ACCOUNTING FINAL CH1-3

A company performed tax services for a client on account. The amount billed to the client was $6000. In transaction analysis, how does this transaction affect the accounting equation? Select one: A. Add $6000 to Accounts Receivable account and add $6000 to Retained Earnings account. B. Add $6000 to Cash account and add $6000 to Service Revenue account. C. Add $6000 to Cash account and add $6000 to Retained Earnings account. D. Add $6000 to Accounts Payable account and add $6000 to Service Revenue account.

A

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

A

An expense occurred in 2013, but it is not paid until 2014. Using the accrual basis of accounting, the expense should appear on: Select one: A. the 2013 income statement. B. the 2014 income statement. C. neither the 2013 nor the 2014 income statement. D. both the 2013 and 2014 income statements.

A

Company A received cash and issued stock to a new stockholder. In recording this transaction: Select one: A. Cash would be debited. B. Retained Earnings would be credited. C. Cash would be credited. D. Common Stock would be debited.

A

On June 1, 2014, Starbucks paid the rent of $60,000 for 30 different stores in Washington and California. The rent covers the period, June 1, 2014 through November 30, 2014. On June 1, Starbucks will record ________. On June 30, Starbucks will record ________. Select one: A. Prepaid Rent of $60,000; Rent Expense of $10,000 B. Rent Expense of $60,000; nothing C. nothing; Rent Expense of $10,000 D. nothing; Rent Expense of $60,000

A

Stockholders' equity as reported on the Balance Sheet does NOT include: Select one: A. short-term investments. B. common stock. C. retained earnings. D. additional paid-in capital. Check

A

The closing entry for the Salaries Expense account would include a debit to: Select one: A. Retained Earnings and a credit to Salaries Expense. B. Salaries Expense and a credit to Net Income. C. Salaries Expense and a credit to Retained Earnings. D. Net Income and a credit to Salaries Expense.

A

The expense recognition principle requires: Select one: A. the recognition of expenses in the same period as the related revenues are earned. B. the recognition of expenses using depreciation theories and methods. C. the recognition of expenses in the period the benefits are received. D. the recognition of expenses in the period they are paid

A

The following accounts and balances are taken from Jenny Company's adjusted trial balance: Accounts Payable $10,000 Accounts Receivable 3,000 Accumulated Depreciation 1,400 Depreciation Expense 1,500 Dividends 2,400 Insurance Expense 2,300 Interest Revenue 1,240 Prepaid Insurance 2,320 Retained Earnings 10,500 Salary Expense 24,100 Service Revenue 37,800 In the closing process, which accounts are debited? Select one: A. Service Revenue, Interest Revenue B. Depreciation Expense, Insurance Expense, Salary Expense, Dividends C. Accounts Payable, Retained Earnings D. Depreciation Expense, Insurance Expense, Salary Expense

A

The left side of a T-account is always the: Select one: A. debit side. B. increase side. C. decrease side. D. credit side.

A

The purchase of office computers for cash would include a debit to: Select one: A. Office Equipment and a credit to Cash. B. Accounts Receivable and credit to Office Equipment. C. Cash and a credit to Office Equipment. D. Office Equipment and a credit to Accounts Payable.

A

Jaye Company purchased a new building by signing a note for $20,000. The entry to record the transaction is: Select one: A. Building 20,000 Notes Payable 20,000 B. Note Payable 20,000 Cash 20,000 C. Building 20,000 Cash 20,000 D. Cash 20,000 Note Payable 20,000

A (Building 20,000 Notes Payable 20,000)

Information must be sufficiently transparent so that it makes sense to reasonably informed users of the financial statements, such as creditors. This qualitative characteristic of information is called: Select one: A. relevant. B. understandability. C. verifiability. D. faithful representative.

B

Notes payable (due in 60 days) would appear on the balance sheet as a: Select one: A. long-term liability. B. current liability. C. long-term asset. D. current asset.

B

Purchasing supplies on account would: Select one: A. increase total liabilities and increase stockholders' equity. B. increase total assets and increase total liabilities. C. increase total assets and decrease total liabilities. D. increase total liabilities and decrease total assets.

B

The entry made to close Service Revenue would include a debit to: Select one: A. Service Revenue and a credit to Net Income. B. Service Revenue and a credit to Retained Earnings. C. Retained Earnings and a credit to Service Revenue. D. Service Revenue and a credit to Dividends

B

The income statement: Select one: A. reports the results of operations since the inception of the business. B. covers a defined period of time. C. must cover only a month in time. D. is not dated.

B

The normal balance of a revenue account is a ________ because revenues increase ________. Select one: A. credit, assets B. credit, Retained Earnings C. debit, Retained Earnings D. debit, expenses

B

The process of verifying accounting information in financial statements is undertaken by: Select one: A. internal auditors only. B. internal and external auditors. C. the Securities and Exchange Commission. D. external auditors only

B

The stable monetary unit assumption: Select one: A. ensures that accounting records and statements are based on the most reliable data available. B. enables accountants to ignore the effect of inflation on the accounting records. C. holds that the entity will remain in operation for the foreseeable future. D. maintains that each organization or section of an organization stands apart from other organizations and individuals.

B

Which accounts are increased by debits? Select one: A. Accounts Payable and Service Revenue B. Accounts Receivable and Utilities Expense C. Cash and Accounts Payable D. Salaries Expense and Common Stock.

B

Which financial statement is dated at the moment in time when the accounting period ends? Select one: A. Statement of cash flows B. Balance sheet C. Income statement D. Statement of retained earnings and income statement Check

B

Connar Company reports the following accounts and balances at year end: Long-Term Notes Payable $150,000 Accounts Receivable $32,000 Accounts Payable $37,000 Building $55,000 Cash and Cash Equivalents $82,000 Salaries Expense $20,500 Common Stock $22,000 Interest Payable $1,500 Land $40,000 Short-term Investments $7000 Income Taxes Payable $15,000 Equipment $59,500 Supplies $5000 Service Revenue $99,000 Supplies Expense $18,000 Utilities Expense $8,500 Income Tax Expense $10,000 What is the total amount of current assets at the end of the year? Select one: A. $82,000 B. $126,000 C. $141,000 D. $114,000 Check

B (Cash and Cash Equivalents $82,000 + Short-term Investments $7000 + Accounts Receivable $32,000 + Supplies $5000 = $126,000 Cash and Cash Equivalents $82,000 + Short-term Investments $7000 + Accounts Receivable $32,000 + Supplies $5000 = $126,000)

A business sold equipment for $44,200 cash. They purchased the equipment one day earlier for $44,200 but changed their plans. Select one: A. Debit Retained Earnings for $44,200 and credit Equipment for $44,200. B. Debit Equipment for $44,200 and credit Retained Earnings for $44,200. C. Debit Cash for $44,200 and credit Equipment for $44,200. D. Debit Equipment for $44,200 and credit Cash for $44,200.

C

A company received $30,000 cash and issued common stock in exchange. In transaction analysis, how does this transaction affect the accounting equation? Select one: A. Add $30,000 to Dividends account and subtract $30,000 to Retained Earnings account. B. Add $30,000 to Cash account and add $30,000 to Retained Earnings account. C. Add $30,000 to Cash account and add $30,000 to Common Stock account. D. Add $30,000 to Cash account and add $30,000 to Revenue account.

C

A doctor performed surgery in April and did not receive cash payment from the patient until August. Under cash-basis accounting, the doctor recognizes revenue: Select one: A. in April or August. B. in April. C. in August. D. at a time that cannot be determined from the facts.

C

A journal entry that debits Cash and credits Accounts Receivable indicates that: Select one: A. revenue decreased. B. revenue increased. C. payment was received on account. D. payment was made on account.

C

Adjusting entries: Select one: A. are needed because errors have been made in previous journal entries. B. must be made on a daily basis to record supplies used during that day. C. are made before the financial statements can be prepared. D. are needed for all balance sheet accounts.

C

An account will have a debit balance if: Select one: A. the amount of the credits exceeds the amount of the debits. B. the account has more debit entries than credit entries. C. the amount of the debits exceeds the amount of the credits. D. it is a liability account.

C

On December 15, 2015, a company receives an order from a customer for services to be performed on December 28, 2015. Due to a backlog of orders, the company does not perform the services until January 3, 2016. The customer pays for the services on January 6, 2016. The revenue principle requires the revenue to be recorded by the company on: Select one: A. January 6, 2016. B. December 28, 2015. C. January 3, 2016. D. December 15, 2015.

C

The CORRECT data flow from one financial statement to the next is: Select one: A. balance sheet, statement of retained earnings, income statement, statement of cash flows. B. statement of retained earnings, income statement, balance sheet, statement of cash flows. C. income statement, statement of retained earnings, balance sheet, statement of cash flows. D. statement of retained earnings, income statement, statement of cash flows, balance sheet. Check

C

The payment for advertising costs for a monthly advertising campaign in the current month would include a: Select one: A. debit to Prepaid Advertising. B. credit to Advertising Revenue. C. debit to Advertising Expense. D. debit to Cash. Check

C

The purchase of equipment involving a cash down payment and a promise to pay the balance in the future would include: Select one: A. a debit to Note Payable and a credit to Cash. B. a debit to Cash and a credit to Equipment. C. a credit to Cash and a credit to Accounts Payable. D. a debit to Cash and a debit to Note Payable.

C

Which of the following statements about the rules of debits and credits is CORRECT? Select one: A. Dividends are decreased by debits. B. A liability is increased by a debit. C. Revenue is increased by a credit. D. An asset is increased by a credit.

C

Which transaction decreases stockholders' equity? Select one: A. provided services and received cash from the customer immediately B. purchase inventory on account C. Employees worked one week and were paid at the end of the week. D. provided services on account

C

On December 1, 2015, Carrie's Day Care receives $3000 in advance for an agreement to care for Susan's children for the months of December, January, and February. Carrie's Day Care will make an adjusting entry on December 31, 2015 to: Select one: A. credit Revenue for $3000. B. credit Prepaid Revenue for $2000. C. debit Unearned Revenue for $1000. D. credit Revenue for $2000.

C ( $3000 ÷ 3 = $1000 revenue per month × 1 month = $1000 revenue earned )

Beck Company had the following accounts and balances at the end of the year. What is net income or net loss for the year? Cash $74,000 Accounts Payable $12,000 Common Stock $21,000 Cost of Goods Sold $85,000 Dividends Declared and Paid $12,000 Operating Expenses $17,000 Accounts Receivable $50,000 Inventory $40,000 Long-term Notes Payable $33,000 Revenues $90,000 Salaries Payable $24,000 Select one: A. Net income of $90,000. B. Net income of $5000. C. Net loss of $12,000. D. Net income of $73,000.

C (Revenues $90,000 - Cost of Goods Sold $85,000 - Operating Expenses $17,000 = Net Loss $12,000 Revenues $90,000 - Cost of Goods Sold $85,000 - Operating Expenses $17,000 = Net Loss $12,000)

Decision makers who use accounting information include: Select one: A. the Internal Revenue Service. B. the Securities and Exchange Commission. C. creditors. D. all of the above.

D

In 1960, Johnson Company purchased a building for $110,000. In 2013, a real estate professional says the building has a fair value of $1,800,000. In 2013, a similar building down the street recently sold for $900,000. What value is reported for the building on the balance sheet at December 31, 2013? Select one: A. $955,000 B. $1,800,000 C. $900,000 D. $110,000

D

On December 31, 2014, salaries owed to employees total $4050. These will be paid on January 4, 2015. An adjusted trial balance prepared on December 31, 2014, includes which of the following? Select one: A. Unearned Salaries, $4050 and Salaries Payable, $4050 B. Salaries Payable, $4050 and Unearned Salaries Revenue, $4050 C. Unearned Salaries, $4050 D. Salaries Expense, $4050 and Salaries Payable, $4050

D

On May 10, a business collected $2400 on account. What journal entry is needed on May 10? Select one: A. Debit Accounts Payable for $2400 and credit Revenue for $2400. B. Debit Accounts Payable for $2400 and credit Accounts Receivable for $2400. C. Debit Accounts Receivable for $2400 and credit Revenue for $2400. D. Debit Cash for $2400 and credit Accounts Receivable for $2400.

D

Prepaid expenses will: Select one: A. become liabilities when their future benefits expire. B. become assets when their future benefits expire. C. become revenues when their future benefits expire. D. become expenses when their future benefits expire.

D

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

D

Andy Company had a Cash balance on May 1 of $31,000. At the end of May, the Cash balance had increased to $28,000. During the month of May, Andy received cash of $48,000 from various sources. Based on this information, cash payments for the month of May were: Select one: A. $79,000. B. $28,000. C. $31,000. D. $51,000.

D ($31,000 + $48,000 - $28,000 = $51,000)

The accounts of Yardy Company are as follows on November 30, 2015: Account Balance Accounts Payable $23,500 Accounts Receivable $17,600 Cash $69,000 Common Stock $37,000 Dividends $8000 Insurance Expense $2100 Retained Earnings $26,800 Salary Expense $10,000 Sales Revenue $14,000 Supplies $3500 What is the total of the debit column in the trial balance at November 30, 2015? Select one: A. $211,500 B. $95,300 C. $102,200 D. $110,200

D (Cash $69,000 + Accounts Receivable $17,600 + Supplies $3500 + Dividends $8000 + Insurance Expense $2100 + Salary Expense $10,000 = $110,200)

A company has the following adjusted trial balance: Account Debit Credit Cash $900 Accounts Receivable 1100 Inventory 2100 Supplies 1800 Prepaid Rent 700 Land 5500 Building 40,200 Accumulated Depreciation $8700 Accounts Payable 7200 Unearned Revenue 4300 Notes Payable, lti 2000 Common Stock 6500 Retained Earnings 3000 Dividends 900 Service Revenue 33,400 Rent Expense 1400 Supplies Expense 1200 Salaries Expense 6300 Depreciation Expense 1600 Utilities Expense 1400 ____________________________ Totals $65,100 $65,100 What closing entries are needed? Select one: A. Debit Dividends for $900 and credit Retained Earnings for $900 B. Debit Rent Expense for $1400 and credit Retained Earnings for $1400 C. Credit Retained Earnings for $2100 and debit Cash for $2100 D. Debit Service Revenue for $33,400 and credit Retained Earnings for $33,400

D (Debit Service Revenue for $33,400 and credit Retained Earnings for $33,400)

Potter Company reports the following line items: Long-Term Notes Payable $50,000 Accounts Receivable $28,000 Accounts Payable $37,000 Building $55,000 Cash and Cash Equivalents $80,000 Salaries Expense $24,500 Common Stock $23,000 Interest Payable $1,500 Land $40,000 Short-term Investments $5,000 Income Taxes Payable $10,000 Equipment $59,500 Supplies $5,000 Service Revenue $105,000 Supplies Expense $21,000 Utilities Expense $13,500 Income Tax Expense $15,000 What is net income? Select one: A. $55,500 B. $105,000 C. $23,000 D. $31,000

D (Service Revenue $105,000 - Supplies Expense $21,000 - Utilities Expense $13,500 - Income Tax Expense $15,000 - Salaries Expense $24,500 = $31,000 Service Revenue $105,000 - Supplies Expense $21,000 - Utilities Expense $13,500 - Income Tax Expense $15,000 - Salaries Expense $24,500 = $31,000)

Yellow Company had a balance of $32,000 in Accounts Payable at the beginning of June, and purchased $102,000 of merchandise on account during the month. At the end of June, Yellow's Account Payable balance was $29,000. What amount did Yellow pay on account during June? Select one: A. $73,000 B. $102,000 C. $41,000 D. $105,000

D ($32,000 + $102,000 - $29,000 = $105,000)

The assets of a company: Select one: A. represent economic resources that are expected to produce a future benefit. B. include short-term investments and notes payable. C. include property, plant, and equipment and accounts payable. D. must equal the liabilities of the company.

a

The balance sheet contains the: Select one: A. ending balance in retained earnings. B. amount of net income or net loss. C. beginning balance in retained earnings. D. amount of cash dividends paid to stockholders.

a

The two types of accounting are: Select one: A. financial and managerial. B. profit and nonprofit. C. internal and external. D. bookkeeping and decision-oriented.

a

If a company prepares its financial statements three years after the end of their accounting period, they have violated the qualitative characteristic of: Select one: A. materiality. B. timeliness. C. verifiability. D. understandability.

b

Net income is computed as: Select one: A. revenues + expenses. B. revenues - expenses. C. revenues - expenses - dividends. D. revenues - expenses + dividends.

b

The accounting equation can be stated as: Select one: A. Assets = Liabilities - Stockholders' Equity. B. Assets -Liabilities = Stockholders' Equity. C. Assets + Stockholders' Equity = Liabilities. D. Assets - Stockholders' Equity + Liabilities = Zero.

b

The major types of transactions that affect retained earnings are: Select one: A. revenues and liabilities. B. revenues, expenses, and dividends. C. paid-in capital and common stock. D. assets and liabilities.

b

Verifiability means that the information: Select one: A. is material and relevant. B. must be capable of being checked for accuracy, completeness and reliability. C. is understandable. D. is timely and understandable.

b

Revenues were $150,000, expenses were $144,000, and cash dividends declared and paid were $4000. What was the net income and the change in retained earnings for the period? Select one: A. Net income was $6000; the change in retained earnings was $6000. B. Net income was $6000; the change in retained earnings was $2000. C. Net income was $150,000; the change in retained earnings was $146,000. D. Net income was $150,000; the change in retained earnings was $10,000. Check

b (Net income = $150,000 - $144,000 = $6000 Retained earnings increased by $6000 for net income, and decreased by $4000 for dividends declared for a net change of $2000. Net income = $150,000 - $144,000 = $6000 Retained earnings increased by $6000 for net income, and decreased by $4000 for dividends declared for a net change of $2000.)

A construction company paid $80,000 cash for equipment used in the business. At the time of purchase, the equipment had a list price of $88,000. When the balance sheet was prepared, the fair value of the equipment was $83,000. At what amount should the equipment be reported on the balance sheet of the company? Select one: A. $88,000 B. $84,000 C. $80,000 D. $83,000

c

To be useful, accounting information must have the fundamental qualitative characteristics of: Select one: A. comparability and relevance. B. faithful representation and timeliness. C. relevance and faithful representation. D. materiality and understandability.

c

Census Company had the following accounts and balances at the end of the year. What are total liabilities at the end of the year? Cash $74,000 Accounts Payable $16,000 Common Stock $21,000 Cost of Goods Sold $85,000 Dividends Declared and Paid $12,000 Operating Expenses $12,000 Accounts Receivable $50,000 Inventory $40,000 Long-term Notes Payable $33,000 Revenues $90,000 Salaries Payable $24,000 Select one: A. $16,000. B. $40,000. C. $73,000. D. $49,000.

c (Accounts Payable $16,000 + Long-term Notes Payable $33,000 + Salaries Payable $24,000 = $73,000)