Final Review Part 1 Flashcards
At the beginning of January, 2014, Wise Company had a balance in its Retained Earnings account totaling $42,000. At the end of the year, the balance totaled $47,000. If $11,000 of dividends were declared and paid during the year, how much was net income during 2014? A. $5,000 B. $16,000 C. $53,000 D. $6,000
47,000-42,000 = 5000
11,000 + 5000 = 16000
B. $16,000
For what purpose is the current ratio used?
A.To assess profitability
B.To determine the composition of a company’s assets
C.To measure the short-term ability of a company to pay its obligations
D.To measure the profitability of operations
C. To measure the short-term ability of a company to pay its obligations
Tatum Enterprises' total assets decreased by $11,000 during the year. Its stockholders' equity increased by $12,000 during the same period. Net income totaled $8,000 during the year. What occurred to the company's total liabilities during the year? A. $23,000 decrease B. $1,000 increase C. $15,000 decrease D. $31,000 decrease
Assets (-11,000) = total labilites (-12,000) + stockholders’ equity (+12,000)
A. $23,000 decrease
To be relevant, what characteristic must accounting information exhibit?
A. It must be capable of making a difference in a decision.
B. It must be compared with other companies.
C. It must be verifiable.
D. It must be based on the U.S. monetary unit.
A. It must be capable of making a difference in a decision.
What is the role of the FASB?
A. To regulate U.S. financial markets and accounting standard-setting bodies
B. To determine auditing standards in the U.S.
C. To establish accounting standards in the U.S.
D. To regulate foreign companies that do business in the U.S.
C. To establish accounting standards in the U.S.
Which of the following has the advantage of enabling a business to raise funds most easily? A. Entity B. Sole proprietorship C.Corporation D.Partnership
C.Corporation
Which of the following is meaningful comparison to assess a company’s profitability?
A. An intracompany comparison of net income for a two-year period
B.Industry-average comparison of total assets
C. Year-to-year comparisons of liabilities with a competitor in the same industry
Incorrect
D. Intercompany comparisons of earnings per share for a two-year period
A. An intracompany comparison of net income for a two-year period
Which of the following is not considered an external user of accounting information? A. Finance directors B. Regulatory agencies C. Creditors D. Stockholders
A. Finance directors
Which of the following items will be reported on the statement of retained earnings?
A. Cash received from customers
B. Amounts received from issuing stock
C. Amounts owed to creditors
D. Income earned by a company but not distributed as dividends
D. Income earned by a company but not distributed as dividends
Which one of the following is not the correct date format for the respective financial statement?
A. A balance sheet as of May 31, 2014
B. A statement of retained earnings as of May 31, 2014
C. An income statement for the month ended May 31, 2014
D. A statement of cash flows for the month ended May 31, 2014
B. A statement of retained earnings as of May 31, 2014
Which one of the following is true?
A. Intangible assets are current assets that do not have physical substance.
B. Obligations expected to be paid after one year are classified as expenses.
C. Current assets are assets that a company expect to convert to cash or use up within the longer of one year or its operating cycle.
D.Property, plant, and equipment are assets with relatively long useful lives that are held for resale purposes.
C. Current assets are assets that a company expect to convert to cash or use up within the longer of one year or its operating cycle.
Which one of the following represents the correct order of the three business activities for a new company? A. Financing, investing, operating B. Investing, financing, operating C. Operating, investing, financing D.Financing, operating, investing
A. Financing, investing, operating
Which one of the following statements is true concerning the interrelationships of financial statements?
A. Net income on the income statement equals the cash balance at the end of the period on the balance sheet.
B. The ending balance of retained earnings on the statement of retained earnings is equal to net income on the income statement.
C.The amount of net income on the income statement is added to the beginning retained earnings balance on the statement of retained earnings.
D. The amount of cash used during the period on the statement of cash flows is equal to total expenses on the income statement.
C.The amount of net income on the income statement is added to the beginning retained earnings balance on the statement of retained earnings.
Which statement describes the periodicity assumption?
A. The life of a business can be divided into artificial times periods for which useful reports can be prepared.
B. The business will remain in operation for the foreseeable future.
C. Every economic unit can be separately identified and accounted for.
D. Financial reports are issued on a timely basis for decision-making.
A. The life of a business can be divided into artificial times periods for which useful reports can be prepared.
Costs of Goods Sold is what?
Not separately presented on the balance sheet.
Accounts Payable is what?
Current Liabilities
Patents are what?
Intangible Assets
Common Stock is what?
Stockholders’ Equity
Supplies are considered what?
Current Assets
Service Revenue is considered what?
Not separately presented on the balance sheet.
Advertising Expense is considered what?
Not separately presented on the balance sheet.
Salaries payable is considered what?
Current Liabilities
Income Taxes Payable is considered what?
Current Liabilities
Invenotries are considered what?
Current Assets
Accounts Receivable is considered what?
Current Assests
Prepaid rent is considered what?
Current Assests
Notes Payable (due in 2 years) is considered what?
Long-term liabilities
Accumulated Depreciation—Buildings are considered what?
Property, Plant, and Equipment
Retained Earnings are considered what?
Stockholder’s Equity
Mortgage Payable is considered what?
Long-term Liabilities
Dividends are considered what?
Not separately presented on the balance sheet.
Given the following information, compute 2019 net income for SaraDyne Company.
Stockholders’ equity—January 1, 2019
$ 84,000
Stockholders’ equity—December 31, 2019
87,000
Stockholder investments during 2019
12,000
Dividends paid during 2019
36,000
Revenues during 2019
310,000
A. $3,000
B. $27,000
C. $310,000
D. $39,000
87,000-84,000 = 3000
36,000 - 12,000 = 24,000
B. $27,000
Distribution of cash or other assets from a corporation to its stockholders:
Dividends
Measures the percentage of total assets that creditors provide:
Debt to assets ratio
The excess of current assets over current liabilities:
Working capital
Current assets divided by current liabilities:
Current Ratio
Measures of the income or operating success of an enterprise for a given period of time:
Profitability
A measure of the net income earned on each share of common stock:
Earnings per share
The ability of a borrower to pay obligations when they become due:
Liquidity
Measures the ability of an enterprise to survive over a long period of time:
Solvency
A credit will increase ________, but decrease ________.
A. accounts receivable; accounts payable
B. accounts receivable; expenses
C. accounts payable; common stock
D.common stock; prepaid insurance
D.common stock; prepaid insurance
Lansing Cycles failed to record an adjusting entry for accrued expenses at the end of June. What effect does this have on the financial statements?
A. Expenses are overstated and revenues are understated.
B. Assets are overstated and expenses are understated.
C. Expenses and liabilities are understated.
D.Revenues and expenses are understated.
C. Expenses and liabilities are understated.
Randall Automotive signed a $5,000,120-day note payable on October 1 that bears interest at an annual rate of 9%. How much will appear on Randall's income statement for interest expense related to this note at December 31? A. $450 B. $150 C. $112.50 D. $4,500
5000 x .09 x 3/12
C. $112.50
Sunny Salon is a tanning salon that caters to college students. The accountant transferred journal entries to the ledger accounts at the end of the month. What is the name of this process? A. Ledgering B. Closing C. Recording D. Posting
D. Posting
What type of accounts can be found on a post-closing trial balance?
A. All accounts that have balances after the closing process is complete
B. Permanent and temporary accounts
C.Assets, expenses, revenues, and liabilities
D. Accounts that have been closed during the period
A. All accounts that have balances after the closing process is complete
Which of the following describes the timing of when revenue is recognized?
A. In the period in which the related expenses are paid
B. In the period in which the performance obligation is satisfied
C. In the period in which payment is received for goods sold or work performed
D. In the period in which the costs associated with earning the revenue are incurred and payment is received for goods sold or work performed
B. In the period in which the performance obligation is satisfied
Which of the following sets of transactions contain only operating activities?
A. Issued stock for cash; received cash from customers
B. Issued note payable for cash; paid rent for the month
C. Purchased equipment for cash; collected cash from customers
D. Received cash for services provided; paid cash for employee salaries
D. Received cash for services provided; paid cash for employee salaries
Which one of the following contains the selected steps of the accounting cycle in the correct order? 1. Journalize the transactions. 2. Post transactions to ledger accounts. 3. Analyze transactions. 4. Prepare financial statements. 5. Prepare a trial balance. A. 1, 2, 3, 5, 4 B. 3, 2, 1, 4, 5 C. 3, 1, 2, 5, 4 D. 3, 1, 2, 4, 5
C. 3, 1, 2, 5, 4
Which one of the following is incorrect concerning the journal?
A. It provides a chronological record of transactions.
B. It helps prevent or locate errors.
C. It contains a record of each account maintained by the company.
D. It discloses in one place the complete effect of a transaction.
C. It contains a record of each account maintained by the company.
Which one of the following is true as it relates to the Accumulated Depreciation account?
A. It is a contra account.
B. It is offset against an asset account on the income statement.
C. It represents the portion of the cost of a long-lived asset that has been allocated as a cost during the current accounting period.
D. It is an operating expense.
A. It is a contra account.
Which statement is not true concerning the accrual basis of accounting?
A. Transactions are recorded when payment is made for the costs incurred.
B. GAAP requires the accrual basis for financial reporting.
C. Transactions are recorded when events occur.
D. Revenue.is recognized when services are performed.
A. Transactions are recorded when payment is made for the costs incurred.
Accounting basis in which companies record amounts in the periods in which the events occur rather than in the periods in which the company receives or pays cash:
Accrual accounting
An assumption that the economic life of a business can be divided into artificial time period:
Periodicity assumption
Expenses incurred but not yet paid in cash or recorded:
Accrued expenses
The principle that companies recognize revenue in the accounting period in which they perform the services:
Revenue recognition princple
The most basic form of journal:
General Journal
The principle that dictates that companies match efforts (expenses) with accomplishments (revenues):
Expense recognition principle
Accounting basis in which a company records revenues only when it receives cash and an expense only when it pays out cash:
Cash basis accounting
A list of accounts and their balances at a given time:
Ledger
Income statement accounts whose balances are closed at the end of an accounting period.:
Temporary accounts
Lowe’s has four employees who earn $90 per day per person. At December 31, two days’ salaries have been earned by employees but not paid. The adjusting entry would be:
A. Dr: Salary & Wages Expense $360 / Cr: Salary & Wages Payable $360
B. Dr: Salary & Wages Payable $360 / Cr: Salary & Wages Expense $360
C. Dr: Salary & Wages Expense $720 / Cr: Salary & Wages Payable $720
D. Dr: Salary & Wages Payable $720 / Cr: Salary & Wages Expense $720
90x 4 x 2 = 720
C. Dr: Salary & Wages Expense $720 / Cr: Salary & Wages Payable $720
A customer paid Lowe’s $9,000 on December 1, 2019 for services to be rendered from December 1 through March 31, 2020. The receipt was credited to a liability account. The adjusting entry on December 31, 2019 was:
A. Dr. Unearned Service Revenue $2,250 / Cr. Service Revenue $2,250
B. Dr. Service Revenue $2,250 / Cr. Unearned Service Revenue $2,250
C. Dr. Unearned Service Revenue $9,000 / Cr. Service Revenue $9,000
D. Dr. Service Revenue $9,000 / Cr. Unearned Service Revenue $9,000
9,000 * 3/12
A. Dr. Unearned Service Revenue $2,250 / Cr. Service Revenue $2,250
Lowe’s purchased equipment costing $38,400 on January 1, 2019. Monthly depreciation is $500. The adjusting entry on December 31, 2019 is:
A. Dr. Depreciation Expense $500 / Cr. Property Plant and Equipment $500
B. Dr. Property Plant and Equipment $500 / Cr. Depreciation Expense $500
C. Dr. Depreciation Expense $6,000 / Cr. Accumulated Depreciation $6,000
D. Dr. Accumulated Depreciation $6,000 / Cr. Depreciation Expense $6,000
E. No correct answer provided
500 X 12 = 6,000
C. Dr. Depreciation Expense $6,000 / Cr. Accumulated Depreciation $6,000
Lowe’s provided lawn services to a customer in 2019 at a fee of $1,100. This fee has not yet been received or billed. The adjusting entry is:
A. Dr. Cash $1,100 / Cr. Service Revenue $1,100
B. Dr. Accounts Receivable $1,100 / Cr. Service Revenue $1,100
C. Dr. Service Revenue $1,100 / Cr. Accounts Receivable $1,100
D. Dr. Cash $1,100 / Cr. Accounts Receivable $1,100
E. No correct answer provided
B. Dr. Accounts Receivable $1,100 / Cr. Service Revenue $1,100
Lowe’s started the year with $400 of lawn care supplies on hand. It purchased $5,800 more during the year and has $700 on hand at December 31. Lowe’s recognizes supplies as an asset when acquired. The adjusting entry on December 31 is:
A. Dr. Supplies Expense $5,800 / Cr. Supplies $5,800
B. Dr. Supplies $5,800 / Cr. Supplies Expense $5,800
C. Dr. Supplies Expense $700 / Cr. Supplies $700
D. Dr. Supplies $700 / Cr. Supplies Expense $700
E. No correct answer provided
E. No correct answer provided
