Accounting Ch.16 Final Exam

1. MC.01.49 Profit is the difference between a. assets and liabilities b. the assets purchased with cash contributed by the owner and the cash spent to operate the business ✔ c. the amounts received from customers for goods or services and the amounts paid for the inputs used to provid d. the incoming cash and outgoing cash Feedback Check My Work Correct 2. MC.01.50 Two common areas of accounting that respectively provide information to internal and external users are a. forensic accounting and financial accounting ✔ b. managerial accounting and financial accounting c. financial accounting and tax accounting systems d. managerial accounting and environmental accounting Feedback Check My Work Correct 3. MC.01.60 Which of the following is the best description of accounting's role in business? ✔ a. Accounting provides information to managers to operate the business and to other users to make decisions reg condition of the company. b. Accounting is not responsible for providing any form of information to users. That is the role of the Information S c. Accounting provides stockholders with information regarding the market value of the company's stocks. d. Accounting helps in decreasing the credit risk of the company. Feedback Check My Work Correct 4. MC.01.64 Which of the following are guidelines for behaving ethically? I. Identify the consequences of a decision and its effect on others. II. Consider your obligations and responsibilities to those affected by the decision. III. Identify your decision based on personal standards of honesty and fairness. a. I and II. ✔ b. I, II, and III. c. I and III. d. II and III. Feedback Check My Work Correct 5. MC.01.66 Most businesses in the United States are a. corporations b. cooperatives c. partnerships ✔ d. proprietorships Feedback Check My Work Correct 6. MC.01.70 On May 20, White Repair Service extended an offer of $108,000 for land that had been priced for sale at $140,000. On May 30, White Repair Service accepted the seller's counter offer of $115,000. On June 20, the land was assessed at a value of $95,000 for property tax purposes. On July 4, White Repair Service was offered $150,000 for the land by a national retail chain. At what value should the land be recorded in White Repair Service's records? ✔ a. $115,000 b. $95,000 c. $140,000 d. $108,000 Feedback Check My Work Correct 7. MC.01.84 The initials GAAP stand for a. General Accounting Procedures ✔ b. Generally Accepted Accounting Principles c. Generally Accepted Plans d. Generally Accepted Accounting Practices Feedback Check My Work Correct 8. MC.01.86 Debts owed by a business are referred to as a. accounts receivables ✔ b. liabilities c. stockholders' equity d. expenses Feedback Check My Work Correct 9. MC.01.87 The accounting equation may be expressed as a. Assets + Liabilities = Stockholders' Equity b. Assets = Expenses - Liabilities ✔ c. Assets - Liabilities = Stockholders' Equity d. Assets = Revenues - Liabilities Feedback Check My Work Correct 10. MC.01.88 The assets and liabilities of a company are $128,000 and $84,000, respectively. Stockholders' equity should equal a. $128,000 b. $84,000 c. $212,000 ✔ d. $44,000 Feedback Check My Work Correct Post-Submission Assets = Liabilities + Stockholders' Equity $128,000 = $84,000 + Stockholders' Equity Stockholders' Equity = $44,000 11. MC.01.89 If total liabilities decreased by $46,000 during a period of time and stockholders' equity increased by $60,000 during the same period, the amount and direction (increase or decrease) of the period's change in total assets is a a. $106,000 decrease ✔ b. $14,000 increase c. $14,000 decrease d. $106,000 increase Feedback Check My Work Correct Post-Submission Assets = Liabilities + Stockholders' Equity Assets = −$46,000 + $60,000 = $14,000 Change in assets = +$14,000 12. MC.01.91 A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to ✔ a. decrease an asset, decrease a liability b. increase an asset, increase stockholders' equity c. increase an asset, decrease another asset d. increase an asset, increase a liability Feedback Check My Work Correct Post-Submission Assets = Liabilities + Stockholders' Equity Asset (Cash) decreases by $7,000. Liability (Accounts Payable) decreases by $7,000. 13. MC.01.92 Earning revenue a. increases assets, decreases stockholders' equity b. increases one asset, decreases another asset ✔ c. increases assets, increases stockholders' equity d. decreases assets, increases liabilities Feedback Check My Work Correct 14. MC.01.94 Goods purchased on account for future use in the business, such as supplies, are called a. prepaid liabilities ✔ b. prepaid expenses c. liabilities d. revenues Feedback Check My Work Correct 15. MC.01.95 The asset created by a business when it makes a sale on account is termed a. prepaid expense ✔ b. accounts receivable c. accounts payable d. interest revenue Feedback Check My Work Correct 16. MC.01.96 The debt created by a business when it makes a purchase on account is referred to as an a. account receivable b. asset c. expense payable ✔ d. account payable Feedback Check My Work Correct 17. MC.02.77 The debit side of an account ✔ a. is the left side of the account b. can be either side of the account depending on how the accountant set up the system c. depends on whether the account is an asset, liability, or stockholders' equity d. is the right side of the account Feedback Check My Work Correct 18. MC.02.83 The balance of an account is determined by a. adding all of the debits to all of the credits b. always subtracting the debits from the credits ✔ c. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum d. always subtracting the credits from the debits Feedback Check My Work Correct 19. MC.02.94 The accounts in the ledger of Monroe Entertainment Co. are listed below. All accounts have normal balances. Accounts payable Accounts receivable Supplies $1,500 1,800 500 Fees earned $8,600 Insurance expense 1,300 Rent expense 1,500 Prepaid insurance 2,000 Land 8,000 Cash 3,200 Wages expense 1,400 Office equipment 1,800 Retained earnings 5,500 Dividends 1,200 Common stock 9,200 Unearned rent 1,600 Total liabilities are a. $1,500 ✔ b. $3,100 c. $7,300 d. $14,300 Feedback Check My Work Correct Post-Submission Total liabilities = Accounts payable + Unearned rent = $1,500 + $1,600 = $3,100 20. MC.02.98 Which of the following types of accounts have a normal credit balance? a. liabilities and expenses ✔ b. revenues and common stock c. common stock and dividends d. assets and liabilities Feedback Check My Work Correct 21. MC.02.99 Which of the following groups of accounts have a normal debit balance? a. liabilities and stockholders' equity ✔ b. assets and expenses c. revenues, liabilities, and stockholders' equity d. stockholders' equity and assets Feedback Check My Work Correct 22. MC.02.116 Which of the following entries records the acquisition of office supplies on account? a. Cash, debit; Office Supplies, credit b. Accounts Receivable, debit; Office Supplies, credit ✔ c. Office Supplies, debit; Accounts Payable, credit d. Office Supplies, debit; Cash, credit Feedback Check My Work Correct 23. MC.02.117 Which of the following entries records the payment of insurance for the current month? a. Cash, debit; Insurance Expense, credit b. Insurance Expense, debit; Accounts Receivable, credit c. Prepaid Insurance, debit; Cash, credit ✔ d. Insurance Expense, debit; Cash, credit Feedback Check My Work Correct 24. MC.02.118 Which of the following entries records the receipt of cash from clients on account? a. Accounts Payable, debit; Fees Earned, credit b. Accounts Receivable, debit; Fees Earned, credit c. Accounts Receivable, debit; Cash, credit ✔ d. Cash, debit; Accounts Receivable, credit Feedback Check My Work Correct 25. MC.03.50 The revenue recognition principle a. states that revenue is not recorded until the cash is received b. is not in conflict with the cash method of accounting c. controls all revenue reporting for the cash basis of accounting ✔ d. determines when revenue is credited to a revenue account Feedback Check My Work Correct 26. MC.03.51 The matching principle a. determines whether the normal balance of an account is a debit or credit b. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance ✔ c. states that the revenues and related expenses should be reported in the same period d. addresses the relationship between the journal and the balance sheet Feedback Check My Work Correct 27. MC.03.52 Using accrual accounting, revenues are recorded a. when cash is received without regard to when the services are performed or products have been delivered to cus b. when cash is received at the time services are performed or products have been delivered to customers c. only if cash is received after the services are performed or products have been delivered to customers ✔ d. when a service has been performed or products have been delivered to customers without regard to when cash Feedback Check My Work Correct 28. MC.03.58 Prior to the adjusting process, accrued revenue has a. been earned and cash received b. not been earned but recorded as revenue ✔ c. been earned and not recorded as revenue d. not been recorded as revenue but cash has been received Feedback Check My Work Correct 29. MC.03.65 Generally accepted accounting principles require that companies use the ____ of accounting. a. deferral basis b. account basis ✔ c. accrual basis d. cash basis Feedback Check My Work Correct 30. MC.03.66 The cash basis of accounting records revenues and expenses when the cash is exchanged while the accrual basis of accounting a. records revenues when cash is received and expenses when they are incurred ✔ b. records revenues when they are earned and expenses when they are incurred c. records revenues when they are earned and expenses when they are paid d. records revenues and expenses when the company needs to apply for a loan Feedback Check My Work Correct 31. MC.03.89.ALGO (Algorithmic) The supplies account had a balance of $1,027 at the beginning of the year and was debited during the year for $3,603, representing the total of supplies purchased during the year. If $3,145 of supplies are on hand at the end of the year, the supplies expense to be reported on the income statement for the year is a. $4,630 b. $3,145 c. $6,748 ✔ d. $1,485 Feedback Check My Work Correct Post-Submission Supplies expense to be reported on the income statement for the year = Balance of supplies account at the beginning of the year + Supplies purchased during the year + Supplies on hand at the end of the year = $1,027 + $3,603 – $3,145 = $1,485 32. MC.03.90 Smokey Company purchases a one-year insurance policy on July 1 for $3,600. The adjusting entry on December 31 is a. debit Insurance Expense, $2,100; credit Prepaid Insurance, $2,100 b. debit Prepaid Insurance, $1,800; credit Cash, $1,800 c. debit Insurance Expense, $1,500; credit Prepaid Insurance, $1,500 ✔ d. debit Insurance Expense, $1,800; credit Prepaid Insurance, $1,800 Feedback Check My Work Correct Post-Submission Insurance expense per month = $3600 / 12 = $300 Insurance expense from July 1 to December 31 = $300 × 6 = $1,800 Debit Credit December 31 Insurance Expense 1,800 Prepaid Insurance 1,800 33. MC.03.100 Prepaid advertising, representing payment for the next quarter, would be reported on the balance sheet as a(n) a. contra asset ✔ b. asset c. stockholders' equity d. liability Feedback Check My Work Correct 34. MC.03.104 The adjusting entry for gym memberships earned that were previously recorded in the unearned gym memberships account is a. debit Gym Memberships Expense; credit Unearned Gym Memberships b. debit Gym Memberships Revenue; credit Unearned Gym Memberships c. debit Unearned Gym Memberships; credit Prepaid Gym Memberships ✔ d. debit Unearned Gym Memberships; credit Gym Memberships Revenue Feedback Check My Work Correct 35. MC.04.72 What is the major difference between the unadjusted trial balance and the adjusted trial balance? a. The adjusted trial balance will show the net income (loss) as an additional account. ✔ b. The adjusted trial balance includes the postings of the adjustments for the period in the balance of the account c. The adjusted trial balance will be used to record the adjustments for the period. d. Unlike the adjusted trial balance, the unadjusted trial balance will continue with the end-of-period processing eve Feedback Check My Work Correct 36. MC.04.74 Accumulated Depreciation appears on the a. balance sheet in the current assets section b. income statement as an operating expense ✔ c. balance sheet in the property, plant, and equipment section d. balance sheet in the long-term liabilities section Feedback Check My Work Correct 37. MC.04.75 Notes receivable due in 390 days appear on the a. income statement as an expense ✔ b. balance sheet in the noncurrent assets section c. balance sheet in the current liabilities section d. balance sheet in the current assets section Feedback Check My Work Correct 38. MC.04.76 Unearned Fees appear on the a. balance sheet in the current assets section b. income statement as revenue c. balance sheet in the stockholders' equity section ✔ d. balance sheet as a current liability Feedback Check My Work Correct 39. MC.04.77 Which one of the fixed asset accounts listed below will not have a related contra asset account? a. Delivery Equipment b. Building ✔ c. Land d. Office Equipment Feedback Check My Work Correct 40. MC.04.78 Prepaid insurance is reported on the balance sheet as a ✔ a. current asset b. current liability c. long-term liability d. fixed asset Feedback Check My Work Correct 41. MC.04.81 The income statement should be prepared a. after the retained earnings statement and balance sheet b. after the retained earnings statement and before the balance sheet ✔ c. before the retained earnings statement and balance sheet d. after the balance sheet and before the retained earnings statement Feedback Check My Work Correct 42. MC.04.82 The following is the adjusted trial balance for Stockton Company. Stockton Company Adjusted Trial Balance December 31 Cash 7,530 Accounts Receivable 2,100 Prepaid Expenses Equipment 700 13,700 Accumulated Depreciation 1,100 Accounts Payable 1,900 Notes Payable 4,300 Common Stock 1,000 Retained Earnings 12,940 Dividends 790 Fees Earned 9,250 Wages Expense 2,500 Rent Expense 1,960 Utilities Expense 775 Depreciation Expense 250 Miscellaneous Expense Totals 185 30,490 Determine the net income (loss) for the period. 30,490 a. net income $9,250 ✔ b. net income $3,580 c. net loss $5,670 d. net loss $790 Feedback Check My Work Correct Post-Submission Net income = Fees earned – (Wages expense + Rent expense + Utilities expense + Depreciation expense + Miscellaneous expense) = $ 9,250 – ($2,500 + $1,960 + $775 + $250 + $185) = $3,580 43. MC.04.83 The following is the adjusted trial balance for Stockton Company. Stockton Company Adjusted Trial Balance December 31 Cash 7,530 Accounts Receivable 2,100 Prepaid Expenses 700 Equipment 13,700 Accumulated Depreciation 1,100 Accounts Payable 1,900 Notes Payable 4,300 Common Stock 1,000 Retained Earnings 12,940 Dividends 790 Fees Earned 9,250 Wages Expense 2,500 Rent Expense 1,960 Utilities Expense 775 Depreciation Expense 250 Miscellaneous Expense 185 30,490 Totals 30,490 Determine the retained earnings ending balance. ✔ a. $15,730 b. $12,150 c. $6,480 d. $21,400 Feedback Check My Work Correct Post-Submission Ending balance of retained earnings = Beginning balance of retained earnings + Net income – Dividends = $12,940 + $3,580 – $790 = $15,730 44. MC.04.84 The following is the adjusted trial balance for Stockton Company. Stockton Company Adjusted Trial Balance December 31 Cash 7,530 Accounts Receivable 2,100 Prepaid Expenses 700 Equipment 13,700 Accumulated Depreciation 1,100 Accounts Payable 1,900 Notes Payable 4,300 Common Stock 1,000 Retained Earnings 12,940 Dividends 790 Fees Earned 9,250 Wages Expense 2,500 Rent Expense 1,960 Utilities Expense 775 Depreciation Expense 250 Miscellaneous Expense 185 30,490 Totals 30,490 Determine the total assets. a. $25,130 ✔ b. $22,930 c. $24,030 d. $16,830 Feedback Check My Work Correct Post-Submission Total assets = Cash + Accounts receivable + Prepaid expenses + (Equipment – Accumulated depreciation) = $7,530 + $2,100 + $700 + ($13,700 – $1,100) = $22,930 45. MC.04.85 The following is the adjusted trial balance for Stockton Company. Stockton Company Adjusted Trial Balance December 31 Cash 7,530 Accounts Receivable 2,100 Prepaid Expenses Equipment 700 13,700 Accumulated Depreciation 1,100 Accounts Payable 1,900 Notes Payable 4,300 Common Stock 1,000 Retained Earnings 12,940 Dividends 790 Fees Earned 9,250 Wages Expense 2,500 Rent Expense 1,960 Utilities Expense 775 Depreciation Expense 250 Miscellaneous Expense 185 30,490 Totals 30,490 Determine the current assets. a. $23,030 b. 21,930 ✔ c. $10,330 d. $8,630 Feedback Check My Work Correct Post-Submission Current assets = Cash + Accounts receivable + Prepaid expenses = $7,530 + $2,100 + $700 = $10,330 46. MC.04.86 The following is the adjusted trial balance for Stockton Company. Stockton Company Adjusted Trial Balance December 31 Cash 7,530 Accounts Receivable 2,100 Prepaid Expenses 700 Equipment 13,700 Accumulated Depreciation 1,100 Accounts Payable 1,900 Notes Payable 4,300 Common Stock 1,000 Retained Earnings 12,940 Dividends 790 Fees Earned 9,250 Wages Expense 2,500 Rent Expense 1,960 Utilities Expense 775 Depreciation Expense 250 Miscellaneous Expense 185 30,490 Totals Determine the total liabilities for the period. a. $20,240 b. $4,300 30,490 c. $1,900 ✔ d. $6,200 Feedback Check My Work Total liabilities = Accounts payable + Notes payable = $1,900 + $4,300 = $6,200 47. MC.04.88 The income statement will present ✔ a. revenues less expenses (ordered largest to smallest amount) with miscellaneous expense listed last b. revenues less expenses (ordered in alphabetical order) c. revenues less expenses (ordered smallest to largest amounts) with miscellaneous expense listed last d. revenues less expenses (order is not important) Feedback Check My Work Correct 48. MC.04.90 The classified balance sheet will show which liability subsections? ✔ a. current liabilities and long-term liabilities b. current liabilities and other liabilities c. other liabilities and long-term liabilities d. present liabilities and tomorrow's liabilities Feedback Check My Work Correct