bmgt220 ch. 1

"Revenues" are best described as:

Increases in assets resulting from the sale of products or services

A credit sale is made with terms of 2/10, net 30 on May 10 and the customer's check is received on May 19. Using the net method, which of the following is true? A. The debit to cash will be less than the credit to accounts receivable on May 19. B. There will be a debit to sales discounts on May 10. C. There will be a credit to sales discounts on May 19. D. The debit to cash will equal the credit to accounts receivable on May 19.

d

Recording an item at its initial transaction price is called the historical cost principle or cost principle.

if you bought a house for $50 in 2010 but in 2017 is estimated to be valued at $70, you still record it as $50

Statement of Cash Flows

provides financial information about the cash receipts/payments period statement (month/yr)

The beginning balance of retained earnings will be greater than the ending balance if A. The company has a net income less than dividends paid B. The company issues additional shares of stock during the period C. The revenues earned for the period are greater than the expenses incurred and dividends paid D. The company has a net income greater than dividends paid

A

perpetual inventory system

A detailed inventory system in which a company maintains the cost of each inventory item, and the records continuously show the inventory that should be on hand.

Trial Balance

A list of general ledger account titles and balances at a certain date - will not balance is journal entry is partially posted

correct date format for balance sheet

AT dec 31

periodic inventory system

An inventory system in which a company does not maintain detailed records of goods on hand throughout the period and determines the cost of goods sold only at the end of an accounting period.

A transaction caused a $55,000 increase in both assets and total liabilities. This transaction could have been: A. Purchase for office equipment for $55,000 cash. B. Purchase of office equipment for $120,000, paying $65,000 cash and issuing a note payable for the balance. C. Repayment of a $55,000 bank loan. D. Investment of $55,000 cash in the business by the owner

B

During the year 2011, Jillian Company's Total Assets increased $25,000, and Total liabilities decreased $15,000. During the same year, the company's investors invested an additional $30,000 and the company paid dividends of $5,000. What must have been Jillian Company's Net Income for 2011? A. $25,000 B. $15,000 C. $20,000 D. $10,000

B

Marilu Company began the year with stockholders' equity of $30,000. During the year, Marilu issued additional shares of stock in exchange for cash of $42,000, recorded expenses of $120,000, and paid dividends of $8,000. If Marilu's ending stockholders' equity was $92,000, what was the company's revenue for the year? A. $140,000. B. $148,000. C. $182,000. D. $190,000.

B

Reflect the balances of unearned revenue prior to adjustment?

Balance sheet accounts are overstated and income statement accounts are understated

All of the following are interrelationships that are important to understand when preparing financial statements except: A. The net income from the income statement is used in the retained earnings statement. B. The ending retained earnings from the Retained earnings statement is used in the stockholder's equity section of the balance sheet. C. The cash on the balance sheet should be equal to the cash at the end of the period on the statement of cash flows. D. All of the expenses on the income statement must match the cash payments for operating activities on the statement of cash flows.

D

If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the following describes the effect of the debit portion of the entry? A. increases the balance of an asset account B. decreases the balance of an stockholders' equity account C. increases the balance of a contra asset account D. increases the balance of an expense account

D

Which of the following organizational attributes do NOT apply to a corporation? A. Most complex to set up B. Transferability of ownership C. Unlimited Life D. Unlimited Liability

D

double-entry accounting

Every business transaction to be recorded in at least two accounts. The total debits recorded for each transaction to be equal to the total credits recorded.

RE equation

REb + NI -div = REe

Making insurance payments in advance is an example of: A. A deferred expense transaction. B. An accrued expense transaction. C. A deferred revenue transaction. D. An accrued revenue transaction.

a

Which of the following accounts follows the same debit and credit rules as unearned revenues? A. Common stock and Retained Earnings B. Supplies and Common Stock C. Notes Payable and Dividends D. Fees Earned and Cost of Goods Sold

a

"collect cash from credit customer"

accounts payable

"on account"

accounts payable

"pay @ at later date"

accounts payable

"billed earlier"

accounts receivable

"bills the balance"

accounts receivable

Accounts Receivable

asset

cash

asset

equipment

asset

inventory

asset

investment

asset

land

asset

supplies

asset

accrued revenue

asset - do a service but aren't paid yet

prepaid rent

asset - person hasn't lived there yet - each day lived turns into rent expense

prepaid expense

asset - rent, gym membership, gift card

Which is the correct sequence of the following steps in the accounting cycle? A. Prepare journal entries, analyze transactions, prepare adjusted trial balance. B. Post adjusting journal entries, prepare adjusted trial balance, prepare financial statements. C. Prepare adjusted trial balance, post adjusting entries, and prepare financial statements. D. Prepare adjusting entries, prepare financial statements, prepare adjusted trial balance.

b

Recording the payment of an account payable twice will result in the A. Overstatement of total assets and total liabilities B. Overstatement of total assets and understatement of total liabilities C. Understatement of total assets and total liabilities D. Understatement of total assets and overstatement of total liabilities

c

The ending balance of the retained earnings account appears in A. both the retained earnings statement and the income statement B. only the retained earnings statement C. both the retained earnings statement and the balance sheet D. both the retained earnings statement and the statement of cash flows

c

What is the primary limitation of the balance sheet? A. It does not reflect the net assets of a company. B. It does not reflect the number of shares issued. C. It does not reflect the current value of the company. D. It does not reflect the undistributed earnings of a company

c

income statement

describe a company's revenues and expenses results in net income/loss period statement (month/yr)

common/preferred stock

equity

dividends

equity

expenses

equity

fees earned

equity

paid in capitol

equity

retained earning

equity

revenue

equity

Under the accrual basis of accounting:

events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.

"bill"

expense

"salaries"

expense

correct date format for income statement/statement of stockholder's equity/statement of RE

for the year ended dec 31

Accounts Payable

liability

Notes Payable

liability

accrued expenses

liability - built up wages paid on friday but worked mon-fri, paid eventually

Unearned Revenue

liability - landlord given money 1st day of the month but hasn't earned it because tenant isn't living there yet - paid for service but haven't performed it

"borrowed"

notes payable

balance sheet

reports assets, liabilities, and owner's equity on a specific date (day)

"providing service"

revenue

Statment of stockholders equity

summary of changes in net income period statement (month/yr)