ACCT EXAM 1

The contra-asset account, ______, is used to record depreciation on equipment.

Accumulated Depreciation

Classify the Balance Sheet accounts listed below as an Asset, Liability, or Shareholders' Equity.

Prepaid Insurance- Asset Deferred Revenue- Liability Interest Payable- Liability

The statement of cash flows reports the ______.

cash collected and cash paid during the period

The cost of a long-term asset, such as Equipment, is expensed ______.

over its useful life

How many of the following accounts (line items) are found on the income statement? [a]

7 = 3

Nim Com Soup, Inc., purchased land at a cost of $7,000 five years ago. Currently, the land is estimated to be worth $23,000. At what amount should the land be reported on Nim Com Soups' balance sheet at year end?

7000

Wok On Water, Inc.'s employees had worked during the first month of May and earned $7,000. Wok on Water had paid $3,000 of the amount owed. How much will be reported as Wages Payable on its May 31 balance sheet?

7000-3000= 4000

On January 1, Year 1, Nothing Bundt Cakes, Inc., purchased equipment for $10,000 with an estimated useful life of five years at which time the equipment will be taken to the dump. Given the financial statements for the year ended and at December 31, Year 2, match each description with the appropriate financial statement and amount.

$2,000; Income Statement $6,000; Balance Sheet

If a company's total assets equals $80,000 and its shareholders' equity equals $40,000, then its liabilities must equal $______.

$40,000

In its first month of business, Sea World Cruises, Inc., collected $20,000 from customers in advance during May. At May 31, it had a balance in its Deferred Revenue of $14,000. What is the amount of Revenue earned that had been collected in advance?

20000-14000 = 6000

Thistle Do Nicely had $200 of supplies on May 1. During May, it purchased $500 of supplies on account. It paid $250 of the $500 it owed for its supplies. At May 31, Thistle Do Nicely only had $35 of supplies left. Supplies on the balance sheet equals ______.

35

During December, Acme, Inc., performed and billed its customers $38,000 for services on account of which it collected $8,000. How much revenue should Acme record in December?

38,000

If a company's total assets equals $50,000 and its shareholders' equity equals $10,000, then its liabilities must equal $______.

40,000 40000+10000 = 50000

Purses, Inc., sold 8 purse(s) that cost $40 each to its customers for a price of $90 each. The Gross Profit amount on the income statement will equal $______.

400

On January 1 of its first month of business, Bags Bunny, Inc., paid $45,000 for eight months rent beginning in January. How much will be reported as Prepaid Rent on its balance sheet at January 31?

45000/8= 5625 45000-5625 = 39,375

Nim Com Soup, Inc., purchased land at a cost of $6,000 five years ago. Currently, the land is estimated to be worth $56,000. At what amount should the land be reported on Nim Com Soups' balance sheet at year end?

6000

Purses, Inc., sold 8 purse(s) that cost $40 each to its customers for a price of $80 each. The Gross Profit amount on the income statement will equal $______.

80-40= 40 40(8)= 320 Answer 320

During the year, Proffitts, Inc., had revenue of $97,000 and expenses of $29,000. During the year, it collected $12,000 from its customers and paid $3,000 of its expenses and $20,000 of dividends to its owners. Net income for the year equals $______.

97000-29000 = 68000

Stockem, Inc., issued $80,000 of stock in exchange for cash. Show the effect on Stockem's accounting equation.

Assets- $80,000 Cash Liabilities- $0 No Effect Stock- $80,000 Stock Retained Earnings- $0 No Effect

Offsets, Inc., purchased land for $100,000 by issuing an $80,000 note and paying the remainder with cash. What is the net effect of this transaction for each column in the accounting equation?

Assets- $80,000 increase Liabilities- $80,000 increase Shareholders' Equity- No effect

Show the effect of the transaction: Hot Diggity Dog, Inc., paid $10 of May's interest on the note payable, plus it paid off the $2,000 note payable. IF THERE IS NO EFFECT, SELECT "0 NO EFFECT."

Assets- (2,010) Cash Liabilities- (2,000) Note Payable Stock- 0 No Effect Retained Earnings- (10) Interest Expense

On February 2, Wursthaus, Inc., purchased 800 sausages that cost $6.00 each on account.

Assets- 4,800 Inventory Liabilities- 4,800 Accounts Payable Shareholders' Equity- 0 No Effect

Which of the following would be included in the operating activity section of the Statement of Cash Flows? (Select all that apply.)

Cash paid to employees Cash collected from customers Cash paid to suppliers

Classify the Balance Sheet accounts listed below as an Asset, Liability, or Shareholders' Equity.

Cash- Asset Notes Payable- Liability Equipment- Asset

A horizontal analysis of the balance sheet would show (select all that apply):

Current assets increased 50% from 20X1 to 20X2 Total stockholders' equity increased 44.16 % from 20X1 to 20X2 . Total assets increased 17.95% from 20X1 to 20X2.

Pane in the Glass, Inc., has Total Long-Term Liabilities of $10,000, Total Liabilities of $40,000, Total Long-Term Assets of $50,000, and Total Assets of $60,000 at the end of the year. Calculate the Debt Ratio as a percentage and round to the nearest whole percent. DO NOT enter your answer as a decimal and DO NOT include the % sign.

Debt Ratio = Total Liabilities / Total Assets 67

Indicate whether the account is an Asset, Liability or Shareholders' Equity account:

Deferred Revenue- Liability Sales Revenue- Shareholders' Equity Accounts Receivable- Asset

Classify each of the items below according to the section of a firm's financial statements in which they would be reported. Each section may be used more than once. Some may not be used at all.

Equipment- Non-current Assets Notes Payable (due in 3 months)- Current Liabilities Accounts Payable- Current Liabilities Notes Payable (due in 18 months)- Non-current Liabilities

A vertical analysis of the income statement would show (select all that apply):

Gross profit was 33.3% of net sales in 20X2. The net profit margin for 20X2 is 10.83%

Indicate whether each activity for Hot Diggity Dogs, Inc., would be classified as an operating, investing, or financing activity.

Issued $10,000 of stock.- Financing Activity Purchased $1,000 of inventory.- Operating Activity Purchased land for $1,000.- Investing Activity

Classify the Balance Sheet accounts listed below as an Asset, Liability, or Shareholders' Equity.

Land- Asset Accounts Payable- Liability Stock- Shareholders' Equity

Calculate the net profit margin for 20X2. (Enter your answer as a decimal and round to 4 places. Example .2605)

Net Profit Margin = Net income/Net sales 0.1083

A horizontal analysis of the data would show (select all that apply):

Net income increased 108% from 20X1 to 20X2. Cost of goods sold increased 18.96% from 20X1 to 20X2.

If a company incorrectly records cash received from customers by increasing Cash and Service Revenue for services that were previously recorded as sales on account, how will this error affect the current period?

Net income will be too high.

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

No effect

During the year, Proffitts, Inc., had revenue of $81,000 and expenses of $34,000. During the year, it collected $6,000 from its customers and paid $3,000 of its expenses and $20,000 of dividends to its owners. Net income for the year equals $______.

Rev - Expense 81000-34000= 47000

What is total Shareholders' Equity at December 31, Year 2?

Revenue for the year ended, December 31, Year 2 - Expenses for the year ended, December 31, Year 2 = 27000 Total Assets at December 31, Year 2 - Total Assets at December 31, Year 1 = 25000 27000 + 25000 = 52000 52000-7000 (dividends) = 45000

Indicate the financial statement where you would expect to find each line item:

Salaries Expense- Income Statement Salaries Paid to Employees- Statement of Cash Flows Salaries Payable- Balance Sheet

Calculate Applesoft's Gross Profit Margin for the year ended December 31. Round to the nearest WHOLE PERCENT and do not include the % sign in your answer.

Sales Rev - COGS/Sales Rev x 100 34

Determine the missing Cost of Goods Sold in the following multi-step income statement:

Sales Rev - Gross profit = COGS

Match the correct description with each of the following line items found on the income statement.

Sales Revenue- price times the quantity sold Cost of Sales- subtracted Sales Revenue to arrive at gross profit Gross Profit- Sales Revenue minus Cost of Sales Operating Expenses- subtracted from Gross Profit to arrive at Operating Income

Calculate the Working Capital

Toal assets - Noncurrent Assets Current Assets - Current Liabilities

When a company receives cash in advance for services it has not yet performed, it records a(n)

liability called Deferred Revenue

Morris Lest, Inc., purchased machinery for $10,000 cash. The effect of this transaction is to cause ______.

total assets to remain the same