Accounting Exam 1

The primary purpose(s) of financial accounting is to

Both measure and communicate financial information to external parties.

Deferred Revenue is:

A liability account.

Which of the following accounts represents a liability of the company?

Accounts payable, Unearned revenue

Which of the following Is/are not included in cash and cash equivalents on a firm's balance sheet?

Accounts receivable

Which of the following accounts represents a resource of the company?

Accounts receivable

Adjusting entries are primarily needed for:

Accrual-basis accounting.

Adjusting entries

Always involve at least one income statement account and one balance sheet account

Revenues normally carry a ______ balance and are shown in the __________.

Credit; Income Statement

ABC Company takes out a loan for $40,000 with 10% interest on April 1, 2018. This amount plus interest is due on March 31, 2019. Record the adjusting entry for December 31, 2018

Debit Interest Expense $3,000; credit Interest Payable $3,000

On March 1, a company paid $24,000 for 12 months of rent in advance. How should the company record this transaction on March 1?

Debit Prepaid Rent $24,000; credit Cash $24,000

At the beginning of the year, ABC Company had $5,000 in supplies on hand. During the year, supplies purchased amounted to $3,500. By the end of the year, the supplies balance was only $900. What is the appropriate adjusting entry for ABC Company?

Debit Supplies Expense $7,600; credit Supplies $7,600

When a company pays dividends to its stockholders, the transaction should be recorded as:

Debit dividends; credit cash.

Howard Jones paid their landlord $4,800 for 24 months' rent in advance. How should Howard Jones record this transaction?

Debit prepaid rent; credit cash

Receiving cash for an accounts receivable:

Decreases one asset and increases another asset

Which of the following is true about a "debit"?

It represents an increase to assets, It represents a decrease to liabilities, It is part of the double-entry procedure that keeps the accounting equation in balance

not a temporary account?

Liabilities

Which element of the fraud triangle do companies have the greatest ability to eliminate?

Opportunity

Operating cash flows would include

Payment for employee salaries.

Closing entries

Reduce the balance of temporary accounts to zero, Transfer the balance of temporary accounts to retained earnings

purpose(s) of closing entries?

Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

When net income is greater than dividends

Stockholders' equity always increases.

When preparing a bank reconciliation, a check outstanding would be

Subtracted from the bank's cash balance

Which of the following best explains the meaning of total stockholders' equity?

The amount of common stock plus profits retained over the life of the company

The act of collusion refers to

Two or more people acting in coordination to circumvent internal controls

XYZ Company provides services to customers totaling $5,000. If the customers are expected to pay in 30 days, how would the transaction be recorded? a. Debit Accounts Receivable $5,000; credit Service Revenue $5,000 b. Debit Cash $5,000; credit Service Revenue $5,000 c. Debit Accounts Receivable $5,000; credit Deferred Revenue $5,000 d. Debit Cash $5,000; credit Accounts Receivable $5,000

a. Debit Accounts Receivable $5,000; credit Service Revenue $5,000

A company receives $3,000 for services to be provided over the next three months. How would the transaction be recorded today? a. Debit Cash $3,000; credit Deferred Revenue $3,000 b. Debit Cash $3,000; credit Service Revenue $3,000 c. Debit Deferred Revenue $3,000; credit Service Revenue $3,000 d. Debit Deferred Revenue $3,000; credit Cash $3,000

a. Debit Cash $3,000; credit Deferred Revenue $3,000

Supplies are recorded as a(n) ________ when they are purchased

asset

Which of the following sales would typically be reported as a cash sale? a. Sale on account. b. Sale in exchange for office supplies received. c. Sale in exchange for equipment received. d. Sale with a credit card.

d. Sale with a credit card.

Suppose a customer rents a vehicle for six months from Rent-A-Car on September 1, paying $6,000 ($1,000/month). Record Rent-A-Car's adjusting entry on December 31. a. Debit Cash $6,000; credit Deferred Revenue $6,000 b. Debit Deferred Revenue $4,000; credit Service Revenue $4,000 c. Debit Cash $4,000; credit Service Revenue $4,000 d. Debit Rent Expense $4,000; credit Accounts Payable $4,000

b. Debit Deferred Revenue $4,000; credit Service Revenue $4,000

Which of the following accounts are current liabilities? I. Unearned Revenue II. Notes Payable (due in 36 months) III. Interest Payable IV. Accounts Payable a. II only b. I, II, III, and IV c. I, III, and IV d. III and IV

c. I, III, and IV

Which of the following accounts are current assets? I. Equipment II. Cash III. Accounts Receivable IV. Supplies a. I only b. II and IV c. II, III, and IV d. II only

c. II, III, and IV

XYZ's general ledger shows a balance of $12,500 before the bank reconciliation was prepared. After examining the July bank statement and items included with it, the company's accountant found the following items: Checks Outstanding, $3,150; NSF Check, $160; Service Charges, $75; Deposits Outstanding, $2,900. XYZ also wrote a check for $115 but recorded it incorrectly for $1,150. What is the amount of cash that should be reported in the company's balance sheet as of July 31? a. $12,265 b. $11,000 c. $12,250 d. $13,300

d. $13,300

Use the following appropriate amounts to calculate owners' claims to the company's resources: Assets, $1,200,000; Liabilities, $800,000; Net Income, $100,000; Retained Earnings, $250,000 a. $1,200,000 b. $800,000 c. $250,000 d. $400,000

d. $400,000

ABC Company had the following net income (loss) the first three years of operations: $7,800, ($1,500), and $2,500. If the Retained Earnings balance at the end of year three is $800, what was the total amount of dividends paid over these three years? a. $11,000 b. $9,600 c. $0 d. $8,000

d. $8,000

Which of the following accounts is not found on a balance sheet? Assets b. Liabilities c. Stockholders' equity d. Dividends

d. Dividends

Which of the following steps would come first in the accounting cycle? a. Prepare a trial balance b. Prepare financial statements c. Make adjusting entries d. Record external transactions

d. Record external transactions