Exam 1 Pq Flashcards
The three ingredients of faithful representation are:
Predictive value, Confirmatory value, Materiality
Which of the following items is NOT included in FASB’s conceptual framework of accounting theory?
Qualities of useful accounting information
Fundamental principles and assumptions that guide financial accounting and reporting
Objectives of financial reporting
All of these choices are included in the conceptual framework
All of these choices are included in the conceptual framework
Which of the following best describes the ability of information to confirm expectations?
Confirmatory value
Which of the following refers to the net assets of an entity?
Equity
GAAP is an abbreviation for:
Generally Accepted Accounting Principles
Which organization has the statutory authority to set accounting standards in the U.S.?
SEC
Confirmatory value is central to the concept of earnings quality because it:
Helps investors predict a company’s future earnings.
Allows investors to verify or change their prior assessments of a company’s performance.
Helps investors predict a company’s future cash flows.
Allows investors to compare the performance of a company over time.
Allows investors to verify or change prior assessments
Gains are:
Increases in equity from peripheral transactions
When there is agreement between a measure and the phenomenon it represents, the information possesses:
Faithful representation
Failing to disclose a change in useful life of machinery violates which GAAP principle?
Completeness
When a company declares and pays a dividend, how does it affect the accounting equation?
Decrease assets and decrease shareholders’ equity
Revenues have what effect on the accounting equation?
Increase shareholders’ equity
Paying for supplies previously purchased affects the accounting equation how?
Assets decrease and liabilities decrease
An asset account increases with a _____; a liability account increases with a _____.
Debit; Credit
When a company borrows $75,000 and signs a note payable, it records:
Credit to Notes Payable
When a company pays $1,800 for utilities, the entry is:
Debit Utilities Expense $1,800, Credit Cash $1,800
A company owes $15,000 in employee salaries. The entry is:
Debit Salaries Expense, Credit Salaries Payable
A company receives $10,000 for future services. The entry is:
Debit Cash $10,000, Credit Deferred Revenue $10,000
A company buys a building by signing a note. The entry is:
Debit Buildings, Credit Notes Payable
Recording an expense for advertising on account:
Debit Advertising Expense, Credit Accounts Payable
A company receives $52,800 in advance rent payments. The entry is:
Debit Cash $52,800, Credit Deferred Rent Revenue $52,800
Which of the following accounts has a normal balance that is a debit?
A) Accounts payable
B) Accrued salaries
C) Accumulated depreciation
D) Advertising expense
Advertising Expense
Cal Farms reported supplies expense of $2,200,000 this year. The supplies account decreased by $130,000 during the year to an ending balance of $470,000. What was the cost of supplies Cal Farms purchased during the year?
A) $2,070,000
B) $1,730,000
C) $2,330,000
D) $2,670,000
$2,070,000
Question 25:
The adjusting entry required to record accrued expenses includes a:
A) Credit to cash.
B) Debit to an asset.
C) Credit to an asset.
D) Credit to a liability.
Credit to liability
Yummy Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2024, and charged the $3,240 premium to Insurance expense. At its December 31, 2024, year-end, Yummy Foods would record which of the following adjusting entries?
A)Account Title Debit Credit
Prepaid insurance 675
Insurance expense 675
B)Account Title Debit Credit
Insurance expense 675
Prepaid insurance 675
C)Account Title Debit Credit
Prepaid insurance 2,565
Insurance expense 2,565
D)Account Title Debit Credit
Insurance expense 675
Prepaid insurance 2,565
Insurance payable 3,240
Debit Prepaid Insurance $2,565, Credit Insurance Expense $2,565
The employees of Persoff Publications work Monday through Friday. Every other Friday, the company issues payroll checks totaling $640,000. The current pay period ends on Friday, July 3. Persoff Publications is now preparing financial statements for the fiscal year ended June 30. What is the adjusting entry to record accrued salaries at the end of June?
A) Prepaid salaries (Debit), Salaries payable (Credit)
B) Salaries expense (Debit), Prepaid salaries (Debit), Salaries payable (Credit)
C) Prepaid salaries (Debit), Salaries payable (Credit)
D) Salaries expense (Debit), Salaries payable (Credit)
Debit Salaries Expense, Credit Salaries Payable
Question 28:
On August 28, 2024, an online subscription service provider received a total of $31,920 in cash from 420 customers for one-year subscriptions. The subscriptions begin in September. On receipt of the cash, the company recorded a liability, deferred subscription revenue. What is the required adjusting entry on December 31, 2024?
A) Deferred subscription revenue (Debit) 10,640, Subscription revenue (Credit) 10,640
B) Deferred subscription revenue (Debit) 10,640, Subscription payable (Credit) 10,640
C) Deferred subscription revenue (Debit) 31,920, Subscription revenue (Credit) 10,640, Prepaid subscriptions (Credit) 21,280
D) Deferred subscription revenue (Debit) 21,280, Subscription revenue (Credit) 21,280
Debit Deferred Subscription Revenue $10,640, Credit Subscription Revenue $10,640
On May 1, 2024, Mama’s Pizza Shoppe borrowed $8,000 from a local bank and signed a note payable. The note requires repayment of principal and 9% interest on October 31, 2025. The company’s fiscal year ends June 30, 2024. What adjusting entry is necessary on June 30, 2024?
A) No adjusting entry is necessary
B) Interest expense (Debit) 240, Interest payable (Credit) 240
C) Interest expense (Debit) 120, Interest payable (Credit) 120
D) Prepaid interest (Debit) 120, Interest payable (Credit) 120
C) Interest expense (Debit) 120, Interest payable (Credit) 120
Eve’s Apples opened its business on January 1, 2024, and paid for two insurance policies effective that date. The policy for equipment damage was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What is the balance in Eve’s prepaid insurance as of December 31, 2024?
A) $9,000
B) $18,000
C) $30,000
D) $48,000
$18,000
On November 1, 2024, Tim’s Toys borrowed $30,000,000 from a local bank and signed a note. The note requires repayment of principal and 9% interest in six months. What is the amount of accrued interest expense as of December 31, 2024?
$112,500
$225,000
$450,000
$1,350,000
$450,000
The statement of shareholders’ equity reports:
Net income from the income statement.
The proceeds of the issuance of common stock during the current period.
Distributions to owners (dividends) during the current period.
All of the other answer choices are correct.
Net income, issuance of stock, and dividends
In the statement of shareholders’ equity, Retained earnings had a beginning balance of $60,000. During the period, the company reports a net loss of $10,000 and net cash outflows of $15,000. The ending balance in the Retained earnings account is:
$60,000
$35,000
$50,000
$45,000
$50,000
Which of the following is NOT a permanent account?
Cost of Goods Sold
Pat’s Custom Tuxedo Shop maintains its records on the cash basis. During this past year Pat’s collected $42,800 in tailoring fees, and paid $13,900 in expenses. Depreciation expense totaled $2,900. Accounts receivable increased $1,200, supplies increased $4,400, and accrued liabilities increased $1,700. Pat’s accrual-basis net income was:
$22,100
$29,900
$33,300
$18,700
$29,900
When Castle Corporation pays insurance premiums, the transaction is recorded as a debit to prepaid insurance. Additional information for the year ended December 31 is as follows:
Prepaid insurance at January 1 $ 51,500
Insurance expense recognized during the year 218,050
Prepaid insurance at December 31 62,650
What was the total amount of cash paid by Castle for insurance premiums during the year?
$229,200
$218,050
$206,900
$166,550
$229,200
