Accounting 201 exam 1 - Exam 1. shows all my correct answers along with the ones I got wrong. PDF

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Exam 1. shows all my correct answers along with the ones I got wrong....

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PRACTICE EXAM 1 ACCOUNTING 201 •

Question 1 4 out of 4 points

When preparing a bank reconciliation, a check outstanding would be: Answers: A.

Added to the bank’s cash balance. B.

Subtracted from the bank’s cash balance. C.

Added to the company’s cash balance. D.

Excluded as this is a non-cash transaction. E.

Subtracted from the company’s cash balance. •

Question 2 4 out of 4 points

Recording salaries owed but not yet paid would have what effect on the accounting equation? Answers: A.

Decrease assets; Decrease stockholders’ equity B.

Decrease liabilities; Increase stockholders’ equity C.

Increase liabilities; Decrease stockholders’ equity D.

Increase assets; Increase liabilities E.

Decrease assets; Decrease liabilities •

Question 3 4 out of 4 points

The following account balances were drawn from the records of Hatter’s Tea Company on December 31, 2012: Cash $30,000 Expenses $17,000 Dividends $ 2,000 Retained Earnings, beginning $ 6,000 Accounts Payable $24,500 Accounts Receivable $15,000 Utilities Payable $ 5,500 Supplies $ 6,000 Common Stock $ 9,000 Revenues $25,000

! What is ending retained earnings for Hatter’s Tea Company? Answers: A.

51,000 B.

6,000 C.

12,000 D.

14,000 E.

21,000 •

Question 4 4 out of 4 points

What is the effect on the basic accounting equation of providing services to customers on account? Answers: A.

Increase in liabilities B.

Decrease in assets C.

Increase equities D.

Decrease in liabilities E.

No change •

Question 5 4 out of 4 points

What is the primary importance of financial important?

Answers: A.

To help investors and creditors to distinguish good companies from bad companies B.

To help managers generate internal reports useful for planning company operations C.

To help politician understand which industries should receive more favorable regulation D.

To help managers to maximize their compensation E.

To help tax authorities generate the amount of taxes to be received •

Question 6 4 out of 4 points

Which of the following is an example of a closing entry? Answers: A.

Debit Retained Earnings; Credit Service Revenue B.

Debit Dividends; Credit Cash C.

Debit Salaries Expense; Credit Salaries Payable D.

Debit Accounts Payable; Credit Retained Earnings E.

Debit Retained Earnings; Credit Supplies Expense •

Question 7 4 out of 4 points

Under accrual-basis accounting, revenues are recorded when __________. Under cash-basis accounting, revenues are recorded when _________.

Answers: A.

Customer orders a service; Cash is received B.

Earned; Cash is received C.

Customer orders a service; Earned D.

Cash is received; Earned E.

Earned; Customer orders a service •

Question 8 4 out of 4 points

Which financial statement represents the accounting equation? Answers: A.

Income statement B.

Balance sheet C.

Statement of stockholders’ equity D.

Statement of cash flows E.

Two of the answers above are correct •

Question 9 4 out of 4 points

Minstrel & Company provides music for special occasions. On January 14, Minstrel & Co. was hired for an upcoming wedding at an agreed upon fee of $7,000. The wedding was scheduled for May 23. As part of the agreement, Minstrel & Co. receives half of the fee at the end of April with the remaining amount received at the time of the wedding. How would Minstrel & Co. record the receipt of the initial amount in April?

Answers: A.

Credit to Service Revenue B.

Credit to Cash C.

Credit to Unearned Revenue D.

Credit to Accounts Receivable E.

Debit to Unearned Revenue •

Question 10 4 out of 4 points

The following account balances were drawn from the records of Hatter’s Tea Company on December 31, 2012: Cash $30,000 Expenses $17,000 Dividends $ 2,000 Retained Earnings, beginning $ 6,000 Accounts Payable $24,500 Accounts Receivable $15,000 Utilities Payable $ 5,500 Supplies $ 6,000 Common Stock $ 9,000 Revenues $25,000

! What is net income for Hatter’s Tea Company? Answers: A.

$2,500 B.

$2,000 C.

$-16,500 D.

$8,000 E.

$23,000 •

Question 11 4 out of 4 points

On March 1, Granny Inc. purchases one year of rent for $6,000 ($500 per month). What is the appropriate adjusting entry for rent at the end of the year?

Answers: A.

Debit Rent Expense $5,000; Credit Prepaid Rent $5,000 B.

Debit Rent Expense $6,000; Credit Prepaid Rent $6,000 C.

Debit Prepaid Rent $1,000; Credit Rent Expense $1,000 D.

Debit Rent Expense $6,000; Credit Cash $6,000 E.

Debit Cash $1,000; Credit Prepaid Rent $1,000 •

Question 12 4 out of 4 points

The company has a beginning cash balance of $7,000. Using the following information, calculate the ending balance of cash:! -Note receivable collected by the bank = $5,000! -Checks outstanding = $8,000! -Bank service fees = $1,000! -Non-sufficient funds (NSF) checks = $2,000! -Deposits Outstanding = $11,000 Answers: A.

$6,000 B.

$8,000 C.

$5,000 D.

$9,000 E.

$10,000 •

Question 13 4 out of 4 points

When purchasing supplies on account, which of the following would be recorded using cash-basis accounting?

Answers: A.

Debit to Cash B.

Debit to Supplies Expense C.

Credit to Cash D.

Debit to Supplies E.

None of the above •

Question 14 4 out of 4 points

Adjusting entries typically involve which transactions: Answers: A.

Those dealing with the Cash account B.

Those between the company and its stockholders. C.

Those necessary to close the temporary accounts to the Retained Earnings account D.

Those that involve calculation errors or misapplication of accounting rules E.

Those that occur continually over a period of time •

Question 15 4 out of 4 points

If Unearned Revenue increased by $70,000 during a month and Salaries Expense of $21,000 is paid during that same month, did assets increase or decrease and by how much?

Answers: A.

$91,000 increase B.

$49,000 increase C.

$70,000 increase D.

$49,000 decrease E.

No change •

Question 16 4 out of 4 points

Which of the following best explains the meaning of stockholders’ equity? Answers: A.

The resources owned by the company minus the amounts owed B.

The amount of common stock less dividends over the life of the company C.

All revenues, expenses, and dividends over the life of the company D.

The difference between total revenues and total expenses E.

Total assets of the company •

Question 17 4 out of 4 points

Huntsman Inc. hired six employees on Dec. 20. All employees worked through the end of the year, earning $6,000 in salaries. Payday is not until Jan. 5. What adjusting entry does Huntsman need to make on Dec. 31?

Answers: A.

No adjusting entry is required. B.

Debit Salaries Expense 6,000; Credit Cash 6,000 C.

Debit Cash 6,000; Credit Salaries Expense 6,000 D.

Debit Salaries Expense 6,000; Credit Salaries Payable 6,000 E.

Debit Salaries Payable 6,000; Credit Cash 6,000 •

Question 18 4 out of 4 points

In an accounting journal entry: Answers: A.

Total debits must equal total credits B.

Debits are shown on top C.

Credits are shown on bottom D.

Two of the above are correct E.

Answers A, B, and C are correct •

Question 19 4 out of 4 points

The resources of a company are referred to as: Answers: A.

Dividends B.

Assets C.

Liabilities D.

Expenses E.

Revenues •

Question 20

4 out of 4 points

WolfCo pays for office supplies previously purchased on account. This transaction would be recorded with a: Answers: A.

Debit to Supplies; Credit to Accounts Payable B.

Debit to Supplies Expense; Credit to Cash C.

Debit to Supplies Expense; Credit to Accounts Payable D.

Debit to Cash; Credit to Supplies E.

Debit to Accounts Payable; Credit to Cash •

Question 21 4 out of 4 points

Geppetto Company owes Pinocchio Company $15,000. Geppetto would report this in its: Answers: A.

Income statement B.

Balance sheet C.

Statement of stockholders’ equity D.

Statement of cash flows E.

All of the above •

Question 22 4 out of 4 points

On January 30, Golds Company provides services to customers on account. On February 5, cash is received from those customers. How is the cash receipt recorded on February 5?

Answers: A.

Debit Accounts Receivable; Credit Cash B.

Debit Cash; Credit Service Revenue C.

Debit Cash; Credit Accounts Receivable D.

Debit Accounts Receivable; Credit Service Revenue E.

Debit Service Revenue; Credit Accounts Receivable •

Question 23 4 out of 4 points

Accountants are responsible for measuring various operating, investing and financing activities. Which of the following correctly matches the activity with its type? Answers: A.

Financing – providing services for cash B.

Operating – paying off a note payable C.

Investing – paying utilities for the month D.

Investing – purchase an office building E.

Financing – selling equipment for cash •

Question 24 4 out of 4 points

Which of the following is (are) a purpose of financial accounting?

Answers: A.

Calculate the taxes owed because of profitable business transactions B.

Communicating business transactions to investors and creditors C.

Measure business transactions D.

Two of the above are correct E.

All of the above are correct •

Question 25 0 out of 4 points

On May 1, 2012, Red’s Basket Company purchased a one-year insurance policy for $12,000 ($1,000 per month). What is the amount of insurance expense in 2012 using accrual-basis versus cash-basis accounting? Answers: A.

Accrual-basis = $4,000; Cash-basis = $0 B.

Accrual-basis = $0; Cash-basis = $12,000 C.

Accrual-basis = $8,000; Cash-basis = $12,000 D.

Accrual-basis = $12,000; Cash-basis = $8,000 E.

Accrual-basis = $6,000; Cash-basis = $6,000 •

Question 26 0 out of 4 points

Which of the following transactions would cause an increase in both the assets and stockholders’ equity of a company?

Answers: A.

Services provided to a customer on account B.

The purchase of supplies on account from a vendor C.

Prepaying for next year’s rent D.

Collection of an account receivable which was the result of services provided on account in a previous period E.

Purchase of land with cash obtained from a bank loan •

Question 27 4 out of 4 points

The following account balances were drawn from the records of Hatter’s Tea Company on December 31, 2012: Cash $30,000 Expenses $17,000 Dividends $ 2,000 Retained Earnings, beginning $ 6,000 Accounts Payable $24,500 Accounts Receivable $15,000 Utilities Payable $ 5,500 Supplies $ 6,000 Common Stock $ 9,000 Revenues $25,000

! What are total liabilities for Hatter’s Tea Company? Answers: A.

30,000 B.

36,000 C.

45,000 D.

39,000 E.

47,000 •

Question 28 4 out of 4 points

Debits increase which of the following accounts:

Answers: A.

Assets B.

Revenues C.

Expenses D.

Dividends E.

Three of the above are correct •

Question 29 4 out of 4 points

Which of the following accounts is (are) considered to have a temporary balance? Answers: A.

Service Revenue B.

Accounts Receivable C.

Retained Earnings D.

Unearned Revenue E.

Two of the above have temporary balances •

Question 30 4 out of 4 points

On September 5, Mirror Inc. issues shares of common stock for cash. The transaction would be recorded with a: Answers: A.

Credit to Stockholders’ Payable B.

Debit to Common Stock C.

Credit to Retained Earnings D.

Debit to Dividends E.

Debit to Cash

•

Question 31 4 out of 4 points

Suppose supplies at the beginning of the year equal $1,200. During the year, an additional $5,400 of supplies is purchased. At the end of the year, $1,400 of supplies remains. The adjusting entry for supplies would include: Answers: A.

Debit Supplies for $5,400 B.

Credit Supplies Payable for $5,200 C.

Debit Supplies Expense for $5,200 D.

Debit Supplies Expense for $5,600 E.

Credit Supplies Expense for $5,600 •

Question 32 4 out of 4 points

What is a direct purpose of internal controls? Answers: A.

Ensure the company will continue to exist for the foreseeable future B.

Help managers determine which projects are likely to be more profitable C.

Improve the accuracy and reliability of accounting information D.

Safeguard the company’s assets E.

Two of the answers above are correct •

Question 33 0 out of 4 points

At any given time, the amount of cash in the petty cash fund should equal:

Answers: A.

All vouchers written during the accounting period. B.

The amount of cash used to establish the fund. C.

The established balance of the fund less all vouchers written during the accounting period. D.

The amount of cash withdrawn from the fund during the accounting period. E.

The net of cash receipts into the fund and cash withdrawn from the fund. •

Question 34 0 out of 4 points

On September 1, 2012, Aesop borrows $10,000 from the bank, due in one year with 12% interest. What is the amount of interest expense that Aesop would report for 2012 using accrual-basis versus cash-basis accounting? Answers: A.

Accrual-basis = $400; Cash-basis = $400 B.

Accrual-basis = $400; Cash-basis = $1,200 C.

Accrual-basis = $1,200; Cash-basis = $1,200 D.

Accrual-basis = $0; Cash-basis = $0 E.

Accrual-basis = $400; Cash-basis = $0 •

Question 35 4 out of 4 points

The following account balances were drawn from the records of Hatter’s Tea Company on December 31, 2012: Cash $30,000 Expenses $17,000 Dividends $ 2,000 Retained Earnings, beginning $ 6,000 Accounts Payable $24,500 Accounts Receivable $15,000 Utilities Payable $ 5,500 Supplies $ 6,000 Common Stock $ 9,000 Revenues $25,000

! What are the total assets for Hatter’s Tea Company?

Answers: A.

21,000 B.

15,000 C.

51,000 D.

45,000 E.

30,000 •

Question 36 4 out of 4 points

At the beginning of 2012, Dade Company has a balance for Retained Earnings of $500. For 2012, 2013, and 2014, the company has net income of $1,500, $2,000, and $2,500, and pays dividends of $500, $1,000, and $2,000. What is the balance of Retained Earnings at the end of 2014? Answers: A.

$2,500 B.

$3,000 C.

$6,500 D.

$3,500 E.

$500 •

Question 37 4 out of 4 points

What is one purpose for closing entries?

Answers: A.

To adjust assets and liabilities for additional transactions B.

To record revenues earned and expenses incurred C.

To record cash flows from operating, investing, and financing activities D.

To transfer the balance of temporary accounts to Retained Earnings E.

To show the equality of the accounting equation •

Question 38 4 out of 4 points

Repaying an amount borrowed would have what effect on the accounting equation? Answers: A.

Decrease assets; Decrease stockholders’ equity B.

Decrease assets; Decrease liabilities C.

Increase liabilities; Decrease stockholders’ equity D.

Increase assets; Increase liabilities E.

Decrease liabilities; Increase stockholders’ equity •

Question 39 4 out of 4 points

How many of the following transactions would decrease net income?! Purchased land with cash! Paid cash for utilities received in the current period! Paid employees for salaries earned in the current period! Repaid money previously borrowed from the bank! Purchased supplies for future use! Paid rent for the current month (not in advance)

Answers: A.

1 B.

4 C.

0 D.

2 E.

3 •

Question 40 4 out of 4 points

Which of the following causes an increase in stockholders’ equity? Answers: A.

Pay dividends to stockholders B.

Perform services that were previously paid for by the customer C.

Use supplies previously purchased D.

Borrow money from the bank E.

Receive cash from customers on account •

Question 41 4 out of 4 points

Which financial statement reports the details of a company’s profitability over the previous 12 months? Answers: A.

Statement of Stockholders’ Equity B.

Balance Sheet C.

Income Statement D.

Statement of Current Activity E.

Statement of Cash Flows

•

Question 42 4 out of 4 points

The balance of Retained Earnings can best be explained as: Answers: A.

The difference between total assets and total liabilities B.

All revenues, expenses, and dividends over the life of the company C.

All revenues, expenses, and dividends over the past year D.

The stockholders’ equity of a company E.

All dividends paid to stockholders over the life of the company •

Question 43 4 out of 4 points

Consider the following transactions:! 1. The company pays cash for supplies (but does not use them), $100! 2. The company pays cash to workers for salaries earned in the current period, $200! 3. The company pays cash for one year of rent in advance, $300! 4. The company pays cash for dividends to shareholders, $400! Calculate the amount of accrual-basis expense. Answers: A.

$200 B.

$400 C.

$1,000 D.

$600 E.

$500 •

Question 44 4 out of 4 points

Which of the ...