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ACC 201 FINAL- used for Ch 5 quiz
Terms in this set (86)
The accounting equation is defined as
Assets = liability + SE
Provides information primarily for external decision makers
Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as:
The form of business organization that is legally separate from its owners is a
Creditors' claims to a corporations resources are referred to as
Net income can be best described as
Revenues - Expenses
Which financial statement is typically prepared first
Which financial statement reports a companies retained earnings
Which accounting number has the single greatest impact on stock prices
Independent auditors express an opinion on the
Fairness of financial statements
Use the following appropriate amounts to calculate net income: Revenues, $11,500; Liabilities, $3,700; Expenses, $3,300; Assets, $18,600; Dividends, $1,000.
Revenues ($11,500) − Expenses ($3,300) = Net Income.
The ending retained earnings balance of Boomer Inc. decreased by $1.0 million from the beginning of the year. The company declared a dividend of $4.3 million during the year. What was the net income earned during the year?
Beginning Retained Earnings ($0) + Net Income − Dividends ($4.3) = Ending Retained Earnings (−$1.0).
External events include all of the following except
Using office supplies
receiving cash from an account receivable
Increases one asset and decreases another asset
An expense has what effect on the accounting equation
Decrease stockholder's equity
Purchasing office supplies on account will
increase assets and increase liabilities
which of the following accounts has a debit balance
which of the accounts is increased with a debit and decreased with a credit
Assets, dividends, and expenses
which of the following is not a possible journal entry
Debit Assets; debit stockholders' equity
Posting is the process of
Transferring the debit and credit information from the journal to individual accounts in the general ledger.
A trial balance represents the
List of all accounts and their balances at a particular date to ensure that debits equal credits.
which of they following accounting principles states that expenses are recognized in the same period as the revenues they help to generate
Air France collected cash on February 4 from the sale of a ticket to a customer on January 26.The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue?
The primary difference between accrual-basis and cash-basis accounting is
The timing of when revenues and expenses are recorded
always involve at least one income statement account and one balance sheet account
which of the following is(are) true regarding the characteristics of adjusting entries
Both B and C are true
An adjusted trial balance
is a list of all accounts and their balances after adjusting entries
The following financial information is from Bronco Company. All debt is due within one year unless stated otherwise.
Retained Earnings $63,700
Accounts Receivable 10,000
Unearned Revenue 5,400
Accounts Payable 14,400
Common Stock 25,000
Notes Payable due in 18 months 29,000
Interest Payable 5,300
What is the amount of current liabilities?
Unearned revenue ($5,400), Accounts payable ($14,400), and Interest payable ($5,300) are normally current liabilities.
The retained earnings account had a beginning credit balance of $26,000, during the period the business had a net loss of $12,000, and the company paid dividends of $8,000. The ending balance in the retained earnings account is
Beginning Retained Earnings ($26,000) − Net Loss ($12,000) − Dividends ($8,000) = Ending Retained Earnings.
When a company prepares closing entries which one of the following is not a correct closing entry
Debit Dividends; Credit Retained Earnings
The closing Process includes which of the following
Closing the balance of revenue, expense, and dividend accounts to zero
what key piece of legislation was passed in response to corporate accounting scandals by ENRON, Worldcom, and others
Under the provisions of the Sarbanes-Oxley Act, corporate executives:
Must personally certify the company's financial statements
common examples of cash equivalents include all of the following except
which of the following would not be considered good internal control for cash receipts
Requiring the employee receiving cash from customers to also deposit the cash into the company's bank account
The following data were obtained from the bank statement and from the process of reconciling it:
Bank service charges = $20
Deposit outstanding = $150
Interest earned on the bank account = $10
Checks outstanding = $400
Which items should be deducted from and added to the bank balance in completing the reconciliation?
deduct checks outstanding; add deposit outstanding
The balance shown in the August bank statement of Colt Company was $23,200. After examining the August bank statement and items included with it, the company's accountant found:
What is the amount of cash that should be reported in the balance sheet as of August 31?
Bank balance ($23,200) + deposits outstanding ($1,800) - checks outstanding ($4,300) = $20,700.
which of the following is not involved in the replenishment of the petty cash fund
weekly payroll checks will be recorded
which of the following is correct regarding a petty cash fund
all of the above are correct
which of the following best describes credit sales
Sales to customers on account
Boynton Jewelers reported the following amounts at the end of the year: total sales = $550,000; sales discounts = $12,000; sales returns = $44,000; sales allowances = $17,000. What was the company's net sales for the year?
Net sales = $550,000 − $12,000 − $44,000 − $17,000 = $477,000.
At December 31, Gill Co. reported accounts receivable of $271,000 and an allowance for uncollectible accounts of $1,000 (credit). An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 5% of accounts receivable. The amount of the adjustment for uncollectible accounts would be:
($271,000 × 5%) − $1,000 = $12,550.
Allowance for uncollectible accounts is
A contra asset account
On February 1, 2012, Sanger Corp. lends cash and accepts a $7,500 note receivable that offers 20% interest and is due in six months. What would Sanger record on August 1, 2012, when the borrower pays Sanger the correct amount owed?
Interest revenue = $7,500 × 20% × 6/12 = $750.
Interest Revenue 750
Notes Receivable 7,500
Sandburg Veterinarian reports the following information for the year:
Net credit sales $110,000
Average accounts receivable 20,000
Cash collections on credit sales 90,000
What is Sandburg's receivables turnover ratio?
Receivables turnover ratio = net credit sales ($110,000) / average accounts receivable ($20,000)
Using the allowance method, writing off an actual bad debts would include a
Credit to accounts receivable
When using an aging method for estimating uncollectible accounts
older accounts are considered less likely to be collected
the largest expense on a retailers income statement it typically
Cost of goods sold
Cost of goods sold is
an expense account
which of the following is true regarding LIFO and FIFO
In a period of rising costs, LIFO results in lower net income than FIFO.
in a perpetual inventory system, the purchase of inventory is debited to
merchandise sold FOB destination indicates that
The seller holds title until the merchandise is received at the buyers location
Given the information below, what is the gross profit?
Sales revenue $350,000
Accounts receivable 53,000
Ending inventory 114,000
Cost of goods sold 242,000
Sales returns 22,000
Sales revenue ($350,000) - Sales returns ($22,000) - Cost of goods sold ($242,000)
which of the following would be recorded as land improvements
adding a parking lot
Kansas Enterprises purchased equipment for $74,000 on January 1, 2012. The equipment is expected to have a ten-year life, with a residual value of $7,650 at the end of ten years.
Depreciation expense = (($74,000 − $7,650) /10) = $6,635
A machine has a cost of $17,100, an estimated residual value of $4,080, and an estimated useful life of seven years. The machine is being depreciated on a straight-line basis. At the end of the second year, what amount will be reported for accumulated depreciation?
($17,100 - $4,080) / 7 years = $1,860 per year × 2 years = $3,720.
Berry Co. purchases a patent on January 1, 2012, for $43,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co. uses the straight-line method, what is the amortization expense for the year ended December 31, 2013?
$43,000 / 5 years = $8,600
the excess of the fair value of a business as a whole over the fair value of all net identifiable assets
which of the following subsequent expenditures would be capitalized
costs that increase the service life of an asset
The balance sheet of Hidden Valley Farms reports total assets of $450,000 and $550,000 at the beginning and end of the year, respectively. Net income and sales for the year are $100,000 and $800,000, respectively. What is Hidden Valley's return on assets?
$100,000/[($450,000 + $550,000)/2] = 20%.
which of the following is not a current liability
a note payable due in 2 years
The Pita Pit borrowed $100,000 on November 1, 2012, and signed a six-month note bearing interest at 12%. Principal and interest are payable in full at maturity on May 1, 2013. In connection with this note, The Pita Pit should report interest expense at December 31, 2012, in the amount of:
[($100,000 x 12%) x 2/12] = $2,000.
The Pita Pit borrowed $100,000 on November 1, 2012, and signed a six-month note bearing interest at 12%. Principal and interest are payable in full at maturity on May 1, 2013. In connection with this note, The Pita Pit should report interest expense in 2013 for the amount of:
[($100,000 x 12%) x 4/12] = $4,000.
which of the following is not an employer payroll cost
federal and state income taxes
United Supply has a $5 million liability at December 31, 2012, of which $1 million is payable in each of the next five years. United Supply reports the liability on the balance sheet as:
a $1 million current liability and a $4 million long-term liability.
At the beginning of 2012, Angel Corporation began offering a 1-year warranty on its products. The warranty program was expected to cost Angel 4% of net sales. Net sales made under warranty in 2012 were $180 million. Five percent of the units sold were returned in 2012 and repaired or replaced at a cost of $5.3 million. The amount of warranty expense on Angel's 2012 income statement is:
working capital is
current assets - current liabilities
Bill wants to give Maria a $590,000 gift in two years. If money is worth 10% compounded semiannually, what is Maria's gift worth today?
PV = $590,000 x .823 (Appendix B; n = 4; i = 5%) = $485,570.
How much will $10,000 grow to in two years, assuming an interest rate of 16% compounded quarterly?
FV = $10,000 x 1.369 (Appendix A; n = 8; i = 4%) = $13,690
How much will $8,000 invested at the end of each year grow to in three years, assuming an interest rate of 10% compounded annually?
FVA = $8,000 x 3.310 (Appendix C; n = 3; i = 10%) = $26,480.
At the end of each quarter, Patti deposits $1,200 into an account that pays 10% interest compounded quarterly. How much will Patti have in the account in four years?
FVA = $1,200 x 19.380 (Appendix C; n = 16; i = 2.5%) = $23,256.
Samson Enterprises issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial statements?
a and b
which of the following definitions describes a secure bond
supported by specific assets pledged as collateral by the issuer
serial bonds are
bonds that mature in installments
the cash interest payment each period is calculated as the
face amount times the stated interest rate
when bonds are issued at a discount and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is
less than the interest expense
which of the following leases is essentially the purchase of an asset with debt financing
a capital lease
financial leverage is best measured by which of the following ratios
the debt to equity ratio
advantages of the corporate form that have led to the growth of this form of business ownership include all of the following except
low government regulation
issued stock refers to the number of shares
outstanding plus treasury shares
If a company issues 1,000 shares of $1 par value common stock for $30 per share, what would be the effect on the accounting equation?
increase assets and increase stockholders' equity
preferred stock is called preferred because it usually has two preferences over common stock. these preferences relate to
dividends and distributions of assets if the corporation is dissolved
decreases stockholders' equity
retained earnings represents a companies
net income less dividends since the company first started
the statement of stockholders' equity shows
how each equity account changed over time
return on equity is calculated as
net income divided by average stockholders' equity
This set is often in folders with...
Accounting 201 CONNECT Ch. 5
CH 5 - ACCT 1
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