Financial accounting test 1 (chapter 1-4)
Obligations to suppliers of goods.
accounts payable
The entry to close the expense accounts includes a:
-debit to income summary -credit expenses
Events that require recording in the financial statements because they affect assets, liabilities, or stockholders' equity.
accounting transactions
The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)
accounts payable
Amounts due from customers.
accounts receivable
Liabilities
are debts and obligations.
The Accounts Receivable account has a beginning balance of $48900 and an ending balance of $69600. If total sales on account were $39500 for the year, what were the total collections on account?
begging balance+total sales - ending balance
The left side of an account.
debit
The process of allocating the cost of an asset to expense over its useful life.
depreciation
Issuing shares of stock in exchange for cash is an example of a(n)
financing activity
An accounting record in which transactions are initially recorded in chronological order.
journal
A post-closing trial balance will show:
only balance sheet accounts.
Net income for the year is:
rev-expenses
The increase in assets or decrease in liabilities resulting from the sale of goods or the performance of services in the normal course of business
revenue
At December 1, 2022, Sheridan Company Accounts Receivable balance was $14110. During December, Sheridan had credit sales of $37800 and collected accounts receivable of $30240. At December 31, 2022, the Accounts Receivable balance is
$14110 + $37800 - $30240 = $21670 debit (Beg. Acc. Rec. + sales - collect.)
In the first month of operations, the total of the debit entries to the Cash account amounted to $8400 and the total of the credit entries to the Cash account amounted to $4800. At the end of the month, the Cash account has a
$8400 dr. - $4800 cr. = $3600 debit
What amount did Marigold Corp.'s trial balance show as total credits?
(Acc. Pay. + Not. Pay. + Com. St. + Rev.)
Based on the following data, what is the amount of current assets?
(Acc. rec.+ Cash + Inventory. +Short term inv + Prepaid ins.)
At January 1, 2022, Concord Corporation reported Retained Earnings of $280000. During 2022, Concord had a net loss of $60000 and paid dividends to the stockholders of $40000. At December 31, 2022, the balance in Retained Earnings is
(Beg. Ret. Earn. - Net loss - div.)
An individual who has met certain criteria and is thus allowed to perform audits of corporations.
(CPA) certified public accountant
Windsor's assets on December 31, 2022 are:
(Equipment + Cash + Supplies + Accounts receivable)
Wildhorse Tables paid employee wages on and through Friday, January 26, and the next payroll will be paid in February. There are three more working days in January (29-31). Employees work 5 days a week and the company pays $910 a day in wages. What will be the adjusting entry to accrue wages expense at the end of January?
-910x3=2730 -debit salaries and wage expense -credit wages payable
If total liabilities increased by $94000 and stockholders' equity increased by $50000 during a period of time, then total assets must change by what amount and direction during that same period?
-add them up -144000 increase
Windsor, Inc. started the year with total assets of $324000 and total liabilities of $264000. During the year the business recorded $634000 in revenues, $330000 in expenses, and dividends of $62000. Stockholders' equity at the end of the year was
-assets-liabilities to get S.E -rev-exp-dividends= new R.E -add S.E to new R.E
If, on December 31, 2022, supplies on hand were $38, the adjusting entry would contain a:
-original supplies-supplies left -debit to Supplies Expense for $131.
On January 1, 2021, Sheffield Corp. purchased equipment for $26500. The company is depreciating the equipment at the rate of $1060 per month. At January 31, 2022, the balance in Accumulated Depreciation is:
1060x13
On January 1, 2022, Novak Corp. purchased equipment for $65880. The company is depreciating the equipment at the rate of $920 per month. The book value of the equipment at December 31, 2022 is:
65880- 920x3
What journal entry is recorded as a result of issuing stock to investors for cash?
A debit to Cash and a credit to Common Stock
Which one of the following is not a justification for adjusting entries?
Adjusting entries are necessary to bring the general ledger accounts in line with the budget.
Which of the statements below is not true?
An adjusted trial balance is prepared before all transactions have been journalized.
Which of the following is the correct sequence of events?
Analyze a transaction; record it in the journal; post it to the ledger
Which of the following is not a satisfactory statement of the accounting equation?
Assets = Stockholders' Equity - Liabilities
Which accounts normally have debit balances?
Assets, dividends, and expenses
An accountant has debited an asset account for $980 and credited a liability account for $490. What can be done to complete the recording of the transaction?
Credit a different asset account for $490.
Mary Richardo has performed $410 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Mary make?
Debit Accounts Receivable and credit Service Revenue
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?
Dividends represent a portion of corporate profits paid to the shareholders. They belong on the retained earnings statement.
Why should the income statement be prepared first?
Net income from the income statement flows into the retained earnings statement. The ending retained earnings balance then flows into the balance sheet.
A business owned by one person.
Proprietorship
Ending retained earnings for a period is equal to beginning
Retained earnings + Net income - Dividends.
Net income results when
Revenues > Expenses.
Blossom Company began the year with retained earnings of $390000. During the year, the company recorded revenues of $489000, expenses of $379000, and paid dividends of $44500. What was Blossom's retained earnings balance at the end of the year?
Revenues-expenses=net income net income+original dividends
A journal provides
a chronological record of transactions
On July 7, 2022, Skysong, Inc. received cash $1150 for services rendered. The entry to record this transaction will include
a debit to Cash of $1150.
An individual accounting record of increases and decreases in specific asset, liability, stockholders' equity, revenue, or expense items.
account
A list of accounts and their balances after all adjustments have been made.
adjusted trial balance
Entries made at the end of an accounting period to ensure that the revenue recognition and expense recognition principles are followed.
adjusting entries
The cost of assets consumed or services used is also known as
an expense
An investment by the stockholders in a business increases
assets and stockholders' equity.
If total liabilities increase by $5,000 then
assets increase by $5,000, or stockholders' equity decrease by $5,000.
A balance sheet shows
assets, liabilities, and stockholders' equity
An expression about whether financial statements conform with generally accepted accounting principles
auditors opinion
Which of the following financial statements is concerned with the company at a point in time?
balance sheet
Genesis Company buys equipment for $900 on credit. This transaction will immediately affect the
balance sheet only.
Assets = Liabilities + Stockholders' Equity.
basic accounting equation
The difference between the cost of a depreciable asset and its related accumulated depreciation.
book value
All of the following statements regarding the double-entry system are true except
both sides of the accounting equation must be affected when recording a transaction using the double-entry system.
A list of the names of a company's accounts.
chart of accounts
Entries at the end of an accounting period to transfer the balances of temporary accounts to a permanent stockholders' equity account, Retained Earnings.
closing entries
The portion of stockholders' equity that results from receiving cash from investors.
common stock
Stockholders' equity is comprised of
common stock and retained earnings.
An account that is offset against an asset account on the balance sheet.
contra asset account
Accumulated Depreciation is a(n):
contra asset account.
A business that raises money by issuing shares of stock.
corporation
The right side of an account.
credit
A party to whom a business owes money.
creditor
The balance in the prepaid rent account before adjustment at the end of the year is $9360 and represents three months rent paid on December 1. The adjusting entry required on December 31 is:
debit Rent Expense, $3120; credit Prepaid Rent, $3120.
If a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be:
debit Unearned Service Revenue and credit Service Revenue.
When a company receives a utility bill but will not pay it right away, it should
debit Utilities Expense and credit Accounts Payable.
If as of December 31, 2022, rent of $153 for December had not been recorded or paid, the adjusting entry would include a:
debit to Rent Expense for $153
Payments of cash from a corporation to its stockholders.
dividends
Which of the following is NOT considered an asset?
dividends
The planned timing of revenues, expenses, gains, and losses to smooth out bumps in net income.
earnings management
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.
The cost of assets consumed or services used in the process of generating revenues.
expenses
To show how successfully your business performed during a period of time, you would report its revenues and expenses in the
income statement
A temporary account used in closing revenue and expense accounts
income summary
Debits
increase assets and decrease liabilities.
Which of the following is not one of the three forms of business organization?
investors
The purpose of the ledger is to
keep in one place all information about changes in specific account balances.
A record of all accounts maintained by a company and their amounts.
ledger
Amounts owed to creditors in the form of debts and other obligations.
liabilities
If cash is received in advance from a customer
liabilities will increase.
The Unearned Service Revenue account is classified as a(n)
liability
Unearned revenue is classified as a(n):
liability.
Which of the following would not be considered an external user of accounting data for the Julian Company?
management
A section of the annual report that presents management's views on the company's ability to pay near-term obligations, its ability to fund operations and expansion, and its results of operations.
management discussion and analysis
The amount by which expenses exceed revenues.
net loss
Which activities involve putting the resources of the business into action to generate a profit?
operating
Prepaid expenses are:
paid and recorded in an asset account before they are used or consumed.
A business that is owned jointly by two or more individuals but does not issue stock.
partnership
Balance sheet accounts whose balances are carried forward to the next accounting period.
permanent accounts
The procedure of transferring journal entry amounts to the ledger accounts.
posting
Expenses paid in cash before they are used or consumed.
pre-paid expense
An income statement
presents the revenues and expenses for a specific period of time.
tamarisk, Inc. began the year with retained earnings of $115000. During 2022, the company issued $78500 of common stock for cash. The company recorded revenues of $783000, expenses of $648000, and paid dividends of $39000. What was Tamarisk's net income for the year 2022?
revenues-expenses
After closing entries have been posted, the balance in retained earnings will be:
revenues-expenses+ original R.E
Regulations passed by Congress to reduce unethical corporate behavior.
sarbanes-oxley act
A party that invests in common stock.
stock holder
The owners' claim to assets.
stock holders equity
Revenue, expense, and dividend accounts whose balances a company transfers to Retained Earnings at the end of an accounting period.
temporary accounts
If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates
the mathematical equality of the accounting equation.
the retained earnings account increases from the beginning of the year to the end of the year, then
then net income is greater than dividends
Based on the account balances below, what is the total of the debit and credit columns of the adjusted trial balance?
total debits are cash, expenses, equipment, prepaids
A list of accounts and their balances at a given time.
trial balance