Acct 201

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Acct 201
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  1. The Financial Accounting Standards
    Board is responsible for establishing:
    • generally accepted accounting
    • principles.
  2. A business paid $15,000 cash for
    equipment used in the business. At the time of purchase, the equipment had a
    list price of $20,000. When the balance sheet was prepared, the value of the
    equipment was $22,000. What is the relevant measure of the value of the
    equipment?
    Historical cost, $15,000
  3. For accounting purposes, the business entity should be considered separate from its owners if the business is organized as a:
    any of the above.
  4. The continuity (going-concern) assumption of accounting:
    holds that the entity will remain in operation long enough to use its existing assets.
  5. An investor wishing to assess a company’s overall financial position at the end of the period should probably examine the:
    Balance Sheet.
  6. Expenses are:
    decreases in retained earnings resulting from operations.
  7. Which of the following is not an asset?
    Accounts Payable
  8. The portion of net income that the company has kept over a period of years is called:
    retained earnings.
  9. Who ultimately controls a corporation?
    The stockholders
  10. Stockholders’ equity for Commerce Corporation on January 1, 2014 and December 31, 2014 were $60,000 and $75,000, respectively. Assets on January 1, 2014 and December 31, 2014 were $115,000 and $105,000, respectively. Liabilities on January 1, 2014 were $55,000. What is the amount of liabilities on December
    $30,000
  11. Which financial statement provides a "snapshot photo" of one moment in time for the whole entity?
    Balance Sheet only
  12. The ending balance in retained earnings appears on the:
    Balance Sheet and Statement of Retained Earnings.
  13. For which form of business ownership are the owners of a business legally distinct from the business?
    Corporation
  14. Which of the following best describes a liability? Liabilities are:
    debts payable to outsiders called creditors.
  15. Which of the following statements should be prepared before the balance sheet is prepared?
    Income statement and statement of retained earnings
  16. Given that total liabilities decreased by $75,000 and total owner’s equity increased by $90,000 during the same accounting time period, what is the net effect on total assets during this period?
    $15,000 increase
  17. An entity that is organized according to state law and in which ownership units are called stock is a:
    corporation.
  18. The stable-monetary-unit assumption of accounting:
    enables accountants to ignore the effect of inflation in the accounting records.
  19. The two main components of stockholders’ equity are:
    retained earnings and paid-in capital.
  20. All things being equal, what form of organization is considered to give its owners the maximum exposure or risk in the event that it fails and cannot pay its debts?
    Partnership
  21. The sum of "outsider claims" plus "insider claims" equals:
    total assets.
  22. Which of the following statements about a corporation is false?
    Its shareholders set policy and appoint officers
  23. A business had a beginning retained earnings balance of $10,000, had revenues of $22,000 and expenses of $20,000 in the period, and an ending retained earnings balance of $7,000. What was the amount of dividends paid in this period?
    $5,000
  24. At the end of the current accounting period, account balances were as follows: Cash, $180,000; Accounts Receivable, $75,000; Common Stock, $20,000; Retained Earnings, $65,000. Liabilities for the period were:
    $170,000
  25. A company purchased medical equipment for $100,000 on January 1, 2009. The company determined that the yearly depreciation expense is $10,000. What will be the ending balance in the Accumulated Depreciation — Medical Equipment on December 31, 2012?
    • $40,000
    • 10,000 depreciation per year  * 4 years = 40,000 accumulated depreciation
  26. A business transaction has occurred when:
    an event affects the entity’s financial position.

    the event can be reliably measured.
  27. Consider the following transactions:
    Owners invested $8,000 cash to begin the business
    Provided services for cash, $6,000
    Provided services on account, $4,000
    Paid cash for expenses, $7,500
    How much net income did the business earn?
    • $2,500
    • Calculations:6,000 (Service revenue) + 4,000 (Service revenue) - 7,500 (Cash expenses) = 2,500
  28. Borrowing money from the bank by signing a note payable:
    has no effect on stockholders’ equity.
  29. Consider the following transactions:
    Borrowed cash on a note payable, $80,000
    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
    What are total liabilities?
    • $81,200
    • Calculations: 80,000 (Note payable) + 1,200 (Accounts payable) = 81,200
  30. Which of the following accounts has a normal debit balance?
    Equipment
  31. The accounts receivable account for Moon Rivers had a beginning balance of $6,000. During August, the company received payments of $8,000 and added new accounts receivable of $11,000. At the end of August the balance in accounts receivable is _____ and is a ______.
    • $9,000, debit   
    • Calculations:  6,000 (Beginning balance) - 8,000 (Collections) + 11,000 (New A/R charges) = 9,000
  32. When a company performs a service and immediately collects the cash from the customer, which of the following occurs?
    Net income increases
  33. The payment of salaries to employees:
    decreases net income and decrease assets.
  34. A person starting a business bought a building for $300,000. She paid for it with an $180,000 outstanding mortgage and by issuing stock for the balance. Which of the following is true?
    Stockholders’ equity increased by $120,000
  35. Consider the following transactions:
    Owners invested $8,000 cash to begin the business
    Provided services for cash, $6,000
    Provided services on account, $4,000
    Paid cash for expenses, $7,500
    How much cash does the business have?
    • $6,500
    • Calculations:     8,000 (Owners investment) + 6,000 (Services for cash) - 7,500 (Cash payment for expenses) = 6,500
  36. Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash. The amount of stockholders’ equity at the end of the period is:
    Calculations:  80,000 (Owners equity) + 10,000 (Services provided) - 2,000 (Utility expense) = 88,000
  37. A company received cash in exchange for issuing stock. This transaction increased assets and increased
    equity.
  38. Which element(s) of an accounting system provide(s) information about the balance in each account?
    Ledgers
  39. Which of the following transactions increase total assets?
    I.   Borrowed cash on a note payable, $80,000
    Provided services on account, $10,000
    Received cash from a customer as payment on account, $8,000
    IV.  Received a utility bill, $1,200
    I and II
  40. A company purchased office supplies for cash. This transaction increased assets and
    decreased assets.
  41. Which type of account is increased when a company records an increase in debt?
    Liability
  42. Consider the following transactions:
    Borrowed cash on a note payable, $80,000
    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
    Total assets would be:
    • $90,000
    • Calculations: 80,000 (cash) + 10,000 (A/R) + 8,000 (cash) - 8,000 (A/R) = 90,000
  43. Accounting transactions are initially recorded in the:
    journal.
  44. Little Company had a beginning cash balance of $10,000, received cash of $8,000 and ended the month with a cash balance of $6,000. Cash payments for the month were:
    • $12,000.
    • Calculations: 10,000 (Beginning balance) + 8,000 (Receipts) - 6,000 (Ending balance) = 12,000
  45. The Chart of Accounts is:
    a listing of all accounts used to record the business transactions.
  46. An owner makes an investment of cash into the business. This transaction includes a:
    debit to cash and a credit to common stock.
  47. The XYZ Company purchased supplies for $5,000 on account. The entry to record this transaction is:
    Supplies        5,000

    Accounts Payable        5,000
  48. The proper order for the accounting process is:
    transaction occurs, transaction analyzed, journalizing, and posting.
  49. Revenues are recorded when:
    the work is completed on the job, whether the cash is received.
  50. Revenues are:
    increases in retained earnings resulting from delivering goods or services to customers.
  51. Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash. The journal entry to record the purchase of the company includes a:
    debit to Inventory for $20,000.
  52. Which of the following financial statements is prepared using the adjusted trial balance?
    Both the balance sheet and the income statement
  53. With an accrual:
    the cash is received after the revenue is recorded.
  54. A doctor performed surgery in March and did not receive cash from the patient until July. Under accrual accounting the doctor recognizes revenue:
    in March.
  55. On July 25, Hockey Company's accountant prepared a check for August's rent payment. Hockey 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 Hockey Company record the rent expense associated with this transaction?
    August 31
  56. When determining the adjusting entries that may be needed:
    a deferral is an adjustment for payment of an item in advance.
  57. Assume Marlin Co.’s 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:
    Marlin Co. had a net loss of $5,000.
  58. On November 1 of the current year, Prepaid Rent was debited $5,400 for three months of rent, paid in advance. The amount of the adjusting entry on December 31 is:
    • $3,600
    • Calculations:  5,400/3= 1,800 rent per month. 1,800 * 2 months used = 3,600
  59. The deferral adjustment for liabilities
    records the amount of revenue earned for the period.
  60. A company started the year with $400 of supplies. During the year the company purchased additional supplies costing $1,600. There were $800 of supplies on hand at the end of the year. An adjusted trial balance prepared at the end of the accounting period shows the following balance in supplies:
    $800
  61. The book value of a plant asset is the:
    cost of the asset less the accumulated depreciation.
  62. A company pays an employee $1,000 per week for a five day work week. The adjusting entry on December 31, which is a Tuesday, is a:
    • debit to Salaries Expense for $400 and a credit to Salaries Payable for $400.
    • Calculations: 1,000/5 = 200 per day;  200 * 2 days = 400
  63. The following accounts are up-to-date and need no adjustment at the end of the period:
    cash, dividends and common stock.
  64. O’Connor Company purchased supplies totaling $21,600. By year end, $9,300 of supplies were still on hand. How much Supplies Expense should O’Connor recognize?
    • $12,300
    • Calculations:  21,600 (Purchases) - 9,300 (Ending balance) = 12,300
  65. Permanent accounts include:
    cash, prepaid expenses and unearned revenue.
  66. A company started the year with $400 of supplies. During the year, the company purchased an additional $1,200 of supplies. There were $700 of supplies on hand at the end of the year. An adjusting entry prepared at the end of the accounting period includes a:
    debit to Supplies Expense for $900.

    Calculations:  400 (Beginning supplies inventory) + 1,200 (Purchases) - 700 (Ending supplies inventory) =     900
  67. A tired accountant failed to record the adjusting entry for accrued salaries. How does this error affect net income?
    The net income for the period will be overstated.
  68. AMR received $1,600 on account for a sale using the cash basis of accounting. The balance sheet omission of the cash basis of accounting with respect to this transaction comes from the failure to record an entry to which account(s)?
    Accounts Receivable
  69. After the closing entries are prepared:
    the Retained Earnings account will have the correct ending balance.
  70. Unearned rent is reported on the balance sheet as a(n):
    liability.
  71. Which of the following transactions would be recorded under accrual accounting but not under cash-basis accounting?
    Purchasing of inventory on account
  72. On December 15, 2010, a company receives an order from a customer for services to be performed on December 28, 2010. Due to a backlog of orders, the company does not perform the services until January 3, 2011. The customer pays for the services on January 6, 2011. The expense recognition or matching principle requires the revenue to be recorded by the company on:
    January 3, 2011.
  73. A company using the accrual basis of accounting pays $15,000 for a television advertising campaign.  Commercials will run evenly in December, January, and February. How much expense will be reported on an income statement prepared for the month of December?
    • $5,000
    • Calculations: 15,000/3 = 5,000
  74. At the end of the accounting period, a company has accrued interest revenue that they will not receive until the next accounting period. The adjusting entry would include a:
    credit to Interest Revenue
  75. An accountant failed to make an adjusting entry to record depreciation for the current year. Which of the following is the effect of this omission?
    Assets, new income, and stockholders’ equity are all overstated.
  76. . Revenue previously recorded as unearned has now been earned.

    Revenue has been earned but not yet billed.

    Interest earned on a note receivable has not been recorded since it has not yet been received
    Is OVER OR UNDERSTATED?
    Understated
  77. Wages have been earned by the employees but have not yet been paid.
    Prepaid Supplies have now been used.
    Prepaid Insurance has expired.
    Depreciation expense for the year.
    IS IT OVER OR UNDERSTATED?
    OVERSTATED
  78. The cost of operating a business; a decrease in stockholders’ equity
    Expense
  79. Revenues – Expenses
    Net income
  80. Always an asset
    Receivable
  81. Record of transactions
    Journal
  82. Side of an account where increases are recorded
    Normal balance
  83. Always a liability
    Payable
  84. Copying data from the journal to the ledger
    Posting
  85. Assets – Liabilities
    Stockholders’ Equity
  86. Right side of an account
    Credit
  87. A system of handling cash receipts by mail whereby customers remit payments directly to the bank, rather than through the company’s mail is a(n):
    lock-box system.
  88. A bank statement included a NSF check from customer Sandy Fields for $2,100. The journal entry to record this reconciling item should:
    debit Accounts Receivable and credit Cash for $2,100.
  89. Internal controls are designed to accomplish five objectives - comply with legal requirements, promote operational efficiency, safeguard assets,  encourage employees to follow company policy and:
    ensure accurate, reliable accounting records.
  90. A fidelity bond is a(n):
    insurance policy that reimburses a company for employee theft.
  91. Which of the following is sent by the company shipping the goods to the company ordering the goods?
    An invoice
  92. Three key duties should always be separated under a good system of internal controls:
    asset handling, record keeping and transaction approval.
  93. Wells Fargo collected $200 on behalf of its customer. The $200 should appear on the Wells Fargo reconciliation as:
    added to the book balance.
  94. Interest paid by the bank to a company’s account should appear on the bank reconciliation as:
    added to the book balance.
  95. The company’s ___________ have/has the primary responsibility for establishing and maintaining a company’s system of internal control.
    top management
  96. If a bank statement included a bank collection and related interest revenue, the journal entry to record this reconciling item should include a:
    debit to Cash.
  97. In a bank reconciliation, items recorded by the company, but not yet been recorded by the bank, include:
    outstanding checks.
  98. An internal control system can be circumvented by:
    collusion, management override and human limitations.
  99. A bank charge of $40 for imprinting checks appears on the bank reconciliation as a(n) __________ to (or from) the __________ balance.
    deduction; book
  100. The two most common types of fraud impacting financial statements are:
    fraudulent financial reporting and misappropriation of assets.
  101. Checks written by a company, but not yet paid by the bank, appear on the bank reconciliation as __________ and are called __________.
    deductions from the bank balance; outstanding checks
  102. Herbert Company deposited $25,000 in its bank on the same day as - but after - the bank prepared Herbert Company’s bank statement. The deposit should appear on the bank reconciliation as a(n) __________ and is called a(n) __________.
    addition to the bank balance; deposit in transit
  103. When opening incoming mail, the mailroom employee should compare the amount of the check received with the amount shown on the:
    remittance advice.
  104. Differences between the amount of cash reported on a company’s bank statement and the balance in the company’s cash account before the bank reconciliation are primarily due to:
    the timing difference in recording transactions.
  105. Requiring employees to take annual vacations is a part of which characteristic of internal control?
    Separation of duties
  106. A purchase order:
    identifies the need for merchandise and begins the purchasing process.
  107. If the bank records a deposit of $1,500 as $150, the error should be shown on a bank reconciliation as a(n):
    addition to the bank balance of $1,350.
  108. When a company receives cash by mail, the bank deposit for the cash receipts should be made by the:
    treasurer.
  109. The primary way that fraud is prevented and detected is through a proper system of:
    internal control.
  110. In a bank reconciliation, an EFT cash receipt is:
    added to the book balance.
  111. Clemens Co. had a beginning cash balance of $2,000. For the year, it estimates cash receipts of 105,900. It has a desired ending cash balance of $3,500 and anticipates no new financing. Clemens Co.’s estimated cash disbursements are:
    • $104,400.
    • Calculations: 2,000 (Beginning cash balance) + 105,900 (Estimated cash receipts) - X (Cash disbursements) = 3,500 (Desired ending cash balance)
  112. Which of the following is an example of poor internal control?
    The mailroom clerk records daily cash receipts in a journal

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