Accounting Exam 1

Permanent accounts include all of the following except: A) Unearned Revenue. B) Prepaid Insurance. C) Depreciation Expense—Equipment. D) Accumulated Depreciation—Equipment. E) Accounts Receivable.

C

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is: A) Debit Office Supplies Expense $254 and credit Office Supplies $254. B) Debit Office Supplies $105 and credit Supplies Expense $254. C) Debit Office Supplies Expense $105 and credit Office Supplies $105. D) Debit Office Supplies $105 and credit Office Supplies Expense $105. E) Debit Office Supplies $254 and credit Office Supplies Expense $254.

C

The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: A) Revenue basis accounting. B) The time period assumption. C) Accrual basis accounting. D) Cash basis accounting. E) The expense recognition (matching) principle.

C) Accrual basis accounting.

A company recorded 2 days of accrued salaries of $1,400 for its employees on January 31. On February 9, it paid its employees $7,000 for these accrued salaries and for other salaries earned through February 9. Assuming the company does not prepare reversing entries, the January 31 and February 9 journal entries are:

1/31 Salaries Expense........................... 1400 Salaries Payable...................... 1400 2/9 Salaries Expense 5600 Salaries Payable 1400 Cash 7000

Sanborn Company has 10 employees, who earn a total of $1,800 in salaries each working day. They are paid on Monday for the five-day workweek ending on the previous Friday. Assume that year ended on December 31, which is a Wednesday, and all employees will be paid salaries for five full days on the following Monday. The adjusting entry needed on December 31 is: A) Debit Salaries Payable, $5,400; credit Salaries Expense, $5,400. B) Debit Salaries Expense, $9,000; credit Salaries Payable, $9,000. C) Debit Salaries Expense, $5,400; credit Salaries Payable, $5,400. D) Debit Salaries Expense, $5,400; credit Cash, $5,400. E) Debit Salaries Expense, $3,600; credit Salaries Payable, $3,600.

C

The statement of cash flows: A) Reports on cash flows for operating, financing, and investing activities at a point in time. B) Reports how equity changes over a period of time. C) Reports on cash flows for operating, financing, and investing activities over a period of time. D) Reports how equity changes at a point in time. E) Reports on amounts for assets, liabilities, and equity at a point in time.

C) Reports on cash flows for operating, financing, and investing activities over a period of time.

The rule that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash, and (3) measures the amount of revenue as the cash plus the cash equivalent value of any noncash assets received from customers in exchange for goods or services, is called the: A) Objectivity principle. B) Business entity assumption. C) Measurement (Cost) principle. D) Revenue recognition principle. E) Going-concern assumption.

D) Revenue recognition principle.

If equity is $300,000 and liabilities are $192,000, then assets equal: A) $192,000. B) $108,000. C) $792,000. D) $300,000. E) $492,000.

E

Which of the following accounting principles prescribes that a company record its expenses incurred to generate the revenue reported? A) Consideration assumption. B) Measurement (Cost) principle. C) Going-concern assumption. D) Business entity assumption. E) Expense recognition (Matching) principle.

E) Expense recognition (Matching) principle.

If assets are $99,000 and liabilities are $32,000, then equity equals: A) $67,000. B) $32,000. C) $99,000. D) $131,000. E) $198,000.

A

Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash. A) $7,000 decrease. B) $34,000 decrease. C) $61,000 increase. D) $37,000 increase. E) $7,000 increase.

A

Land

Asset and Debit

Notes Receivable

Asset and Debit

Prepaid Rent

Asset and Debit

A company reported total equity of $145,000 at the beginning of the year. The company reported $210,000 in revenues and $165,000 in expenses for the year. There were no stockholder investments or dividends during the year. Liabilities at the end of the year totaled $92,000. What are the total assets of the company at the end of the year? A) $92,000. B) $282,000. C) $45,000. D) $98,000. E) $210,000.

B

On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of equity as of May 31 of the current year? A) $49,700. B) $31,100. C) $20,500. D) $13,050. E) $40,400.

B

Prepaid accounts (also called prepaid expenses) are generally: A) Payments made for products and services that never expire. B) Assets that represent prepayments of future expenses. C) Classified as liabilities on the balance sheet. D) Promises of payments by customers. E) Decreases in equity.

B

A business's record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is known as a(n): A) Chart of accounts. B) Journal. C) Account. D) Posting. E) Trial balance.

C

Net Income: A) Represents stockholders' claims against assets. B) Equals assets minus liabilities. C) Is the excess of revenues over expenses. D) Decreases equity. E) Represents the amount of assets stockholders put into a business.

C) Is the excess of revenues over expenses.

The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash equivalent amount given in exchange, is the: A) Going-concern assumption. B) Realization principle. C) Measurement (Cost) principle. D) Business entity assumption. E) Accounting equation.

C) Measurement (Cost) principle.

Bologna Lodging had the following accounts and balances as of December 31: Account Debit Credit Cash $ 20,000 Accounts Receivable 2,000 Salaries Expense 500 Accounts Payable $ 4,000 Lodging Revenue 7,000 Utilities Expense 500 Prepaid Insurance 1,400 Supplies 1,500 Common Stock 10,000 Retained Earnings 4,900 Totals $ 25,900 $ 25,900 Using the information in the table, calculate the total assets reported on Bologna's balance sheet for the period. A) $ 22,500. B) $ 25,400. C) $ 25,900. D) $ 24,900. E) $ 23,400.

D

Unearned revenues are generally: A) Revenues that have been earned but not yet collected in cash. B) Recorded as an asset in the accounting records. C) Increases to common stock. D) Liabilities created when a customer pays in advance for products or services before the revenue is earned. E) Revenues that have been earned and received in cash.

D

Use the following information as of December 31 to determine equity. Cash $57,000 Building 175,000 Equipment 206,000 Liabilities 141,000 A) $57,000. B) $141,000. C) $438,000. D) $297,000. E) $579,000.

D

A company made no adjusting entry for accrued and unpaid employee wages of $28,000 on December 31. This oversight would: A) Understate net income by $28,000. B) Overstate assets by $28,000. C) Understate assets by $28,000. D) Overstate net income by $28,000. E) Have no effect on net income.

D) Overstate net income by $28,000.

Commissions Earned

Equity and Credit

Fees Earned

Equity and Credit

common stock

Equity and Credit

Advertising Expense

Equity and Debit

Dividends

Equity and Debit

Interest Payable

Liability and Credit

Unearned Rent Revenue

Liability and Credit