Exam 1 Review Problem Set.pdf

Exam 1 Review 1. Financial statements can be used by which of the following groups? A. Regulatory bodies B. Individuals C. Investors and creditors D. All of the above. 2. An organization's investors and creditors will primarily use information...

Exam 1 Review 1. Financial statements can be used by which of the following groups? A. Regulatory bodies B. Individuals C. Investors and creditors D. All of the above. 2. An organization's investors and creditors will primarily use information provided by: A. the organization's managerial accounting system. B. the Financial Accounting Standards Board. C. the Internal Revenue Service. D. the organization's financial accounting system. 3. Frost Enterprises buys a warehouse for $ 570,000 to use for its East Coast distribution operations. On the date of the purchase, a professional appraisal shows a value of $620,000 for the warehouse. The seller had originally purchased the building for $525,000. Frost has a similar warehouse on the West Coast that has a book value of $586,000. Under the historical cost principle, Frost should record the building for A. $ 525,000. B. $ 620,000. C. $ 570,000. D. $ 586,000. 4. To be useful, information must have which of the following fundamental qualitative characteristics? A. Faithful representation and diversity B. Timeliness and affordability C. Relevance and faithful representation D. Expediency and relevance 5. Assume that a business is headed for certain bankruptcy and it is evident that its liabilities greatly exceed its assets. Which principle would be violated if its financial statements were prepared using standard U.S. GAAP? A. Entity assumption B. Continuity assumption C. Stable-monetary-unit assumption D. Historical cost principle 6. The accounting equation can be expressed as A. Assets = Liabilities-Equity. B. Assets-Liabilities = Equity. C. Assets + Liabilities = Equity. D. Equity-Assets = Liabilities. 7. Sebastapol Corporation holds cash of $ 2,000 and owes $ 28,000 on accounts payable. Sebastapol has accounts receivable of $ 35,000, inventory of $ 18,000, and land that cost $ 60,000. How much are Sebastapol's total assets and liabilities?  Total assets Liabilities A. $115,000 $ 28,000 B. $115,000 $46,000 C. $97,000 $46,000 D. $55,000 $88,000 8. During the year, GreenWash Corporation has $270,000 in revenues, $145,000 in expenses, and $3,000 in dividend declarations and payments. Net income for the year was: A. $ 270,000 B. $ 148,000 C. $ 128,000 D. $ 125,000 9. How would the issuance of common stock for cash affect the accounting equation? A. Decrease assets and decrease liabilities B. Increase liabilities and decrease stockholders' equity C. Increase assets and increase liabilities D. Increase assets and increase stockholders' equity 10. Which financial statement would show how well a company performed over the past year? A. Balance sheet B. Income statement C. Statement of retained earnings D. Statement of cash flows 11. What item flows from the income statement to the statement of retained earnings? A. Dividends B. Inventory C. Cash D. Net income 12. White Instruments had retained earnings of $380,000 at December 31, 2017. Net income for 2018 totaled $210,000, and dividends declared for 2018 were $ 75,000. How much retained earnings should White report at December 31, 2018? A. $ 515,000 B. $ 380,000 C. $ 455,000 D. $ 590,000 13. Terry Corporation began the year with cash of $147,000 and land that cost $47,000. During the year Terry earned service revenue of $240,000 and had the following expenses: salaries, $185,000; rent, $87,000; and utilities, $20,000. At year-end Terry's cash balance was down to $43,000. How much net income (or net loss) did Terry experience for the year? A. $(32,000) B. $ 55,000 C. $(156,000) D. $(52,000) 14. All of the following are current assets except A. accounts receivable. B. prepaid expenses. C. inventory. D. accounts payable. 15. Amounts owed to a company by its customers would be: A. Accounts Receivable. B. Accounts Payable. C. Inventory. D. Prepaid Expenses. 16. Identify the asset from the following list of accounts: A. Inventory B. Common Stock C. Retained Earnings D. Notes Payable 17. Which of the following is an asset? A. Common Stock B. Salary Expense C. Service Revenue D. None of the listed accounts is an asset. 18. Thorpe Corporation purchases a new delivery truck and signs a note payable at the truck dealership for the total cost. The impact of this transaction on Thorpe Corporation A. decreases assets and increases liabilities. B. increases assets and increases liabilities. C. increases assets and decreases stockholders' equity. D. increases assets and increases stockholders' equity. 19. Martex, a new company, completed these transactions. 1. Stockholders invested $57,000 cash and inventory with a fair value of $25,000. 2. Sales on account, $19,000. What will Martex's total assets equal? A. $57,000 B. $82,000 C. $101,000 D. $76,000 20. Purchasing a laptop computer on account will A. increase total liabilities. B. increase total assets. C. have no effect on stockholders' equity. D. All of the listed choices are correct. 21. Accounts Payable had a normal beginning balance of $1,800. During the period, there were debit postings of $200 and credit postings of $700. What was the ending balance? A. $2,300 debit B. $1,300 debit C. $1,300 credit D. $2,300 credit 22. Which of the following debit and credit rules is correct? A. Increases in liabilities and stockholders' equity are debited. B. Increases in liabilities and stockholders' equity are credited. C. Increases in assets and liabilities are debited. D. Decreases in assets and liabilities are credited. 23. A firm's beginning Cash balance was $10,000. At the end of the period, the balance was $8,000. If total cash paid out during the period was $23,000, the amount of cash receipts was A. $31,000. B. $33,000. C. $21,000. D. $25,000. 24. A doctor purchases medical supplies of $640 and pays $290 cash with the remainder on account. The journal entry for this transaction would be which of the following? A. Debit Supplies Credit Accounts Receivable Credit Cash B. Debit Supplies Credit Accounts Payable Credit Cash C. Debit Supplies Debit Accounts Receivable Credit Cash D. Debit Supplies Debit Accounts Payable Credit Cash 25. An attorney performs services of $1,100 for a client and receives $400 cash with the remainder on account. The journal entry for this transaction would A. debit Cash, debit Accounts Receivable, credit Service Revenue. B. debit Cash, debit Service Revenue, credit Accounts Receivable. C. debit Cash, credit Accounts Receivable, credit Service Revenue. D. debit Cash, credit Service Revenue 26. The journal entry to record the acquisition of land and a building by issuing common stock A. debits Land and credits Common Stock. B. debits Land, Building, and Common Stock. C. debits Common Stock and credits Land and Building. D. debits Land and Building and credits Common Stock. 27. The following accounts have normal debit balances: A. Liabilities B. Revenues C. Assets D. All of the listed accounts have a normal debit balance. 28. If the credit to record the purchase of supplies on account is not posted, A. expenses will be overstated. B. liabilities will be understated. C. stockholders' equity will be understated. D. assets will be understated. 29. If the credit to record the payment of an account payable is not posted, A. cash will be overstated. B. liabilities will be understated. C. cash will be understated. D. expenses will be understated. 30. Which of the following transactions would be recorded if using the accrual basis of accounting but not if using the cash basis of accounting? A. Purchasing inventory on account B. Paying off loans C. Borrowing money D. Collecting customer payments 31. The method of accounting that recognizes revenue when money is received and expenses when bills are paid is called: A. Managerial Accounting B. Accrual Basis C. Forensic Accounting D. Cash Basis 32. A physician performs medical services for a patient on October 20; the total bill for the medical services was $200. The patient makes a co-pay of $20 on October 20, and the insurance company pays the remaining balance of $180 on November 19. On what date(s) will the physician record the revenue for those medical services provided on October 20? (Assume the accrual basis of accounting is used.) A. $200 of revenue on November 19 B. $20 of revenue on October 20 and $180 of revenue on November 19 C. $200 of revenue on October 20 D. $180 of revenue on October 20 and the remaining $20 on November 19 33. Jenna Newbury began a music business in July 2018. Newbury prepares monthly financial statements and uses the accrual basis of accounting. The following transactions are Newbury Company's only activities during July through October: Jul 14 Bought music on account for $ 65, with payment to the supplier due in 90 days. Aug 3 Performed a job on account for Alanna Turner for $ 55, collectible from her in 30 days, and used up all the music purchased on July 14. Sep 16 Collected the $ 55 receivable from Turner. Oct 22 Paid the $ 65 owed to the supplier from the July 14 transaction. In which month should Newbury record the cost of the music as an expense? A. October B. July C. August D. September 34. All of the following are types of adjusting entries except A. transactions. B. depreciation. C. accruals. D. deferrals. 35. Aster Corporation had a balance of $1,200 in Prepaid Supplies at the beginning of the year. The company purchased $850 of supplies during the year. At year end, Prepaid Supplies had a balance of $1,700. What is the amount of Supplies Expense that Aster Corporation will recognize for the year? A. $1,350 B. $1,700 C. $850 D. $350 36. On January 1 of the current year, Jasmine Company paid $1,500 in rent to cover six months (January- June). Jasmine recorded this transaction as follows: Jan 1 Prepaid Rent 1,500 Cash 1,500 Jasmine adjusts the accounts at the end of each month. Based on these facts, the adjusting entry at the end of January should include A. a debit to Prepaid Rent for $ 250. B. a credit to Prepaid Rent for $ 250. C. a debit to Prepaid Rent for $ 1250. D. a credit to Prepaid Rent for $ 1250. 37. What data flows from the statement of retained earnings to the balance sheet? A. Cash B. Net income C. Assets D. Ending retained earnings 38. A company's balance of retained earnings on January 1 was $ 20 million. During the year, sales revenue was $ 75 million, while expenses totaled $ 40 million. The company declared and paid $ 10 million in cash dividends during the year. What was the balance of retained earnings at the end of the year? A. $ 45 million B. $ 145 million C. $ 65 million D. $ 55 million 39. Which financial statement reports assets, liabilities, and equity? A. Balance sheet B. Statement of retained earnings C. Income statement D. Statement of cash flows 40. Which of the following accounts would need to be closed at the end of the period? A. Supplies expense B. Accounts receivable C. Cash D. Unearned revenue 41. How are the assets and liabilities ordered on the balance sheet? A. Alphabetical order B. Random order C. Based on liquidity (most liquid to least liquid) D. Based on liquidity (least liquid to most liquid) 42. For 2018, Broadview Company had revenues in excess of expenses. Which statement describes Broadview's closing entries at the end of 2018? (Assume there is only one closing entry for both revenue and expenses.) A. Revenues will be credited, expenses will be debited, and retained earnings will be debited. B. Revenues will be debited, expenses will be credited, and retained earnings will be debited. C. Revenues will be credited, expenses will be debited, and retained earnings will be credited. D. Revenues will be debited, expenses will be credited, and retained earnings will be credited. 43. Which of the following accounts would not be included in the closing entries? A. Retained Earnings B. Accumulated Depreciation C. Depreciation Expense D. Service Revenue 44. Which ratio measures the ability to pay current liabilities with current assets? A. Asset ratio B. Debt ratio C. Current ratio D. Liability ratio  45. Selected data for the Blossom Company follows: Current assets $37,800 Current $27,000 liabilities Long-term 178,000 Long-term 105,000 assets liabilities Total 192,000 Total expenses 178,000 revenues Based on these facts, what is Blossom's current ratio (Ratios have been rounded to three decimal places.) A. 7.993 B. 1.079 C. 1.635 D. 1.400 Answer Key 1 D 16 A 31 D 2 D 17 D 32 C 3 C 18 B 33 C 4 C 19 C 34 A 5 B 20 D 35 D 6 B 21 D 36 B 7 A 22 B 37 D 8 D 23 C 38 A 9 D 24 B 39 A 10 B 25 A 40 A 11 D 26 D 41 C 12 A 27 C 42 D 13 D 28 B 43 B 14 D 29 A 44 C 15 A 30 A 45 D