accounting chapter 1-4
A gift card purchased in December for $100 and used in January of the following year for purchase of goods, should be recognized as (assume December 31st as end of accounting year)
an unearned revenue liability in December, which should be reversed into Sales Revenue in January.
The first step in the recording process is to
analyze each transaction for its effect on the accounts.
Credits
decrease assets and increase liabilities
If an adjusting entry for depreciation is not made
expenses will be understated
On June 1, Diane Leno purchases a copier machine for her business by paying half of the cost in cash and the balance is on account. When journalizing this transaction, she will
prepare a compound entry
All of the following are required steps in the accounting cycle except
prepare a worksheet
If cash received for future services is initially recorded in revenue accounts and the company has not yet performed all of the required services at the end of the accounting period, then failure to make an adjusting entry will cause
revenues to be overstated.
Which of the following is an optional step in the accounting cycle?
reversing entries
An account that will have a zero balance after closing entries have been journalized and posted is
service revenue
All of the following are property, plant, and equipment except
supplies
If a company records a transaction with wrong amounts but properly debits and credits affected accounts, or posts correct numbers to wrong accounts
the accounting equation will be satisfied but the financial statements will be incorrect
Before posting a payment of $5,000, the Accounts Payable of Senator Company has a normal balance of $16,000. The balance after posting this transaction was
11,000
Milo has the following year-end account balances: Accounts Receivable, $5,000; Supplies, $12,000; Equipment, $18,000; Accounts Payable, $17,000; Stockholders' Equity, $43,000. Given the account balances listed, the balance in the Cash account should be
25,000
clark Real Estate signed a four-month note payable in the amount of $8,000 on September 1. The note requires interest at an annual rate of 12%. The amount of interest to be accrued at the end of September is
80
Which of the following errors will not cause a trial balance to be out of balance?
A credit to Accounts Receivable was posted as a credit to Cash.
What is the impact on the financial statements if the adjusting entries for prepaid expenses are omitted?
Balance sheet accounts are overstated and income statement accounts are understated.
When Alexander Company purchased supplies for $500, it incorrectly recorded a credit to Supplies for $5,000 and a debit to Cash for $5,000. Before correcting this error
Cash is overstated and Supplies is understated.
Which of the following is not a long-term liability?
Current maturities of long-term debt
The left side of an account
Debit
The investment of cash by the stockholder
Increases stockholders' equity.
Which of the following statements is false?
Revenues are increased by debits.
The time period assumption states that
The economic life of a business can be divided into artificial time periods.
What is the primary criterion by which accounting information can be judged?
Usefulness for decision making
A trial balance will not balance if
a $100 cash drawing by the owner is debited to Dividends for $1,000 and credited to Cash for $100
A company has purchased a tract of land. It expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. The land should be reported as
a long-term investment.
Liabilities of a company would not include
accounts receivable
The adjusted trial balance is prepared
after the adjusting entries are prepared and posted to the ledger.
If a resource has been consumed but a bill has not been received at the end of the accounting period,
an adjusting entry should be made recognizing the expense.
Current liabilities
are obligations that a company is to pay within the coming year or its operating cycle, whichever is longer are listed in the balance sheet in order of their expected maturity.
The historical cost principle states that
assets should be recorded at their cost.
All of the financial statements are for a period of time except the
balance sheet
The ending retained earnings amount is shown on the
balance sheet and the retained earnings statement.
under cash-basis accounting, companies record revenue only when
cash is received.
The correct order of presentation in a classified balance sheet for the following current assets is
cash, accounts receivable, inventories, prepaid insurance.
Fayette Company includes in its accounting records only transaction data that can be expressed in terms of money.
correct, monetary unit assumption
When a net loss has occurred, Income Summary is
credited and Retained Earnings is debited.
In a classified balance sheet, assets are usually classified using the following categories:
current assets; long-term investments; property, plant, and equipment; and intangible assets.
Correcting entries are only made at the end of an accounting period.
false
The Dividends account decreases stockholders' equity and is an income statement account like expenses.
false
The ledger accounts should be arranged in
financial statement order
Revenues and expenses are reported on the
income statement
Tina Company owns buildings that are worth substantially more than they originally cost. In an effort to provide more relevant information, Tina reports the buildings at fair value in its accounting reports.
incorrect, cost principle
Omar Shariff, president of Omar's Oasis, records his personal living costs as expenses of Oasis.
incorrect, economic entity assumption
Debits
increase assets and decrease liabilities
A credit to a revenue account
indicates an increase in revenues earned.
A credit to a liability account
indicates an increase in the account.
A ledger
is a collection of the entire group of accounts maintained by a company
The Accumulated Depreciation account
is a contra asset account with a credit balance.
A reversing entry
is the exact opposite of an adjusting entry made in a previous period.
On June 30, a printing shop provides $1,000 of services to a customer to custom print restaurant menus. The customer is sent a bill on July 5 for the amount due. A check in the amount of $1,000 is received from the customer on July 25. The printing shop follows GAAP and applies the revenue recognition principle. When is the $1,000 sale recognized?
june 30
If the adjusting entry for unearned revenues is not made
liabilities are overstated
An item is ________ if it is likely to influence the decision of an investor or creditor.
material
Expenses paid in cash and recorded as assets before they are used are called
prepaid expenses
A list of accounts and their balances at a given point in time is called a
trial balance
The revenue recognition principle dictates that revenue should be recognized in the accounting records
when service was performed