Accounting Test
Which of the following accounts decreases with a credit?
Cash
Which of the following is the most liquid asset?
Cash
John Tilden contributes cash to his business in exchange for capital. John is the sole proprietor. The two accounts involved in this transaction are ________.
Cash and Tilden, Capital
Montgomery Equipment Rental Company received $1,000 cash from a customer; the amount was owed to the business from the previous month. What is the effect of this transaction on the accounting equation?
Cash increases and Accounts Receivable decreases
A business purchases equipment by paying $7,517 in cash and issuing a note payable of $19,410. Which of the following occurs?
Cash is credited for $7,517, Equipment is debited for $26,927, and Notes Payable is credited for $19,410.
Which of the following accounts will be included in a postminus−closing trial balance?
Interest Payable
What type of account is Prepaid Rent, and what is its normal balance?
It is an asset account and has a debit balance.
Which of the following is a measure of how quickly an item can be converted to cash?
Liquidity
Which of the following journal entries would be recorded if a business purchased $800 of office supplies on account?
Office Supplies 800 Accounts Payable 800
Posting a transaction means ________.
Transferring data from the journal to the ledger
Which of the following is a liability account?
Unearned Rent
Your Business Advisor, a consulting company, uses reversing entries. On March 31, 2018, the bookkeeper journalized and posted the following adjusting entry to accrue Utilities Expense: Utilities Expense 1 comma 0001,000 Utilities Payable 1 comma 0001,000 Which of the following entries is the correct reversing entry to be prepared on April 1, 2018?
Utilities Payable 1,000 Utilities Expense 1,000
Metropolitan Casting Services started the year with total assets of $ 110 comma 000$110,000 and total liabilities of $ 40 comma 000$40,000. The company is a sole proprietorship. The revenues and the expenses for the year amounted to $ 110 comma 000$110,000 and $ 50 comma 000$50,000, respectively. During the year, there were no new capital contributions and the owner withdrew $ 55 comma 000$55,000. Calculate the amount of increase or decrease in owner's equity for the year.
a $5,000 increase
Which of the following accounting elements does the matching principle help to match?
expenses and revenues
The field of accounting that focuses on providing information for external decision makers is ________.
financial accounting
Patents, copyrights, and trademarks are examples of ________.
intangible assets
Managerial accounting provides information to ________.
internal decision makers
Transactions are first recorded in a ________.
journal
Which one of the following account groups normally has a credit balance?
liabilities and revenues
Which one of the following account groups will decrease with a debit?
liabilities and revenues
Jason Ford has been the sole owner of a bicycle sales and repair shop for several years. Which of the following business types would limit Jason's personal liability exposure to the entity's debts?
limited−liability company
At the time the transaction occurred, which of the following would result in an increase in net income under the accrual basis of accounting, but would not result in an increase in net income under cash basis accounting?
performance of services on account
The Sarbanesminus−Oxley Act (SOX) ________.
requires companies to take responsibility for the accuracy and completeness of their financial reports
Maxwell Plumbing Services earned $500 by completing a job for Smith Company. The $500 earned by Maxwell Plumbing Services is its ________.
revenue
A reversing entry ________.
switches the debit and the credit of a previous entry
Which of the following is considered a fiscal year?
twelve months
When does a company account for revenue if it uses cash basis accounting?
when cash is received, either prior to, at the time of, or after the services are performed
If a company is using accrual basis accounting, when should it record revenue?
when services are performed, even though cash may be received at a later date
Which of the following accounts increases with a credit?
Owner, Capital
Which of the following are temporary accounts that are closed at the end of the year?
revenues, expenses, and Owner, Withdrawals
Which of the following is true of assets?
Assets are something of value the business owns or controls.
The return on assets is calculated by ________.
dividing net income by average total assets
The following transactions for the month of March have been journalized and posted to the proper accounts of a sole proprietorship. Mar. 1 The business received $ 7 comma 000$7,000 cash from the owner of the business, Morris Tharps. The business gave capital to Morris Tharps. Mar. 2 Paid the first month's rent of $ 800$800. Mar. 3 Purchased equipment by paying $ 2 comma 500$2,500 cash and executing a note payable for $ 8 comma 000$8,000. Mar. 4 Purchased office supplies for $ 730$730 cash. Mar. 5 Billed a client for $ 8 comma 000$8,000 of design services completed. Mar. 6 Received $ 7 comma 900$7,900 on account for the services previously recorded. What is the balance in Cash on March 6?
$10,870
Following is a list of account balances of Nabers Delivery Services as of December 31, after the first year of operations. Accounts Receivable $ 5 comma 000$5,000 Accounts Payable 5 comma 0005,000 Salaries Expense 6 comma 0006,000 Repairs Expense 500500 Truck 11 comma 00011,000 Equipment 8 comma 0008,000 Notes Payable 8 comma 4008,400 Cash 7 comma 4007,400 Supplies Expense 1 comma 0001,000 Service Revenue 33 comma 00033,000 Gasoline Expense 2 comma 9002,900 Salaries Payable 400400 What is the amount of total liabilities at the end of the year?
$13,800
The following transactions have been journalized and posted to the proper accounts. March is the first month of business operations for the sole proprietorship. Mar. 1 The business received $ 9 comma 000$9,000 cash from the owner in exchange for capital. Mar. 2 Paid the first month's rent of $ 800$800. Mar. 3 Purchased equipment by paying $ 4 comma 000$4,000 cash and executing a note payable for $ 6 comma 000$6,000. Mar. 4 Purchased office supplies for $ 500$500 cash. Mar. 5 Billed a client for $ 14 comma 000$14,000 of design services completed. Mar. 6 Received $ 6 comma 000$6,000 on account for the services previously recorded. What is the ending balance in the Service Revenue account?
$14,000
The following is the adjusted trial balance for Baker Services. Accounts Debit Credit Cash $ 45 comma 200$45,200 Accounts Receivable 29 comma 00029,000 Prepaid Insurance 6 comma 5006,500 Office Supplies 2 comma 8002,800 Land 50 comma 00050,000 Building 145 comma 000145,000 Accumulated Depreciationlong dash—Building $ 14 comma 500$14,500 Equipment 71 comma 00071,000 Accumulated Depreciationlong dash—Equipment 8 comma 0008,000 Accounts Payable 20 comma 00020,000 Salaries Payable 5 comma 0005,000 Unearned Revenue 24 comma 00024,000 Mortgage Payable 106 comma 000106,000 Baker, Capital 30 comma 50030,500 Baker, Withdrawals 23 comma 00023,000 Service Revenue 277 comma 000277,000 Salaries Expense 62 comma 00062,000 Depreciation Expenselong dash—Building and Equipment 5 comma 9005,900 Supplies Expense 12 comma 00012,000 Insurance Expense 14 comma 60014,600 Utilities Expense 18 comma 00018,000 Total $ 485 comma 000$485,000 $ 485 comma 000$485,000 There were no new capital contributions during the year. After the closing entries are posted, what is the balance in Baker, Capital?
$172,000
A sole proprietorship reported the following transactions for the month of March. The transactions have been journalized and posted to the proper accounts. Mar. 1 The business received $ 10 comma 000$10,000 cash from the owner in exchange for capital. Mar. 2 Paid the first month's rent of $ 700$700. Mar. 3 Purchased equipment by paying $ 2 comma 000$2,000 cash and executing a note payable for $ 5 comma 000$5,000. Mar. 4 Purchased office supplies for $ 750$750 cash. Mar. 5 Billed a client for $ 11 comma 000$11,000 of design services completed. Mar. 6 Received $ 9 comma 000$9,000 on account for the services previously recorded. What is the balance in Accounts Receivable?
$2,000
Murphy Company prepaid $ 3 comma 600$3,600 on October 1, 2018 for a oneminus−year insurance premium. Coverage begins October 1. On January 1, 2019 (after December 31 adjustments), the Prepaid Insurance account will have a debit balance of ________. (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.)
$2,700
Following is an extract of account balances of Aztec Moving Services as of December 31, after the first year of operation. Accounts Receivable $4,000 Accounts Payable 4,000 Salaries Expense 7,000 Repairs Expense 700 Truck 10,000 Equipment 9,000 Notes Payable 8,200 Cash 7,100 Supplies Expense 1,200 Service Revenue 35,000 Gasoline Expense 3,600 Salaries Payable 300 What is the amount of total assets at the end of the year?
$30,100
Oakland Tax Planning Service bought computer equipment for $ 23 comma 000$23,000 on January 1, 2018. It has an estimated useful life of four years and zero residual value. Oakland uses the straightminus−line method to calculate depreciation and records depreciation expense in the books at the end of each month. Calculate the amount of Depreciation Expense for the period, January 1, 2018 through September 30, 2018, for this equipment. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
$4,313
Watson Tax Planning Service has the following plant assets: Communications Equipment: Cost, $ 6 comma 960$6,960 with useful life of eight years; Furniture: Cost, $ 19 comma 200$19,200 with useful life of 12 years; and Computer: Cost, $ 13 comma 200$13,200 with useful life of four years. (Assume residual value of all the assets is zero.) Watson's monthly depreciation expense calculated using the straightminus−line method is ________. (Round any intermediate calculations and your final answer to the nearest cent.)
$481
Following is a list of account balances of Lincoln Lawn Services as of December 31, after the first year of operations. Accounts Receivable $ 6 comma 000$6,000 Accounts Payable 5 comma 0005,000 Salaries Expense 5 comma 0005,000 Repairs Expense 700700 Truck 12 comma 00012,000 Equipment 8 comma 0008,000 Notes Payable 26 comma 30026,300 Cash 12 comma 00012,000 Supplies Expense 8 comma 0008,000 Service Revenue 26 comma 30026,300 Gasoline Expense 7 comma 3007,300 Salaries Payable 1 comma 5001,500 Calculate the net income.
$5,300
Diamond Company had the following transactions during June: Performed services for $ 5 comma 000$5,000 on account; received cash on account, $ 8 comma 000$8,000; paid $ 800$800 for repair expense; paid $ 1 comma 800$1,800 to a supplier that it owed from the previous month. What is the combined effect on Cash of these June transactions?
$5,400 increase
Watson Foods Company, a sole proprietorship, reported the following transactions for September 2019. a) The business received $ 21 comma 000$21,000 cash from the owner in exchange for capital. b) The business purchased office equipment for $ 10 comma 000$10,000 for which $ 3 comma 000$3,000 cash was paid and the balance was put on a note payable. c) Paid insurance expense of $ 1 comma 700$1,700 cash. d) Paid the September utility bill for $ 900$900 cash. e) Paid $ 2 comma 000$2,000 cash for September rent. f) The business had sales of $ 11 comma 000$11,000 in September. Of these sales, 4040% were cash sales, and the balance was credit sales. g) The business paid $ 6 comma 000$6,000 cash for office furniture. What are the total liabilities at the end of September 2019?
$7,000
The asset account, Office Supplies had a beginning balance of $ 5 comma 300$5,300. During the accounting period, office supplies were purchased, on account, for $ 5 comma 500$5,500. A physical count, on the last day of the accounting period, shows $ 2 comma 700$2,700 of office supplies on hand. What is the amount of Supplies Expense for the accounting period?
$8,100
On the first day of January, Builders Company borrowed $ 3 comma 000$3,000 on a oneminus−year note payable bearing interest at 66% per year. The note specifies that principal and interest must be paid in full at the end of the oneminus−year period. On June 30, the adjusted trial balance will show Interest Payable of ________.
$90 credit
Precision Camera Services started the year with total assets of $ 120 comma 000$120,000 and total liabilities of $ 50 comma 000$50,000. The company is a sole proprietorship. The revenues and the expenses for the year amounted to $ 140 comma 000$140,000 and $ 60 comma 000$60,000, respectively. During the year, there were no new capital contributions and the owner withdrew $ 55 comma 000$55,000. What is the amount of owner's equity at the end of the year?
$95,000
A company has $ 140 comma 000$140,000 in current assets; $ 600 comma 000$600,000 in total assets; $ 90 comma 000$90,000 in current liabilities, and $ 130 comma 000$130,000 in total liabilities. Calculate the current ratio of the company. (Round your answer to two decimal places.)
1.56
The following are selected current month's balances for Morgan Company. Accounts Payable $ 8 comma 000$8,000 Revenue 9 comma 0009,000 Cash 1 comma 1501,150 Expenses 1 comma 6001,600 Furniture 12 comma 00012,000 Accounts Receivable 16 comma 00016,000 Morgan, Capital 9 comma 2509,250 Notes Payable 4 comma 5004,500 Based on this information, calculate the total amount of credits for the trial balance.
30,750
Converse Florists & Co. reported assets of $1,100 and equity of $500. What is its debt ratio? (Round your percentage answer to two decimal places.)
54.55%
Assume Metro Company had a net income of $ 2 comma 500$2,500 for the year ending December 2018. Its beginning and ending total assets were $ 35 comma 500$35,500 and $ 19 comma 500$19,500, respectively. Calculate Metro's return on assets (ROA). (Round your percentage answer to two decimal places.)
9.09%
Green Lawns Company earned $500 for landscaping services rendered. The customer promised to pay at a later time. Which of the following accounts increased as a result of this transaction?
Accounts Receivable
The formula for computing the current ratio is ________.
Current ratio = Total Current assets / Total Current liabilities
Salaries Payable, Accounts Payable, and Unearned Revenue are examples of ________.
current liabilities
Which of the following organizations is responsible for the creation and governance of accounting standards in the United States?
Financial Accounting Standards Board
GAAP refers to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to ________.
Generally Accepted Accounting Principles
Revenues and expenses may be transferred to the ________ account before their final transfer into the Owner, Capital account.
Income Summary
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
The account title used for recording the payment of rent in advance for an office building is ________.
Prepaid Rent
Which of the following entries would be recorded by a company that uses the cash basis method of accounting?
Rent Expense 1,000 Cash 1,000
________ represents a debt owed for renting a building.
Rent Payable
Which of the following is a permanent account?
Salaries Payable
Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?
Securities and Exchange Commission (SEC)
Which of the following accounts will be closed by crediting the Income Summary account?
Service Revenue
The income statement section of the worksheet includes ________.
Service Revenue and Utilities Expense
Which of the following is the correct formula for calculating depreciation under the straightdash-line method?
Straightdash-line depreciation= (Cost − Residualvalue) / Useful life
The adjusted trial balance shows ________.
account balances after adjustments
Which of the following is an asset account?
accounts receivable
Financial statements are prepared from the balances in a(n) ________.
adjusted trial balance
Adjusting journal entries are prepared ________.
after preparing the unadjusted trial balance
For accounting purposes, depreciation refers to the process of ________.
allocating the cost of a plant asset to expense over its useful life
Which financial statement is prepared last?
balance sheet
The entries that transfer the revenue, expense, and Owner, Withdrawals balances to the Owner, Capital account to prepare the company's books for the next period are called ________ entries.
closing
Accumulated Depreciation is a(n) ________ account and carries a normal ________ balance.
contra asset; credit
Salaries are $ 5 comma 500$5,500 per week for five working days and are paid weekly at the end of the day on Fridays. The end of the month falls on a Thursday. The accountant for Sunset Company made the appropriate accrual adjustment and posted it to the ledger. The balance of Salaries Payable, as shown on the adjusted trial balance, will be a ________. (Assume that there was no beginning balance in the Salaries Payable account.)
credit balance of $4,400
Martinville Company earned revenues of $20,000 and incurred expenses of $4,000. Martinville withdrew $3,500 for personal use. What is the balance in the Income Summary account prior to closing net income or loss to the Martinville, Capital account?
credit balance of $16,000
Brownstone Company has a current ratio of 66. This indicates that the company has $ 6.00$6.00 in ________.
current assets for every $1 of current liabilities