Acccount Exam 1

Liability accounts are increased: a. By debits b. By credits c. On the left side d. Below the balance line

By credits

A company's retained earnings balance would decrease by: a. The declaration and payment of dividends b. Sales c. Investments by owners d. Net income

a. The declaration and payment of dividends

Cray Corp. purchased supplies for $12,000 during 2008. At January 1, 2008, supplies on hand were $2,000. At December 31, 2008, supplies on hand were $1,000. Determine the supplies expense for 2008. a. $10,000 b. $12,000 c. $13,000 d. $14,000

c. $13,000, Supplies Expense=Beginning Balance+Purchases−Ending Balance

Which of the following is true? a. Accounts receivable are found in the current asset section of a balance sheet. b. Accounts receivable increase by credits. c. Accounts receivable are generated when a customer makes payments. d. Accounts receivable become more valuable over time.

a. Accounts receivable are found in the current asset section of a balance sheet.

Which of the following types of accounts will always be credited when a prepaid expense account is adjusted? a. Assets b. Liabilities c. Revenues d. Expenses

a. Assets

Which of the following account types increase by debits in double-entry accounting? a. Assets, Expenses, Losses b. Assets, Revenue, Gains c. Expenses, Liabilities, Losses d. Gains, Expenses, Liabilities

a. Assets, Expenses, Losses

Owners' equity accounts are decreased with: a. Debit entries b. Credit entries c. Liabilities d. Assets

a. Debit entries

Rent-a-Wreck, Inc. paid $36,000 cash for a two-year insurance policy on April 1, 2011. What adjustment should the company make before preparing its annual financial statements on December 31, 2011? 31. ______ a. Decrease Prepaid insurance and recognize Insurance expense of $13,500. b. Decrease Cash and recognize Insurance expense of $13,500. c. Decrease Cash and increase Prepaid insurance by $36,000. d. Decrease Prepaid insurance and recognize Insurance expense of $18,000.

a. Decrease Prepaid insurance and recognize Insurance expense of $13,500.

Income statement accounts are also known as which of the following? a. Nominal accounts b. Real accounts c. Closing accounts d. Both a and c

a. Nominal accounts

A company that uses the cash basis of accounting will: a. Record revenue when it is collected. b. Record revenue when it is earned. c. Record revenue at the same time as accounts receivable. d. Record bad debt expense on the income statement.

a. Record revenue when it is collected.

Which of the following statements about adjusting entries is NOT true? a. They are recorded on a daily basis as transactions occur. b. They are posted at the end of an accounting period. c. They do not affect the cash account. d. None of these are true.

a. They are recorded on a daily basis as transactions occur.

A system of accounting in which revenues and expenses are recorded as they are earned and incurred is called: a. Revenue recognition accounting b. Accrual-basis accounting c. Realization accounting d. Cash-basis accounting

b. Accrual-basis accounting

What are the main sections on a balance sheet? a. Assets, liabilities, income b. Assets, liabilities, equity c. Assets, liabilities, expenses d. Assets, gains, revenue

b. Assets, liabilities, equity

Which is true about time in accounting? a. Current liabilities are debts payable within 2 years. b. Balance sheets reflect a company's financial position at a certain point in time. c. The time value of money is a finance concept, not relevant in accounting. d. Accounts receivable are more easily collected as time passes.

b. Balance sheets reflect a company's financial position at a certain point in time.

May 23: A $430 bill for electricity for the month of April is received and will be paid on its due date in June.May 31: Salaries are paid to employees, $850. Based only on the above transactions, what is the total amount of expenses that should appear on the income statement? a. $430 b. $850 c. $1,280 d. $1,440

c. $1,280

May 15: Payment is made to City Office Inc. for the furniture and office supplies delivered on May 9.The journal entry to record the May 15 transaction will include a debit of $1,220 to: a. Furniture and supplies b. Cash c. Accounts payable d. Administrative expenses

c. Accounts payable

Revenues: a. Decrease assets b. Decrease owners' equity c. Increase liabilities d. Increase owners' equity

d. Increase owners' equity

Given the following data, what is the amount in the supplies account to be shown as an asset on the balance sheet at the end of the period? A.Supplies (beginning): $500 B.Supplies purchased: $425 C. Supplies used: $375

Ending Supplies Balance=Beginning Balance+Supplies Purchased−Supplies Used, 500+425−375=550

Q1: Which of the following is not a core financial statement? a. The Income Statement b. Statement of Cash Flows c. The Trial Balance d. The Balance Sheet

The Trial Balance

Which of the following scenarios increases accounts payable? a. A customer fails to pay an invoice. b. A supplier delivers raw materials on credit. c. Office supplies are purchased with cash. d. None of the above

b. A supplier delivers raw materials on credit.

Advantage Auto sold merchandise for $3,000 on credit on July 10, 2008. The customer paid on July 31. Under the accrual basis of accounting, which statement is true? a. Advantage Auto will recognize the revenue on July 31, 2008. b. The July 10th transaction increases revenue but has no effect on assets because cash has not been received. c. Revenue is recognized after the cost of merchandise is paid by Advantage Auto. d. The July 31st transaction has no effect on total assets under the accrual basis.

d. The July 31st transaction has no effect on total assets under the accrual basis. Under the accrual basis, revenue is recognized when earned (July 10), and payment (July 31) only affects the asset type, not the total.

Revenues: Service Fees Revenue = $600 Expenses: Wage Expense = $200, Store Supplies Expense = $50 From the information given, Cajon Corporation had net income in 2009 of: a. $150 b. $530 c. $330 d. $350

Net Income=Total Revenues−Total Expenses, D. 350

The entry to close the revenue accounts normally includes a: a. Debit to each revenue account b. Credit to each revenue account c. Debit to each expense account d. Credit to each expense account

a. Debit to each revenue account

Hanna's Swim Club sells season memberships for $200 each. The season starts on May 15, 2021. As of April 30, 2021, Hanna's had collected $9,000 of membership dues. What amount should be recognized in the accounts as of April 30, 2021? a. Unearned swim membership revenue of $9,000 b. None of the above c. Accounts receivable of $9,000 d. Swim membership revenue of $9,000

a. Unearned swim membership revenue of $9,000

Forney Industries' plant operates five days per week with a daily payroll of $4,000. Employees are paid every Saturday for the week completed (Monday-Friday). The last day of the month is Wednesday, March 31. The correct adjusting entry at March 31 is: a. Wages Expense $12,000; Wages Payable $12,000 b. Wages Payable $4,000; Cash $4,000 c. Wages Expense $12,000; Cash $12,000 d. Wages Expense $4,000; Wages Payable $4,000

a. Wages Expense $12,000; Wages Payable $12,000, Since three days of wages (Monday-Wednesday) need to be accrued, the adjusting entry is $12,000.

When are liabilities recorded under the accrual basis of accounting? a. When incurred b. When paid c. At the end of the fiscal year d. When bank accounts are reconciled

a. When incurred

32. Clean Sweep, Inc. started the month of June with $800 worth of cleaning supplies. During the month, Clean Sweep purchased $300 of supplies for cash. At June 30, $200 worth of supplies was unused. How will the company report its unused supplies on June 30? 32. ______ a. $900 of unused supplies will appear as an expense on the income statement. b. $200 of unused supplies will appear as an asset on the balance sheet. c. $900 of unused supplies will appear as an asset on the balance sheet. d. $200 of unused supplies will appear as an expense on the income statement.

b. $200 of unused supplies will appear as an asset on the balance sheet.

Bills sent in April for 800 dollars. The journal entry to record the May 1 transaction will include a debit of $800 to: a. Sales revenue b. Accounts receivable c. Cash d. Retained earnings

b. Accounts receivable, On May 1, bills for services provided were sent to clients. Since the revenue has been earned but not yet collected in cash, the proper debit entry is to Accounts Receivable.

24. On December 31, 2012, Twisted Pretzel was told by an appraiser that its land, which cost $100,000, was worth $120,000. How should Twisted Pretzel show this information on its financial statements prepared under U.S. GAAP? 24. ______ a. Report a gain of $20,000 on its income statement. b. Continue showing the land at its cost of $100,000. c. Report land at $120,000 on its income statement. d. Report land at $100,000 on its income statement.

b. Continue showing the land at its cost of $100,000.

What would the journal entry be for a company that takes out a five-year, $100,000 business loan? a. Debit $100,000 non-current asset, Credit $100,000 non-current liabilities b. Debit $100,000 current asset, Credit $100,000 non-current liabilities c. Debit $100,000 non-current liabilities, Credit $100,000 non-current assets d. Debit $100,000 current liabilities, Credit $100,000 current assets

b. Debit $100,000 current asset, Credit $100,000 non-current liabilities

Bay Graphics pays employees each Friday for a five-day workweek. Payroll is $9,000 per week. If the accounting period ends on Wednesday, the adjusting entry for wages payable would include: a. Debit to Salary Expense of $3,600 b. Debit to Salary Expense of $5,400 c. Credit to Cash of $9,000 d. Credit to Salaries Payable of $3,600

b. Debit to Salary Expense of $5,400 ( 9000 times 3/5)

38. A potential investor interested in predicting the earnings of a company in the future should examine the: 38. ______ a. Statement of Retained Earnings. b. Income Statement only. c. Balance Sheet only. d. statement of Retained Earnings and Balance Sheet

b. Income Statement only.

38. A potential investor interested in predicting the earnings of a company in the future should examine the: 38. ______ a. Statement of Retained Earnings. b. Income Statement only. c. Balance Sheet only. d. statement of Retained Earnings and Balance Sheet.

b. Income Statement only.

40. Which of the following accounts are considered permanent accounts? 40. ______ a. Inventory and Cost of Goods Sold b. Land and Accounts Receivable c. Common Stock and Salary Expense d. Accounts Payable and Service Revenue

b. Land and Accounts Receivable

Balance sheet accounts are also known as which of the following? a. Nominal accounts b. Real accounts c. Temporary accounts d. Closing accounts

b. Real accounts

Food To Go, a local catering service, should recognize revenue: a. When the order is placed b. When the meals are served c. When the invoice is mailed d. When payment is received

b. When the meals are served, Revenue is recognized when the service is performed, not when payment is received or invoiced.

Miss Happ of Ace Electronics forgot to make the adjusting entry for prepaid insurance that expired during the accounting period. As a result of this mistake ________. 34. ______ a. net income is too low b. net income is too high c. shareholders' equity is too low d. total liabilities are too low

b. net income is too high, Miss Happ forgot to make the adjusting entry for prepaid insurance that expired, the insurance expense for the period would not be recorded. This means expenses would be understated, and as a result, net income would be overstated (too high).

Reader, Inc. collected $12,000 in October 2011 from customers in exchange for 12-month subscriptions to its monthly magazine Reader. The October issue was the first issue of the subscription. How much revenue should the company report on its income statement for the year ended March 31, 2012? 30. ______ a. No revenue will be recognized until all the magazines are delivered. b. $6,000 c. $8,000 d. $12,000

c. $8,000, Since the revenue is recognized evenly over the 12 months, six out of the twelve months have passed, resulting in the fraction 6/12 of the total revenue being recognized.

Which of the following will not cause a trial balance to be out of balance? a. The balance for an account is incorrectly computed. b. A debit entry is posted as a credit. c. A credit entry is posted to the wrong account as a credit. d. An account is accidentally omitted from the trial balance.

c. A credit entry is posted to the wrong account as a credit.

May 9: City Office Inc. delivers furniture ($1,060) and office supplies ($160) to Narada, leaving an invoice for $1,220. The journal entry to record the May 9 transaction will include a credit of $1,220 to: a. Furniture and supplies b. Cash c. Accounts payable d. Administrative expenses

c. Accounts payable

f the business has an _____ from a customer, then the customer has an _____ to the business. a. Accounts receivable; accounts receivable b. Accounts payable; accounts payable c. Accounts receivable; accounts payable d. Accounts payable; accounts receivable

c. Accounts receivable; accounts payable

The following accounts are up-to-date and need no adjustment at the end of the period: 39. ______ a. Cash, Dividends and Unearned Rent Revenue. b. Cash, Common Stock and Prepaid Rent. c. Cash, Land and Common Stock. d. Prepaid Rent, Supplies and Unearned Rent Revenue.

c. Cash, Land and Common Stock.

Christopher Company purchased $20,000 of equipment for cash. The correct entry to record the purchase of equipment is: a. Cash: 20,000 | Equipment: 20,000 b. Equipment: 20,000 | Accounts Payable: 20,000 c. Equipment: 20,000 | Cash: 20,000 d. Accounts Payable: 20,000 | Equipment: 20,000

c. Equipment: 20,000 | Cash: 20,000

On August 1, 2009, Base Line Realty purchased a two-year insurance policy for $15,000. The adjusting entry on December 31, 2009, would include a debit to: a. Prepaid Insurance for $2,500 b. Prepaid Insurance for $3,125 c. Insurance Expense for $3,125 d. Insurance Expense for $2,500

c. Insurance Expense for $3,125

Closing entries are: a. Required to bring all real accounts to a zero balance at the end of the accounting period b. Not required to be posted c. Required to bring all nominal accounts to a zero balance prior to starting a new accounting cycle d. Generally taken from the financial statements rather than from the worksheet or the accounts themselves

c. Required to bring all nominal accounts to a zero balance prior to starting a new accounting cycle

*Which of the following accounts typically needs to be adjusted? 33. ______ a. Common stock b. Land c. Unearned revenue d. Cash

c. Unearned revenue

After the closing entries are prepared and posted: 41. ______ a. all liability accounts will have a zero balance. b. the temporary accounts will have debit balances. c. the Retained Earnings account will have the correct ending balance. d. all asset accounts will have a zero balance.

c. the Retained Earnings account will have the correct ending balance.

May 23: A $430 bill for electricity for the month of April is received and will be paid on its due date in June. The journal entry to record the May 23 transaction will include a credit of $430 to: a. Utilities expense b. Cash c. Prepaid expenses d. Accounts payable

d. Accounts payable, May 23 involves recording the liability for an unpaid bill

How are a company's financial statements used? a. For internal analysis b. For external negotiation c. For compliance d. All of the above

d. All of the above

The income statement, which presents the results of operations, can be prepared in many forms, including: a. Single Step Income Statement b. Condensed Income Statement c. Common Sized Income Statement d. All of the above

d. All of the above

May 31: Salaries are paid to employees, $850. he journal entry to record the May 31 transaction will include a credit to: a. Salaries payable b. Salaries expense c. Prepaid salaries d. Cash

d. Cash, May 31 involves paying salaries (credit to Cash).

A system of accounting in which revenues and expenses are recorded only when cash is received or paid is called: a. Revenue recognition accounting b. Accrual-basis accounting c. Realization accounting d. Cash-basis accounting

d. Cash-basis accounting

The entry to close the expense accounts normally includes a: a. Debit to each revenue account b. Credit to each revenue account c. Debit to each expense account d. Credit to each expense account

d. Credit to each expense account

Which accounts are associated with the cost of goods sold? a. Accrued interest b. Depreciation c. Dividends d. Inventory

d. Inventory