Final Review Part 4/5 Flashcards by John Smith

A company has purchased a tract of land. It expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. The land should be reported as:

a long-term investment.

How well did you know this?

Not at all

Perfectly

A company makes a credit sale of $750 on June 13, terms 2/10, n/30, on which it grants a return of $50 on June 16. What amount is received as payment in full on June 23?

$686

How well did you know this?

Not at all

Perfectly

Adjusting entries are made to ensure that:

expenses are recognized in the period in which they are incurred.

revenues are recorded in the period in which the performance obligation is satisfied.

balance sheet and income statement accounts have correct balances at the end of an accounting period.

How well did you know this?

Not at all

Perfectly

Adjustments for accrued revenues:

increase assets and increase revenues.

How well did you know this?

Not at all

Perfectly

Adjustments for prepaid expenses:

decrease assets and increase expenses.

How well did you know this?

Not at all

Perfectly

Adjustments for unearned revenues:

decrease liabilities and increase revenues.

How well did you know this?

Not at all

Perfectly

A ledger:

is a record of all accounts maintained by a company and their amounts.

How well did you know this?

Not at all

Perfectly

All of the following are required steps in the accounting cycle except:
A. journalizing and posting closing entries.
B. preparing an adjusted trial balance.
C. preparing a post-closing trial balance.
D. prepare financial statements from the unadjusted trial balance.

D. prepare financial statements from the unadjusted trial balance.

How well did you know this?

Not at all

Perfectly

A revenue account:

is increased by credits.

How well did you know this?

Not at all

Perfectly

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2022. This count did not take into consideration the following facts. Rogers Consignment Store currently has goods worth $35,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $50,000. Railway purchased $13,000 of goods that were shipped on December 27, FOB destination, that will be received by Railway on January 3. Determine the correct amount of inventory that Railway should report.

180000 + 35000

$215,000.

How well did you know this?

Not at all

Perfectly

As of December 31, 2022, Rockford Corporation has assets of $3,500 and stockholders’ equity of $1,500. What are the liabilities for Rockford as of December 31, 2022?

3500-1500

$2,000

How well did you know this?

Not at all

Perfectly

A trial balance:

is a list of accounts with their balances at a given time.

How well did you know this?

Not at all

Perfectly

Bufford Corporation had reported the following amounts at December 31, 2022: sales revenue $184,000, ending inventory $11,600, beginning inventory $17,200, purchases $60,400, purchase discounts $3,000, purchase returns and allowances $1,100, freight-in $600, and freight-out $900. Calculate the cost of goods available for sale.

$17,200 + $60,400 - $3,000 + $600 - $1,100

$74,100

How well did you know this?

Not at all

Perfectly

Colleen Mooney earned a salary of $400 for the last week of September. She will be paid on October 1. The adjusting entry for Colleen’s employer at September 30 is:

Salaries and Wages Expense 400

Salaries and Wages Payable 400

How well did you know this?

Not at all

Perfectly

Companies can use free cash flow to:

pay additional dividends
acquire more property, plant, and equipment.
pay off debts.

How well did you know this?

Not at all

Perfectly

Considerations that affect the selection of an inventory costing method do not include:

perpetual versus periodic inventory system.

How well did you know this?

Not at all

Perfectly

Cost of goods available for sale consists of two elements: beginning inventory and:

cost of goods purchased.

How well did you know this?

Not at all

Perfectly

Current assets are listed:

by order of expected conversion to cash.

How well did you know this?

Not at all

Perfectly

Davidson Electronics has the following:
Units Unit Cost
Inventory, Jan. 1 5,000 $ 8
Purchase, April 2 15,000 10
Purchase, Aug. 28 20,000 12
If Davidson has 7,000 units on hand at December 31, the cost of ending inventory under the average-cost method is:

Total Cost (430000) Total Units (40000) = 10.75

10.75 x 7000 =

$75,250.

How well did you know this?

Not at all

Perfectly

Debits:

increase assets and decrease liabilities.

How well did you know this?

Not at all

Perfectly

During 2022, Gibson Company assets decreased $50,000 and its liabilities decreased $90,000. Its stockholders’ equity therefore:

increased $40,000.

How well did you know this?

Not at all

Perfectly

During the year ended December 31, 2022, Bjornstad Corporation had the following results: net sales $267,000, cost of goods sold $107,000, net income $92,400, operating expenses $55,400, and net cash provided by operating activities $108,950. What was the company’s profit margin?

92,400/267000 = 0.346

34.6%.

How well did you know this?

Not at all

Perfectly

Each of the following is a major type (or category) of adjusting entry except:
A. prepaid expenses. 
B. accrued revenues. 
C. accrued expenses. 
D. unearned expenses.

D. unearned expenses.

How well did you know this?

Not at all

Perfectly

What financial statements shows the financial position of the company at a point in time?

Balance sheet

How well did you know this?

Not at all

Perfectly

For 2022, Spanos Corporation reported net income $26,000, net sales $400,000, and weighted-average common shares outstanding 4,000. There were preferred dividends of $2,000. What was the 2022 earnings per share?

= (26,000-2,000)/4,000 = 24,000/4,000 = $6.00

Generally accepted accounting principles are:

a set of standards and rules that are recognized as a general guide for financial reporting.

Genesis Company buys a $900 machine on credit. This transaction will affect the:

balance sheet only.

Gross profit will result if:

net sales are greater than cost of goods sold.

If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, what is cost of goods sold under a periodic system?

60000-50000 = 10000 380000+ 10000 $390,000

If net sales are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, what is the gross profit?

400000 - 310000 = | $90,000

In a classified balance sheet, assets are usually classified as:

current assets; long-term investments; property, plant, and equipment; and intangible assets.

In periods of rising prices, LIFO will produce:

lower net income than FIFO.

Net income will result during a time period when:

revenues exceed expenses.

Neutrality is an ingredient of:

Faithful Representation: Yes Relevance: No

Norton Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a net realizable value of $80 each. The ending inventory under lower-of-cost-or-net realizable value is:

200 x 80 = 16000 $16000

Paying an account payable with cash affects the components of the accounting equation in the following way:

Decreases assets and decreases liabilities.

Posting:

transfers journal entries to ledger accounts.

Queenan Company computes depreciation on delivery equipment at $1,000 for the month of June. The adjusting entry to record this depreciation is as follows:

Depreciation Expense 1,000 | Accumulated Depreciation-Equipment 1,000

Accounts and notes receivable are reported in the current assets section of the balance sheet at:

cash (net) realizable value

Additions to plant assets are:

capital expenditures

The reconciling item in a bank reconciliation that will result in an adjusting entry by the depositor is:

bank service charges.

Stockholders' equity represents:

claims of owners.

The balance in retained earnings is not affected by:

issuance of common stock.

The characteristic of information that evaluates whether it is large enough to impact a decision.

Materiality.

Able Towing Company purchased a tow truck for $60,000 on January 1, 2022. It was originally depreciated on a straight-line basis over 10 years with an assumed salvage value of $12,000. On December 31, 2024, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 years (including 2024) and the salvage value to $2,000. What was the depreciation expense for 2024?

Depreciation per Year = (Cost – Salvage Value) / Useful Life Depreciation per Year = (60,000 – 12,000) / 10 Depreciation per Year = $4,800 Accumulated Depreciation on the date of Change = Depreciation per year * 2 Accumulated Depreciation on the date of Change = $4,800 * 2 = $9,600 Book Value on the date of Change = $60,000 - $9,600 Book Value on the date of Change = $50,400 Revised Depreciation = (50,400 – 2,000) / 4 Revised Depreciation = 48,400 / 4 Revised Depreciation = $12,100

$16,000

Inventory, Jan. 1 8,000 $11 Purchase, June 19 13,000 $12 Purchase, Nov. 8 5,000 $13 If 9,000 units are on hand at December 31, what is the cost of the ending inventory under FIFO?

5000 * 13 = 65,000 4000 * 12 = 48000 $113,000.

Inventory, Jan. 1 8,000 $11 Purchase, June 19 13,000 $12 Purchase, Nov. 8 5,000 $13 If 9,000 units are on hand at December 31, what is the cost of the ending inventory under LIFO?

1000 units * $12 = $12,000 8000 units * $11 = $88,000 Total ending inventory = $100,000 ($12,000 + $88,000)

Bennie Razor Company has decided to sell one of its old manufacturing machines on June 30, 2022. The machine was purchased for $80,000 on January 1, 2018, and was depreciated on a straight-line basis for 10 years assuming no salvage value. If the machine was sold for $26,000, what was the amount of the gain or loss recorded at the time of the sale?

``` Annual deprecation = Cost of machine/ Estimated useful life = 80,000/10 = $8,000 Accumulated depreciation expense for 4.5 years = Annual deprecation x 4.5 = 8,000 x 4.5 = $36,000 = 80,000-36,000 = $44,000 Sale price of machine = $26,000 = 26,000- 44,000 = $18,000 loss ```

Permitting only designated personnel such as cashiers to handle cash receipts is an application of the principle of:

establishment of responsibility.

A check written this month to City Utilities and cleared the bank at the correct amount of $1,790, but was recorded at $1,870.

The $80 difference should be treated as an addition to the balance per books.

The deposit in transit on February 28 of $1,800 should be treated as:

An addition of $1,800 to the balance per bank.

Days of Slumber sells mattress for cash and on credit. At the end of 2014, the following appeared in the company's balance sheet: Accounts receivable, net of $2,460 allowance……………………$166,200 Which one of the following statements for Days of Slumber is correct?

Customers owe $168,660 to Days of Slumber

Hughes has a debit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Hughes estimates that $60,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is:

$65,000.

In Jackson Jones Company, land decreased $270,000 because of a cash sale for $270,000, the equipment account increased $90,000 as a result of a cash purchase, and bonds payable increased $300,000 from issuance for cash at face value. The net cash provided by investing activities is $270,000

270000 - 90000 $180,000

Justice Corporation’s net income for the current year was $510,000. Depreciation recorded on plant assets was $76,000. Accounts receivable and inventories increased by $40,000 and $16,000, respectively. Supplies and accounts payable decreased by $2,000 and $32,000, respectively. A $500,000 convertible bond was retired through the issuance of common stock. How much cash was provided by operating activities?

$500,000

Generally, the most important category on the statement of cash flows is cash flows from

operating activities

Financing activities involve

issuing debt

The effects on the basic accounting equation of performing services for cash are to:

increase assets and increase stockholders' equity.

The element of a corporation's annual report that describes the corporation's accounting methods is:

notes to the financial statements.

The element of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is the:

auditor's opinion.

The financial statements for Macias Corporation contained the following information: Accounts receivable $5,000, Sales Revenue $75,000, Cash $15,000, Sales and Wages Expense $20,000, Rent expense $10,000. What was the company net income?

Sales revenue 75,000 Salaries and wages expense -$20,000 Rent expense -$10,000 Net income=$45,000.

The gross profit rate is equal to:

net sales minus cost of goods sold, divided by net sales

The lower-of-cost-or-net realizable value rule for inventory is an example of the application of:

the conservatism convention.

The lower-of-cost-or-net realizable value rule for inventory is an example of the application of:

the conservatism convention.

``` The multiple-step income statement for a merchandising company shows each of these features except: A. gross profit. B. cost of goods sold. C. a sales section. D. an investing activities section. ```

D. an investing activities section.

The trial balance shows Supplies $1,350 and Supplies Expense $0. If $600 of supplies are on hand at the end of the period, the adjusting entry is:

Supplies Expense 750 | Supplies 750

To record the sale of goods for cash in a perpetual inventory system:

two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory.

Under a perpetual inventory system, when goods are purchased for resale by a company:

purchases on account are debited to Inventory.

What are the first step and the final step in the revenue recognition process?

The first step is identify the contract with customers, and the final step is recognize revenue when each performance obligation is satisfied.

What is the periodicity assumption?

The economic life of a business can be divided into artificial time periods.

What is the primary criterion by which accounting information can be judged?

Usefulness for decision-making.

What organization issues U.S. accounting standards?

Financial Accounting Standards Board.

What section of a statement of cash flows indicates the cash spent on new equipment during the past accounting period?

The investing activities section.

When is a physical inventory usually taken? (a) When the company has its greatest amount of inventory. (b) When a limited number of goods are being sold or received. (c) At the end of the company's fiscal year. (d) Both (b) and (c).

(d) Both (b) and (c).

When there is a change in estimated depreciation:

current and future years' depreciation should be revised.

Which accounts normally have debit balances?

Assets, dividends, and expenses.

Which account will have a zero balance after a company has journalized and posted closing entries?

Service Revenue.

Which financial statement reports assets, liabilities, and stockholders' equity?

Balance sheet.

Which is an advantage of corporations relative to partnerships and sole proprietorships?

Reduced legal liability for investors.

Which is an indicator of profitability?

Earnings per share.

Which is not one of the three forms of business organization?

Creditorship

``` Which is not one of the three primary business activities? A. Advertising. B. Financing. C. Investing. D. Operating. ```

A. Advertising.

Which is not part of the recording process?

Preparing an income statement.

Which of the following did not result from the Sarbanes-Oxley Act? A. Penalties for fraudulent activity increased. B. Tax rates on corporations increased. C. Top management must now certify the accuracy of financial information. D. Independence of auditors increased.

B. Tax rates on corporations increased.

What event is not recorded in the accounting records?

An employee is terminated.

What is an example of a financing activity?

Issuing shares of common stock.

What should not be included in the physical inventory of a company?

Goods held on consignment from another company.

What statement about a periodic inventory system is true?

Companies determine cost of goods sold only at the end of the accounting period.

What would affect the gross profit rate? (Assume sales remains constant.)

An increase in cost of goods sold.

Which of these statements about a journal is false? A. It contains only revenue and expense accounts. B. It provides a chronological record of transactions. C. It helps to locate errors because the debit and credit amounts for each entry can be readily compared. D. It discloses in one place the complete effect of a transaction.

A. It contains only revenue and expense accounts.

Which one of these statements about the accrual basis of accounting is false? A. Companies record events that change their financial statements in the period in which events occur, even if cash was not exchanged. B. Companies recognize revenue in the period in which the performance obligation is satisfied. C. This basis is in accordance with generally accepted accounting principles. D. Companies record revenue only when they receive cash and record expense only when they pay out cash.

D. Companies record revenue only when they receive cash and record expense only when they pay out cash.

Which principle dictates that efforts (expenses) be recorded with accomplishments (revenues)?

Expense recognition principle

``` Which sales accounts normally have a debit balance? A. Sales Discounts B. Sales Returns and Allowances. C. Both (a) and (b) D. Neither (a) nor (b). ```

C. Both (a) and (b)

Which statement about an account is true? A. An account consists of a title, a debit side, and a ledger side. B. An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items. C. There are separate accounts for specific assets and liabilities but only one account for stockholders' equity items. D. The left side of an account is the credit, or decrease, side.

B. An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity items.

Which statement about users of accounting information is incorrect? A. Management is considered an internal user. B. Regulatory authorities are considered internal users. C. Present creditors are considered external users. D. Taxing authorities are considered external users.

B. Regulatory authorities are considered internal users.

Which statement is incorrect concerning the adjusted trial balance? A. An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made. B. The adjusted trial balance provides the primary basis for the preparation of financial statements. C. The adjusted trial balance does not list temporary accounts. D. The company prepares the adjusted trial balance after it has journalized and posted the adjusting entries.

C. The adjusted trial balance does not list temporary accounts.

``` Which statement presents information as of a specific point in time? A. Balance sheet. B. Income statement. C. Retained earnings statement. D. Statement of cash flows. ```

A. Balance sheet.

Which types of accounts will appear in the post-closing trial balance?

Permanent accounts.

Final Review Part 4/5 Flashcards

(99 cards)