Accounting test 1

On May 31, 2022, Hughes Construction recorded $50,000 in bonds payable, $30,000 in notes payable, $9,000 in wages payable, $3,000 in accounts payable, and $1,450 in taxes payable. How are all of these accounts similar? Select answer from the options below a. All of them represent revenues that the company will receive at some specified point in the future. b. All of them represent liabilities that must be paid back at some specified point in the future. c. All of them represent transactions responsible for the company's net loss for the current accounting period. d. All of them represent expenses that have been paid in the current accounting period.

b. All of them represent liabilities that must be paid back at some specified point in the future.

The information system that identifies, records, and communicates the economic events of an organization to interested users" is the definition of. a. Chart of Accounts b. Balance Sheet c. Accounting d. Accounts Receivable

c. Accounting

Which of the following MOST accurately describes the function of the balance sheet? Select answer from the options below a. The balance sheet presents the revenues and expenses for a specific period of time. b. The balance sheet summarizes the changes in retained earnings for a specific period of time. c. The balance sheet reports the assets, liabilities, and stockholders'; equity at a specific date. d. The balance sheet reports the changes in assets, liabilities, and stockholders'; equity over a period of time.

c. The balance sheet reports the assets, liabilities, and stockholders'; equity at a specific date.

Sol-Tex has net income of $1,300,000 and 400,000 shares outstanding. It has preferred dividends of $300,000. What are the earnings per share? Select answer from the options below a. $4.33 b. $1.86 c. $0.25 d. $2.50

d. $2.50

Which of the following problems may cause financial statements to be inaccurate? a. Failing to follow a specific budget. b. Paying more dividends than net income received. c. Overspending the Cash account. d. Failing to use specific account titles.

d. Failing to use specific account titles.

An example of a financing activity is a. borrowing money by getting a bank loan b. delivering goods or services to customers c. marketing the company d. investing in the stock of other companies.

A. borrowing money by getting a bank loan

Liability with a credit balance is the classification and normal balance of Dividends. Accounts Payable. Retained Earnings. Accumulated Depreciation.

Accounts Payable.

What does a current ratio of 1.20:1 mean? Select answer from the options below For every dollar of current liabilities, a company has $1.00 of current assets. For every dollar of current liabilities, a company has $1.20 of current assets. For every $1.20 of current liabilities, a company has $1.20 of current assets. For every $1.20 of current liabilities, a company has $1.00 of current assets.

For every dollar of current liabilities, a company has $1.20 of current assets.

Mallard Company's total debit column is $27,000 on its trial balance. The remainder of the trial balance shows Accounts Payable of $3,000, Service Revenue of $20,000, and Notes Payable is blank. What is the balance for the Notes Payable account if no errors have occurred in the trial balance? a. $4,000 b. $23,000 c. $27,000 d. $17,000

a. $4,000

Which of the following is true of a partnership? Select answer from the options below a. A partnership must have more than one owner. b. A partnership does not have the tax advantages that a sole proprietorship enjoys. c. Partners are not personally liable for debts incurred by the business. d. A partnership cannot be incorporated.

a. A partnership must have more than one owner.

On January 14, Welsford Agency purchased supplies of $500 on account. The entry to record the purchase will include a debit to a. Supplies and a credit to Accounts Payable. b. Supplies Expense and a credit to Accounts Receivable. c. Supplies and a credit to Cash. d. Accounts Receivable and a credit to Supplies

a. Supplies and a credit to Accounts Payable.

Which of the following does a balance sheet show? Select answer from the options a. assets, liabilities, and stockholders' equity b. revenues, liabilities, and stockholders' equity c. expenses, dividends, and stockholders' equity d. revenues, expenses, and dividends

a. assets, liabilities, and stockholders' equity

All of the following are current liabilities EXCEPT ________ payable. Select answer from the options below a. bonds b. accounts c. taxes d. salaries and wages

a. bonds

Coburn Incorporated reported the following results for the month ended January 31, 2022: Revenues of $45,000, Expenses of $48,000, and Dividends of $3,500. Coburn experienced a net ____________ of Select answer from the options below a. loss; $3,000. b. income; $3,000. c. income; $500. d. loss; $6,500.

a. loss; $3,000.

Crawford Fishing had a net income of $35,640 in 2022. They decided to pay $3,000 in dividends and keep the rest to help expand their production line. The profit that they keep to reinvest in the business is reported as Select answer from the options below - a. retained earnings. b. a long-term investment. c. property, plant, and equipment. d. common stock.

a. retained earnings

What is the primary purpose of the trial balance? a. to prove the equality of the debit and credit amounts after posting b. to ensure a journal entry is not posted twice c. to facilitate the transfer of journal entries to the ledger accounts d. to disclose the complete effect of a transaction in one place

a. to prove the equality of the debit and credit amounts after posting

Which of the following accounting entries would you MOST expect to accompany a $2,500 increase in cash, and why? a. A $2,500 increase in notes payable, because this increase in stockholders' equity would need to be offset by a corresponding increase in assets. b. A $2,500 increase in unearned service revenue, because unearned service revenue is considered a liability until the service is actually performed. c. A $2,500 decrease in unearned service revenue, because unearned service revenue is considered an asset no matter when it is received. d. A $2,500 decrease in notes payable, because this reduction in liabilities would need to be offset by a corresponding increase in assets.

b. A $2,500 increase in unearned service revenue, because unearned service revenue is considered a liability until the service is actually performed.

Some of the balances on Carla's Cookies June 30th trial balance include Cash $100,000, Accounts Receivable $50,000, Equipment $25,000, and Accounts Payable $75,000. During the month of July, the company used cash to purchase $8,000 of equipment. How will this transaction affect the equipment account balance on the July 31st trial balance? a. An increase of $4,000. b. An increase of $8,000. c. A decrease of $8,000. d. A decrease of $4,000.

b. An increase of $8,000.

Watson Energy decided to borrow cash from the bank in order to build a new office building. The board of directors was arguing about which type of business activity this was. Diane stated that it was a financing activity, but Paul stated that it was an investing activity. Who was correct? a. Diane. Because the project required borrowing money, it should be categorized as a financing activity. b. Both. Borrowing the cash is a financing activity, but building the new office building is an investing activity. c. Neither. Because the office building will be used for administrative activities, this should be categorized as an operating activity. d. Paul. Because the project would increase the company's property, plant, and equipment assets, it should be categorized as an investing activity.

b. Both. Borrowing the cash is a financing activity, but building the new office building is an investing activity.

On November 15, Paulson Painting received a $6,000 cash payment from Apex Inc. in exchange for painting services to be provided in December. When posting the journal entries related to this payment, Paulson's accountant debits the Cash account for $6,000 and credits Service Revenue for $6,000. Which of the following statements best describes the results of this posting? a. In Paulson's general ledger, the ending balance for the Cash account will be too low, the ending balance for the Service Revenue account will be too low, and the ending balance for the Unearned Service Revenue account will be too high. b. In Paulson's general ledger, the ending balance for the Cash account will be correct. However, the ending balance for the Service Revenue account will be too high and the ending balance for the Unearned Service Revenue account will be too low. c. In Paulson's general ledger, the ending balances for both the Cash account and the Service Revenue account will be correct. d. In Paulson's general ledger, the ending balances for the Cash and Service Revenue accounts will be too high. However, the ending balance for the Unearned Service Revenue account will be too low.

b. In Paulson's general ledger, the ending balance for the Cash account will be correct. However, the ending balance for the Service Revenue account will be too high and the ending balance for the Unearned Service Revenue account will be too low.

Coleman Camping Supplies decided to use cash to purchase a new tent sewing machine. It will effectively double their ability to produce tents. How will this purchase affect Coleman's operating activities? Select answer from the options below a. It will increase their accounts receivable and decrease expenses. b. It will increase their finished goods inventory and hopefully increase revenue. c. It will decrease their wages payable and increase administrative expenses. d. It will decrease their cost of goods sold and hopefully increase net income.

b. It will increase their finished goods inventory and hopefully increase revenue.

Jansen Corporation just purchased a piece of equipment with a 10-year useful life. How should it allocate the equipment's cost? Select answer from the options below a.Jansen should expense the full purchase price of the equipment in the year in which it was purchased. b. Jansen should assign a portion of the equipment's cost to expense each year of its useful life. c. Jansen should expense the full purchase price of the equipment in the last year of its useful life. d. Jansen should not record any expense until the asset is sold.

b. Jansen should assign a portion of the equipment's cost to expense each year of its useful life.

Which of the following events would lead to a decrease in a firm's retained earnings, and why? a. Issuance of a $10,000 note payable in exchange for cash, because notes payable are considered an expense, and an increase in expenses will reduce a firm's retained earnings b. Payment of $10,000 in employee salaries, because salaries are considered an expense, and an increase in expenses will reduce a firm's retained earnings c. Payment of $10,000 in employee salaries, because salaries are considered a liability, and an increase in liabilities will reduce a firm's retained earnings d. Issuance of a $10,000 note payable in exchange for cash, because notes payable are considered a liability, and an increase in liabilities will reduce a firm's retained earnings

b. Payment of $10,000 in employee salaries, because salaries are considered an expense, and an increase in expenses will reduce a firm's retained earnings.

The system that keeps track of the results of each of the three business activities is called a(n) ________ system. a. financial information b. accounting information c. operating d. a recording

b. accounting information

Beacon Books issues common stock for $500,000 and uses $100,000 of the cash for building improvements. As a result, a. stockholders' equity will be reduced by $500,000. b. assets will be increased by $500,000. c. assets will be increased by $400,000. d. assets will be unchanged.

b. assets will be increased by $500,000.

Cash was used to pay $2,500 of accounts payable. The prior balance in Accounts Payable was $5,500. Which of the following would be included in the ledger entry for Accounts Payable? a. a credit of $2,500a b. debit of $2,500 c. a balance of $2,500 d. a balance of $8,000

b. debit of $2,500

Which concept helps a company decide on a case-by-case basis which items or events should be included in their financial statements in order to comply with the full disclosure principle? Select answer from the options below a.understandability b. materiality c. consistency d. cost constraint

b. materiality

Charlie and Gwen are arguing about the proper method for recording long-term liabilities on their company's classified balance sheet. Charlie insists that each obligation must be listed separately, while Gwen says a single total amount can be listed with notes showing details of the debt. Who is correct? Select answer from the options below a. Neither Charlie nor Gwen is correct; long-term liabilities are not included on a classified balance sheet. b. Charlie is correct; long-term liabilities must be listed individually on a classified balance sheet because the sheet by nature classifies all liabilities as specifically as possible. c. Both Charlie and Gwen are correct; long-term liabilities can be listed either individually or as a single amount depending upon the company's preferences. d. Gwen is correct; long-term liabilities must be listed as a single amount with detailed notes because the notes enable greater detail about the liabilities to be recorded.

c. Both Charlie and Gwen are correct; long-term liabilities can be listed either individually or as a single amount depending upon the company's preferences.

Which of the following statements about the proprietorship form of business is true? a. It combines the records of the business with the personal records of the owner b. It is classified as a separate legal entity c. It generally receives favorable tax treatment relative to a corporation d. It must have at least two owners in most states.

c. It generally receives favorable tax treatment relative to a corporation

Which quality of an asset makes it more appropriate for the fair value principle rather than the historical cost principle? Select answer from the options below a. The asset never undergoes depreciation, but the seller reports a gain or loss upon sale of the asset. b. The asset undergoes depreciation over time. c. The market price of the asset is readily available and reliable. d. The value of the asset depends on the specific agreement between the buyer and seller.

c. The market price of the asset is readily available and reliable.

Internal production supervisors of a company's product line would be most likely to ask which of the following questions? a. How much of a dividend can the company afford to pay its stockholders? b. What can the company afford to pay its employees this year? c. Which product line is the least profitable and should be eliminated? d. How much should the company charge for its products to maximize its net income?

c. Which product line is the least profitable and should be eliminated?

How are liabilities usually classified on a balance sheet? Select answer from the options below a. as small liabilities and large liabilities b. as tangible liabilities and intangible liabilities c. as current liabilities and long-term liabilities d. as present liabilities and future liabilities

c. as current liabilities and long-term liabilities

The basic accounting equation states that ________ must equal liabilities plus stockholders' equity. Select answer from the options below a. revenues b. net income c. assets d. dividends

c. assets

A business that is organized as a separate legal entity owned by shareholders is a a. partnership. b. limited sole proprietorship. c. corporation. d. sole proprietorship.

c. corporation

What are assets? a. a decrease in liabilities b. amounts earned on the sale of products c. resources owned by a business d. claims made by creditors on a business

c. resources owned by a business

Several years ago, Viking Industries purchased a new machine with a 7-year expected life for $49,700. On its current balance sheet, Viking listed accumulated depreciation on the machine at $35,500. Based on this, how much has the company expensed over the life of the asset? Select answer from the options below a. $14,200.00 b. $49,700.00 c. $7,100.00 d. $35,500.00

d. $35,500.00

aulson Oil account balances at January 31st include: Cash $70,000, Accounts Receivable $100,000, Common Stock $120,000 and Accounts Payable $50,000. During the month of February, the company collected $25,000 of its account receivable and paid $10,000 of its accounts payable. What is Paulson's cash balance on their February 28th trial balance? a. $65,000 b. $95,000.00 c. $60,000.00 d. $85,000.00

d. $85,000.00

Which of the following represents an alternative expression of the basic accounting equation? Select answer from the options below a. Assets + Liabilities = stockholders'; Equity b. Assets = Liabilities - stockholders'; Equity c. Assets + stockholders'; Equity = Liabilities d. Assets - Liabilities = stockholders'; Equity

d. Assets - Liabilities = stockholders'; Equity

Nathaniel and Hosea have both invested $25,000 in businesses. Now they both want to sell out and recoup their money. If Nathaniel invested in a corporation and Hosea invested in a partnership, which of them is going to have the MOST difficulty selling their investment? Why? a. Select answer from the options below Nathaniel, because selling ownership of a corporation requires finding an individual or small group willing to invest a large amount in one business. b. Nathaniel, because selling ownership of a corporation requires finding many individuals who are willing to invest a small amount in one business. c. Hosea, because selling ownership of a partnership requires finding many individuals who are willing to invest a small amount in one business. d. Hosea, because selling ownership of a partnership requires finding an individual or small group willing to invest a large amount in one business.

d. Hosea, because selling ownership of a partnership requires finding an individual or small group willing to invest a large amount in one business.

ou are the accountant responsible for creating financial documents and recording transactions. In which order will you perform the following actions related to these tasks? I. create financial statements II. record transactions in the ledger III. examine business documents IV. record transactions in the journal a. III, II, I, IV b. III, II, IV, I. c. IV, II, I, III d. III, IV, II, I

d. III, IV, II, I

How would the Salaries and Wages Payable account compare with the Salaries and Wages Expense account in terms of classification in the ledger? a. Salaries and Wages Payable would be found in the stockholders' equity section while Salaries and Wages Expense would be found in the liabilities section. b. Both would be found in the stockholders' equity section. c. Both would be found in the liabilities section. d. Salaries and Wages Payable would be found in the liabilities section while Salaries and Wages Expense would be found in the stockholders'; equity section.

d. Salaries and Wages Payable would be found in the liabilities section while Salaries and Wages Expense would be found in the stockholders'; equity section.

Which of the following situations would be recorded as wages payable? a. King Candy Stores has budgeted $142,000 for employee salaries and wages in fiscal year 2022 b. Collins Accounting Services paid $25,740 to their employees on the most recent pay day c. Baker Resources expects to spend $55,000 to pay their employees next month d. Sanchez Flooring owes $12,490 to their employees for time worked over the past three days.

d. Sanchez Flooring owes $12,490 to their employees for time worked over the past three days.

What would it mean if there was a new ledger credit entry of $5,000 to the Notes Payable account? a. The company has $5,000 in unearned income (a liability account). b. The company has paid $5,000 towards an existing note. c. The company has loaned $5,000 in the form of a note. d. The company has borrowed $5,000 in the form of a note.

d. The company has borrowed $5,000 in the form of a note.

During the month of May, Apex Industries recorded a $3,000 debit to an expense account. Which of the following explanations of this transaction is the MOST accurate? a. This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 debit to an asset account in order to offset the corresponding increase in stockholders' equity. b. This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 debit to an asset account in order to offset the corresponding decrease in stockholders' equity. c. This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 credit to an asset account in order to offset the corresponding increase in stockholders' equity. d. This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 credit to an asset account in order to offset the corresponding decrease in stockholders' equity.

d. This entry indicates that Apex incurred $3,000 in expenses. It also suggests that the firm may have recorded a $3,000 credit to an asset account in order to offset the corresponding decrease in stockholders' equity.

During October, Blue Sky Inc. correctly enters a $10,000 credit to its Revenues account. What conclusions can be made based on this accounting entry? a. This entry indicates that Blue Sky lost $10,000 in revenue in October, which likely means that the firm's net income, ending retained earnings, and stockholders' equity all decreased. b. This entry indicates that Blue Sky lost $10,000 in revenue in October, which likely means that the firm's net income and ending retained earnings decreased while its stockholders' equity increased. c. This entry indicates that Blue Sky recognized $10,000 in revenue in October, which likely means that the firm's net income and ending retained earnings increased while its stockholders' equity decreased. d. This entry indicates that Blue Sky recognized $10,000 in revenue in October, which likely means that the firm's net income, ending retained earnings, and stockholders' equity all increased.

d. This entry indicates that Blue Sky recognized $10,000 in revenue in October, which likely means that the firm's net income, ending retained earnings, and stockholders' equity all increased.

Of the following sets of accounting entries, which one correctly records the purchase of a piece of equipment? Select answer from the options below a. a $14,000 decrease in cash, a $4,000 increase in notes payable, and a $10,000 increase in equipment, all entered on the same date b. a $15,000 increase in cash and a $15,000 decrease in equipment, both entered on the same date c. a $16,000 decrease in notes payable and a $16,000 increase in equipment, both entered on the same date d. a $5,000 decrease in cash, a $15,000 increase in notes payable, and a $20,000 increase in equipment, all entered on the same date

d. a $5,000 decrease in cash, a $15,000 increase in notes payable, and a $20,000 increase in equipment, all entered on the same date

The normal balances in stockholders' equity accounts are a. all credits except for expenses that are debits. b. all credits, like liabilities. c. credits for Common Stock and Retained Earnings, but debits for all others. d. credits for Common Stock, Retained Earnings, and revenues, but debits for the others.

d. credits for Common Stock, Retained Earnings, and revenues, but debits for the others.

What type of activity is borrowing money? a. delivering b. investing c. operating d. financing

d. financing