Exam 1 Pq

Question 1

The three ingredients of faithful representation are:

Answer 1

Predictive value, Confirmatory value, Materiality

Question 2

Which of the following items is NOT included in FASB’s conceptual framework of accounting theory?

Qualities of useful accounting information

Fundamental principles and assumptions that guide financial accounting and reporting

Objectives of financial reporting

All of these choices are included in the conceptual framework

Answer 2

All of these choices are included in the conceptual framework

Question 3

Which of the following best describes the ability of information to confirm expectations?

Answer 3

Confirmatory value

Question 4

Which of the following refers to the net assets of an entity?

Answer 4

Equity

Question 5

GAAP is an abbreviation for:

Answer 5

Generally Accepted Accounting Principles

Question 6

Which organization has the statutory authority to set accounting standards in the U.S.?

Answer 6

SEC

Question 7

Confirmatory value is central to the concept of earnings quality because it:

Helps investors predict a company’s future earnings.

Allows investors to verify or change their prior assessments of a company’s performance.

Helps investors predict a company’s future cash flows.

Allows investors to compare the performance of a company over time.

Answer 7

Allows investors to verify or change prior assessments

Question 8

Gains are:

Answer 8

Increases in equity from peripheral transactions

Question 9

When there is agreement between a measure and the phenomenon it represents, the information possesses:

Answer 9

Faithful representation

Question 10

Failing to disclose a change in useful life of machinery violates which GAAP principle?

Answer 10

Completeness

Question 11

When a company declares and pays a dividend, how does it affect the accounting equation?

Answer 11

Decrease assets and decrease shareholders’ equity

Question 12

Revenues have what effect on the accounting equation?

Answer 12

Increase shareholders’ equity

Question 13

Paying for supplies previously purchased affects the accounting equation how?

Answer 13

Assets decrease and liabilities decrease

Question 14

An asset account increases with a _____; a liability account increases with a _____.

Answer 14

Debit; Credit

Question 15

When a company borrows $75,000 and signs a note payable, it records:

Answer 15

Credit to Notes Payable

Question 16

When a company pays $1,800 for utilities, the entry is:

Answer 16

Debit Utilities Expense $1,800, Credit Cash $1,800

Question 17

A company owes $15,000 in employee salaries. The entry is:

Answer 17

Debit Salaries Expense, Credit Salaries Payable

Question 18

A company receives $10,000 for future services. The entry is:

Answer 18

Debit Cash $10,000, Credit Deferred Revenue $10,000

Question 19

A company buys a building by signing a note. The entry is:

Answer 19

Debit Buildings, Credit Notes Payable

Question 20

Recording an expense for advertising on account:

Answer 20

Debit Advertising Expense, Credit Accounts Payable

Question 21

A company receives $52,800 in advance rent payments. The entry is:

Answer 21

Debit Cash $52,800, Credit Deferred Rent Revenue $52,800

Question 22

Which of the following accounts has a normal balance that is a debit?

A) Accounts payable
B) Accrued salaries
C) Accumulated depreciation
D) Advertising expense

Answer 22

Advertising Expense

Question 23

Cal Farms reported supplies expense of $2,200,000 this year. The supplies account decreased by $130,000 during the year to an ending balance of $470,000. What was the cost of supplies Cal Farms purchased during the year?

A) $2,070,000
B) $1,730,000
C) $2,330,000
D) $2,670,000

Answer 23

$2,070,000

Question 24

Question 25:
The adjusting entry required to record accrued expenses includes a:

A) Credit to cash.
B) Debit to an asset.
C) Credit to an asset.
D) Credit to a liability.

Answer 24

Credit to liability

Question 25

Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2024, and charged the $3,240 premium to Insurance expense. At its December 31, 2024, year-end, Yummy Foods would record which of the following adjusting entries? A)Account Title Debit Credit Prepaid insurance 675 Insurance expense 675 B)Account Title Debit Credit Insurance expense 675 Prepaid insurance 675 C)Account Title Debit Credit Prepaid insurance 2,565 Insurance expense 2,565 D)Account Title Debit Credit Insurance expense 675 Prepaid insurance 2,565 Insurance payable 3,240

Answer 25

Debit Prepaid Insurance $2,565, Credit Insurance Expense $2,565

Question 26

The employees of Persoff Publications work Monday through Friday. Every other Friday, the company issues payroll checks totaling $640,000. The current pay period ends on Friday, July 3. Persoff Publications is now preparing financial statements for the fiscal year ended June 30. What is the adjusting entry to record accrued salaries at the end of June? A) Prepaid salaries (Debit), Salaries payable (Credit) B) Salaries expense (Debit), Prepaid salaries (Debit), Salaries payable (Credit) C) Prepaid salaries (Debit), Salaries payable (Credit) D) Salaries expense (Debit), Salaries payable (Credit)

Answer 26

Debit Salaries Expense, Credit Salaries Payable

Question 27

Question 28: On August 28, 2024, an online subscription service provider received a total of $31,920 in cash from 420 customers for one-year subscriptions. The subscriptions begin in September. On receipt of the cash, the company recorded a liability, deferred subscription revenue. What is the required adjusting entry on December 31, 2024? A) Deferred subscription revenue (Debit) 10,640, Subscription revenue (Credit) 10,640 B) Deferred subscription revenue (Debit) 10,640, Subscription payable (Credit) 10,640 C) Deferred subscription revenue (Debit) 31,920, Subscription revenue (Credit) 10,640, Prepaid subscriptions (Credit) 21,280 D) Deferred subscription revenue (Debit) 21,280, Subscription revenue (Credit) 21,280

Answer 27

Debit Deferred Subscription Revenue $10,640, Credit Subscription Revenue $10,640

Question 28

On May 1, 2024, Mama's Pizza Shoppe borrowed $8,000 from a local bank and signed a note payable. The note requires repayment of principal and 9% interest on October 31, 2025. The company's fiscal year ends June 30, 2024. What adjusting entry is necessary on June 30, 2024? A) No adjusting entry is necessary B) Interest expense (Debit) 240, Interest payable (Credit) 240 C) Interest expense (Debit) 120, Interest payable (Credit) 120 D) Prepaid interest (Debit) 120, Interest payable (Credit) 120

Answer 28

C) Interest expense (Debit) 120, Interest payable (Credit) 120

Question 29

Eve's Apples opened its business on January 1, 2024, and paid for two insurance policies effective that date. The policy for equipment damage was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What is the balance in Eve's prepaid insurance as of December 31, 2024? A) $9,000 B) $18,000 C) $30,000 D) $48,000

Answer 29

$18,000

Question 30

On November 1, 2024, Tim's Toys borrowed $30,000,000 from a local bank and signed a note. The note requires repayment of principal and 9% interest in six months. What is the amount of accrued interest expense as of December 31, 2024? $112,500 $225,000 $450,000 $1,350,000

Answer 30

$450,000

Question 31

The statement of shareholders' equity reports: Net income from the income statement. The proceeds of the issuance of common stock during the current period. Distributions to owners (dividends) during the current period. All of the other answer choices are correct.

Answer 31

Net income, issuance of stock, and dividends

Question 32

In the statement of shareholders' equity, Retained earnings had a beginning balance of $60,000. During the period, the company reports a net loss of $10,000 and net cash outflows of $15,000. The ending balance in the Retained earnings account is: $60,000 $35,000 $50,000 $45,000

Answer 32

$50,000

Question 33

Which of the following is NOT a permanent account?

Answer 33

Cost of Goods Sold

Question 34

Pat's Custom Tuxedo Shop maintains its records on the cash basis. During this past year Pat's collected $42,800 in tailoring fees, and paid $13,900 in expenses. Depreciation expense totaled $2,900. Accounts receivable increased $1,200, supplies increased $4,400, and accrued liabilities increased $1,700. Pat's accrual-basis net income was: $22,100 $29,900 $33,300 $18,700

Answer 34

$29,900

Question 35

When Castle Corporation pays insurance premiums, the transaction is recorded as a debit to prepaid insurance. Additional information for the year ended December 31 is as follows: Prepaid insurance at January 1 $ 51,500 Insurance expense recognized during the year 218,050 Prepaid insurance at December 31 62,650 What was the total amount of cash paid by Castle for insurance premiums during the year? $229,200 $218,050 $206,900 $166,550

Answer 35

$229,200