Accounting 1303 - Final Study Set

If Lacy's Department Store charges 8 percent sales tax, the amount of sales tax collected on a $315 sale would be

25.20

If during the year total assets increase by $77,000 and total liabilities decrease by $17,000, by how much did owner's equity increase/decrease?

94000 Increase Explanation $77,000 = ($17,000) + $94,000

Which of the following accounts would not be involved in any of the closing entries?

Accounts Payable

The form of a business organization that is not affected by the withdrawal or death of an owner and can continue indefinitely is the

Corporation

A firm's financial affairs are summarized in periodic reports called general ledgers.

False

When a business pays cash for salaries, assets decrease and expenses __________.

Increase

The balance sheet shows:

The financial position of a business at a given time

The entire process of analyzing, recording, and reporting business transactions is based on the fundamental accounting equation.

True

The list price is also known as the established retail price.

True

The owner's capital balance at the beginning of the period is required on the statement of owner's equity.

True

Identify the form of business that is considered a separate legal entity.

a corporation

The total assets on the balance sheet was $128,800 before journalizing and posting the adjusting entries for $800 of expired insurance, $2,400 of expired rent and $900 of depreciation. What are the total assets after journalizing and posting the adjusting?

124700 Explanation $128,800 unadjusted total assets − $800 prepaid insurance reduction − $2,400 prepaid rent reduction − $900 accumulated depreciation increase = $124,700 adjusted total assets

Kelly Corporation reported Net Income for the year ended December 31, 20X1, of $15,100 then discovered that an entry for revenue earned on December 30, 20X1, in the amount of $1,200 had not been journalized and posted. What is the Net Income after the correcting journal entry is journalized and posted?

16300

Machinery costing $20,000 with an estimated salvage value of $2,000 and an estimated life of 5 years was purchased on October 31, 20X1. Using the straight-line depreciation method, what is the amount of depreciation expense to be recorded at December 31, 20X1?

600 ($20,000 − $2,000)/60 months = $300 per month × 2 months = $600

Pepper Company reported revenues of $13,200, supplies expense of $3,000, and net income of $3,200 for the most recent period. If the company's only other expense was Rent Expense, what was its balance at the end of the period?

7,000 Revenues ($13,200) − Supplies Expense ($3,000) − Rent Expense ($7,000) = Net Income ($3,200)

Which of the following is NOT an occupation with similar job duties to accountants and auditors? a) budget analyst b) cost estimator c) actuary d) personal financial advisor

Actuary

When revenue and expenses are equal, the firm is said to __________.

Break Even

Anyone can invest in a closely held corporation.

False

Increases in assets and revenue are both recorded with debits.

False

A form of the partnerships business entity is

LLP

On the income statement, revenues minus expenses equals __________ for a period of time.

Net Income or net Loss

A(n) ____________________ account is used to record increases in owner's equity from the sale of goods or services.

Revenue

The journal entry to record a payment made in January for rent for the months of February and March would include:

a debit to Prepaid Rent and a credit to Cash.

Which of the following is a liability account?

accounts payable

When an entry is made in the general journal,

accounts to be debited should be listed first

Revenue by definition is:

amounts earned from the sale of goods or services.

The adjustments made on the worksheet:

are recorded in the journal and then posted to the general ledger accounts.

Debits are used to record increases in:

assets and expenses

When the owner invests equipment in a business,

assets and owner's equity increase.

If a business receives $5,000 on account from clients who owed money for services previously billed, identify the effect on the accounting equation:

assets remain the same and owner's equity remains the same.

The account Moriah Paige, Capital, would appear on both the Statement of Owner's Equity and the__________________.

balance sheet

Which of the following accounts is not a permanent account? a) Cash b) Accounts Payable c) Salaries Expense d) Thomas Bernard, Capital

c) Salaries Expense

Transactions in a journal are initially recorded in

chronological order

Management advisory services are designed to help

clients

A(n) ____________________ entry is recorded when there is an error in data that has been journalized and posted.

correcting

The first two closing entries to the Income Summary account indicate a debit of $57,750 and a credit of $69,700. The third closing entry would be:

debit Income Summary $11,950; credit Capital $11,950. Explanation $69,700 credit (total revenue) − $57,750 debit (total expenses) = $11,950 Net Income. This results in a credit balance of $11,950 in income summary after the second step of the closing process. The third closing entry would then debit income summary to close the account, with an offsetting credit to the capital account of $11,950.

On September 1, 20X1, Upholstery Masters purchased a one-year insurance policy for $960. The correct adjusting entry on December 31, 20X1, is:

debit Insurance Expense $320; credit Prepaid Insurance $320

A total of $2,800 in supplies was purchased during the year. At the end of the year $700 of the supplies were left. The adjusting entry needed at the end of the year is:

debit Supplies Expense $2,100; credit Supplies $2,100

The ABC Company paid cash on account for supplies purchased last month. This would be recorded in the T-accounts as a:

debit to accounts payable and credit cash

The normal balance of a contra asset account is a debit.

false

Which of the following is NOT part of the process of accounting for financial information?

identifying

Credits are used to record:

increases in liabilities and revenues.

The total of the figures on the left side of a Cash T account is $36,700. The total of the figures on the right side is $16,250. The balance of this account:

is $20,450 and would be recorded on the left side of the T account.

When recording a transaction in a T account, which of the following is not accurate?

it is not necessary to record a credit for every transaction

Which of the following is not a step taken when completing the trial balance section of a worksheet?

label each balance with a small letter to identify them for later reference

The increase side of an account represents the ____________________ balance of the account.

normal

During the closing process, Accumulated Depreciation, Equipment will

not be closed

After the worksheet has been completed, the next step in the accounting cycle is to

prepare the financial statements.

Managerial accounting is

private accounting

Withdrawals are reported on which of the following financial statements?

statement of owner's equity

Tax planning includes

suggesting actions to reduce tax liability.

Revenue and expense accounts are called ____________________ accounts.

temporary

When an entry is made in the general journal,

the accounts to be credited should be indented.

The Income Statement shows:

the amount of net income or net loss

If a worksheet is prepared at the end of the accounting year,

the financial statements are prepared using the worksheet data.

Which of the following did NOT result from the Sarbanes-Oxley Act?

the requirement that accounting firms maintain the same lead auditor for a company for at least ten years

Letters are used to label the corresponding debit and credit transactions of an adjustment on the worksheet.

true

The unadjusted net income on the income statement was $22,600. After journalizing and posting the adjusting entries for expired insurance during the year of $850 and for supplies used during the year of $520, the adjusted net income is:

21230 example: $22,600 unadjusted net income − $850 insurance expense − $520 supplies expense = $21,230 adjusted net income

At the end of the first month of operations for Jackson's Catering Service, the business had the following accounts: Cash, $19,950; Prepaid Rent, $500; Equipment, $7,500 and Accounts Payable $4,000. By the end of the month, Jackson's had earned $41,000 of Revenues, and used $2,850 of Utilities Expenses, $6,250 of Rent Expense and $4,200 of Salaries Expenses. Calculate the net income to be reported by the company for this first month.

27700 Revenues $41,000 − Utilities Expense $2,850 − Rent Expense $6,250 − Salaries Expense $4,200 = Net Income $27,700.

At the end of the first month of operations for SloMo Delivery Service, the business had the following accounts: Accounts Receivable, $11,700; Prepaid Insurance, $560; Equipment, $26,900 and Cash, $22,000. On the same date, SloMo owed the following creditors: Simpson Supply Company, $17,700; Allen Office Equipment, $15,200. The total amount of Liabilities is:

32900 Liabilities = Simpson Supply = 17700 + Allen Office Equipment = 15200 Total = 32900

If the following are the only accounts of Jones Supply Company, what is the missing Supplies balance? Cash: $8,600 Supplies: ????? Accounts Payable: $4,000 John Smith, Capital: $9,390

4790 (Assets = Liabilities + Owners Equity) Assets (Cash + Supplies) Liabilities + Owner Equity = (AP + Capital)

At the end of its first year of operations, Shapiro's Consulting Services reported net income of $32,300. They also had account balances of: Cash, $19,900; Office Supplies, $3,200, Equipment, $26,300 and Accounts Receivable, $8,000. The owner's total investment for this first year was $19,800 and the owner withdrew $2,670 for personal use. Calculate the ending balance to be reported on the Statement of Owner's Equity in the Owner's Capital account.

49430 Investments $19,800 + Net Income $32,300 − Withdrawals $2,670 = $49,430. Note that the beginning capital balance would typically be added within the formula as well, but as this is the company's first year of operations, the beginning capital balance is zero.

From the following list, identify the accounts that will appear on the postclosing trial balance.

CashCorrect Accounts ReceivableCorrect SuppliesCorrect EquipmentCorrect Accumulated DepreciationCorrect Accounts PayableCorrect Brianna Celina, Capital

Bertrand Incorporated performed services for clients in the amount of $1,350 on credit. If this transaction had been posted in error to the Cash account instead of the Accounts Receivable account, what correcting entry would be necessary?

Debit Accounts Receivable $1,350; credit Cash $1,350

A business performed $8,000 of services. Their customer paid $3,000 of the amount right away but charged the remaining amount. To record this transaction, the business would:

Debit Cash $3,000 and Debit Accounts Receivable $5,000 and Credit Fees Income $8,000

All of the following accounts will appear on the post-closing trial balance except

Depreciation Expense

The Financial Accounting Standards Board is responsible for

Developing generally accepted accounting principles

A merchandising business sells goods that it produces.

False

All owner's equity accounts increase via a credit.

False

The SEC uses financial information to determine a company's tax base.

False

The owner's capital account is closed at the end of each accounting period.

False

When a sales department needs goods, it sends the purchasing department a purchase invoice.

False

When a transaction is entered in a general journal, the first account title is indented about half an inch from the left margin of the Description column.

False

When an owner invests assets in a business, the capital account is debited.

False

The normal balance of a liability account is on the debit side.

False Explanation The normal balance side of a T account is the side on which the account increases. As liability accounts increase on the credit side, this is the normal balance side for a liability.

Which of the following statements is not correct?

Salvage value is computed by subtracting the accumulated depreciation from the cost of a long-term asset.

When a correcting entry includes a debit to Shop Equipment for $800 and a credit to Office Equipment for $800, what is the impact of this entry?

This entry increases the balance of Shop Equipment by $800 and decreases the balance of Office Equipment by $800.

"Closing" is written in the Description column of the individual revenue and expense accounts in the general ledger.

True

A retail business sells goods and services to individual customers

True

A subsidiary ledger is a ledger that contains accounts of a single type.

True

A withdrawal of funds by the owner for personal use decreases owner's equity.

True

Asset accounts are the first accounts displayed within the general ledger.

True

Assets always equal debts of the business plus the financial interest of the owner.

True

If assets are $8,000 and liabilities are $2,000, owner's equity is $6,000.

True

Increases in the owner's drawing account are recorded with debits.

True

Normally a credit memorandum is issued to the customer when a return or allowance is related to a credit sale.

True

One of the purposes of closing entries is to transfer net income or net loss for the period to the owner's capital account.

True

Posting references are part of the audit trail.

True

The Securities and Exchange Commission (SEC) has the authority to suspend trading of a company's shares on stock exchanges.

True

The temporary owner's equity accounts are closed because they apply to only one accounting period.

True

When cash is paid to a creditor, the firm's liabilities decrease.

True

When developing GAAP, one step undertaken by the FASB includes holding public hearings where interested parties can express their opinions.

True

Al Dunn Bakery bought a new oven for $1,500. Al paid $480 as a cash down payment and will pay the balance in 30 days. Total assets increased by $1,020.

True `

On October 25, 20X1, the company paid $33,000 rent in advance for the six-month period November 20X1 through April 20X2. On December 31, 20X1, the adjustment for expired rent would include:

a $11,000 debit to Rent Expense. example: $33,000/6 months = $5,500 per month; 5,500/month × 2 months = $11,000 rent expense as of 12/31/20X1

On December 1, the Accounts Receivable account had a $20,400 debit balance. During December the business earned $11,200 in revenue on account and collected $13,400 from its charge-account customers. After posting these transaction, the balance in the Accounts Receivable account on December 31 is

a $18,200 debit balance.

On October 25, 20X1, the company paid $24,000 rent in advance for the six-month period November 20X1 through April 20X2. On December 31, 20X1, the adjustment for expired rent would include:

a $8,000 debit to Rent Expense. Example: $24,000/6 months = $4,000 per month; $4,000/month × 2 months = $8,000 rent expense as of 12/31/20X1

A company purchased equipment costing $15,000. They paid $1,000 right away and agreed to pay the balance in 30 days, the journal entry to record the purchase of equipment would include:

a debit to Equipment for $15,000, a credit to Cash for $1,000 and a credit to Accounts Payable for $14,000.

A total of $5,100 in supplies was purchased during the year. By the end of the year, the company had used $4,400 of the supplies. The adjusting entry needed at the end of the year is:

debit Supplies Expense $4,400; credit Supplies $4,400

The corporations whose stock can be bought and sold on stock exchanges and in over-the-counter markets are referred to as

publicly owned corporations

The cost of a long-term asset, such as equipment, is transferred to expense as it is used during its useful life.

true