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Accounting 210 > AC210 Test 1 > Flashcards

AC210 Test 1 Flashcards

0
Q

SeWhich of the following elements are found on the income statement?

a. rent expense
b. cash
c. accounts receivable
d. contributed capital
e. retained earnings

A

a. rent expense

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1
Q

Grenoble Company’s retained earnings increases $20,000 during 2014. What was Greenboy’s 2014 net income or loss given that Greenboy declared $25,000 of dividends during 2014.

A

Net income was $45,000

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2
Q

Which of the following statements is true?

a. the three basic elements of the balance sheet are revenues, expenses, and assets.
b. assets on the balance sheet include retained earnings.
c. the amounts you owe to suppliers as part of an informal agreement to purchase supplies are called notes payable.
d. After every business transaction, the accounting equation always has to balance.
e. all are true.

A

d. After every business transaction, the accounting equation always has to balance.

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3
Q

Which of the following accounts would be reported as assets on the balance sheet?

a. accounts payable, notes payable, and cash
b. retained earnings, accounts receivable, and cash
c. accounts receivable, inventory, and cash
d. inventory, propert and equipment, and contributed capita.

A

c. accounts receivable, inventory, and cash.

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4
Q

Wally Corporation had assets of 270,000 and liabilities of 160,000 at the beginning of 2014. During 2014, assets increased 25,000 and liabilities increased 5,000. What was stockholder’s equity on December 31, 2014?

A

130,000

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5
Q

Which of the following accounts would not be reported on the balance sheet?

a. notes payable
b. dividends
c. retained earnings
d. equipment
e. inventory

A

b. dividends

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6
Q

Which of the following statements is false?

a. accounts receivable and accounts payable are reported on the income statement.
b. stockholders’ equity on the balance sheet includes contributed capital and retained earnings.
c. the income statement is a financial statement that shows revenues earned and expenses incurred during a specified period of time.
d. contributed capital represents the amount that stockholders have invested in the country.
e. the ending retained earnings balance from the statement of retained earnings is reported on the balance sheet.

A

a. accounts receivable and accounts payable are reported on the income statement.

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7
Q

Park and Company was recently formed with a $6,300 investment in the company by stockholders. The company then borrowed $3,300 from a local bank, purchased $1,130 of supplies on account, and also purchased $6,300 of equipment by paying $2,130 in cash and signing a promissory note for the balance. Based on these transactions, the company’s total assets are:

A

14,900

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8
Q

Which of the following statements is true?

a. debits decrease assets and increase liability and equity accounts.
b. credits increase assets accounts and decrease liability and equity accounts.
c. the total amount debited does not always need to equal the total amount credited for a particular transaction.
d. the normal balance of the contributed capital account is a debit.
e. none of the above.

A

e. NONE

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9
Q

A company entered into the following transactions:

  • borrowed 5,110 from the bank by signing a promissory note.
  • issued stock to owners for 11,100.
  • purchased 1,110 of supplies, on account
  • paid 510 to suppliers as payment on account for the supplies purchased.

What is the amount of total liabilities?

A

5,710

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10
Q

Li company paid cash to purchase land. As a result of this accounting event…

a. both assets and liabilities decreased
b. total equity decreases
c. total assets were unchanged.
d. both assets and total equity decreased.
e. both assets and liabilities decreased.

A

c. total assets was unchanged.

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11
Q

Which of the following statements is false?

a. when a company borrows money from a bank, the liabilities increase and stockholder’s equity is unchanged.
b. when the principal of a loan is repaid, total stockholder’s equity is decreased.
c. the journal is a chronological record of a company’s transaction.
d. a company’s assets and stockholder’s equity both increase when the company sells additional shares of stock in exchange for cash.
e. none are true

A

b. when the principal of a loan is repaid, total stockholder’s equity is decreased.

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12
Q

A company’s January 1, 2014 balance sheet reported total assets of 120,000 and total liabilities of 40,000. During January 2014, the following transactions occurred:

(a. ) the company issued stock and collected cash totaling 30,000
(b. ) the company paid an account payable of 6,000.
(c. ) the company purchased supplies for 1,000 with cash.
(d. ) the company purchased land for 60,000 paying 10,000 cash and signing a note payable for the balance

What is the total stockholder’s equity after the transaction above?

A

110,000

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13
Q

The Buddy Burger Corporation owes 1.5 million to the Texas Wholesale Meat Company from whom Buddy Burger buys burger meat. Which account would Buddy burger use to report the amount owed.

A

Accounts payable.

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14
Q

Which of the following accounts are increase by credit?

a. cash and equipment
b. accounts payable and contributed capital
c. buildings and contributed capital
d. inventory and notes payable.

A

b. accounts payable and contributed capital.

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15
Q

List the 4 basic financial statements in order:

A
  1. Income statement
  2. Statement of retained earnings
  3. Balance sheet
  4. Statement of cash flow
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16
Q

What is a sole proprietorship?

A

Business organization owned by one person. The owner is personally liable for all debts of the business.

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17
Q

What is a partnership?

A

Business organization owned by two or more people. Each partner is responsible for all debts of the business.

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18
Q

What is a corporation?

A

A separate legal entity. Owners or corporations (stockholders) are not personally liable for debts of the corporation.

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19
Q

What is the basic accounting equation?

A

Assets = Liabilities + Stockholders’ Equity

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20
Q

What are assets? Provide some examples.

A

What a business owns. Resources controlled by the company that have measurable value and are expected to provide future benefits to the company. Examples include cash, supplies, furniture, and equipment.

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21
Q

What are liabilities? Provide some examples.

A

What a business owes. Measurable amounts owed by the business to creditors. Examples include notes payable and accounts payable.

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22
Q

What is stockholders’ equity?

A

Owners’ claim to the business resource. Examples include contributed capital and retained earnings.

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23
Q

Net Income is…

A

Revenue - Expenses

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24
Q

What is revenue?

A

Sales of goods and/ or services to customers. they are measured at the amount the business charges the customer.

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25
Q

What are expenses?

A

The costs of doing business necessary to earn revenues, including wages to employees, advertising, insurance, and utilities.

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26
Q

The Unit of Measure Assumption

A

reports of business transactions should be in an appropriate monetary unit.

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27
Q

What does the statement of retained earnings tell us?

A

Reports the way that net income and the distribution of dividends affected the financial position of the company during the period.

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28
Q

How does all of this flow?

A
  1. Net income flows from the income statement to the statement of retained earnings. 2. Ending retained earnings flows from the statement of retained earnings to the balance sheet. 3. Cash on the balance sheet and cash at end of year on the statement of cash flows agree.
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29
Q

What 2 reasons do creditors use financial statements for?

A
  1. Is the company generating enough cash to make payments on its loan?
  2. Does the company have enough assets to cover its liabilities?
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30
Q

What 2 reasons do investors use financial statements for?

A
  1. What is the immediate return (through dividends) on my contributions?
  2. What is the long-term return (through stock price increases resulting from the company’s profit?
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31
Q

What is the main goal of external financial reporting?

A

to provide useful financial information to external users for decision making.

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32
Q

What is useful?

A

Relevant and faithful representation.

33
Q

What is the FASB?

A

Financial Accounting Standards Board. They make the rules for U.S.

34
Q

GAAP?

A

General Accepted Accounting Principals. These are the rules.

35
Q

External changes:

A

Exchanges involving assets, liabilities, and stockholder’s equity that you can see between the company and someone else.

36
Q

Internal Events:

A

Events occurring within the company, for example, using some assets to create an inventory product.

37
Q

Transaction:

A

A business activity that affects the basic accounting equation.

38
Q

Duality of effects:

A

Every transaction has at least two effects on the basic accounting equation.

39
Q

Assets increase is a debit or credit?

A

Debit

40
Q

Assets decrease is a debit or credit?

A

Credit

41
Q

Liabilities increase is a debit or credit?

A

Credit

42
Q

Liabilities decrease is a debit or credit?

A

Debit

43
Q

Stockholders’ Equity increase is a debit or credit?

A

Credit

44
Q

Stockholders’ Equity decrease is a debit or credit?

A

Debit

45
Q

Debit is on what side? Credit is on what side?

A

Debit- left

Credit- right

46
Q

What is the current ration?

A

Current Assets / Current Liabilities

47
Q

What are current assets?

A

Used or converted into cash within the next 12 months.

48
Q

What is the accrual basis of accounting?

A

Records revenue when they are earned and expenses when they are incurred, regardless of the timing of cash receipts or payments.

49
Q

Revenue principle:

A

Revenues are recognized when there are earned.

50
Q

Matching principle

A

Record expenses in the same period as the revenues with which they can be reasonably associated.

51
Q

Are revenues recorded with credits or debits?

A

Credits

52
Q

Are expenses recorded with debits or credits?

A

Debits

53
Q

Recording of revenue does what to stockholder equity? Recording of expenses does what to stockholder equity?

A

Increases. Decreases.

54
Q

Unearned revenue is a what?

A

Liability

55
Q

Net Profit Margin =

A

Net Income / Total Revenue

56
Q

What is the net profit margin?

A

What you take home.

57
Q

Pay $1,200 rent to cover the next two months. Affect on accounting equation?

A

A: no change
L: no change
SHE: no change.
they net each other out.

58
Q

What are the 2 external parties that we prepare statements for?

A

Investors and Creditors

59
Q

If you buy supplies for $100.00 cash, what is the affect on the Accounting Equation?

A

No net change. Nothing happened to any of them.

60
Q

Put $50.00 on account.

What affect on accounting equation?

A

Assets go up.
Liabilities go up.
No change in SHE.

61
Q

Sells pizza for $15,000 on account.

What affect on accounting equation?

A

Assets go up.
Liabilities no change.
SHE goes up because the revenue went up.

62
Q

Receive utility bill in July for $150.00 and will pay the bill next month.
What affect on accounting equation?

A

No asset change.
Liabilities change because you owe money.
SHE goes down because expenses.

63
Q

Receiving $100.00 cash today for services to be performed next month. Affect on accounting equation?

A

A: goes up
L: goes up
SHE: no change

64
Q

Pay $1,200 rent to cover the next two months. Affect on accounting equation?

A

A: no change
L: no change
SHE: no change.
they net each other out.

65
Q

The normal balance:

A

is the side where the account increases.

66
Q

What is an assets normal balance?

A

Debit

67
Q

What is liabilities normal balance?

A

Credit

70
Q

What is SHE normal balance?

A

Credit

71
Q

In January, your company prepays rent of $15,200 for February and March. Which of the following describes the effects of this transaction in January?

a. assets decrease 15200 and liabilities decrease 15200.
b. assets increase 15200 and stockholders’ equity increases 15200.
c. liabilities decrease 15200 and stockholders’ equity increases 15200.
d. assets increase 15200 and liabilities increases 15,200.
e. no change in any of it

A

e. no change

72
Q

In January, your company prepays rent of $15,200 for February and March. Which of the following describes the effects of this transaction in January?

a. assets decrease 15200 and liabilities decrease 15200.
b. assets increase 15200 and stockholders’ equity increases 15200.
c. liabilities decrease 15200 and stockholders’ equity increases 15200.
d. assets increase 15200 and liabilities increases 15,200.
e. no change in any of it

A

e. no change

73
Q

which of the following would eventually cause a reduction in retained earnings?
a. using up supplies
b. earning unearned revenue
c. receiving contributions from investors.
billing customers for services provided.

A

a. using up supplies.

74
Q

on november 3, 2015, cee-high company bought an advertisement that aired during a sporting event at a cost of 3.6 million. it is legally obligated to pay for the ad but has not yet done so. how does the purchase and use of the ad time affect cee- highs balance sheet on november 3, 2015?

a. it increases both assets and liabilities by 3.6 million
b. it increases liabilities and decreases stockholders’ equity by 3.6 million each.
c. it increases assets and decreases stockholders equity by 3.6 million each.
d. it does not affect the balance sheet.
e. it decreases both assets and liabilities by 3.6 million.

A

b. it increases liabilities and decreases stockholder’s equity by 3.6 million.

75
Q

Genius Company receives 3,500 in advance on march 20,2015 for work to be performed in april 2015. on march 20, the company should… debit and credit what?

A

debit cash 3,500

credit unearned revenue 3,500

76
Q

Clifford Company provides $1,000 of pool maintenance services during July and collects payment in August.the company performs 1600 of pool maintenance services during july that were paid for in june. the company accepts an order to perform 500 of pool maintenance services in august (that it actually performs in august and will be paid in the same month. revenue should be credited for …

A

0 in June
2,600 in July
500 in August

77
Q

Select the answer that best describes the entry that is required to enter the following transaction in the company’s accounting system: Webster Company collected 13,000 from a customer on account.

a. debit accounts receivable, credit revenue
b. debit cash, credit accounts receivable.
c. debit cash, credit revenue
d. debit accounts receivable, credit cash.
e. debit accounts payable, credit cash.

A

b.

78
Q

Select the answer that best describes the entry that is required to enter the following transaction in the company accounting system: Beautiful Company paid 1450 for supplies previously purchased on account in prior month. the supplies have not yet been used.

a. total owners equity decreased
b. total owners equity increases.
c. total assets decrease
d. total liabilities increases.
e. total assets increase.

A

c. total assets decrease

79
Q

on june 15, cozy cats consulting company provides 23,000 in consulting services of which 12000 is immediately paid for and 11000 is on account. what journal entry will cozy cats record on june 15?

A 
dr cash (+A) 12000
dr accounts receivable (+A) 11000
credit revenue (R+, SE+) 23000
80
Q

Cash Basis

A

records revenues when cash is received and expenses when cash is paid

81
Q

What is net income NOT?

A

Cash, change in value, or exact.

Accounting 210 (4 decks)

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