Dividends.................................... 1,200 Interest expense........................ 17,500 Notes Payable............................ 4,200 Prepaid Insurance....................... 1,700 Retained earnings....................... 1,400 Service revenue....................... 24,000 What would the company show as its total credits on its trial balance? A) $32,600 B) $37,200 C) $36,400 D) $38,400 E) $38,900

B) $37,200

Barnes Company's financial records report the following accounts and balances at the end of the year: Accounts Payable..................... $ 3,200 Accounts Receivable................. 3,900 Cash............................................. 13,300 Common Stock........................... 4,800 Dividends.................................... 1,400 Interest expense........................ 17,700 Notes Payable............................ 4,400 Prepaid Insurance....................... 1,900 Retained earnings....................... 1,600 Service revenue....................... 24,200 What would the company show as its total credits on its trial balance? A) $325,600 B) $38,200 C) $38,900 D) $38,400 E) $35,600

B) $38,200

Barnes Company's financial records report the following accounts and balances at the end of the year: Accounts Payable..................... $ 4,000 Accounts Receivable................. 4,700 Cash............................................. 14,100 Common Stock........................... 5,600 Dividends.................................... 2,200 Interest expense........................ 18,500 Notes Payable............................ 5,200 Prepaid Insurance....................... 2,700 Retained earnings....................... 2,400 Service revenue....................... 25,000 What would the company show as its total credits on its trial balance? A) $43,400 B) $42,200 C) $44,400 D) $36,600 E) $39,800

B) $42,200

Bonita Realty Management Co. received a check for $30,000 on October 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rent Revenue was credited when the realty company collected the rent. Financial statements are prepared on December 31. The appropriate year-end adjusting journal entry that the realty company must record for the first year would be a A) No adjusting entry is necessary. B) $7,500 debit to Unearned Rent Revenue and a $7,500 credit to Rent Revenue. C) $2,500 debit to Rent Revenue and a $2,500 credit to Unearned Rent Revenue. D) $22,500 debit to Unearned Rent Revenue and a $22,500 credit to Rent Revenue. E) $2,500 debit to Rent Revenue and a $2,500 credit to Unearned Rent Revenue.

B) $7,500 debit to Unearned Rent Revenue and a $7,500 credit to Rent Revenue.

FastAct Company pays its employees their wages each Friday. The most recent payment occurred on Friday, December 28. The next payroll will be paid on January 4. There is one more work day in December after December 28th. Employees work 5 days a week and the company pays $2,000 per day in wages. What will the adjusting entry to accrue wages expense at the end of December include? A) No adjusting entry would be required. B) A debit to Salaries and Wages Expense for $2,000 C) A credit to Salaries and Wages Expense for $400. D) A debit to Salaries and Wages Expense for $400 E) A credit to Salaries and Wages Expense for $2,000

B) A debit to Salaries and Wages Expense for $2,000

Which of the following events is not recorded in a company's accounting records? A) Equipment is purchased on account. B) A decision to offer a company's services in a new geographic area. C) A collection of cash in advance from a customer. D) A company prepays one year's insurance. E) The owner withdraws cash for personal use.

B) A decision to offer a company's services in a new geographic area.

Which of the following errors, each considered individually, would cause the trial balance to be out of balance? A) Cash received from a customer for services to be performed later was posted as a $350 debit to Cash and a $350 credit to Accounts Payable. B) A payment of $150 to a creditor was posted as a $150 debit of $150 to Accounts Payable and a $148 debit to Cash. C) A payment of $59 for supplies was posted as a $95 debit to Supplies and a $95 credit to Cash. D) A $350 transaction was not posted. E) A $300 collection of cash for services provided to a customer was recorded twice.

B) A payment of $150 to a creditor was posted as a $150 debit of $150 to Accounts Payable and a $148 debit to Cash.

An account is a part of a company's financial information system and is described by all except which one of the following? A) An account has a debit and credit side. B) An account is a source document. C) The debit side is the left side of the account's T-account. D) The credit side is the right side of the account's T-account. E) An account consists of three parts with one part being the account's title.

B) An account is a source document.

Which of the following occurs when an account payable is paid with cash? A) Assets decrease and stockholders' equity increases B) Assets decreases and liabilities decrease C) Assets increase and liabilities increase D) Stockholders' equity decreases and liabilities decrease E) Assets increases and liabilities decreases

B) Assets decreases and liabilities decrease

Which of the following correctly describes the closing process? A) Net income is transferred to the Common Stock account. B) Each revenue account and expense account is closed to a zero balance. C) All of these are correct. D) Net income is transferred to the Cash account. E) Permanent accounts are closed to zero balances.

B) Each revenue account and expense account is closed to a zero balance.

Which pair of accounts follows the rules of debit and credit in relation to increases and decreases in the same manner? A) Retained Earnings and Supplies B) Equipment and Selling Expense C) Rent Expense and Accounts Payable D) Dividends and Service Revenue E) Service Revenue and Accounts Receivable

B) Equipment and Selling Expense

Companies prepare various types of trial balances. Which trial balance lists all of a company's permanent accounts but not its temporary accounts? A) The pre-disclosure trial balance B) The post-closing trial balance C) The adjusted trial balance D) All of these list the same number of accounts. E) The trial balance prepared before recording adjusting entries

B) The post-closing trial balance

Financial statements can be prepared directly from the A) All of these are correct. B) adjusted trial balance. C) post-closing trial balance. D) trial balance. E) reversing trial balance.

B) adjusted trial balance.

The closing entry process consists of closing A) only the dividends account. B) all temporary accounts. C) only the Retained Earnings account. D) all permanent accounts. E) all asset and liability accounts.

B) all temporary accounts.

Under the cash basis of accounting, an amount received from a customer in advance of providing the services would be reported as a(n): A) an increase to assets and an increase to liabilities. B) an increase to assets and an increase to revenue. C) an increase to an asset and a decrease to a different asset. D) none of these. E) an increase to assets and an increase to expenses.

B) an increase to assets and an increase to revenue.

Carpenter Company pays employees' salaries. This transaction will immediately affect the A) income statement and cash flows statement only. B) balance sheet, income statement, retained earnings statement, and cash flows statement. C) retained earnings statement and cash flows statement only. D) income statement and retained earnings statement only. E) retained earnings statement, cash flows statement, and balance sheet only.

B) balance sheet, income statement, retained earnings statement, and cash flows statement.

In the closing process total revenues are determined to be $4,750 while total expenses are determined to be $3,875 and total dividends are $1,150. The retained earnings account will A) increase by $875. B) decrease by $275. C) increase by $275. D) Retained earnings does not change. E) decrease by $875.

B) decrease by $275.

Carpenter Company performs services for cash. This transaction will immediately affect the A) income statement only. B) income statement, retained earnings statement, cash flows statement, and balance sheet. C) income statement and cash flows statement only. D) income statement, balance sheet, and retained earnings statement only. E) balance sheet and retained earnings statement only.

B) income statement, retained earnings statement, cash flows statement, and balance sheet.

Buying supplies in exchange for cash A) increases liabilities and decreases liabilities. B) increases assets and decreases assets. C) increases stockholders' equity and decreases stockholders' equity. D) decreases liabilities and increases assets. E) increases liabilities and increases assets.

B) increases assets and decreases assets.

Issuing a 3-month, 10%, $10,000 note A) decreases liabilities and increases assets. B) increases assets and increases liabilities. C) decreases retained earnings and increases assets. D) decreases assets and decreases liabilities. E) decreases stockholders' equity and increases liabilities.

B) increases assets and increases liabilities

Payments from customers received before performing services for the customers are recorded as A) expenses. B) liabilities. C) equity. D) dividends. E) revenues.

B) liabilities.

During the adjusting process two transactions were neglected or omitted. The first is for unearned rent revenue of which $540 was earned during the period, the second was for accrued interest payable of which $225 is owed for the period. As a result of these omissions A) These omissions would not affect the financial statements; the financial statements will be correct. B) net income is understated by $315. C) assets are overstated by $315. D) revenue is overstated by $315. E) liabilities are understated by $315.

B) net income is understated by $315.

If cash is received from owners as an investment by stockholders A) assets will increase and liabilities will decrease. B) stockholders' equity will increase and assets will increase. C) retained earnings will increase and assets will increase. D) assets will decrease and liabilities will decrease. E) liabilities will increase and assets will increase.

B) stockholders' equity will increase and assets will increase.

If cash is received from owners as an investment by stockholders A) liabilities will increase and assets will increase. B) stockholders' equity will increase and assets will increase. C) assets will increase and liabilities will decrease. D) retained earnings will increase and assets will increase. E) assets will decrease and liabilities will decrease.

B) stockholders' equity will increase and assets will increase.

Accounts are listed on the trial balance in A) order of largest balances to smallest balances. B) the order that they appear in the ledger. C) chronological order. D) alphabetical order. E) the order in which they are posted.

B) the order that they appear in the ledger.

Posting A) transfers ledger transaction data to the journal. B) transfers journal entry amounts to ledger accounts. C) normally occurs before journalizing. D) occurs after finishing the financial statements. E) is an optional step in the recording process.

B) transfers journal entry amounts to ledger accounts.

A company has unearned revenues on its books. If the company fails to record a year-end adjusting entry for unearned revenues, then its financial statements A) understate revenues and overstate stockholders' equity. B) understate retained earnings and understate revenues. C) understate revenues and understate liabilities. D) understate assets and overstate retained earnings. E) overstate assets and overstate revenues.

B) understate retained earnings and understate revenues.

On December 31, but before any year-end adjustments, McCarthy Company's Prepaid Insurance account had a balance of $2,700. It was determined that $1,500 of the Prepaid Insurance had expired. The Insurance Expense for the year would be A) $1,200. B) $900. C) $1,500. D) $1,900. E) $2,700.

C) $1,500.

Bonita Realty Management Co. received a check for $30,000 on September 1, which represents a one year advance payment of rent on an office it rents to a client. Unearned Rent Revenue was credited when the realty company collected the rent. Financial statements are prepared on December 31. The appropriate year-end adjusting journal entry that the realty company must record for the first year would be a A) $20,000 debit to Unearned Rent Revenue and a $20,000 credit to Rent Revenue. B) No adjusting entry is necessary. C) $10,000 debit to Unearned Rent Revenue and a $10,000 credit to Rent Revenue. D) $20,000 debit to Rent Revenue and a $20,000 credit to Unearned Rent Revenue. E) $10,000 debit to Rent Revenue and a $10,000 credit to Unearned Rent Revenue.

C) $10,000 debit to Unearned Rent Revenue and a $10,000 credit to Rent Revenue.

Based on the following adjusted trial balance: Peak Corporation Adjusted Trial Balance As of December 31, 2018 Debit Credit Cash $ 800 Accounts Receivable 200 Inventory 2,000 Building 30,000 Accumulated Depreciation $ 1,000 Notes Payable 3,000 Common Stock 17,000 Retained Earnings 10,000 Dividends 3,000 Revenues 7,000 Selling and Administrative Expense 1,000 Insurance Expense 1,000 $ 38,000 $ 38,000 Determine the amount that will be reported as retained earnings on the post-closing trial balance. A) $14,000 B) $10,000 C) $12,000 D) $9,000 E) $2,000

C) $12,000

Galileo Company borrowed money from a bank by signing a three-month note payable in the amount of $12,000 on November 1. The note requires Galileo Company to pay interest at an annual rate of 8%. Galileo Company records adjusting entries on December 31. The adjusting entry that Galileo Company should record for accrued interest on December 31 would include a debit to Interest Expense for A) $960 B) $270 C) $160 D) $80 E) $1,200

C) $160

At the start of the month, Acme Enterprises reported a $34,000 debit balance in its cash account. During the month, Acme collected cash of $30,000 and made disbursements of $42,000. At the end of the month, the cash balance is A) $64,000 credit. B) $22,000 credit. C) $22,000 debit. D) $34,000 debit. E) $64,000 debit.

C) $22,000 debit.

Galileo Company borrowed money from a bank by signing a three-month note payable in the amount of $18,000 on November 1. The note requires Galileo Company to pay interest at an annual rate of 9%. Galileo Company records adjusting entries on December 31. The adjusting entry that Galileo Company should record for accrued interest on December 31 would include a debit to Interest Expense for A) $1,620 B) $100 C) $270 D) $1,500 E) $135

C) $270

C) $38,200

Kepler Company borrowed money from a bank by signing a three-year note payable in the amount of $15,000 on July 1, 2018. The note requires Kepler Company to pay interest at an annual rate of 8%. Kepler Company records adjusting entries on December 31. The adjusting entry that Kepler Company should record for accrued interest on December 31, 2018 would include a debit to Interest Expense for A) $640 B) $1,200 C) $600 D) $100 E) $3,600

C) $600

On August 1, Crestview Company purchased equipment for $8,000. The equipment's estimated salvage value is $500. The machine will be depreciated using straight-line depreciation and a five year life. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be a A) $625 debit to Depreciation Expense and a $625 credit to Cash. B) $625 debit to Accumulated Depreciation and a $625 credit to Depreciation Expense. C) $625 debit to Depreciation Expense and a $625 credit to Accumulated Depreciation. D) $1,500 debit to Accumulated Depreciation and a $1,500 credit to Depreciation Expense. E) $1,500 debit to Depreciation Expense and a $1,500 credit to Accumulated Depreciation.

C) $625 debit to Depreciation Expense and a $625 credit to Accumulated Depreciation.

The following is information is from Clark Corporation's financial records for the current fiscal year. i. Cash received from customers, $230,000 ii. Revenue earned, $255,000 iii. Cash paid for wages, $110,000 iv. Wage expense incurred, $115,000 v. Cash paid during the current year for computers that will be used for 3 years, $30,000 vi. Depreciation expense, $10,000 vii. Proceeds from issuing debt (e.g., borrowed money from a bank), $30,000 viii. Interest incurred on debt, $3,000 ix. Cash paid for supplies, $4,000 x. Supplies expense incurred, $2,000 What is the company's net income for the current year using the cash-basis of accounting? A) $130,000 B) $135,000 C) $86,000 D) $125,000 E) $92,000

C) $86,000

Jarrell Company began the year with $124,000 in its Common Stock account and a debit balance in Retained Earnings of $18,000. During the year, the company earned net income of $33,000 and declared and paid $6,000 of dividends. In addition, the company sold additional common stock amounting to $40,000. Based on this information, what is the ending Retained Earnings? A) $16,000 B) $160,000 C) $9,000 D) $15,000 E) $14,000

C) $9,000

In a classified balance sheet, how and in what order are assets usually classified?

Current assets; long-term investments; property, plant, and equipment; and intangible assets

What journal entry is recorded as a result of issuing stock to investors for cash? A) A credit to Cash and a debit to Retained Earnings B) A debit to Common Stock and a credit to Cash C) A debit to Cash and a credit to Common Stock D) A debit to Cash and a credit to Retained Earnings E) A debit to cash and a debit to Common Stock

C) A debit to Cash and a credit to Common Stock

Adjusting entries are recorded to ensure that A) None of the choices are correct. B) balance sheet and income statement accounts have correct balances at the end of an accounting period. C) All of these choices are correct. D) expenses are recognized in the period in which they are incurred. E) revenues are recorded in the period in which the performance obligation is satisfied.

C) All of these choices are correct.

Which of the following events is not recorded in a company's accounting records? A) The owner withdraws cash for personal use. B) Issuing a note in exchange for cash. C) Discussing with a customer the services a company offers. D) Performs services for a customer on account. E) A collection of cash in advance from a customer.

C) Discussing with a customer the services a company offers.

Which of the following is not based on accrual accounting? A) Total assets B) Retained earnings C) Net cash provided by operating activities D) Net income

C) Net cash provided by operating activities

Which types of accounts will appear in the post-closing trial balance? A) None of these answer choices are correct. B) All accounts will appear in the post-closing trial balance. C) Permanent accounts D) Temporary accounts E) Accounts shown in the income statement

C) Permanent accounts

Companies prepare various types of trial balances. Which trial balance likely lists the smallest number of accounts for a given company? A) The trial balance prepared before recording adjusting entries B) The pre-disclosure trial balance C) The post-closing trial balance D) The adjusted trial balance E) All of these list the same number of accounts.

C) The post-closing trial balance

A trial balance will not balance if A) a $50 cash purchase of supplies was posted twice. B) a $500 collection of cash was not posted. C) a $50 cash dividend was debited to Dividends for $500 and credited to cash for $50. D) a $500 receipt of a customer's advance payment for services was recorded as a $500 debit to Cash and a $500 credit to Service Revenue. E) a $500 payment of an account payable was debited to Accounts Payable for $50 and credited to Cash for $50.

C) a $50 cash dividend was debited to Dividends for $500 and credited to cash for $50.

If a company receives cash from a customer before performing services for the customer, then A) assets increase and liabilities decrease. B) assets decrease and liabilities increase. C) assets increase and liabilities increase. D) assets increase and stockholders' equity increases. E) assets increase and stockhodlers' equity decreases.

C) assets increase and liabilities increase.

If a company fails to adjust for accrued revenues: A) liabilities will be understated and revenues will be understated. B) equity will be overstated and revenue will be understated. C) assets will be understated and revenues will be understated. D) liabilities will be overstated and revenues will be understated. E) assets will be overstated and revenues will be understated.

C) assets will be understated and revenues will be understated.

If the year-end adjusting entry to record salaries owed to employees were omitted then A) retained earnings would be understated. B) liabilities would be overstated. C) assets would be correctly stated. D) stockholders' equity would be correctly stated. E) expenses would be overstated.

C) assets would be correctly stated.

The following information is from the Income Statement of the Crowley Corporation: Revenues Service Revenue $5,500 Expenses Salaries and wages expense $ 1,950 Advertising expense 500 Rent expense 300 Supplies expense 200 Insurance expense 100 Total expenses 3,050 Net Income $2,450 The closing entries includes a: A) debit to expenses for $3,050. B) debit to Retained Earnings for $2,450. C) debit to Income Summary for $2,450. D) credit to Income Summary for $2,450. E) credit to Common Stock for $2,450.

C) debit to Income Summary for $2,450.

The year-end trial balance for Beltway Corporation appears as follows: Beltway Corporation Trial Balance December 31 Debit Credit Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Equipment 4,000 Accumulated Depreciation, Equipment $ 800 Accounts Payable 300 Common Stock 1,000 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $6,500 $6,500 If, at year-end, the unexpired insurance were $20, the company should record an adjusting entry that A) debits Insurance Expense for $20 and credits Prepaid Insurance for $20. B) debits Prepaid Insurance for $20 and credits Insurance Expense for $20. C) debits Insurance Expense for $40 and credits Prepaid Insurance for $40. D) debits Prepaid Insurance for $40 and credits Insurance Expense for $40. E) debits Insurance Expense for $20 and credits Cash for $20.

C) debits Insurance Expense for $40 and credits Prepaid Insurance for $40.

In its first year, a company purchased $10,000 of supplies and recorded the purchase by debiting the supplies account. At the end of the year, the company had $3,500 of supplies on hand. If the company failed to make an adjusting entry for supplies, then: A) assets will be understated. B) liabilities will be understated. C) expense will be understated. D) stockholders' equity will be understated. E) net income will be understated.

C) expense will be understated.

During the adjusting process two transactions were neglected or omitted. The first is for unearned rent revenue of which $475 was earned during the period, the second was for accrued interest payable of which $315 is owed for the period. As a result of these omissions A) assets are overstated by $475. B) These omissions would not affect the financial statements; the financial statements will be correct. C) liabilities are overstated by $160. D) revenue is overstated by $790. E) net income is overstated by $315.

C) liabilities are overstated by $160.

McMasters Corporation purchased a one-year insurance policy on March 1 of the current year for $30,000. The insurance policy will be in effect from March 1 through February 28 of the next year. The company recorded the payment as prepaid Insurance. The company neglects to record the year-end adjusting entry at the end of the current year. As a result, the company's current year A) net income and assets will be overstated by $5,000. B) net income and assets will be understated by $5,000. C) net income and assets will be overstated by $25,000. D) neither net income nor assets will be overstated or understated. E) net income and assets will be understated by $25,000.

C) net income and assets will be overstated by $25,000.

If the year-end adjusting entry to record salaries owed to employees were omitted then A) assets would be understated. B) liabilities would be overstated. C) retained earnings would be overstated. D) stockholders' equity would be correctly stated. E) expenses would be overstated.

C) retained earnings would be overstated.

The generally accepted accounting principle which dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied is the A) expense recognition principle. B) periodicity assumption. C) revenue recognition principle. D) accrued revenues principle. E) going concern assumption.

C) revenue recognition principle.

A complete journal entry does not show A) the date of the transaction. B) a brief explanation of the transaction. C) the new balance in the accounts affected by the transaction. D) the dollar amount of the transaction. E) the accounts and amounts to be debited and credited.

C) the new balance in the accounts affected by the transaction.

In what order are the following accounts and their balances listed on a classified balance sheet?

Cash, accounts receivable, inventories, equipment.

Which of the following is the correct order for listing assets on the balance sheet?

Cash, short-term investments, land, and patents

Different companies using the same accounting principles is an example of _________________. For instance, this occurs when two different companies both use the accrual accounting rather than cash-basis accounting or when both companies use the same method to compute depreciation rather than using two different methods.

Comparability

The following is information is from Clark Corporation's financial records for the current fiscal year. i. Cash received from customers, $230,000 ii. Revenue earned, $255,000 iii. Cash paid for wages, $110,000 iv. Wage expense incurred, $115,000 v. Cash paid during the current year for computers that will be used for 3 years, $30,000 vi. Depreciation expense, $10,000 vii. Proceeds from issuing debt (e.g., borrowed money from a bank), $30,000 viii. Interest incurred on debt, $3,000 ix. Cash paid for supplies, $4,000 x. Supplies expense incurred, $2,000 What is the company's net income for the current year using the cash-basis of accounting? A) $135,000 B) $130,000 C) $86,000 D) $125,000 E) $92,000

D) $125,000

Wilson Company has the following accounts and account balances at the end of its first year: Accounts payable, $4,000 Cash, $22,000 Common stock, ? Dividends, $4,000 Expenses, $17,000 Notes payable, $3,000 Prepaid insurance, $5,000 Revenues, $28,000 What is the balance of its common stock account at the end of the first year? A) $8,000 B) $7,000 C) $3,000 D) $13,000 E) $9,000

D) $13,000

Jarrell Company began the year with $112,000 in its Common Stock account and a debit balance in Retained Earnings of $20,000. During the year, the company earned net income of $43,000 and declared and paid $8,000 of dividends. In addition, the company sold additional common stock amounting to $35,000. Based on this information, what is the ending Retained Earnings? A) $147,000 B) $160,000 C) $162,000 D) $15,000 E) $23,000

D) $15,000

At the start of the month, Hawaii Inc. reported retained earnings of $163,000. During the month, Hawaii generated revenues of $44,000, incurred expenses of $21,000, borrowed $10,000 by signing a note payable, and paid dividends of $2,000. What is the balance in retained earnings at the end of the month? A) $174,000 credit B) $166,000 credit C) $142,000 credit D) $184,000 credit E) $136,000 debit

D) $184,000 credit

At the start of the month, Acme Enterprises reported a $34,000 debit balance in its cash account. During the month, Acme collected cash of $30,000 and made disbursements of $42,000. At the end of the month, the cash balance is A) $64,000 credit. B) $34,000 debit. C) $64,000 debit. D) $22,000 debit. E) $22,000 credit.

D) $22,000 debit.

On September 1 the Petite-Sizes Store paid $15,000 to the Mega-Mall Co. for 3 months' rent beginning September 1. Prepaid Rent was debited for the payment. If Petite-Sizes Store prepares financial statements on September 30, the appropriate adjusting journal entry to make on September 30 would be a A) $10,000 debit to Prepaid Rent and a $10,000 credit to Rent Expense. B) No adjusting entry is necessary. C) $5,000 debit to Prepaid Rent and a $5,000 credit to Rent Expense. D) $5,000 debit to Rent Expense and a $5,000 credit to Prepaid Rent. E) $10,000 debit to Rent Expense and a $10,000 credit to Prepaid Rent.

D) $5,000 debit to Rent Expense and a $5,000 credit to Prepaid Rent.

On August 1, Crestview Company purchased equipment for $8,000. The equipment's estimated salvage value is $500. The machine will be depreciated using straight-line depreciation and a five year life. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be a A) $1,500 debit to Depreciation Expense and a $1,500 credit to Equipment. B) $1,500 debit to Depreciation Expense and a $1,500 credit to Accumulated Depreciation. C) $625 debit to Depreciation Expense and a $625 credit to Cash. D) $625 debit to Depreciation Expense and a $625 credit to Accumulated Depreciation. E) $625 debit to Depreciation Expense and a $625 credit to Equipment.

D) $625 debit to Depreciation Expense and a $625 credit to Accumulated Depreciation.

On September 1 the Petite-Sizes Store paid $16,000 to the Mega-Mall Co. for 2 months' rent beginning September 1. Prepaid Rent was debited for the payment. If Petite-Sizes Store prepares financial statements on September 30, the appropriate adjusting journal entry to make on September 30 would be a A) $16,000 debit to Prepaid Rent and a $16,000 credit to Rent Expense. B) No adjusting entry is necessary. C) $8,000 debit to Prepaid Rent and a $8,000 credit to Rent Expense. D) $8,000 debit to Rent Expense and a $8,000 credit to Prepaid Rent. E) $16,000 debit to Rent Expense and a $16,000 credit to Prepaid Rent

D) $8,000 debit to Rent Expense and a $8,000 credit to Prepaid Rent.

D) $9,000

Wilson Company has the following accounts and account balances at the end of its first year: Accounts payable, $1,000 Cash, $15,000 Common stock, ? Dividends, $2,000 Expenses, $15,000 Notes payable, $4,000 Prepaid insurance, $2,000 Revenues, $20,000 What is the balance of its common stock account at the end of the first year? A) $13,000 B) $3,000 C) $7,000 D) $9,000 E) $8,000

D) $9,000

An account is a part of a company's financial information system and is described by all except which one of the following? A) An account has a debit and credit side. B) The credit side is the right side of the account's T-account. C) An account consists of three parts with one part being the account's title. D) An account is a source document. E) The debit side is the left side of the account's T-account.

D) An account is a source document.

Which of the following is the correct sequence of events in the recording process? A) Analyze a transaction; post it to the ledger; record it in the journal B) Record a transaction in the journal; analyze the transaction; post it to the ledger C) Post to the ledger; analyze a transaction; record it in the journal D) Analyze a transaction; record it in the journal; post it to the ledger E) None of the answer choices provides the correct sequence

D) Analyze a transaction; record it in the journal; post it to the ledger

McMasters Inc. pays its rent of $48,000 annually on January 1 and makes monthly adjusting entries. If the February 28 monthly adjusting entry for prepaid rent is omitted, which of the following are true? A) Expenses will be overstated by $4,000 and net income and stockholders' equity will be understated by $4,000. B) Assets will be overstated by $8,000 and net income and stockholders' equity will be understated by $8,000. C) Failure to make the adjustment does not affect the February financial statements. D) Assets will be overstated by $4,000 and net income and stockholders' equity will be overstated by $4,000. E) Expenses, net income, and stockholders' equity will be understated by $4,000.

D) Assets will be overstated by $4,000 and net income and stockholders' equity will be overstated by $4,000.

Which principle dictates that efforts (i.e., expenses) be matched with results (i.e., revenues)? A) Periodicity principle B) Monetary unit assumption C) Revenue recognition principle D) Expense recognition principle E) Historical cost principle

D) Expense recognition principle

The accounting cycle is a series of certain steps that businesses, such as corporations, perform in sequence and repeat in each accounting period. Although steps may be missing among the options listed below, which of the following lists steps of the accounting cycle in their correct order? A) Journalize the closing entries, prepare the adjusted trial balance, and prepare the financial statements, B) Post the transactions, prepare the post-closing trial balance, and journalize the transactions. C) Post the transactions, journalize the closing entries, and prepare the financial statements. D) Post the transactions, journalize the adjusting entries, and prepare the financial statements. E) Prepare the financial statements, prepare the trial balance, and post the closing entries.

D) Post the transactions, journalize the adjusting entries, and prepare the financial statements.

A trial balance will not balance if A) A trial balance will always balance. B) a correct journal entry is posted twice. C) a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45. D) a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100. E) the purchase of supplies on account is debited to Supplies and credited to Cash.

D) a $100 cash dividend is debited to Dividends for $1,000 and credited to Cash for $100.

Financial statements can be prepared directly from the A) post-closing trial balance. B) reversing trial balance. C) All of these are correct. D) adjusted trial balance. E) trial balance.

D) adjusted trial balance.

The closing entry process consists of closing A) only the dividends account. B) all permanent accounts. C) only the Retained Earnings account. D) all temporary accounts. E) all asset and liability accounts.

D) all temporary accounts.

An investment by the stockholders in a company increases the company's A) liabilities and stockholders' equity. B) assets only. C) assets and liabilities. D) assets and stockholders' equity. E) revenues and equity.

D) assets and stockholders' equity.

If a company pays for a one-year insurance policy that will expire next year, then A) assets increase and liabilities decrease. B) assets decrease and liabilities increase. C) liabilities increase and liabilities decrease. D) assets increase and assets decrease. E) assets increase and stockholders' equity increase

D) assets increase and assets decrease.

If a company buys supplies on account, then A) assets decrease and liabilities increase. B) liabilities increase and liabilities decrease. C) assets increase and stockholders' equity increases. D) assets increase and liabilities increase. E) assets increase and assets decrease.

D) assets increase and liabilities increase.

Employees have worked for one week and have earned $5,000 in wages. The company does not record wages until they are paid. Recording the payment of wages A) decreases liabilities and decreases stockholders' equity. B) decreases assets and increases liabilities. C) increases stockholders' equity and decreases stockholders' equity. D) decreases assets and decreases stockholders' equity. E) increases liabilities and decreases liabilities.

D) decreases assets and decreases stockholders' equity.

Paying an expense when it is incurred A) decreases revenues and assets. B) decreases assets and liabilities. C) increases liabilities and decreases stockholders' equity. D) decreases stockholders' equity and assets. E) decreases liabilities and increases stockholders' equity.

D) decreases stockholders' equity and assets.

Adjusting entries are recorded to ensure that A) None of the choices are correct. B) revenues are partitioned between revenue from sales to customers and revenue from other sources (e.g., interest revenue). C) All of these choices are correct. D) expenses are recognized in the period in which they are incurred. E) income statement accounts have zero balances at the end of an accounting period.

D) expenses are recognized in the period in which they are incurred.

During the adjusting process two transactions were neglected or omitted. The first is for unearned rent revenue of which $540 was earned during the period, the second was for accrued interest payable of which $225 is owed for the period. As a result of these omissions A) revenue is overstated by $225. B) These omissions would not affect the financial statements; the financial statements will be correct. C) Liabilities are understated by $225. D) expenses are understated by $225. E) net income is understated by $225.

D) expenses are understated by $225.

Carpenter Company performs services for cash. This transaction will immediately affect the A) income statement only. B) income statement and cash flows statement only. C) balance sheet and retained earnings statement only. D) income statement, retained earnings statement, cash flows statement, and balance sheet. E) income statement, balance sheet, and retained earnings statement only.

D) income statement, retained earnings statement, cash flows statement, and balance sheet.

The effects of performing services for cash on the basic accounting equation are to A) increase assets and increase liabilities. B) decrease assets and decrease stockholders' equity. C) decrease assets and decrease liabilities. D) increase assets and increase stockholders' equity. E) increase liabilities and increase stockholders' equity.

D) increase assets and increase stockholders' equity.

Buying supplies in exchange for cash A) increases stockholders' equity and decreases stockholders' equity. B) decreases liabilities and increases assets. C) increases liabilities and increases assets. D) increases assets and decreases assets. E) increases liabilities and decreases liabilities.

D) increases assets and decreases assets.

Paying for a one-year insurance policy that will expire next year A) decreases liabilities and increases assets. B) increases liabilities and decreases liabilities. C) increases stockholders' equity and decreases stockholders' equity. D) increases assets and decreases assets. E) increases liabilities and increases assets.

D) increases assets and decreases assets.

If cash is received in advance from a customer A)assets will decrease and liabilities will decrease. B)stockholders' equity will decrease and assets will increase. C) assets will increase and liabilities will decrease. D) liabilities will increase and assets will increase. E) retained earnings will increase and assets will increase.

D) liabilities will increase and assets will increase.

In Year 1, Costello Company performed work for a customer and billed the customer $10,000. In Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the company incurred $3,000 of wage expense, but it did not pay the employees until Year 2. If Costello Company uses the cash-basis of accounting, then it will report A) revenue of $10,000 and expense of $3,000 in Year 2. B) revenue of $10,000 in Year 1 and expense of $3,000 in Year 2. C) no revenue or expenses in either year. D) revenue of $10,000 and expense of $3,000 in Year 1. E) revenue of $10,000 in in Year 2 and expense of $3,000 in Year 1.

D) revenue of $10,000 and expense of $3,000 in Year 1.

If cash is received from owners as an investment by stockholders A) retained earnings will increase and assets will increase. B) liabilities will increase and assets will increase. C) assets will decrease and liabilities will decrease. D) stockholders' equity will increase and assets will increase. E) assets will increase and liabilities will decrease.

D) stockholders' equity will increase and assets will increase.

Accounts are listed on the trial balance in A) alphabetical order. B) the order in which they are posted. C) chronological order. D) the order that they appear in the ledger. E) order of largest balances to smallest balances.

D) the order that they appear in the ledger.

On September 1, Crestview Company purchased equipment for $25,000. The equipment's estimated salvage value is $2,500. The machine will be depreciated using straight-line depreciation and a five year life. If the company prepares annual financial statements on December 31, the appropriate adjusting journal entry to make on December 31 of the first year would be a A) $1,500 debit to Depreciation Expense and a $1,500 credit to Equipment. B) $4,500 debit to Depreciation Expense and a $4,500 credit to Equipment. C) $4,500 debit to Depreciation Expense and a $4,500 credit to Accumulated Depreciation. D) $4,500 debit to Depreciation Expense and a $4,500 credit to Cash. Correct Answer E) $1,500 debit to Depreciation Expense and a $1,500 credit to Accumulated Depreciation.

E) $1,500 debit to Depreciation Expense and a $1,500 credit to Accumulated Depreciation.

Crowley Company has the following adjusted trial balance: Debit Credit Cash 1,500 Accounts receivable 2,100 Prepaid rent 100 Equipment 3,500 Accumulated depreciation-Equipment 1,500 Accounts payable 150 Unearned service revenue 200 Common stock 1,000 Retained earnings 4,700 Service revenue 800 Interest revenue 100 Salaries and wages expense 150 Depreciation expense 600 Rent expense 500 Total 8,450 8,450 After closing entries have been journalized and posted, the balance in the company's retained earnings account will be A) $8,450. B) $5,050. C) $4,700. D) $4,550. E) $4,350.

E) $4,350.

On August 1, Long Corporation signed a $30,000, 14%, 2-year note to help finance renovations being made to the corporation headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be a A) $4,200 debit to Interest Expense and a $4,200 credit to Interest Payable. B) $1,750 debit to Interest Expense and a $1,750 credit to Notes Payable. C) $4,200 debit to Interest Expense and a $4,200 credit to Notes Payable. D) No adjusting entry would be required. Correct! E) $1,750 debit to Interest Expense and a $1,750 credit to Interest Payable.

E) $1,750 debit to Interest Expense and a $1,750 credit to Interest Payable.

On July 1, Mesa Verde, Inc. purchased a 3-year insurance policy for $12,600. Prepaid Insurance was debited for the entire amount. On December 31, when the annual financial statements are prepared, the appropriate adjusting journal entry would be a A) $2,100 debit to Prepaid Insurance and a $2,100 credit to Insurance Expense. B) $10,500 debit to Prepaid Insurance and a $10,500 credit to Insurance Expense. C) No adjusting entry is necessary. D) $10,500 debit to Insurance Expense and a $10,500 credit to Prepaid Insurance. E) $2,100 debit to Insurance Expense and a $2,100 credit to Prepaid Insurance.

E) $2,100 debit to Insurance Expense and a $2,100 credit to Prepaid Insurance.

In its first month of operations, a company's cash account has total debit entries amounting to $27,500 and total credit entries amounting to $24,900. At the end of the month, the cash account has a A) $2,600 credit balance. B) $27,500 debit balance. C) $0 balance. D) $52,400 debit balance. E) $2,600 debit balance.

E) $2,600 debit balance.

Wilson Company has the following accounts and account balances at the end of its first year: Accounts payable, $3,000 Cash, $15,000 Common stock, ? Dividends, $1,000 Expenses, $14,000 Notes payable, $4,000 Prepaid insurance, $3,000 Revenues, $23,000 What is the balance of its common stock account at the end of the first year? A) $8,000 B) $9,000 C) $7,000 D) $13,000 E) $3,000

E) $3,000

On June 1, Long Corporation signed a $30,000, 18%, 3-year note to help finance renovations being made to the corporation headquarters. Assuming interest is accrued only when the year ends on December 31, the appropriate journal entry for the first year would be a A) $5,400 debit to Interest Expense and a $5,400 credit to Interest Payable. B) $5,400 debit to Interest Expense and a $5,400 credit to Notes Payable. C) No adjusting entry would be required. D) $3,150 debit to Interest Expense and a $3,150 credit to Notes Payable. E) $3,150 debit to Interest Expense and a $3,150 credit to Interest Payable.

E) $3,150 debit to Interest Expense and a $3,150 credit to Interest Payable.

E) $36,400

What journal entry is recorded as a result of issuing stock to investors for cash? A) A debit to Common Stock and a credit to Cash B) A credit to Cash and a debit to Retained Earnings C) A debit to cash and a debit to Common Stock D) A debit to Cash and a credit to Retained Earnings E) A debit to Cash and a credit to Common Stock

E) A debit to Cash and a credit to Common Stock

FastAct Company pays its employees their wages each Friday. The most recent payment occurred on Friday, December 26. The next payroll will be paid on January 2. There are three more work days in December after December 26th. Employees work 5 days a week and the company pays $30,000 per week in wages. What will be the adjusting entry to accrue wages expense at the end of December? A) A credit to Salaries and Wages Expense for $6,000 B) No adjusting entry would be required. C) A credit to Salaries and Wages Expense for $18,000 D) A debit to Salaries and Wages Expense for $6,000 E) A debit to Salaries and Wages Expense for $18,000

E) A debit to Salaries and Wages Expense for $18,000

Which one of the following is not a proper justification for adjusting entries? A) Adjusting entries are necessary to ensure that the expense recognition principle is followed. B) Adjusting entries are necessary to ensure that the revenue recognition principle is followed. C) Adjusting entries are necessary to enable financial statements to be in conformity with generally accepted accounting principles. D) All of these are proper justifications for adjusting entries. E) Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

E) Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Which of the following is correct concerning the adjusted trial balance? A) The company prepares the adjusted trial balance after it has journalized and posted the adjusting entries. B) An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made. C) The adjusted trial balance provides the primary basis for the preparation of financial statements. D) None of these statements are correct. E) All of these statements are correct.

E) All of these statements are correct.

What does a general ledger of a company contain? A) Revenue and expense accounts only B) Asset and liability accounts only C) Asset, and stockholders' equity accounts only D) None of these E) All the asset, liability, stockholders' equity, revenue, expense, and dividend accounts

E) All the asset, liability, stockholders' equity, revenue, expense, and dividend accounts

Which pair of accounts follows the rules of debits and credits in relation to increases and decreases in the same manner? A) Interest Expense and Accounts Payable B) Dividends and Accumulated Depreciation--Equipment C) Retained Earnings and Supplies D) Common Stock and Rent Expense E) Cash and Income Tax Expense

E) Cash and Income Tax Expense

The accounting cycle is a series of certain steps that businesses, such as corporations, perform in sequence and repeat in each accounting period. Although steps may be missing among the options listed below, which of the following lists steps of the accounting cycle in their correct order? A) Prepare the financial statements, prepare the trial balance, and post the closing entries. B) Post the transactions, journalize the closing entries, and prepare the financial statements. C) Journalize the closing entries, prepare the adjusted trial balance, and prepare the financial statements, D) Post the transactions, prepare the post-closing trial balance, and journalize the transactions. E) Post the transactions, journalize the adjusting entries, and prepare the financial statements.

E) Post the transactions, journalize the adjusting entries, and prepare the financial statements.

Which of the following is evidence that a transaction has occurred that needs to be recording in a company's accounting records? A) Chart of accounts B) Journal C) Ledger D) Trial balance E) Source document

E) Source document

Companies prepare various types of trial balances. Which trial balance lists all of a company's permanent and temporary accounts? A) The pre-disclosure trial balance B) The post-closing trial balance C) All of these list the same number of accounts. D) The trial balance prepared before recording adjusting entries E) The adjusted trial balance

E) The adjusted trial balance

Cash received before services are performed may be recorded as a debit to a Cash account and a credit to a liability account is called A) None of these answer choices are correct. B) an unrecorded revenue. C) an accrued revenue. D) accounts payable E) an unearned revenue.

E) an unearned revenue.

If a company pays for a one-year insurance policy that will expire next year, then A) assets decrease and liabilities increase. B) assets increase and liabilities decrease. C) assets increase and stockholders' equity increases. D) liabilities increase and liabilities decrease. E) assets increase and assets decrease.

E) assets increase and assets decrease.

The following information is from the Income Statement of Crowley Corporation: Revenues Service Revenue $5,500 Expenses Salaries and wages expense $ 1,950 Advertising expense 500 Rent expense 300 Supplies expense 200 Insurance expense 100 Total expenses 3,050 Net Income $2,450 The closing entries includes a: A) debit to Cash for $3,050. B) debit to Retained Earnings for $5,500. C) credit to Service Revenue for $5,500. D) debit to Income Summary for $5,500. E) debit to Service Revenue for $5,500.

E) debit to Service Revenue for $5,500.

The year-end trial balance for Beltway Corporation appears as follows: Beltway Corporation Trial Balance December 31 Debit Credit Cash $ 300 Accounts Receivable 500 Prepaid Insurance 60 Supplies 140 Equipment 4,000 Accumulated Depreciation, Equipment $ 800 Accounts Payable 300 Common Stock 1,000 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $6,500 $6,500 If, at year-end, supplies on hand were $40, the company should record an adjusting entry that A) debits Supplies for $100 and credits Supplies for $100. B) debits Supplies for $40 and credits Supplies Expense for $40. C) debits Supplies Expense for $40 and credits Supplies for $40. D) debits Supplies Expense for $100 and credits Cash for $100. E) debits Supplies Expense for $100 and credits Supplies for $100.

E) debits Supplies Expense for $100 and credits Supplies for $100.

Year-end adjusting entries for unearned revenues A) decrease revenues and decrease assets. B) increase revenues and decrease stockholders' equity. C) increase liabilities and increase revenues. D) increase assets and increase revenues. E) decrease liabilities and increase revenues.

E) decrease liabilities and increase revenues.

Accounts with normal debit balances include A) stockholders' equity and revenues. B) expenses and liabilities. C) liabilities and expenses. D) assets and liabilities. E) expenses and assets.

E) expenses and assets.

Retained earnings is decreased by A) revenues. B) cash payments for assets. C) contributions from owners. D) cash payments. E) expenses.

E) expenses.

Debits A) decrease assets and increase liabilities. B) increase assets and increase revenues. C) decrease assets and increase equities. D) increase assets and increase equities. E) increase assets and increase expenses.

E) increase assets and increase expenses.

A transaction that increases an unearned revenue A) increases a liability and decreases stockholders' equity. B) decreases a liability and increases stockholders' equity. C) increases an asset and increases a revenue. D) decreases a revenue and increases stockholders' equity. E) increases an asset and increases a liability.

E) increases an asset and increases a liability.

Issuing a 3-month, 10%, $10,000 note A) decreases retained earnings and increases assets. B) decreases assets and decreases liabilities. C) decreases stockholders' equity and increases liabilities. D) decreases liabilities and increases assets. E) increases assets and increases liabilities.

E) increases assets and increases liabilities.

If the year-end adjusting entry to record salaries owed to employees were omitted then A) liabilities would be overstated. B) stockholders' equity would be correctly stated. C) expenses would be overstated. D) assets would be understated. E) retained earnings would be overstated.

E) retained earnings would be overstated.

In Year 1, Costello Company performed work for a customer and billed the customer $10,000. In Year 2, the customer pays Costello Company for the services it rendered in Year 1. In Year 1, the company incurred and paid $3,000 of wage expense. If Costello Company uses the cash-basis of accounting, then it will report A) no revenue or expenses in either year. B) revenue of $10,000 and expense of $3,000 in Year 2. C) revenue of $10,000 in Year 1 and expense of $3,000 in Year 2. D) revenue of $10,000 and expense of $3,000 in Year 1. E) revenue of $10,000 in in Year 2 and expense of $3,000 in Year 1.

E) revenue of $10,000 in in Year 2 and expense of $3,000 in Year 1.

If an account is debited in the journal entry, then A) that account will be credited in the ledger. B) the account balance is being increased. C) that account will be both debited and credited in the ledger. D) the transactions will not balance. E) that account will be debited in the ledger.

E) that account will be debited in the ledger.

A company has unearned revenues on its books. If the company fails to record a year-end adjusting entry for unearned revenues, then its financial statements A) understate retained earnings and overstate revenues. B) understate net income and overstate retained earnings. C) understate revenues and understate liabilities. D) overstate assets and overstate revenues. E) understate revenues and overstate liabilities.

E) understate revenues and overstate liabilities.

Dividing net income minus preferred stock dividends by the average of common shares outstanding produces the following:

Earnings per share

It is assumed that the activities of a company can be distinguished from the activities of its owners because of the

Economic Entity Assumption

The accounting concept that indicates that assets and liabilities should be reported at the price received to sell the asset or settle the liability is the

Fair Value Principle

Accounting information should be neutral in order to enhance

Faithful representation

What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U. S.?

Generally accepted accounting principles

Which of the following is an example of an intangible asset?

Goodwill

Which of the following would not be reported among property, plant, and equipment on a classified balance sheet?

Inventory

Which of the following did not result from the Sarbanes-Oxley Act (SOX)?

It decreased the oversight role of boards of directors.

Which of the following is also referred to as debt?

Liabilities -Liabilities are the amounts owed, such as the amounts that a company owes to its creditors. Example include accounts payable, notes payable, and unearned revenues. .

Which of the following describes a company's ability to pay its obligations that are expected to become due within the next year or operating cycle whichever is longer?

Liquidity

Which of the following is a financial ratio classification that measures short-term ability of a company to pay its maturing obligations and to meet unexpected needs for cash?

Liquidity ratios

How does a company compute its free cash flow?

Net cash provided by its operating activities minus (i) expenditures on property, plant, and equipment and (ii) its dividends paid.

Which of the following is a financial ratio classification that measures the income or operating success of a company for a given period of time?

Profitability ratios

Which of the following is not an asset?

Revenue -Accounts are classified into categories including assets, liabilities, equities, revenues, expenses, and dividends. Assets are the resources owned by a company. Common examples of assets include cash, accounts receivable, inventory, supplies, buildings, equipment, patents, etc.

Which of the following would not appear on a retained earnings statement?

Service revenue -The retained earnings statement reports beginning retained earnings, net income, dividends, and ending retained earnings. Service revenue is reported on the income statement, not on the retained earnings statement.

Which of the following is comprised of two parts: (1) common stock and (2) retained earnings?

Stockholders' equity

Which of the following best describes stockholders' equity?

Stockholders' equity are the claims of owners.

What section of a cash flows statement shows the amount of cash received from shareholders in exchange for issuing additional shares of its stock to its shareholders?

The financing section

In which of the following sequences are these financial statements usually prepared?

The income statement is prepared before the retained earnings statement.

Which of the following is not a characteristic of relevance?

Verifiability

Information is _________ if independent observers, using the same methods, obtain similar results. For example, certified public accountants (CPAs) perform audits of financial statements to confirm or double-check their accuracy.

Verifiable

What is measured by current assets minus current liabilities?

Working Capital

A company borrowing money from a bank is an example of

a financing activity

A company should report an issuance of common stock on its statement of cash flows as

a financing activity

The payment of dividends is an example of

a financing activity

A company borrows money from a bank. It should report the cash received from the bank on its statement of cash flows as

a financing activity.

The right to receive money in the future is called a(n)

account receivable.

The cost of assets consumed or services used is also known as

an expense

The cost of assets consumed or services used in the process of generating revenues is also known as

an expense -Companies incur costs, such as rent, utilities, and salaries. These costs are referred to as expenses when they are incurred. Expenses are the cost of assets consumed or services used to produce and sell the company's products and services.

The payment of cash to purchase a truck to be used by a company as a delivery truck is an example of

an investing activity

A company paying cash to its suppliers for inventory to be sold to its customers is an example of

an operating activity

In terms of the principal types of cash flow activities, paying for goods and services is an example of

an operating activity

When the auditor is satisfied that the financial statements provide a fair representation of the company's financial position and results of operation in accordance with generally accepted accounting principles, the auditor will express

an unqualified opinion.

The ending balance of the Retained Earnings account appears on

both the retained earnings statement and the balance sheet.

Which form of business organization have owners called stockholders?

corporations

The sole proprietorship form of business organization

generally receives favorable tax treatment relative to a corporation.

Accounting information is relevant to business decisions because it

has predictive value

The following ratios are available for Leer Inc. and Stable Inc. Leer Inc. Stable Inc. Current Ratio 2.0 1.5 Compared to Stable Inc., Leer Inc. has

higher liquidity The current ratio is computed as current assets divided by current liabilities. The current ratio measures liquidity. Higher current ratios mean the company is more liquid (i.e., better able to pay is short-term liabilities), and lower current ratios mean the company is less liquid.

Issuing new shares of common stock will

increase common stock.

Relevant accounting information

is information that is capable of making a difference in a business decision.

Which accounting assumption requires that only those things that can be expressed in dollar values are included in the accounting records?

monetary unit assumption.

A company can change to a new method of accounting if management can justify that the new method results in

more meaningful financial information.

Earnings per share is computed by dividing

net income less preferred stock dividends by the average common shares outstanding.

The three most common financial ratio classifications used by businesses include

profitability ratios, liquidity ratios, and solvency ratios.

The retained earnings statement

reports the amounts and causes of changes in retained earnings for a specific period of time such as a year.

The balance sheet

reports the assets, liabilities, and stockholders' equity at a specific date.

An income statement:

reports the revenues and expenses for a specific period of time.

Which of the following best defines assets

resources belonging to a company that have a future benefit to the company.

Net income will result during a time period when

revenues exceed expenses.

An income statement shows

revenues, expenses, and net income.

The periodicity assumption states

the life of a business can be divided into artificial time periods for financial reporting purposes.

The notion that the life of a business can be divided into artificial time periods for financial reporting purposes is known as

the periodicity assumption.

Which of the following would appear on a balance sheet?

unearned revenue -The balance sheet reports all of a company's assets (e.g., cash, accounts receivable, prepaid rent, equipment, etc.), liabilities (e.g., accounts payable, notes payable, unearned revenues, etc.) ,and equities (common stock, retained earnings, etc.).

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