Test 1 Flashcards
Describe the effect of each transaction on assets, liabilities, and owner’s equity.
- Purchased computers for $20,000 from Digital Equipment on account.
An increase in assets and an increase in liabilities
Describe the effect of each transaction on assets, liabilities, and owner’s equity.
- Paid $4,000 cash for May rent on storage space.
A decrease in assets and a decrease in owner’s equity
Describe the effect of each transaction on assets, liabilities, and owner’s equity.
- Received $17,000 cash from customers for contracts billed in April.
An increase in assets and a decrease in assets
Describe the effect of each transaction on assets, liabilities, and owner’s equity.
- Performed computer services for Viking Construction Company for $4,000 cash.
An increase in assets and an increase in owner’s equity
Describe the effect of each transaction on assets, liabilities, and owner’s equity.
- Paid Tri-State Power Co. $11,000 cash for energy usage in May.
A decrease in assets and a decrease in owner’s equity
Describe the effect of each transaction on assets, liabilities, and owner’s equity.
- Falske invested an additional $29,000 in the business.
An increase in assets and an increase in owner’s equity
Describe the effect of each transaction on assets, liabilities, and owner’s equity.
- Purchased computers for $20,000 from Digital Equipment on account.
- Paid Digital Equipment for the computers purchased in (1) above.
A decrease in assets and a decrease in liabilities
Pharoah Service Shop started the year with total assets of $326000 and total liabilities of $238000. During the year, the business recorded $630000 in revenues, $441000 in expenses, and owner drawings of $60400.
The net income reported by Pharoah Service Shop for the year was
A. $216600.
B. $238000.
C. $128600.
D. $189000.
D. $189000.
Vaughn Company compiled the following financial information as of December 31, 2020:
Revenues $350000 Owner's Capital (1/1/20) 61800 Equipment 79000 Expenses 251000 Cash 90500 Owner's Drawings 19500 Supplies 19500 Accounts payable 40300 Accounts receivable 70800
Vaughn’s assets on December 31, 2020 are
A. $189500.
B. $259800.
C. $321500.
D. $203000.
B. $259800.
Sheffield Company’s owner’s equity at the beginning of August 2020 was $749000. During the month, the company earned net income of $176000 and owner’s drawings were $78000. At the end of August 2020, what is the balance in owner’s equity?
A. $827000
B. $847000
C. $749000
D. $671000
B. $847000
Which of the following is not part of the accounting process?
A. Financial decision making
B. Communicating
C. Recording
D. Identifying
A. Financial decision making
The first part of the accounting process is
A. processing.
B. communicating.
C. identifying.
D. recording.
C. identifying.
Keeping a systematic, chronological diary of events that are measured in dollars and cents is called
A. recording.
B. processing.
C. communicating.
D. identifying.
A. recording.
A proprietorship is a business
A. owned by two or more persons.
B. owned by one person.
C. organized as a separate legal entity under state
corporation law.
D. owned by a governmental agency.
B. owned by one person.
Internal users of accounting information include all of the following except
A. production supervisors.
B. investors.
C. company officers.
D. marketing managers.
B. investors.
The primary accounting standard-setting body in the United States is the
A. SEC
B. IASB
C. IFRS
D. FASB
D. FASB
A net loss will result during a time period when
A. assets exceed liabilities.
B. expenses exceed revenues.
C. revenues exceed expenses.
D. assets exceed owner’s equity.
B. expenses exceed revenues.
Which one of the following could represent the expanded basic accounting equation?
A. Assets – Liabilities – Owner’s Drawings = Owner’s Capital + Revenues – Expenses.
B. Assets = Revenues + Expenses – Liabilities.
C. Assets = Liabilities + Owner’s Capital + Owner’s Drawings – Revenue – Expenses.
D. Assets + Owner’s Drawings + Expenses = Liabilities + Owner’s Capital + Revenues.
D. Assets + Owner’s Drawings + Expenses = Liabilities + Owner’s Capital + Revenues.
Which of the following correctly identifies normal balances of accounts?
A. Assets Credit
Liabilities Debit
Owner's Equity Debit
Revenues Credit
Expenses Debit
B. Assets Debit
Liabilities Credit
Owner's Equity Credit
Revenues Credit
Expenses Debit
C. Assets Debit
Liabilities Credit
Owner's Equity Credit
Revenues Debit
Expenses Credit
D. Assets Debit
Liabilities Credit
Owner's Equity Credit
Revenues Credit
Expenses Credit
B. Assets Debit
Liabilities Credit
Owner's Equity Credit
Revenues Credit
Expenses DebitThe best interpretation of the word credit is the
A. offset side of an account.
B. decrease side of an account.
C. right side of an account.
D. increase side of an account.
C. right side of an account.
In recording an accounting transaction in a double-entry system
A. the number of debit accounts must equal the number of credit accounts.
B. there must only be two accounts affected by any transaction.
C. there must always be entries made on both sides of the accounting equation.
D. the amount of the debits must equal the amount of the credits.
D. the amount of the debits must equal the amount of the credits.
Debits
A. decrease both assets and liabilities.
B. decrease liabilities and increase assets.
C. increase both assets and liabilities.
D. increase liabilities and decrease assets.
B. decrease liabilities and increase assets.
A debit is not the normal balance for which account listed below?
A. Service Revenue
B. Cash
C. Owner’s Drawings
D. Accounts Receivable
A. Service Revenue
An accountant has debited an asset account for $1350 and credited a liability account for $510. Which of the following would be an incorrect way to complete the recording of the transaction?
A. Credit another liability account for $840.
B. Credit an owner’s account for $840.
C. Debit an owner’s account for $840.
D. Credit an asset account for $840.
C. Debit an owner’s account for $840.
Which of the following is not true of the terms debit and credit?
A. They can be abbreviated as Dr. and Cr.
B. They can be interpreted to mean increase and decrease.
C. They can be interpreted to mean left and right.
D. They can be used to describe the balance of an account.
B. They can be interpreted to mean increase and decrease.
An account will have a credit balance if the
A. last transaction entered was a credit.
B. first transaction entered was a credit.
C. debits exceed the credits.
D. credits exceed the debits.
D. credits exceed the debits.
For the basic accounting equation to stay in balance, each transaction recorded must
A. always affect exactly two accounts.
B. affect two or more accounts.
C. affect the same number of asset and liability accounts.
D. affect two or less accounts.
B. affect two or more accounts.
What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $18560, and unexpired amounts per analysis of policies of $5960?
A. Debit Prepaid Insurance, $12600; Credit Insurance Expense, $12600.
B. Debit Insurance Expense, $18560; Credit Prepaid Insurance, $18560.
C. Debit Insurance Expense, $12600; Credit Prepaid Insurance, $12600.
D. Debit Insurance Expense, $5960; Credit Prepaid Insurance, $5960.
C. Debit Insurance Expense, $12600; Credit Prepaid Insurance, $12600.
At December 31, 2020, before any year-end adjustments, Sheridan Company’s Insurance Expense account had a balance of $2580 and its Prepaid Insurance account had a balance of $3780. It was determined that $2810 of the Prepaid Insurance had expired. The adjusted balance for Insurance Expense for the year would be
A. $5390.
B. $3550.
C. $2810.
D. $2580.
A. $5390.
Depreciation is the process of
A. writing down an asset to its real value each accounting period.
B. allocating the cost of an asset to expense over its useful life in a rational and systematic manner.
C. increasing the value of an asset over its useful life in a rational and systematic manner.
D. valuing an asset at its fair value.
B. allocating the cost of an asset to expense over its useful life in a rational and systematic manner.
The balance in the Prepaid Rent account before adjustment at the end of the year is $24300, which represents three months’ rent paid on December 1. The adjusting entry required on December 31 is to
A. debit Rent Expense, $8100; credit Prepaid Rent, $8100.
B. debit Prepaid Rent, $16200; credit Rent Expense, $16200.
C. debit Rent Expense, $16200; credit Prepaid Rent $16200.
D. debit Prepaid Rent, $8100; credit Rent Expense, $8100.
A. debit Rent Expense, $8100; credit Prepaid Rent, $8100.
An accumulated depreciation account
A. is a contra-liability account.
B. increases on the debit side.
C. is offset against total assets on the balance sheet.
D. has a normal credit balance.
D. has a normal credit balance.
Which of the following would not result in unearned revenue?
A. Services performed on account
B. Sale of season tickets to football games
C. Rent collected in advance from tenants
D. Sale of two-year magazine subscriptions
A. Services performed on account
The balances that appear on the post-closing trial balance will match the
A. income statement account balances after adjustments.
B. balance sheet account balances after adjustments.
C. balance sheet account balances after closing entries.
D. income statement account balances after closing entries.
C. balance sheet account balances after closing entries.
The purpose of the post-closing trial balance is to
A. prove the equality of the balance sheet account balances that are carried forward into the next accounting period.
B. prove that no mistakes were made.
C. prove the equality of the income statement account balances that are carried forward into the next accounting period.
D. list all the balance sheet accounts in alphabetical order for easy reference.
A. prove the equality of the balance sheet account balances that are carried forward into the next accounting period
A post-closing trial balance will show
A. only income statement accounts.
B. only balance sheet accounts.
C. zero balances for all accounts.
D. zero balances for balance sheet accounts.
B. only balance sheet accounts.
Which of the following steps in the accounting cycle would not generally be performed daily?
A. Post to ledger accounts
B. Prepare adjusting entries
C. Journalize transactions
D. Analyze business transactions
B. Prepare adjusting entries
Which of the following depicts the proper sequence of steps in the accounting cycle?
A. Prepare a trial balance, prepare adjusting entries, prepare financial statements
B. Journalize the transactions, analyze business transactions, prepare a trial balance
C. Prepare a trial balance, post to ledger accounts, post adjusting entries
D. Prepare a trial balance, prepare financial statements, prepare adjusting entries
A. Prepare a trial balance, prepare adjusting entries, prepare financial statements
The first required step in the accounting cycle is
A. analyzing transactions.
B. journalizing transactions in the book of original entry.
C. posting transactions.
D. reversing entries.
A. analyzing transactions.
