Exam 1 Flashcards
(92 cards)
1
Q
Eagle Eye, Inc., a corporation, received an additional investment of $6,000 cash in exchange for shares of capital stock. How does this transaction affect Eagle Eye’s accounts?
a. Increase capital stock and increase cash by $6,000 each
b. Increase capital stock and decrease retained earnings by $6,000 each
c. Increase capital stock and increase revenue by $6,000 each
d. Increase in stock expense and decrease cash by $6,000 each
A
a. Increase capital stock and increase cash by $6,000 each
2
Q
The income statement of a corporation for the month of November indicates a net income of $90,000. During the same period, $100,000 in cash dividends were paid.
Which of the following is true?
a. The business incurred a net loss of $10,000 during the month.
b. The retained earnings was reduced by a net amount of $10,000.
c. Liabilities increased by $10,000.
d. The business realized a deferred gain of $10,000
A
b. The retained earnings was reduced by a net amount of $10,000.
3
Q
A vacant lot acquired for $300,000, on which there is a balance owed of $120,000, is sold for $415,000 in cash. The seller pays the $120,000 owed. What is the effect of these transactions on the total amount of the seller’s (1) assets, (2) liabilities, and (3) stockholders’ equity?
A
1.Total assets: decreased $5000
415,000-$420,000
- Total liabilities decreased $120,000
- Stockholders’ equity
increased $115,000
$415000
4
Q
Using accrual accounting, revenue is recorded and reported only:
a. when cash is received before services are rendered.
b. if cash is received after the services are rendered. c. when cash is received without regard to when the services are rendered. d. when the services are rendered without regard to when cash is received.
A
d. when the services are rendered without regard to when cash is received
5
Q
UNI Co. received $1,000 advance from Newbie as rent for the use of a building owned by UNI. How does this transaction affect UNI’s accounts if UNI recognizes a liability?
a. Cash is increased and revenue is increased.
b. Cash is increased and revenue is decreased.
c. Cash is increased and unearned revenue is increased.
d. It is not recorded
A
c. Cash is increased and unearned revenue is increased.
6
Q
Unearned revenue is what type of an account?
a. Asset
b. Stockholders' equity c. Liability d. Revenue
A
c. Liability
7
Q
&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M’s accounts?
a. Increase accounts receivable and cash by $1,000,000 each
b. Increase accounts receivable and revenues by $1,000,000 each c. Increase cash and decrease accounts receivable by $1,000,000 each d. Increase accounts receivable and unearned revenues by $1,000,000 each
A
B. Increase accounts receivable and revenues by $1,000,000 each
8
Q
lectrodo Co. purchased land for $55,000 with $20,000 paid in cash and $35,000 in notes payable. What effect does this transaction have on the accounts under the accrual basis of accounting?
a. Net increase in assets of $55,000 and a net decrease in liabilities of $35,000
b. Net increase in assets and liabilities of $55,000 c. Net increase in assets of $75,000 and a net decrease in liabilities of $30,000 d. Net increase in assets of $35,000 and a net increase in liabilities of $35,000
A
d. Net increase in assets of $35,000 and a net increase in liabilities of $35,000
9
Q
The unearned rent account has a balance of $60,000. If $4,000 of the $60,000 is unearned at the end of the accounting period, the amount of the adjusting entry is:
a. $60,000.
b. $4,000. c. $56,000. d. $64,000
A
c. $56,000.
10
Q
Which of the following is an example of an accrued expense?
a. Supplies on hand
b. A two-year premium paid on a fire insurance policy c. Fees received but not yet earned d. Salary owed but not yet paid
A
d. Salary owed but not yet paid
11
Q
hen cash is paid to suppliers on account, which section of the Statement of Cash Flows is affected?
a. There is no effect on the Statement of Cash Flows.
b. Cash Flow from Operating Activities. c. Cash Flow from Investing Activities. d. Cash Flow from Financing Activities.
A
b. Cash Flow from Operating Activities.
12
Q
On June 1, Unidevo, Inc. purchased $1,700 worth of supplies on account. Prior to the purchase, the balance in the supplies account was $0. On December 31, the fiscal year-end for Unidevo, it is determined that $800 of supplies still remain. What is the balance in the supplies account after adjustment?
a. $900
b. $800 c. $0 d. $1,700
A
b. $800
13
Q
If prepaid insurance expires over time, this asset account becomes a(n):
a. revenue.
b. liability. c. expense. d. another asset
A
c. expense
14
Q
Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become _____ over time.
a. liabilities
b. expenses c. stockholders' equity d. assets
A
b. expenses
15
Q
Check My Work
In October, cash is received in advance of rendering services. Assuming that half of the services have been performed by December 31, the year-end adjustment would:
a. decrease Unearned Service Revenue and decrease Cash.
b. increase Accounts Receivable and increase Service Revenue.
c. decrease Unearned Service Revenue and increase Service Revenue.
d. increase Cash and increase Service Revenue.
A
c. decrease Unearned Service Revenue and increase Service Revenue
16
Q
or a corporation, stockholders’ equity consists of:
a. assets plus liabilities.
b. current assets plus long-term assets. c. capital stock and retained earnings. d. intangible assets.
A
c. capital stock and retained earnings.
17
Q
ASE Company sold goods, receiving $35,000 in cash and $15,000 on credit. How much revenue should it record under the accrual basis of accounting?
a. $60,000
b. $35,000 c. $50,000 d. $15,000
A
c. $50,000
18
Q
orking capital is calculated as _____.
a. current assets plus current liabilities
b. stockholders' equity plus current assets c. current assets less current liabilities d. current assets less stockholders' equity
A
c. current assets less current liabilities
19
Q
The quick ratio is computed as _____.
a. current liabilities divided by current assets
b. quick assets divided by current liabilities c. current assets divided by stockholders' equity d. quick assets divided by current assets
A
b. quick assets divided by current liabilities
20
Q
Three measures useful in assessing liquidity and the ability of a company to pay its current liabilities are _____, the current ratio, and the quick ratio.
a. debt equity ratio
b. interest coverage c. net profit d. working capital
A
d. working capital
21
Q
From the following data for David ProElecticals, calculate the quick ratio.
Cash $ 68,500 Accounts receivable 130,000 Inventories 213,000 Prepaid expenses 25,000 Total current assets $436,500 Less current liabilities 275,000 Working capital $161,500 a. 1.5 b. 0.7 c. 0.3 d. 1.6
A
b. 0.7
Quick Ratio/current liabilities
Cash 68500 + AR 130,000= $198,5000/275,000 (current liabilities)
=.72
22
Q
Gross profit is determined by subtracting the cost of merchandise sold from what?
a. Fees earned
b. The cost of merchandise purchased c. Net sales d. Accounts receivable
A
c. Net sales
net sales- cgs = gross profit
23
Q
The difference between sales and cost of merchandise sold for a merchandising business is:
a. net sales.
b. gross sales. c. gross profit. d. sales.
A
c. gross profit.
24
Q
Which of the following items is subtracted from sales to arrive at net sales?
a. Sales returns and allowances
b. Cost of after sales services c. Desired sales d. Sales commission
A
a. Sales returns and allowances
25
est, Inc. had beginning inventory of $30,000, purchases of $65,000, and ending inventory of $10,000. What is West's cost of merchandise sold?
a. $65,000
b. $10,000
c. $85,000
d. $30,000
c. $85,000
Beginning inventory 30,000 +
Purchase 65,000 = 95,000
95,000- 10,000(ending inventory) = $85,000
26
alaxy, Inc. had the following merchandise transactions in October:
Purchases $80,000
Purchase returns 8,000
Purchase discounts 7,200
Transportation in 3,000
What is the total cost of merchandise purchased for Galaxy, Inc.?
a. $67,800
b. $83,000
c. $77,000
d. $80,000
a. $67,800
```
Purchases $80,000
-Purchase returns 8,000
-Purchase discounts 7,200
+Transportation in 3,000
--------------------------------------
$67,800
```
27
```
Check My Work
Which of the following accounts is a contra account to Sales?
a. Accounts Receivable
b. Sales Returns and Allowances
c. Interest Revenue
d. Accounts Payable
```
b. Sales Returns and Allowances
28
Surist, Inc.
Surist, Inc. purchased merchandise for $300,000, received credit for purchase returns of $20,000, availed purchase discounts of $5,000, and paid transportation in of $12,000.
Refer to Surist, Inc. What is the total cost of merchandise purchased?
a. $312,000
b. $263,000
c. $288,000
d. $287,000
d. $287,000
```
purchased merchandise for $300,000
-credit for purchase returns of $20,000
-purchase discounts of $5,000
+ paid transportation in of $12,000
______________________
$287,000
```
29
urist, Inc.
Surist, Inc. purchased merchandise for $300,000, received credit for purchase returns of $20,000, availed purchase discounts of $5,000, and paid transportation in of $12,000.
Refer to Surist, Inc. If Surist, Inc. had $30,000 in beginning inventory, and sold goods costing $180,000, what is the ending inventory balance?
a. $137,000
b. $90,000
c. $150,000
d. $162,000
a. $137,000
```
purchased merchandise for $300,000
-credit for purchase returns of $20,000
-purchase discounts of $5,000
+ paid transportation in of $12,000
______________________
$287,000
+$30,000 in beginning inventory
-$180,000 cost of good sold
--------------------------------------
$137,000
```
30
Silver Co. sold merchandise to Copper Co. on account, $75,000, terms 2/10, net 30. The cost of the merchandise sold is $55,000. Silver Co. issued a credit memorandum for $10,000 for merchandise returned that originally cost $9,000. Copper Co. paid the invoice within the discount period. What is amount of net sales from the transactions?
a. $65,000
b. $63,500
c. $64,680
d. $63,700
d. $63,700
$ 75,000 on account
-$10,000 for merchandise returned
_____________
$65,000 x .98 discount = $63,700
31
If Johnson, Inc. sold $800,000 worth of merchandise, had $100,000 returned, and then the balance paid during the 1% discount period, how much was Johnson's net sales?
a. $700,000
b. $692,000
c. $800,000
d. $693,000
d. $693,000
$800,000 sold
-$100,000 returned
____________
$700,000 x.99 =693,000
32
erchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 15; the merchandise is received by the buyer on November 17; the transaction is recorded in the buyer's accounts on November 18. The credit period begins with what date?
a. November 15
b. November 17
c. November 12
d. November 18
a. November 15
33
If a $50,000 sale is made on January 1, with terms of 1/10, n/30, how much would the discount be if payment is made on January 9?
a. $500
b. $5,000
c. $0
d. $1,000
a. $500
50,000 x .01 = $500
34
When merchandise that was sold on account is returned, which accounts are affected?
a. Cash, accounts receivable, cost of goods sold, and sales returns
b. Sales returns, accounts receivable, purchases, and merchandise inventory
c. Sales returns, accounts receivable, merchandise inventory, and cost of goods sold
d. Sales returns, accounts receivable, purchases, and cost of goods sold
c. Sales returns, accounts receivable, merchandise inventory, and cost of goods sol
35
```
Check My Work
If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a:
a. debit memorandum.
b. sales invoice.
c. credit memorandum.
d. purchase invoice.
```
c. credit memorandum
36
Orange Co. sells merchandise on credit to Zea Co. in the amount of $9,000. The invoice is dated on September 15 with terms of 1/15, net 45. What is the amount of the discount, and up to what date must the invoice be paid in order for the buyer to take advantage of the discount?
a. $180, September 30
b. $90, September 25
c. $90, September 30
d. $180, September 25
c. $90, September 30
37
Using a perpetual inventory system, the return of merchandise purchased on account includes a(n):
a. decrease in Merchandise Inventory.
b. decrease in Sales.
c. increase in Sales.
d. increase in Merchandise Inventory
a. decrease in Merchandise Inventory.
38
If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as:
a. FOB destination.
b. FOB shipping point.
c. FOB seller.
d. FOB n/30.
FOB destination.
39
Ratio of sales to assets is calculated by:
a. dividing net sales by average total assets.
b. dividing total current assets by net sales.
c. dividing average total assets by net sales.
d. dividing net sales by total current assets.
a. dividing net sales by average total assets.
40
If sales is $50,000 and cost of merchandise sold is $35,000, how much would be the markup percent?
a. 42.9%
b. 70.0%
c. 14.3%
d. 30.0%
a. 42.9%
avg markup percent = gross profit/ cost of merchandise sold
```
$50,000-$35,000 = $15,000
$15,000/$35,000 = 42.9%
```
41
What is gross profit percent?
gross profit/net sales
42
he purpose of the Sarbanes-Oxley Act of 2002 is to:
a. protect companies from demands of investors, stockholders, and creditors.
b. require all companies to prepare financial statements.
c. do all of these choices are correct.
d. restore public confidence and trust in the financial statements of publicly held companies.
d. restore public confidence and trust in the financial statements of publicly held companies.
43
The framework that has become widely accepted as the standard by which companies design, analyze, and evaluate internal controls is the:
a. Internal Control Localized Structure by the Committee of Sponsoring Organizations.
b. Internal Control Localized Structure by the Congress of Special Offerings.
c. Internal Control - Integrated Framework by the Committee of Sponsoring Organizations.
d. Internal Control - Integrated Framework by the Congress of Special Offerings
c. Internal Control - Integrated Framework by the Committee of Sponsoring Organizations.
44
nternal control consist of policies and procedures that _____.
a. involve cost-benefit considerations
b. ensure the accuracy of business information
c. deal with human element of controls such as, fatigue, carelessness, etc
d. ensure public relations
b. ensure the accuracy of business information
45
_____ , which constitute one of the most important elements of internal control, include separating operations, custody of assets, and accounting.
a. Risk assessment
b. Monitoring
c. Control environment
d. Control Procedures
d. Control Procedures
46
An element of internal control is:
a. personnel policies.
b. business.
c. monitoring.
d. management
c. monitoring.
47
Separating the custody of assets from accounting for assets is a part of which element of internal control?
a. Information and communication
b. Monitoring
c. Control environment
d. Control procedures
d. Control procedures
48
hich of the following elements of internal control focuses on locating weaknesses and improving control effectiveness?
a. Control procedures
b. Monitoring
c. Control environment
d. Risk assessment
b. Monitoring
49
In reference to a promissory note, the person who is to receive payment is called the:
a. payer.
b. maker.
c. payee.
d. seller.
c. payee
50
A 90-day, 10% note for $10,000 dated March 15 is received from a customer on account. The face value of the note is:
a. $10,250.
b. $10,000.
c. $9,750.
d. $9,000
b. $10,000.
51
The two methods of accounting for uncollectible receivables are the:
a. allowance method and the direct write-off method.
b. cash method and the accrual method.
c. direct method and the indirect method.
d. percent of sales method and the analysis of receivables method
a. allowance method and the direct write-off method.
52
ne of the weaknesses of the direct write-off method is that it:
a. violates the matching principle.
b. understates accounts receivable on the balance sheet.
c. adjusts allowance account the end of the year.
d. is based on estimates
a. violates the matching principle.
53
After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $500,000 and Allowance for Doubtful Accounts has a balance of $25,000. What is the net realizable value of the accounts receivable?
a. $475,000
b. $525,000
c. $500,000
d. $25,000
a. $475,000
Accounts Receivable $500,000
-Doubtful Accounts has a balance of $25,000
_______________
$475,000
54
Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and an analysis of accounts in the customers' ledger indicates doubtful accounts of $15,000. Compute the adjusted balance in the allowance for doubtful accounts?
a. $14,000
b. $15,500
c. $15,000
d. $14,500
c. $15,000
55
Allowance for Doubtful Accounts has an unadjusted balance of -$1,100 at the end of the year, and an analysis of customers' accounts indicates doubtful accounts of $12,900. Which of the following records the proper provision for doubtful accounts?
a. Increase Uncollectible Accounts Expense, $14,000; increase Allowance for Doubtful Accounts, $14,000
b. Increase Uncollectible Accounts Expense, $11,800; increase Allowance for Doubtful Accounts, $11,800
c. Decrease Allowance for Doubtful Accounts, $14,000; decrease Uncollectible Accounts Expense, $14,000
d. Decrease Allowance for Doubtful Accounts, $11,800; decrease Uncollectible Accounts Expense, $11,800
b. Increase Uncollectible Accounts Expense, $11,800; increase Allowance for Doubtful Accounts, $11,800
56
Allowance for Doubtful Accounts has an unadjusted balance of $500 at the end of the year, and uncollectible accounts expense is estimated at 1% of net sales. If net sales are $950,000, the amount of the adjustment to record the provision for doubtful accounts is:
a. $9,500.
b. $9,000.
c. $500.
d. $8,500.
a. $9,500.
$950,000x.01 =$9,500
57
When an account is written off under the allowance method:
a. accounts receivable remains unchanged.
b. accounts receivable decreases.
c. accounts receivable increases.
d. bad debt expense is increased
b. accounts receivable decreases.
58
The inventory costing method that considers the ending inventory to be composed of units of the merchandise acquired earliest is called:
a. lowest-in, first-out.
b. first-in, first-out.
c. highest-in, first-out.
d. last-in, first-out.
d. last-in, first-out
59
The inventory data for an item for November are:
```
Nov 1 Inventory 20 units at $25
Nov 10 Purchase 25 units at $20
Nov 30 puchase 20 units at $22
Sale 35 Units
Using the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?
```
d. $640
FIFO
Nov 30 20 units x 22 = 440
Nov 10 10 units x 20= 200
___________________
$640
60
What happens under FIFO to CGS and profits?
less CGS and higher profits
61
What hapens under LIFO to CGS and profits?
higher CGS and lower profits
62
What happens to tax and net income under FIFO?
higher taxes and net income
63
What happens to tax and net income under LIFO
lower taxes and net income
64
```
The inventory data for an item for November are:
Nov 1 Inventory 20 units at $25
Nov 10 Purchase 25 units at $20
Nov 30 puchase 20 units at $22
Sale 35 Units
Using the last-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?
a. $700
b. $600
c. $640
d. $660
```
a. $700
Nov 1 Inventory 20 units at $25 = 500
Nov. 10 Purchase 10 units at $20 = 200
_____________
$700
LIFO take the oldest and count them first.
65
Use the following data to calculate the cost of ending inventory under the FIFO method.
September 1 Beginning Inventory 15 units at $20 each
September 10 Purchase 20 units at $25 each
September 20 Purchase 25 units at $28 each
September 30 Ending Inventory 30 units
a. $840
b. $750
c. $825
d. $675
c. $825
25 units X $28 = 700
5 units x 25= 125
________________
$825
66
se the following data to calculate the cost of ending inventory using the LIFO method.
September 1 Beginning Inventory 15 units at $20 each
September 10 Purchase 20 units at $25 each
September 20 Purchase 25 units at $28 each
September 30 Ending Inventory 30 units
a. $825
b. $675
c. $600
d. $750
b. $675
15 x $20 = $300
15 x $25 = $375
_______________
$675
LIFO = start with the oldest
67
Check My Work
Calculate the cost of ending inventory using FIFO method.
```
1/1 Beginning inventory 10 units at $10 each
2/28 Purchase 40 units at $12 each
5/10 Purchase 50 units at $14 each
9/20 Purchase 30 units at $16 each
12/31 Ending inventory 50 units
a. $580
b. $500
c. $800
d. $760
```
d. $760
```
30 units x 16 =$480
20 unit x 14 = $280
_______________
$760
FIFO use the lastest one first
```
68
Check My Work
The accounts receivable turnover is computed by dividing:
a. total assets by average accounts receivable.
b. net income by average accounts receivable.
c. net purchases by average accounts receivable.
d. net sales by average accounts receivable.
d. net sales by average accounts receivable
69
Inventory turnover is calculated by dividing:
a. cost of inventory by average inventory.
b. cost of merchandise sold by average inventory.
c. amount of current assets by average inventory.
d. amount of total asset by average inventory.
b. cost of merchandise sold by average inventory.
70
If net sales is $550,000, beginning inventory is $110,000, and ending inventory is $125,000, how much would be the accounts receivables turnover?
a. 4.0
b. 4.7
c. 5.0
d. 4.4
b. 4.7
net sales by average accounts receivable
550,000/
(110,000+125,000)/2
=4.7
71
If sales is $1,000,000, cost of merchandise sold is $750,000, and average inventory is $220,000, how much would be inventory turnover?
a. 1.1
b. 3.4
c. 4.5
d. 1.3
b. 3.4
cost of merchandise sold by average inventory.
750,000/220,000 =3.4
72
```
Determine the amount and direction (increase or decrease) of the period's change in total assets if total liabilities decreased by $28,074 during a period of time and stockholders' equity increased by $30,356 during the same period.
$28,074 decrease
$2,282 increase
$28,074 increase
$2,282 decrease
```
$2,282 increase
30,356-28,076 =2,282
73
On November 1 of the current year, the assets and liabilities of Jim Chu, Inc., are as follows: Cash, $10,840; Accounts Receivable, $8,402; Supplies, $1,940; Land, $24,305; Accounts Payable, $5,618. What is the amount of stockholders' equity as of November 1 of the current year?
Select the correct answer.
$19,242
$39,869
$10,840
$51,105
```
$39,869
Cash, $10,840
+ Accounts Receivable, $8,402
+Supplies, $1,940
+Land, $24,305
_____________
45,487 Assets
-5618 AP
______
$39,869 stockholder's equity
```
74
Rivers Computer Makeover Company purchased $18,088 of Computer and Office Equipment. The company paid $3,887 in cash at the time of the purchase and signed a promissory note for the remainder to be paid in six monthly installments. How will this transaction affect the accounting equation?
Select the correct answer.
Increase Total Assets by a net amount of $18,088 (increase Computer and Office Equipment $14,201 and increase Cash $3,887) and decrease Liabilities (Accounts Payable $18,088)
Increase Assets (Computer and Office Equipment $14,201) and increase Liabilities (Accounts Payable $14,201)
Increase Assets (Computer and Office equipment $18,088) and decrease Liabilities (Accounts Payable $18,088)
Increase Total Assets by a net amount of $14,201(increase Computer and Office Equipment $18,088 and decrease Cash $3,887) and increase Liabilities (Notes Payable $14,201
Increase Total Assets by a net amount of $14,201(increase Computer and Office Equipment $18,088 and decrease Cash $3,887) and increase Liabilities (Notes Payable $14,201)
75
A voucher:
a. system is used to control cash receipts.
b. is received from customers to explain the purpose of a payment.
c. is normally prepared in the Accounting Department.
d. system is an internal control procedure to verify that the assets in the records are the ones the company owns
c. is normally prepared in the Accounting Department
76
On the bank's accounting records, customers' accounts are normally shown as a(n):
a. liability.
b. asset.
c. expenses.
d. revenue.
a. liability.
77
credit memorandum from the bank:
a. is used to show a bank service charge.
b. shows that a company has deposited a customer's NSF check.
c. shows the bank has collected a note receivable for the customer.
d. decreases a bank customer's account.
c. shows the bank has collected a note receivable for the customer.
78
Check My Work
A check drawn by a depositor for $295 in payment of a liability was recorded in the depositor's book as $925. The $630 difference would be included on the bank reconciliation as a(n):
a. deduction from the cash balance per books.
b. addition to the cash balance per bank.
c. addition to the cash balance per books.
d. deduction from the cash balance per bank.
c. addition to the cash balance per books
79
e bank reconciliation:
a. is part of the internal control system.
b. is for information purposes only.
c. should be prepared by an employee who records cash transactions.
d. is sent to the bank for verification.
a. is part of the internal control system.
80
Receipts from cash sales of $5,700 were recorded incorrectly by the depositor as $7,500. The $1,800 difference would be included on the bank reconciliation as a(n):
a. deduction from the cash balance per books.
b. deduction from the cash balance per bank.
c. addition to the cash balance per bank.
d. addition to the cash balance per books.
a. deduction from the cash balance per books
81
```
nas Company gathered the following reconciling information in preparing its April bank reconciliation:
Cash balance per books, 4/30 $2,864
Deposits in transit $500
Notes receivable and interest collected by bank $752
Bank charge for check printing $26
Outstanding checks $1,318
NSF check $131
Find the adjusted cash balance per books on April 30.
Select the correct answer.
$3,459
$2,772
$2,641
$2,046
```
$3,459
82
he basic financial statements include the:
a. bank reconciliation statement.
b. balance sheet.
c. trial balance.
d. ledger account.
b. balance sheet.
83
If a $15,000 purchase of equipment for cash is incorrectly recorded as an increase to equipment and as an increase to cash, at the end of the period assets will:
a. exceed liabilities and stockholders' equity by $30,000.
b. equal liabilities and stockholders' equity.
c. exceed liabilities and stockholders' equity by $15,000.
d. exceed liabilities and stockholders' equity by $40,000.
a. exceed liabilities and stockholders' equity by $30,000
84
hich of the following is considered to be a liability?
a. Accrued revenues
b. Prepaid expenses
c. Unearned revenues
d. Investments
c. Unearned revenue
85
Which of the following accounts is a stockholders' equity account?
a. Prepaid Insurance
b. Accounts Payable
c. Capital Stock
d. Cash
c. Capital Stock
86
Check My Work
Which of the following group of accounts are all assets?
a. Cash, Accounts Payable, Buildings
b. Unearned Revenues, Prepaid Expenses, Cash
c. Prepaid Expenses, Buildings, Patents
d. Accounts Receivable, Revenue, Cash
c. Prepaid Expenses, Buildings, Patents
87
Expenses can be defined as:
a. costs that have been incurred during the normal course of business.
b. assets consumed.
c. All of these choices are correct.
d. services used in the process of generating revenues.
Hide Feedback
c. All of these choices are correct
88
The gross increases in stockholders' equity attributable to business activities are called:
a. liabilities.
b. revenues.
c. assets.
d. net income.
b. revenues.
89
The payment of $20,000 for expenses was incorrectly recorded by Elite Co. as an increase in cash of $20,000 and a decrease in retained earnings of $20,000. What is the effect of this error on the accounting equation?
a. Total assets will be less than total liabilities and stockholders' equity by $40,000.
b. The error will not affect the accounting equation.
c. Total assets will exceed total liabilities and stockholders' equity by $20,000.
d. Total assets will exceed total liabilities and stockholders' equity by $40,000
d. Total assets will exceed total liabilities and stockholders' equity by $40,000.
90
Stockholders' equity will be increased by:
a. issuance of bonds.
b. increase in expenses.
c. payment of dividends.
d. increase in revenues.
d. increase in revenues.
91
Johnson, Inc. issued $15,000 in capital stock in exchange for cash. What is the effect of this transaction?
a. Total assets remain unchanged.
b. Net Income will increase.
c. Cash flow from Financing Activities will increase.
d. Total Retained Earnings will increase.
c. Cash flow from Financing Activities will increase.
92
Beginning of the year Total Assets $300,000 Total Liabilities 130,000
End of the Year Total Assets $800,000; Total Liabilities 550,000
Refer to Exhibit 2-1. Determine the net income (or loss), assuming no stock was issued and dividends of $40,000 were paid?
a. $210,000
b. $290,000
c. $40,000
d. $120,000
d. $120,000
BOY 300,000 - 130,000 = 170,000
EOY 800,000-550,000= 250,000
250,000-170,000= 80,000+40 dividend = 120,000
