Accounting 2301 Test 1

Assume Global Cleaning Service had a net income of $570 for the year, Global Cleaning Service's beginning and ending total assets were $4,520 and $4,180, respectively. Calculate Global Cleaning Service's return on assets (ROA).

ROA = Net Income / Average Assets X 100 ROA = 570 / (4,520 + 4180 / 2) X 100 ROA = 570 / 4350 X 100 ROA = .13103 X 100 *ROA = 13.1%

Consider the following accounts:

Accounts Payable- Liability Cash- Asset Common Stock- Equity Accounts Receivable- Asset Rent Expense- Equity Service Revenue- Equity Office Supplies- Asset Dividends- Equity Land- Asset Salaries Expense- Equity

Which of the following is true of accrual basis accounting and cash basis accounting?

Accural accounting records revenue only when its earned

The balance sheet reports the

Financial position on a specific date

The detailed record of the changes in a particular asset, liabilities, or stockholders equity is called

An account

A & D Window leaning preformed $450 of services but has not yet billed customers for the month. If A & D fails to record the adjusting entry, what is the impact on the financial statements?

Balance sheet: assets understated, equity understated income statement, revenues understated

Which of the following is not an external user of a business's financial information?

Employee

Assume that Global Cleaning Service preformed cleaning services for a department store on account for $180. How would this transaction affect Global Cleaning Services accounting equation?

Increase both assets and equity by $180

A worksheet

Is an internal document that helps summarize data for the preparation of financial statements

Which of the following steps of the accounting cycle is not completed at the end of the period?

Journalize transactions as they occur

Which sequence correctly summarizes the accounting process?

Journalize transactions, post to the accounts, prepare a trial balance

At the end of a recent year, Global Cleaning Services, a full service house and office cleaning service, had total assets of $3,630 and equity of $2,280. How much were Global Cleaning Services Liabilities?

Liabilities = Assets - Stockholders equity Liabilities = 3,630 - 2,280 *Liabilities = 1,350

Pixel Copies recorded a cash collection on account by debiting Cash and crediting Accounts Payable. What will the trial balance show for this error?

Liabilities are overstated

Assets and liabilities are listed on the balance sheet in the order of their

Liquidity

Accounting is the information system that

Measures business activities, communicates the results to the decision makers, and processes information into reports

Consider the overall effects on Global Cleaning Service from selling and preforming services on account for $6,400 and paying expenses totaling $2,500. What is Global Cleaning Services net income or net loss?

Net Income/Net Loss = Revenues - Expenses Net Income/Net Loss = 6,400 - 2,500 *Net Income = 3,900

Your business purchased office supplies of $2,500 on account. The journal entry to record this transaction is as follows:

Office Supplies 2,500 Accounts Payable 2,500

Posting a $2,500 purchase of office supplies on account appears as follows:

Office Supplies Accounts payable ----------------------- ------------------------ 2,500 | | 2,500

Which of the following is an example of a prepaid adjusting entry?

Recording usage of office supplies during the period

Gee Fit Now gains a client who prepays $540 for a package of six physical training sessions. Get Fit Now collects the $540 in advance and will provide the training later. After four training sessions, what should Get Fit Now report on its income statement assuming it uses the accrual basis accounting method?

Service revenue of $360

Which type of business organization is owned by only one owner?

Sole proprietorship

Which of the following characteristics best describes a corporation?

Stockholders not personally liable for entities debts

What do closing entries accomplish?

Zero out the revenues, expenses, and dividends, transfer revenues, expenses, and dividends to the Retained Earning account, bring the Retained Earnings account to its correct ending balance

The adjusted trail balance shows

Account balance after adjustments

Sedlor Properties purchased office supplies on account for $800. Which journal entry records the payment of those office supplies?

Accounts Payable 800 Cash 800

Which of the following statements is correct?

Accounts Payable is increased with a credit

Which of the following accounts is not closed?

Accumulated Depreciation

Which of the following accounts would be included in the plant assets category of the classified balance sheet?

Accumulated Depreciation

Which of the following accounts may appear on a post closing trial balance?

Cash, Salaries Payable, and Retained Earnings

Clean Water Softener Systems has Cash of $600, Accounts Receivable of $900, and Office Supplies of $400. Clean owes $500 on Accounts Payable and Salaries Payable of $200. Cleans current ratio is

Current Ratio = Current assets / Current liabilities Current Ratio = 1,900 / 700 *Current Ratio = 2.71

The left side of an account is used to record which of the following?

Debits (the right side is for credits)

Nathville Laundry reported assets of $800 and equity of $480. What is Nathville's debt ration?

Debt Ratio = Total Liabilities / Total Assets Debt Ratio = 320 / 800 Debt Ratio = .4 *Debt Ratio = 40%

Which of the following requires accounting information to be complete, neutral, and free from material error?

Faithful representation concept

Generally Accepted Accounting Principles (GAAP) are currently formulated by the

Financial Accounting Standards Board (FASB)

The revenue recognition principle requires

Revenue to be recorded only after the business has earned it

Which of the following statements concerning reversing entries is true?

Revising entries are most often used with accrual-type adjustments

Assume that the weekly payroll of In the Woods Camping Supplies is $300. December 31, end of the year, falls on a Tuesday, and In the Woods will pay its employees on Friday for the week. What adjusting entry will In the Woods make on Tuesday, December 31?

Salaries Expense 120 Salaries Payable 120

Which of the following is not a closing entry?

Salaries Payable xxx Income Summary xxx

On February 1, Clovis Wilson Law Firm contracted to provide $3,000 of legal services for the next three months and received $3,000 cash from the client. Assuming Wilson records unearned revenues using the alternative treatment, what would be the adjusting entry recorded on February 28?

Service Revenue 2,000 Unearned Revenue 2,000

Which situation indicates a net loss within the Income Statement section of the worksheet?

Total debits exceed total credits

Which of the following accounts is a liability?

Unearned Revenue (Examples: Accounts payable, bank loans, & salary and wages owed to employees)

Adjusting the accounts is the process of

Updating the accounts at the end of a period