Accounting Test 1
Income Statement
+Revenues -Expenses = Net income
On June 7, Branch, Inc. provided a service to a customer and received $1,400 cash. The journal entry to record this transaction would include:
A debit to Cash and a credit to Service Revenue
On January 31, Carmichael, Inc. received the $900 January utility bill, which will be paid at a later date. The journal entry to record this transaction would include...
A debit to Utilities Expense and a credit to Utilities Payable.
Which of the following accounts is not a temporary account? A. Interest Expense B. Dividends C. Accounts Payable D. Service Revenue
Accounts Payable
Liabilities
Accounts payable (Permanent account), notes payable, Salaries/Wages payable Debit for decrease, credit for increase.
Victoria is an accountant at Maple Ridge Consulting. Which of the following events would not require Victoria to make a journal entry?
An employee is fired for sexual harassment
Which of the following accounts would not be involved in an adjusting entry at year-end?
Cash
Assets
Cash, Accounts Receivable, Supplies, Equipment, Copyright, Debit for increase and credit for decrease.
Stockholders Equity
Common stock and Retained earnings. Liabilities + Common Stock + Revenue - Exp - Div +Common stock, +Service Revenue, -Rent Expense, -Salaries/Wages Expense, -Utilities Expense, -Advertising Expense, -Dividends
On May 1, 2020, McCoy, Inc. paid $7,500 for a 12-month insurance policy. McCoy, Inc. has a December 31 fiscal year end and monthly financial statements are not prepared. Prepare the necessary adjusting journal entry for McCoy, Inc. in good form.
Dec. 31 Insurance Expense..........5,000 Prepaid Insurance.............5,000
On September 1, 2021, Fayette Inc. borrowed $60,000 from Illinois State Bank by signing a 6-month, 7% interest-bearing note. Fayette Inc. has a December 31 fiscal year-end and monthly financial statements are not prepared. Prepare the necessary Dec. 31 adjusting journal entry on the books of Fayette Inc. (You do not need to prepare all 3 journal entries).
Dec. 31 Interest Expense............1,400 Interest Payable................1,400
Nickerson Property Management owns an apartment building in downtown Lexington, Kentucky. All rent is due on the first of the month (i.e. - January rent is due January 1). However, as of December 31, the tenants in Apartment 756 have not yet paid their December rent of $1,250. Prepare the necessary adjusting journal entry for Nickerson Property Management in good form.
Dec. 31 Rent Receivable.............1,250 Rent Revenue....................1,250
On December 31, McCoy, Inc. paid its director of marketing her salary of $5,000 for the month. Prepare the necessary journal entry in good form.
Dec. 31 Salaries Expense......................5,000 DEBIT Cash.............................................5,000 CREDIT
Sally's Crab Shack pays weekly salaries of $10,600 on Friday for a five-day work week ending on that day. December 31, the company's fiscal year end, is on a Thursday. Prepare the necessary adjusting journal entry.
Dec. 31 Salaries Expense...............8,480 Salaries Payable.......................8,480
On May 1, Rocky's Gym received $840 from a client for a 12-month membership. Rocky's Gym has a December 31 fiscal year end and monthly financial statements are not prepared. Prepare the necessary adjusting journal entry for Rocky's Gym in good form.
Dec. 31 Unearned Revenue............560 Service Revenue.................560
Lanessa Walters owns a small interior design company. During August, she paid $240 for tickets for her two children & their friends' admission into SplashLand Water Park. She paid the $240 from the company's checking account and recorded the transaction as Miscellaneous Expense for her business. Which accounting assumption/principle is Lanessa violating?
Economic Entity Assumption
True or False: Depreciation is the method of adjusting property, plant and equipment to fair market value.
False
True or False: If an error is discovered, the company accountant should wait and make the correcting entry on the last day of the fiscal period.
False
True or False: The FASB requires all companies to have a December 31 fiscal year end.
False
True or False: The accounting equation must always balance for corporations, but not for sole proprietorships or partnerships.
False
True or False: The journal shows the increases, decreases, and ending balance in each account.
False
On June 1, Fontana Manufacturing received $25,000 from stockholders and issued common stock. Prepare the necessary journal entry in good form.
June 1 Cash..........................25,000 DEBIT Common Stock.................25,000 CREDIT
On June 17, Briscoe, Inc. purchased $1,800 of supplies for cash. Prepare the necessary journal entry in good form.
June 17 Supplies.......................1,800 DEBIT Cash................................1,800 CREDIT
On May 5, a veterinarian at River Forrest Vet Clinic performed surgery on a dog and the clinic received $1,020 cash from the client. Prepare the necessary journal entry in good form.
May 5 Cash........................1,020 DEBIT Service Revenue........1,020 CREDIT
Kent is the owner and operator of Sunshine Travel Agency. Which of the following accounts is not classified under the current asset section of the Sunshine Travel Agency balance sheet?
Office Equipment
The process of transferring journal entries to the ledger accounts is called...
Posting
Which of the following would not directly affect a company's net income?
Receipt of cash as an additional investment from stockholders
Dividends
Reduce retained earnings, which is part of stockholder equity. Like stockholders investments, dividends are excluded in determining net income.
Retained Earnings
Retained Earnings = Net Income -Dividends Debit for decrease, credit for increase
On September 1, Greene, Inc. borrowed $20,000 cash and signed a note payable. Prepare the necessary journal entry in good form.
Sept. 1 Cash............................20,000 DEBIT Notes Payable................20,000 CREDIT
Which of the following accounts is not an asset?
Service Revenue
Veterinary Services received a $2,000 payment from a previously billed customer. Which of the following statements is true?
The Cash account would increase; Accounts Receivable would decrease.
True or False: Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users.
True
True or False: The normal balance of an account is the side where an increase in the account is recorded.
True
True or False: To close a net loss to Retained Earnings, Retained Earnings is debited and Income Summary is credited.
True
Credits
decrease assets and increase liabilities
In preparing closing entries
each expense account will be credited.
Debits
increase assets and decrease liabilities
Carmichael Florists buys a $38,000 delivery van and signs a note payable. This transaction will result in an...
increase in assets and increase in liabilities
What type of account is Notes Payable?
liability
What type of account is Wages Payable?
liability
The balance in the income summary account before it is closed will be equal to
the net income or loss on the income statement.
Reversing the order of numbers (for example, writing $189 instead of $198) is called a _____ error
transposition
Balance Sheet
Balance both sides to same number. First, Total Assets (Cash, Accounts Receivable, Supplies, Equipment) Second, + Liabilities (Accounts payable) + Stockholders Equity (Common Stock + Retained Earnings)
Accounting Equation
Assets = Liabilities + Stockholders' Equity Debit+ Credit- include Assets, expenses, and dividends Debit- Credit+ includes Liabilities, Common stock, Retained earnings, and revenue.
Kayla Walters, an attorney, writes up a will for a client on August 20. On August 22, the client picks up the will, and the law firm bills the client $850. The law firm receives the $850 check in the mail on September 4. Under the accrual basis of accounting, in what month should the law firm record the revenue?
August
Suzanne is the owner of a small coffee shop in Detroit, Michigan. Suzanne is considering adding freshly made muffins to her shop's offerings, and she asks her accountant for production cost information to help her make a decision. True or False: The accountant's report is an example of managerial accounting information.
True
Stockholders of Preston, Inc. invested $20,000 cash in the company in exchange for common stock. The effect on the specific items in the basic accounting equation is:
an increase in assets and stockholders' equity
What type of account is Cash?
asset