Accounting Test 1

1. A potential investor interested in evaluating whether a company can pay

its liabilities when they come due would look at which of the following
financial statements? - Balance sheet

2. What effect does an accrued revenue adjustment have on a company's

net income?
accrued revenue
- increase assets
- increase revenue
- net income
- stockholder equity

3. A business purchases equipment for $150,000 by paying $10,000 in cash

and signing a notes payable for the balance. How does this transaction
impact the accounting equation?

A= L+ SE
150000-1000=+140000+SE
Assets and liabilities increase 140000

4. All of the following are characteristics of useful accounting information

under the conceptual framework of accounting EXCEPT: - informative

5. Transactions affecting Stockholders' Equity include: -

stockholder - expense
/revenue
- sale of common stock and payment of expenses

6. A liability that arises from an expense that has not yet been paid is a(n): -
accrued expense

7. Which of the following is NOT a business transaction -

-financial impact / cash or goods of services change
-hiring a new president

8. At the end of the current accounting period, account balances were as

follows: Cash, $180,000; Accounts Receivable, $75,000; Accounts
Payable, $50,000; Common Stock, $20,000; Retained Earnings, $65,000.
Assuming other than liabilities, these are the only accounts the company
has, total liabilities for the period were: - 170000

9. The income statement is prepared to determine: - the changed in

retained earnings due to the results of operations

10. The owners' equity of any business is its: - assets - liabilities

11. Which statement about the journal (or a journal entry) is NOT true? - The
journal entry shows the balance in each account

12. Which of the following transactions will decrease an asset account and
decrease a liability account? - paying off a notes payable

13. To close the books of a company, you should -

debit revenue credit retained earning
debit retained earning
credit expense account
credit dividends debit retained earnings

14. In what order are financial statements generally prepared? - Income

Statement, Statement of Retained Earnings, and Balance Sheet

15. A company started the year with $800 of supplies. During the year, the
company purchased an additional $1,600 of supplies. There were $900 of
supplies on hand at the end of the year. An adjusting entry prepared at
the end of the accounting period includes a: - supplies expense 1500

16. Oakwood Company had accounts receivable of $650,000 and an

allowance for doubtful accounts of $18,500 just prior to writing off as
worthless an account receivable for Hyland Company of $3,000. Calculate
the net realizable value of accounts receivable as shown by the
accounting records after the write-off - 631500

17. Turner Co. uses the percentage of credit sales method to estimate bad
debts. Based on past experience Turner Co. estimates that 3% of its
credit sales will be uncollectible. Turner's total sales for the year were
$3,500,000 and its credit sales for the year were $1,800,000. During the
year, Turner wrote off $20,000 of uncollectible accounts. Turner's
allowance for uncollectible accounts had a $15,000 credit balance on
January 1. In its December 31 balance sheet, what amount should Turner
report as Allowance for Uncollectible Accounts? - 49000

18. . Porter Corp. specializes in custom order computers. Porter Corp.

requires the customer to pay the full price of the computer when the order
is placed due to the custom nature of the product. Assume John Titus, a
customer, places an order for a custom computer on June 1, 2020 and
pays Porter Corp. $5,000 cash for the computer. Porter Corp. begins
production of the computer on June 20, 2020, and completes production
on July 15, 2020. Porter Corp. then delivers the computer to John Titus on
July 25, 2020. On what date should Porter Corp. recognize the revenue
associated with the sale to John Titus? - July 25,2020

19. . Which of the following accounts is considered a "temporary" account? -

income statement and dividends

20. . At the beginning of the period, assets were $525,000 and stockholders'
equity was $280,000. During the year, assets increased by $80,000,
 liabilities increased by $100,000, and stockholders' equity decreased by
$20,000. Calculate ending liabilities. - 145000

21. . A company pays an employee $1,500 per week for a five day work
week. The adjusting entry on December 31, which is a Tuesday, is a: -

1500/5=300
300*2=600
salary expense 600
salaries payable 600

22. . If the debit amount of an entry to record the purchase of supplies on

account was not posted:
supplied
understate assets

23. Which accounts are increased by debits? - assets, expenses, dividends

24. Warren Corporation received $1,500 cash on account from customers.

The journal entry Warren Corporation would record for this transaction
includes: - cash /accounts receivable 1500

25. . On October 1, 2020 Rella Inc. signed a $600,000, 10 month, 10% note
payable. At due date, the principal and interest will be paid. Calculate the
amount of interest expense that Rella Inc. should report on its income
statement for the year ended December 31, 2021. (round to the nearest
dollar) - 35000

26. Which of the following is a false statement regarding a trial balance: - trial
balance lists all accounts free of all errors

27. . ABC Company has shipped goods to one of its customers FOB
destination. ABC Company will recognize sales revenue when: - the
goods are received

28. accrued revenue -

A revenue that has been earned but for which the cash has not yet
been collected.

Accounts receivable - debit (increase assets)

Revenue - credit

balance sheet - acid and liabilities

29. At the end of the current accounting period, account balances were as
follows: Cash, $80,000; Common Stock, $30,000; Retained Earnings,
$45,000; Accounts payable $60,000; Notes payable, $120,000; Salaries
payable $40,000; and Utilities payable $1200. Assuming other than
 assets these are the only accounts the company has, assets at the end of
the current period were: - 296200

30. Failure to make an adjusting entry to recognize accrued interest payable

would cause an: - Understate expense overstate net income
31. understate liabilities

32. Which of the following transactions would increase total assets?

I. Borrowed cash on a note payable, $80,000
II. Provided services on account, $10,000
III. Received cash from a customer as payment on account, $8,000
IV. Received a utility bill, $1,200

V. Performing services on account would: - increase net income and

stockholders' equity

33. The following accounts are up-to-date and need no adjustment at the end
of the period: - cash, land and common stock.

34. The Houston Rockets basketball team receives $5,000 for season tickets
on August 1. By December 31, they have earned $2,000 of the revenue.
The adjusting entry to be made on December 31 by the Houston Rockets
includes a: - debit to Unearned Revenue of $2,000

35. Revenues are recorded when: - the work is completed on the job,
whether or not the cash is received.

36. Which of the following is a false statement regarding a trial balance: - A

trial balance ensures the financial statements are free of all errors

37. . Which section of the Statement of Cash Flows is the most important? -
Operating Activities

38. . On September 1, 2020, Beard Entertainment paid $4,000 for September,

October, November and December's rent in advance. The company
recorded this transaction by increasing the balance in the Prepaid Rent
account. The balance in the Prepaid Rent account as of October 31,
2020, will be - 2000

39. Bigg and Talle Corporation uses the percent-of-sales method to estimate
uncollectibles. Net credit sales for the current year amount to $5,000,000,
and management estimates 2% will be uncollectible. Allowance for
Uncollectible Accounts prior to adjustment has a credit balance of
$16,000. The amount of expense reported on the income statement will
be: - 100000

40. . On September 1, Banger Bros. Company paid $9,000 for one year of
rent, in advance. Which of the following accounts and amounts will appear
on an adjusted trial balance prepared on December 31? - rent expense
3000
41. . The CEO of a business owns a residence in Flagstaff. The company the
CEO works for owns a factory in Chandler. Which of these properties is
considered an asset(s) of the business? - The Chandler factory only

42. Using the aging-of-receivables method to estimate uncollectibles, Avidity

Corporation estimates that $3,550 of its accounts receivable will be
uncollectible. Prior to adjustment, the Allowance for Uncollectible
Accounts has a credit balance of $800. Bad debt expense to be reported
on the income statement is: - $2,750.

43. . If liabilities increase by $8,000 during a given period and stockholders'

equity decreases by $4,000 during the same period, assets must have -
increased by $12,000

44. . On July 25, Hamilton Bey Company's accountant prepared a check for
August's rent payment. Hamilton Bey Company mails the check on July
27 to the landlord. The landlord receives the check on July 31 and cashes
the check on August 2. When should Hamilton Bey Company record the
rent expense associated with this transaction? - August 31st

45. . Assume the beginning balance in the Retained Earnings account is zero.
If a debit balance of $5,000 exists in Retained Earnings after closing out
revenues and expenses at the end of the current period, it indicates: - the
company had a net loss of $5,000

46. The entry to record the payment of salaries to employees would include a:
- debit to Accounts Payable

47. Calside Company signed a 15-month, $50,000, 6% note on June 1, 2020.

The amount of interest to be accrued on December 31, 2020, is: - $1,750

48. . An expense incurred in 2020 is not paid until 2021. Using the accrual
basis of accounting, the expense should appear on - the 2020 income
statement

49. . The closing entry for the dividends account would include a debit to: -
Retained Earnings and a credit to Dividends

50. . On December 1, 2020, Debbie's Plantscape receives $2,400 in advance

for an agreement to care, in equal monthly efforts, for a client's office
plants during the months of December, January, and February. As of
December 31, 2020, Debbie's Plantscape would have: - recognized $800
revenue under accrual accounting, or $2,400 revenue under cash-
basis accounting.

51. . ABC Company had total sales for the period of $20,000 and total
expenses for the period of $7,000. ABC Company began the period with a
beginning cash balance of $10,000, received cash of $8,000 and ended
 the period with a cash balance of $6,000. Cash payments for the period: -
were $12,000.

52. Graham Company has a total accounts receivable balance of $175,000

and total allowance for uncolectible accounts of $22,000 just prior to
writing off a $2,500 accounts receivable. What is the net realizable value
before and after the write-off? - $153,000 $153,000

53. . All of the following are true statements about the Accumulated
Depreciation account EXCEPT that it: - is a contra asset account with a
normal debit balance.

54. Advantages of a corporation include - limited liability of the

stockholders.

55. . Revenues were $325,000, expenses were $175,000, and cash dividends
were $55,000. What was the net income and the change in retained
earnings for the period? - Net income was $150,000; the change in
retained earnings was $95,000.

56. 9. On October 1 of the current year, a company received $7500 for

services to be performed evenly over the next six months. If no adjusting
entry was made on December 31 of the current year: - net income
would be understated by $3,750.

57. Given the following transactions, what is the balance in the cash account?
1. The owner started the company by investing $9,800 cash. 2. The
company paid $3,000 for 9 months' rent in advance. 3. The company
acquired $2,400 in merchandise inventory with one-third of the purchase
on account - $5,200 debit balance

58. Describe the two primary functions of financial accounting. -

-To measure business activities of a company, and
-To communicate those measurements to external parties for
decision-making purposes.

59. Understand the business activities that financial accounting measures. -

Financing activities: transactions the company has with investors
and creditors.
Investing activities: transactions involving the purchase and sale
of resources that are expected to benefit the company for several years.
Operating activities: transactions that relate to the primary
operations of the company.

60. corporation - is a company that is legally separate from its owners.

The advantage of being legally separate is that the stockholders
have limited liability.

61. Revenues - are the amounts recognized when the company sells
products or provides services to customers.
62. Determine how financial accounting information is communicated through
financial statements. -
Financial statements are periodic reports published by the
company for the purpose of providing information to external users.
 §Primary financial statements.
 §Income statement.
 §Statement of stockholders' equity.
 §Balance sheet.
 §Statement of cash flows.

63. Income statement - reports companies revenues and expenses - the

income statement compares revenues and expenses for the current
period to assess the company's ability to earn a profit from running
its operation

64. statement of stockholders' equity - a financial statement that shows

changes in a corporation's ownership for a fiscal period
common stock-external
less dividends

65. Are dividends included in income statement? - NO

66. Balance sheet - Presents the financial position of the company on a

particular date

67. Statement of Cash flows - measures activities involving cash receipts

and cash payments over an interval of time

68. Borrow $10,000 from the local bank and sign a note promising to repay
the full amount of the debt in three years. - cash notes payable

69. Purchase supplies on account - supplies accounts payable

70. Provide soccer training to customers for cash, $4,300. - cash and
service revenue

71. Provide soccer training to customers on account, $2,000. - account

receivable and service revenue

72. Receive cash in advance for 12 soccer training sessions to be given in the
future, $600. -
cash
deferred revenue

73. The T-account - record of increases and decreases in a specific asset

liability equity revenue

74. A trial balance - is a list of all accounts and their balances at a

particular date, showing that total debits equal total credits
75. FOB (free on board) shipping point - ownership changes hands and
revenue is recognized when goods leave the shipping dock

76. FOB (free on board) destination - ownership changes hands and

revenue is recognized at the point of delivery to the customer

77. Under accrual-basis accounting - , we record revenues when we

provide goods and services to customers, and we record expenses
when costs are used in company operations.

78. Under cash-basis accounting, - we record revenues when we receive

cash, and we record expenses when we pay cash. Cash-basis
accounting is not allowed for financial reporting purposes for most
major companies.

79. Accrued expenses - occur when a company has used costs in the
current period, but the company hasn't yet paid cash for those
costs.