Accounting Final Exam
For Year 2 Daisy Corporation reported net income of $60; net sales $800; and average shares outstanding 6. There were no preferred stock dividends. What were the Year 2 earnings per share for Daisy?
$10.00
liabilities
Creditor claims against the assets of the business
Cash, Accounts Receivable and Prepaid Insurance will be classified on a balance sheet as
Current assets
A list of all the accounts used by a company
Chart of accounts
Includes only permanent-balance sheet-accounts
Post closing trial balance
A company would be expected to generate small amounts of cash from operations during the
Growth phase
If a company uses the direct write-off method of accounting for bad debts,
It will record bad debt expense only when an account is determined to be uncollected
assets
Involves acquiring the resources necessary to run the business
Which of the following is the most appropriate and modern definition of accounting?
the information system that identifies, records, and communicates the economic events of an organization to interested users
At the year-end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of:
the buyer
The excess of current assets over current liabilities
Working capital
Increases assets and liabilities
The purchase of an asset on credit
A Premium on Bonds Payable account would appear on the balance sheet as
An addition to a long term liability
Materiality
An item important enough to influence the decision of an investor of creditor
Noncurrent assets that do not have physical substance
Intangible assets
A business organized as a separate legal entity from its owners is a:
corporation
If the market intrest rate for a bond is higher than the stated intrest rate, the bond will sell at
discount
Consumed assets or services
expenses
Which of the following is not one of the three forms of business organization?
investors
Failure to record depreciation expense for the period results in which of the following?
both a and c
Par value represents the
Arbitrary amount that establishes a minimum price for the stock when it is first issued
The book value of an asset is equal to the
Asset's cost less accumulated depreciation
Which one of the following represents the expanded basic accounting equation?
Assets = liabilities + common stock + retained earnings + revenues - expenses - dividends
If a corporation repurchases 500 shares of its previously-issued common stock for $5,000 and then reissues it for $4,000, which of the following statements is true regarding the difference in the amounts of the repurchase and reissuance?
It is a decrease in stockholders' equity.
Expenses paid before they are incurred
Prepaid Expenses
Transferring journal entries to ledger accounts
posting
Information that has a bearing on a decision
relevance
Which of the following companies would most likely have the highest inventory turnover?
A bakery
Efforts are related to accomplishments
Expenses recognition principle
The common characteristic possessed by all assets is
Future economic benefit
If a company determines cost of goods sold each time a sale occurs, it
Uses a perpetual inventory system
If a company has assets of $5,000,000, liabilities of $3,000,000, and retained earnings of $1,200,000, how much is total stockholders' equity?
$2,000,000
The interest charged on a $400 note payable, at the rate of 6%, on a 90-day note would be
$6
Given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. cash basis of accounting. Revenues recognized $19,000 Accounts receivable 3,000 Expensesss incurred 7250 Accounts payable (related to expenses) 750 Supplise purchased with cash1,800
$8,750
Carnegie Jewelers accepted a 9-month, 9% note for $100,000 from a customer on July 1, 2019. The note is due on March 31, 2020. Assuming the company's accounting period ends on December 31, 2019, how much interest revenue should be recognized during 2019 and 2020?
2019 - $4,500 2020 $2,250
Some of the steps in the accounting cycle are listed below. Select the choice that places these steps in the correct order. 1 Close the accounts. 2 Post transactions to accounts in the ledger. 3 Journalize daily transactions. 4 Record and post adjustments. 5 Prepare financial statements.
3,2,4,5,1
Which of the following is not classified properly as a current asset?
A receivable from the sale of an asset to be collected in two years
Revenues earned but not yet received
Accrued Revenue
Expenses incurred but not yet paid
Accrued expenses
Revenues earned but not yet received
Accrued revenues
Which of the following correctly identifies normal balances of accounts?
Assets debit Liabilities credit Common stock credit Revenues credit Expenses debit
Powers Corporation received a cash advance of $500 from a customer. As a result of this event,
Assets increased by $500
Plant assets are ordinarily presented in the balance sheet
At cost less accumulated depreciation
Madson Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 90,000 subscriptions in January at $10 each. What entry is made in January to record the sale of the subscriptions?
B cash 900,000 Unearned subscription revenue900,000
Cost less accumulated depreciation
Book Value
Cost less accumulated depreciation
Book value
The Discount on Bonds Payable account is shown on the balance sheet as
Contra Liability
Each of the following documents is used in the control of cash disbursements except
Cash register tapes
A Discount on Bonds Payable account would appear on the balance sheet as
Contra-liability
Different companies using the same accounting principles
Comparability
Same accounting principles and methods used form year to year within a company
Consistency
Expenses
Consumed assets or services
A corporation purchased a three-year insurance policy on December 1, Year A for $7,200. Assuming that the. corporation debited the prepaid insurance account in recording the original transaction, the adjusting entry on December 31, Year A, the company's yearend, will include a:
Credit to prepaid insurance $200
Current ratio
Current assets divided by current liabilities
Current assets divided by current liabilities
Current ratio
What is the order in which assets are generally listed on a classified balance sheet?
Current, long term investment; property, plant and equiptment, intanggibles
All of the following are examples of internal control procedures except
Customer satisfaction surveys
Revenue recognition principles
Depreciation
Which of the following methods will result in the highest depreciation in the first year?
Declining balance
For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except to:
Determine ownership of the goods
Dividends
Distribution of cash from a corporation to its stockholders
Distribution of cash from a corporation to its stockholders
Dividends
The revenue recognition principle dictates that revenue should be recognized in the accounting period in which it is:
Earned
(net income - preferred stock dividents) dividend by average common shares outstanding
Earnings per share
Economic events can be identified with a particular unit of accountability
Economic entity assumption
Cash Basis
Events recorded only in periods the company receives or pays cash
Under the accrual basis of accounting:
Events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.
If a company fails to adjust for accrued expenses, what effect will this have on that month's financial statements?
Expenses will be understated and net income and stockholders' equity will be overstated.
In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?
FIFO method
Which of the following terms fit this definition: "The area of accounting principally concerned with reporting to external users."
Financial accounting
Cash from operating activities less capital expenditures and cash dividends
Free cash flow
The current portion of long-term debt should
Incompatible duties
Which of the following is not one of the main factors that contribute to fraudulent activity?
Incompatible duties
Officers and others who manage the business
Internal users
Creditor claims against the assets of the business
Liabilities
Liquidity Ratios
Measures of the short-term ability of the enterprise pay its maturing obligations
The side which increases an account
Normal balance
If common stock is issued for an amount greater than par value, the excess should be credited to
Paid in cpaital in excess of par value
Expenses paid before they are incurred
Prepaid expenses
Which of the following would be unethical?
Recording backdated revenue
Which of the following would be deducted from the balance per bank on a bank reconciliation?
Service Charges
Income statement accounts are also known as which of the following?
Temporary accounts
Plant assets are depreciated because
The accrual basis of accounting requires matching of costs to revenues
Net Income may be defined as follows
The excess of revenues over expenses for the time period
Which of the following is not a significant date with respect to dividends?
The incorporation date
If goods in transit are shipped FOB destination
The seller has legal title to the goods until they are delivered.
A list of accounts and their balanes at a given time
Trial balance
Under accrual accounting when is revenue recognized?
When earned, and expenses when incurred.
A current liability is a debt that can reasonably be expected to be paid
Within one year, or the operating cycle, whichever is longer.
An accounting record of increase and decreases in specific assets, liabilities, and stockholders equity items
account
The category that is generally considered to be the best measure of a company's ability to continue as a going concern is
cash flows from operating activities.
A list of all the accounts used by a company
chart of accounts
Left side of an account
debit
Left side of the account
debit
Shows the debit and credit effects of specific transactions
journal
An item important enough to influcene the decision of an investor or creditor
materiality
Shows the debit and credit effects of specific transactions
normal account balance
A very small company would have the most difficulty in implementing which of the following internal control activities?
separation of duties.
Dividends in arrears on cumulative preferred stock
Must be paid before common stockholders can receive a dividend
A check returned by a bank because the issuer's cash account balance could not cover the check is called a(n)
NSF check
A company purchased equipment for $150,000 cash. What is the effect on total assets?
No Net Effect
Which of the following is not a current liability?
Notes payable due in two years
Internal users
Officers and others who manage the business
Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment? This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.
$0.10
A credit sale of $1,400 is made on July 15, terms 2/10, net/30, on which a return of $100 is granted on July 18. What amount is received as payment in full on July 24?
$1,274
June 1 On hand, 50 units at $18.00 each $ 900.00 4 Purchased 115 units at $18.20 each $2,093.00 5 Sold 100 units 10 Purchased 75 units at $18.25 each $1,368.75 24 Sold 50 units Total cost of goods available for sale $4,361.75 30 On hand, 1000 units Refer to the information provided for Klump Co. If the company uses the FIFO inventory costing method, the amount of ending inventory reported on the balance sheet is:
$1,823.75
2020 2019 Net income $ 150,000 $ 120,000 Cash dividends paid on preferred stock 15,000 15,000 Cash dividends paid on common stock 42,000 38,000 Common stock price 15 14 Preferred stock price 31 26 Purchases of treasury stock 100,000 -0- Total stockholders' equity 2,300,000 2,157,000 Common stockholders' equity 1,780,000 1,637,000 Average number of preferred shares outstanding 20,000 20,000 Average number of common shares outstanding 104,000 95,000 Refer to Labor Finders, Inc. The company's 2020 earnings per share is reported as
$1.30
Sales $250,000 Purchases 112,500 Beginning Inventory 8,000 Ending Inventory 15,000 Operating Expenses 74,000 Income Tax Expense 5,000 Beginning Retained Earnings 26,500 Dividends 7,500 Refer to the information provided for Aaron Corporation. Calculate the Cost of Goods Sold.
$105,500
If total assets are $100,000, liabilities are $60,000, and Common Stock is $25,000, the Retained Earnings of the firm is:
$15,000
The interest on a $15,000, 6%, 60-day note receivable is
$150
A landscaping company operates five days per week with a daily payroll of $16,000. Employees are paid every Saturday for the workweek just completed (Monday through Friday). The last day of the month is Wednesday, March 31. What is the amount of Wages Expense recorded on the next payday, Saturday, April 3?
$16,000*2= $8,000
Nov. 1 Sent bills to clients for services provided in August in the amount of $12,000. Nov. 9 Purchased office equipment of $4,000 and office supplies of $150 from Office Depot receiving an invoice for $4,150. None of the office supplies were used during November. Nov. 15 Paid for the office furniture and supplies purchased from Office Depot. Nov. 23 Received a $350 bill from WKRP Radio for advertising. The bill will be paid next month. Nov. 30 Paid salaries of $2,500 to employees. Refer to HVAC Service. Based on these transactions, what is the total amount of expense that should be reported on the company's income statement for the month?
$2,850
At January 1, 2017, Troyer Industries reported Retained Earnings of $350,000. During 2017, Troyer had a net loss of $75,000 and paid dividends to the stockholders of $50,000. At December 31, 2017, the balance in Retained Earnings is
$225,000 credit
A plant asset with a cost of $600,000 and accumulated depreciation of $570,000 is sold for $70,000. What is the amount of the gain or loss on disposal of the plant asset?
$40,000 gain
Refer to Fernbank Farms. What amount should be recorded as depreciation expense each year starting in 2021? This company purchased a semi truck at the beginning of 2019 at a cost of $100,000. The truck had an estimated life of 5 years, an estimated residual value of $20,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $30,000 to the truck that extended the life 3 years. Thus, starting with 2021, the truck has a remaining life of 5 years and a new salvage value of $8,000.
100,000-32,000+30,000-18,000= $80,000
Inventory $380,000 Accounts Receivable $190,000 Land 290,000 Accounts Payable 180,000 Cash 129,000 Unearned Revenue 110,000 Prepaid Rent 33,000 Common Stock 312,000 Retained Earnings 220,000 Long-term Notes Payable 200,000 Refer to the Bass Tours. Calculate the total current assets
732,000
The balance in the retained earnings account represents
Accumulated earnings that have not been distributed to stockholders
Adjusting entries are made to ensure that:
All the reponses above are correct
Two methods of accounting for uncollectible accounts are the
Allowance method and the direct write off method
June 1 Purchased two new maintenance carts on account at $750 each. Payment is due in 30 days June 8 Accepted $500 of advance payments from customers for services to be provided next month June 15 Received the utility bill for $300. Payment is due in 30 days June 20 Billed customers $1,500 services provided. Payment is due in 30 days. June 30 Received $500 from customers who were billed earlier Refer to Hesson Properties. What journal entry is required to record the cash collected in advance?
Cash 500 Unearned revenue 500
discount
If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at
On October 1, 2019 the company received a $50,000 promissory note from a customer. The annual interest rate is 6%. Principle and interest will be collected in cash at the maturity date. An adjusting entry is needed to
Increase interest receivable by $750
In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure?
LIFO method
The primary purpose of the statement of cash flows is to
Provide information about the cash receipts and cash payments during a period
The journal entries required for purchase and sales transactions using the perpetual system are more complex than under the periodic system but offer the advantage of
Providing management with more complete information from which to control inventoreis
The current portion of long-term debt should
Reported as a current liability on the balanc esheet
A merchandiser that sells directly to consumers is a
Retailer
Ending retained earnings for a period is equal to beginning
Retained earnings + net income - dividends
All of the following statements regarding retained earnings are true except
Retained earnings represents a claim on cash
Has a credit normal balance
Revenue account
Revenue is recognized when the performance obligation is satisfied
Revenue recognized
Gross profit equals the difference between
Sales revenue and cost of goods sold
Measures of the ability of the company to survive over a long period of time
Solvency ratios
Evidence that a transaction has taken place
Source document
After a corporation declares a cash dividend, what takes place on the date of record?
Stockholders equity decreases
Which depreciation method is most frequently used in businesses today?
Straight-line
Future economic benefits
The common characteristic possessed by all assets
If a company erroneously records a $500 deposit as $50 in its records, which of the following must occur when reconciling its bank statement?
The company must increase the balance per its records by $450.
Receivables might be sold to
generate cash quickly.
Measures of the short-term ability of the enterprise to pay its maturing obligations
Liquidity ratios
Working capital is
The amount by which current assets exceed current liabilities (Equation= Current Assets-Current Liabilities)
The entire group of accounts maintained by a company
ledger
The chronological record in which transactions are initially recorded in the order in which they occur is called a(n)
journal
A bond issued at 101.25 means that the bond
sold for $1,012.50.
June 1 Purchased two new maintenance carts on account at $750 each. Payment is due in 30 days June 8 Accepted $500 of advance payments from customers for services to be provided next month June 15 Received the utility bill for $300. Payment is due in 30 days June 20 Billed customers $1,500 services provided. Payment is due in 30 days. June 30 Received $500 from customers who were billed earlier Refer to Hesson Properties. What journal entry is required to record the utility bill?
utilities expense 300 accounts payable 300
United Services and Supplies reports net income of $60,000 and cost of goods sold of $360,000. If US&S's gross profit rate was 40%, net sales were
$600,000
Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Revenue recognized $19,000 Accounts receivble 3,000 Expenses incurred 7,250 Accounts payable (related to expanses) 750 Supplise purchased with cash1,800
$11,750
On January 15, Nifty Company sells merchandise on account to Martinez Associates for $5,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $1,000 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received?
$3,880
A corporation has 5,000 shares of $5 par, 6% cumulative preferred stock outstanding and 25,000 shares of $2 par common stock outstanding. No dividends have been paid for the past 2 years. If the company wishes to distribute $2 per share to the common stockholders this year, what is the total amount of dividends that must be paid?
$54,500
Investing activities
Future economic benefits
If the amount assigned to ending inventory is incorrect,
both the balance sheet and income statement are affected
Nov. 1 Sent bills to clients for services provided in August in the amount of $12,000. Nov. 9 Purchased office equipment of $4,000 and office supplies of $150 from Office Depot receiving an invoice for $4,150. None of the office supplies were used during November. Nov. 15 Paid for the office furniture and supplies purchased from Office Depot. Nov. 23 Received a $350 bill from WKRP Radio for advertising. The bill will be paid next month. Nov. 30 Paid salaries of $2,500 to employees. Refer to HVAC Service. The journal entry to record payment of the salaries will include a credit to
cash
Refer to Fabian Woodworks. Based on the information presented above, what method of depreciation will maximize depreciation expense in 2019? This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020.
double declining balance
Fresh n' Fit Cuisine purchased land and a building for $320,000 so that it could open a new restaurant. The building's fair market value at the time of purchase was $220,000. In addition, the following costs were incurred prior to the restaurant's opening: Transfer taxes $10,000 Interest incurred on the mortgage loan taken out to make the purchase 4,000 Attorney and real estate agent's fees 15,000 Repave the parking lot 6,000 How much will be recorded as land improvements?
$6,000
A company had beginning accounts receivable of $175,000. All sales were on account and totaled $550,000. Cash collected from customers totaled $650,000. Calculate the ending accounts receivable balance.
$75,000
If a company has $10,500,000 of revenues, declares and pays $550,000 in dividends, and has net income of $1,600,000, how much were expenses for the year?
$8,900,000
A company receives $348, of which $28 is for sales tax. The journal entry to record the sale would include a
Debit to Cash for $348.
The payment of Accounts Payable results in a(n)
Decrease in both liabilities and assets
Discount
If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at
Expenses should be matched against revenue
In the same period as the revenue that they helped generate
Credit entries are used to
Increase liability accounts
Kiss Greetings planned to raise $500,000 by issuing bonds. The bond certificates were printed bearing a stated interest rate of 6%, which was equal to the yield rate of interest. However, before the bonds could be issued, economic conditions forced the yield rate up to 7%. If the life of the bonds is 10 years and interest is paid annually on December 31, how much will the company receive from the sale of the bonds?
Less than $500,000 because the 7% yield rate of interest was higher than the stated rate
Nov. 1 Sent bills to clients for services provided in August in the amount of $12,000. Nov. 9 Purchased office equipment of $4,000 and office supplies of $150 from Office Depot receiving an invoice for $4,150. None of the office supplies were used during November. Nov. 15 Paid for the office furniture and supplies purchased from Office Depot. Nov. 23 Received a $350 bill from WKRP Radio for advertising. The bill will be paid next month. Nov. 30 Paid salaries of $2,500 to employees Refer to HVAC Service. The journal entry to record the bills sent to clients will include a debit of $12,000 to
Accounts Receivable
Consistency
Same accounting principles and methods used from year to year within a company
ledger
The side which increases an account
If a corporation issues cumulative, participating preferred stock, which of the following is true regarding the rights of the preferred stockholders?
They will share in the dividends that exceed a specified amount.
On May 31, 2020, all but $1,500 of the gift cards had been redeemed for salon services. Which of the following is the correct journal entry to record for the expired gift cards? The salon sells $50,000 of gift cards in May 2019. These gift cards may be used anytime before their expiration on May 31, 2020.
Unearned sales revenue 1,500 sales revenue 1,500
The following selected financail information is available for Pham Enterprises for the year ended December 31: Net sales $450,000 Inventory, January 1 $48,400 Cost of goods sold $299,500 Inventory, December 31 $49,670 Refer to the information provided for Pham Enterprises. What is the company's average-days-to-sell inventory measure?
33.44%
Annual report
A report prepared by management that presents financial information
Management discussion and analysis
A section of the annual report that presents management's views
corporation
A separate legal entity under state laws
Sole Proprietorship
Ownership is limited to one person
The economic life of a business can be divided into artificial time periods
Periodicity Assumption
Measures of the short-term ability of the enterprise pay its maturing obligations
Liquidity Ratios
Working capital
The excess of current assets over current liabilities
What is the distinguishing characteristic between accounts receivable and notes receivable?
Notes receivable result from a written promise to pay within a specified amount of time.
Suppose a corporation issues 5,000 shares of $1 par common stock for $30 per share. In addition to the increase in cash, what effect does this transaction have on the accounting equation?
Paid in capital in excess of par increases $145,000
This company purchased a semi truck at the beginning of 2019 at a cost of $100,000. The truck had an estimated life of 5 years, the estimated residual value of $20,000, and will be depreciated using the straight-line method. On January 1, 2021, the company made major repairs of $30,000 to the truck that extended the life 3 years. Thus, starting with 2021, the truck has a remaining life of 5 years and a salvage value of $8,000.
100,000 - 32,000 +30,000 -18,000 = $80,000
Includes only permanent-balance sheet accounts
Post closing trial balance
During May 2019, $10,000 of the gift cards were redeemed for salon services. Which of the following is the correct journal entry to record the redemption of the gift cards? The salon sells $50,000 of gift cards in May 2019. These gift cards may be used anytime before their expiration on May 31, 2020.
Unearned sales revenue 10,000 sales revenue 10,000