ACCT201 DEBOSKEY EXAM 2

EXAM 1 TOP 20: Which account measures amounts owed to suppliers? a. Accounts Payable b. Supplies Expense c. Retained Earnings d. Cash e. Supplies

a. Accounts Payable Current liability

EXAM 1 TOP 20: A company reports the following balances before closing entries: - Cash: $12,000 - Supplies: $4,500 - Prepaid Rent: $2,000 - Salary Expense: $4,500 - Equipment: $65,000 - Service Revenue: $30,000 - Miscellaneous - Expenses: $20,000 - Dividends: $3,000 - Accounts Payable: $5,000 - Common Stock: $68,000 - Retained Earnings: $8,000 What amount will be reported for total assets? a. $83,500. b. $82,500. c. $77,000 d. $68,500. e. $81,500.

$83,500 $12,000 (cash) + $4,500 (supplies) + $2,000 (prepaid rent) + $65,000 (equipment) Assets: Resources owned by a company EX: Cash, accounts receivable, prepaid expenses, land, property, inventory, supplies, and equipment.

EXAM 1 TOP 20: For the past three years, a company reported the following annual net income and dividend amounts: Net Income: NI Dividends: D - Year 1 NI: $130,000 D: $80,000 - Year 2 NI: $140,000 D: $80,000 - Year 3 NI: $150,000 D: $90,000 If the company had Retained Earnings of $200,000 at the end of Year 3, what was the company's Retained Earnings at the beginning of Year 1? a. $30,000. b. $60,000. c. $40,000. d. $70,000 e. $50,000.

a. $30,000. Year 1: $130,000 - $80,000 = $50,000 Year 2: $140,000 - $80,000 = $60,000 Year 3: $130,000 - $80,000 = $60,000 $50,000 + $60,000 + $60,000 = $170,000 $200,000 - $170,000 = $30,000 Retained earnings represent the total net income earned over the life of the company that has not been distributed as dividends. beginning balance + net income - dividends = retained earnings

EXAM 1 TOP 20: The adjusting entry to record the expiration of rent over the year would include: a. A credit to Prepaid Rent. b. A debit to Prepaid Rent. c. A credit to Rent Payable. d. A credit to Cash e. A credit to Rent Expense.

a. A credit to Prepaid Rent (asset) A debit to Rent Expense (liability) If it involves an asset that is used/unused, debit an expense and credit an asset

EXAM 1 TOP 20: The Common Stock account records: a. Cash received by the company from its stockholders. b. The amounts owed to creditors. c. Total profits less dividends. d. The resources owned by the company. e. Cash payments by the company to its stockholders.

a. Cash received by the company from its stockholders.

EXAM 1 TOP 20: A credit to an asset account: a. Decreases its balance b. Has no effect on its balance c. Increases its balance d. Also increases stockholders' equity e. Two of the other answers are correct

a. Decreases its balance DEALOR Increase account with a credit: Liabilities, Stockholders' Equity, and Revenues. Increase account with a debit: Dividends, Expenses, and Assets

EXAM 1 TOP 20: Consider the following items: - Land - Accounts Receivable - Notes Payable (due in three years) - Accounts Payable - Retained Earnings - Supplies - Unearned Revenue - Buildings - Notes Payable (due in six months) - Equipment How many of the items listed above are generally reported as current assets? a. Two. b. Four. c. Five. d. Three.

a. Two. Accounts receivable (Cash's best friend) and notes payable due in 6 month.

EXAM 1 TOP 20: A company has the following balance sheet accounts: - Cash: $20,000 - Accounts Receivable: ? - Accounts Payable: $2,000 - Common Stock: $20,000 - Retained Earnings: $10,000 - Notes Payable: $5,000 What is the balance of Accounts Receivable? a. $7,000 b. $17,000 c. $22,000. d. Cannot be determined given the information provided. e. $15,000.

b. $17,000 Assets = Liabilities + Stockholders' Equity Assets: Cash and accounts receivable. Liabilities: Accounts payable and notes payable. SE: Common stock and retained earnings $20,000 + x = $2,000(L) + $5,000 (L) + $20,000 (SE) + $10,000 (SE)

EXAM 1 TOP 20: The beginning balance of the Cash account is $10,000. The following transactions occur during the year: 1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. What was the balance of the company's Cash account following these six transactions? a. $23,800 b. $37,800. c. $25,800. d. $22,800. e. $25,500.

b. $37,800 beginning balance ($10,000) + common stock issued ($15,000) - office equipment ($1,200) + cash service revenue ($14,000).

EXAM 1 TOP 20: Which of the following financial statements reports a company's retained earnings? a. Income statement. b. Balance sheet. c. Statement of cash flows. d. All of the other answers are correct. e. Statement of resources

b. Balance sheet. Retained earnings: All revenues, expenses, and dividends over the life of the company. The statement of stockholders' equity reports the ending balance retained earnings. Information contained on the balance sheet: Assets, liabilities, and stockholders equity.

EXAM 1 TOP 20: The closing process includes which of the following? a. Two of the other answers are correct. b. Closing the balances of revenue, expense and dividend accounts to zero. c. Closing the balances of asset and liability accounts to zero. d. Closing the balance of the retained earnings account to zero.

b. Closing the balances of revenue, expense and dividend accounts to zero. Purpose: To transfer the balance of temporary accounts to Retained Earnings.

EXAM 1 TOP 20: Which of the following is a possible closing entry? a. Debit Cash;, credit Service Revenue. b. Debit Service Revenue; credit Retained Earnings. c. Debit Cash; credit Retained Earnings. d. Debit Dividends; credit Retained Earnings.

b. Debit Service Revenue; credit Retained Earnings. Expenses and dividends are zeroed out by crediting each account and revenues are zeroed out by debiting each account. Assets and liabilities are permanent accounts so they will never be "closed". EX: Debit Retained Earnings; Credit Supplies Expense

EXAM 1 TOP 20: Providing services on account would be recorded with a: a. Debit to Service Revenue. b. Debit to Accounts Receivable. c. Debit to Accounts Payable d. Credit to Accounts Payable. e. Credit to Cash.

b. Debit to Accounts Receivable. Increase equities Also increases assets Revenues earned but no cash, so use cash's "best friend" of accounts receivable. Accounts receivable goes up, revenue account goes up meaning stockholders' equity goes up.

EXAM 1 TOP 20: Consider the following list of accounts: - Cash - Salaries Expense - Common Stock - Utilities Expense - Accounts Receivable - Accounts Payable - Service Revenue - Buildings How many of these accounts will increase with a debit? a. Three b. Five c. Four d. Six e. Seven

b. Five 1. Cash 2. Salaries Expense 3. Utilities Expense 4. Accounts receivable 5. Buildings Increase with a debit: Dividends, Expenses, and Assets Increase with a credit: Liabilities, owners' equity, and revenues.

EXAM 1 TOP 20: The sale of land for cash is considered a(n): a. Financing cash flow. b. Investing cash flow. c. Not a cash flow. d. Operating cash flow.

b. Investing cash flow. Involves the buying and selling of land, buildings, and equipment used in the business. EX: Transactions involving the purchase and sale of productive assets, long term asset, selling equipment for cash, and purchasing a delivery truck.

EXAM 1 TOP 20: When a company incurs a cost used in current operations but has not yet paid cash for that cost in the current period, the accounting equation would be affected as follows: a. Assets decrease and liabilities increase. b. Liabilities increase and stockholders' equity decreases. c. The accounting equation would not be affected. d. Assets decrease and liabilities decrease. e. Liabilities decrease and stockholders' equity increases.

b. Liabilities increase and stockholders' equity decreases. Balance out the accounting equation. Accrued expense: Incurred but not yet paid.

EXAM 1 TOP 20: Given the information below, what was the amount of dividends the company paid in the current period? Beginning Retained Earnings = $120,000 Decrease in Cash = $10,000 Ending Retained Earnings = $140,000 Net Income = $50,000 a. $80,000. b. $10,000 c. $30,000. d. $140,000. e. $20,000.

c. $30,000 (Beginning Retained Earnings) $120,000 - (Decrease in Cash) $10,000 + (Dividends) x = (Ending Retained Earnings) $140,000

EXAM 1 TOP 20: A company's balance of cash in its own records is $10,000. The following information is determined after comparing the company's cash records with the bank statement: - Bank's balance: $13,000 - Notes collected: $1,600 - Deposits Outstanding: $1,000 - Checks Outstanding: $3,000 - Bank service fees: $100 - NSF checks: $500 What is the company's correct amount of cash? a. $12,000 b. $10,100 c. $12,500 d. $11,000 e. $11,600

d. $12,000 Beginning cash balance of $13,000 + notes receivable collected of $1,600 - bank fee of $100 - NSF of $500 = $ Note receivable collected by the bank (Co knows) Checks outstanding: BANK KNOWS Bank service fees (Co knows) Non-sufficient funds (NSF) checks (Co knows) Deposits Outstanding: Cash receipts that have been recorded in the company's accounting records but are not yet recorded by the bank

EXAM 1 TOP 20: Payment of cash dividends to stockholders is considered a(n): a. Not a cash flow. b. Operating cash flow. c. Investing cash flow. d. Financing cash flow.

d. Financing cash flow. Includes cash transactions resulting from the external financing of a business. Effecting stockholders' equity/liabilities EX: Notes payable, borrowing money from the bank, selling stock to an investor, and paying dividends

EXAM 1 TOP 20: An example of an adjusting entry would not include: a. Recording the interest cost incurred during the year. b. Recording the expiration of prepaid insurance over the year. c. Recording the salaries owed at the end of the year. d. Recording supplies used during the year. e. Recording the cash received in advance from customers during the year.

e. Recording the cash received in advance from customers during the year. Adjusting: Never have CASH in debit/credit adjusting entries. Prepayments (deferred revenue prepaid expenses) and accruals (accrued revenue and accrued expenses). Generally adjust revenue or expenses that have not been recorded yet, OR adjust deferred revenue that was earned/ that was previously a liability, OR adjust an unused asset (future economic benefit).