Accounting 1 Final Exam Review from Chapter Quizzes

2. Jason Company paid $5,100 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of a. $5,100; $5,100 b. $850; $5,100 c. $1,275; $1,275 d. $1,275; $5,100

$1,275; $5,100 ($5,100 × 3/12 = $1,275 rent expense; $5,100 payment on 10/1/Year 1 is a cash outflow for rent)

1. Which of the following is an accurate definition of the term "asset?" a. A transfer of wealth from the business to its stockholders b. An obligation to creditors c. A resource that will be used to produce revenue d. A sacrifice incurred from operating the business

A resource that will be used to produce revenue (assets = resources a business uses to conduct its operations. Businesses use some assets to produce greater quantities of other assets. Cash is received = revenue.)

1. Which of the following items is an example of revenue? a. Cash received from a bank loan b. Cash received from investors from the sale of common stock c. Cash received from the sale of land for its original selling price d. Cash received from customers at the time service were provided

Cash received from customers at the time services were provided (cash received from providing services to customers = revenue and asset source transaction)

1. Retained Earnings at the beginning and ending of the period were $850 and $1,800, respectively. If revenues were $3,300 and dividends paid to stockholders were $750, what was the amount of expenses for the period? a. $2,350 b. $950 c. $1,600 d. $2,550

$1,600 (Beginning retained earnings of $850 + Revenues of $3,300 − Expenses − Dividends of $750 - Ending retained earnings of $1,800)

10. During its first year of operations, Silverman Company paid $10,285 for direct materials and $9,800 for production workers' wages. Lease payments and utilities on the production facilities amounted to $8,800 while general, selling, and administrative expenses totaled $4,300. The company produced 5,450 units and sold 3,300 units at a price of $7.80 a unit. What is the amount of finished goods inventory on the balance sheet at year-end? a. $2,150 b. $8,250 c. $5,698 d. $11,395

$11,395 (Average cost per unit = (Materials cost + Labor costs + Overhead costs) ÷ Number of units produced Average cost per unit = ($10,285 + $9,800 + $8,800) ÷ 5,450 units = $5.30 per unit Finished goods inventory = Unsold units × Average cost per unit Finished goods inventory = (5,450 units produced − 3,300 units sold) × $5.30 per unit = $11,395)

10. During its first year of operations, Connor Company paid $48,360 for direct materials and $19,600 in wages for production workers. Lease payments and utilities on the production facilities amounted to $8,600. General, selling, and administrative expenses were $9,600. The company produced 6,600 units and sold 5,600 units for $16.60 a unit. The average cost to produce one unit is which of the following amounts? a. $10.17 b. $13.67 c. $11.60 d. $13.05

$11.60 (Average cost per unit = (Materials cost + Labor costs + Overhead costs) ÷ Number of units produced Average cost per unit = ($48,360 + $19,600 + $8,600) ÷ 6,600 units = $11.60 per unit)

1. Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $54,000 2) borrowed $32,000 from its bank 3) provided consulting services for $53,000 cash 4) paid back $22,000 of the bank loan 5) paid rent expense for $12,500 6) purchased equipment for $19,000 cash 7) paid $3,700 dividends to stockholders 8) paid employees' salaries of $28,000 What is Yowell's net income for Year 1? a. $8,800 b. $12,500 c. $24,300 d. $40,500

$12,500 (Net income = Revenues of $53,000 − Rent expense of $12,500 − Salaries expense of $28,000 = $12,500)

2. Sheldon Company began Year 1 with $1,300 in its supplies account. During the year, the company purchased $3,800 of supplies on account. The company paid $2,200 on accounts payable by year end. At the end of Year 1, Sheldon counted $2,100 of supplies on hand. Sheldon's financial statements for Year 1 would show: a. $2,100 of supplies; $1,700 of supplies expense b. $2,900 of supplies; $3,800 of supplies expense c. $2,900 of supplies; $800 of supplies expense d. $2,100 of supplies; $3,000 of supplies expense

$2,100 of supplies; $3,000 of supplies expense ($2,100 of supplies on hand is the supplies asset on the balance sheet; $1,300 beginning balance + $3,800 of supplies purchased − $2,100 ending balance = $3,000 supplies expense)

10. During its first year of operations, Silverman Company paid $15,085 for direct materials and $10,200 for production workers' wages. Lease payments and utilities on the production facilities amounted to $9,200 while general, selling, and administrative expenses totaled $4,700. The company produced 6,050 units and sold 3,700 units at a price of $8.20 a unit. What is Silverman's cost of goods sold for the year? a. $18,338 b. $29,985 c. $21,090 d. $34,385

$21,090 (Average cost per unit = (Materials cost + Labor costs + Overhead costs) ÷ Number of units produced Average cost per unit = ($15,085 + $10,200 + $9,200) ÷ 6,050 units = $5.70 per unit Cost of goods sold = Number of units sold × Average cost per unit Cost of goods sold = 3,700 units sold × $5.70 per unit = $21,090)

2. Revenue on account amounted to $8,000. Cash collections of accounts receivable amounted to $5,300. Expenses for the period were $4,100. The company paid dividends of $1,450. What was the amount of net income for the period? a. $1,200 b. $3,900 c. $3,850 d.$2,450

$3,900 (Net income = Revenue of $8,000 − Expenses of $4,100 = $3,900 Dividends do not affect the determination of net income.)

1. Stosch Company's balance sheet reported assets of $102,000, liabilities of $27,000 and common stock of $24,000 as of December 31, Year 1. If Retained Earnings on the balance sheet as of December 31, Year 2, amount to $66,000 and Stosch paid a $26,000 dividend during Year 2, then the amount of net income for Year 2 was which of the following? a. $51,000 b. $26,000 c. $41,000 d. $15,000

$41,000 ($26,000 + ($66,000-$51,000) = $41,000

2. Nelson Company experienced the following transactions during Year 1, its first year in operation. Issued $7,000 of common stock to stockholders Provided $3,300 of services on account Paid $1,850 cash for operating expenses Collected $2,400 of cash from accounts receivable Paid a $150 cash dividend to stockholders What is the of net cash flow from operating activities shown on the Year 1 statement of cash flows? a. $1,300 b. $550 c. $1,450 d. $400

$550 (Net cash flow from operating activities = $2,400 cash collected from customers − $1,850 cash paid for expenses = $550 The issue of stock for cash and the payment of dividends are classified as a financing activities.)

1. The accounting records of Coastal Company contained the following account balances. Cash$580 Land$950 Notes Payable$210 Common Stock$520 The records also contained an account titled Retained Earnings. Based on this information the balance of the retained earnings account must be... a. $520 b. $950 c. $800 d. $580

$800 Assets = $580 + $950 Liabilities = $210 Common Stock = $520 Retained Earnings = $800 (Only amount that would balance out the accounting equation is $800)

10. Steuben Company produces dog houses. During the current year, Steuben Company incurred the following costs: Rent on manufacturing facility $123,000 Office manager's salary $72,000 Wages of factory machine operators $52,000 Depreciation on manufacturing equipment $22,000 Insurance and taxes on selling and administrative offices $12,000 Direct materials purchased and used $82,000 Based on the above information, the amount of period costs shown on Steuben's income statement is: a. $12,000 b. $207,000 c. $84,000 d. $72,000

$84,000 (Selling, general, and administrative costs (SG&A) are normally expensed in the period in which they are incurred. Because of this recognition pattern, nonproduct expenses are sometimes called period costs. In this case, the period costs of $84,000 are comprised of the office manager's salary of $72,000 and the insurance and taxes on selling and administrative offices of $12,000.)

1. Which term describes a distribution of the business's assets back to the owners of the business? a. Common stock b. Dividend c. Retained earnings d. Liability

Dividend (When companies redistribute its assets back to the owners of the business = dividend)

1. Financial accounting standards are known collectively as GAAP. What does that acronym stand for? a. Generally Authorized Auditing Principles b. Governmentally Approved Accounting Practices c. Generally Accepted Accounting Principles d. Generally Applied Accounting Procedures

Generally Accepted Accounting Principles (referred to as GAAP, established by the Financial Accounting Standards Board)

2. Amber Company recognized accrued salary expense. Which of the following financial statements are affected by this accounting event? a. Income statement and the balance sheet b. Income statement c. Statement of cash flows d. Balance sheet

Income statement and the balance sheet (Recognizing accrued salary expense will cause an increase in a liability account (salaries payable) that appears on the balance sheet. The recognition will also cause an increase in the salaries expense account that appears on the income statement. Since cash was not collected or paid, the statement of cash flows is not affected.)

2. Jack's Snow Removal Company received a cash advance of $11,400 on December 1, Year 1 to provide services during the months of December, January, and February. The year-end adjustment on December 31, Year 1, to recognize the partial expiration of the contract will... a. Increase stockholder's equity by $3,800 b. Increase assets by $3,800 c. Increase liabilities by $3,800 d. Increase assets by $3,800 and increase stockholders' equity by $3,800

Increase stockholders' equity by $3,800 (The year-end adjustment to recognize one month's work on the three-month contract results in a $3,800 decrease in liabilities (unearned revenue) and an increase in stockholder's equity (retained earnings due to recognizing revenue).)

10. Choose the answer that is not a distinguishing characteristic of financial accounting information. a. It is focused primarily on the future b. It is more concerned with financial data than physical or economic data c. It is more highly regulated than managerial accounting information d. It is global information that reflects the performance of the whole company

It is focused primarily on the future (Financial accounting deals with regulated, historical financial information that pertains to the whole company and is designed primarily to meet the information needs of outsiders.)

10. Select the incorrect statement regarding costs and expenses. a. Expenses are incurred when assets are used to generate revenue b. Non-manufacturing costs should be expensed in the period in which they are incurred c. Some costs are initially recorded as expenses while others are initially recorded as assets d. Manufacturing-related costs are initially recorded as expenses

Manufacturing-related costs are initially recorded as expenses

2. Stannous Company earns $10,000 of revenue on account in Year 1. Cash collections of receivables amount to $3,500 in Year 1 with the remainder being collected in Year 2. Which of the following shows how the collection of cash will affect the company's accounting equation in Year 1? Cash + Accounts Receivable = ...Retained Earnings a. 3,500 -3,500 b. 3,500 3,500 c. 10,000 10,000 -4,000 d. 10,000 10,000

Option A (When $3,500 cash is collected, the amount of cash collected is removed from the accounts receivable account and placed in the cash account. Therefore, cash increases by $3,500 and accounts receivable decreases by $3,500.)

2. In Year 1, Dale Company incurred $4,000 of utility expense on account. Dale paid cash for these expenses in Year 2. Which of the following shows how paying cash for utility expense will affect Dale's accounting equation in Year 2? Cash + Accounts Receivable = Accounts Payable + Retained Earnings a. (4,000) (4,000) b. 4,000 (4,000) c. (4,000) (4,000) d. (4,000) (4,000)

Option A (While the expense was incurred and recognized in Year 1, the cash payment occurred in Year 2. The Year 2 cash payment would cause the asset account (cash) and the liability account (accounts payable) to decrease.)

1. At the end of Year 1, Clayton Company had $9,200 of cash, $11,800 land, $3,600 of liabilities, $6,200 of common stock, and $11,200 of retained earnings. During Year 2, Clayton experienced the following events. Borrowed $4,700 cash. Earned $9,700 of cash revenue. Paid $7,200 of cash expenses. Paid $8,200 cash to purchase land. Based on this information the amount of total assets, total liabilities, and retained earnings appearing on the Year 2 financial statements is Total Assets Total Liabilities Retained Earnings a. $8,200 $8,700 $14,900 b. $28,200 $8,300 $13,700 c. $17,400 $3,600 $13,700 d. $17,400 $2,500 $8,700

Option B layton has two assets at the end of the accounting period. The amount of cash is $8,200 ($9,200 beginning balance + $4,700 borrowed + $9,700 from revenue − $7,200 to pay expenses − $8,200 to purchase land). Land shown on the balance sheet is $20,000 ($11,800 beginning balance + $8,200 purchased). Total assets is $28,200 ($8,200 cash + $20,000 land). Liabilities amount to $8,300 ($3,600 beginning balance + $4,700 borrowed). Retained earnings is $13,700 ($11,200 beginning balance + $9,700 revenue − $7,200 expenses).

2. Stanley Company earns $8,000 of revenue on account in Year 1. Cash collections of receivables amount to $4,500 in Year 1 with the remainder being collected in Year 2. Which of the following shows how the recognition of revenue in Year 1 will affect the company's accounting equation? Cash Accounts Receivable Retained Earnings a. 4,500 4,500 b. 4,500 4,000 c. 8,000 8,000 d. 8,000 8,000

Option C (revenue should be recongized in the period regardless of whether cash has or has not been collected. The asset account (Accounts Receivable) increases by 8,000 and (Stockholders' Equity) Retained Earnings increased by 8,000.)

1. Which of the following accounts are permanent? a. Retained earnings b. All income statement accounts c. Dividends d. All balance sheet accounts including dividends

Retained earnings (Accounts that do not close at the end of the accounting period = permanent. Income statement accounts and dividends = temporary.)

2. What happens when a company collects cash from accounts receivable? a. Total assets are not affected b. The asset accounts receivable increases c. Stockholders' equity increases d. Liabilities decrease

Total assets are not affected (When a company collects an account receivable one asset (cash) increases and another asset (accounts receivable) decreases. The amount of total assets is not affected.)