ACG Exam 1

At December 31, 2021 Lowery Company had retained earnings of $2,184,000. During 2021 they issued stock for $98,000, and paid dividends of $34,000. Net income for 2021 was $402,000. The retained earnings balance at the beginning of 2021 was:

$1,816,000 (X+402000-34000=2184000; X=1816000)

.Benedict Company compiled the following financial information as of December 31, 2021: Revenues$280,000 Common stock 60,000 Equipment 80,000 Expenses 250,000 Cash 70,000 Dividends 20,000 Supplies 10,000 Accounts payable 40,000 Accounts receivable 30,000 Retained earnings, 1/1/21 150,000 Benedict's stockholders' equity on December 31, 2021 is:

$220,000 (150000+280000-250000-20000+60000)

Finney Company began the year by issuing $20,000 of common stock for cash. The company recorded revenues of $185,000, expenses of $160,000, and paid dividends of $10,000. What was Finney's net income for the year?

$25,000 (185000-160000)

Crawford Company started the year with $30,000 in its Common Stock account and a credit balance in Retained Earnings of $12,000. During the year, the company earned net income of $24,000 and declared and paid $10,000 of dividends. In addition, the company sold additional common stock amounting to $14,000. As a result, the amount of its retained earnings at the end of the year would be:

$26,000 (12000+24000-10000)

Elston Company compiled the following financial information as of December 31, 2021: Revenues$420,000 Common stock 90,000 Equipment 120,000 Expenses 375,000 Cash 105,000 Dividends 30,000 Supplies 15,000 Accounts payable 60,000 Accounts receivable 45,000 Retained earnings, 1/1/21 225,000 Elston's assets on December 31, 2021 are:

$285,000 (120000+105000+15000+45000)

La More Company had the following transactions during 2021: Sales of $4,500 on account Collected $2,000 for services to be performed in 2022 Paid $1,375 cash in salaries for 2021 Purchased airline tickets for $250 in December for a trip to take place in 2022 What is La More's 2011 net income using accrual accounting?

$3,125 (4500 - 1375)

If total liabilities decreased by $45,000 and stockholders' equity increased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period?

$30,000 decrease (45000-15000)

In 2021 Grider Corporation had cash receipts of $28,000 and cash disbursements of $16,000. Grider's ending cash balance at December 31, 2021 was $44,000. What was Grider's beginning cash balance?

$32,000 (X+28000-16000=44000; X=32000)

Walton Company collected $7,200 in May of 2021 for 4 months of service which would take place from October of 2021 through January of 2022. The revenue reported from this transaction during 2021 would be:

$5,400 (7200 / 4 = 1800, 1800 * 3 = 5400)

At December 1, 2021, Orear Company's Accounts Receivable balance was $3,600. During December, Orear had credit sales of $15,000 and collected accounts receivable of $12,000. At December 31, 2021, the Accounts Receivable balance is

$6,600 debit (3600+15000-12000)

Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Revenue earned-$14,000 Accounts receivable-3,000 Expenses incurred-7,250 Accounts payable (related to expenses)-750 Supplies purchased with cash-1,800

$6,750 (14000 - 7250)

Gilkey Corporation began the year with retained earnings of $155,000. During the year, the company issued $210,000 of common stock, recorded expenses of $600,000, and paid dividends of $40,000. If Gilkey's ending retained earnings was $165,000, what was the company's revenue for the year?

$650,000 (155000+X-600000-40000=165000, X=650000)

The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)

Account Payable

The right to receive money in the future is called a(n)

Account Receivable

Adjusting entries are made to ensure that:

All of the above.

Which of the following correctly identifies normal balances of accounts?

Assets-Debit Liabilities-Credit Common Stock-Credit Revenues-Credit Expenses-Debit

Ending retained earnings for a period is equal to:

Beginning retained earnings + Net income - Dividends

An accountant has debited an asset account for $800 and credited a liability account for $600. Which of the following would be an incorrect way to complete the recording of the transaction?

Debit a stockholders' equity account for $200

Which of the following is not a principal type of business activity?

Delivering

Which of the following accounts is increased with a debit?

Dividends

Net income results when

Revenues > Expenses

Under the cash basis of accounting:

cash must be received before revenue is recognized

Greese Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,100 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:

debit Office Supplies Expense, $2,900; credit Office Supplies, $2,900

When a company has performed a service but has not yet received payment, it

debits accounts receivable and credits revenue from services

A company that receives money in advance of performing a service

debits cash and credits unearned fees

Dividends paid:

decrease retained earnings

Accrued revenues are:

earned but not yet received or recorded

Under the accrual basis of accounting:

events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.

A current asset is

expected to be converted to cash or used in the business within a relatively short period of time

One of the accounting concepts upon which adjustments for prepayments and accruals are based is:

expense recognition

Borrowing money is an example of a(n)

financing activity

The double-entry system requires that each transaction must be recorded

in at least two different accounts

On a classified balance sheet, companies usually list current assets

in the order in which they are expected to be converted into cash

To show how successfully your business performed during a period of time, you would report

income statement

Expenses are recognized when:

they contribute to the production of revenue

A list of accounts and their balances at a given time is called a(n)

trial balance

The revenue recognition principle dictates that revenue should be recognized in the accounting records:

when it is earned

A debit to an asset account indicates a(n)

increase in the asset

Accrued expenses are:

incurred but not yet paid or recorded

The primary purpose of the statement of cash flows is to report

information about cash receipts and cash payments of a company

If the retained earnings account increases from the beginning of the year to the end of the year, then

net income is greater than dividends

The following is selected information from L Corporation for the fiscal year ending October 31, 2021. Cash received from customers-$300,000 Revenue earned-370,000 Cash paid for expenses-170,000 Cash paid for computers on November 1, 2020 that will be used for 3 years-48,000 Expenses incurred including any depreciation-216,000 Proceeds from a bank loan, part of which was used to pay for the computers-100,000 Based on the accrual basis of accounting, what is L Corporation's net income for the year ending October 31, 2021?

$154,000 (370000 - 216000)

On June 1, 2021, England Inc. reported a cash balance of $18,000. During June, England made deposits of $8,000 and made disbursements totaling $24,000. What is the cash balance at the end of June?

$2,000 debit balance. (18000+8000-24000)

In the first month of operations, the total of the debit entries to the Cash account amounted to $1,200 and the total of the credit entries to the Cash account amounted to $800. The Cash account has a

$400 debit balance. (1200-800)

Henson Company began the year with retained earnings of $350,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson's retained earnings at the end of the year?

$430,000 (350000+500000-380000-40000)

During 2021, its first year of operations, Jane's Bakery had revenues of $60,000 and expenses of $33,000. The business paid cash dividends of $18,000. What is the balance in Retained Earnings at December 31, 2021?

$9,000 credit. (60000-33000-18000)

These are selected account balances on December 31, 2021. Land-$100,000 Land (held for future use)-150,000 Buildings 600,000Inventory-200,000 Equipment-450,000 Furniture-100,000 Accumulated Depreciation-300,000 What is the total amount of property, plant, and equipment that will appear on the balance sheet?

$950,000 (100000+600000+450000+100000-300000)

When expenses exceed revenues, which of the following is true?

A net loss results

Which of the following is not classified properly as a current asset?

A receivable from the sale of an asset to be collected in two years

The accounting equation may be expressed as:

Assets = Liabilities + Stockholders' Equity

If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck,

Assets will be increased by $40,000

Which activities involve acquiring the resources to run the business?

Investing

Which account below is not a subdivision of stockholders' equity?

Liabilities

Which of the following describes the classification and normal balance of the Unearned Revenue account?

Liability, credit

On March 1, 2021, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not?

No, hiring an employee is an important event; however it is not an economic event that should be recorded.

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not?

No, revenue cannot be recognized until the work is performed

flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned?

November 30

Which activities involve putting the resources of the business into action to generate a profit?

Operating

Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n):

Purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance

Which of the following accounts has a normal credit balance?

Rent Revenue

Which of the following financial statements is divided into major categories of operating, investing, and financing activities?

The statement of cash flows

A trial balance will not balance if

a $50 cash dividend is debited to dividends for $500 and credit to cash for $50

An account consists of

a title, a debit side, and a credit side

An adjusting entry:

affects a balance sheet account and an income statement account.

The closing entry process consists of closing:

are accounting rules that are recognized as a general guide for financial reporting.

If total liabilities increased by $5,000, then

assets must have increased by $5,000, or stockholders' equity must have decreased by $5,000

Courtney Company purchased equipment for $1,800 cash. As a result of this event,

assets remained unchanged.

Liabilities are generally classified on a balance sheet as

current liabilities and long-term liabilities

What is the order in which assets are generally listed on a classified balance sheet?

current; long-term investments; property, plant and equipment, intangibles

The normal balance of any account is the

side which increases that account

The left side of an account is

the debit side