SB 1&2

On January 1, Noonan Company purchases equipment for $100,000. The equipment is expected to have a useful life of 5 years and will have no value at the end of that period. Noonan allocates the cost equally over the period of use so the depreciation expense that must be recognized for the year is

$20,000 Reason: $100,000/5 years = $20,000 per year.

Place the steps in the accounting process in the correct order. Instructions Choice 1 of 4. Record the transaction. Choice 2 of 4. Analyze the transaction. Choice 3 of 4. Prepare the unadjusted trial balance. toggle button Choice 4 of 4. Post from the journal to the general ledger.

1. Analyze the transaction. 2. Record the transaction. 3. Post from the journal to the general ledger. 4. Prepare the unadjusted trial balance.

Place the steps at the end of the accounting period in the correct order.

1. Prepare an unadjusted trial balance. 2. Record adjusting entries. 3. Prepare an adjusted trial balance. 4. Prepare financial statements. 5. Close the temporary accounts. Correct Answer

Match the following components of the basic accounting equation. Assets Liabilities Stockholders' Equity

Assets - Resources Liabilities - Creditors' claim to resources Stockholders' Equity - Owners' claim to resources

Which of the following is the correct formula to calculate cost of goods sold?

Beginning inventory + purchases - ending inventory

The _____ ______ ______ portrays the equality between the total economic resources of a company and the total claims to those resources by creditors and owners.

Blank 1: basic Blank 2: accounting Blank 3: equation

In a double-entry accounting system, each transaction has a ________ effect on the accounting equation. (Enter only one word.)

Blank 1: dual or double

In a double-entry accounting system, each transaction has a ___________ effect on the accounting equation. (Enter only one word.)

Blank 1: dual or double

A(n) ________ event is any event that directly affects the financial position of the company. (Enter one word per blank)

Blank 1: economic

Cost of assets acquired in one accounting period and expensed in a future accounting period are ________ _______ . (Enter one word per blank.)

Blank 1: prepaid Blank 2: expenses

Ethics deals with the ability to distinguish ______ from _______. (Only one word per blank

Blank 1: right Blank 2: wrong

The International Accounting Standards Committee issued International Accounting Standards (IAS), whereas the International Accounting Standards Board currently issues

International Financial Reporting Standards.

Identify which transaction would result in the following journal entry: debit to Cash for $60,000 and credit to Common stock for $60,000.

Issue stock to investors

Which approach to standard setting emphasizes the use of professional judgment when choosing how to account for a transaction?

Objectives-oriented

Which transaction would require the following journal entry: debit Inventory for $60,000 and credit Accounts payable for $60,000?

Purchase inventory on account.

Which of the following are examples of prepayments?

Purchasing supplies that will be used later

An account that is used for instructional purposes instead of drawing a formal general ledger account is referred to as a(n)

T-account

What transaction results in a debit to cash and a credit to deferred rent revenue?

The receipt of rent in advance.

True or false: The objective of an Enterprise Resource Planning (ERP) system is to create a customized software program that integrates the information of departments and functions of a company into a single computer system.

True

Which of the following items is prepared at the end of the accounting period immediately before the financial statements are prepared?

adjusted trial balance

A company paying rent in advance for the month of April records:

an asset

The Sarbanes-Oxley Act increases accountability of who?

corporate executives

The normal balance in a contra asset account is

credit

Carly Enterprises borrows $3,000 on a 9-month 8% note from Second National Bank. The journal entry to record the note is

debit cash $3,000; credit note payable $3,000.

Tindall Corp. purchased inventory for $50,000 cash. The entry to record this transaction is

debit inventory $50,000; credit cash $50,000.

Lemon Creek Industries purchased a building for $280,000. The journal entry to record this transaction would include a

debit to building $280,000.

When a company pays rent in advance, prepaid rent is Blank______ and cash is Blank______.

debited, credited

The accounting system that refers to the effect that each transaction has on the accounting system is called a(n)

double-entry system

A code or moral system that provides criteria for evaluating right and wrong is referred to as

ethics

Prepaid expenses are:

expensed in a later period than cash was paid

Economic events cause changes in the:

financial position of a company

A T-account has space at the top for the account title and two sides for recording Blank______ and Blank______ to the account.

increases; decreases

Proponents of objectives-based standards assert that

professional judgment minimizes sidestepping of rules

One of the purposes of adjusting entries is to

recognize all revenues earned during the period.

True or false: Retained earnings equals net income plus distributions to shareholders.

False Reason: Retained earnings equals net income less distributions to shareholders.

On January 1, Poodle Company purchases equipment for $120,000. The equipment is expected to have a useful life of 4 years and will have no value a the end of that period. Poodle allocates the cost equally over the period of use so the depreciation expense that must be recognized for the year is

$30,000. Reason: $120,000/4 years = $30,000 per year depreciation expense.

Lassiter Corp. uses the periodic inventory method. During the year, Lassiter purchases $10,000 of inventory. Ending inventory is $6,000. Cost of goods sold is $12,000. Beginning inventory was:

$8,000 Reason: Let beginning inventory = x. x + $10,000 - 12,000 = $6,000. Solve for x, and x = $8,000.

Beginning inventory was $50,000. Inventory purchased during the year cost $75,000. Inventory on hand at year-end was $40,000. Cost of goods sold was

$85,000

On April 1, Larken Corp. pays $36,000 for 3 years of rent. The transaction is appropriately recorded as prepaid rent. The adjusting entry on December 31, of the same year, will require a (Select all that apply.)

- credit to prepaid rent - debit to rent expense

On October 1, Arcelia Corp. pays $24,000 for two years of rent. The transaction is appropriately recorded in a prepaid rent account. On December 31, of the same year Arcelia should make an adjusting entry for the rent expired, which includes (Select all that apply.)

- credit to prepaid rent $3,000 - debit to rent expense for $3,000.

Logan Corp. purchases supplies on account and appropriately records the transaction in an asset account. The adjusting journal entry at year-end when accounting for supplies used will require a (Select all that apply.)

- credit to supplies - debit to supplies expense

On July 1, Davis Corporation receives $10,000 for rent in advance from a tenant. Which of the following are correct for Davis to record? (Select all that apply.)

- Credit deferred rent revenue $10,000 - Debit cash $10,000

On July 1, Davis Corporation pays $10,000 for August rent. Which of the following are correct? (Select all that apply.)

- Davis credits cash $10,000 - Davis debits prepaid rent $10,000

The involvement of accounting professionals and management in accounting scandals resulted in Congress passing the Sarbanes-Oxley Act. What is the purpose of the Sarbanes-Oxley Act? (Select all that apply.)

- Provide penalties for violators. - Regulate auditors. - Addresses conflicts of interests. - Require accountability of corporate executives.

Which of the following are economic events? (Select all that apply.)

- The payment of employee salaries for the week. - Borrowing $10,000 from the bank.

Which of the following make up shareholders' equity? (Select all that apply.)

- amounts invested by shareholders - amounts earned by the corporation

Samuel Corporation purchased a building for $500,000. To record this transaction (Select all that apply.)

- cash is credited $500,000 - building is debited $500,000

To record the issuance of common stock at par value, (Select all that apply.)

- credit common stock - debit cash

Ferguson Corp. purchased inventory on account for $20,000. The entry to record this transaction would include (Select all that apply.)

- credit to accounts payable $20,000. - debit to inventory $20,000.

Ragland Corp. purchases supplies on account for $1,000 and appropriately records the transaction in an asset account. A count of inventory at year-end indicates that $300 of supplies are remaining. The adjusting journal entry required at year-end includes (Select all that apply.)

- credit to supplies on hand $700 - debit to supplies expense $700.

Beck Company borrowed $50,000 from the bank and signed a note. The journal entry Beck makes to record this transaction includes (Select all that apply.)

- debit to cash for $50,000 - credit to notes payable $50,000

Adjusting journal entries are needed to record (Select all that apply.)

- expense incurred, but not yet paid - revenue earned, but not yet received

Criticisms of the objectives-oriented approach for accounting standards are (Select all that apply.)

- professional judgment may result in different treatments of similar transactions. - an absence of rules may lead to intentional misuse of a standard.

Which of the following make up shareholders' equity of a corporation? (Select all that apply.)

- retained earnings - paid-in capital

Adjusting entries help a company accurately measure (Select all that apply.)

- the company's financial performance. - revenues and expenses for the period.

Prepayments are: (Select all that apply.)

- transactions in which cash flow precedes expense recognition. - transactions in which cash flow precedes revenue recognition.

The contra account used to record depreciation _______ is depreciation. (Enter only one word.)

Blank 1: accumulated

When rent is paid in advance for 2 years, it is appropriately recorded as a(n) ______ , whereas when rent is paid and used during one month, it is appropriately recorded as a(n) ________ . (Enter one word per blank)

Blank 1: asset, prepaid, or prepayment Blank 2: expense

When rent is paid in advance for 2 years, it is appropriately recorded as a(n) ________ , whereas when rent is paid and used during one month, it is appropriately recorded as a(n) _______ . (Enter one word per blank)

Blank 1: asset, prepaid, or prepayment Blank 2: expense

Prepaid expenses are the cost of _______ acquired in one accounting period and ________ in a future period. (Enter one word per blank.)

Blank 1: assets or asset Blank 2: expensed or expense

Sales invoices, bills from suppliers, and cash register tapes that relay information to the accountant are referred to as documents. (Enter only one word.)

Blank 1: source

At the end of the period, an unadjusted __________ balance, a listing of all accounts with their respective balances, is used to assist in the preparation of adjusting entries, financial statements, and closing entries. (Enter one word per blank)

Blank 1: trial or trail

Which transaction would result in the following journal entry: debit Cash for $40,000 and credit Notes payable for $40,000?

Borrow from a bank.

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?

Corporate management

The journal entry to record the issuance of 100 shares of $5 par value common stock for $500 would include which of the following?

Debit cash $500.

Which of following is true regarding a trial balance?

Debits must equal credits.

The type of system that integrates the information of departments and functions of a company into a single computer system is called a(n)

Enterprise Resource Planning (ERP) system.

True or false: Retained earnings equals net income plus distributions to shareholders.

False

True or false: Prepayments are transactions in which the cash flow follows the expense or revenue recognition.

False Reason: A prepayment is a transaction in which the cash flow precedes the expense or revenue recognition.

The primary purpose of a source document is to assist in

analyzing a transaction.

Prepayments occur when:

cash flow precedes expense or revenue recognition

A deferred revenue liability appears on the balance sheet for:

cash received before revenue is earned