ACC 210 CH 1-3

On October 30, Wolfpack paid stockholders a $1,000 dividend.

Dividends - debit 1000 Cash - credit 1000

A closing journal entry should be prepared at what point in the accounting cycle? Select one: a. Immediately after preparation of the financial statements. b. Immediately after preparing the Post-Closing trial balance. c. Immediately before preparing the Adjusted trial balance. d. Immediately after posting the adjusting journal entries to the General Ledger. e. Closing journal entries are optional. They need not be made as part of completing the accounting cycle.

Immediately after preparation of the financial statements. --- Closing entries are prepared after the financial statements and are designed to prepare the books for the next accounting period (and to update the Retained Earnings balance in the General ledger to its correct end-of-period balance).

In accounting courses (ex. Acc 210), T-accounts are often used to represent a more simplified version of the: Select one: a. income statement. b. general ledger. c. trial balance. d. general journal. e. balance sheet.

general ledger

D. Paid $400 for utility costs.

Assets: decrease Cash Liabilities: no effect Stockholders' Equity: decrease (utility expense is going up which causes RE to go down)

When preparing financial statements, what is the correct order they should be prepared in?

Income Statement → Prepared first. Statement of Stockholders' Equity (or Statement of Retained Earnings)→ Prepared second. Balance sheet → Prepared third.

Which one of the following financial statements is prepared as of a particular date as opposed to providing information covering a specific time period (e.g., one month)? Select one: a. Statement of Cash Flows b. Statement of Stockholders' Equity c. Income Statement d. Balance Sheet

Balance Sheet --- The balance sheet provides information about the financial position of a company as of a particular date (for example, December 31). The other financial statements provide information about a particular time period (for example, the month of December)

On October 1, Wolfpack issued shares of common stock to investors in exchange for $45,000 in cash.

Cash - debit 45000 Common Stock - credit 45000

A revenue account has a normal __________ balance. Select one: a. Negative. b. Revenue accounts may have normal debit or credit balances. c. Credit. d. Debit. e. Work-life

Credit --- Revenue accounts have a normal credit balance. They are increased by credits and decreased by debits.

Information is said to possess the enhancing qualitative characteristic of ______ when different measurers can reach a consensus on the measurement of the activity. Select one: a. understandability b. timeliness c. comparability d. consistency e. verifiability

verifiability

Below is one of the t-accounts ABC Inc. has. Accounts Receivable 2500 | 300 | | 700 | 50 925 | Question: What is the account's balance?

It has a debit account balance of $ 2975 --- FEEDBACK: Add up all the debits and credits. Subtract the smaller side from the larger side. The balance should be on the larger side.

An amount is considered to be material if its omission from or misstatement in a company's financial statements could influence a user's decision about the company. Select one: True False

True

The overriding objective of financial reporting is to provide information that is: Select one: a. Timely. b. Verifiable. c. Reliable. d. Useful in decision-making. e. Relevant.

Useful in decision-making. --- The most important objective in financial reproting is to provide information useful for making investing and lending decisions.

When we record a journal entry in the General Journal Select one: a. We should first record the account whose balance we are increasing followed by the account whose balance we are decreasing. b. We typically would exclude the date on which the transaction occurred. c. We should first record the account that we are debiting followed by the account that we are crediting d. We should first record the account whose balance we are decreasing followed by the account whose balance we are increasing.

We should first record the account that we are debiting followed by the account that we are crediting --- Each journal entry should include a date, an entry first to the account debited, followed by an entry into the account that is credited.

Click here to open up a partial set of financial statements as a downloadable file. Solve for the missing amounts and come back to this page to answer the following questions: A. From the balance sheet, what is the cash account balance at Aug 31? Answer: $ B. From the Balance Sheet, what is the Retained Earnings balance? (Hint: this answer should also match the Retained Earnings at Aug 31 from the Statement of Stockholders' Equity) Answer: $Answer C. From the Statement of Stockholders' Equity, how much in dividends were paid for the month of August? Answer: $Answer D. From the Income Statement, how much service revenue was earned for the month of August? Answer: $Answer

A. 13000 B. 180000 C. 3000 D. 230000

On October 15, Wolfpack paid $400 for the supplies previously purchased on account on October 5th.

Accounts Payable - debit 400 Cash - credit 400

Beginning with step #1, identify below the first six steps in the accounting cycle.

Assess whether the transaction results in a debit or a credit to account balances. → 3 Post the transaction to the general ledger. → 5 Use source documents to identify which accounts are affected by a transaction. → 1 Record the transaction in the general journal using debits and credits. → 4 Prepare a trial balance. → 6 Analyze the impact of the transaction on the accounting equation. → 2

H. Paid cash dividends of $1,000 to stockholders.

Assets: decrease Cash Liabilities: no effect Stockholders' Equity: decrease (Dividends are going up which causes RE to go down)

Below are various transactions that a local corporation had occur during the month. For each transaction, indicate the transaction's effect on the company's accounting equation by selecting either increase, decrease, or no effect under each area of the accounting equation. Do not leave any of the fields below blank. (Note: If the transaction were to cause an increase and decrease to the same area of the accounting equation, "no effect" should be chosen as the overall effect to that area) A. Received $50,000 in cash from the sale of its common stock to stockholders. B. Borrowed $20,000 from the local bank by signing a note promising to pay back the $20,000 loan plus interest in two years. C. Provided services to customers for $5,000 on account. D. Paid $400 for utility costs. E. Received $5,000 from the customers in "C" above. F. Received $3,000 from customers for services to be performed in the future. G. Purchased supplies costing $500 on account. H. Paid cash dividends of $1,000 to stockholders.

FEEDBACK:

Which one of the following components is not an aspect of the fundamental characteristic of relevance? Select one: a. Materiality b. Confirmatory value c. Predictive value d. Freedom from error

Freedom from error --- Confirmatory value, predictive value and materiality are the three components of relevance. Freedom from error is a component of the other fundamental characteristic--faithful representation.

On October 31, Wolfpack purchased a six-month insurance policy costing $600. The policy period will begin in November.

Prepaid Insurance - debit 600 Cash - credit 600

Which of the following types of accounts should find its account balance reported on a company's income statement? (check all that apply) Select one or more: a. Liability accounts b. Stock accounts (ex. Common Stock) c. Asset accounts d. Revenue accounts e. Expense accounts f. Dividend account

Revenue accounts; Expense accounts --- FEEDBACK: Revenues and expenses are found on the income statement. Assets, liabilities, and owner's equity accounts are found on the balance sheet. Dividends declared is found on the statement of retained earnings.

Which of the following is not one of the three types of activities we identify as a business activity? Select one: a. Financing Activities b. Sales Activities c. Investing Activities d. Operating Activities

Sales Activities --- The three types of business activities are operating, investing and financing activities

True or False: When preparing a journal entry for a transaction that affects retained earnings, the "Retained Earnings" account should not be debited or credited. Instead, the account which ultimately affects retained earnings should be debited or credited. Select one: True False

True

True or False: Revenues are the amounts recognized from the sale of products or services to customers. Select one: True False

True

TH Corp. borrowed $60,000 from NoleBank on June 1, 2021. The loan must be repaid in nine months (from June 1). The interest rate is 9%. If TH only prepares adjusting journal entries on December 31 each year, how much Interest Expense will they record on December 31, 2021? Select one: a. $3,150 b. $-0- c. $3,600 d. $2,700 e. $4,200

$3,150 --- Interest Expense = $60,000 x .09 x 7/12 = $3,150. June 1 - December 31 is seven months. Also recall that interest rates are expressed as annual rates.

Which of the following statements best describes what "accounting" is? Select one: a. Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers. b. Accounting is a math course.

Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers.

Indicate the location on the balance sheet of each of the following accounts and their respective balances:

Accounts Payable → liability section Land → asset section Cash → asset section Notes Payable → liability section Common Stock → owners' equity section Accounts Receivable → asset section Retained Earnings → owners' equity section Supplies → asset section

Below are two T-accounts into which a single transaction was just posted. Question: Based on these T-accounts, what journal entry must have been recorded? Accounts Receivable 9000 Service Revenue 9000 Select one: a. Both accounts were credited. b. Both accounts were debited. c. Accounts Receivable was credited and Service Revenue was debited. d. Accounts Receivable was debited and Service Revenue was credited.

Accounts Receivable was debited and Service Revenue was credited

Indicate whether each of the following accounts has its balance increased with a debit or a credit.

Accounts Receivable → debit Notes Payable → credit Service Revenue → credit Supplies Expense → debit Prepaid Insurance → debit Dividends → debit Land → debit Deferred Revenue → credit Common Stock → credit Cash → debit

F. Received $3,000 from customers for services to be performed in the future.

Assets: increase Cash Liabilities: increase Unearned Revenue (a liability account) Stockholders' Equity: no effect

G. Purchased supplies costing $500 on account.

Assets: increase Supplies Liabilities: increase Accounts Payable Stockholders' Equity: no effect

On October 25, Wolfpack collected $2,000 cash from the customer from the above October 18th transaction.

Cash - debit 2000 Accounts Receivable - credit 2000

On October 4, Wolfpack borrowed $6,000 from First City Bank by signing a one-year, 10% note.

Cash - debit 6000 Note Payable - credit 6000

How is the Chart of Accounts organized? Select one: a. In the same manner as the General Ledger. b. There is no particular format for the Chart of Accounts. c. In the order in which accounts are first utilized by the company. d. It is a listing of all the accounts used by a business arranged in alphabetical order. e. In the same manner as the General Journal.

In the same manner as the General Ledger. --- The chart of accounts is a listing of all the accounts used by a particular business. It is organized in the same manner as the General Ledger. Assets first, followed by liabilities, stockholders' equity accounts, dividends, revenues and expenses.

The "Dividends" account balance is reported on which financial statement? Select one: a. balance sheet b. income statement c. statement of stockholders' equity (or statement of retained earnings)

statement of stockholders' equity (or statement of retained earnings)

WP, Inc. pays $18,000 for an annual insurance policy on March 1, 2021. They initially debit Prepaid Insurance for that amount. If WP only prepares adjusting journal entries at the end of the year (12/31), how much Prepaid Insurance will appear on the December 31, 2021 Balance Sheet as a result of this transaction? Select one: a. $18,000 b. $3,000 c. $4,500 d. $15,000 e. $13,500

$3,000 --- After 10 months (March - December), WP will have consumed $15,000 of the insurance ($18,000 x 10/12). $3,000 will remain as an asset to be reported on the 12/31/2021 Balance Sheet.

C. Provided services to customers for $5,000 on account.

Assets: increase Accounts Receivable Liabilities: no effect Stockholders' Equity: increase Retained Earnings (revenue is going up which causes RE to go up)

Double-entry bookkeeping means that Select one: a. We record a transaction in both the General Journal and in the General Ledger. b. We record a change in at least two account balances when we prepare a journal entry. c. We generally make two unique journal entries when we record a transaction. d. We must always record only one debit and one credit for each transaction.

We record a change in at least two account balances when we prepare a journal entry --- Every transaction or event that is recorded in the General Journal affects at least two separate accounts.

When determining the account balance for a particular account (ex. Accounts Receivable) in order to prepare a trial balance, the best place to find the balance would be in the company's _____. Select one: a. general journal b. general ledger

general ledger

In accounting, expenses are defined as: Select one: a. cash payments to stockholders. b. the costs of providing products and services and other business activities during the current period. c. the costs of purchasing new assets.

the costs of providing products and services and other business activities during the current period

Duke, Inc. purchased $25,000 of office supplies throughout 2021. They had $5,000 of office supplies on hand at January 1, 2021 and a physical count of the office supplies inventory at December 31 found $8,000 of supplies remaining. If Duke only prepares adjusting journal entries on December 31 each year, what amount of Supplies Expense will appear on the 2021 Income Statement? Select one: a. $30,000 b. $22,000 c. $17,000 d. $28,000 e. $25,000

$22,000 --- Duke had $30,000 of office supplies available to use and still has $8,000 at year-end. hence, they must have used $22,000. That would be the expense to recognize on the Income Statement.

In practice, most companies list accounts on their trial balance in alphabetical order. Select one: True False

False

True or False: The cost constraint suggests that, even when the cost of providing accounting information exceeds its benefit, the financial accounting information should always be provided. Select one: True False

False

True or False: Account balances are always increased with debits. Select one: True False

False --- FEEDBACK: False. Only certain types of accounts are generally increased with debits (ex. assets and expenses). Some accounts are increased with credits (ex. liabilities and revenues)

True or False: When total debits equal total credits on a trial balance, we can be assured that no errors of any sort occurred during the preceding steps in the accounting cycle. Select one: True False

False --- Feedback: This is false. The debit and credit could have been made for an incorrect amount or an entire journal entry could have been omitted during the accounting cycle.

A company purchased supplies for $600 cash; however, when the transaction was journalized, the accountant accidentally debited Cash and credited Supplies for $600 each. Assuming the above error is not corrected and there were no other errors, which of the following statements is/are true? (check all that apply) Select one or more: a. The account balances for cash and supplies will be incorrect. b. The account balances for cash and supplies will still be correct. c. The balance sheet equation will not be in balance. d. Total debits and total credits on the trial balance will still be equal. e. Total debits and total credits on the trial balance will not be equal. f. The balance sheet equation will be in balance.

Total debits and total credits on the trial balance will still be equal; The account balances for cash and supplies will be incorrect; The balance sheet equation will be in balance. --- FEEDBACK: Since total debits equal total credits in the journal entry, the balance sheet equation will still balance. However, the individual account balances for the accounts affected will be wrong.

Measuring a company's business transactions and communicating those measurements for decision-making purposes in the form of financial statements are two key functions of financial accounting. The full set of procedures used to accomplish both of these key functions is called the: Select one: a. accounting cycle. b. tax cycle. c. sales cycle. d. auditing cycle. e. operating cycle.

accounting cycle.

Wolfpack Inc. has the following information available at year-end: Total Assets =$400,000 Total Stockholders' Equity =$300,000 Question: What should be Wolfpack's total liabilities balance at year-end? Answer: $

100000 --- FEEDBACK: Assets = Liabilities + Owner's Equity

Classify each of the following business activities as either an operating activity, investing activity, or financing activity.

A company pays a dividend to its stockholders. → financing activity A company receives cash for services performed to customers.→ operating activity A company borrows $40,000 from its local bank. → financing activity A company pays its employees their weekly wages. → operating activity A company receives $10,000 cash from each of its owners to get started as a business. → financing activity A company pays the utilities costs to run its facilities. → operating activity A company pays cash for the purchase of equipment to be used in its business. The equipment will be used for ten years. → investing activity

B. Borrowed $20,000 from the local bank by signing a note promising to pay back the $20,000 loan plus interest in two years.

Assets: increase cash Liabilities: increase Note Payable Stockholders' Equity: no effect

A. Received $50,000 in cash from the sale of its common stock to stockholders.

Assets: increase cash Liabilities: no effect Stockholders' Equity: increase Common Stock

Which of the following financial statements should be prepared first? Select one: a. Statement of Cash Flows b. Statement of Stockholders' Equity c. Balance Sheet d. Income Statement

Income Statement --- The Income Statement is the first statement prepared because we need the amount of net income in order to prepare the Statement of Stockholders' Equity. That statement provides data for the Balance Sheet which is needed to complete the Statement of Cash Flows.

Which of the following is the best definition of a trial balance? Select one: a. It is a listing of only income statement accounts and their respective balances at a particular date. b. It is a listing of only balance sheet accounts and their respective balances at a particular date. c. It is a listing of all accounts and their respective balances at a particular date.

It is a listing of all accounts and their respective balances at a particular date.

Under accrual accounting principles, when may we recognize revenue? Select one: a. When we have satisfied the performance obligation. b. When we receive cash. c. Only at the end of an accounting period. d. Only when we have both satisfied the performance obligation and have been paid. e. Only when we have received cash in return for performing a service.

When we have satisfied the performance obligation. --- Accrual accounting allows entities to recognize revenue once they have satisfied the performance obligation, regardless of whether they have been paid in cash.

The Securities and Exchange Commission (SEC) requires publicly traded companies to have their financial statements verified by: Select one: a. the SEC. b. an independent outside auditor. c. the company's management. d. the company's stockholders. e. the internal revenue service.

an independent outside auditor.

The set of accounting standards and rules that many U.S. corporations follow when preparing their financial statements are called: Select one: a. income tax laws. b. generally accepted accounting principles (GAAP). c. international financial reporting standards (IFRS).

generally accepted accounting principles (GAAP).

When the Trial Balance is prepared and found to be in balance we can conclude that Select one: a. There are no errors in the accounting records. b. That the sum of the Asset account balances in the General Ledger equal the sum of the Liability account balances plus the balances in Common Stock and Retained Earnings. c. The General Ledger is in balance. d. All journal entries have been posted from the General Journal to the General Ledger.

The General Ledger is in balance --- The Trial balance simply verifies that the sum of the accounts in the General Ledger with debit balances equals the sum of the accounts with credit balances. If you exclude the Dividends, Revenues and Expenses you will likely not have a balanced trial balance (this would be true only if net income coincidentally equals the amount of dividends paid in the accounting period).

Which of the following are not objectives of financial reporting according to FASB? (check all which apply) Select one or more: a. To minimize the amount of income tax the business must pay to the U.S. government. b. To provide information about the businesses resources and claims against those resources. c. To provide information which helps users predict the business' future cash flows. d. To prevent competitors from offering a similar product. e. To provide information which is useful to investors and creditors. f. To guarantee that a business will be profitable.

To guarantee that a business will be profitable; To prevent competitors from offering a similar product; To minimize the amount of income tax the business must pay to the U.S. government.

On October 18, Wolfpack performed $2,000 worth of services on account.

Accounts Receivable - debit 2000 Service Revenue - credit 2000

Journal entries are written in a certain format in the general journal.When writing a journal entry, which of the following is/are true? (check all that apply) Select one or more: a. A reference, often a date, should be written along with the journal entry. b. The account to be debited is listed first starting with the debited account name followed by the amount being debited. c. In the United States, amounts written in the debit and credit columns represent dollar amounts. d. The account to be credited is listed below and indented to the right of the debited account.

All are true.

E. Received $5,000 from the customers in "C" above.

Assets: no effect (increase Cash and decrease Accounts Receivable) Liabilities: no effect Stockholders' Equity: no effect

Which of the four basic financial statements is best represented by the fundamental accounting equation? Select one: a. Income Statement b. Balance Sheet c. Statement of Cash Flows d. Statement of Stockholders' Equity

Balance Sheet -- Each journal entry should include a date, an entry first to the account debited, followed by an entry into the account that is credited.

On October 2, Wolfpack purchased equipment for $8,000 cash.

Equipment - debit 8000 Cash - credit 8000

True or False: Dividends return back to the owners of a corporation a portion of their original contributions. Select one: True False

False -- FEEDBACK: False. Dividends are a return of the profits earned by the corporation. They are not a return of the original contributions by owners.

What does the acronym GAAP stand for? Select one: a. GAAP stands for general accounting and auditing principles b. GAAP stands for generally accepted accounting principles c. GAAP stands for generally allowed accounting principles d. GAAP stands for generally accepted auditing principles e. GAAP stands for general accounting and auditing pronouncements

GAAP stands for generally accepted accounting principles --- GAAP is short for generally accepted accounting principles. These are the rules that companies follow to prepare their financial statements.

For each of the following financial statements, indicate whether the financial statement reports account balances for a "period of time" (ex. for the year ended Dec 31, 20X9) or reports account balances "at a point in time" (ex. at Dec 31, 20X9).

Income Statement → Reports balances for a period of time. Statement of Stockholders' Equity→ Reports balances for a period of time. Balance Sheet → Reports balances at a point in time.

Which of the following hypothetical adjusting entries is not possible? Select one: a. Interest Receivable 2,000 Interest Payable 2,000 b. Salaries Expense 450 Salaries Payable 450 c. Insurance Expense 800 Prepaid Insurance 800 d. Deferred Revenue 1,200 Service Revenue 1,200 e. All of the above could be adjusting journal entries.

Interest Receivable 2,000 Interest Payable 2,000 --- All adjusting entries involve both an income statement acccount (a revenue or an expense) and a balance sheet account (an asset or liability). No adjusting entry includes a debit or credit to Cash. Also, recall that Deferred Revenue is a liability account.

Each of the following accounts would find its balance reported on either the income statement or balance sheet Required: For each account, indicate which of these financial statements the account's balance should be reported on. In addition, if the account's balance should be found on the balance sheet, further indicate if it is found in the asset, liability, or owners' equity section. There is only one possible answer for each account. Example: Cash = Balance Sheet - asset

Prepaid Insurance → Balance Sheet - asset Common Stock → Balance Sheet - owners' equity Prepaid Rent → Balance Sheet - asset Equipment → Balance Sheet - asset Accounts Payable → Balance Sheet - liability Salaries Expense → Income Statement Accounts Receivable → Balance Sheet - asset Utilities Expense → Income Statement Deferred Revenue → Balance Sheet - liability Rent Expense → Income Statement Retained Earnings → Balance Sheet - owners' equity Supplies → Balance Sheet - asset Notes Payable → Balance Sheet - liability Supplies Expense → Income Statement Service Revenue → Income Statement

On October 5, Wolfpack purchased supplies costing $400 on account.

Supplies - debit 400 Accounts Payable - credit 400

True or False: The primary overriding objective of financial reporting is to provide decision-useful information to investors and creditors. Select one: True False

True

Which assumption which underlies GAAP is being violated if a United States company reports assets on its balance sheet in terms of how many assets are owned rather than with a measurement in terms of dollars? Select one: a. going concern assumption b. economic entity assumption c. periodicity assumption d. monetary unit assumption

monetary unit assumption

The group attempting to develop a single set of high-quality, understandable global accounting standards is: Select one: a. the U.S. Congress. b. the International Accounting Standards Board (IASB). c. the Financial Accounting Standards Board (FASB). d. the Internal Revenue Service (IRS). e. the Securities and Exchange Commission (SEC). f. the company's outside auditors.

the International Accounting Standards Board (IASB)