Accounting

A bond with an issue price of $10,100 and a face value of $10,000 was issued at ______.

a premium

The unit of measure concept is the idea that a company should report its financial results on its financial statements using ______.

a single monetary unit, such as the US dollar

Financial information needed to manage a company is provided by a(n) ______ system.

accounting

A seller records an increase to the asset account called _________ _________ when it sells to a customer on credit. (Enter one word per blank.)

accounts receivable

Reporting revenues when the goods or services are provided and expenses when they are incurred is called basis accounting. (Enter one word per blank.)

accrual

Deposits in transit are ______ on a bank reconciliation.

added to the bank balance

If a company recorded an adjusting entry by debiting Interest Expense for $500 and Interest Payable for $50 in error, then the ______.

adjusted trial balance's debits will not equal its credits

A(n) _________ trial _________ is prepared immediately _________ the adjusting entries have been recorded and ___________ the financial statement are prepared. (Enter one word per blank.)

adjusted, balance, after, before

Revenue expenditures are recorded with a debit to ______.

an expense when they relate to ordinary repairs and maintenance

A transaction may be recorded with an increase in an asset and a decrease in a(n) ______.

another asset

Adjustments ensure that ______ balances are reported at amounts representing the economic benefits that remain at the end of the current period.

assets

What does a business typically receive when it issues stock to owners?

cash

Which of the following are reported on a balance sheet?

cash assets liabilities stockholders' equity retained earnings

In accrual basis accounting, revenue is recorded when the seller ______.

performs the work promised to the customer and thus is entitled to receive compensation

True or false: All payroll deductions are required by law.

False

True or false: Gross Profit is a stockholders' equity account and is credited when goods are delivered to customers.

False

_______ checks written by the company that have not cleared the bank are subtracted from the _______ balance on a bank reconciliation. (Enter one word per blank.)

Outstanding, bank

True or false: A classified balance sheet separates liabilities into current and non-current categories.

True

True or false: A company generates Retained Earnings by operating profitably.

True

The adjusting entry to record revenue for services the seller has performed but not yet collected requires:

a debit to Accounts Receivable and credit to Service Revenue.

The journal entry to record the purchase of land for $30,000 cash includes ______.

a debit to Land and a credit to Cash

The purchase of merchandise on account is recorded with a debit to ______ and a credit to ______.

perpetual inventory system and is recording a purchase on account

A cash system involves putting money into a fund, paying money out to reimburse others and putting money back into to replenish the fund. (Enter one word per blank.)

petty

Inventory consists of the purchase price ______.

plus freight-in

If a company debits Cash and credits Sales Revenue, it is recording the:

sale of goods to a customer for cash.

Sales Revenue reports the ______.

sales price times the quantity of goods sold

Accounts Receivable arises when a company ______.

sells on credit and is an asset

A classified balance sheet ______.

shows subtotals for current assets and current liabilities

Identify the primary ways in which a business may be organized.

sole proprietorship, the partnership, and the corporation

Three common forms of business organizations include ______. (Select all that apply.)

sole proprietorship, the partnership, and the corporation

All accounting systems ______. (Select all that apply.)

- combine beginning balances with the activity during the accounting cycle to yield the ending balances for each account. - follow the accounting cycle - record and summarize financial effects of transactions

Notes receivable are used for ______. (Check all that apply.)

- selling large dollar-value items - lending money to individuals or businesses - extending payment periods

A multistep income statement is useful to financial statement users because it ______. (Select all that apply.)

- separates income statement items into meaningful components - separates cost of goods sold from other operating expenses, which allows the calculation of gross profit

The issue price of 1,000, 5%, $1,000 bonds issued at 92.10 equals ______.

$921,000

Which of these might cause the value of inventory to fall below its original cost? (Check all that apply.)

- Damage - Increased competition - Obsolescence from going out of style

The journal entry to record depreciation include which of the following?

- Debit Depreciation Expense - Credit Accumulated Depreciation

If Revenues is credited, then the possible debits are ______. (Select all that apply.)

- Deferred Revenue - Cash - Accounts Receivable

Which accounts are affected by borrowing from a bank? (Select all that apply.)

- cash - notes payable

The journal entry to record the payment of salaries and wages for work performed in the current accounting period causes ______. (Select all that apply.)

- stockholders' equity to decrease - liabilities to increase - assets to decrease

The heading of an income statement should include ______. (Select all that apply.)

- the accounting period covered by the statement - the name of the business - the title "Income Statement"

A company purchased a new cash register in exchange for a cash payment of $1,200. The company recorded only an increase of $1,200 in the Equipment account. No entry was made to the Cash account. As a result, ______. (Check all that apply.)

- total assets are too high - the accounting equation is not in balance

Bijoux Company uses a perpetual inventory system. Its bookkeeper properly recorded a $5,000 sale on account, but forgot to record the related cost of the sale of $3,000. As a result of this error, ______. (Check all that apply.)

- total assets will be too high - net income will be too high

Dumb Waiters, Inc. has 2 units in beginning inventory with a cost of $10 each. It purchases 3 more at $12 each. It sold 2 units. Using the beginningBlank 1Blank 1 beginning , Incorrect Unavailable inventoryBlank 2Blank 2 inventory , Incorrect Unavailable cost inventory method, Cost of Goods Sold equals $22.40. (Enter one word per blank.)

- weighted - average

Any costs incurred to get the merchandise into a condition and location ready for sale should be debited to ______.

Inventory

Which of the following are the correct terms for the 3 activities found on the statement of cash flows? (Select all that apply.)

Investing Financing Operating

Liberty, Inc., a US company, sold merchandise to Belle, a French company, for 10,000 euros. In Liberty's US financial statements, this sale should be reported in ______.

US dollars

Using the allowance method, Bad Debt Expense is recorded _____.

as an estimate in the period of the related credit sales

Creditors want to see that a company that owes them money has ______.

assets that are greater than its liabilities

A classified balance sheet shows subtotals for current and current. (Enter one word per blank.)

assets, liabilities

The step in the accounting cycle where entries are recorded to update retained earnings and zero out temporary accounts is referred to as the _________ process. (Enter one word per blank.)

closing

Allowance for Doubtful Accounts is a(n) -asset account and has a normal balance. (Enter only one word per blank.)

contra, credit

The _________ principle requires that assets and liabilities be recorded at the amounts that were measurable at the time transactions occurred. (Enter only one word per blank.)

cost

An asset's book value or carrying value is its ______.

cost minus accumulated depreciation

A company paid $2,000 cash to an employee for this month's salary. The entry to record this transaction would include a ______ to Cash.

credit

A company purchased supplies and promised to pay $200 for them next month. The increase in Accounts Payable would be recorded with a ______.

credit

An increase in Retained Earnings would be recorded with a ______.

credit

Common Stock has a normal _________ balance.

credit

the adjusting entry to record depreciation on equipment includes a _____

credit to accumulated depreciation; debit to depreciation expense

As of December 31 (the end of the accounting period), ABC Company has a profit before tax of $12,000. The company's tax rate is 25%. The adjustment will include a(n) _________ of $ to Income Tax Payable.

credit, 3.000

Accumulated Depreciation has a normal ___________ balance which indicates that it ___________ Total Assets. (Enter one word per blank.)

credit, decrease

A contra-asset account, such as Allowance for Doubtful Accounts or Accumulated Depreciation, has a normal balance of a ______ and causes total assets to ______.

credit; decrease

When recording a transaction, the debits must always equal the . (Add only one word per blank.)

credits

The current ratio equals _________ _________ divided by ________ ________

current assets, current liabilities

Accrued Liabilities are ______.

current liabilities resulting from adjusting entries that record amounts incurred but not yet paid

Accounts (or trade) Payable is a ______ and increases when ______ and decreases when ______.

current liability; purchases are made on credit; bills are paid

Days to sell measures the average number of ______.

days from the time inventory is purchased to the time it is sold

A company received $2,000 of equipment and promised to pay for it next month. The increase in equipment would be recorded with a ______ to the Equipment account.

debit

Expenses decrease net income and retained earnings, so expenses are recorded with a _________, just like all decreases in stockholders' equity. (Enter one word per blank)

debit

The entry to record the issuance of a note receivable is ______.

debit Notes Receivable and credit Cash

The beginning balance in Acme's Cash account was $100,000. During the month, Acme issued $25,000 of common stock for cash. The balance in Acme's Cash account is now a:

debit of $125,000.

As of December 31 (the end of the accounting period), ABC Company has a profit before tax of $12,000. The company's tax rate is 25%. The adjustment will include a(n) _________of $ to Income Tax Expense.

debit, 3,000

Assets are increased with __________ and liabilities and stockholders' equity are increased with __________. (Enter one word per blank.)

debit, credit

The adjusting entry to record the amount of prepaid rent used during the period requires a _________ to Rent Expense and a __________ to Prepaid Rent. (Enter one word per blank.)

debit, credit

A company made a $1,000 payment on its $100,000, 20-year mortgage. The decrease in liabilities would be recorded with a Blank______ to Notes Payable.

debit: increase in assets, decrease in liabilities and SE accounts CORRECT credit: increase in liabilities and SE accounts, decrease in assests

Utilities Expense is ______.

debited when the service is received

The Accounts Receivable account should be _________when adjusting at the end of the period for any revenues from fulfilling obligations to buyers which has not yet been collected or recorded. (Enter one word per blank.)

debited/increased

An employee paid a company back for amounts the company lent 3 months earlier. The company would record the collection from the employee by ______.

debiting Cash and crediting Notes Receivable

The totals on a trial balance reveal whether the total _________ equal the _________ total . (Enter one word per blank.)

debits, credits

A company's debt-to-assets ratio is 0.7 or 70%. If the company issues common stock for cash, then the debt-to-assets ratio will ______.

decrease

The adjusting entry to record the revenue earned by the seller fulfilling its obligation results in a(n) _________ to the Deferred Revenue account. (Enter one word per blank.)

decrease

The gross profit percentage is the ratio to watch if you are worried about increased competition. If the company lowers its prices to retain market share without lowering its cost of goods sold, its gross profit percentage will ______.

decrease

Matching part of the cost of a long-lived asset with the revenues generated by the asset is ______.

depreciation

Adjusting entries are made at the __________ of the accounting period, while daily transactions are made throughout the accounting period. (Enter one word per blank.)

end

Cash ______ are short-term, highly ______ investments purchased within ______ of maturity.

equivalents; liquid; 3 months

A company's Bad Debt Expense reports the ______.

estimated amount of this period's credit sales that customers will fail to pay

If the Allowance for Doubtful Accounts has a credit balance prior to recording the adjusting entry for the current period's uncollectible accounts, then the ______.

estimated amount of uncollectible was greater than the amounts actually written off

The accounting principle that governs the recording of bad debt expense in the same period as sales revenue is called the _____

expense recognition (matching) principle

Ordinary repairs and maintenance costs should be ______.

expensed as incurred

A transaction that involves an exchange of assets, liabilities and/or stockholders' equity between the company and someone else is called a(n) _________ exchange

external

The is the payment made when a bond matures.

face value

True or false: If one asset increased, it must be the case that either liabilities or stockholders' equity increased by the same amount.

false

Employee _________ is often grouped into 3 categories: corruption, asset misappropriation, financial statement fraud. (Enter only one word per blank.)

fraud

Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using first-in, first-out, the 3 goods sold are assumed to be ______.

from the beginning inventory

Notes Receivable differ from Accounts Receivable in that Notes Receivable ______.

generally charge the borrowers interest from the day they are signed to the day they are collected

An increase in a company's inventory balance from a prior year is ______.

good if the inventory turnover ratio is higher

Beginning Inventory + Purchases = _____.

goods available for sale

If the Accounts Receivable ending balance is greater than its beginning balance, then its debits were ______ than its credits during the period.

greater

Events that do not involve exchanges between the company and someone else but affect assets, liabilities and/or stockholders' equity are called events.

internal events

The _________ _________ system consists of actions taken to promote efficient and effective operations, protect assets, enhance accounting information and adhere to laws and regulations. (Enter only one word per blank.)

internal, control

From the issuing company's perspective, a bond is a liability. From a bondholder's perspective, the bond is a(n) . (Enter one word per blank.)

investment

A bond's issue price is determined by the ______.

investors

The Discount on Bonds Payable account ______.

is a contra account to Bonds Payable

A productive asset ______.

is used to produce goods or services that will be sold to customers

The Equipment account is increased with an entry on the side of the Equipment T-account. (Enter one word per blank.)

left

Interest incurred, but not yet paid during an accounting period, should be recorded as an expense and a(n) ______.

liability

When a company borrows from a bank by signing a formal agreement, an asset titled Cash is increased and a __________ titled __________ _________ is increased.

liability, notes, payable

When a company borrows from a bank by signing a formal agreement, an asset titled Cash is increased and a ____________ titled ____________ ___________ is increased.

liability, notes, payable

Adjustments ensure that liabilities are reported as all amounts ______ at the end of the accounting period.

owed

The adjusting entry for income taxes records income tax that is incurred and ___________ by the company. (Only add one word per blank.)

owed

If a company debits Advertising Expense and credits Cash, it must have ______.

paid for advertising run in the same accounting period

Allowance for Doubtful Accounts is a ______.

permanent account so its balance carries forward to the next accounting period

The rate on a bond is the rate used to determine the interest payments. (Enter one word per blank.)

stated

Net pay is calculated by ______.

subtracting payroll deductions from gross pay

Bad Debt Expense is a ______.

temporary account so its balance is closed (zeroed out) at the end of the accounting period

True or false: The accounting equation is Assets = Liabilities + Stockholders' Equity.

true

To determine the adjusting entries required, a(n) ______ is prepared.

unadjusted trial balance

After the adjustments have been completed, the adjusted balance in the Supplies Expense account represents the cost of supplies ______.

used during the accounting period

Accounts are:

used to accumulate and report the effects of each different business activity

The days to collect ratio is computed as ______

365 divided by the receivable turnover ratio

After posting the adjusting entry to record revenues for which the seller has performed of its obligations but has not yet collected, which account will be increased?

Accounts Receivable

Which report is constructed immediately prior to preparing the financial statements with the purpose of demonstrating that the accounts balance?

Adjusted trial balance

How does the timing of adjusting entries differ from the accounting for daily transactions?

Adjustments are made at the end of the accounting period because making them on a daily basis would be inefficient.

Which method requires first estimating the desired amount for the Allowance for Doubtful Accounts and then determining the amount of the expense required to get to this desired balance given the amount of the unadjusted balance?

Aging of accounts receivable method

True or false: In accordance with generally accepted accounting principles, the timing of cash receipts dictates when revenues are recognized.

False

True or false: Internal controls prevent and detect all errors and fraud.

False

True or false: Strong internal control surrounding cash receipts requires the cashier to perform the following procedures: count the cash receipts, take the cash to the bank, and record the amount collected in the accounting records.

False

True or false: The person who has custody of an asset should also account for the asset. A person who performs both duties will best know what the balance should be in the accounting records.

False

During the year, a $1,000,000 lawsuit was filed against a US company for unsafe working conditions. Management and the attorneys feel that it is not likely that the company will lose the case. The plaintiff who filed the lawsuit has offered to settle for $600,000. Management estimates that lawsuits for unsafe working conditions are generally settled for $300,000. What amount of contingent liability would be recorded for this lawsuit on the current balance sheet?

$0

In its 1st year of operation, City Perk paid Salaries Expense of $1.1 million. On December 31, it recorded an entry for additional Salaries Expense of $100,000 that will be paid at the beginning of the 2nd year. How much will Salaries Expense for the 1st year ended equal?

$1.2 million

Which of these assets are not depreciated? (Select all that apply.)

- cash - inventory - land

The two equalities in accounting that aid in providing accuracy.

A = L + SE; Debits = Credits

In which company would you rather invest?

A company with high gross profit percentage and high sales volume

Which statement is false?

A trial balance is the same as a balance sheet.

______ are used to accumulate and report the effects of each different business activity separately rather than combining the various types of activities together.

Accounts

When a company is owed for sales made to customers on credit, the asset called:

Accounts Payable is a liability on the balance sheet, not the income statement.

The journal entry to record the payment for merchandise previously purchased on account includes a debit to ______ and a credit to ______.

Accounts Payable; Cash

A resource owned by a business, with measurable value and expected future benefits.

Assets

Which of the following are ways of expressing the basic accounting equation? (Select all that apply.)

Assets = Liabilities + Stockholders' Equity Assets - Liabilities = Stockholders' Equity Assets - Stockholders' Equity = Liabilities

What would be the effect of forgetting to record the adjusting entry for estimated bad debts?

Assets and stockholders' equity would be overstated.

Complete the following table by selecting either the word increases or decreases in each column.

Assets: Debt= increase, Credit= decrease Liabilities: Debt= decrease, Credit= increase SE: Debt= decrease, Credit= increases

The issuance of common stock is recorded with a debit to ______ and a credit to ______

Cash; Common Stock

Which financial statement reports the financial position of the business at a point in time?

Balance sheet

Supplies________ Supplies expense__________ Cash paid for supplies_________

Balance sheet Income statement Statement of cash flows

The underlying rules of accounting in the US are called principles. (Enter one word per blank.)

Blank 1: generally Blank 2: accepted Blank 3: accounting

Which company has the higher receivables turnover ratio?

Both are the same

Which of the following would cause the balance sheet to appear stronger and income statement to appear more profitable than it should?

Capitalizing costs that should be expensed.

If Sales Revenue is credited, then which of the following would be the corresponding debit?

Cash

Which of the following poses a high risk of theft because of its high volume and ease of portability?

Cash

Match the description with each of the accounts that may be debited when Service Revenue is credited.

Cash = Collections occur in the same period as the services Accounts Receivable = The service is performed prior to the collections Deferred Revenue = Collections occur in advance of the performance of the service

Beginning Inventory + Purchases - Ending Inventory = ______.

Cost of Goods Sold on the income statement

On October 25, Yacht Doc received $200,000 for a yacht valued at $180,000 and a 4-month service contract. During November, the yacht was delivered and 1 month of the service contract was performed. The remaining services are to be performed evenly over the next 3 months. What is the entry Yacht Doc should record on October 25?

Debit Cash; Credit Deferred Revenue

$1,000 is posted to the left side of the Logo and Trademarks T-account. Which of the following might have been the entry that was recorded in the journal?

Debit Logo and Trademarks and credit Cash

Are the Sky Blue Corporation's assets financed primarily by debt or equity?

Debt

A single-step income statement includes which of the following? (Select all that apply.)

Expenses, net income, revenue

In 2019, were creditors providing a greater (or lesser) proportion of financing for Bailey-Reed's assets?

Greater

When should supplies be recorded as an expense?

In the period the supplies are used, regardless of when they were purchased

Four periodic financial statements.

Income statement, balance sheet, statement of retained earnings, and statement of cash flows

In its 1st year of operation, Jetway Airlines paid Salaries Expense of $40 million. On December 31, it recorded an entry for additional Salaries Expense of $2 million that will be paid at the beginning of the 2nd year. What should Jetway report in the income statement and balance sheet for its first year ended December 31?

Income statement: Salaries Expense $42 million; Balance sheet: Salaries Payable $2 million

The adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to ______.

Interest Expense and credit to Interest Payable

If total assets increase but total liabilities remain the same, what is the impact on the debt-to-assets ratio?

It decreases.

What is occurring if a company is debiting Cash and crediting Notes Receivable?

It is collecting the principal on amounts lent earlier.

What effect will issuing more bonds have on the times interest earned ratio over time?

It will decrease.

The results of transaction analysis in debits-equal-credits format.

Journal entry

The main reason companies exist is to maximize their ______. (Check all that apply.)

owners' health and profits

Which inventory costing method minimizes income taxes?

LIFO

Which inventory costing method uses the newest cost for Cost of Goods Sold on the income statement and the oldest cost for Inventory on the balance sheet?

LIFO

In 2019, was Bailey-Reed more (or less) successful at covering its interest costs, as compared to 2018?

Less

Which method requires estimating the amount of the Bad Debt Expense and then determining the balance in the Allowance for Doubtful Accounts which will differ from the expense if there is an unadjusted balance?

Percentage of credit sales method

Which of the following would be considered merchandise inventory?

Purchased finished goods

Accounts ________ is an asset on the balance sheet that reports the amounts owed by customers for sales or services provided on credit. (Enter one word per blank.)

Receivable

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20; Medicare $8.70; Federal income tax $58; and State income tax $10. Assuming that John gets paid in cash and payroll deductions will be paid the following month, how would ABC record his gross pay?

Salaries and Wages Expense increases $600.

Which of the following statements is true?

Sea the World Cruises' bonds sold at a discount because the stated rate is less than the market rate of interest.

Which of the following is incorrect regarding the Income Tax Payable account?

The account represents tax refunds due to the company.

Acme, Inc. bought land and a factory building for $80,000. The land was appraised at $25,000 and the building at $75,000. Using the basket purchase allocation, Acme would record the ______.

Thermal, Inc. bought a new office computer for $5,000 cash. The journal entry to record this transaction will include a $5,000 ______. (Check all that apply.)

Which of the following statements is true about Sea the World Cruises' $1,000 bond price?

They sold for $931.40 each.

Why are adjustments needed at the end of an accounting period?

To ensure that all assets and liabilities are reported at appropriate amounts

What effect does the collection of a note receivable, excluding interest, have on the accounting equation?

Total assets remain the same.

What are the effects on the financial condition of the business from the adjustment for revenues from the seller fulfilling its obligations that have not yet been collected?

Total assets will increase and total stockholders' equity will increase.

What are the effects on the accounting equation from the adjustment for income tax expense accrued, but not paid, at the end of the accounting period?

Total liabilities will increase and total stockholders' equity will decrease.

Which statement best describes transaction (c)?

Transaction (c) occurs between the owners and others in the stock market, there is no effect on the business.

True or false: GAAP require end-of-period adjustments for the estimated bad debts in the period of the credit sale even though the specific, non-paying customers have not yet been identified.

True

True or false: Land is not depreciated.

True

True or false: Long-lived assets (except land) are expensed over their useful lives.

True

True or false: Operating activities are the primary sources of revenue and expenses involved in running a business.

True

True or false: Specific identification is an inventory method typically used when accounting for expensive and unique inventory items.

True

Which depreciation method results in higher depreciation expense when the asset is used more?

Units-of-production

The debt-to-asset ratio is calculated by dividing total liabilities by total. (Enter one word per blank.)

assets

The balance sheet balances when ______.

assets equal liabilities plus stockholders equity

In a perpetual inventory system, Inventory is initially recorded at ______.

cost

A prepayment is originally recorded as an asset. Later at the end of the accounting period, an adjustment is recorded causing in a(n) ______ in the asset account and a(n) ______ in the expense account.

decrease; increase

The accountant recorded the adjusting entry for the depreciation of its long-lived assets with a debit to Depreciation Expense and a credit to Accumulated Depreciation. As a result of this entry, assets and stockholders' equity will be ______.

decreased

The allowance method is a method of accounting that ______ for estimated bad debts.

decreases net accounts receivable

In a bank reconciliation, an outstanding check is ______.

deducted from the bank balance

Outstanding checks have already been ______.

deducted from your cash balance per your books but not the bank balance

Outstanding checks written by the company should be a(n) ______ on the company's bank reconciliation.

deduction from the bank balance

FOB ______ is the term used when ownership of the goods transfers to a buyer when the goods arrive at the buyer's place of business.

destination

Which of the following are assets?

equipment, cash, land

Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using last-in, first-out, the 3 goods sold are ______.

from the purchases made during the month

A check that you have written has cleared the bank when ______.

funds have been withdrawn from your bank account to cover the check

What does FOB shipping point mean?

goods are owned by the buyer when they leave the seller's place of business

Amounts presently owed by a business.

liabilities

The statement of retained earnings reports the ______.

profits that have accumulated in the company over time

Cost of goods sold equals beginning inventory plus __________ minus ending inventory. (Enter one word per blank.)

purchases

A bank _________ is an internal report used to compare the bank statement with the company's cash records and should be prepared by an employee whose duties are separate from recording and handling of cash. (Enter one word per blank.)

reconciliation

The services provided by a bank help business control cash by ______.

restricting access and providing documentation and independent verification

Under the expanded accounting equation, assets equal liabilities plus common stock and _________ earnings. (Enter one word per blank.)

retained

Under the expanded accounting equation, assets equal liabilities plus common stock and __________ earnings. (Enter one word per blank.)

retained

In accrual accounting, according to the ___________ recognition principle, revenues should be recognized when the seller performs the work promised, not necessarily when cash is received. (Add only one word per blank.)

revenue

The income statement is the financial statement that reports the amount of _________ and _________during the accounting period. (Enter only one word per blank.)

revenues and expenses

Accounts Payable is increased with an entry on the side of the T-account. (Enter one word per blank.)

right

The Common Stock account is increased with an entry on the side of the T-account.

right

In June, Cellars, Inc. collected $1,000 from a customer in advance. In July, Cellars completed the first half of the job. In August, Cellars completed the work. If Cellars uses the cash basis of accounting, it will record revenues of ______.

$1,000 in June when the cash is collected

In May, Sea the World Cruises, Inc. collected $1,000 cash from a customer for services to be performed in June. Which of the following is true assuming accrual accounting?

$1,000 of revenue should be recorded in June.

In May, Just In Thyme, Inc. billed a customer $1,000 for services performed in May. In June, Just In Thyme collected the $1,000. Which of the following is true assuming accrual accounting?

$1,000 of revenue should be recorded in May.

Mountain Made started the month with 3 quilts in its beginning inventory that cost $200 each. During the month, Mountain Made purchased 7 additional quilts for $210 each. At the end of the month, Mountain Made counted its inventory and found that 2 quilts remained unsold. If Mountain Made uses periodic weighted average cost, its Cost of Goods Sold for the month is ______.

$1,656

Beginning inventory was $5,000. During the month, the company purchased an additional $25,000 of inventory and sold goods that cost $20,000. Ending inventory was ______.

$10,000

Management estimates that 1% of the $100,000 of credit sales will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. After the adjusting entry is recorded, Bad Debt Expense on the income statement will be ______ the Allowance for Doubtful Accounts on the balance sheet.

$100 less than

Using the aging approach, management estimates that 10% of the $10,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. After the bad debt adjusting entry is recorded, Bad Debt Expense on the income statement will be ______ the Allowance for Doubtful Accounts on the balance sheet.

$100 less than

Ace Electronics signed a 10-year, $100,000, 4% note payable on January 1. When the note is signed, Ace should record a liability of ______.

$100,000

On the maturity date, the bondholders of $100,000 of bonds that were issued at a $90,000 will receive ______.

$100,000 in cash plus the interest owed

If a company collected $1,000 from its customers in advance and then fulfilled $800 of its obligation and incurred expenses of $700 of which it paid $300, using accrual basis accounting, it would report net income equal to:

$100.

The list price of a computer was $100,000. The sales tax on the computer was 5%. The delivery cost was $1,000. The cost to assemble the computer was $500. The Equipment account should be debited for a total of ______.

$106,500

Dumb Waiters, Inc. has 2 units in beginning inventory with a cost of $10 each. It purchased 3 more at $12 each. What is the weighted average cost per unit?

$11.20

X Circle Company purchased a computer system Black Box, Inc. with a list price of $100,000 plus 5% sales tax. The cost to deliver and install the computer was $10,000. The debit to Equipment equals .

$115,000

Beta Company bought 80 units of inventory for $12 each and 20 units of inventory for $12.50 each. It sold 90 units for $25 each. Beta's weighted average cost is ______.

$12.10

Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using periodic weighted average cost, its inventory after the December 24 sale is ______.

$2,240

Delta Diamonds had 5 one-carat diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold one of the diamonds that was purchased on July 9. Using a periodic specific identification, its Inventory after the December 24 sale is ______.

$2,250

Lux Company started the month with 20 lamps in its beginning inventory that cost $30 each. During the month, Lux purchased 80 additional lamps for $31 each. At the end of the month, Lux counted its inventory and found that 25 lamps remained unsold. If Lux uses periodic weighted average cost, its Cost of Goods Sold for the month is ______.

$2,310

Quartz Instruments had Retained Earnings of $145,000 at December 31, 2020. Net Income for 2021 was $90,000, and Dividends for 2021 were $30,000. What amount of Retained Earnings should be reported at December 31, 2021?

$205,000

Ace Electronics had Cost of Goods Sold of $20,000. If purchases of inventory were $23,000 and Ending Inventory was $6,000, Ace's Beginning Inventory must have been ______.

$3,000

On May 1, Cut Above, Inc. collected $3,000 in advance from customers to mow their lawns in June. Under cash basis accounting, revenues in May will equal ______.

$3,000

Mountain Made started the month with 3 quilts in its beginning inventory that cost $200 each. During the month, Mountain Made purchased 20 additional quilts for $210 each. At the end of the month, Mountain Made counted its inventory and found that 5 quilts remained unsold. If Mountain Made uses LIFO periodic, its Cost of Goods Sold for the month is ______.

$3,780

Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using first-in, first-out, Cost of Goods Sold equals ______.

$30

Widget Company started the month with 10 gadgets in its Inventory that cost $5 each. During the month, Widget bought 50 more gadgets that cost $6 each. At the end of the month, Widget counted its inventory and found that 8 gadgets remained unsold. If Widget uses FIFO, its Cost of Goods Sold for the month is ______.

$302

Beginning Inventory consists of 4 items at $10 each. During the month, the company purchased 3 items for $11 each and it sold 3 items. Using last-in, first-out, Cost of Goods Sold equals ______.

$33

Boron Company has Net Sales of $60,000; Beginning Inventory of $7,000; Purchases of $35,000 and Ending Inventory of $5,000. The Cost of Goods Sold is ______.

$37,000

A company's beginning Accounts Payable is $1,000. It had a $10,000 of purchases on account and paid $7,000 of the amounts owed. The Accounts Payable ending balance equals a ______ balance.

$4,000 credit

XYZ Company sold merchandise for $5,000, with payment terms of 2/10,n/30. If the customer pays within the discount period and takes the discount, XYZ will receive ______.

$4,900

A company's beginning Cash is $10,000. It had a $100,000 of cash receipts and $70,000 of cash payments during the period. The company's ending Cash balance equals a _____ balance.

$40,000 debit

Beauty and the Bistro, Inc. had $5,000 of supplies available to use during the year. At the end of the year, it recorded an adjusting entry for $4,500 for the amount used during the year. Supplies on the balance sheet equals ______.

$500

Delta Diamonds had 5 diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds. Using FIFO, its Cost of Goods Sold for the year ended is ______.

$500

King Costume started the month with 8 masks in its beginning inventory that cost $10 each. During the month, King Costume purchased 40 additional masks for $12 each. At the end of the month, King counted its inventory and found that 5 masks remained unsold. If King Costume uses LIFO periodic, its Cost of Goods Sold for the month is ______.

$510

Delta Diamonds had 5 one-carat diamonds available for sale this year: 1 purchased June 1 for $500, 2 purchased July 9 for $550 each, and 2 purchased September 23 for $600 each. On December 24, it sold 1 of the diamonds that was purchased on July 9. Using periodic specific identification, its Cost of Goods Sold is ______.

$550

On January 1, Ace Electronics bought a new cash register for $2,500. Ace plans to use the cash register for 4 years and then sell it for $200. If Ace uses straight-line depreciation, depreciation expense for the 1st year ended December 31 equals ______.

$575

Acme Enterprises began the new year owing its suppliers $3,000 for merchandise purchased last year. Acme then sold half of this merchandise for $5,000 on account. Two weeks later, Acme paid its suppliers $1,000 and bought another $4,000 of merchandise on account. Acme now has an Accounts Payable balance of ______.

$6,000

In its 1st month of business, Brewed Awakenings, Inc. purchased $1,000 of supplies of which it had paid $700 and owes the rest. At the end of the month, it had $400 of supplies available for use. What is the amount of Supplies Expense on the income statement?

$600

Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850. What is the net pay to employees?

$70,000

The Three Little Pigs purchased three houses for a total cost of $160,000. Appraisal values for the three completed houses were: straw house, $40,000; wood house $60,000; and brick house $100,000. Using the basket purchase allocation, the recorded value of the brick house should be ______.

$80,000

A company has a $8,000 cash balance per its books. The bank statement has a balance of $8,450. The bank reconciliation included $800 of deposits-in transits, $500 of checks outstanding, EFTs of $1,000 were received from customers, a $200 NSF check from a customer, and a $50 bank service charge. Given the above reconciling items, the up-to-date cash balance equals ________.

$8750

Acme, Inc.'s books show an ending cash balance of $10,000 before preparing the bank reconciliation. Given the bank reconciliation shows outstanding checks of $3,000; deposits in transit of $2,000; NSF check of $100; and interest earned on the bank account of $10, the company's up-to-date ending cash balance equals ______.

$9,910

The formula for calculating straight-line depreciation is ______.

(cost - residual value) x (1/useful life)

X-it Company, signed a $500,000, 5-year note payable to buy a new industrial machine. The company paid $2,000 cash for transportation of the machine and $1,000 cash for installation costs. The journal entry to record this transaction will include a ______. (Check all that apply.)

- $503,000 debit to Machinery - $3,000 credit to Cash - $500,000 credit to Note Payable

Vango, Inc. bought a new delivery van during the year. Which of these costs should be expensed as ordinary repairs and maintenance? (Check all that apply.)

- $900 for cleaning the van during the year - $100 oil change on van

X-it Company bought a new delivery truck. The manufacturer says that the truck should last for ten years and 120,000 miles. X-it plans to use the truck for 4 years, during which it will be driven 50,000 miles. What is the useful life of the truck for depreciation purposes? (Check all that apply.)

- 50,000 miles - 4 years

Which of the following are limitations in internal control systems? (Select all that apply.)

- A control may not be implemented because the cost of the control may exceed the benefit of reducing the fraud or potential errors. - Collusion can exist making it impossible to completely prevent fraud.

Which of the following are possible effects on the accounting equation when recording a transaction that increases an asset by $100?

- A decrease in another asset by $100 - A liability account increases by $100 - A stockholders' equity account increases by $100

Which statements are true? (Select all that apply.)

- A grocery store may or may not use the Last-in, First-out inventory method. - The inventory method is an assumed cost flow and does not have to correspond with the actual physical flow of goods.

Which of the following have normal credit balances? (Select all that apply.)

- Accounts Payable - Common Stock - Notes Payable

Debits will increase which of the following T-accounts?

- Accounts Receivable - Prepaid Rent - Utilities Expense

Which of the following are contra-asset accounts? (Check all that apply.)

- Accumulated Depreciation - Allowance for Doubtful Accounts

Delectable, Inc.'s unadjusted trial balance includes Accounts Receivable of $10,000; Allowance for Doubtful Accounts of $50 credit balance; and credit sales of $100,000. Based on an aging of its receivable, management estimates that $1,000 of receivables will be uncollectible. Delectable's financial statements will show ______. (Select all that apply.)

- Allowance for Doubtful Accounts of $1,000 - Bad Debt Expense of $950

Which of the following are possible effects on the accounting equation when recording a transaction that increases by $100? Select all that apply

- An asset increases by $100 - A stockholders' equity account decreases by $100

Which of the following statements are true? (Check all that apply.)

- An increased inventory balance is undesirable if it is a result of an accumulation of unsaleable inventory. - An increased inventory balance is desirable if management is building up stock in anticipation of higher sales.

Identify which of the following statements are true. (Select all that apply.)

- Assets are on the left side of the accounting equation and have a normal debit balance. - Credits increase liabilities. - Liabilities are on the right side of the accounting equation and have normal credit balances. - Credits increase stockholders' equity.

If management was to unethically capitalize costs that should not have been, which of the following would be misstated? (Select all that apply.)

- Assets would be overstated. - Stockholders' equity would be overstated.

Delectable, Inc.'s unadjusted trial balance includes Accounts Receivable of $10,000; Allowance for Doubtful Accounts of $50 credit balance; and Sales Revenue of $100,000 (all on credit). Management estimates that 2% of credit sales will be uncollectible. Delectable's financial statements will show ______. (Check all that apply.)

- Bad Debt Expense of $2,000 - Allowance for Doubtful Accounts of $2,050 credit balance

Which financial statements are needed to calculate the inventory turnover ratio? (Check all that apply.)

- Balance sheet - Income statement

Banks provide important controls surrounding a company's cash. These include which of the following? (Select all that apply.)

- Banks provide statements that are used for independent verification. - Banks provide documentation. - Banks restrict access.

Which of the following should be classified as stockholders' equity? (Check all that apply.)

- Common Stock - Retained Earnings

The weighted average cost method uses the weighted average cost to calculate the value of ______. (Check all that apply.)

- Cost of Goods Sold - Inventory

As of December 31, the unadjusted balance in Deferred Revenue contains $5,600 for unredeemed gift cards. An analysis of the monthly sales indicates that $3,200 gift cards were redeemed during the month but not yet recorded. How will these transactions affect the adjustments at the end of the period?

- Deferred Revenue needs to be decreased by the amount of gift cards redeemed during the month. - Sales Revenue needs to be increased by the amount of gift cards redeemed during the month.

Which principles of internal control are incorrectly described? (Select all that apply.)

- Document procedures - do not provide access to assets or information unless it is needed to fulfill the assigned task - Restrict access - prepare documents that show activities that have occurred

Which of the following are true about the income statement? (Select all that apply.)

- Each major caption has an underlined subtotal, such as Total Expenses. - Revenues are listed before expenses. - A dollar sign appears only at the top and bottom of the column of numbers. - Net Income has a double underline.

What are the key events with notes payable? (Check all that apply.)

- Establishing the note - Recording interest paid - Recording principal paid - Accruing interest incurred but not paid

A goal of the Sarbanes-Oxley Act is improving corporations' internal controls. Which of these may accomplish this goal? (Select all that apply.)

- External auditors must test the effectiveness of the company's internal controls. - Marketing managers must determine whether the marketing team is submitting accurate sales and expense reports. - An audit committee of independent directors oversees financial matters of the company.

Employees' gross earnings differ from their net pay because of ______. (Select all that apply.)

- FICA taxes - federal and state income taxes - payroll deductions

Which of the following are found on the income statement of a merchandiser? (Check all that apply.)

- Gross Profit - Cost of Goods Sold - Sales Revenue

Which of the following income statement line items are affected by the inventory method chosen? (Select all that apply.)

- Income before Income Tax Expense - Income Tax Expense - Income from Operations - Net Income -Gross Profit

Which of the following accounts found on an unadjusted balance typically require adjusting entries? (Select all that apply.)

- Interest Payable - Supplies - Prepaid Rent

Which of the following statements are true about the balance sheet. (Select all that apply.)

- It is sometimes called the statement of financial position. - It reports the economic resources and claims on those resources. - It reports the assets, liabilities and stockholders' equity at a point in time.

Cedar Fair purchased land; which of the following should be debited to the Land account? (Check all that apply.)

- Legal fees for the land's title search - Fees for surveying of the land - Commissions paid to brokers when purchasing the land

Which of these are cash equivalents? (Check all that apply.)

- Money market funds - Investments within 3 months to maturity

Which are 3 common misconceptions users of an income statement may have? (Select all that apply.)

- Net Income equals Cash. - Net Income does not include estimates. - Net Income reports all changes of value that occurred during the accounting period.

Why might a bank statement and the company's records differ? (Select all that apply.)

- Not all checks written cleared the bank. - Customer checks that bounced (NSF). - Deposits were made at the end of the bank statement date in an ATM.

Which of the following are possible effects on the accounting equation when recording a transaction that affects two accounts?

- One asset account increases and one stockholders' equity account increases - One asset account increases and one asset account decreases

Which of the following account balances will typically be reduced as a result of adjusting entries? (Select all that apply.)

- Prepaid Rent - Supplies - Deferred Revenue

Which of the following are the steps involved in a petty cash system? (Select all that apply.)

- Putting money into petty cash to establish a fund - Paying money out to reimburse others - Replenishing the petty cash fund

Which of the following may occur with a higher inventory turnover ratio? (Check all that apply.)

- Reduction in obsolescence - Reduction in inventory storage costs

Which of the following line items appear on an income statement? (Select all that apply.)

- Revenues - Wages Expense

Which of the following items are netted against Sales Revenue to arrive at Net Sales (Sales Revenue to net sales)? (Select all that apply.)

- Sales Returns - Sales Discounts - Sales Allowances

Credits will increase which of these T-accounts? (Select all that apply.)

- Sales Revenue - Deferred Revenue - Accounts Payable

In financial statements, Sales on account will cause an increase in ______. (Select all that apply.)

- Sales Revenue on the income statement - Accounts Receivable on the balance sheet

The issue price of a bond is ______. (Select all that apply.)

- based on a present value calculation - based on what the market is willing to pay

Which of the following are typical reconciling items on the book side of a reconciliation because the company did not know about these items until it got the bank statement? (Select all that apply.)

- Services charges - Electronic funds transfers - Interest income

Which of the following are not required payroll deductions from an employees' gross earnings? (Check all that apply.)

- State unemployment tax (SUTA) - Federal unemployment tax (FUTA) - Charitable contributions

Which of these depreciation methods are allowed by GAAP? (Select all that apply.)

- Straight-line - Units-of-production - Declining-balance

What information is provided by the receivables turnover ratio? (Check all that apply.)

- That a higher ratio means faster (better) turnover - The number of times the average receivables balance is collected during the period

Acme Enterprises just bought a new manufacturing machine. Which of these costs should be capitalized? (Check all that apply.)

- The $8,000 cost of tearing down Acme's factory wall to get the machine inside - The $500,000 invoice price of the machine - The $15,000 freight bill to deliver the machine to Acme's factory

The days to collect ratio provides what kind of information? (Check all that apply.)

- The average number of days from sale on account to collection - That a higher number of days means a longer (worse) time for collection

In which situations does a company issue a note receivable? (Check all that apply.)

- The company converts an existing account receivable to grant the customer an extended payment period for the amount owed plus interest. - The company lends money to employees or businesses.

Which statement are true? (Select all that apply.)

- The inventory methods apply to both perpetual and periodic inventory systems. - Specific identification, weighted average cost, LIFO and FIFO are generally accepted costing methods. - The inventory costing methods determine the amount of the debit to Cost of Goods Sold and credit to Inventory.

X-it Company signed a $500,000, 5-year note payable to buy a new machine. The company paid $2,000 cash for transporting and $1,000 cash for installing the machine. What is the effect of this transaction on the accounting equation? (Check all that apply.)

- Total liabilities increase $500,000. - Machinery, an asset, increases $503,000. - Total assets increase $500,000.

What is the effect of recording depreciation expense on the accounting equation? (Check all that apply.)

- Total stockholders' equity decreases. - Total assets decrease.

In its first year of business, Wok 'n' Roll, Inc. provided $100,000 of goods to its customers of which $80,000 was collected. It also incurred $90,000 in expenses for which $80,000 was paid. Which of the following statements are correct?

- Wok 'n' Roll should use accrual basis accounting for external reporting purposes to conform with GAAP and IFRS. - Wok 'n' Roll should report net income of $10,000 for external reporting purposes.

The debt-to-asset ratio indicates _____. (Check all that apply.)

- a higher ratio means greater financing risk - the percentage of assets financed by debt

The current ratio measures a company's:

- ability to pay in the upcoming year - short-term liquidity

All transactions ______. (Select all that apply.)

- affect assets, liabilities, and/or stockholders' equity - have at least two effects on the accounting equation

A bond's stated interest rate is ______. (Check all that apply.)

- always expressed as an annual interest rate - used to calculate interest payments

Which of the following statements are true regarding the income statement? Income statements ______. (Select all that apply.)

- are sometimes called the statement of operations - report revenues minus expenses

Sales returns and allowances ______. (Select all that apply.)

- are typically recorded after the initial sale when the actual return or allowance occurs - are adjusted for at the end of the accounting period for estimated returns and allowance expected to occur in the following months - reduce the amount the seller expects to receive from customers

Long-lived assets are ______. (Check all that apply.)

- assets acquired for use over 1 or more years - used by the business

The entry to record the issuance of a note for cash was recorded with a debit to Cash and a credit to Notes Receivable instead of Notes Payable. The effect of recording this entry causes ______. (Select all that apply.)

- assets to be understated - liabilities to be understated

Which of the following are advantages of using national credit cards? (Check all that apply.)

- avoid lengthy cash collection periods - reduction of bad debts expense

Z Best, Inc. issued $1,000,000 of common stock for cash. By accident, Z Best recorded the transaction by increasing cash and decreasing stockholders' equity. As a result of this entry, ______. (Check all that apply.)

- common stock is understated - the accounting equation is out of balance - stockholders' equity is understated

If a company issues $100,000 common stock, the Common Stock T-account will have $100,000 posted on the ________ side. (Select all that apply.)

- credit - right

Using a perpetual system, purchasing merchandise on account includes a ______. (Check all that apply.)

- credit to Accounts Payable - debit to Inventory

ABC purchased $500 of merchandise on account. ABC's journal entry to record this transaction includes a ______. (Check all that apply.)

- credit to Accounts Payable of $500 - debit to Inventory of $500

When using the allowance method, the adjusting entry to record estimated bad debt expense includes a ______. (Check all that apply.)

- credit to Allowance for Doubtful Accounts - debit to Bad Debt Expense

Using the aging approach, management estimates that $1,000 of Accounts Receivable will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______. (Check all that apply.)

- credit to Allowance for Doubtful Accounts of $900 - debit to Bad Debt Expense of $900

The entry to record lending $1,000 to an employee at a rate of 6% for 8 months includes a ______. (Check all that apply.)

- credit to Cash of $1,000 - debit to Notes Receivable of $1,000

The journal entry to record the payment for merchandise previously purchased on account includes a ______. (Select all that apply.)

- debit to Accounts Payable - credit to Cash

The journal entry to record $5.6 million in sales on account includes a ______. (Select all that apply.)

- debit to Accounts Receivable of $5.6 million - credit to Sales Revenue of $5.6 million

Management estimates that 1% of the $100,000 of credit sales will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a ______. (Select all that apply.)

- debit to Bad Debt Expense of $1,000 - credit to Allowance for Doubtful Accounts of $1,000

Using a perpetual inventory system, the journal entry to record a sale on account will include a ______. (Check all that apply.)

- debit to Cost of Goods Sold - debit to Accounts Receivable - a credit to Sales Revenue - credit to Inventory

The adjusting entry to record depreciation on equipment includes a ______. (Select all that apply.)

- debit to Depreciation Expense - credit to Accumulated Depreciation

Thermal, Inc. bought a new office computer for $5,000 cash. The journal entry to record this transaction will include a $5,000 ______. (Check all that apply.)

- debit to Equipment - credit to Cash

Bank 'n' Roll, Inc. pays its employees once a month and records the expense at the time of payment. On May 31, Bank 'n' Roll, Inc. paid its employees $10,000 for work performed in May. The entry to record the payment includes a ______ for $10,000. (Check all that apply.)

- debit to Wages Expense - credit to Cash

On-a-Roll, Inc. amortizes its patent of $20,000 over 20 years. The adjusting entry to record amortization results in a(n) ______. (Check all that apply.)

- decrease to assets on the balance sheet - decrease to net income on the income statement

Which line items appear on the statement of retained earnings? (Check all that apply.)

- dividens - net income - ending balance of Retained Earnings

Revenues are recognized when ______, even when the cash is collected in a different accounting period than the obligation to the customer has been performed.

- goods are delivered - services are performed

The benefits of internal control procedures are that they ______. (Check all that apply.)

- improve the efficiency and effectiveness of operations - enhance the reliability of accounting information - protect against theft of assets

The heading of an income statement ______. (Select all that apply.)

- indicates if the reported numbers are rounded to the nearest thousand or million - includes the name of the company - includes the time period covered

For an investor, bonds are attractive investments because ______.

- interest is higher than bank savings accounts - they can be traded on established bond exchanges

The Sarbanes-Oxley (SOX) Act provides increased regulations for ______. (Select all that apply.)

- internal controls - corporate executives - auditors

Boopsie Agin, the company's bookkeeper, recorded the purchase of merchandise on account with a debit to Cost of Goods Sold and a credit to Cash. As a result, ______. (Check all that apply.)

- liabilities are understated - assets are understated - stockholders' equity is understated

The goals of inventory managers include ______. (Check all that apply.)

- making sure that inventory quality meets customer expectations - having enough inventory on hand to meet customer demand - keeping the costs of buying and storing inventory as low as possible

On-a-Roll, Inc. amortizes its copyright of $20,000 over 20 years. Miss Hap, the bookkeeper, forgot to record the amortization in the current year. The effect of this mistake causes ______. (Check all that apply.)

- net income to be overstated - assets to be overstated

Internal control for cash is important because ______. (Check all that apply.)

- of the large volume of cash transactions - cash is portable and is "owned" by whomever possesses it - of the high risk of theft - the risk of cash-handling errors is significant

A sales discount with terms of 1/10,n/30 means the buyer receives a ________ % discount if paid within ________ days.

1, 10

Ace Electronics paid $4,000 of the $5,000 its employees had earned during the period. Ace Electronics should report Wages Expense of $5,000 on the income statement and Wages Payable of ______ on the balance sheet prepared in accordance with generally accepted accounting principles.

1,000

Place the steps in the adjustment process in order. Drag the items to put them in the proper order with the first step on top.

1. Analyze the accounts to determine the amount of the adjustment 2. Record the adjusting entry. In the journal 3. Summarize the adjusting entries in the accounts

Which of the following are financial statements?

1. Income Statement 2. Statement of Retained Earnings 3. Balance Sheet 4. Statement of Cash Flows

Barry, Inc.'s sales equal $30,000 and cost of goods sold equals $10,000. Its beginning inventory was $800 and its ending inventory is $1,200. Barry's inventory turnover ratio equals ______ times.

10

A company started the month with $1,000 of Retained Earnings. During the month, it had Revenue of $5,000 and Expenses of $4,500. It also distributed a Dividend of $100 among its stockholders. The company's Retained Earnings at the end of the period equals $

1000+(5000-4500)-100=1400

A bond with an issue price of $10,100 and a face value of $10,000 was issued at ______.

101.000

Net sales revenue is $720,000. Beginning and ending net accounts receivable are $62,000 and $58,000, respectively. Calculate the receivables turnover ratio.

12.0 times

Sterling Company paid $1,200 for 3 months of rent on April 1 of the current year. On April 30, Sterling Company made an adjusting entry to account for the rent that expired during the month of April. The adjusting entry contained a debit to Rent Expense in the amount of $ and a credit to Prepaid Rent in the amount of $. The remaining balance in the Prepaid Rent account after the adjustment was $.

400, 400, 800

Ace Electronics had the following increases in the cash account during the month: $20,000 from owners for stock; $5,000 from sales to customers; and $15,000 borrowed from River Bank. Ace's revenue for the month was ______.

5,000

If Vito, Inc. has an inventory turnover ratio of 5 times, then its days to sell must be ______.

73 days

When a company makes a payment for amounts owed from prior purchases, it will record a debit to ______ and a credit to ______.

Accounts Payable; Cash

Using its aging of accounts receivable, Age Old, Inc. estimates that $90,000 of its $4,000,000 of accounts receivable will be uncollectible. Prior to making its adjusting entry, the unadjusted Allowance for Doubtful Accounts has a credit balance of $1,000. After the adjustment, the ______.

Allowance for Doubtful Accounts will have a $90,000 credit balance

Alpha Company bought inventory from Omega Company, FOB shipping point. On December 31, the last day of the accounting year, the goods were on a truck owned by Theta, Inc., exactly half-way between Alpha and Omega. Which company should include these goods in its December 31 inventory?

Alpha

Which of the following is recorded at the end of an accounting period when accounting for receivables using the allowance method?

An estimate is recorded by debiting Bad Debt Expense and crediting Allowance for Doubtful Account in the same period as the related sale.

Liabilities are potential liabilities that arise as a result of past transactions or events and are reported on the balance sheet if the loss will probably occur and can be reasonably estimated. (Enter one word per blank.)

Contingent

How does the inventory costing methods affect the income statement when costs tend to rise over time?

Cost of Goods Sold on the income statement differs between the methods causing Income Tax Expense to differ.

What effect does the inventory costing method have on the income statement? The inventory methods affects the amount of the ______.

Cost of Goods Sold, Gross Profit, Income from Operations, Income before Income Tax Expense, Income Tax Expense and Net Income

Of the 4 companies listed below, which company is more likely to use specific identification to value its inventory and cost of goods sold?

Custom home builder

Using the allowance method, which is the correct adjusting journal entry to record bad debt expense?

Debit Bad Debt Expense and credit Allowance for Doubtful Accounts

Based on these ratios, does it appear Shaver relies mainly on debt or equity to finance its assets?

Debt

Which of the following is not a revenue account that appears on the income statement?

Deferred Revenue

Place the following in order (top down) of how they would appear in the heading of Deli Llama's annual income statement for the fiscal year ended March 31, 2020.

Deli Llama's Inc Annual income statement For the fiscal year ended March 31, 2020.

Which of the following is shown as an addition to the bank balance on a bank reconciliation?

Deposits in transit

_________ Expense should be recorded to recognize the use of and benefit received from long-lived assets, such as equipment, during the accounting period. (Enter one word per blank.)

Depreciation

Do the measures calculated in requirement 1 represent an improvement (or deterioration) in receivables turnover, compared to 2018, when the turnover was 10.9?

Deterioration

True or false: Financial statements must have a year end of December 31.

False: Financial statements may be prepared for any 12-month period.

Which of the following statements is correct?

Financial statements are prepared after adjustments to ensure that all accounts have been brought to their correct balance.

Which of the following costs should be added to the buyer's Inventory account?

Freight-in with terms FOB shipping point

Which of these line items appear on a balance sheet?

Liabilities, Assets, Stockholders' Equity

On May 1, Doormart received an order from a customer. The goods were shipped FOB shipping point on May 3. The customer received the goods on May 5 and paid for the merchandise on June 1. When should Doormart record the sale?

May 3

Which of the following is correct?

Measurement of net income involves estimations.

Which of the following is not a proper segregation of duties for cash received in person?

Members of the accounting department are responsible for the collection of cash and depositing the cash in the bank.

______ inventory consists of products acquired in a finished condition, ready for sale without further processing. (Enter one word per blank.)

Merchandise

is a liability that represents the amount the company owes to others as a result of issuing a promissory note.

Notes Payable

On October 25, Yacht Doc received $200,000 for a yacht valued at $180,000 and a 4-month service contract. During November, the yacht was delivered and 1 month of the service contract was performed. The remaining services are to be performed evenly over the next 3 months. In what month should the $180,000 for the yacht be recognized as revenue?

November

Vicious Cycle built a new building. Which of the following costs should be expensed?

Party to celebrate grand opening

The expenditure incurred for changing the oil in the company's fleet of trucks is debited to ______.

Repairs and Maintenance Expense

________ cash must be reported separately on the balance sheet because it is legally or contractually required to be set aside for a specific purpose. (Enter one word per blank.)

Restricted

Surfshack Corp. buys surfboards, wetsuits, and surf wax from Rip to Shreds, Inc. for sale to consumers. What type of company is Surfshack Corp?

Retail merchandiser

Which of the following statements are true?

Retained Earnings increases when a company earns and keeps its profit.

When a seller fulfills its performance obligation, it credits ______.

Revenue

_________ is the quantity sold times the price charged from selling goods or services to customers. (Enter one word per blank.)

Revenues

The equation for the income statement is - = . (Enter only one word per blank.)

Revenues-expenses=net income

Which of the following statements is correct regarding the adjustment for salaries and wages accrued but not paid at the end of the accounting period?

Salaries and Wages Expense will increase by the amount of the unpaid salaries and wages.

Cashiers at a supermarket have to talk to a manager before approving price changes at the register. Which internal control principle is being followed?

Segregate duties

_______ of duties is essential for safeguarding assets. The person who has custody of an asset should not also account for the asset. A person who performs both duties can steal the asset and hide the theft by making a bogus entry in the accounting records. (Enter one word per blank.)

Segregation

When a business issues common stock, what does it give to its owners?

Stock certificates

The adjustment for supplies used during the period will result in a debit to the ______ account and a credit to the ______ account.

Supplies Expense; Supplies

The journal entry to record the purchase of supplies on account is debit ______.

Supplies and credit Accounts Payable

Acme Enterprises, which uses a perpetual inventory system, recorded a debit to Sales Returns & Allowances and a credit to Accounts Receivable. (No other accounts were affected.) What business event must have taken place?

The customer received a damaged product, but kept the product and asked for a reduction in the price.

How does the adjustment for depreciation differ from other deferral adjustments?

The depreciation adjustment uses a contra-account rather than reducing the asset accounts directly.

ABC Company is in the process of issuing bonds. The bonds have a stated interest rate of 6%, which is 2% above the current market rate. What effect will the two interest rates have on the bond issue price?

The issue price will be above the bond's face value.

Which of the following is recorded with a debit to Cash and a credit to Interest Receivable?

The receipt of an interest payment for interest previously recorded

Which of the following is recorded with a debit to Cash and a credit to Notes Receivable?

The receipt of the principal payment

Acme, Inc., bought land and a building for $150,000. Acme plans to use the building for 20 years and then sell it. What is the useful life of the land?

Unlimited

The adjusting entry to record wages incurred but not yet recorded includes a credit to ______.

Wages Payable

What is the inventory costing method that adds together the total cost of all goods available for sale during the period, and then divides that by the number of units available for sale to get a value to assign to all goods sold and all goods remaining in inventory?

Weighted average cost

During the year, ABC Corp. realizes that a particular customer will never pay. What action should ABC take? Multiple choice question.

Write off the uncollectible account and its corresponding allowance from the accounting records.

Is it probable that Shaver will be able to meet its future interest obligations?

Yes

Did these transactions change the extent to which Madison Shoes relied on creditors versus stockholders for financing?

Yes - the transactions affected liabilities and stockholders' equity, and they led Madison Shoes to rely to a greater extent on stockholders (versus creditors).

If a bond's stated rate is 4% and the market rate is 6%, this bond will sell at ______.

a discount

Removing an uncollectible account and its corresponding allowance from the accounting records is called ______.

a write-off

Deposits in transit occur when you make a deposit ______.

after the bank's normal business hours

Closing journal entries are recorded ______.

after the financial statements have been prepared

After the adjustments have been recorded, the adjusted balance in the Prepaid Rent account represents the ______.

amount of the prepayment that remains towards future rental periods

Revenue on the income statement for the year ended December 31, 2020 equals the ______.

amount recognized by selling goods or services to customers during 2020

Payroll deductions ______. (Check all that apply.)

are amounts subtracted from employees' gross earnings to determine their net pay decrease the amount of cash an employee receives

FIFO, LIFO, and weighted average inventory costing methods are based on ______.

assumptions that accountants make about the flow of inventory costs

The adjusting entry to record the estimated amount of bad credit sales is a debit to and a credit to Allowance for Doubtful Accounts. (Enter only one word per blank.)

bad, debt, expense

Assets________ Net income________ Investing activites

balance sheet income statement statement of cash flows

Inventory is reported on the ______. Later, when the inventory is sold, it becomes ______.

balance sheet as a current asset; Cost of Goods Sold on the income statement

Goods Available for Sale will ______ when sold.

become cost of goods sold on the income statement

The adjusted trial balance should be prepared ______ the financial statements are prepared to prove the ______ of the debits and credits.

before; equality

The difference between the Equipment account and its Accumulated Depreciation is called the value. (Enter only one word per blank.)

book

All costs to get an asset in place and ready for its intended use should be ______.

capitalized

All reasonable and necessary costs to acquire and prepare an asset for its intended use should be ______.

capitalized as an asset

The old Metropolitan Theater, which had been unused for years, was purchased for $1, renovated at a cost of $3.5 million, and then reopened for business. The renovation cost should be ______.

capitalized as part of the cost of the theater

When Revenue is credited, the possible three debits are ________, Accounts ________, and/or _________ Revenue. (Enter only one word per blank.)

cash, receivable, unearned/deffered

When a check is presented to a bank for payment and the amount is deducted from the payer's account, the check is said to have _________ the bank. (Enter one word per blank.)

cleared

If a company forgets to record the journal entry to accrue interest expense, then its net income is too ______ and its liabilities are too ______.

high; low

Sales Returns and Allowances are reported on the ______.

income statement

Which financial statement reports the financial performance of the business during the current accounting period?

income statement

Depreciation Expense is reported on the ______.

income statement as an operating expense

For long-lived assets that have been in use for more than one accounting period, Depreciation Expense on the ______ Accumulated Depreciation on the ______.

income statement will be less than; balance sheet

The assumption that a company makes about its inventory cost flow can affect cost of goods sold on its ______ and inventory on its ______.

income statement; balance sheet

A company paid $200 cash for supplies that were purchased last month. However, the company recorded a debit to Accounts Payable of $200 and a credit to Cash of $20. This company's accounting records are ______.

incorrect, because debits do not equal credits

The adjustment for supplies used during the period will result in a(n) ______ to the Supplies Expense account.

increase

Issuing a note payable for cash immediately results in a(n) ______.

increase in assets and an increase in liabilities

Capitalized costs differ from expenses in that only capitalized costs result in a(n) ______.

increase to long-lived assets

As inventory quality increases, its cost usually _______. (Enter one word per blank.)

increases

On the balance sheet, Land is reported at its ______.

original cost

Applying the lower of cost or market rule results in inventory being reported at the ______.

market value if lower than cost

An asset's useful life ______.

may be expressed in terms of time or units of capacity

Net Sales on an income statement equals Sales Revenue ______.

minus Sales Returns, Allowances and Discounts

Fraudulent reporting by management includes ______.

misreporting revenues and expenses

A ________ income statement shows how much profit is earned from product sales without being clouded by other operating expenses and separates other items that are not core to the operations of the company. (Enter only one word per blank.)

multistep

What is the effect on total assets when a company purchases a cash register for a cash payment of $1,200?

no effect

When the times interest earned ratio is less than 1.0, a company is ______.

not generating enough income to cover its interest expense

When accounting for accounts receivable, a primary objective is to ______.

not overstate assets and stockholders' equity by the estimated amount of bad debt

If an adjusting entry for interest owed is recorded then the company must have issued .

notes payable

The inventory turnover measures the ______.

number of times the average inventory balance is bought and sold

FIFO uses the ______ cost for Cost of Goods Sold on the income statement and the ______ cost for Inventory on the balance sheet.

oldest; newest

Financial statements can be prepared ______. (Check all that apply.)

on a quarterly basis on a monthly basis on a fiscal year basis

Collecting cash from customers for services provided is a(n) ______ activity.

operating

Place these items in the order in which they appear on the statement of cash flows.

operating activities investing activities financial activities

The fees charged by major credit card companies are included in ______.

selling expenses on the income statement

A corporation earns profits for its stockholders by ______. (Check all that apply.)

selling goods at more than their cost

Restricted cash is reported ______.

separately as an asset on the balance sheet

If a seller sells its merchandise with the shipping terms FOB shipping point, it credits Revenue when the merchandise is _______.

shipped from the seller's place of business

The purchaser of inventory pays for shipping if the shipping terms are FOB ______.

shipping point

Lox, Stock and Bagel, Inc., issued $100,000 of common stock. It recorded the transaction by increasing Cash and decreasing Common Stock. As a result of this entry,:

the accounting equation will be out of balance.

US GAAP are ______.

the accounting rules developed by the FASB for use in the United States

Accounts Receivable is ______.

the amount the company expects to collect for previous credit sales

A bond's maturity date is ______.

the date on which the bond principal will be repaid in full

An income statement is referred to as a single-step income statement because ______.

the format separates total revenues from expenses and reports a single measure of income

The inventory turnover ratio directly measures ______.

the times per period the average inventory balance is sold

If a company has no Wages Payable on its balance sheet, then one may conclude ______.

the wages expensed in the period were paid

An exchange or event that has a direct and measurable financial effect.

transaction

True or false: Creditors would like a company that owes them money to have a large positive cash flow from operating activities.

true

A(n) ______ is a collection of documents prepared in the process of approving, processing and documenting all purchases and payment made on account.

voucher

A(n) ______ system involves the processing of purchases and payments made on account.

voucher

Liabilities are classified as current if they ______.

will be paid within the company's operating cycle or within 1 year, whichever is longer