ACC 103 Midterm

A company shows a balance in Salaries Payable of $38,000 at the end of the month. The next payroll amounting to $48,000 is to be paid in the following month. What will be the journal entry to record the payment of salaries? A. Debit Salaries Expense for 10,000, debit Salaries Payable for 38,000 and credit Cash for 48,000 B. debit Salaries Expense for 48,000 and credit Cash for 48,000 C. debit Salaries Expense for 10,000 and credit Cash for 10,000 D. debit Salaries Expenses for 48,000 and credit Salaries Payable for 48,000

A. Debit Salaries Expense for 10,000, debit Salaries Payable for 38,000 and credit Cash for 48,000

Which of the following accounts is not classified under the current asset section of the balance sheet? A. equipment B. Supplies C. Cash D. Prepaid Rent

A. Equipment

What type of account is Cost of Goods Sold? A. Expense Account B. Revenue Account C. Asset Account D. Contra-Revenue Account

A. Expense Account

What type of account is Wages Payable? A. Liability B. Revenue C. Asset D. Expense

A. Liability

What type of account is Service Revenue? A. Revenue B. Liability C. Asset D. Expense

A. Revenue

What type of account is Common Stock? A. Stockholder's Equity B. Asset C. Liability D. Revenue

A. Stockholder's Equity

Historical cost less accumulated depreciation for a plant asset is called A. book value B. market value C. accounting value D. original value

A. book value

If a buyer using a perpetual inventory system agrees to freight terms of FOB shipping point, then the A. buyer will debit the Inventory account for the amount of the freight charges B. buyer will debit Shipping Expense C. transportation company will bear the freight cost D. seller will bear the freight cost

A. buyer will debit the Inventory account for the amount of the freight charges

Closing entries A. cause the revenue and expense accounts to have zero balances B. summarize the activity in every account C. reduce the number of permanent accounts D. are prepared before the financial statements

A. cause the revenue and expense accounts to have zero balances

Gross profit is calculated as a net sales minus A. cost of goods sold B. sales returns and allowances C. operating expenses D. advertising expense

A. cost of goods sold

On October 21, Martin, Inc. provided a service to a customer and received $1,400 cash. The journal entry to record this transaction would include: A. A debit to Cash and a credit to Service Revenue B. A debit to Accounts Receivable and a credit to Service Revenue C. A debit to Service Revenue and a credit to Cash D. A debit to Cash and a credit to Accounts Receivable

A. A debit to Cash and a credit to Service Revenue

What type of account is Equipment? A. Asset B. Revenue C. Liability D. Expense

A. Asset

The basic accounting equation may be expressed as A. Assets = Liabilities + Stockholders' Equity B. Assets + Liabilities = Stockholders' Equity C. Assets - Expenses = Stockholders' Equity D. Revenues = Liabilities + Stockholders' Equity

A. Assets = Liabilities + Stockholders' Equity

The beginning balance of Supplies for Lu Inc. was $900. During the year, additional supplies were purchased for $450. At the end of the year, an inventory count indicates $700 of supplies on hand. The adjusting entry at December 31, is: A. debit Supplies Expense 650, credit Supplies 650 B. debit Supplies 650, credit Supplies Expense 650 C. debit Supplies 450, credit Supplies Expense 450 D. debit Supplies Expense 250, credit Supplies 250

A. debit Supplies Expense 650, credit Supplies 650

Hamilton Laundry purchased $7,000 worth of supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the supplies indicated only $1,000 on hand. The adjusting entry that should be made by the company on June 30 is A. debit supplies Expense and credit Supplies for $6,000 B. debit Supplies Expense and credit Supplies for $1,000 C. debit Supplies and credit Supplies Expense for $1,000 D. debit Supplies and credit Supplies Expense for $6,000

A. debit supplies Expense and credit Supplies for $6,000

Husker Supplies Inc. purchased a 12-month insurance policy on March 1, 2015 for $1,800. At March 31, 2015, the adjusting journal entry to record expiration of this asset will include a A. debit to Insurance Expense and a credit to Prepaid Insurance for $150 B. debit to Prepaid Insurance and a credit to Cash for $1,800 C. debit to Insurance Expense and a credit to Cash for $150 D. debit to Prepaid Insurance and a credit to Insurance Expense for $200

A. debit to insurance Expense and a credit to Prepaid Insurance for $150

Which of the following is false? A. Sales is a revenue account with a normal credit balance. B. Sales Discounts is a contra-revenue account with a normal debit balance. C. Inventory is an asset account with a normal debit balance. D. Cost of Goods Sold is an asset account with a normal debit balance.

D. Cost of Goods Sold is an asset account with a normal debit balance.

What type of account is Utilities Expense? A. Liabilities B. Revenue C. Asset D. Expense

D. Expense

Under a perpetual inventory system, purchases of merchandise for sale are recorded in an account called: A. Cost of Goods Sold B. Finished Goods C. Purchased D. Inventory

D. Inventory

Which of the following statements is true? A. Inventory is an expense account with a normal debit balance. B. Sales is a revenue account with a normal debit balance. C. Cost of Goods Sold is an expense account with a normal credit balance. D. Inventory is an asset account with a normal debit balance.

D. Inventory is an asset account with a normal debit balance.

A company spends $15 million dollars for an office building. Over what period should the cost be written off? A. When the $15 million is expended in cash B. After $15 million in revenue is recognized C. All in the first year D. Over the useful life of the building

D. Over the useful life of the building

Vicki's Dance Studio bills a client for dancing lessons earned during the past week. The journal entry will include a credit to A. Cash B. Common Stock C. Accounts Receivable D. Service Revenue

D. Service Revenue

Which of the following is a temporary account? A. Common Stock B. Cash C. Retained Earnings D. Service Revenue

D. Service Revenue

On October 4, 2015, Terry Corporation had sales on account of $2,500 from selling merchandise which had cost $1,900. The entries to record the day's sales would include: A. a debit of $1,900 to Inventory B. a debit of $2,500 to Inventory C. a credit of $1,900 to Cost of Goods Sold D. a credit of $2,500 to Sales

D. a credit of $2,500 to Sales

Which of the following accounts is not a temporary account? A. dividends B. advertising expense C. sales D. accounts payable

D. accounts payable

Hint: This question is from the buyer's point of view. The journal entry to record a return of merchandise purchased on account under a perpetual inventory system would be A. debit to Accounts Payable and a credit to Purchase Returns & Allowances B. debit to Purchase Returns & Allowances and a credit to Accounts Payable C. debit to Inventory and a credit to Accounts Payable D. debit to Accounts Payable and a credit to Inventory

D. debit to Accounts Payable and a credit to Inventory

An account which is increased by a debit is a A. revenue account B. retained earnings account C. liability account D. dividends account

D. dividends account

All of the following are property, plant and equipment except A. land B. machinery C. buildings D. supplies

D. supplies

After closing entries are posted, all permanent accounts will have zero balances T or F

False

An adjusting entry always involves two balance sheet accounts T or F

False

Dividends has a normal credit balance T or F

False

Equipment has a normal credit balance T or F

False

If a merchandising company sells land at more than its cost, the gain should be reported in the sales revenue section of the Income Statement. T or F

False

In a perpetual inventory system, no attempt is made to keep detailed inventory records of the goods on hand throughout the period. T or F

False

Prepaid Insurance is a temporary account T or F

False

Prepaid Insurance is an expense account T or F

False

Service Revenue is closed out by debiting Income Summary and crediting Service Revenue T or F

False

Supplies and supplies expense are both permanent accounts T or F

False

The adjusting entry to record an accrued expense always involves a debit to a liability account and a credit to an expense account. T or F

False

The matching principle requires that assets be matched with liabilities T or F

False

The terms 2/10, n/30 mean that a 2% discount is available if the invoice is paid within the first 10 days of the next month. T or F

False

Unearned Revenue has a normal debit balance T or F

False

When the terms are FOB shipping point, the seller pays the freight costs. T or F

False

Misra Company compiled the following financial information as of December 31, 2015: Revenues.....$340,000 Retained Earnings (1/1/15)......60,000 Equipment......80,000 Expenses.....250,000 Cash.....90,000 Dividends......20,000 Supplies....10,000 Accounts Payable.....40,000 Accounts Receivable...70,000 Common Stock....80,000 Mira's assets on December 31, 2015 are A. $180,000 B. $490,000 C. $360,000 D. $250,000

$250,000

The following items are taken from the financial statements of Dunagan Company for the year ending December 31, 2011: Accounts Payable.....$18,000 Accounts Receivable.....11,000 Accumulated Depreciation - Equipment.....28,000 Advertising Expense....21,000 Cash.......15,000 Common Stock......42,000 Dividends.......14,000 Depreciation Expense......12,000 Equipment.....210,000 Insurance Expense....3,000 Note Payable, due 6/30/12... 70,000 Prepaid Insurance (12-month policy).....6,000 Rent Expense.....17,000 Retained Earnings (1/1/11)....60,000 Salaries Expense.....32,000 Service Revenue......133,000 Supplies.....4,000 Supplies Expense.....6,000 What are total current liabilities at December 31, 2011? A. $88,000 B. $0 C. $70,000 D. $18,000

$88,000

Financial information is presented below: Operating Expenses......90,000 Sales Returns & Allowances.......26,000 Sales Discounts.........12,000 Sales..........300,000 Cost of Goods Sold.......158,000 Gross profit would be A. $104,000 B. $142,000 C. $130,000 D. $116,000

A. $104,000

As of December 31, 2015, Morley Company has liabilities of $5,000 and stockholders' equity of $7,000. It received revenues of $23,000 during the year ended December 31, 2015. What are the assets for Morley Company as of December 31, 2015? A. $12,000 B. $35,000 C. $25,000 D. $2,000

A. $12,000

The following items are taken from the financial statements of Dunagan Company for the year ending December 31, 2011: Accounts Payable.......$18,000 Accounts Receivable........11,000 Accumulated Depreciation - Equipment.....28,000 Advertising Expense......21,000 Cash.......15,000 Common Stock.......42,000 Dividends.......14,000 Depreciation Expense......12,000 Equipment........210,000 Insurance Expense......3,000 Note Payable, due 6/30/12......70,000 Prepaid Insurance (12-month policy)......6,000 Rent Expense......17,000 Retained Earnings (1/1/11).....60,000 Salaries Expense.....32,000 Service Revenue......133,000 Supplies....4,000 Supplies Expense......6,000 What is the book value of the equipment at December 31, 2011? A. $182,000 B. $198,000 C. $28,000 D. $210,000

A. $182,000

Kern Company sells merchandise on account for $8,000 to Block Company with credit terms of 2/10, n/30. Block Company returns $1,600 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? A. $6,272 B. $6,400 C. $7,480 D. $7,872

A. $6,272

For the year ended 2015, Degas Co. has the following amounts: Sales Revenue $350,000; Gross Profit $120,000; and Operating Expenses $90,000. What are the amounts of Cost of Goods Sold and Net Income? A. $130,000 and $90,000 B. $230,000 and $30,000 C. $230,000 and $140,000 D. $260,000 and $140,000

B. $230,000 and $30,000

On October 15, Grafton, Inc. received $400 from a customer in payment of a balance due for services billed on October 1. The entry by Grafton, Inc. will include a credit to A. Cash B. Accounts Receivable C. Service Revenue D. Unearned Revenue

B. Accounts Receivable

Which of the following accounts would not appear on the balance sheet? A. Accounts payable B. Dividends C. Cash D. Common Stock

B. Dividends

Betsy Carter owns a small dry cleaning business. During October, she paid for her family's groceries and her home utility bill using her company's checking account. She records these transactions as Miscellaneous Expenses for her business. Which accounting assumption/principle is Betsy violating? A. Monetary Unit Assumption B. Economic Entity Assumption C. Historical Cost Principle D. No violation has occurred

B. Economic Entity Assumption

What type of account is Advertising Expense? A. Revenue B. Expense C. Liability D. Asset

B. Expense

What type of account is Notes Payable? A. Stockholder's Equity B. Liability C. Expense D. Asset

B. Liability

Which of the following accounts is not an asset? A. Accounts Receivable B. Service Revenue C. Inventory D. Equipment

B. Service Revenue

An account which is increased by a credit is A. a dividends account B. a liability account C. an expense account D. an asset account

B. a liability account

On a classified balance sheet, current assets are customarily listed A. with the largest dollar amounts first B. in the order of liquidity C. in alphabetical order D. in the order of acquisition

B. in the order of liquidity

The balance in the income summary account before it is closed will be equal to A. the beginning balance in the retained earnings account B. the net income or loss on the income statement C. zero D. the ending balance in the retained earnings account

B. the net income or loss on the income statement

On December 7, Foster, Inc. paid a cash dividend of $1,700. The journal entry to record this transaction would include: A. a debit to Common Stock and a credit to Cash B. A debit to Wages Expense and a credit to Dividends C. A debit to Dividends and a credit to Cash D. A debit to Cash and a credit to Dividends

C. A debit to Dividends and a credit to Cash

What type of account is Accounts Receivable? A. Revenue B. Liability C. Assets D. Stockholder's Equity

C. Asset

What type of account is Cash? A. Expense B. Revenue C. Asset D. Liability

C. Asset

Which of the following is false? A. The carrying value of an asset is historical cost - accumulated depreciation. B. Depreciation expense has a normal debit balance. C. Depreciation is the method of adjusting property, plant and equipment to fair market value. D. Accumulated depreciation is a contra asset account.

C. Depreciation is the method of adjusting property, plant and equipment to fair market value.

Which of the following events would not require a journal entry? A. Paying employees for wages earned B. Borrowing cash from a bank and signing a note C. Hiring a new director of human resources D. Purchasing supplies on account

C. Hiring a new director of human resources

What type of account is Accounts Payable? A. Stockholder's Equity B. Expense C. Liability D. Asset

C. Liability

Which of the following accounts is not a liability? A. Utilities Payable B. Notes Payable C. Wages Expense D. Unearned Revenue

C. Wages Expense

On Dec. 1, 2015, The Sun Shop received $240 from Carla for a twelve-month membership. The membership allows Carla to tan as much, or as little, as she wants each month. The December 31 adjusting entry is A. a debit to Unearned Revenue and a credit to Service Revenue for 220. B. a debit to Cash and a credit to Unearned Revenue for 240. C. a debit to Unearned Revenue and a credit to Service Revenue for 20. D. a debit to Service Revenue and a credit to Unearned Revenue for 20.

C. a debit to Unearned Revenue and a credit to Service Revenue for 20.

A dividend is A. equal to liabilities minus stockholders' equity B. equal to assets minus stockholders' equity C. a distribution of the company's earnings to its stockholders D. equal to revenues less expenses

C. a distribution of the company's earnings to its stockholders

The ending retained earnings amount is shown on A. the balance sheet only B. the retained earning statement only C. both the balance sheet and the retained earnings statement D. both the income statement and the retained earnings statement

C. both the balance sheet and the retained earnings statement

In preparing closing entries A. the dividends account will be debited B. each revenue account will be credited C. each expense account will be credited D. the retained earnings account will be debited if there is net income for the period

C. each expense account will be credited

An income statement A. reports the assets, liabilities, and stockholders' equity at a specific date. B. summarizes the changes in retained earnings for a specific period of time. C. presents the revenues and expenses for a specific period of time. D. reports the changes in assets, liabilities, and stockholders' equity over a period of time.

C. presents the revenues and expenses for a specific period of time.

El Greco Co. made a credit sale to a customer with the terms of n/30. Upon payment by the customer, El Greco Co. should debit Cash and credit A. None of these answers are correct B. Sales Revenue C. Accounts Receivable and Sales Discounts D. Accounts Receivable

D. Accounts Receivable

On May 1, 2015, Maricel Advertising Company received $3,000 from a customer for advertising services to be completed by April 30, 2016. At December 31, 2015, $2,000 of the fees have been earned. The adjusting entry on December 31, 2015 by Maricel Advertising will include a A. $2,000 credit to Unearned Revenue B. $1,000 debit to Service Revenue C. $1,000 credit to Unearned Revenue D. $2,000 debit to Unearned Revenue

D. $2,000 debit to Unearned Revenue

Tamara Company purchased a machine on January 1, 2015. Annual depreciation is $800. At December 31, 2017, the balance in the accumulated depreciation account, after adjustment should be: A. $3,200 B. $1,600 C. $800 D. $2,400

D. $2,400

Stockholders invested $20,000 cash in a business for common stock. The journal entry to record this transaction would include A. A debit to Cash and a credit to Retained Earnings B. A debit to Cash and a credit to Investment Income C. A debit to Service Revenue and a credit to Cash D. A debit to Cash and a credit to Common Stock

D. A debit to Cash and a credit to Common Stock

Accounts Payable is a permanent account T or F

True

Accounts Receivable has a normal debit balance T or F

True

Admission Revenue has a normal credit balance T or F

True

Cash has a normal debit balance T or F

True

Cash is a permanent account T or F

True

Common Stock has a normal credit balance T or F

True

Ending inventory is subtracted from the cost of goods available for sale in determining the cost of goods sold. T or F

True

If an unearned revenue account is not adjusted for revenues earned during the period, liabilities will be overstated and revenue will be understated. T or F

True

In accounting, the terms debit and credit mean left and right, respectively. T or F

True

In general, adjusting entries are required each time financial statements are prepared. T or F

True

Inventory is reported in the current asset section of the balance sheet T or F

True

Notes Payable has a normal credit balance T or F

True

Prepaid Insurance, Prepaid Rent, Supplies and Accounts Receivable are all asset accounts. T or F

True

Retained Earnings has a normal credit balance T or F

True

Salaries Expense is a temporary account T or F

True

Sales Returns & Allowances and Sales Discounts are subtracted from Sales in reporting Net Sales on the Income Statement. T or F

True

The adjusting entry to record an accrued revenue always involves a debit to a receivable and a credit to a revenue account. T or F

True

The dividends account is a temporary account T or F

True

The interest on a $10,000, 8%, 3 month note would be $200. T or F

True

The time-period assumption assumes that the economic life of a business can be divided into artificial time periods. T or F

True

To record a sale, an asset account is debited and the revenue account Sales is credited. T or F

True

Unearned Revenue is a permanent account T or F

True

Utilities Expense is a temporary account T or F

True

Wages Payable has a normal credit balance T or F

True

When preparing journal entries, total debits must always equal total credits T or F

True