financial accounting test 1

Which of these appears on both the statement of stockholders' equity and the balance sheet?

Retained earnings

Which of the following accounts are stockholders' equity accounts?

Retained earnings Common stock

sales of goods or services to customers

Revenue

What are the three components of retained earnings?

Revenues, expenses, and dividend

_____ are recorded in the period that goods and services are provided to customers and _____ are recorded in the period that costs are incurred while providing those goods and services.

Revenues; expenses

Expenses are:

the costs of doing business that are necessary to produce revenue

Stockholders' equity is

the owners' claims to resources of the corporation.

In May, Sea the World Cruises, Inc. collected $1,000 cash in advance 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.

On January 1, Gucci Brothers Inc. started the year with a $492,000 balance in Retained Earnings and a $605,000 balance in Common Stock. During the year, the company reported net income of $92,000, paid a dividend of $15,200, and issued more common stock for $27,500. What is total stockholders' equity at the end of the year?

$1,201,300

Burrow, Inc. borrowed $20,000 with an annual rate of 6%, the note and interest are due at the end of two years. Calculate the interest for a three-month period.

$20,000 x 0.06 x 3/12 = $300

On November 1, 2019, Movers, Inc., paid $24,000 for 2 years' rent beginning on November 1. The Prepaid rent balance at December 31, 2019 equals ______.

$22,000

On August 1, 2019, a firm prepaid $53,520 for 2 years' rent of an office building. On March 1, 2020, the firm prepaid $34,800 for 2 years' rent of a warehouse. The rent agreements on both buildings went into effect on the dates the rents were prepaid. What amount will be shown for prepaid rent on the December 31, 2020 balance sheet?

$35,910

Use the following appropriate amounts to calculate net income: Revenues, $10,200; Liabilities, $4,800; Expenses, $5,100; Assets, $17,300; Dividends, $1,200.

$5,100

Milton Corp. has beginning retained earnings of $800. During the year Milton had $2,000 of revenues and $900 in expenses. Milton paid a dividend of $100. What is retained earnings at year-end?

1,800

Burrow, Inc. borrowed $20,000 with an annual rate of 6%, the note and interest are due at the end of two years. By the end of the first month, the interest incurred equals

100

Quartz Instruments had retained earnings of $145,000 at December 31, 2017. Net income for 2018 was $90,000, and dividends for 2018 were $30,000. What amount of retained earnings should be reported at December 31, 2018?

205,000

Rahls issues stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to stockholders of $4,000. What is the balance in stockholders' equity at the end of year 2?

31,000

Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year?

33,000

Margot starts a new business and contributes $20,000 in cash; she also borrows $25,000 from her local bank. She utilizes the cash to purchase supplies for $5,000 and a computer system for $10,000. After these transactions, the total claims to the company's total resources are:

45,000

If a transaction decreases cash by $100, the balance sheet will balance if which of the following occurs?

A liability is decreased Another asset is increased

The basic _____________ ___________ is referred to as the fundamental model of business valuation

Accounting equations

A journal entry should contain which of the following information?

Accounts and amounts credited The date Accounts and amounts debited Description of the transaction

Reporting revenues when goods or services are provided and expenses in the period they are incurred to generate related revenues is referred to as -basis accounting.

Accrual

When recording an adjustment for the cost of using equipment during the current accounting period, which two accounts are affected?

Accumulated Depreciation and Depreciation Expense

Which of the following represents a resource of the company?

Asset.

Resources owned by a company are called

Assets

London Corp. issues 1,000 shares of stock for $20 per share. What is the effect of this transaction on the accounting equation?

Assets increase Stockholders' equity increases

Which of the following appear on the statement of stockholders' equity?

Beginning balance of retained earnings Net income Dividends

London Corp. issues 1,000 shares of stock for $20 per share. What are the effects of this transaction?

Common stock is increased. Cash is increased.

When Pizza Company sells three $100 gift cards at the beginning of the month, it should record a $300 debit to ______ and a $300 credit to ______.

Cash; Deferred Revenue

Which of the following are stockholder equity accounts?

Common stock Retained earnings

Wolfgang Company's assets and stockholders' equity both increased by $50,000 as a result of a single transaction. Which of the following transactions would explain this increase?

Common stock was sold for cash

Expenses represent

Costs of providing products or services to customers. Correct

Fuller Company provides services to customers for $25,000 cash. Which of the following is used to record this transaction?

Debit cash; credit revenue

Gilman Company pays a dividend of $4,000 to stockholders. Which of the following is used to record this transaction?

Debit dividends; credit cash.

On June 1, Kale Inc. repays a promissory note for $10,000. Which of the following is used to record this transaction?

Debit notes payable; credit cash.

Alvord Company pays employees $10,000 for work performed in the current period. Which of the following is used to record this transaction?

Debit to salary expense.

The heading of a balance sheet for the 2018 fiscal period will include which of the following?

December 31, 2018 The title "Balance Sheet" The name of the business

The first step for analyzing the effect of transactions is:

Determine one account in the accounting equation that will increase or decrease

A distribution of net income to owners is called a(n)

Dividend

Adjusting entries help to ensure that all ______ are recorded in the period in which they are incurred.

Expenses

The term debit means increase, and the term credit means decrease. True false question.

False

On February 1, Domino Corporation ordered inventory. The inventory was received on February 15. Domino paid for the inventory on February 27. On which of the following dates will Domino record a transaction? (Select all that apply)

February 27 February 15

Measuring business activities and reporting those measurements to external parties is the function of ______ accounting.

Financial

The four financial statements published to provide information to external users include which of the following?

Income Statement Statement of Cash Flows Statement of Stockholders' Equity Balance Sheet

What are the effects of providing services on account to customers?

Increase assets Increase retained earnings

LMN Enterprises performs accounting services for a client for $3,000 cash. What is the effect on the accounting equation?

Increase assets and increase retained earnings

Price Company provides cleaning services to customers for $10,000 cash. What are the effects of this transaction on the accounting equation? (Select all that apply.)

Increase retained earnings Increase assets

What are the effects of providing services on account to customers? Multiple select question.

Increase retained earnings Increase assets

Financial accounting provides information primarily to:

Investors and creditors.

In January, Pizza Company bought pizza ingredients on account for $100, with payment due to the supplier in April. The pizza ingredients were used for pizzas made in January. In which month should Pizza Company record the cost of the pizza ingredients as an expense?

January

Which of the following represents an obligation of the company?

Liabilities.

Any amount owed to a creditor is classified in the balance sheet as a/an

Liability

____________________accounting deals with the concepts and methods used to provide information to an organization's internal users.

Management

Which definition best describes financial accounting?

Measuring a company's business activities and communicating those measurements to external parties.

At the end of the current period, Rogers Company reports the following amounts: Assets = $27,000; Liabilities = $14,000; Dividends = $3,300; Revenues = $16,000; Expenses = $11,000.

Net income $5,000 Stockholders' equity $13,000

Analyze the following t-accounts. What is the transaction that required the posting of item (7)?

Perform services for customers on account

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit:

Service revenue for $1,800

Which of the following transactions do not require an adjusting journal entry for Mueller Corporation on December 31?

Shipping expense for December is paid in cash Service is provided during December for cash

Dividends paid to shareholders is on which financial statement?

Statement of Shareholders' Equity

Which financial statement shows the changes in common stock and retained earnings?

Statement of stockholders' equity

For a corporation, the owners' claims to the resources of a company are called

Stockholder equity

Which of the following items are found on a balance sheet?

Stockholders' equity Assets Liabilities

Taggert Company paid $1,800 for a 6-month insurance premium on December 1. Which of the following statements are correct regarding the accounting for this insurance over the six-month period?

Taggert will credit Prepaid Insurance for $300 on Dec. 31. Taggert will debit Prepaid Insurance for $1,800 on Dec. 1. Taggert will debit Insurance Expense for $300 on Dec. 31.

Under accrual-basis accounting, which of the following result in an expense being recorded in May?

The company pays cash in April for supplies used in May. The company pays cash in June for salaries earned in May.

Claire purchases equipment for $10,000 by paying $3,000 in cash and borrowing $7,000 from the bank. The number of accounts affected by this transaction is

Three accounts are affected: equipment, notes payable, and cash.

Identify which of the following are included in the heading of the statement of stockholders' equity for Xoff, Inc.

Xoff, Inc. Statement of Stockholders' Equity The period of time covered by the statement

Income Statement

a financial statement that gives operating results for a specific period

statement of stockholders' equity

a financial statement that summarizes the changes in stockholders' equity over an interval of time

Consistent with the __________-basis of accounting, we record revenue when we provide goods and services to customers, and we record expenses in the period that costs are used to provide those goods and services.

accrual

A prepayment that is originally recorded as an asset will be ______.

allocated to future accounting periods based on the cost of the asset used during the period

Which of the following is used to record the summary of effects on one particular item?

an account

Adjusting entries:

are needed before financial statement preparation. update the accounts to their proper balances.

The primary functions of accounting are to:

communicate information to decision makers. measure a company's activities.

The financial statement that displays a firm's financial position on a particular date is the

balance sheet

Ending retained earnings appears on the:

balance sheet statement of stockholders' equity

Assets = Liabilities + Stockholders' equity.

basic accounting equation

Recording the repayment of a promissory note will include a credit to

cash

Reporting revenues only when cash is received and expenses only when cash is paid is called the ______________ basis of accounting.

cash

Which of the following accounts is on the statement of stockholders' equity?

common stock

The two components of stockholders' equity are

common stock and retained earnings.

The balance of a revenue account increases with a

credit

Turkey Corp. provides services to customers on account for $3,000. Recording this transaction will include

credit to revenues. debit to accounts receivable.

Turkey Corp. provides services to customers on account for $3,000. Recording this transaction will include a

credit to revenues. debit to accounts receivable.

who lends money to a company and expects the company to repay the debt?

creditor

The balance sheet shows that a company's resources equal _____ claims to those resources.

creditors claims plus owners'

In a double-entry accounting system, a(n) __________ represents the left side of the account.

debit

The balance of an expense account increases with a

debit

dividends are recorded as _________ and debits reduce retained earnings

debit

On July 1, Book Palace prepaid 12 months' fire insurance with coverage starting the following month. The adjusting entry on December 31 includes:

debit to Insurance Expense credit to Prepaid Insurance

Zinc Corp. pays a dividend of $10,000 to its stockholders. Which of the following entries are required to record this transaction?

debit to dividend credit cash

Dividends ______ retained earnings; therefore, to increase dividends, one would ______ the dividends account.

decrease; debit

Expenses ______ retained earnings; therefore, to increase any expense, one would ______ the expense account.

decrease; debit

Expenses _________________ , stockholders' equity because they ______________ , Correct Unavailable retained earnings

decreases; decreases

The adjusting entry for equipment depreciation includes a debit to _____ and a credit to _____.

depreciation expense; accumulated depreciation

Stockholders' equity arises primarily from amounts invested by shareholders and amounts

earned by the corporation

The two sources of stockholders' equity are amounts ______.

earned by the corporation paid in from shareholders

The adjusting entry for a prepaid expense includes a debit to a(n) ______ account and a credit to a(n) ____ account.

expense; asset

A(n) ______ is a cost of doing business that is necessary to produce ___.

expense; revenue

Which of the following line items appear on an income statement?

expenses Revenues Net income

Under cash-basis accounting,

expenses are recorded when cash is paid. revenues are recorded when cash is received.

Cash increases; Accounts Payable decreases

false

Service Revenue increases; Salaries Payable increases.

false

On January 1, Kim pays for two years of rent in advance. The effect of this transaction

has no effect on total assets.

When services are provided on account, what is the effect on stockholders' equity?

increase

When a company earns net income, its retained earnings:

increases

assets

is a resource, such as cash, land, or buildings, that is owned by a company.

Sampson Corporation issues common stock for $25,000 cash and uses some of the proceeds to purchase equipment for $10,000 cash. Sampson also purchases $4,000 of supplies on account. After recording these transactions total assets are

issuing common stock increases assets by $25,000 (cash) and increases equity (common stock). Purchasing equipment for cash decreases one asset and increases another asset, so there is no change in assets. Purchasing supplies on account increases assets and increases accounts payable. $25,000 + $0 + $4,000 = $29,000 total assets.

Which of the following includes the list of transactions affecting each individual account and the account's balance?

ledger

A company reports a net loss if its revenues are ________ than expenses

less

A balance sheet lists the assets, _____ , Incorrect Unavailable, and stockholders' equity as of a specific date.

liabilities

Amounts owed to creditors are

liabilities

Creditor

loans money to a company

On May 1, Ace Electronics ordered office equipment. The equipment was delivered to Ace on May 15, and Ace agreed to pay for it by the end of the month. Ace paid for the equipment on May 31. When will Ace make the first entry in its accounting system for this purchase?

may 15

The difference between two amounts is described using the term

net

Which of these appears on both the income statement and the

net income

Pizza Aroma generated $11,000 in revenues and had expenses of $6,000. Pizza Aroma's net income or loss is:

net income of $5,000

When expenses are greater than revenues, it is referred to as

net loss

Investor

owns stock in the company

Many liabilities are referred to as _______ to indicate that amounts must be paid.

payable

The purpose of a general ledger is to

provide in a single location the list of transactions affecting each account and the account's balance.

Ursula Company's bookkeeper records revenue relating to a customer transaction. This indicates that the company

provided goods or services to a customer

The purpose of a journal is to

record a chronological listing of every transaction for a company.

After the adjusting entries have been completed, the ending balance in the Supplies account represents the cost of supplies ______.

remaining at the end of the accounting period

Undistributed profits that have accumulated in the company over time are called

retained earnings

An external transaction is a transaction the firm conducts with a

separate economic entity.

The purpose of an account is to

summarize all transactions for that item.

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

supplies expense; supplies

Stockholders' Equity

total assets - total liabilities

Rory purchases supplies for cash. Which of the following occurs?

total assets remain the same

net income

total revenues-total expenses

A list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a

trial balance

Advertising Expense increases; Cash decreases.

true

Revenue is recorded when services are performed, whereas deferred revenue is recorded when cash is received from customers in advance before services are performed.

true

Reason: While Accumulated Depreciation is listed in the asset section, it is a contra or negative asset. Therefore, it will have a normal credit balance since the

true assets have a debit balance.

The statement of stockholders' equity indicates the changes in the ____________ equity accounts

various