Accounting Exam 2

an accrued asset can also be called A) an accrued revenue. B) an accrued contra asset. C) a deferred expense. D) an accrued expense. E) a prepaid expense.

an accrued revenue

A deferred expense could also be called A) an asset. B) a contra asset. C) an accrued expense. D) a contra revenue. E) a liability.

an asset

Prepaid expenses will become ________ when their future benefits expire. A) assets B) expenses C) liabilities D) revenues

expenses

A doctor performed surgery in March and did not receive cash from the patient until July. Under accrual accounting, the doctor recognizes revenue: A) in July. B) in March. C) in either March or July. D) at a time that cannot be E) determined from the facts.

in March

What type of account is Dividends and on which financial statement is it reported?

Account type: Contra equity Reported on: Statement of Retained Earnings

What is a revenue that has been earned but not yet collected called?

Accrued Revenue

Which account is credited in the adjusting entry to allocate the cost of equipment? A) Accumulated Equipment B) Equipment Expense C) Accumulated Depreciation- Equipment D) Depreciation Expense-Equipme

Accumulated Depreciation - Equipment

What are the 3 permanent accounts?

Assets Liabilities Stockholders equity

In preparing a bank reconciliation, all of the following would be used to adjust the balance per books, EXCEPT: A) Bank service charges B) Customer note collected C) Deposits in transit D) Interest on bank accounts E) NSF customer checks

Deposits in transit

Which of the following accounts would not have have a balance on the Post Closing Trial Balance? A) Unearned revenues B) Retained Earnings C) Dividends D) Prepaid expenses E) Accumulated depreciation

Divedends

Which one of the following is an example of an deferred expense? A) Cash has been received from customers for work that is to be completed in future periods. B) The utility bill for the current month has been paid. C) Customers made payments on their accounts. D) Wages have been earned by employees, but have not been paid at the end of the period. E) Equipment that has a useful life of ten years has been purchased.

Equipment that has a useful life of ten years has been purchased

Which of the following would be items that would be subtracted from balance per bank in a bank reconciliation: A) Customer's NSF check and outstanding checks. B) Outstanding checks and a deposit of $1,100 that was recorded as $11,000 by the bank. C) Service charge for a lock box and outstanding checks. D) Deposit in transit, interest earned on an account, and customer NSF check. E) Deposit in transit and a customer's NSF check.

Outstanding checks and a deposit of $1,100 that was recorded as $11,000 by the bank

Wolverine, Inc. has the following account balances related to its 2016 operations: Repair Revenues 840,000 Insurance Expense 85,000 Wages and Salaries 240,000 Advertising 1,500 Depreciation Expense 13,000 Unearned Revenue 120,000 Equipment Rentals Revenues 56,000 Accum. Depreciation 25,000 Which of these accounts would be debited in the closing entries?

Repair revenues and Equipment rentals revenue only

Interest payable, income tax payable and salary payable are all examples of: A) retained earnings. B) prepaid expenses. C) expenses of future periods. D) accrued liabilities.

accrued liabilities

Which of the following accounts would have balances on a post closing trial balance? A) Dividends B) Interest revenue C) Utilities expense D) Loss on Sale of Equipment E) Accumulated depreciation

accumulated depreciation

Adjusting entries: A) adjust Cash. B) close the expense accounts. C) close the revenue accounts. D) adjust Unearned Revenue.

adjust unearned revenue

Definition of accrual

an accrual is the opposite of a deferral. It is an expense or revenue that occurs before the business pays or receives cash

An accrued liability could also be called A) an accrued expense. B) an accrued contra asset. C) a deferred expense. D) an accrued revenue. E) unearned revenue.

an accrued expense

The following balance sheet items, listed in alphabetical order, are available from the records of Breaking Bad Company as of December 31, 2015. Accounts payable 300,000 Income taxes payable 50,000 Accounts receivable 200,000 Interest payable 100,000 Accumulated Depreciation - buildings 50,000 Marketable securities 250,000 Accumulated depreciation - equipment 25,000 Notes payable, due March 1, 2025 300,000 Buildings 200,000 Office supplies 100,000 Capital stock 10,000 Patents 200,000 Cash 100,000 Retained Earnings 315,000 Equipment 100,000 Total total non-current assets is $

$425,000 (Eqip + Buildings + Patents - Accum dep buildings - accum dep equip)

What type of account is Accounts Receivable and on which financial statement is it reported?

Account type: Asset Reported on: Balance sheet

Given the following activity for Caprock Company during the month of February, how much total expense would Caprock Company recognize on the February income statement using accrual accounting? Feb. 1 Caprock paid a total of $3,000 for 3 months of automobile insurance. The coverage on the insurance policy included the months of February, March, and April. Feb. 5 Caprock paid $5,000 to its landlord for February rent. Feb. 10 Caprock paid $4,000 on an accounts payable that had been recorded in January. Feb. 27 Caprock received the bill for the February utilities, and recorded $5,000 in accounts payable on that date. The bill will be paid in March.

11,000 (Feb 1 3,000/3 = 1,000 + Feb 5 Rent exp = 5,000 + Feb 27 Util exp 5,000)

The Marjan Company's bank statement showed a balance of $14,087 on March 31, 2017. In searching its records and the bank statement, Marjan found the following: Outstanding checks $856 Bank service charges 80 Non-sufficient funds checks 907 Deposits in transit 1,640 Customer note collected by the bank 1,020 Based on this financial information, what should be the adjusted bank balance on the bank reconciliation?

14, 871 (balance + DIT - Outstanding checks)

Andy, Inc. was in the process of reconciling its bank balance with the company records and found an unadjusted book balance of $17,120, outstanding checks of $2,065, non-sufficient funds (NSF) checks of $508, deposits in transit of $1,650, bank service charges of $75, a customer note collected by the bank of $3,000 and interest on the note collected of $40. The adjusted book balance on the bank reconciliation should be?

19,577 (balance + customer note + collection of note interest - NSF - Bank charge)

On October 31, 2016, Siri Studios, Inc. had a balance per their records of $15,015. In reconciling their October 31, 2016 bank statement, Siri found outstanding checks of $4,500, a deposit in transit of $8,300, NSF checks of $1,400, and bank service charges of $88. Additionally, the October 23rd deposit of $8,100 was incorrectly recorded as $1,800 in the records of Siri. The adjusted cash balance should be?

19,827 (cash balance + book error - NSF - bank service charge)

On September 1, Tucker Inc. received $30,000 from a customer who would like Tucker to provide services evenly over the next five months. Using the revenue recognition principle, how much would Tucker record as revenue for the year from this job?

24,000 (30,000/ 5 months= 6,000 6,000 x 4 months left in year = 24,000

Movie 16 Theaters, Inc. has the following information for March 31, 2016: balance per the company records, $8,684; outstanding checks of $14,400, a deposit in transit of $5,220, bank service charge of $310, and NSF checks of $4,225. What is the adjusted cash balance? (Do Not enter dollar signs.)

4,149 8,684 - 310 - 4,225

The following balance sheet items, listed in alphabetical order, are available from the records of Breaking Bad Company as of December 31, 2015. Accounts payable 300,000 Income taxes payable 50,000 Accounts receivable 200,000 Interest payable 100,000 Accumulated Depreciation - buildings 50,000 Marketable securities 250,000 Accumulated depreciation - equipment 25,000 Notes payable, due March 1, 2025 300,000 Buildings 200,000 Office supplies 100,000 Capital stock 10,000 Patents 200,000 Cash 100,000 Retained Earnings 315,000 Equipment 100,000 Total current liabilities is?

450,000 Accounts Payable + Interest Payable + Income Taxes Payable

Using the following information determine the amount that Pearson will report as Cash and Cash Equivalents on the Balance Sheet at the end of December. Cash is checking account $10,000 Petty cash 580 Postage Stamps 654 Check from customer dated Jan 20, next year 321 3-month certificate of deposit 35,000 12- month certificate of deposit 35,000 Check from customer dated Dec 15, this year 175 Undeposited Cashier's Checks from customer 729 IOU from customer 500 6-month U.S. Treasury bill purchased 4 months ago 2,500 2-month high-grade Canada government security purchased 1 month ago 1,000 Cash in savings account 100 Accounts Receivable 3,700 1-month U.S. Treasury bill purchased 2 weeks ago 2,000 Time Deposits 1,600

51,184 (Cash in checking + Petty cash + 3 month CID + Check from Dec 15 + Undeposited Cashiers check + 2 month Canada gov security + cash in savings + 1 month treasury bill + time deposits)

Black and Red Corp. has the following accounts and balances as of December 31, 2017. Accounts payable 23,000 Inventory 50,000 Accounts receivable 25,000 Interest payable 10,000 Accum. Depreciation 17,000 Marketable securities 30,000 Capital stock 90,000 Notes Payable due Mar. 4, 2022 60,000 Cash 32,000 Patents 25,000 Customer deposits 19,000 Prepaid insurance 6,000 Equipment 80,000 Retained earnings 29,000 The total current liability amount is $

52,000 (AP + Int pay + Customer deposits)

The following balance sheet items, listed in alphabetical order, are available from the records of Breaking Bad Company as of December 31, 2015. Accounts payable 300,000 Income taxes payable 50,000 Accounts receivable 200,000 Interest payable 100,000 Accumulated Depreciation - buildings 50,000 Marketable securities 250,000 Accumulated depreciation - equipment 25,000 Notes payable, due March 1, 2025 300,000 Buildings 200,000 Office supplies 100,000 Capital stock 10,000 Patents 200,000 Cash 100,000 Retained Earnings 315,000 Equipment 100,000 Total current assets is

650,000 Cash + AR + Marketable Securities + Office Supplies

Use the following data to answer the question presented below for Linda Company's preparation of a bank reconciliation on October 31, 2015: Bank Statement balance $12,800 Outstanding checks 8,400 NSF checks 5,200 Service charges 400 Deposits in transit 3,500 Interest earned on checking account 100 What is the adjusted cash balance on October 31, 2015?

7,900 (Bank statement balance + DIT - Outstanding checks)

During the month of October, Labrador, Inc. provided $300,000 of services for cash and $500,000 of services on account. Also during October, Labrador's customer paid $400,000 on their accounts. How much should Labrador report as revenues for October using accrual accounting?

800,000 (cash + services on account)

Bagel Corp. billed a customer $125,000 for service performed during the month of September. The journal entry to reflect this billing would be:

Debit: Accounts receivable Credit: Service Revenue

On September 19, Beagle Corp. received payment of $40,000 for services provided to a customer in August. The September 19 journal entry would be: Debit: Credit:

Debit: Cash Credit: Accounts Receivable

What would the journal entry to record $500 worth of depreciation be?

Debit: Depreciation expense 500 Credit: Accumulated Depreciation 500

Big Daddy Auto Parts, Inc. has an office supplies account that had a January 1st balance of $13,450. During the year, Big Daddy Auto purchased $24,360 in office supplies. On December 31st, a count of the office supplies revealed that there were $7,500 remaining. On December 31st, Big Daddy's adjusting entry for office supplies should be: Use the following abbreviations for accounts to fill in the blanks: AR = Accounts Receivable AP = Accounts Payable OS = Office Supplies Inventory OE = Office Supplies Expense Debit: Credit: $:

Debit: Office supplies expense Credit: Office Supplies Inventory $: 30,310 (24,360+13,450-7,500)

What accounts would be debited and credited to record the prepayment of three months rent?

Debit: Prepaid Rent Credit: Cash

What accounts would be debited and credited to make the adjustment after the prepaid rent is used up?

Debit: Rent Expense Credit: Prepaid Rent

On November 1, NASA rented some office space in Houston for twelve months paying $30,000 in advance for the 12-month rental. NASA adjusts accounts annually on December 31st for its financial report. The appropriate adjusting entry for NASA's office rent on December 31st would be:

Debit: Rent exp Credit: Prepaid rent $: 5,000 (30,000/12 x 2)

On September 1, 2017, Kian Co. recorded an Unearned Revenues account, a liability, for $66,000. This amount represents an amount that a customer paid in advance and the amount will be recognized in Service Fees evenly over a six-month period. The adjusting entry needed on December 31, 2017, would be: Debit: Credit: $:

Debit: UR Credit: Service Fees $: 44,000 (66,000/1.5)

What are the three categories of accounting and adjusting entries?

Deferrals, Depreciation, and Accruals

What type of account is Accumulated depreciation? What is its normal balance?

It is a contra asset account with a normal credit balance

On March 25, its first day of operations, Ladybug Inc. purchased $1,200 of office supplies on account. On March 31st, Ladybug had $800 of office supplies on hand. On April 5th Ladybug paid for the supplies it had purchased on account on March 25th. Under accrual accounting which of the following statements about recognizing supplies expense is correct? A) Ladybug should recognize $400 of supplies expense in March. B) Ladybug should not recognize any supplies expense in March. C) Ladybug should recognize $1,200 of supplies expense in April. D) Ladybug should recognize $1,200 of supplies expense in March. E) Ladybug should recognize $800 of supplies expense in March

Ladybug should recognize $400 of supplies expense in March

Which of the following accounts are considered permanent accounts? A) Land and Accounts Receivable B) Common Stock and Salary Expense C) Inventory and Cost of Goods Sold D) Accounts Payable and Service Revenue

Land and Accounts Receivable

On a classified balance sheet: A) Accounts Receivable is a current liability. B) Salaries Payable is a long-term liability. C)Notes Payable due in one year is a current liability. D) Dividends is a current asset.

Notes Payable due in one year is a current liability

In preparing a bank reconciliation, all of the following would be used to adjust the balance per books, EXCEPT: A) Outstanding checks. B) Interest on bank accounts. C) Bank service charges. D) NSF customer checks. E) Error made in company's records.

Outstanding Checks

The closing entry for the Salaries Expense account includes a debit to: A) Salaries Expense and a credit to Retained Earnings. B) Retained Earnings and a credit to Salaries Expense. C) Net Income and a credit to Salaries Expense. D) Salaries Expense and a credit to Net Income.

Retained earnings and a credit to salaries expense

Which of the following would be an accrual adjustment? A. Salary Expense B. Unearned revenue C. Service Revenue D. All of the Above

Salary Expense

What is the document that lists all the accounts and their final adjusted balances in a single place called?

The adjusted trial balance

________ will be increased when a company receives cash before performing the services. A) Accumulated Depreciation B) Unearned Service Revenue C) Accrued Salaries Payable D) Service Revenue

Unearned Service Revenue

Badger, Inc. has the following account balances related to its 2016 operations: Repair Revenues $840,000 Prepaid Expenses $85,000 Wages and Salaries 240,000 Dividends 1,500 Depreciation Expense 13,000 Unearned Revenue 120,000 Interest Revenue 6,000 Accum. Depreciation 25,000 Which of these accounts would be credited in the closing entries?

Wage and Salaries, Depreciation Expense, and Dividends only

The revenue principle deals with the following: A) when to record revenue and when to record related expenses. B) when to record revenue and the amount of revenue to record. C) when to record revenue and where to record this revenue. D) where to record revenue and the amount of revenue to record.

When to record revenue and the amount of revenue to record

What is the definition of a deferral?

a deferral is an adjustment for payment of an item or receipt of cash in advance

A type of liability resulting from the receipt of cash before the recognition of revenue is A) a deferred expense B) an accrued liability C) a cost allocation D) an accrued asset E) a deferred revenue

a deferred revenue

A deferred revenue could also be called A) a contra revenue. B) a contra asset. C) an accrued revenue. D) a liability. E) an asset.

a liability

The entry to close expense accounts includes a A) credit to Retained Earnings. B) debit to the expense accounts. C) debit to the revenue accounts. D) credit to the expense accounts.

credit to the expense accounts

When preparing the financial statements of a company: A) liabilities are not classified on the balance sheet. B) current assets are the most liquid assets. C) the income statement can be prepared using the multistep or report format. D) the balance sheet must be prepared using the account format.

current assets are the most liquid assets

Definition of depreciation

depreciation allocates the cost of a plant asset to expense over the asset's useful life

Accounts that relate to a limited period of time are called: A) temporary accounts. B) asset and liability accounts. C) real accounts. D) permanent accounts.

temporary accounts

With an accrual revenue A) the cash is received after the revenue is recorded. B) the cash is received before the revenue is recorded. C) prepaid expenses can create an accrual adjustment. D) plant assets can create an accrual adjustment.

the cash is received after the revenue is recorded

After the closing entries are prepared and posted: A) all liability accounts will have a zero balance. B) the temporary accounts will have debit balances. C) the Retained Earnings account will have the correct ending balance. D) all asset accounts will have a zero balance.

the retained earnings account will have the correct ending balance

Under accrual accounting, revenue is recorded: A) when the cash is received, regardless of when the services are performed. B) only if the cash is received at the same time the services are performed. C) at the end of every month. D) when the services are performed, regardless of when the cash is received.

when the services are performed, regardless of when cash is received