2301 Final Review Fall 2015 - answers PDF

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ACCT 2301 Final Review

Fall 2015 - Gee

Accounting Information and Decision Making 2. What is the primary purpose of financial accounting? A. Determine the amount of tax liability owed to the government. B. Communicate business transactions to internal management. C. Measure business transactions and communicate those measures to external users to make decisions. D. Measure the profitability of the company in order to assist employees with making decisions. 8. The accounting equation is defined as: A. Assets = Liabilities + Stockholders' Equity. B. Assets = Liabilities - Stockholders' Equity. C. Net Income = Revenues - Expenses. D. Liabilities + Revenues = Assets. 11. Emmitt had the following final balances after the first year of operations: assets, $55,000; stockholders' equity, $25,000; dividends, $3,000; and net income, $10,000. What is the amount of Emmitt's liabilities? A. $55,000. B. $30,000. C. $13,000. D. $7,000. 27. Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000. A. $6,000. B. $8,000. C. $4,000. D. $14,000. 38. Sooner Company has had a net income of $8,000, $5,000, $12,000, and $10,000 over the first four years of the company's existence. If the average annual amount of dividends paid over the last four years is $3,000, what is the ending retained earnings balance? A. $47,000. B. $35,000. C. $23,000. D. $7,000. 40. On January 1, 2012, Gucci Brothers Inc. started the year with a $492,000 balance in Retained Earnings and a $605,000 balance in Common Stock. During 2012, the company earned net income of $92,000, paid a dividend of $15,200, and issued more common stock for $27,500. What is total stockholders' equity on December 31, 2012? A. $1,231,700. B. $1,097,000. C. $1,201,300. D. $1,588,300. 42. Which of the following is the correct order for preparing the financial statements? A. Balance sheet, statement of stockholders' equity, and income statement. B. Balance sheet, income statement, and statement of stockholders' equity. C. Statement of stockholders' equity, income statement, and balance sheet. D. Income statement, statement of stockholders' equity, and balance sheet. 56. Given the information below about Thomas Corporation, what was the amount of dividends the company paid in the current period? Page 1 of 50

ACCT 2301 Final Review

Fall 2015 - Gee

A. $13,000. B. $110,000. C. $28,000. D. $18,000. 87. The assumption that a business can continue to remain in operation into the future is the: A. Monetary unit assumption. B. Periodicity assumption. C. Economic entity assumption. D. Going concern assumption. 90. The assumption that the assets and liabilities of the business are accounted for on the books of the company but not included in the records of the owner is the: A. Monetary unit assumption. B. Going concern assumption. C. Economic entity assumption. D. Periodicity assumption. 92. If accounting information is considered to have faithful representation, then which of the following is true? A. The information represents to users what it claims to represent. B. The information follows conservatism principles and is also material. C. The information is considered pertinent to or affects decisions. D. The information will have predictive value, feedback value, and is timely.

The Accounting Information System 6. When a company incurs workers' salaries but does not pay them, how will the basic accounting equation be affected? A. Stockholders' equity decreases. B. Revenues decrease. C. Expenses decrease. D. Liabilities decrease. 10. Receiving assets from customers before services are performed results in: A. Prepaid Assets. B. Service Revenue. C. Unearned Revenues. D. Accounts Receivable.

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ACCT 2301 Final Review Fall 2015 - Gee 11. When the company pays stockholders a dividend, what is the effect on the accounting equation for that company? A. Decrease stockholders' equity and increase assets. B. Increase liabilities and increase assets. C. Decrease assets and decrease liabilities. D. Decrease assets and decrease stockholders' equity. 12. Pumpkin Inc. sold $500 in pumpkins to a customer on account on January 1. On January 11 Pumpkin collected the cash from that customer. What is the impact on Pumpkin's accounting equation from the collection of cash? A. No net effect to the accounting equation. B. Decrease assets and increase liabilities. C. Increase assets and increase liabilities. D. Decrease assets and decrease liabilities. 20. Amounts owed to suppliers for supplies purchased on account are defined as: A. Cash. B. Accounts Receivable. C. Accounts Payable. D. Supplies Expense. 21. Purchasing office supplies on account will: A. Not change assets. B. Increase assets and decrease liabilities. C. Increase assets and increase liabilities. D. Increase assets and increase stockholders' equity. 22. Providing services and receiving cash will: A. Increase assets and increase stockholders' equity. B. Increase assets and increase liabilities. C. Decrease assets and increase liabilities. D. Decrease liabilities and increase stockholders' equity. 23. When a company provides services on account, the accounting equation would be affected as follows: A. Assets increase. B. Revenues increase. C. Assets increase and liabilities decrease. D. Assets increase and stockholders' equity increases. 25. When a payment is made on an account payable: A. Assets and stockholders' equity decrease. B. Assets and liabilities decrease. C. Liabilities and revenues decrease. D. Assets and expenses decrease. 26. Purchasing office equipment on account has what impact on the accounting equation? A. Stockholders' equity decreases and assets increase. B. Liabilities increase and assets increase. C. Assets decrease and liabilities decrease. D. Assets increase and stockholders' equity increases.

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ACCT 2301 Final Review Fall 2015 - Gee 32. Assume that Sallisaw Sideboards, Inc. had a retained earnings balance of $10,000 on April 1, and that the company had the following transactions during April. Issued common stock for cash, $5,000. Provided services to customers on account, $2,000. Provided services to customers in exchange for cash, $900. Purchased equipment and paid cash, $4,300. Paid April rent, $800. Paid workers salaries for April, $700. What was Sallisaw's retained earnings balance at the end of April? A. $11,400. B. $12,100. C. $16,400. D. Some other amount. Questions 33 & 34: Following are transactions of Gotebo Tanners, Inc., a new company, during the month of January 2012: 1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. 6. Paid employees $10,000 for their first month's salaries. 33. What was the balance of Gotebo's Cash account following these six transactions? A. $29,800. B. $19,300. C. $17,800. D. $22,400. 34. What was the total amount of Gotebo's liabilities following these six transactions? A. $12,300. B. $27,300. C. $22,600. D. $15,500. \45.

If the liabilities of a company increased by $55,000 during a month and the stockholders' equity decreased by $21,000 during that same month, did assets increase or decrease and by how much? A. $34,000 increase B. $55,000 increase C. $34,000 decrease D. $76,000 increase

46. Which of the accounts are decreased on the debit side and increased on the credit side? A. Liabilities, stockholders' equity, and revenues. B. Dividends, liabilities, and assets. C. Expenses, dividends, and stockholders' equity. D. Assets, dividends, and expenses.

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ACCT 2301 Final Review 49. Dividends normally carry a _______ balance and are shown in the _________. A. Debit; Statement of stockholders' equity B. Debit; Income statement C. Credit; Balance sheet D. Debit; Balance Sheet

Fall 2015 - Gee

50. Expenses normally carry a _______ balance and are shown in the _________. A. Debit; Statement of stockholders' equity B. Debit; Income statement C. Credit; Balance sheet D. Debit; Balance Sheet 51. Liabilities normally carry a _______ balance and are shown in the _________. A. Debit; Statement of stockholders' equity B. Debit; Income statement C. Credit; Balance sheet D. Debit; Balance Sheet 53. Which of the following accounts would normally have a credit balance? A. Accounts Payable, Service Revenue, Common Stock. B. Salaries Payable, Unearned Revenue, Delivery Expense. C. Income Tax Payable, Service Revenue, Dividends. D. Cash, Repairs and Maintenance Expense, Dividends. 54. Which of the following accounts would normally have a debit balance? A. Accounts Payable, Service Revenue, Common Stock. B. Salaries Payable, Unearned Revenue, Utilities Expense. C. Income Tax Payable, Service Revenue, Dividends. D. Cash, Delivery expense, Dividends. 63. The following statements pertain to recording transactions. Which of them are true? I. Total debits should equal total credits. II. It is possible to have multiple debits or credits in one journal entry. III. Assets are always listed first in journal entries. IV. Some journal entries will have debits only. A. I only. B. I and II. C. I, II, and IV. D. II, III, and IV. 68. A company received a bill for newspaper advertising services received, $400. The bill will be paid in 10 days. How would the transaction be recorded today? A. Debit Advertising Expense $400, credit Accounts Payable $400. B. Debit Accounts Payable $400, credit Advertising Expense $400. C. Debit Accounts Payable $400, credit Cash $400. D. Debit Advertising Expense $400, credit Cash $400.

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ACCT 2301 Final Review Fall 2015 - Gee 70. Assume that cash is paid for rent to cover the next year. The appropriate debit and credit are: A. Debit Rent Expense, credit Cash. B. Debit Prepaid Rent, credit Rent Expense. C. Debit Prepaid Rent, credit Cash. D. Debit Cash, credit Prepaid Rent. 71. Summer Leasing received $12,000 for 24 months rent in advance. How should Summer record this transaction? A. Debit Prepaid Rent; credit Rent Expense. B. Debit Cash; credit Unearned Revenue. C. Debit Cash; credit Service Revenue. D. Debit Rent Expense; credit Cash. 74. Schooner Inc. purchased equipment by signing a note payable. This transaction would be recorded as: A. Debit Equipment, credit Cash. B. Debit Cash, credit Notes Payable. C. Debit Notes Payable, credit Equipment. D. Debit Equipment, credit Notes Payable. 75. When a company pays $2,500 dividends to its stockholders, the transaction should be recorded as: A. Debit Cash; credit Dividends. B. Debit Retained Earnings; credit Dividends. C. Debit Dividends; credit Cash. D. Debit Dividends; credit Accounts Payable. 83. On December 1, 2012, Bears Inc. signed a contract with a retailer to supply maintenance for the next calendar year. How should this transaction be recorded on December 1, 2012? A. Debit Cash, credit Service Revenue. B. Debit Cash, credit Accounts Receivable. C. Debit Accounts Receivable, credit Service Revenue. D. No transaction should be recorded on December 1, 2012. 88. The Accounts Payable account has a beginning balance of $12,000 and the company purchased $50,000 of supplies on account during the month. The ending balance was $10,000. How much did the company pay to creditors during the month? A. $50,000. B. $52,000. C. $60,000. D. $62,000. 89. On March 3, Cobra Inc. purchased a desk for $450 on account. On March 22, Cobra purchased another desk for $500 also on account, and then on March 24, Cobra paid $400 on account. At the end of March, what amount should Cobra report for desks (assuming these two desks were the only desks they had)? A. $50. B. $450. C. $500. D. $950.

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ACCT 2301 Final Review Fall 2015 - Gee 90. Posting is the process of: A. Analyzing the impact of the transaction on the accounting equation. B. Obtaining information about external transactions from source documents. C. Transferring the debit and credit information from the journal to individual accounts in the general ledger. D. Listing all accounts and their balances at a particular date. 91. Accounts Receivable account has a beginning balance of $10,000 and the company provides services of $50,000 on account during the month. The ending balance was $12,000. How much did the company receive from customers during the month? A. $50,000. B. $52,000. C. $48,000. D. $62,000. 96. A trial balance represents the: A. Source documents used to determine the effects of transactions on the company's accounts. B. List of all accounts and their balances at a particular date to ensure that debits equal credits. C. Chronological record of all transactions affecting the company. D. Process of transferring debit and credit information from the journal to the accounts in the general ledger.

The Financial Reporting Process 1. The revenue recognition principle states that: A. Revenue should be recognized in the period the cash is received. B. Revenue should be recognized in the period earned. C. Revenue should be recognized in the balance sheet. D. Revenue is a component of common stock. 2. The matching principle is the principle that states: A. All costs that are used to generate revenue are recorded in the period the revenue is recognized. B. All transactions are recorded at the exchange price. C. The business is separate from its owners. D. The business will continue to operate indefinitely unless there is evidence to the contrary. 4. Air France collected cash on February 4 from the sale of a ticket to a customer on January 26.The flight took place on April 5. According to the revenue recognition principle, in which month should Air France have recognized this revenue? A. January. B. February. C. April. D. Evenly in each of the three months. 11. Which of the following statements are correct?

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ACCT 2301 Final Review A. (1) and (4) B. (2) and (3) C. (1) and (3) D. (2) and (4)

Fall 2015 - Gee

32. Adjusting entries are primarily needed for: A. Cash-basis accounting. B. Accrual-basis accounting. C. Current value accounting. D. Manual accounting systems. 34. Making insurance payments in advance is an example of: A. An accrued revenue. B. An accrued expense. C. An unearned revenue. D. A prepaid expense. 35. When a magazine sells subscriptions to customers, it is an example of: A. An accrued expense. B. An accrued revenue. C. A prepaid expense. D. An unearned revenue. 38. Prepayments occur when: A. Cash payment (or an obligation to pay cash) occurs before the expense recognition. B. Sales are delayed pending credit approval. C. Customers are unable to pay the full amount due when goods are delivered. D. Cash payment occurs after the expense is incurred and liability is recorded. 43. The adjusting entry required to record accrued expenses includes: A. A credit to Cash. B. A debit to an asset. C. A credit to an asset. D. A credit to liability. 48. During the year, Cheng Company paid salaries of $24,000. In addition, $8,000 in salaries has accrued by the end of the year but has not been paid. The year-end adjusting entry would include which one of the following? A. Debit to Salaries Expense for $32,000. B. Credit to Salaries Expense of $8,000. C. Debit to Salaries Payable for $24,000. D. Credit to Salaries Payable for $8,000. 49. At the beginning of December, Global Corporation had $2,000 in supplies on hand. During the month, supplies purchased amounted to $3,000, but by the end of the month the supplies balance was only $800. What is the appropriate month-end adjusting entry? A. Debit Cash $4,200, credit Supplies $4,200. B. Debit Supplies $4,200, credit Supplies Expense $4,200. C. Debit Supplies Expense $4,200, credit Supplies $4,200. D. Debit Cash $800, credit Supplies $800.

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ACCT 2301 Final Review Fall 2015 - Gee 44. Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the $4,200 premium to prepaid insurance. At its December 31 year-end, Yummy Foods would record which of the following adjusting entries? A Insurance Expense 1,750 Prepaid Insurance 1,750 B C

D

Prepaid Insurance Insurance Expense

1,750

Insurance Expense Prepaid Insurance Accounts Payable

1,750 2,450

Insurance Expense Prepaid Insurance

2,450

1,750

4,200 2,450

45. The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $32,000. The current pay period ends on Friday, January 3. Neat Clothes is now preparing financial statements for the year ended December 31. What is the adjusting entry to record accrued salaries at the end of the year? A Salaries Payable 22,400 Salaries Expense 22,400 B

C D

Salaries Expense Salaries Payable

6,400

Salaries Expense Salaries Payable

9,600

Salaries Expense Salaries Payable

22,400

6,400 9,600

22,400

47. On September 1, 2012, Gold Magazine sold 400 one-year subscriptions for $90 each. The total amount received was credited to Unearned Revenue. What would be the required adjusting entry at December 31, 2012? A Unearned Revenue 36,000 Service Revenue 36,000 B

C D

Service Revenue Unearned Revenue

24,000

Unearned Revenue Service Revenue

24,000

Unearned Revenue Service Revenue

12,000

24,000 24,000

12,000

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ACCT 2301 Final Review Fall 2015 - Gee 50. Eve's Apples opened for business on January 1, 2012, and paid for two insurance policies effective that date. The liability policy was $36,000 for eighteen-months, and the crop damage policy was $12,000 for a twoyear term. What was the balance in Eve's Prepaid Insurance account as of December 31, 2012? A. $9,000. B. $18,000. C. $30,000. D. $48,000. 54. A list of all accounts and their balances after updating account balances for adjusting entries is referred to as: A. A trial balance. B. An adjusted trial balance. C. A post-closing trial balance. D. An accounting trial balance. 57. The following financial information is from Shovels Construction Company for 2012:

What is the amount of current assets, assuming the accounts above reflect normal activity? A. $20,000. B. $60,000. C. $140,000. D. $175,000. 59. The following financial information is from Bronco Company. All debt is due within one year unless stated otherwise.

What is the amount of current liabilities? A. $63,000. B. $28,000. C. $45,600. D. $22,000. Page 10 of 50

ACCT 2301 Final Review Fall 2015 - Gee Questions 60 - 62: The following table contains financial information for Trumpeter Inc. before closing entries:

60. What is Trumpeter's net income? A. $3,500. B. $2,500. C. $5,000. D. $5,500. 61. What is the amount of Trumpeter's total assets? A. $81,500 B. $82,500 C. $68,500 D. $83,500 62. What is the amount of Trumpter's total liabilities? A. $5,000 B. $78,500 C. $68,500 D. $83,500 63. The closing entry for expenses includes: A. A debit to Dividends and a credit to all expense accounts. B. A debit to Retained Earnings and a credit to all expense accounts. C. A debit to Revenues and a credit to Retained Earnings. D. A debit to Revenues and a credit to all expense accounts. 64. The primary purpose of closing entries is to: A. Prove the equality of the debit and credit entries in the general journal. B. Ensure that all assets and liabilities are recognized in the appropriate period. C. Update the balance of Retained Earnings and prepare revenue, expense, and dividend accounts for next period's transactions. D. Assure that adjusting entries balance. 66. Permanent accounts would not include: A. Interest Expense. B. Salaries Payable. C. Prepaid Rent. D. Unearned Revenues...