ACCT 201 Chapters 1-4

FA

For each user of accounting information, identify if the user would use financial accouting (FA) or managerial accounting (MA). Investor

FA

For each user of accounting information, identify if the user would use financial accouting (FA) or managerial accounting (MA). Banker

FA

For each user of accounting information, identify if the user would use financial accouting (FA) or managerial accounting (MA). Internal Revenue Service

MA

For each user of accounting information, identify if the user would use financial accouting (FA) or managerial accounting (MA). Manager of the business

MA

For each user of accounting information, identify if the user would use financial accouting (FA) or managerial accounting (MA). Owner

FA

For each user of accounting information, identify if the user would use financial accouting (FA) or managerial accounting (MA). Stockholder

MA

For each user of accounting information, identify if the user would use financial accouting (FA) or managerial accounting (MA). Human Resources Director

FA

For each user of accounting information, identify if the user would use financial accouting (FA) or managerial accounting (MA). Creditor

A. financial accounting

The field of accounting that focuses on providing information for external decision makers is ________. A. financial accounting B. managerial accounting C. cost accounting D. nonmonetary accounting

C. Generally Accepted Accounting Principles

GAAP refer to guidelines for accounting information in the United States. The acronym GAAP in this statement refers to ________. A. Global Accommodation Accounting Principles B. Generally Accredited Accounting Policies C. Generally Accepted Accounting Principles D. Globally Accepted and Accurate Policies

A. cost principle

According to the ________, acquired assets should be recorded at the amount actually paid rather than at the estimated market value. A. cost principle B. monetary unit assumption C. economic entity concept D. going concern assumption

C. going concern assumption

As per the ________, the entity will remain in operation for the foreseeable future. A. economic entity concept B. monetary unit assumption C. going concern assumption D. cost principle

A. Assets = Liabilities + Equity

Which of the following is the correct accounting equation? A. Assets = Liabilities + Equity B. Assets + Revenues = Equity C. Assets + Revenues = Liabilities + Expenses D. Assets + Liabilities = Equity

D. $160,000

Sunlight Company has assets and equity that amount to $220,000 and $60,000, respectively. Liabilities total ________. A. $60,000 B. $220,000 C. $280,000 D. $160,000

B. assets decrease by $5,000 and liabilities decrease by $5,000

Venus, Inc. paid $5,000 on accounts payable. How does this transaction affect the accounting equation of Venus? A. assets decrease by $5,000 and equity increases by $5,000 B. assets decrease by $5,000 and liabilities decrease by $5,000 C. assets increase by $5,000 and equity decreases by $5,000 D. assets increase by $5,000 and liabilities increase by $5,000

D. assets increase by $14,000; assets decrease by $14,000

Exchange Company collected $14,000 from one of its customers, the amount owed from the previous month. How does this affect the accounting equation for Exchange? A. assets increase by $14,000; equity increases by $14,000 B. assets increase by $14,000; liabilities decrease by $14,000 C. assets increase by $14,000; liabilities increase by $14,000 D. assets increase by $14,000; assets decrease by $14,000

B. liabilities increase and equity decreases

Zetom Company receives a bill from one of its suppliers for services received and will pay the supplier next month. How does the receipt of the bill from the supplier affect the accounting equation of Zetom? A. liabilities and equity increase B. liabilities increase and equity decreases C. assets and liabilities increase D. assets and equity decrease

B. the income statement; the statement of owner’s equity

The amount of net income is transferred from ________ to ________. A. the balance sheet; the income statement B. the income statement; the statement of owner’s equity C. the balance sheet; the statement of cash flows D. the income statement; the statement of expenditures

C. Assets

The balance sheet is a snapshot of the entity. Which of the following is included on the balance sheet? A. Expenses B. Owner’s withdrawals C. Assets D. Revenues

B. Statement of owner’s equity

Which of the following financial statements shows the amounts distributed to the owner? A. Budgeted balance sheet B. Statement of owner’s equity C. Income statement D. Balance sheet

B. Balance sheet

Which of the following financial statements lists the entity’s assets, liabilities, and stockholders’ equity as of a specific date? A. Statement of cash flows B. Balance sheet C. Income statement D. Statement of owner’s equity

D. Prepaid Rent

The account title used for recording the payment of rent in advance for an office building is ________. A. Rent Revenue B. Rent Payable C. Rent Expense D. Prepaid Rent

B. Accounts Payable

Which of the following is a liability account? A. Salaries Expense B. Accounts Payable C. Service Revenue D. Prepaid Expense

DR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Increase to Accounts Receivable

DR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Decrease to Unearned Revenue

CR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Decrease to Cash

DR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Increase to Interest Expense

CR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Increase to Salaries Payable

CR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Decrease to Prepaid Rent

CR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Increase to Perry, Capital

DR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Increase to Notes Receivable

DR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Decrease to Accounts Payable

CR

For each account, identify whether the changes would be recorded as a debit (DR) or credit (CR). Increase to Interest Revenue

CR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Notes Payable

DR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Hernandez, Withdrawls

CR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Service Revenue

DR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Land

CR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Unearned Revenue

CR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Hernandez, Capital

DR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Utilities Expense

DR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Office Supplies

DR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Advertising Expense

CR

For each account, identify whether the normal balance is a debit (DR) or credit (CR). Interest Payable

C. Taccount

A shortened form of the ledger is called a ________. A. trial balance B. balance sheet C. Taccount D. chart of accounts

D. asset; debit

Accounts Receivable is a(n) ________ account and has a normal ________ balance. A. asset; credit B. liability; credit C. liability; debit D. asset; debit

D. It is an equity account that has a normal credit balance.

Which of the following statements is true of the Owner’s Capital account? A. It is an equity account that has a normal debit balance. B. It is a liability account that has a normal credit balance. C. It is a liability account that has a normal debit balance. D. It is an equity account that has a normal credit balance.

C. $23,000 debit

The Accounts Receivable account of Rosewood Company has the following postings: Accounts Receivable 24,000 3,000 4,000 Calculate the ending balance of the account. A. $27,000 debit B. $31,000 debit C. $23,000 debit D. $4,000 credit

A. Sales invoice

Which of the following is a source document that provides the evidence and data for accounting transactions? A. Sales invoice B. Trial balance C. Ledger D. Journal

A. journal

Transactions are first record in a ________. A. journal B. ledger C. trial balance D. chart of accounts

A. recording the data only in the journal

Journalizing a transaction involves ________. A. recording the data only in the journal B. calculating the balance in an account using journal entries C. posting the account balances in the chart of accounts D. preparing a summary of account balances

D. transferring data from the journal to the ledger

Posting a transaction means ________. A. preparing a summary of account balances B. finding the account number in the chart of accounts C. calculating the balance in an account D. transferring data from the journal to the ledger

D. Source document, Journal, Ledger

Which of the following sequences is the normal sequence of flow of accounting data? A. Ledger, Journal, Source document B. Journal, Source document, Ledger C. Source document, Ledger, Journal D. Source document, Journal, Ledger

D. Cash

A business makes a cash payment of $12,000 to a creditor. Which of the following accounts is credited? A. Accounts Receivable B. Bank C. Accounts Payable D. Cash

A. Office Supplies 800
Accounts Payable 800

Which of the following journal entries would be recorded if a business purchased $800 of office supplies on account? A. Office Supplies 800 Accounts Payable 800 B. Office Supplies 800 Cash 800 C. Accounts Payable 800 Office Supplies 800 D. Cash 800 Office Supplies 800

A. Cash 900
Service Revenue 900

Which of the following journal entries would be recorded if a business renders service and receives cash of $900 from the customer? A. Cash 900 Service Revenue 900 B. Service Revenue 900 Accounts Payable 900 C. Service Revenue 900 Cash 900 D. Service Revenue 900 Accounts Receivable 900

A. Accounts Payable 750
Cash 750

Which of the following journal entries would be recorded if a business purchased office supplies on account in a previous accounting period and now makes a cash payment of $750 to the supplier to settle the account? A. Accounts Payable 750 Cash 750 B. Accounts Payable 750 Office Supplies 750 C. Cash 750 Office Supplies 750 D. Cash 750 Accounts Payable 750

A. Cash 3000
C. Jones, Capital 3000

Which of the following journal entries would be recorded if Christy Jones Company received a $3,000 cash contribution from the owner? A. Cash 3000 C. Jones, Capital 3000 B. Accounts Payable 3000 Cash 3000 C. C. Jones, Capital 3000 Accounts Payable 3000 D. C. Jones, Capital 3000 Cash 3000

D. Assets, Liabilities, Equity

Which of the following sequences states the order in which accounts are listed on a trial balance? A. Liabilities, Assets, Equity B. Equity, Assets, Liabilities C. Assets, Equity, Liabilities D. Assets, Liabilities, Equity

B. A trial balance is a list of all accounts with their balances.

Which of the following statements is true of a trial balance? A. A trial balance is also known as the chart of accounts. B. A trial balance is a list of all accounts with their balances. C. A trial balance is the first step in the accounting cycle. D. A trial balance is also known as a balance sheet.

A. $31,750

The following are the current month’s balances for Jackson Company. Accounts Payable 8,000 Revenue 11,000 Cash 5,000 Expenses 1,600 Furniture 10,000 Accounts Receivable 14,000 B. Jackson, Capital 8,250 Notes Payable 4,500 Calculate the total amount of credits for the trial balance. A. $31,750 B. $23,500 C. $20,750 D. $23,750

B. Balance Sheet

Which of the following is a financial statement that presents a business’s accounting equation? A. Chart of Accounts B. Balance Sheet C. Income Statement D. Trial Balance

B. before the financial statements are prepared

When is a trial balance usually prepared? A. after each entry is journalized B. before the financial statements are prepared C. at the beginning of an accounting period D. after the financial statements are prepared

a. cash basis 4,500
b. accrual basis 1,800

The Yellow Buttercup Law Firm prepays for advertising in the local newspaper. On January 1, the law firm paid $4,500 for five months of advertising. How much advertising expense should Yellow Buttercup Law Firm record for the two months ending February 28 under the a. cash basis? b. accrual basis?

A. Accrual accounting records revenue only when it is earned.

Which of the following is true of accrual basis accounting and cash basis accounting? A. Accrual accounting records revenue only when it is earned. B. Cash basis accounting records all transactions. C. Accrual accounting is not allowed under GAAP. D. All of the above are true.

Time period concept

assumes that a business’s activities can be sliced into small time segments and that financial statements can be prepared for specific periods

Revenue recognition principle

requires companies to record revenue when it has been earned and determines the amount of revenue to record

Matching principle

guides accounting for expenses, ensures that all expenses are recorded when they are incurred during the period, and matches those expenses against the revenues of the period.

B. Service revenue of $440

Strongman’s Gym gains a client who prepays $660 for a package of six physical training sessions. Strongman’s Gym collects the $660 in advance and will provide the training later. After four training sessions, what should Strongman’s Gym report on its income statement assuming it uses the accrual basis accounting method? A. Cash of $220 B. Service revenue of $440 C. Service revenue of $660 D. Unearned service revenue of $440

C. matching

The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle. A. accrual B. revenue recognition C. matching D. comparison

B. expenses and revenues

Which of the following accounting elements does the matching principle help to match? A. expenses and liabilities B. expenses and revenues C. revenues and liabilities D. expenses and assets

A. revenue to be recorded only after the business has earned it.

The revenue recognition principle requires A. revenue to be recorded only after the business has earned it. B. expenses to be matched with revenue of the period. C. revenue to be recorded only after the cash is received. D. time to be divided into annual periods to measure revenue properly.

C. updating the accounts at the end of the period.

Adjusting the accounts is the process of A. recording transactions as they occur during the period. B. subtracting expenses from revenues to measure net income. C. updating the accounts at the end of the period. D. zeroing out account balances to prepare for the next period.

A. at the end of the accounting period

An adjusting entry is completed ________. A. at the end of the accounting period B. when accounts need to be balanced in the ledger C. when the balance sheet is prepared D. at the beginning of the accounting period

B. accrued expense

An expense that has been incurred but not yet paid is called a(n) ________. A. deferred expense B. accrued expense C. deferred revenue D. accrued revenue

C. $320

Saturn Services Company signed a one − year $48,000 note payable at 8% interest on May 1, 2017. How much interest expense must be accrued on May 31, 2017? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole number.) A. $160 B. $51,200 C. $320 D. $3,840

False

Adjusting entries may involve any account, including Cash. True False

D. Service Revenue

Kostner Financial Services performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received the client’s check by mail on January 5. Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services performed? A. Accounts Payable B. Unearned Revenue C. Prepaid Expense D. Service Revenue

C. Salaries Payable

The employees of Sinclair Services Company worked the last two weeks of December. They received their paychecks on January 2. Which of the following accounts should appear on the balance sheet as of December 31? A. Prepaid Expense B. Salaries Expense C. Salaries Payable D. Accounts Payable

A. deferred revenue

The liability created when a business collects cash from its customers before completing a service or delivering a product is called ________. A. deferred revenue B. deferred expense C. accrued revenue D. accrued expense

B. Debit $31,000 to Depreciation Expense—Equipment, and credit $31,000 to Accumulated Depreciation—Equipment.

A business purchased equipment for $155,000 on January 1, 2017. The equipment will be depreciated over the five years of its estimated useful life using the straight − line depreciation method. The business records depreciation once a year on December 31. Which of the following is the adjusting entry required to record depreciation on equipment for the year 2017? (Assume the residual value of the acquired equipment to be zero.) A. Debit $31,000 to Depreciation Expense, and credit $31,000 to Equipment. B. Debit $31,000 to Depreciation Expense—Equipment, and credit $31,000 to Accumulated Depreciation—Equipment. C. Debit $155,000 to Equipment, and credit $155,000 to Cash. D. Debit $31,000 to Depreciation Expense—Equipment, and credit $155,000 to Accumulated Depreciation—Equipment.

B. adjusted trial balance

Financial statements are prepared from the balances in a(n) ________. A. unadjusted trial balance B. adjusted trial balance C. chart of accounts D. general journal

A. The total assets will be overstated.

The accountant of Zeus Legal Services failed to make an adjusting entry for supplies that had been used for the year. Assume the supplies were initially recorded as an asset. Which of the following statements is true? A. The total assets will be overstated. B. The equity will be understated. C. The total assets will be understated. D. The total liabilities will be overstated.

C. worksheet

An internal document that helps summarize data for the preparation of financial statements is called a ________. A. chart of accounts B. ledger C. worksheet D. journal

A. ledger

To fill in the unadjusted trial balance columns in a worksheet, the account balances before adjustments are copied directly from the ________. A. ledger B. chart of accounts C. balance sheet of previous year D. adjusted trial balance

C. adjusted trial balance

The financial statements are prepared from the ________. A. unadjusted trial balance B. chart of accounts C. adjusted trial balance D. statement of retained earnings

B. current

Assets that are expected to be converted to cash, sold, or used up during the next 12 months, or within the business’s normal operating cycle if the cycle is longer than a year, are called ________ assets. A. intangible B. current C. plant D. longterm

B. intangible assets

Patents, copyrights, and trademarks are examples of ________. A. shortterm investments B. intangible assets C. fixed assets D. longterm investments

A. Cash

Which of the following is the most liquid asset? A. Cash B. Prepaid Expenses C. Building D. Accounts Receivable

C. Net income is recorded in the income statement debit column.

Which of the following statements is true of the worksheet? A. Net income is recorded in the balance sheet debit column. B. Net income is recorded in the adjusted trial balance debit column. C. Net income is recorded in the income statement debit column. D. Net income is recorded in the income statement credit column.

C. permanent account

An account that is not closed at the end of the period is called a(n) ________. A. revenue account B. temporary account C. permanent account D. expense account

B. Salaries Payable

Which of the following is a permanent account? A. Utilities Expense B. Salaries Payable C. Wages Expense D. Service Revenue

A. revenues, expenses, and owner’s withdrawals

Which of the following categories of accounts are temporary accounts that are closed at the end of the year? A. revenues, expenses, and owner’s withdrawals B. assets, liabilities, and owner’s withdrawals C. revenues, expenses, and owner’s equity D. assets, liabilities, and owner’s equity

A. debit Income Summary and credit Insurance Expense

Which of the following entries will be necessary to close the Insurance Expense account at the end of the year? A. debit Income Summary and credit Insurance Expense B. debit Insurance Expense and credit Owner, Capital C. debit Insurance Expense and credit Income Summary D. debit Owner, Capital and credit Insurance Expense

A. Revenues and expenses

Which of the following are NOT included in a postclosing trial balance? A. Revenues and expenses B. Assets and liabilities C. Common Stock and liabilities D. Owner, Capital and assets

A. post-closing trial balance

A list of the accounts and their balances at the end of the period, after journalizing and posting the closing entries, is called ________. A. post-closing trial balance B. chart of accounts C. preclosing balance sheet D. adjusted trial balance

A. Interest Payable

Which of the following accounts will be included in a postclosing trial balance? A. Interest Payable B. Interest Expense C. Utilities Expense D. Service Revenue

D. journalize adjusting entries

In an accounting cycle, which of the following steps takes place only at the end of the accounting period? A. journalize transactions that occur B. start with the beginning account balances C. analyze transactions as they occur D. journalize adjusting entries

B. after preparing the unadjusted trial balance

Adjusting journal entries are prepared ________. A. after preparing the financial statements B. after preparing the unadjusted trial balance C. after posting the closing entries D. after preparing the adjusted trial balance

C. posting of journal entries to the accounts

Which of the following steps must be completed before preparing the adjusted trial balance? A. preparation of the financial statements B. preparation of the closing entries C. posting of journal entries to the accounts D. preparing the postclosing trial balance

C. It is a process by which financial statements for a period are produced.

Which of the following statements is true of the accounting cycle? A. It involves preparation of adjusting entries after the closing entries. B. It ignores the beginning balances of accounts. C. It is a process by which financial statements for a period are produced. D. It takes place only at the end of an accounting period.