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ACC 201 Final > Acc 201 Final > Flashcards

Acc 201 Final Flashcards

1
Q

Which accounts normally have credit balances?

A

Revenues, Liabilities, and Equity

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2
Q

Which of the following is an error?
A debit balance in the Dividends account
b. A credit balance in an expense account
c. A credit balance in a liabilities account
d. A credit balance in a revenue account

A

B. A credit balance in an expense account

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3
Q

What is the balance in cash at September 30, 2022?

A

Cash (Debit) + Cash Sales (Debit) - Paid Expenses (Credit)

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4
Q

Which of the following is an asset?
a. Sales Revenue
b. Notes Payable
c. Rent Expense
d. Prepaid Insurance

A

D. Prepaid Insurance

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5
Q

Adjusting entry for supplies

A

Debit Supplies Expense 4,500
Credit Supplies 4,500

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6
Q

Status of Accounts before adjustments - overstated/understated

A

If a company fails to make an adjusting entry to record supplies expense, then expense will be UNDERSTATED

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7
Q

Account Balance after adjustment

A

$4,200-1,800= 2,400

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8
Q

Temporary Accounts

A

CLOSED - All revenue accounts, all expense accounts, dividends

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9
Q

Permanent Accounts

A

Asses, Liabilities, stockholders equity

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10
Q

Normal Balance of sales, returns, and discounts

A

Sales Revenue= Credit
Sales Returns and Allowances= Debit
Sales Discounts= Debit

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11
Q

A credit sale of $1,400 is made on July 15, terms 2/10, net/30, on
which a return of $100 is granted on July 18. What amount is
received as payment in full on July 24?
a. $1,400
b. $1,274
c. $1,350
d. $1,372

A

B. $1,274

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12
Q

Formula to Calculate Gross Profit Rate

A
  1. Net Sales = Revenue - Returns - Discounts
  2. Gross Profit Rate= (Net Sales - COGS) / Net Sales
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13
Q

Factor that determines inventory ownership

A

Legal Title determines whether or not goods should be included in physical count

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14
Q

Doe Company uses a periodic inventory system. Details for the
inventory account for the month of January 2022 are as follows:

Units Per unit price Total
Balance 300 $5.00 $1,500
Purchase 150 5.30 795
Purchase 150 5.50 825

An end of the month inventory showed that 240 units were on hand.

If the company uses LIFO, what is the value of the ending inventory?
a. $1,264
b. $1,200
c. $1,302
d. $1,920

A

B. 1200

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15
Q

Which inventory method results in the highest net income

A

FIFO

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16
Q

Calculate ending inventory using lower of cost or net realizable value

A

Units x lower number

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17
Q

Days In Inventory

A
  1. Inventory Turnover= COGS / Average Inventory
  2. Days in Inventory= 365 / Inventory Turnover
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18
Q

Internal Control Procedures
An accounts payable clerk also has access to the approved
supplier master file for purchases. The control principle of
a. establishment of responsibility is violated.
b. independent internal verification is violated.
c. documentation procedures is violated.
d. separation of duties is violated.

A

D. Separation of duties is violated

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19
Q

Identify which control activity is violated and explain
how the situation creates an opportunity for a fraud.

Wellstone Company’s treasurer received an award for
distinguished service because he had not taken a
vacation in 30 years.

A

Human Resource Controls

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20
Q

Identify which control activity is violated and explain
how the situation creates an opportunity for a fraud.

To save money spent on order slips and to reduce
time spent keeping track of order slips, a local
restaurant does not buy pre-numbered order slips.

A

Documentation Procedures

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21
Q

Two individuals at a retail store work the same cash register. This is

a. a violation of establishment of responsibility
b. a violation of segregation of duties
c. supporting the establishment of responsibility
d. supporting internal independent verification

A

A. a violation of establishment of responsibility

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22
Q

Jalen Hurts has been a trusted employee for over 10 years. He is responsible for ordering merchandise inventory, receiving the inventory items, and authorizing the payment for these items. Which internal control principle is being violated?

a. Segregation of duties
b. Documentation procedures
c. Establishment of responsibilities
d. None

A

A. Segreation of duties

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23
Q

Limitations of Internal Controls

A

costs should not exceed benefits, human element, size of business

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24
Q

Treatment of reconciling items (Check Notes)

A

Outstanding checks= deducted
NSF Checks= deducted

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25
Q

Which of the following would be deducted from the balance per
bank on a bank reconciliation?
a. Outstanding checks.
b. Deposits in transit.
c. Notes collected by the bank.
d. Service charges.

A

A. outstanding checks

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26
Q

Calculate adjusted cash balance

Nilson Company gathered the following reconciling information in
preparing its August bank reconciliation:

Cash balance per books, 8/31 $28,000
Deposits in transit 1,200
Notes receivable and interest collected by bank 6,800
Bank charge for check printing 160
Outstanding checks 16,000
NSF check 1,360

The adjusted cash balance per books on August 31 is:
a. $33,280.
b. $32,080
c. $18,400
d. $19,680

A

Cash Balance per books 28,000
Add: Notes and Interest. +6,800
Deduct: Bank Charge. - 160
Deduct: NSF Check. -1,360
=33,280

A. 33,280

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27
Q

3 Classifications of Recievables

A

Accounts Receivable
Notes Receivable
Other Receivables

28
Q

Calculate Bad Debt Expense using the % of receivables

Using the percentage-of-receivables method for recording bad
debt expense, estimated uncollectible accounts are $55,000. If
the balance of the Allowance for Doubtful Accounts is an
$11,000 debit before adjustment, what is the amount of bad
debt expense for that period?

a. $55,000
b. $11,000
c. $66,000
d. $44,000

A

Estimated collectibles + Allowance for doubtful accounts
$55,000 + $11,000= $66,000

C. $66,000

29
Q

Calculate Maturity Value of a Note Receivable

A

Interest= 10,000 x .09 x 5/12= 375
Maturity Value= $10,000 + 375= $10,375

30
Q

Calculate the Average Collection Period for Accounts Receivable

The financial statements of the Bell Company report net sales
of $600,000 and accounts receivable of $80,000 and $40,000 at
the beginning of the year and the end of the year, respectively.
What is the average collection period for accounts receivable
in days?

a. 24.3 days
b. 73.0 days
c. 36.5 days
d. 48.7 days

A

365/Accounts Receivable Turnover
365/(180,000+40,000)/2
365/10
36.5

C. 36.5 days

31
Q

Characteristics of plant assets

A

Have physical substance, used in the operations, not intended for sale, provide service

32
Q

Definition of Depreciation

A

-a process of allocating to expense the cost of a plant asset over its useful life
-a cost allocation process; not a valuation process

33
Q

Calculate the cost of land improvements

Wesley Hospital purchased land for a new parking lot for
$100,000. The paving cost $60,000 and the lights to illuminate
the new parking area cost $24,000. Which of the following
statements is true with respect to these additions

a. $184,000 should be debited to the Land account.
b. $24,000 should be debited to Land Improvements.
c. $84,000 should be debited to the Land account.
d. $84,000 should be debited to Land Improvements.

A

$60,000 paving cost + $24,000 parking area cost = $84,000

D. $84,00 should be debited to land improvements

34
Q

Calculate Depreciation expense using the STRAIGHT-LINE METHOD

A

Annual Depreciation= (Cost - salvage value) / useful life x months/year

35
Q

A company purchased factory equipment on June 1, 2022 for
$128,000. It is estimated that the equipment will have an $8,000
salvage value at the end of its 10-year useful life. Using the
straight-line method of depreciation, the amount to be recorded
as depreciation expense at December 31, 2022 is

a. $12,000
b. $7,000
c. $6,000
d. $5,000

A

128,000 - 8,000 / 10 x 7/12
= $7,000

B. 7,000

36
Q

Calculate Gain/Loss on Disposal

A

Book Value = cost - accumulated depreciation
Gain/Loss = book value - sale value

37
Q

Definition and common types of intangibles

A

Rights, privileges, and competitive advantages that result from ownership of long-lived assets that do not have physical substance

Common types: patents, copy-rights, franchises, trademarks, goodwill

38
Q

Goodwill

A

Recorded only when an entire business is purchased, never amortized, written down if its value has been permanently impaired

39
Q

Calculate Amortization expense

On July 1, 2022, Linden Company purchased the copyright to
Norman Computer Tutorials for $210,000. It is estimated that
the copyright will have a useful life of 5 years. The amount of
amortization expense recognized for the year 2022 would be

a. $42,000
b. $19,687
c. $38,850
d. $21,000

A

(purchase price / useful life x months / year)

210,000 / 5 x 6 / 12 = $21,000

D. $21,000

40
Q

Recording interest expense and interest payable

A

Interest expense is debited; interest payable is credited

Interest 1,000
Interest Payable 1,000

41
Q

Accounting for the current portion of a long-term liability

A

Subtract

42
Q

Calculate Sales Revenue and sales tax payable

A retail store credited the Sales Revenue account for the sales
price and the amount of sales tax on sales. If the sales tax rate
is 5% and the balance in the Sales Revenue account amounted
to $630,000, what is the amount of the sales taxes owed to the
taxing agency?

a. $600,000
b. $630,000
c. $31,500
d. $30,000

A

$630,000/1.05 = $600,000
$630,000 - $600,000 = $30,000

D. $30,000

43
Q

Calculate Interest

A

100,000 x .06 x 4/12

44
Q

Definition of convertible bonds

A

can be converted into common stock

45
Q

Bond Discount vs. Premium

If bonds are issued at a premium, the contractual interest rate is

a. higher than the market rate of interest.
b. lower than the market rate of interest.
c. too low to attract investors.
d. adjusted to a higher rate of interest.

A

if bonds are issued at a premium, the contractual interest rate is HIGHER than the market rate of interest

A. Higher than the market rate of interest

46
Q

Calculate Bond selling price

Bonds with a face value of $600,000 and a quoted price of 104¼
have a selling price of

a. $625,500.
b. $624,150.
c. $602,550.
d. $624,000.

A

$600,000 x. 1.0425= $625,500

A. $625,500

47
Q

Classification of corporations by purpose and ownership

A

Purpose= not for profit, for profit
Ownership= publicly held, privately held

48
Q

Disadvantages of the corporate from of an organization

A

Corporation management= separation of ownership and management, government regulation, more taxes

49
Q

Stockholder’s rights

A

Vote, Dividends, Residual Claim, Preemptive Rights (Keep same % of ownership)

50
Q

Definition of Treasury Stock

A

-corporation’s own stock that is has reacquired from shareholders
-contra stockholders equity account

51
Q

Effect of stock dividend and stock split on stockholders equity

A

No change

52
Q

Effect of transactions on total stockholders equity

A corporation purchases 30,000 shares of its own $10 par
common stock for $25 per share, recording it at cost. What will
be the effect on total stockholders’ equity?

a. Increase by $300,000.
b. Decrease by $750,000.
c. Increase by $750,000.
d. Decrease by $300,000.

A

30,000 shares x. $25 per share = $750,000 decrease

B. Decrease by $750,000

Treasury stock is a contra- equity account meaning it decreases stockholders’ equity

53
Q

Calculate Preferred Dividends

Ace Inc. has 10,000 shares of 4%, $100 par value, cumulative
preferred stock outstanding at December 31, 2020. What is the
annual dividend on the preferred stock?

a. $40 per share
b. $40,000 in total
c. $4,000 in total
d. $0.40 per share

A

10,000. x .04 x 100 = $40,000

B. $40,000 in total

54
Q

Calculate Stockholders Equity

What is the total stockholders’ equity based on the following
account balances?

Common Stock $2,300,000
Preferred Stock 120,000
Retained Earnings 570,000
Treasury Stock 60,000

a. $2,690,000
b. $2,930,000
c. $3,050,000
d. $2,180,000

A

Common stock + preferred stock + retained earnings - treasury stock

$2,300,000 + 120,000 + 570,000 – 60,000 = $2,930,000

B. $2,930,000

55
Q

Items used to prepare the statement of cash flow

A

comparative balance sheets, current income statement, additional information

56
Q

Operating Activity

A

Income Statement Items

Cash Inflows-
1. from sale of goods and services
2. from interest and dividends received

Cash Outflows
1. to suppliers for inventory
2. to employees for wages
3. to government for taxes

Ex. Paid the monthly rent expense
Collected $20,000 cash for services performed

57
Q

Investing Activity

A

Changes in investments and long-term assets

Cash Inflows
1. from sale of property, plant, and equipment
2. from sale of investments
3. from collection on principle on loans

Cash Outflows
1. purchase

Ex. Sold a piece of equipment

58
Q

Financing Activity

A

long-term liabilities and stockholders equity

Cash Inflows
1. from sale of common + preferred stock
2. from issuance of debt (bonds + notes)

Cash Outflows
1. to stockholders as dividends
2. to repay long-term debt
3. to reacquire stock (treasury)

Ex. Purchased shares of the company’s own stock for cash

59
Q

Significant Noncash Activities

A

direct issuance of common stock to purchase assets, conversion of bonds into common stock, issuance of debt to purchase assets, exchanges of plant assets

Ex. Issued a note to purchase assets

60
Q

The purchase of equipment would be classified as a(n)

a. operating activity.
b. investing activity.
c. financing activity.
d. significant noncash activity.

A

B. investing activity

61
Q

Where would an inventory increase be classified on the
statement of cash flows?

a. Operating activities section
b. Investing activities section
c. Financing activities section
d. Significant noncash activity

A

A. Operating Activities section

62
Q

Calculate cash inflow/outflow

Vanguard Company purchased treasury stock with a cost of
$55,000 during 2022. During the year, the company paid
dividends of $20,000 and issued common stock for proceeds of
$876,000. Cash flows from financing activities for 2022 total

a. $856,000 net cash inflow.
b. $911,000 net cash inflow.
c. $75,000 net cash outflow.
d. $801,000 net cash inflow.

A

Common stock - treasury stock - dividends

876,000 - 55,000 - 20,000 = 801,000 inflow

D. $801,000 net cash inflow

63
Q

Items that are added/subtracted to convert net income to net cash provided

Which of the following adjustments to convert net income to net
cash provided by operating activities is subtracted from net
income?

a. Gain on Disposal of Equipment.
b. Depreciation Expense.
c. Patent Amortization Expense.
d. Depletion Expense.

A

+ add back non-cash expenses (depreciation, amortization, current liabilities)
- deduct gains
+ add back losses
analyze changes in non-cash, current assets, current liabilities

A. Gain on Disposal of Equipment

64
Q

Amount Reported as investing activity

If Martinelli Corporation realizes a gain of $81,000 on a cash
sale of equipment having a book value of $600,000, the total
amount reported in the cash flows from investing activities
section of the statement of cash flows is

a. $519,000.
b. $681,000.
c. $600,000.
d. $81,000.

A

total cash receive (book value + gain) will be recorded

$600,000 + 81,000 = $681,000

B. $681,000

65
Q

Significant non-cash activities

A

-Direct issuance of common stock to purchase assets
-Conversion of bonds into common stock
-Issuance of debt to purchase assets
-Exchange of plant assets

ACC 201 Final (1 decks)

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