Accounting chapter 1 and 2
Get in Shape, a healthy living magazine, collected $ 480,000 in subscription revenue on May 31. Each subscriber will receive an issue of the magazine in each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. What is the balance in the Unearned Revenue account as of December 31?
$200,000
On January 1, 2015, the Accounts Receivable of Linda, Inc. had a debit balance of $180,000. During January, the company provided services for $700,000 on account. The company collected $230,000 from its customers on account in January. What was the ending balance in the Accounts Receivable account at the end of January?
$650,000
The following Office Supplies account information is available for Able, Inc. Beginning balance $ 1,200 Office Supplies expensed 6,000 Ending balance 4,000 From the above information, calculate the amount of office supplies purchased.
$8,800
Anthony Delivery Service has a weekly payroll of $ 32,000 . December 31 falls on Tuesday and Anthony will pay its employees the following Monday (January 6) for the previous full week. Assume that Anthony has a five day workweek and has an unadjusted balance in Salaries Expense of $ 885,000 . What is the December 31 balance of Salaries Expense after adjusting entries are recorded and posted?
$897,800
Which of the following is a characteristic of a corporation
A corporation is owned by stockholders
Which of the following statements is true of accrual basis accounting?
Accrual basis accounting is required by Generally Accepted Accounting Principles (GAAP).
Regarding a classified balance sheet, which of the following statements is correct?
Assets are listed in the order of their liquidity.
what is the stockholders equity equation?
Beginning equity + common stock issued + net income or - net loss - dividends = ending equity
Which of the following accounts will be closed by debiting the Income Summary account?
Depreciation Expense
Which of the following statements is true of expenses?
Expenses decrease equity, so an expense account's normal balance is a debit balance.
in a corporation, the board of directors is elected by the chairperson of the company T OR F
FALSE
As per the economic entity assumption, an organization and its owners should be seen as the same entity T OR F
False
GAAP refer to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to ________
Generally Accepted Accounting Principles
Assume that Global Cleaning Service performed cleaning services for a department store on account for $180. How would this transaction affect Global Cleaning Service's accounting equation?
Increase both assets and equity by $180
Regarding the separation of corporate ownership and management, which of the following is a true statement?
Stockholders own the business, but a board of directors appoints corporate officers to manage the business
In a sole proprietorship, the owner is personally liable for the debts of the business. T OR F
TRUE
Which of the following statements is true of a sole proprietorship?
The sole proprietor is personally liable for the liabilities of the business.
Which of the following accounts would be used under the accrual basis of accounting, but not under cash basis accounting?
Unearned Revenue
York Casting Services started the year with total assets of $110,000 and total liabilities of $50,000. The revenues and the expenses for the year amounted to $140,000 and $50,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $70,000. Calculate the amount of increase or decrease in stockholders' equity for the year.
a $20,000 increase
definition of account
a detailed record of all decreases and increases that have occurred in a particular asset, liability, or equity during a period
define compound journal entry
a journal entry that is characterized by having multiple debts and or credits
define chart of accounts
a list of all accounts with their account numbers
define trial balance
a list of all accounts with their balances at some point in time
define journal
a record of transactions in date order
An adjusting entry that credits Salaries Payable is an example of a(n) ________.
accrued expense
The financial statements are prepared from the ________.
adjusted trial balance
asset
an economic resource that is expected to be of benefit in the future
accounting equation
assets= liabilities +assets
Which of the following accounts decreases with a credit?
cash
The entries that transfer the revenue, expense, and dividends balances to the Retained Earnings account to prepare the company's books for the next period are called ________.
closing entries
The taxable income of a sole proprietorship is ________.
combined with the personal income of the proprietor
Dogwood, Inc. earned revenues of $ 10,000 and incurred expenses of $ 7,500. The company declared and paid cash dividends of $ 1,000. What is the balance in the Income Summary account prior to closing net income or loss to the Retained Earnings account?
credit balances of $2,500
Classic Artists' Services signed a contract with a maintenance service company to maintain a building that Classic will use for office purposes. The contract states that the work will begin work on February 1 and end on May 31. Classic Artists' will pay the maintenance service company $ 8,000 at the end of May. It accrues Maintenance Expense at the end of every month. What is the balance in the Accounts Payable account for amounts owed to the maintenance service company at the end of March?
credit balances of $4,000
Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business's normal operating cycle if the cycle is longer than a year, are called ________ assets.
current
Salaries Payable, Interest Payable, and Unearned Revenue are examples of ________
current liabilities
For each of the users of accounting information, identify whether the user is an external decision maker (E) or an internal decision maker (I):
customer (E) company manager (I) internal revenue service (E) lender (E) investor (E) controller (I) cost accountant (I) SEC (E)
liability
debts owe to creditors
cahs dividends of $1,000 paid to stockholders
decrease asset: cash decrease equity: dividends
paid $1,000 for rent
decrease asset: cash decrease equity: rent expense
paid $400 wages to employees
decrease asset: cash decrease equity: wages expense
paid $400 for office supplies
decrease asset: cash increase asset: office supplies
expense
decreases in equity that occur in the course of selling goods or services
Corporations pay their own income tax on corporate income. Stockholders pay personal income tax on the dividends received from corporations. This is an example of ________.
double taxation
Corporations pay their own income tax on corporate income. Stockholders pay personal income tax on the dividends received from corporations. This is an example of ________.
double taxation
net loss
excess of total expenses over total revenue
net income
excess of total revenue over total expenses
Which of the following organizations is responsible for the creation and governance of accounting standards in the United States?
financial accounting standards board
Revenues and expenses are transferred to the ________ account before their final transfer into the Retained Earnings account.
income summary
earned $1,000 for services provided. customer has not paid yet
increase asset: accounts receivable increase equity: service revenue
earned and received $2,500 cash for service revenue
increase asset: cash decrease equity: service revenue
Purchased equipment for $ 5,000 on account.
increase asset: equipment increase liability: accounts payable
Investors contributed $ 10,000 to the corporation in exchange for common stock
increase assset: cash increase equity: common stock
received a bill for $ 250 for the monthly utilities. The bill has not yet been paid.
increase liability: accounts payable decrease equity: utilities expense
identify if this would be recorded as debit or credit
increase to accounts receivable (DR) decrease to unearned revenue (DR) decrease to cash (CR) increase to interest expense (DR) increase to salaries payable (CR) decrease to prepaid rent (CR) increase to common stock (CR) increase in notes recieveable (DR) decrease to accounts payable (DR) increase in interest revenue (CR)
revenue
increases in equity that occur over the course of selling goods or services
Managerial accounting provides information to ________.
internal decision makers
Transactions are first record in a ________.
journal
Which of the following is a measure of how quickly an item can be converted to cash?
liquidity
The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle.
matching
In a limited−liability company, the ________
members pay income tax on their share of earnings
Adjusting entries are needed to correctly measure the ________
net income (loss) on the income statement
Which of the following accounts decreases with a debit?
notes payable
identify as asset, liability, or equity
notes receivable (A) common stock (E) prepaid insurance (A) notes payable (L) rent revenue (E) taxes payable (L) rent expense (E) furniture (A) dividends (E) unearned revenue (L)
An account that is not closed at the end of the period is called a(n) _______
permanent account
Members of a Limited−liability company (LLC) are not
personally liable for the debts of the business
statement of cash flows
reports on a businesses cash receipts and cash payments during a period
balance sheet
reports on an entity's assets, liabilities, and stockholders equity as of a specific date
income statement
reports on an entity's revenues, expenses, and net income or loss for the period
statement of retained earnings
reports on how a company retained earnings balanced changed from the beginning to the end of a period
define normal balance
side of an account where increases are recorded
Which of the following is a major reason why corporate ownership is popular in the United States?
stockholders have limited liability for the debts of the corporation.
he company records furniture at its cost of $9,000, not its market value of $13,000
the cost principle
Michael's personal assets are not recorded on the company's balance sheet_________________
the economic entity asumption
Michael expects the company to remain in operations for the foreseeable future
the going concern assumption
define debit
the left side of the T account
he company records its financial statements in U.S. dollars:________
the monetary unit assumption
define ledger
the record holding of all the accounts of a business, the changes in those accounts, and their balance
define credit
the right side of the T account
Which of the following statements is true of a sole proprietorship?
the sole proprietor is personally liable for the liabilities of the business
define posting
transferring amounts from the journal to ledger
Posting a transaction means _______
transferring data from the journal to the ledger
Mutual agency of the owners is not present in a corporation as it is in a partnership T OR F
true
If a company is using accrual basis accounting, when should it record revenue?
when services are performed, even though cash may be received at a later date