accounting exam 1
On September 30, the bank statement of Fine Company showed a balance of $9,250. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records: Deposits in transit amounted to $3,915 Outstanding checks amounted to $7,410 A $630 check was incorrectly drawn on Fine's account NSF checks returned by the bank were $930 Bank service charge was $35 Credit memo for $115 for the collection of one of the company's account receivable Based on the above information, the true cash balance was:
$9,250 unadjusted bank balance + $3,915 deposits in transit − $7,410 outstanding checks + $630 error correction = $6,385 true cash balance
Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $76,000 2) borrowed $43,000 from its bank 3) provided consulting services for $75,000 cash 4) paid back $33,000 of the bank loan 5) paid rent expense for $18,000 6) purchased equipment for $30,000 cash 7) paid $4,800 dividends to stockholders 8) paid employees' salaries of $39,000 What is Yowell's notes payable balance at the end of Year 1?
-43, 000 + 33,000 = 10,000
Issued $7,000 of common stock to stockholders Provided $3,300 of services on account Paid $1,850 cash for operating expenses Collected $2,400 of cash from accounts receivable Paid a $150 cash dividend to stockholders What is the of net cash flow from operating activities shown on the Year 1 statement of cash flows?
2,400 -1,850 = 550
Which of the following is an accurate depiction of the accounting equation?
Assets = Liabilities + Common Stock + Retained Earnings
In the reconciliation of the June bank statement, a deposit made on June 30 did not appear on the June bank statement. In preparing the bank reconciliation, this deposit in transit should be:
added to the unadjusted book balance
For which of the following bank reconciliation adjustments would an adjusting entry not be necessary?
an error in which the bank charged the company $83 for a check that had been written by another account holder
The Cost of Goods Sold account is classified as:
an expense
Robertson Company paid $1,850 cash for rent expense. As a result of this business event:
both stockholder's equity and net cash flow for operating activities decreased
In preparing the April bank reconciliation for Oscar Company, it was discovered that on April 10 a check was written to pay delivery expense of $45 but the check was erroneously recorded as $54 in the company's books. The correction the error of this error would increase:
cash and decrease delivery expense by $9
Which of the following is not a motive for the embezzlement of cash by employees?
cash is the common unit of measurement
Which resource providers lend financial resources to a business with the expectation of repayment with interest?
creditors
Duluth Company collected a $6,000 cash advance from a customer on November 1, Year 1 for work to be performed over a six-month period beginning on that date. If the year-end adjustment is properly recorded, what will be the effect of the adjusting entry on Duluth's Year 1 financial statements?
decrease liabilities and increase revenues
Which term describes assets generated through operations that have been reinvested into the business?
retained earnings
Bledsoe Company received $32,000 cash from the issue of stock on January 1, Year 1. During Year 1, Bledsoe earned $10,200 of revenue on account. The company collected $9,400 cash from accounts receivable and paid $7,100 cash for operating expenses. Based on this information alone, during Year 1, which of the following statements is true?
$32,000 (cash) + $10,200 (accounts receivable) + $9,400 (cash) − $9,400 (accounts receivable) − $7,100 (cash) = $35,100 increase
Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $5,000 cash from issuing common stock. 2) Borrowed $3,200 from a bank. 3) Earned $4,100 of revenues. 4) Incurred $2,600 in expenses. 5) Paid dividends of $600. The amount of total assets on Lexington's balance sheet at the end of Year 1 was:
$5,000 + $3,200 + $4,100 − $2,600 − $600 = $9,100
Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.) 1) Acquired $3,700 cash from issuing common stock. 2) Borrowed $2,550 from a bank. 3) Earned $3,450 of revenues. 4) Incurred $2,470 in expenses. 5) Paid dividends of $470. Total liabilities on Lexington's balance sheet at the end of Year 1 equal:
2,550
The business issued $31,000 of common stock to its stockholders. The business purchased land for $23,000 cash. Services were provided to customers for $27,000 cash. Services were provided to customers for $16,000 on account. The company borrowed $27,000 from the bank. Operating expenses of $23,000 were incurred and paid in cash. Salary expense of $1,900 was accrued. A dividend of $15,000 was paid to the stockholders of Warren Enterprises. Assuming the company began operations during Year 1, What is the amount of retained earnings as of December 31, Year 1?
27,000 + 16,000 - 23,000 - 1,900 - 15,000 =3,100
Revenue on account amounted to $4,200. Cash collections of accounts receivable amounted to $3,900. Cash paid for expenses was $3,100. The amount of employee salaries accrued at the end of the year was $900. What is the net cash flow from operating activities for the year?
3,900 - 3,100 = 800
Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $60,000 2) borrowed $35,000 from its bank 3) provided consulting services for $59,000 cash 4) paid back $25,000 of the bank loan 5) paid rent expense for $14,000 6) purchased equipment for $22,000 cash 7) paid $4,000 dividends to stockholders 8) paid employees' salaries of $31,000 What is Yowell's notes payable balance at the end of Year 1?
35,000- 25,000 = 10,000
Revenue on account amounted to $4,600. Cash collections of accounts receivable amounted to $2,750. Expenses for the period were $2,400. The company paid dividends of $600. What was the amount of net income for the period?
4,600 - 2,400 = 2,200
Revenue on account amounted to $6,200. Cash collections of accounts receivable amounted to $3,950. Expenses for the period were $3,200. The company paid dividends of $1,000. What was the amount of net income for the period?
6,200 - 3, 200 = 3,000
Yowell Company began operations on January 1, Year 1. During Year 1, the company engaged in the following cash transactions: 1) issued stock for $70,000 2) borrowed $40,000 from its bank 3) provided consulting services for $69,000 cash 4) paid back $30,000 of the bank loan 5) paid rent expense for $16,500 6) purchased equipment for $27,000 cash 7) paid $4,500 dividends to stockholders 8) paid employees' salaries of $36,000 What is Yowell's net cash flow from operating activities?
69,000 - 16,500- 36,000 = 16,500
Lexington Company engaged in the following transactions during Year 2: 1) Acquired an additional $700 cash from the issue of common stock. 2) Repaid $1,440 of its debt to the bank. 3) Earned revenues, $4,700. 4) Incurred expenses of $2,830. 5) Paid dividends of $880. What is the net cash flow from financing activities on Lexington's statement of cash flows for Year 2?
700 - 1440 - 880 = -1620 (outflow)
What do the credit terms, 2/15, n/30, mean?
A 2% discount can be deducted if the invoice is paid before the 15th day following the date of the sale.
ABC Company ended Year 1 with the following account balances: Cash $600, Common Stock $400, and Retained Earnings $200. The following transactions occurred during Year 2: Issued common stock for $19,000 cash. ABC borrowed an additional $11,000 from Chris Bank. ABC earned $9,000 of revenue on account. ABC incurred $4,000 of operating expenses on account. Cash collections of accounts receivables were $6,000. ABC provided additional services to customers for $1,000 cash. ABC purchased land for $14,000. ABC used $3,000 in cash to make a partial payment on its accounts payable. ABC declared and paid a $200 dividend to the stockholders On December 31 ABC had accrued salaries of $4,000. What is the amount of net income (loss) reported on the December 31, Year 2 income statement?
Revenue = $9,000 earned revenue on account + $1,000 provided services for cash = $10,000 Expenses = $4,000 operating expenses + $4,000 accrued salaries = $8,000 Net income = Revenue of $10,000 − Expenses of $8,000 = $2,000
Sanchez Company engaged in the following transactions during Year 1: Started the business by issuing $11,900 of common stock for cash. The company paid cash to purchase $7,300 of inventory. The company sold inventory that cost $4,700 for $9,400 cash. Operating expenses incurred and paid during the year, $4,200. Sanchez Company engaged in the following transactions during Year 2: The company paid cash to purchase $10,200 of inventory. The company sold inventory that cost $8,900 for $16,000 cash. Operating expenses incurred and paid during the year, $5,200. Note: Sanchez uses the perpetual inventory system. What is the amount of retained earnings as of December 31, Year 2?
Year 1 Net Income: $9,400 − $4,700 − $4,200 = $500 Year 2 Net Income: $16,000 − $8,900 − $5,200 = $1,900 Beginning Retained Earnings $500 + $1,900 = $2,400 Ending Retained Earnings
In a bank reconciliation, a customer's NSF check included with the bank statement is:
deducted from the company's cash balance to get the true cash balance
Which of the following is not considered a common control activity?
duplication of duties
What types of accounts are "matched" when the matching concept is used in a discussion of accrual accounting?
expenses and revenues
Ashton Company uses the perpetual method. The company's inventory account had a $6,600 balance as of December 31, Year 1. A physical count of inventory shows only $5,900 of merchandise in stock at December 31, Year 1. How does the related adjusting entry affect the financial statements?
expenses increase
Abbott Company purchased $8,500 of merchandise inventory on account. Abbott uses the perpetual inventory method. How does this transaction affect the financial statements?
increase inventory and increase accounts payable
Under a periodic inventory system, which of the following accounts are not used by the buyer when recording transactions related to inventory duringthe accounting period
inventory
providing services contributes to?
net income
Which of the following is not an asset use transaction?
paying cash to purchase land
Which of the following would cause net income on the accrual basis to be different from (either higher or lower than) the amount of net cash flow for operating activities on the statement of cash flows?
purchased supplies for cash
Which of the following is not one of the elements that are typically present when fraud occurs?
the assistance of others
Under a periodic system, the payment of shipping costs on goods received from the vendor will increase the:
the transportation in account
How does the purchase of inventory on account under the perpetual inventory method affect the financial statements?
total assets and total liabilities increase
Galaxy Company sold merchandise costing $1,900 for $2,800 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?
total assets and total stockholder's equity decrease by 900
Mayberry Company paid $30,000 cash to purchase land. As a result of this business event:
total assets and total stockholder's equity was not affected and cash flow from investing activities decreased
Li Company paid cash to purchase land. As a result of this accounting event, which of the following statements is true?
total assets were unaffected
Which of the following items is not a product cost?
transportation cost on goods delivered to customers
Which of the following is not an internal control procedure for the control of cash receipts?
use of pre numbered checks