BUA 201 Exam 1 Review - Akono

What was Jackson's net cash provided by operating activities? a. $95,000 b. $35,000 c. $110,000 d. $89,000

b. $35,000

91. At December 31, 2014, before any year-end adjustments, Dallis Company's Prepaid Insurance account had a balance of $2,900. It was determined that $1,300 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be: a. $1,300. b. $1,600. c. $2,900. d. $1,400.

a. $1,300

77. On January 14, Decker industries purchased supplies of $500 on account. The entry to record the purchase will include a. a debit to Supplies and a credit to Accounts Payable. b. a debit to Supplies Expense and a credit to Accounts Receivable. c. a debit to Supplies and a credit to Cash. d. a debit to Accounts Receivable and a credit to Supplies.

a. A debit to Supplies and a credit to Accounts Payable.

43. Which of the following is not generally an accounting time period? a. A week. b. A month. c. A quarter. d. A year.

a. A week

45. Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September I and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was recognized? a. August 31 b. August 1 c. September 5 d. September 6

a. August 31

48. A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in: a. January. b. February. c. the period when the workers receive their checks. d. either January or February depending on when the pay period ends.

a. January

58. Which account will have a zero balance after closing entries have been journalized and posted? a. Service revenue. b. Supplies. c. Prepaid Insurance. d. Accumulated Depreciation.

a. Service Revenue

15. Which of the following is the most appropriate and modern definition of accounting? a. The information system that identifies, records, and communicates the economic events of an organization to interested users. b. A means of collecting information. c. The interconnected network of subsystems necessary to operate a business. d. Electronic collection, organization, and communication of vast amounts of information.

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

12. When expenses exceed revenues, which of the following is true? a. a net loss results b. a net income results c. assets equal liabilities d. assets are increased

a. a net loss results

4. The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n) a. account payable. b. account receivable. c. revenue. d. expense.

a. account payable

80. Powers Corporation received a cash advance of $500 from a customer. As a result of this event, a. assets increased by $500. b. equity increased by $500. c. liabilities decreased by $500. d. Both assets and equity increased by $500.

a. assets increased by $500.

13. Which of the following financial statements is concerned with the company at a point in time? a. Balance sheet b. Income statement c. Retained earnings statement d. Statement of cash flows

a. balance sheet

51. Adjusting entries are required: a. because some costs expire with the passage of time and have not yet been journalized. b. when the company's profits are below the budget. c. when expenses are recorded in the period in which they are earned. d. None of these answer choices are correct.

a. because some costs expire with the passage of time and have not yet been journalized

74. Equipment costing $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a a. credit to Notes Payable. b. debit to Cash. c. credit to Notes Receivable. d. credit to Equipment.

a. credit to Notes Payable

90. Leyland Realty Company received a check for $15,000 on July l, which represents a 6month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $15,000. Financial statements will be prepared on July 31. Leyland Realty should make the following adjusting entry on July 3 1 : a. debit Unearned Rent Revenue, $2,500; credit Rent Revenue, $2,500. b. debit Rent Revenue, $2,500; credit Unearned Rent Revenue, $2,500. c. debit Unearned Rent Revenue, $15,000; credit Rent Revenue, $15,000. d. debit Cash, $15,000; credit Rent Revenue, $15,000.

a. debit Unearned Rent Revenue $2500 ; credit Rent Revenue, $2,500.

3 1 . A company that receives money in advance of performing a service a. debits Cash and credits Unearned Service Revenue. b. debits Unearned Service Revenue and credits Accounts Payable c. debits Cash and credits Prepaid Insurance. d. debits Cash and credits Accounts Receivable.

a. debits Cash and credits Unearned Service Revenue

30. A paid dividend a. decreases assets and stockholders' equity. b. increases assets and stockholders' equity. c. increases assets and decreases stockholders' equity. d. decreases assets and increases stockholders' equity.

a. decreases assets and stockholders' equity

79. Collection of a $600 Accounts Receivable a. increase an asset $600; decreases an asset $600. b. increases an asset $600; decreases a liability $600. c. decreases a liability $600; increases stockholders' equity $600. d. decreases an asset $600; decreases liability $600.

a. increases an asset $600; decreases an asset $600.

34. A credit to a liability account a. indicates an increase in the amount owed to creditors. b. indicates a decrease in the amount owed to creditors. c. is an error. d. must be accompanied by a debit to an asset account.

a. indicates an increase in the amount owed to creditors

2. Which of the following groups uses accounting information to determine whether the company's net income will result in a stock price increase? a. Investors in common stock b. Marketing managers c. Creditors d. Chief Financial Officer

a. investors in common stock

8. Buying and selling products are examples of a. operating activities. b. investing activities. c. financing activities. d. delivering activities.

a. operating activities

84. Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n) a. purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance. b. investment of $5,000 cash in the business by the stockholders. c. purchase of office equipment for $5,000 cash. d. repayment of a $5,000 bank loan.

a. purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance.

Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? a. reduced legal liability for investors b. harder to transfer ownership c. lower taxes d. most common form of organization

a. reduced legal liability for investors

41. A trial balance proves a. the mathematical equality of debits and credits after the posting process. b, the ledger is posted correctly. c. that all transactions have been recorded correctly. d. that all transactions have been posted

a. the mathematical equality of debits and credits after the posting process.

35. When collection is made on Accounts Receivable, a. total assets will remain the same. b. stockholders equity will increase. c. total assets will increase. d. total assets will decrease.

a. total assets will remain the same

49. Using accrual accounting, expenses are recorded and reported only: a. when they are incurred whether or not cash is paid. b. when they are incurred and paid at the same time. c. if they are paid before they are incurred. d. if they are paid after they are incurred.

a. when they are incurred whether or not cash is paid

62. If total liabilities increased by $75,000 and stockholders' equity increased by $25,000 during a period of time, then total assets must change by what amount and direction during that same period? a. $100,000 decrease b. $100,000 increase c. $125,000 increase d. $150,000 increase

b. $100,000 increase

64. 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? a. $2,440,000 b. $2,600,000 c. $3,280,000 d. $33,440,000

b. $2,600,000

66. Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was a. $360,000. b. $300,000. c. $240,000. d. $270,000.

b. $300,000

70. Jackson Company recorded the following cash transactions for the year: Paid $135,000 for salaries. Paid $60,000 to purchase office equipment. Paid $15,000 for utilities. Paid $6,000 in dividends. Collected $245,000 from customers. What was Jackson's net cash provided by operating activities? a. $95,000 b. $35,000 c. $110,000 d. $89,000

b. $35,000

63. Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year? a. $490,000 b. $410,000 c. $790,000 d. $450,000

b. $410,000

65. If total liabilities decreased by $90,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period? a. $120,000 increase b. $60,000 decrease c. $60,000 increase d. $90,000 decrease

b. $60,000 decrease

78. At December 1, 2014, Orear Company's Accounts Receivable balance was $5,600. During December, Orear had credit sales of $15,000 and collected accounts receivable of $12,000. At December 3 1, 2014, the Accounts Receivable balance is a. $5,600 debit b. $8,600 debit c. $20,600 debit d. $8,600 credit

b. $8,600 debit

21 . Which of the following statements is true? a. Amounts received from issuing stock are revenues. Amounts paid out as dividends are not expenses. c. Amounts paid out as dividends are reported on the income statement. d. Amounts received from issued stock are reported on the income statement.

b. Amounts paid out as dividends are not expenses.

36. On March l, 2017, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not? a. Yes, the company is now obligated to pay the employee, thus that event must be recorded. b.' No, hiring an employee is an important event; however it is not an economic event that should be recorded. c. Yes, failure to record the event would cause the financial statements to be misleading. d. No, the financial position of the company has been changed, however, the dollar amount of the transaction is not yet known.

b. No, hiring an employee is an important event; however it is not an economic event that should be recorded.

3. The right to receive money in the future is called a(n) a. account payable. ' b., account receivable. c. liability. d. revenue.

b. account recievable

53. Adjusting entries can be classified as: a. postponements and advances. b. accruals and deferrals. c. deferrals and postponements. d. accruals and advances.

b. accruals and deferrals

7. The cost of assets consumed or services used is also known as a. a revenue. b. an expense. c. a liability. d. an asset.

b. an expense

37. The usual sequence of steps in the transaction recording process is a. journalize, analyze, post to the ledger. b. analyze, journalize, post to the ledger. c. journalize, post to the ledger, analyze. d. post to the ledger, journalize, analyze.

b. analyze, journalize, post to the ledger

23. The management discussion and analysis (MD&A) section of the annual report covers all of the following aspects except the a. ability of the company to pay near-term obligations. b. certification criteria of the company's auditors. c. company's ability to fund operations and expansion. d. results of the company operations.

b. certification criteria of the company's auditors.

89. The Harris Company purchased equipment for $9,000 on December 1. It is estimated that annual depreciation on the computer will be $1,800. If financial statements are to be prepared on December 3 1, the company should make the following adjusting entry: a. debit Depreciation Expense, $1,800; credit Accumulated Depreciation, $1,800. b. debit Depreciation Expense, $150; credit Accumulated Depreciation, $150. c. debit Depreciation Expense, $7,200; credit Accumulated Depreciation, $7,200. d. debit Equipment, $9,000; credit Accumulated Depreciation, $9,000.

b. debit Depreciation Expense, $150; credit Accumulated Depreciation, $150.

33. Assets normally show a. credit balances. b. debit balances. c. debit and credit balances. d. debit or credit balances.

b. debit balances

32. When a company performs a service but has not yet received payment, it a. debits Service Revenue and credits Accounts Receivable. b. debits Accounts Receivable and credits Service Revenue. c. debits Service Revenue and credits Accounts Payable. d. makes no entry until cash is received.

b. debits Accounts Receivable and credits Service Revenue

46. The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that: a. assets should be matched with liabilities. b. efforts should be matched with accomplishments. c. dividends should be matched with stockholder investments. d. cash payments should be matched with cash receipts.

b. efforts should be matched with accomplishments

5. Borrowing money is an example of a(n) a. delivering activity. b. financing activity. c. investing activity. d. operating activity.

b. financing activity

24. Management's views on the company's short-term debt paying ability, expansion financing, and results of operations are found in the a. auditor's report. b. management discussion and analysis section. c. notes to the financial statements. d. president's state of the company report.

b. management discussion and analysis section.

55. An adjusted trial balance: a. is prepared after the financial statements are completed. b. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. c. is a required financial statement under generally accepted accounting principles. d. cannot be used to prepare financial statements.

b. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made

44. The revenue recognition principle dictates that revenue should be recognized in the accounting records: a. when cash is received. b. when the performance obligation is satisfied. c. at the end of the month. d. in the period that income taxes are paid.

b. when the performance obligation is satisfied

69. If total liabilities decreased by $105,000 and stockholders' equity decreased by $35,000 during a period of time, then total assets must change by what amount and direction during that same period? a. $140,000 increase b. $70,000 decrease c. $140,000 decrease d. $70,000 decrease

c. $140,000

73. At October 1, 2014, Metz Industries had an Accounts Payable balance of $70,000. During the month, the company made purchases on account of $50,000 and made payments on account of $80,000. At October 31, 2014, the Accounts Payable balance is a. $70,000 debit b. $10,000 credit c. $40,000 credit d. $80,000 credit

c. $40,000 credit

72. On June 1, 2014, England Inc. reported a cash balance of $21,000. During June, England made deposits of $8,000 and made disbursements totaling $24,000. What is the cash balance at the end of June? a. $5,000 credit balance b. $29,000 debit balance c. $5,000 debit balance d. $3,000 credit balance

c. $5,000 debit balance

68. Elston Company compiled the following financial information a of December 31, 2014: Service Revenue $700,000 Common Stock 150,000 Equipment 200,000 Operating Expenses 625,000 Cash 175,000 Dividends 50,000 Supplies 25,000 Accounts Payable 100,000 Accounts Receivable 75,000 Retained Earnings, 1/1/14 375,000 Elston's stockholders' equity on December 31, 2014 is a. $600,000 b. $400,000 c. $550,000 d. $525,000

c. $550,000

83. An accountant has debited an asset account for $900 and credited a liability account for $600. What can be done to complete the recording of the transaction? a. Debit a stockholders' equity account for $300. b. Debit another asset account for $300.CSO c. Credit a different asset account for $300. d. Nothing further must be done.

c. Credit a different asset account for $300.

22. In a study session, a classmate makes this statement "Dividends are listed as expenses on the income statement." What is your best response to this statement? a. I've been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets. b. You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends? c. Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement. d. Dividends are deducted from retained earnings on the balance sheet.

c. Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement.

25. Which of the following clarifies information presented in the financial statements, as well as expanding upon it where additional detail is needed? a. Auditor's report b. Management discussion and analysis section c. Notes to the financial statements d. President's state of the company report

c. Notes to the financial statements

47. A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized? a. December 5 b. December 10 c. November 30 d. December I

c. November 30

38. Which of the following accounts has a normal credit balance? a. Prepaid Rent b. Notes Receivable c. Rent Revenue d. Rent Expense

c. Rent Revenue

56. Which of the following is a true statement about closing the books of a corporation? a. Expenses are closed to the Expense Summary account. b. Only revenues are closed to the Income Summary account. c. Revenues and expenses are closed to the Income Summary account. d. Revenues, expenses, and the Dividends account are closed to the Income Summary account.

c. Revenues and expenses are closed to the Income Summary account.

19. External users want answers to all of the following questions except a. Is the company earning satisfactory income? b. Will the company be able to pay its debts as they come due? c.Will the company be able to afford employee pay raises this year? d. How does the company compare in profitability with competitors'?

c. Will the company be able to afford employee pay raises this year?

52. An adjusting entry: a. affects two balance sheet accounts. b. affects two income statement accounts. c. affects a balance sheet account and an income statement account. d. is always a compound entry.

c. affects a balance sheet account and an income statement account

82. If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck, a. assets will be increased by $10,000. b. equity will be reduced by $40,000. c. assets will be increased by $40,000. d. i assets will be unchanged

c. assets will be increased by $40,000

40. Customarily, a trial balance is prepared a. at the end of each day. b. after each journal entry is posted. c. at the end of an accounting period. d. only at the inception of the business.

c. at the end of an accounting period

18. Which of the following external groups uses accounting information to determine whether the company can pay its obligations? a. Investors in common stock b. Marketing managers c. Creditors d. Chief Financial Officer

c. creditors

88. On July 1 the Fisher Shoe Store paid $18,000 to Acme Realty for .6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 3 1, the adjusting entry to be made by the Fisher Shoe Store is: a. debit Rent Expense, $18,000; credit Prepaid Rent, $3,000. (60- b. debit Prepaid Rent, $3,000; credit Rent Expense, $3,000. c. debit Rent Expense, $3,000; credit Prepaid Rent, $3,000. d. debit Rent Expense, $18,000; credit Prepaid Rent, $15,000.

c. debit Rent Expense, $3,000 ; credit Prepaid Rent, $3,000.

6. Issuing shares of stock in exchange for cash is an example of a(n) a. delivering activity. b. investing activity. c.financing activity. d. operating activity.

c. financing activity

39. A trial balance is a listing of a. transactions in a journal. b. the chart of accounts. c. general ledger accounts and balances, d. the totals from the journal pages.

c. general ledger accounts and balances

1 1 . Debts and obligations of a business are referred to as a. assets. b. equities. ( c liabilities. d. expenses.

c. liabilities

26. If services are rendered on account, then a. assets will decrease. b. liabilities will increase. c. stockholders' equity will increase. d. liabilities will decrease.

c. stockholder's equity will increase

85. At February l, 2017, the balance in Goebel Inc.'s supplies account was $3,500. During February. Goebel purchased supplies of $3,000 and used supplies of $4,000. At the end of February, the balance in the Supplies account should be a. $3,500 debit. b. $4,500 credit. c. $10,500 debit. d. $2,500 debit

d. $2,500 debit.

67. Elston Company compiled the following financial information as of December 31, 2014: Service Revenue $700,000 Common Stock 150,000 Equipment 200,000 Operating Expenses 625,000 Cash 175,000 Dividends 50,000 Supplies 25,000 Accounts Payable 100,000 Accounts Receivable 75,000 Retained Earnings 1/1/14 375,000 Elstons assets on December 31, 2014 are a. $1,175,000 b. $850,000 c. $400,000 d. $475,000

d. $475,000

50. Adjusting entries are made to ensure that: a. expense are recognized in the period in which they are incurred. b. revenues are recorded in the period in which the performance obligation is satisfied. c. balance sheet and income statement accounts have correct balances at the end of an accounting period. d All of these answer choices are correct.

d. All of these answer choices are correct.

81. Comstock company provided consulting services and billed the client $2,500. As a result of this event a. assets remained unchanged. b. assets increased by $2,500. c. equity increased by $2,500. d. Both assets and equity increased by $2,500.

d. Both assets and equity increased by $2,500.

16. Which of the following is the best definition of an internal user of accounting information? a. Investors who use accounting information to decide whether to buy or sell stock. b. Creditors like banks that use accounting information to evaluate the risk of lending money. c. Labor unions who use accounting information to examine the ability of the company to pay increased wages and benefits. d. Managers who use accounting information to plan, organize, and run a business.

d. Managers who use accounting information to plan, organize, and run a business

17. Which of the following would not be considered an internal user of accounting data for the Xanadu Company? a. President of the company b. Production manager c. Merchandise inventory clerk d. President of the employees' labor union

d. President of the employees' labor union

59. Which of the following account's balance will change between the adjusted trial balance and the post-closing trial balance? a. Common stock b. Prepaid rent c. Unearned service revenue d. Retained earnings

d. Retained Earnings

61. The primary source used in the preparation of the financial statements is the: a. trial balance. b. post-closing trial balance. c. general trial balance. d. adjusted trial balance.

d. adjusted trial balance

57. The closing entry process consists of closing: a. all asset and liability accounts. b. out the Retained Earnings account. c. all permanent accounts. d. all temporary accounts.

d. all temporary accounts

27. If expenses are paid in cash, then a. assets will increase. b. liabilities will decrease. c. stockholders' equity will increase. d. assets will decrease.

d. assets will decrease

54. Accumulated Depreciation is a(n): a. expense account. b. stockholders' equity account. c. liability account. d. contra asset account.

d. contra asset account

87. The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $1,000 on hand. The adjusting entry that should be made by the company on June 30 is: a. debit Supplies Expense, $1,000; credit Supplies, $1,000. b. debit Supplies, $5,500; credit Supplies Expense, $5,500. c. debit Supplies, $1,000; credit Supplies Expense, $1,000. d. debit Supplies Expense, $5,500; credit Supplies, $5,500.

d. debit Supplies Expense, $5,000; credit Supplies $5,5,00.

29. The payment of a liability a. decreases assets and stockholders' equity. b. increases assets and decreases liabilities. c. decreases assets and increases liabilities. d. decreases assets and liabilities

d. decreases assets and liabilities

9 The common characteristic possessed by all assets is a. long life. b. great monetary value. c. tangible nature. d. future economic benefit.

d. future economic benefit

10. The statement of cash flows would disclose the payment of a dividend a. nowhere on the statement. b. in the operating activities section. c. in the investing activities section. d.) in the financing activities section.

d. in the financing activities section

28. The purchase of an asset for cash a. increases assets and stockholders' equity. b. increases assets and liabilities. c. decreases assets and increases liabilities. d. leaves total assets unchanged.

d. leaves total assets unchanged

60. All of the following are required steps in the accounting cycle except' a. journalizing and posting closing entries. b. preparing an adjusted trial balance. c. preparing a post-closing trial balance. d. preparing a work sheet.

d. preparing a work sheet.

14. An annual report includes all of the following except a. management discussion and analysis section. b. notes to the financial statements. c. an auditor's report. salary information for all the executives.

d. salary information for all the executives

42. The periodicity assumption states that: a. a transaction can only affect one period of time. b. estimates should not be made if a transaction affects more than one time period. c. adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. d. the economic life of a business can be divided into artificial time periods.

d. the economic life of a business can be divided into artificial time periods

20. Expenses are incurred a. only on rare occasions. b. to produce assets. c. to produce liabilities. d. to generate revenues.

d. to generate revenues