Learnsmarts
what are the balance sheet effects of providing services on account to customer?
increase retained earnings increase assets
a payment of cash dividends will decrease which of the following? assets, liabilities, stockholders equity, retained earnings
assets stockholders equity retained earnings
what are current assets
assets that will be USED UP OR CONVERTED TO CASH within 12 months
______ express a professional opinion on the compliance of financial statements with GAAP
auditors
the account sales return and allowances account is a contra revenue account and requires a ___ entry to increase the account
debit
payments of dividends to investors. records the transaction
debit dividends credit cash
zinc corp. pays dividend of 10,000 to its stockholders. what is the journal entry?
debit dividends, credit cash
record the repayment of a promissory note
debit notes payable credit cash
because dividends reduce retained earnings, a _____ to dividends is essentially a ____ to retained earnings
debit, debit
during the closing process, the closing entry to reduce the sales revenue normal account balance to zero requires the revenue account to be _______
debited (since revenues usually increase with a credit and therefore have a normal credit balance, the accounts must be debited to reduce the balance)
the board of directors officially approves a dividend
declaration date
what is the effect of expenses on net income
decrease
______ revenue arises when a business receives cash in one period, but does not earn all of it until a later period
deferred
a distribution of assets to shareholders is referred to as a
dividend
similar to a stock split, a stock ____ also distributes additional shares of stock to existing stockholders on a pro rata basis at no cost to the stockholders
dividend
external or internal transaction? borrowing money from the bank
external
oif: issuing stock
financing
a _______ is a collection of accounts used to keep track of increases and decreases in financial position elements
general ledger
in times of rising prices, ending inventory determined using the lifo inventory assumption will be ____ than the ending inventory determined using the fifo inventory assumption
lower
who has the responsibility to apply accounting standards when communicating with investors and creditors
management
oif: paying advertising expenses
operating
oif: paying salaries to employees
operating
oif: providing services to customers
operating
is invested capital in retained earnings or common stock
common stock
the adjusting entry for supplies requires a _____ to supplies and a ________ to supplies expense
credit, debit
the amount reported on the balance sheet approximates current cost of inventory
fifo
when a corporation issues shares of common stock for an amount above par, which of the following entries occur?
credit to common stock credit to additional paid-in capital
on november 1, orange corp. sold goods on account to apple. orange agreed to accept 40,000, 12%, 3-month interest-bearing note from apple in payment for the goods. orange has a dec 31 year-end. on feb 1, year 2, when the note matures, the journal entry will include a
credit to interest revenue (interest rev = 40,000 x 0.12 x 1/12)
special contractually granted features can make preferred stock
cumulative convertible redeemable
assets that will be used up or converted to cash within 12 months are _____ assets
current
an account receivable is normally classified as a _______
current asset
how do you correctly calculate "total assets"
current assets + long term assets
when an account previously written off is collected in full, the entry to reinstate the account would require (journal entry)
debit accounts receivable credit allowance for uncollectible accounts
roslin corp provides services to customers on account for 5000. record the transaction
debit accounts receivable credit revenues
on august 2, garner company provides services to a long-time customer for 50,000. payment for this service is due on september 1. what is the journal entry for august 2?
debit accounts receivable, credit service revenue
joyce corp uses the percentage-of-credit sales method to account for bad debt expense. joyce determines that a customer account of 20,000 should be written off as uncollectible. the write off of the account will include what journal entry?
debit allowance for uncollectible accounts credit accounts receivable
claire provides $100 of services to customers on account with terms 2/10, n/30. the service revenue account is credited for 100. if the customer pays within 10 days, claire will record what journal entry?
debit cash 98 debit sales discount 2 credit accounts receivable 100
joyce inc. issues 5,000 shares of common stock to investors for 100,000. what is the journal entry?
debit cash, credit common stock
inwood corporation receives 36,000 in advance from customers for services to be performed over the next three years. what is the journal entry?
debit cash, credit deferred revenue
pluto inc. borrow 3,000 from second national bank by signing a promissory note. what is the journal entry?
debit cash, credit note payable
_____ is an allocation of the cost of building, vehicles, and equipment to expense over time as they are used
depreciation
the purpose of the international accounting standards board is to
develop global accounting standards converge national standards with IFRS
what explains and elaborates on data presented in the financial statemends
disclosure notes
the adjusting entry to record interest owed on obligations at the end of the accounting period includes a debit to "interest _____" and a credit to "interest _____"
expense, payable
adjustments help to ensure that all _____ are recorded in the period in which they are incurred
expenses
external or internal transaction? buying equipment
external
external or internal transaction? paying rent for the month
external
the formula for calculating interest on a note is
face amount x annual rate x fraction of the annual period
what is an important purpose of GAAP
facilitates comparison of financial information among companies
____ is the common abbreviation for the board that currently establishes financial accounting and reporting standards in the US
fasb
on february 1, domino corp ordered inventory. the inventory was purchased on account and was received on feb 15. domino paid for the inventory on feb. 27. on which of the following dates will domino record a transaction?
feb 15 & feb 27
oif: borrowing from a bank
financing
what contains a list of all accounts and the account balances for the company?
general ledger
which of these would be found on a company's balance sheet? interest receivable, equipment, depreciation expense, sales revenue, notes payable
interest receivable equipment notes payable
total number of shares of stock issued or sold to investors
issued shares
a transaction is initially recorded in the general ____, and then subsequently posted to the general ______.
journal, ledger
the amount reported on the income statement approximately matches current cost with current revenue
lifo
when prices increase the ______ inventory method tends to decrease a company's tax liability
lifo
on a classified balance sheet, long-term assets may be reported in these sub-categories:
long term investments intangible assets property, plant, equipment
jordan corporation settles an account receivable from london company by accepting a six-month interest bearing note receivable with an interest rate of 8%/ the effect on jordan's financial statements is
no change in current assets (increase in notes receivable & decrease in accounts receivable)
shriver corp. borrows 25,000 from a bank and signs a two-year promissory note. what accounts will be affected by this transaction and what is the effect?
notes payable increases cash increases
daffy duct inc. issued 10,000 shares of $1 par value common stock at $5 per share. the effect of this transaction on the accounting equation includes
$50,000 increase in total assets and $50,000 increase in total stockholder's equity
a trade discount is a reduction from the list price which is used to
-change prices without publishing a new catalog -give quantity discounts to customers -disguise real prices from competitors
in times of rising prices, cost of good sold determined using the life inventory assumption typically will be ____ than cost of goods sold determined using the fifo inventory assumption
higher
lifo is on income statement or balance sheet?
income statement
salaries expense appears on the _____, while salaries payable is a ________.
income statement liability
bad debt expense is reported on the _____ and classified as a ____________
income statement, operating expense
rondo borrows 5000 from the bank. the effects on rondo's financial position are to
increase assets increase liabilities
_______ transactions typically are recognized at the end of the period
internal
external or internal transaction? using supplies on hand
internal
external or internal transaction? using supplies purchased last month
internal
oif: paying cash to buy equipment
investing
the 1934 and 1934 SEC acts were designed to restore
investor confidence in financial accounting
the number of shares outstanding equals the number of shares
issued minus the number of shares in treasury
deferred revenue is a _____
liability
how is deferred revenue classified on the balance sheet
liability
dividends payable is a ____ account with a normal ____ balance and is recorded on the ____ date
liability credit declaration
the specific identification method
matches each unit of inventory with its actual cost would be beneficial to a company that makes fine jewelry
the ______ principle require an adjustment for wages expense incurred during the accounting period that will be paid in a future accounting period
matching
the direct write-off method is normally not permitted for U.S. GAAP reporting because it violates the ____ principle
matching
adjusting entries are a natural part of accrual-basis accounting and support which principles?
matching and revenue recognition
stockit, inc. issued 100,000 shares of the 1,000,000 shares authorized. stockit has repurchased 10,000 of its shares. the number of shares authorized represents the
maximum number of shares stockit is allowed to reissue maximum number of shares stockit is allowed to sell
an increase in revenues increases ______, which increases retained earnings, which increases stockholders' equity
net income
which of these appears on both the income statement and the statement of stockholders equity? net income, revenues, cash, expenses
net income
the amount that is actually expected to be collected on accounts receivable is referred to as
net realizable value
only _____ common shares are eligible to receive dividends
outstanding
the number of shares issued less treasury shares repurchased by the corporation
outstanding shares
dividend payable is decreased
payment date
costs of assets acquired in one period that will be expenses in a future period are referred to as
prepaid expenses
attributes of FASB
private sector organization independence full time board members
stock dividends
require a journal entry
the involvement of professionals and management in accounting scandals resulted in congress passing the sarbanes-oxley act. what is the purpose of the sarbanes-oxley act?
require ceo accountability prevent conflicts of interests provide penalties for violators regulate auditors
what appears on both the statement of stockholders equity and the balance sheet?
retained earnings
ming corporation pays its employees 4000 for salaries. recording the payment of salaries would include a debit to
salary expense
when merchandise is returned for a refund or for credit to be applied to other purchases, the situation is called a ______________
sales return
which of the following accounts would require a debit to decrease? stockholders equity, liabilities, assets
stockholders equity liabilities
london corp. issues 1,000 shares of stock for 20 per share. what are the effects of this transaction on the balance sheet?
stockholders equity increases assets increase
the purpose of an account is to
summarize all transactions for that item
accounts receivable are assets which represent
the amounts owed by customers
the statement of shareholder's equity reports
the changes in each shareholder's equity account
long issued 5000 shares of stock for 10,000. long used 2000 of the proceeds to purchase supplies, and borrowed 8,000 cash from the bank. long's total assets are
18,000
what is the formula for weighted-average unit cost
cost of goods sold available for sale/ number of units available for sale
accounts receivable are classified as current assets because
they will be converted to cash within 1 year or the normal operating cycle
what is the purpose of the audit report?
to add credibility to the financial statements
the contra account used to record a company's repurchase of its own common stock is the ____ stock account
treasury
the account "allowance for uncollectible accounts" normally has a _____ balance
credit (this is because allowance for uncollectible accounts is a contra asset)
accounts receivable should be classified as a
current asset
geo corporation issues stock to investors for 100,000. what is the journal entry to record this transaction?
debit cash, credit common stock
declaration date journal entry
debit dividends credit dividends payable
gilman company declares and pays a dividend of 4,000 to stockholders. what is the journal entry?
debit dividends, credit cash
journal entry for recording a write-down of inventory from cost to its lower market value
debit to cost of goods sold credit to inventory
the entry to record lending 1,000 to an employee at a rate of 6% for 3 months includes a
debit to notes receivable of 1,000 credit to cash of 1,000
pizza company prepaid 3 months store rent. what is the journal entry for this transaction?
debit to prepaid rent credit to cash
adrian corp. sells goods on account for 100,000 on may 1. the customer paid for the goods on may 10. on may 15, the customer returns 40,000 of the merchandise. the journal entry adrian makes on may 15 is
debit to sales return credit to cash
when a cash dividend is declared and pain in the same year, the total effects on the balance sheet include which of the following?
decrease stockholders equity decrease assets
when a company pays salary expense, the balance sheet effects are to
decrease stockholders equity decrease assets
the allowance method is a method of accounting that ___ net accounts receivable and net income for estimated bad debts
decreases
after the accountant analyzes the impact of a transaction on the accounting equation, the next step in the measurement process is to
determine the accounts to debit and credit
preferred stock generally _____ voting rights and _____ preference as to dividends
does not have has
salaries paid to employees for the month is a(n) _____ account that appears on the _______
expense, income statement
______ are the costs of operating a business that are incurred to generate revenues in the period covered by the income statement
expenses
external or internal transaction? paying salaries to employees
external
external or internal transaction? purchasing inventory from suppliers
external
on jan 1, linden has total assets of 100,000, total liabilities of 30,000 and total stockholders equity of 70,000. linden purchases 20,000 of supplies on account, and 2,000 of prepaid rent for cash. after these transactions, total assets equal
120,000 (100,000 + 20,000 supplies + 2000 prepaid rent - 2000 cash)
tudor corp. has an ending balance in the accounts receivable account of 20,000. tudor recorded bad debt expense of 1,000. tutor has an ending balance in the allowance for uncollectible accounts of 2,000. what is the net realizable value of accounts receivable?
18,000 (20,000 - 2,000 because allowance for uncollectible accounts is a contra accounts receivable)
fog corporation sells 5,000 goods on account. salaries expense was 3,000. sales returns were 100 and sales discounts were 300. net sales were
4,600
beginning inventory is 60,000. purchases of inventory during the year are 100,000. cost of goods sold is 120,000. what is ending inventory?
40,000
lox, stock and bagel, inc. issued 50,000 shares of the 100,000 authorized. it has since repurchased 5,000 of its shares. the number of shares outstanding equals ____ shares
45,000
the FASB's objectives for financial accounting are: (3)
-help predict cash flows -report on economic resources, claims to resources, and changes in resources and claims -provide useful information to investors and creditors
dilution solutions inc. repurchased 500 shares of its $2 par value common stock for $10,000. the journal entry to record this transaction includes
10,000 debit to treasury stock 10,000 credit to cash
anuU inc. sold 100,000 shares of the 1,000,000 shares it is allowed to sell. anuU repurchased 10,000 of these shares. the number ISSUED equals
100,000
which of the following occurs on the date of record
a list of shareholders that are entitled to receive a dividend is made
the average cost method assumes that cost of goods sold consists of
a mixture of all the goods available for sale
the allowance for uncollectible accounts is a contra account to
accounts receivable
when a company performs services for a customer, and the customer agrees to pay for the services at a later date, the transaction is recorded in
accounts receivable
the term net accounts receivable refers to
accounts receivable less the allowance for uncollectible accounts
_________ adjustments are needed when a company has earned revenue or incurred an expense but cash has not been exchanged
accrual
what is prepaid expense
asset
the estimated expense for accounts that may not be collected that is matched against revenue of the period is referred to as
bad debt expense
fifo is on income statement or balance sheet?
balance sheet
if investors or lenders were interested in the amount of debt a company currently has, which financial statement would they need?
balance sheet
the financial statement that displays a firm's financial position on a particular date is the
balance sheet
cash is reported on the ____
balance sheet statement of cash flows
stock records are finalized to determine which stockholders are to receive payment
date of record
on march 5, oak corp. provided services on account to pine. oak agreed to accept a 100,000, 8%, 6 month interest bearing note from pine in payment for the services. the entry required on oak's books on march 5 would require what journal entry?
debit notes receivable 100,000 credit service revenue 100,000
the closing journal entry for expense accounts is
debit retained earnings credit expenses
perkins company pays employees 5000 for work performed. what is the journal entry?
debit salary expense credit cash
using a perpetual inventory system, the entry to record the return of goods you previously purchased on account is:
debit to accounts payable credit to inventory
candle corp. purchases supplies for cash. record the jounal entry
debit to supplies credit to cash
larkin company pays 300 for utilities for the month. what is the journal entry?
debit utilities expense, credit cash
the financial statement that is most useful in explaining a company's stock price performance is the _____
income statement
the financial statement that summarizes revenues and expenses for a period of time is the
income statement
the purpose of a _____ is to report the profit-generating activities of the firm during a period of time
income statement
what are the financial statement effects of recording bad debt expense using the allowance method?
increase expenses decrease assets
price company provides cleaning services to customers for 10,000 cash. what are the effects of this transaction on the accounting equation?
increase retained earnings increase assets
the most important advantage to the corporate form of business is
limited liability
roland corporation borrows 10,000 from the bank by signing a promissory note. recording the transaction will include a credit to ________
notes payable
oif: collection on account receivable
operating
investors earn a return on stock investments by
receiving dividends selling the stock for more than its cost
two entries are required when a previously written off account is paid. these two entries include:
reinstate the account receivable record the collection on the account receivable
green company declares and issues a 20% stock dividend. the stock dividend will cause total stockholders' equity to
remain the same
rory purchases supplies for cash. do total assets increase, decrease, or remain the same
remain the same
members of the FASB may include: (4)
representatives from profit-oriented companies accounting professionals accounting educators government representatives
a list of all accounts and their balances at a particular date showing that debits equal credits is referred to as a ________
trial balance
the direct write-off method is used when
uncollectible accounts are not anticipated or are immaterial
cash- basis accounting
violates both the revenue recognition and matching principles is generally not accepted in preparing financial statements records revenues when collected and expenses when paid
what are the methods for costing inventory
weighted average lifo fifo specific identification
clem corporation issues 1,000 shares of common stock for 25,000. clem purchased equipment by 10,000 by borrowing from the bank. clem's total assets are
35,000
The _____ is dedicated to developing a set of high-quality, understandable, and enforceable GLOBAL accounting standards
IASB
the legal authority to set accounting and reporting standards for companies whose securities are publicly traded lies with the _____
SEC
treasury stock is reported in the financial statements as
a contra equity account
klaussen corporation settles an account receivable from milton company by accepting a two-year interest bearing not receivable with an interest rate of 8%. the effect on klaussen's financial statements is:
a decrease in current assets an increase in long-term assets
when cash is received in advance for services to be performed at a later date, an asset is increased and _____
a liability is increased
if a transaction decreases cash by 100, the balance sheet will balance if what occurs
another asset is increased a liability is decreased stockholders equity is decreased
cumulative preferred stock is entitled to receive current dividends plus dividends in ____ before future common dividends can be paid
arrears
unpaid dividends on cumulative preferred stock are referred to as dividends in
arrears
wyanot company issued 1,000 shares of its 5%, $100 par value, cumulative preferred stock for $110 cash per share. the journal entry to record the transaction includes
110,000 debit to cash 10,000 credit to additional paid-in capital 100,000 credit to preferred stock
______ occur when the cash flow occurs after either the expense is incurred or the revenue is earned
accruals
the income statement, statement of stockholders equity and balance sheet typically are prepared utilizing information shown in the _______
adjusted trial balance
which business organizations' owners have unlimited liability?
partnership sole proprietorship
the process of transferring information form a journal entry to the specific accounts affected in the general ledger is referred to as _____
posting
the process that causes a particular account to reflect all transactions that affected the account is referred to as ________
posting
which type of stock usually has a high par value and a percentage of par value dividend rate
preferred stock
on november 1, 2018, movers inc. paid 24,000 for 2 years' rent beginning on november 1. movers' financial statements as of and for the month ended november 30, 2013 will show:
prepaid rent of 23,000 rent expense of 1,000
retained earnings are
sometimes called earned capital decreased by dividends increased by net income all of the company's earnings rather than distributed to stockholders
sales invoices, bills from suppliers, signed contracts, and cash register tapes that relay information to the accountant are referred to as __________
source documents
the type of information included in an account includes (3)
the account number account title columns for increases and decreases
what provides the underlying foundation of FASB's key objectives of financial accounting information
the conceptual framework
in accounting, the term NET is used to describe
the difference between two amounts
stockholders equity is
the owners claims to resources of the corporation
what is the formula for net realization?
total accounts receivable - allowance for uncollectible accounts
what are the effects on the accounting equation from the adjustment for salaries incurred but not yet paid during the accounting period?
total stockholders equity decreases total liabilities increases
what would be reported as intangible assets on a classified balance sheet?
trademarks copyrights patents
deferred revenue is another term for ______ revenue
unearned
________ companies purchase inventory that is primarily in finished form and ready for resale to customers
wholesale
stock splits
cause the par value per share to change
stock splits and stock dividends
cause total stockholders equity to remain the same
in 2002, the FASB and IASB signed the _______ formalizing their commitment to the convergence of US and international accounting standards
norwalk agreement
keepers, inc.'s balance sheet reported retained earnings as 10,000 at december 31, 2011 and 12,000 at the december 31, 2012. the income statement reported net income of 3,000 for the year ended december 31, 2012. dividends declared for the year ended december 31, 2012 must equal ___________.
1000
what is the journal entry for stockits? and what is the effect? ima rich purchased 100 shares of stockits inc.'s $1 par value common stock for $5 per share.
500 debit to cash 100 credit to common stock 400 credit to additional paid in capital financing activities on statement of cash flows increases stockholders equity on the balance sheet increases
relay corporation provides services with a normal price of 105,000 and a trade discount of 5,000. terms are 1/10, n/30, and the customers pay within 10 days. the net service revenue is
99,000
which accounts require a debit entry to increase the account? advertising expense, accounts receivable, common stock, supplies
advertising expense (expense) accounts receivable (expense) supplies (asset)
a sales return occurs when a customer returns a product for full refund, whereas a sales ____ is when the customer keeps the product and obtains a partial refund
allowance
which method requires estimating bad debt expense and matching the sales of that period?
allowance method
accounts receivable are
assets
accrued revenues are earned before we receive the related cash or other consideration and reported as ______
assets
marcy receives 10,000 cash in advance from customers for services to be performed in the following year. this transaction would cause
assets to increase liabilities to increase
the purpose of a trial balance is to (3)
assist in preparing adjusting entries assist in preparing financial statements ensure debits equals credits
total number of shares available to sell as indicated in the company's articles of incorporation
authorized shares
ending retained earnings is calculated as
beginning retained earnings + net income - dividends
______ typically is the most liquid asset reported on the balance sheet
cash
deferred revenue
cash received from customers for services to be performed in the future
a frequent reason for a stock split is to
cause the market price per share to decline
the two conditions that must exist for a sale and the related receivable to be recognized are
collection from the customer is reasonably assured the earnings process is virtually complete
jeremy issues 5,000 shares of common stock for $10 per share. which of the following accounts are affected? notes payable, revenue, common stock, cash
common stock cash
which of the following accounts normally has (have) a credit balance common stock, retained earnings, equipment, accounts receivable, cash
common stock retained earnings
the lcm rule represents an application of the _____ principle or concept
conservatism
the purpose of the international accounting standards board is to (2)
converge national standards with IFRA develop global accounting standards
the right of a shareholder to exchange his preferred stock is referred to as a ____ right, whereas the right to of the preferred shareholder to have her stock repurchased by the corporation is referred to as a _____ right
convertible redeemable
which form of organization has limited liability? corporation, partnership, sole propietorship
coporation
a business that is organized as a separate legal entity with limited liability for its owners is a
corporation
in a double entry accounting system, the right side of the account is referred to as a _________
credit
stockholders equity accounts normally have a _____ balance
credit
to increase a revenue account, you should ___ the revenue account
credit
on january 1, lorna pays 36,000 of rent in advance. the balance sheet effects of this transaction are to increase ______ and decrease ______
prepaid rent, cash
long-term productive assets used in the normal course of business are classified as
property, plant, equipment
the purpose of a general ledger is to
provide in a single location the lost of transactions affecting each account and the account's balance
gross accounts receivable less allowance for doubtful accounts is the net _____ value of accounts receivable
realizable
is earned capital in retained earnings or common stock
retained earnings
the accumulated net amount of revenue less expenses and dividends is reflected in the balance of ______
retained earnings
which of the following accounts are classified as shareholder's equity?
retained earnings common stock additional paid-in capital
the sales discount is a contra ____ account
revenue
which accounts require a credit to increase the account? cash, equipment, revenue, common stock
revenue (revenue) common stock (owner's equity)
according to the ______ principle, revenues should be recognized when they are earned, not necessarily when cash is received
revenue recognition
identify the three components of retained earnings
revenues dividends expenses
an income statement reports
revenues expenses net income or loss
what components calculate net income
revenues and expenses
if sales returns are treated as expenses, what are the effects on the financial statements?
revenues are overstated expenses are overstated
a cash discount representing a reduction in the amount to be paid by a credit customer if the customer pay within a specified period of time is also referred to as a _____________ discount
sales
the ownership interests of the investors in a corporation is referred to as
shareholder's equity
treasury stock is
shares of stock no longer outstanding a contra-equity account has a negative equity balance
