Accounting Test 1

A corporation is: A. Not subject to double taxation B. The same as a limited liability partnership C. Controlled by the FASB D. Not responsible for its own acts and own debts E. A business legally separate from its owners

A business legally separate from its owners

If assets are $300,000 and liabilities are $192,000, then equity equals: A. $192,000 B. $792,000 C. $108,000 D. $492,000 E. $300,000

Assets = Liabilities + stockholders equity Equity = $300,000 -$192,000 = $108,000

The closing process is necessary in order to: A. Ensure that all permanent accounts are closed to zero at the end of each accounting period B. Calculate net income or net loss for an accounting period C. Ensure that management is aware of how well the company is operating D. Ensure that net income or net loss and dividends for the period or closed into a retained earnings account E. Ensure that the company complies with state laws

Ensure that net income or net loss in dividends for the period are closed into the retained earnings account

The rule that (1) requires revenue to be recognized when goods or services are provided to customers and (2) At the amount expected to be received from the customer is called the: A. Going-concern assumption B. Objectivity principle C. Revenue recognition D. Business entity assumption E. Measurement (cost) principle

Revenue recognition principle

If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is considered by the purchaser as easily being worth $140,000 and is purchased for $137,000, the land should be recorded in the purchasers book at: A. $95,000 B. $138,500 C. $150,000 D. $140,000 E. $137,000

$137,000

If accured salaries were recorded on December 31 with a debit to salaries expense and a credit to salaries payable, and no reversing entries were made on January 1, the entry to record payment of these wages on the following January 5 would include: A. No entry would be necessary on January 5 B. A debit to salaries payable and a credit to salaries expense C. A debit to cash and a credit to salaries payable D. A debit to cash and a credit to prepaid salaries E. A debit to salaries payable and a credit to cash

A debit to salaries payable and a credit to cash

Adjusting entries: A. Affect both income statement and balance sheet accounts B. Affect cash accounts C. Affect only balance sheet accounts D. Affect only income statement accounts E. Affect only equity accounts

Affect both income statement and balance sheet accounts

If a company receives $12,000 from a stockholder, the effect on the accounting equation would be: A. Assets increase $12,000 in equity increases $12,000 B. Liabilities increase $12,000 in equity decreases $12,000 C. Assets increased $12,000 and liabilities decreased $12,000 D. Assets decreased $12,000 and equity decreases $12,000 E. Assets increased $12,000 and liabilities increase $12,000

Assets increase $12,000 and equity increases $12,000

If a company purchases equipment costing $4500 on credit, the effect on the accounting equation would be: A. Assets increase $4500 and liabilities decreased $4500 B. Assets increase $4500 and liabilities increase $4500 C. One asset increase is $4500 and another asset decreases $4500 D. Equity decreases $4500 and liabilities increase $4500 E. Equity increase is $4500 and liabilities decreased $4500

Assets increase $4500 and liabilities increase $4500

Two common sub groups for liabilities on a classified balance sheet are: A. Current liabilities and intangible liabilities B. Current liabilities and long-term liabilities C. Intangible liabilities and long-term liabilities D. Present liabilities and operating liabilities E. General liabilities and specific liabilities

Current liabilities and long-term liabilities

If throughout an accounting. The fees for legal services paid in advance by clients are recorded in an account called an earned legal fees, the end of period adjusting entry to record the portion of those fees that has been earned is: A. Debit legal fees earned and credit unearned legal B. Debit unearned legal fees and credit accounts receivable C. Debit cash and credit unearned D. Debit on earned legal fees and credit legal fees earned E. debit cash and credit legal fees earned

Debit unearned legal fees and credit legal fees earned

An adjusting entry often includes an entry to cash True or false

False

The accurai basis of accounting: A. Recognizes expenses when paid in cash B. Is generally excepted for external reporting because it is more useful than cash basis for most business decisions C. Recognize revenue when received in cash D. Illuminates the need for adjusting entries at the end of each period E. Is flawed because it gives complete information about cash flow's

Is generally excepted for external reporting because it is more useful than cash basis for most business decisions

The accounting principle that requires accounting information to be based on actual cost and requires assets in services to be recorded initially at the cash or cash equivalent amount given in exchange, is the: A. Business entity assumption B. Accounting equation C. Going-concern assumption D. Realization principle E. Measurement (cost) principle

Measurement (cost) principle

If a company uses $1300 of its cash to purchase supplies, the effect on the accounting equation would be: A. One asset increase is $1300 and another asset decreases $1300, causing no affect B. Assets increase $1300 in liabilities increase $1300 C. Assets decreased $1300 in equity decreases $1300 D. Assets increase $1300 in liabilities decrease $1300 E. Assets decreased $1300 in equity increases $1300

One as it increases $1300 and another asset decreases $1300, causing no effect

The primary objective of financial accounting is to: A. Know what, when, and how much product to produce B. Provide information on both the costs and benefits of looking after products and services C. Serve the decision-making needs of internal users D. Monitor consumer needs, tastes, and price concerns E. Provide accounting information that serves external users

Provide accounting information that serves external users

Net income for aperiod will be understated if accrued revenues are not recorded at the end of the accounting period True or false

True

Permanent accounts carry their balances into the next period: True or false

True

Revenue and expense balances are transferred from the adjusted trial balance to the income statement True or false

True

Revenue is properly recognized: A. When the customer makes an order B. When goods or services are provided to customers and at the amount expected to be received from the customer C. At the end of the accounting period D. When cash from a sale is received E. Only if the transaction creates an account receivable

When goods or services are provided to customers and at the amount expected to be received from the customer