Accounting Exam 1

Murphy company pre-paid $7200 on October 1, 2024 for a one-year insurance premium. Coverage begins October 1. On January 1, 2025 (after December 31 adjustments) the prepaid insurance account will have a debit a balance of

$5400

Which of the following statements is correct?

Accounts Payable is increased with a credit.

Which of the following is the correct order of preparation of financial​ statements?

Income statement→ statement of​ owner's equity→ balance sheet→ statement of cash flows

Which of the following accounts is a liability?

unearned revenue

Adjusting the accounts is the process of

updating the accounts at the end of the period

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

40%

Accounting is the information system that

All of the above- measures business activities, communicates the results to decision-makers, and processes information into reports

B + A = E + D

B: beginning balance A: purchased E: ending balance D: expense

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

Employees

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

Increase both assets and equity by $180

A business purchases equipment by paying $7000 in cash and issuing a Notes payable of $18,000, which of the following occurs?

Cash is credited for $7000, equipment is debited for $25,000, and notes payable is credited for $18,000

A business makes a payment of $1,400 on a note payable. Which of the following journal entries would be recorded?

Cash is credited, and notes payable is debited for $1400

Aquatics supplies company purchased $2000 of supplies on account. Under the accrual basis of accounting, no entry is made until the amount is paid.

False

Financial statements can be prepared from the unadjusted trial balance.

False

The accounting analysis system is used to record the dual effects of each transaction.

False

The total amount of assets a business possesses may or may not be equal to the total of liabilities and equity of the business.

False

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

Financial Accounting Standards Board (FASB)

Which of the following is an example of a deferral (or Prepaid) adjusting entry?

Recording the usage of office supplies during the period.

Regarding generally accepted accounting principles, which of the following statements is incorrect?

Relevant information is complete, neutral, and free from error

Assume that the weekly payroll of In the Woods Camping Supplies is $300. December 31, end of the year, falls on Tuesday, and In the Woods will pay its employee on Friday for the full week. What adjusting entry will In the Woods make on Tuesday, December 31? (use five days as a full workweek)

Salaries expense debit:120 Salaries payable Credit: 120

On February 1, Clovis Wilson Law Firm contracted to provide $3000 of legal services for the next three months and received $3000 cash from the client. Assuming Wilson Records Deferred revenues using the alternative treatment, what would be the adjusting entry recorded on February 28?

Service revenue debit: 2000 Unearned revenue credit: 2000

Get 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 is a true statement regarding the accounting equation?

The equation can be stated as assets minus liabilities equals equity.

The adjusted trial balance shows

account balances after adjustments

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

accounts payable dedit: 800 Cash credit: 800

Which of the following accounts decreases with a credit?

cash

Stuart Allen Company manufactures computer hardware. The president of the company bought a new car as a gift for his daughter and paid for it using cash from the business. Since the company paid for the car, it was recorded in its books as an asset. Which of the following concepts or principles of accounting did the company violate?

economic entity assumption

Which of the following events is NOT recorded by accountants?

effects of an economic boom

The balance sheet reports the

financial position on a specific date

A worksheet

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

Which one of the following account groups will decrease with a debit?

liabilities and revenues

Your business purchased office supplies of $2500 on account. The journal entry to record this transaction is as follows:

office supplies debit: 2500 Accounts payable credit:2500

Posting a $2500 purchase of office supplies on account appears as follows:

office supplies debit: 2500 accounts payable credit: 2500

The revenue recognition principle requires

revenue to be recorded only after the business has satisfied its performance obligation.

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 entity's debts

The following office supplies account information is available for nabors company Beginning balance: $1200 Office supplies expense: $8000 Ending balance: $4000 From the above information calculate the amount of office supplies purchased.

$10,800

At the end of the recent year, Global Cleaning Service, a full-service house and office cleaning service, had total assets of $3630 and equity of $2280. How much were Global Cleaning Service's liabilities?

$1350

Ten years ago a corporation purchased a building for $180,000. At that time, the corporation felt that the building was worth $205,000. The current market value of the building is $500,000. The building has been assessed at $475,000 for property tax purposes. At which amount should the corporation record the building in its accounting records?

$180,000

Assume Jefferson Cleaning Service had net income of $1,260 for the year. Jefferson Cleaning​ Service's beginning and ending total assets were $5,210 and $4,870​, respectively. Calculate Jefferson Cleaning​ Service's return on assets for the year. ​(Round to the nearest hundredth​ percent, X.XX%.)

25%

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

Accrual accounting records revenue only when it is earned.

The detailed record of the changes in a particular asset, liability, or owner's equity is called

An account

A & D Window Cleaning performed $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

A bank deposit slip is a source document that shows the total of all checks written by a company.

False

A business purchase equipment for $120,000 on January 1 of the current year. The equipment will be depreciated over the five years of its estimated useful life using the straight line depreciation method. The business record depreciation once a year on December 31. Which of the following of the adjusting entry requires to record depreciation on the equipment for the end of the first year? (assume the residential value of the required quick equipment to be zero)

Debit $24,000 to depreciation expense- equipment, and credit $24,000 to accumulated depreciation - equipment

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

Debits

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

Faithful representation concept

Adjusting entries do not update balance sheet accounts

False

Which sequence correctly summarizes the accounting process?

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

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

Consider the overall effects on Global Cleaning Service from selling and performing services on account for $6400 and paying expenses totaling $2500. What is Global Cleaning Service's net income or net loss?

Net income of $3900

Accounting is referred to as the language of business because it is the method of communicating business information to decision makers.

True

The adjusted trial balance is prepared after the adjustments have been journalized and posted.

True

The debt ratio is one indication of the ability of a company to fulfill its obligation to repay liabilities.

True

The guidelines for accounting information in the United States are called Generally Accepted Accounting Principles​ (GAAP).

True

The time period concept assumes that the activities of a business can be sliced into small time segments

True

The trial balance verifies the equality of debits and credits on a specific date.

True