Accounting Test 1

The following financial information is from Bronco Company. All debt is due within one year unless stated otherwise. Retained Earnings $52,000 Supplies 37,000 Equipment 72,000 Accounts Receivable 8,600 Deferred Revenue 6,000 Accounts Payable 15,000 Common Stock 25,000 Notes Payable (due in 18 months) 35,000 Interest Payable 7,000 Cash 22,400 What is the amount of current liabilities?

$28,000

DW has an ending Retained Earnings balance of $51,100. If during the year DW paid dividends of $4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance?

$32,900

The following table contains financial information for Trumpeter's Inc. before closing entries: Cash $12,000 Supplies 4,500 Prepaid Rent 2,000 Salaries Expense 4,500 Equipment 65,000 Service Revenue 30,000 Miscellaneous Expense 20,000 Dividends 3,000 Accounts Payable 5,000 Common Stock 68,000 Retained Earnings 8,000 What is the amount of Trumpeter's total liabilities?

$5,000

In the statement of stockholders' equity, Retained Earnings had a beginning balance of $60,000. During the period, the company reports a net loss of $10,000 and net cash outflows of $15,000. The ending balance in the Retained Earnings account is:

$50,000

The Retained Earnings account had a beginning credit balance of $26,000. During the period, the business had a net loss $12,000, and the company paid dividends of $8,000. The ending balance in the Retained Earnings account is:

$6,000

The following financial information is from Shovels Construction Company: Accounts Payable: $15,000 Buildings: 80,000 Cash: 10,500 Accounts Receivable:9,500 Sales Tax Payable: 4,500 Retained Earnings: 47,500 Supplies: 40,000 Notes Payable (due in 18 months): 35,000 Interest Payable: 3,000 Common Stock: 35,000 What is the amount of current assets, assuming the accounts above reflect normal activity?

$60,000

The following table contains financial information for Trumpeter's Inc. before closing entries: Cash $12,000 Supplies 4,500 Prepaid Rent 2,000 Salaries Expense 4,500 Equipment 65,000 Service Revenue 30,000 Miscellaneous Expense 20,000 Dividends 3,000 Accounts Payable 5,000 Common Stock 68,000 Retained Earnings 8,000 What is the amount of Trumpeter's total stockholders' equity?

$78,500.

The following amounts are reported in the ledger of Mariah Company: Assets: 80,000 Liabilities: 36,000 Retained Earnings: 12,000 What is the balance in the common stock account

32,00

Which of the following statements is NOT correct about the financial statements?

A balance sheet reports assets, liabilities, revenues, and expenses.

The assets of a company represent:

Resources that will be used to benefit the company.

Which of the following accounts appears in the statement of stockholders' equity?

Retained Earnings & Common Stock

An accrued revenue represents:

Revenue being recorded prior to cash collection from the customer

The revenue recognition principle states that:

Revenue should be recognized in the period goods and services are provided

The equation best describing the income statement is:

Revenues − Expenses = Net Income.

Which of the following accounts has a debit balance?

Salaries Expense.

Stockholders' claims to the company's resources are referred to as:

Stockholders' equity.

When a company makes an end-of-period adjusting entry, which includes a debit to Supplies Expense, the usual credit entry is made to

Supplies

Liabilities can be best described as:

The amount owed to creditors.

Prepayments occur when:

Cash payment (or an obligation to pay cash) occurs before the expense recognition.

Dividends represent:

Cash payments to stockholders

A list of all account names used to record transactions of a company is referred to as the:

Chart of Accounts

The closing process includes which of the following?

Closing the balances of revenue, expense and dividend accounts to zero

Which one of the following accounts will have a credit balance?

Common Stock

Which of the following are reported as stockholders' equity in a classified balance sheet?

Common Stock and Retained Earnings

The two categories of stockholders' equity usually found in the balance sheet of a corporation are:

Common stock and retained earnings.

Which business form has the advantage of limited liability?

Corporation.

Purchasing office supplies on account will:

Increase assets and increase liabilities.

Providing services and receiving cash will:

Increase assets and increase stockholders' equity.

Revenues have what effect on the accounting equation?

Increase stockholders' equity.

On April 1, a $4,800 premium on a one-year insurance policy on equipment was paid and charged to Prepaid Insurance. At the end of the year, the financial statements would report:

Insurance Expense, $3,600; Prepaid Insurance $1,200

Accountants are responsible for measuring various operating, investing and financing activities. Which of the following correctly matches the activity with its type?

Investing - purchasing land.

Transactions of a company that include the purchase and sale of long-term assets are referred to as:

Investing activities.

An adjusted trial balance:

Is a list of all accounts and their balances after adjusting entries

Financing activities include:

Transactions involving external sources of funding

Which of the following statements regarding financial reports is not correct?

A statement of stockholders' equity reports revenues, net income, and dividends information.

A(n) _______________ summarizes all transactions related to a particular item over a period of time.

Account

The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the:

Accounting cycle

Which of the following accounts would normally have a credit balance?

Accounts Payable, Service Revenue, Common Stock.

Which of the following accounts represents a resource of the company?

Accounts receivable.

The accounting basis that records revenues when goods or services are provided to customers and expenses with related revenues is referred to as:

Accrual-basis

Which one of the following best describes the characteristics of adjusting entries?

Adjusting entries allow for the proper recognition of revenue and expenses

The concept of matching in accounting refers to:

All costs that are used to generate revenue are recorded in the period the revenue is recognized

Consider the following events for Sophia Incorporated: April 5: Sophia purchases volleyballs for $200 on account. April 6: Sophia advertises a sand volleyball camp for $20 a person. April 12: Thirty people sign up for the camp paying a total of $600. April 21: Sophia hosts the sand volleyball camp. April 23: Sophia pays for the volleyballs purchased on April 5. Under accrual-basis accounting, what is the appropriate day to record the revenues from the sand volleyball camp?

April 21

The accounts that represent the resources of the company are called:

Assets

For each transaction recorded in an accounting system, the basic equation that must be maintained at all times is:

Assets = Liabilities + Stockholders' Equity

The balance sheet depicts which of the following equations?

Assets = liabilities + stockholders' equity

Investments by stockholders have what effect on the accounting equation?

Assets increase and stockholders' equity increases.

When a company issues common stock for cash, what is the effect on the accounting equation for the company?

Assets increase and stockholders' equity increases.

A company orders office supplies in June. Those supplies are received and paid for in July. The supplies are used in August. In which month should the company record supplies expense?

August

Liabilities are shown in which of the following statements?

Balance sheet.

The financial statement that represents the accounting equation is the:

Balance sheet.

The primary purpose(s) of financial accounting is(are) to:

Both measure and communicate financial information to external parties.

Which of the following is a balance sheet item?

Cash

When cash payments are made to stockholders, what is the effect on the company's accounts?

Cash decreases and dividends increase

When cash payments are made to stockholders, what is the effect on the company's accounts?

Cash decreases and dividends increase.

Tyler Incorporated receives $150,000 from investors in exchange for shares of its common stock. Tyler Incorporated records this transaction with a:

Credit to Common Stock

During the year, Cheng Company paid salaries of $24,000. In addition, $8,000 in salaries has accrued by the end of the year but has not been paid. The year-end adjusting entry would include which one of the following?

Credit to Salaries Payable for $8,000

Revenues normally carry a _______ balance and are shown in the ______________.

Credit; Income statement

On July 7, Saints Inc. received $10,000 in cash from a customer for services to be provided on October 10. Which of the following describes how the transaction should be recorded on July 7?

Debit Cash $10,000, credit Deferred Revenue $10,000.

Styleson Inc. performed cleaning services for its customers for cash. These transactions would be recorded as:

Debit Cash, credit Service Revenue

Summer Leasing received $12,000 for 24months rent in advance. How should Summer record this transaction?

Debit Cash; credit Deferred Revenue.

When a company prepares closing entries, which one of the following is NOT a correct closing entry?

Debit Dividends; credit Retained Earnings

Assume that $18,000 cash is paid for insurance to cover the next year. The appropriate debit and credit are:

Debit Prepaid Insurance $18,000, credit Cash $18,000.

Sooner purchased office supplies on account. The transaction would be recorded as:

Debit Supplies, Credit Accounts Payable

Assets normally carry a _______ balance and are shown in the ______________.

Debit; Balance sheet

An increase to an asset account is shown with a ______________. A decrease to an asset account is shown with a ______________.

Debit; Credit

An increase to an expense account is shown with a ______________. An increase to a revenue account is shown with a ______________.

Debit; Credit

Expenses normally carry a _______ balance and are shown in the ______________.

Debit; Income statement

Dividends normally carry a _______ balance and are shown in the ______________.

Debit; Statement of stockholders' equity

When the company pays stockholders a dividend, what is the effect on the accounting equation for that company?

Decrease assets and decrease stockholders' equity.

An expense has what effect on the accounting equation?

Decrease stockholders' equity.

Receiving cash from customers before services are performed results in:

Deferred Revenues.

The costs associated with producing revenues are referred to as:

Expenses

The costs of providing goods and services to customers are referred to as

Expenses

Cash received from bank borrowing would be reported in the statement of cash flows as what type of activity?

Financing.

The body of rules and procedures that guide the measurement and communication of financial accounting information in the United States is known as:

Generally Accepted Accounting Principles (GAAP).

GAAP is an abbreviation for:

Generally accepted accounting principles

The term commonly used in accounting to describe the format for recording a transaction is:

Journal entry

A company received an order from a customer in June for services to be provided. Those services were provided in July, and the customer paid the full amount in August. According to the revenue recognition principle, in which month should the company record revenue?

July

The accounts that represent resources owed to creditors are called:

Liabilities

Deferred Revenue is a:

Liability

Resources owned by the company that will provide a benefit for more than one year are called:

Long-term assets

What is the primary purpose of financial accounting?

Measure business activities and communicate those measures to external users to make decisions.

When a company pays cash for equipment, what is the effect on the accounting equation for that company?

No change

Purchasing supplies for cash has what effect on the accounting equation?

No effect.

On January 1, Brad Inc. sold $30,000 in products to a customer on account. Then on January 10, Brad collected the cash on that account. What is the impact on Brad's accounting equation from the collection of cash on January 10?

No net effect on the accounting equation

Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as:

Operating activities.

September 1, 2018, Gold Magazine sold 400 one-year subscriptions for $90 each. The total amount received was credited to Deferred Revenue. What would be the required adjusting entry at December 31, 2018? A. Deferred Revenue 36,000 Service Revenue 36,000 B. Service Revenue 24,000 Deferred Revenue 24,000 C. Deferred Revenue 24,000 Service Revenue 24,000 D. Deferred Revenue 12,000 Service Revenue 12,000

Option D

Which of the following transactions would cause a decrease in both assets and stockholders' equity?

Paying advertising for the current month

Financing cash flows in the statement of cash flows would include which of the following?

Paying dividends to stockholders.

Which of the following is an operating activity?

Paying electricity bills for the month.

An example of an adjusting entry would not include:

Paying salaries to company employees

Which step in the process of measuring external transactions involves assessing the equality of total debits and total credits for the period?

Prepare a trial balance.

Financial accounting does not deal with which of the following?

Providing information to internal users.

Which of the following transactions would cause an increase in both the assets and liabilities of a company?

Purchase of a building by issuing a note payable.