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ACCT 2600 Exam 1 study sheet

Chapter 1 The Financial Statements


Which financial statement shows cash collected from customers?
Statement of cash flows
Which of the following is the accounting equation?
Assets = Liabilities + Owners Equity
What is the claim of a business owner to the assets of the business?
Owners equity
Current assets include
Cash and accounts receivable
A loan from the bank
Increases assets and liabilities
Which of the following events increase an owners capital account of a sole
proprietorship?
Owners contributions
Ending assets for CompuHelp equals $650,000 and the beginning capital account
was $325,000. If investments by owners during the period were $225,000 and the
owners withdrew a total of $150,000, what were ending liabilities?
$250,000
The owner of Shady Grove Company has the bookkeeper write company checks to
pay for his personal items. This violates
The separate-entity assumption
Net income for the period was $245,000. The capital account of Sherry, owner of
Rvs R Us, had a beginning balance of $25,000. If Sherry had withdrawals of
$15,000 during the year, what is the ending balance in her capital account?
$225,000
Sue Mason owns a bagel shop as a sole proprietorship. Sue includes her personal
home, car, and boat on the books of her business. Which of the following is
violated?
Entity Concept
The primary objective of financial reporting is to provide information
Useful for making investment and credit decisions
Assets are usually reported at their
Historical cost

Alan Sanders Realty Company


Balance Sheet
July 31, 2014
(Millions)
Assets
Receivables
Investment assets
Property and equipment, net

$0.6
135.6
1.9

Cash
Other assets

1.8
10.7

Total assets

$150.6

Liabilities
Current liabilities
Long-term liabilities
Total liabilities

$2.1
102.2
104.3

Stockholders' Equity
Common stock
Retained earnings
Total stockholders' equity
Total liabilities and stockholders'
equity

21.8
24.5
46.3
$150.6

Alan Sanders Realty


Company
Statement of Retained
Earnings
Year Ended July 31,
2014

Beginning retained earnings


Add:
Net income
Less:

Dividends

Ending retained earnings

(millio
ns)
$16.9
18.1
35.0
(10.5)
$24.5

Cameron Services, Inc.


Income Statement
For the Year Ended December 31, 2014
Revenue:
Service revenue
Expenses:

$457,600

Interest expense
Salary expense
Property tax expense
Rent expense
Utilities expense
Total expenses
Net income

10,800
108,700
7,700
41,600
8,500
177,300
$280,300

Chapter F2 Transaction analysis


During one period, a corporation earned income of $20,000, received paid-in capital
of $30,000, paid dividends of $15,000, and retired debt of $5,000. The retained
income account:
Increased $5,000
Which of the following statements about cash is true?
None of these answers are true
The following data pertains to Thompson. Total assets at January 1, 20X4, were
$310,000; at December 31, 20X4, total assets were $382,000. During 20X4, sales
were $1,072,000; cash withdrawals were $14,000; and operating expenses
(exclusive of cost of goods sold) were $610,000. Total liabilities at December 31,
20X4, were $175,000; at January 1, 20X4, total liabilities were $130,000. There were
no additional capital investments by Thomson during 20X4. What was net income
for 20X4?
$41,000
Retained earnings can be found on:
The statement of changes in shareholders equity and the balance sheet
Which of the following is the correct journal entry for providing $20,000 worth of
consulting services for cash?
Cash
20,000
Service Revenue 20,000
During the month of July, the Scolari Corporation received $60,000 in investments
from owners, paid $25,000 cash for inventory, and purchased $10,000 of inventory
on account. The ending balance in the paid-in capital account for the month of July
is:
$60,000 credit
Liabilities are
debts or obligations owed to creditors
A materials-inventory account had a beginning balance of $100,000, purchase of
materials was $50,000, and usage of material was $120,000. The ending inventory
balance was:
$30,000
The owner of shady grove company has the bookkeeper write company checks to
pay for his personal items. This violates
The separate-entity assumption
Which of the following is the correct journal entry for purchasing $5,000 worth of
supplies on account?

Supplies
5,000
A/P
5,000
Which sequence of actions correctly summarizes the accounting process?
Journalize transactions, post to the accounts, prepare a trial balance
Vaughn-Williams Co. has total assets of $600,000 and owners equity of $320,000. It
purchased $80,000 of merchandise on account and collected $50,000 on account
from its customers. As a result, the companys total assets would be
$680,000
Which of the following accounts increase with a credit?
Owners Capital
Which of the following is the correct journal entry for a purchase of equipment for
$50,000 cash?
Equipment 50,000
Cash
50,000
During the month of July, the Scolari Corporation received $60,000 in investments
from owners, paid $25,000 cash for inventory, and purchased $10,000 of inventory
on account. The ending balance in the cash account for the month of July is:
$35,000
During the month of July, the Scolari Corporation received $60,000 in investments
from owners, paid $25,000 cash for inventory, and purchased $10,000 of inventory
on account. The ending balance in the accounts payable account for the month of
July is
$10,000 credit
During the month of July, the Scolari Corporation received $60,000 in investments
from owners, paid $25,000 cash for inventory, and purchased $10,000 of inventory
on account. The ending balance in the inventory account for the month of July is
$35,000 debit
A business makes a cash payment of $12,000 to a creditor. Which of the following
occurs?
Cash is credited for $12,000
Ravel Co. purchased merchandise with $200,000 of its cash. As a result, there was
No change in the total amount of its assets
A company in its first year of business earned revenues of $100,000 but collected
only $80,000 in cash from its customers. Which of the following is correct?
The income statement will show revenues of $100,000, the balance sheet will
show account receivable of $20,000, and the statement of cash flows will
show cash collected from customers of $80,000
On September 15, 20X4, the Larsen Company declared a $3,000 cash dividend
payable on October 10, 20X4. The effect of the October 10, 20X4 transaction on the
Larsen Company would be to:
Decrease the balance in the cash account and decrease the balance in the
dividend payable account by $3,000
During the year, ABC Company had revenues of $100,000 of which $90,000 has
been collected from customers. It also had expenses of $60,000 of which $40,000
has been paid. The owners were paid $20,000 in dividends. Net income for the year
equals:
40,000
A trial balance is which of the following?
List of all the accounts with their balances

A record of all the changes in a particular asset during a period of time is found in
a(n):
Account
All of the following accounts would be considered assets EXCEPT for:
Retained Earnings
Which account includes bank account balances in multiple checking accounts?
Cash
Notes payable, accounts payable, taxes payable and salaries payable are all
examples of
Liabilities
A double-entry accounting system
A debit entry is recorded on the left side of a T-account

Old Harbor Company


Trial Balance
December 31, 2011
Account Title
Cash
Other assets
Accounts payable
Other liabilities
Stockholders' equity
Revenues
Expenses
Total

Balance (in millions)


Debit
Credit
$7
21
$5
4
6
39
26
$54

Chapter F3 Accrual Accounting & Income

$54

If an accountant forgets to adjust the Prepaid Rent account, the result will be
An overstatement of net income
During June, Busy Beaver bought $5,000 of office supplies on account, and promises
to pay the vendor the full amount in July. At the end of June, Busy Beaver estimated
that there was $2,000 of office supplies left unused. How much supplies expense
should Busy Beaver report for June?
$3,000
The adjusting entry to record and accrued expense also involves recording
A liability
Which of the following is true about every adjusting entry?
It affects a balance sheet account and an income statement account
Maxim Company has just started a program of selling gift certificates at its store. In
the first month, the company recorded a cash sale of $6,000 worth of certificates
and customers redeemed $1,750 of these certificates for merchandise. As of the
end of the month, what adjusting journal entry should be reported?
Unearned Revenue
1,750
Revenue from Gift Certificates 1,750
Mason Company has a weekly payroll of $5,000. Wages are paid every Friday for the
work performed Monday through Friday of the week. Assuming that the accounting

period ends on a Tuesday, what amount of wages expense should be recorded on


that date?
$2,000
When is revenue recorded under the cash-basis system of accounting?
When cash is received
During June, Busy Beaver preformed $3,500 of services for clients on account. In
June, $500 of this amount was collected in cash. The remaining $3,000 was
collected in July. How much service revenue should Busy Beaver report for June?
$3,500
What is book value?
The cost of the depreciable asset minus accumulated depreciation
Revenue has been collected in advance; earned amounts have not been recognized
at the end of 2010, but instead, all revenue was recognized as earned in 2011.
What would be the effects on income for 2010 and 2011 in the error was made?
Understate, Overstate
The accountant for Ace Electronics forgot to make the adjusting entry for
depreciation on the companys equipment. As a result of this mistake:
Net income is too high
ABC, Inc. shows $300 of supplies expense on its income statement. ABC must have:
Used $300 of supplies during the period
Which of the following entities would most likely have an Unearned Revenue
accounts
A magazine publisher.
What items should be matched according to the matching principle?
Expenses with revenues
Which of the following accounts is depreciated?
Building
The accountant for Ace Electronics forgot to make the adjusting entry for
depreciation on the companys equipment. As a result of this mistake,
Net income is too high
When a company pays for six months of insurance in advance, it records
Prepaid insurance, an asset
On August 1, Fargos paid $2,100 for 1-years rent in advance. What is Fargos
adjusting journal entry on December 31?
Rent Expense
875
Prepaid rent 875
Christies lemonade stand shows $300 of supplies expense on its income statement.
Christie must have
Used $300 of supplies during the period
Salaries payable on a companys balance sheet indicates that:
Employees had not received payment for the last few days of work because
the last day of the accounting period was not a payday.
Employees are paid $6,400 every Friday for a 5-day workweek. The accounting
period ends on Wednesday, December 31. Which of the following would be the
adjusting entry for the salaries and benefits expense on December 31?
Salaries Expense 3,840
Salaries Payable
3,840
Accounts receivable appears on a companys balance sheet because
The company sold merchandise to customers, but has not yet received
payment yet

The adjusting entry to record accrued revenue also involves recording


An asset
In October, $600 cash was received by Briar Company in advance of providing a
service. If 40% of the service was performed by Briar by November 30, the adjusting
entry would include.
A debit to unearned services for $240 and a credit to revenues from services
for $240
Georgia Company paid $48,000 for two years of insurance coverage on July 1, 2013.
The company prepares financial statements on July 31, 2013. What is the amount of
insurance expense on July 31?
$2,000
In which month should revenue be recorded?
In the month that goods are shipped to the customer
Adjusting entries
Are needed to measure the periods net income or net loss. Update the
accounts. Do not debit or credit cash. All of the above
An adjusting entry that debits an expense and credits a liability is which type?
Accrued expense
The account unearned revenue is a
Liability

California Bulbs, Inc.


Income Statement
Year Ended December 31, 2014
Thousands
Revenues:
Sales revenue
Expenses:
Selling, administrative, and general expense
Cost of goods sold

$42,500
10,300
25,000

Total expenses
Income before tax
Income tax expense

35,300

Net income

$5,100

7,200
2,100

California Bulbs, Inc.


Statement of Retained Earnings
Year Ended December 31, 2014
Retained earnings, December 31, 2013
Add:
Net income
Less:

Dividends

Thousands
$5,500
5,100
10,600
(1,500)

$9,100

Retained earnings, December 31, 2014


Uptown Sporting Goods Company
Balance Sheet
July 31, 2014
Thousands
Assets
Current assets
Accounts receivable
Other current assets

$28,000
5,000

Cash
Inventories
Total current assets
Property and equipment, net
Other assets

26,700
35,000
94,700
19,800
22,000
$136,500

Total assets
Liabilities
Total current liabilities
Long-term liabilities
Total liabilities

$55,100
7,500
62,600

Stockholders' Equity
Retained earnings
Common stock

51,400
22,500

Total stockholders' equity

73,900

Total liabilities and stockholders' equity


Net Working Capital = Total Current Assets Total Current Liabilities
Current Ratio = Total Current Assets / Total Current Liabilities

$136,500