Accounting Exam – Flashcards
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accrual
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Generally accepted accounting principles requires that companies use the ____ of accounting.
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after adjusting journal entries are posted
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When is the adjusted trial balance prepared?
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contra asset, credit
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The type of account and normal balance of Accumulated Depreciation is
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d wages expense c wages payable
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The entry to adjust the accounts for wages accrued at the end of the accounting period is
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become expenses when their future economic value expires.
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Prepaid expenses are eventually expected to
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needed to bring accounts up to date and match revenue and expense
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Adjusting entries are
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when the services are rendered without regard to when cash is received
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Using accrual accounting, revenue is recorded and reported only
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when they are incurred, whether or not cash is paid
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Using accrual accounting, expenses are recorded and reported only
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posting
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The process of transferring the debits and credits from the journal entries to the ledger accounts is called
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trial balance
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The verification that the total dollar amount of the debits equals the total dollar amount of the credits in the ledger is called a
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liability with a credit balance
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The classification and normal balance of the accounts payable account is
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journal
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The ____ is where a transaction can first be found on the accounting records.
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Answer. the normal balance for revenues and expenses is a credit b. assets are decreased by credits and have a normal debit balance c. liabilities, revenues, and retained earnings are increased by credits d. assets, expenses, and dividends are increased by debits
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Which of the following is not a correct rule of debits and credits?
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asset decrease, liability decrease
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How does paying a liability in cash affect the accounting equation?
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$135000
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The assets and liabilities of the company are $175,000 and $40,000, respectively. Stockholders' equity should equal
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A. investments b.Answer stockholders' equity c. inventory d. cash
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Which of the following is not an asset?
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liabs
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Debts owed by a business are referred to as
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115000
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Donner Company is selling a piece of land adjacent to their business. An appraisal reported the market value of the land to be $120,000. The Focus Company initially offered to buy the land for $107,000. The companies settled on a purchase price of $115,000. On the same day, another piece of land on the same block sold for $122,000. Under the cost concept, what is the amount that will be used to record this transaction in the accounting records?
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60000
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Equipment with an estimated market value of $55,000 is offered for sale at $75,000. The equipment is acquired for $20,000 in cash and a note payable of $40,000 due in 30 days. The amount used in the buyer's accounting records to record this acquisition is
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a. a proprietorship b. a corporation c. a partnership d. all of these Answer
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For accounting purposes, the business entity should be considered separate from its owners if the entity is
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generally accepted accounting principles
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The initials GAAP stand for
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corporation
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An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a
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IASB
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Countries outside the United States use financial accounting standards issued by the
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1.? not Re 2. income sm 3.sm of cash flows 4. IS 5. RE 6.BS 7.RE
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1. Reports as of a specific date 2. The first statement prepared 3. Has three sections: operating, investing and financing 4. Reports only revenues and expenses 5. The second statement prepared 6. A formal presentation of the accounting equation 7. The connecting link between the income statement and balance sheet
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1. Retained Earnings C 2. Accounts Receivable D 3. Accounts Payable C 4. Interest Earned C 5. Copyrights D
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For the following accounts, please indicate whether their normal balance is on the credit side or the debit side of the T-account.
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a. Office Equipment b. Land Answer c. Building d. Delivery Equipment
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Which one of the fixed asset accounts listed below will not have a related contra asset account?
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balance sheet in the prop, plant, and equip
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Accumulated depreciation appears on the
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sales discount
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Discounts taken by a buyer because of early payment are recorded on the seller's accounting records as a(n)
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a. Cost of Merchandise Sold debit $1,200; Merchandise Inventory credit $1,200.
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If the physical count of the inventory revealed $72,000 of merchandise on hand and the inventory records reported $73,200, what would be the necessary adjusting entry to record inventory shortage?
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a. the inclusion of gross profit in the income statement b. accounting equation Answer c. merchandise inventory included in the balance sheet d. in what is sold
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Which one of the following is not a difference between a retail business and a service business?
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sales
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Generally, the revenue account for a merchandising business is entitled
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selling expenses
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Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
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current asset
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Merchandise inventory is classified on the balance sheet as a
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perpetual
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The inventory system employing accounting records that continuously disclose the amount of inventory is called
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d. sales less (sales discounts and sales returns and allowances) less cost of merchandise sold
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Gross profit is equal to:
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25737
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Silver Co. sold merchandise to Bronze Co. on account, $29,367, terms 2/15, net 45. The cost of the merchandise sold is $13,900. Silver Co. issued a credit memorandum for $3,105 for merchandise returned that originally cost $1,159. The Bronze Co. paid the invoice within the discount period. What is amount of net sales from the above transactions?
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sales returns and allowances
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Which of the following accounts has a normal debit balance?
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credit memo
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If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a
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credit terms
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The arrangements between buyer and seller as to when payments for merchandise are to be made are called
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balance sheet as a current liab
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Unearned Fees appear on the
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will be paid in less than 1 year
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Current liabilities are those liabilities that
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are called real accts
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Balance sheet accounts
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a. Rent Revenue, Fees Earned, Miscellaneous Expense
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Which of the following account groups are all considered nominal accounts?
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b. the last day of the accounting period, although they are actually journalized after the end of the accounting period
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Closing entries are dated in the journal as of
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b. analyze and record transactions, post transactions to the ledger, prepare a trial balance, analyze adjustment data, prepare adjusting entries, prepare financial statements, journalize closing entries and post to the ledger
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The proper sequence for the steps in the accounting cycle is a follows
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c. ordinarily begins on the first day of a month and ends on the last day of the following twelfth month.
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A fiscal year
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c. preparation of adjustments, adjusted trial balance, financial statements
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During the end-of-period processing, which of the following best describes the logical order of steps?
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b. is a fiscal year that ends when business activities are at its lowest point.
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the natural business year
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d. The adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts.
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What is the major difference between the unadjusted trial balance and the adjusted trial balance?
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a. Sales Tax Payable C b. Merchandise Inventory D c. Delivery Expense D d. Cost of Merchandise Sold D e. Sales Returns and Allowances D f. Sales Discounts D g. Sales C
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what is the nominal balance of the following accts
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amortization
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The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is
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D accum deprec, C machinery
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When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry
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2000 gain
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A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?
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initial cost - resid value
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The formula for depreciable cost is
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capital expenditures
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Expenditures that add to the utility of fixed assets for more than one accounting period are
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145000
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A building with an appraisal value of $147,000 is made available at an offer price of $152,000. The purchaser acquires the property for $35,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $65,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is
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a. installation costs b. transportation costs c. testing costs prior to placing the equipment into production d. all are Correct Answer
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Which of the following should be included in the acquisition cost of a piece of equipment?
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8695
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Allowance for Doubtful Accounts has a debit balance of $511 at the end of the year (before adjustment), and Bad Debt Expense is estimated at 1% of net credit sales. If net credit sales are $869,514, the amount of the adjusting entry to record the estimate of the uncollectible accounts is
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3000
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Abbott Company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of net credit sales will be uncollectible. On January 1, 2010, the Allowance for Doubtful Accounts had a credit balance of $2,400. During 2010, Abbott wrote-off accounts receivable totaling $1,800 and made credit sales of $100,000. There were no Sales Returns or Sales Discounts during the year. After the adjusting entry, the December 31, 2010, balance in the Bad Debt Expense would be
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bad debt exp 13720 allowance for doubtful accts 13720
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Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $252,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 6% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $1,400 before adjustment?
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contra asset, credit
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What is the type of account and normal balance of Allowance for Doubtful Accounts?
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direct write off method
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The two methods of accounting for uncollectible receivables are the allowance method and the
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asset, debit
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The type of account and normal balance of Petty Cash is a(n)
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debit A/R C Cash
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Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company's accounts?
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deduction from the balance per companys records
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Accompanying the bank statement was a debit memo for an NSF check received from a customer. This item would be included on the bank reconciliation as a(n)
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addition to the bal per companys recs
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Receipts from cash sales of $7,500 were recorded incorrectly in the cash receipts journal as $5,700. This item would be included on the bank reconciliation as a(n)
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d. is part of the internal control system
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the bank reconciliatoin
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promissory note left for colleciton
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A debit or credit memo describing entries in the company's bank account may be enclosed with the bank statement. An example of a credit memo is
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an expense on the income statement
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The debit balance in Cash Short and Over at the end of an accounting period is reported as
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c. a single employee is responsible for collecting and recording of cash
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Which one of the following below reflects a weak internal control system?
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b. provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with
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The objectives of internal control are to
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FIFO
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If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is
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a. net income is overstated, assets are overstated, retained earnings is overstated
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Merchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and retained earnings?
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LIFO
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During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is
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FIFO
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The inventory costing method that reports the most current prices in ending inventory is
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a. a credit to Sales Tax Payable for $210
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Merchandise is sold for cash. The selling price of the merchandise is $3,000 and the sale is subject to a 7% state sales tax. The journal entry to record the sale would include
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b. periodic system determines the inventory on hand only at the end of the accounting period
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The primary difference between a periodic and perpetual inventory system is that a
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preparing a post closing trial balance
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In the accounting cycle, the last step is
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a. after the income statement and the retained earnings statement
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The balance sheet should be prepared
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after income and before balance
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The retained earnings statement should be prepared
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32000
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The unearned rent account has a balance of $36,000. If $4,000 of the $36,000 is unearned at the end of the accounting period, the amount of the adjusting entry is
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c. debit Insurance Expense, $10,000; credit Prepaid Insurance, $10,000
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What is the proper adjusting entry at April 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $16,000, and unexpired amounts per analysis of policies, $6,000?
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a. records revenues and expenses when they are incurred.
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The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting
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a. Cash A b. Wages expense RE c. Accounts payable L d. Fees earned RE e. Supplies A f. Land A
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a. Cash b. Wages expense c. Accounts payable d. Fees earned e. Supplies f. Land asset liab or RE?
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no expenses or fees earned
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balance sheet appearance?
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1. Accounts Receivable no 2. Capital Stock no 3. Cash no 4. Fees Earned yes 5. Land no 6. Supplies no 7. Supplies Expense yes 8. Utilities Expense yes 9. Wages Expense yes 10. Wages Payable no
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Appear on IS?
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net income = fees earned - expenses
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net income
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1. Cash received from fees earned. op 2. Cash paid for expenses. op 3. Cash paid for land. I 4. Cash received from issuing capital stock. Fi
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op act, invest act, financing act?
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the inventory records do not show the amount available for sale or the amount sold during the period. Instead, the cost of merchandise sold and the merchandise on hand are determined at the end of the period by physically counting the inventory
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periodic inventory system
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each purchase and sale of merchandise is recorded in the inventory and the cost of merchandise sold accounts. As a result, the amounts of merchandise available for sale and sold are continuously (perpetually) updated in the inventory records. Because many retailers use computerized systems, the perpetual inventory system is widely used.
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perpetual inventory system
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sales - sales returns & allows. - sales discounts
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Net sales
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net sales - cost of merch sold
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gross profit
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Merchandise costs consist of all the costs of acquiring the merchandise and readying it for sale, such as purchase and freight costs
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cost of merch sold
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GP - op expenses and admin exp
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income from op
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incurred directly in selling things. Examples of selling expenses include sales salaries, store supplies used, depreciation of store equipment, delivery expense, and advertising.
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selling expense
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sometimes called general expenses, are incurred in the administration or general operations of the business. Examples of administrative expenses include office salaries, depreciation of office equipment, and office supplies used.
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administrative expenses
