BUS 214 Test No. 1 April 21, 2014
1. Write the definition of accounting.
Name . .
2. What do we call the branch of accounting that provides information to external users?
What do we call the branch of accounting that provides information to internal users?
3. What organization creates accounting standards in the U.S.? Please do not abbreviate.
4. Of the types of business organizations discussed in our book, which types limit the legal liability to which their owners are exposed?
5. Of the business organizations discussed in our book, which types of business organizations are
NOT required to pay income tax?
6. What types of accounts comprise Net Income?
7. What types of accounts appear on the Balance Sheet?
8. Define “Expense.”
9. What are the three types of activities presented on the Statement of Cash Flows?
10. Choose your words carefully. Explain how a company might begin the year with limited cash on hand, report a net loss for the year, yet end the year with more cash than it began the year.
11. Indicate the effect a D ECREASE in each of the following accounts would have on net income.
Cash
Dividends
Prepaid rent expense
Increase Net Income no affect Decrease Net Income
Increase Net Income no affect Decrease Net Income
Increase Net Income no affect Decrease Net Income
Service revenue
Supplies expense
Increase Net Income no affect Decrease Net Income
Increase Net Income no affect Decrease Net Income
12. Indicate on which financial statement(s) each of the following accounts would appear.
Cash
Dividends
Prepaid insurance
Retained earnings
Unearned revenue
Income State State of Retained Earnings Balance Sheet
Income State State of Retained Earnings Balance Sheet
Income State State of Retained Earnings Balance Sheet
Income State State of Retained Earnings Balance Sheet
Income State State of Retained Earnings Balance Sheet

13.
For each of the following events, indicate whether it (INC) increases Net Income, has NO effect on Net Income or (DEC) decreases Net Income.
1) Paid $40,000 to purchase land
2) Purchase office supplies costing $3,700 on account
3) Performed services for a customer who agreed to pay $3,000 next month
4) Paid $3,700 on the account in transaction # 2
5) Accrued $4,500 salaries which will be paid on the 5 th day of next month
INC NO DEC
INC NO DEC
INC NO DEC
INC NO DEC
INC NO DEC
14. For each of the following transactions, indicate whether it (INC) increases Total Assets, has NO effect on Total Assets or (DEC) decreases Total Assets.
1) Declared and paid dividends of $6,000
2) Received $50,000 for issuing common stock
3) Performed services for a customer who agreed to pay $3,000 next month
4) Received $3,000 for the customer in transaction #3
INC NO DEC
INC NO DEC
INC NO DEC
INC NO DEC
5) Received and paid the telephone bill, $16,800 INC NO DEC
15. Match the definitions in the left column with the accounting terms in the right column.
Expense
Net income
Credit
Payable
Owners’ equity
A
_B_ Always a liability
C Revenue minus expenses
D
E
Right side of an account
Assets minus liabilities
Decrease in retained earning that results from operations
Cash
Supplies
Equipment
Trial Balance for 2013
Accounts receivable
Accounts payable
Salaries payable
Unearned revenue
Common stock
Retained earnings
Dividends
Service revenue
Rent expense
Salary expense
Supplies expense
Deprecaition expense
Utilities expense
152
125
20
236
32
10
18
3
4
11
611
140
6
2
388
0
75
611
16. Use the information in the Trial
12/31/2013.
17.
Income Statement for the month ending 12/31/10
Use the information in the Trial
Balance to compute Net Income for the period.
Miller Motor Co.
Statement of Retained Earnings

18. Prepare journal entries for the following transactions
1) Performed services for customer ABC on account and billed ABC $3,000.
2) Paid salary expense of $2,700
3) Collected $1,000 from customer ABC, as partial payment on their account.
19. During 2013 Santa Maria Sales earned revenues of $500 on account. Santa Maria Sales collected all $510 from customers during the year. Expenses totaled $420, and the related cash payments were $400. Prepare a properly labelled income statement for Santa Maria Sales.
20.
When does “The Revenue Principle” indicate that revenue should be recorded?
21.
Describe the “Expense Recognition Principle” or the “Matching Principle.”
22. On Sept. 1 st , Ping-Pong Warehouse paid $900 for insurance coverage from 9/1/13 to 8/31/14.
Prepare the adjusting entry to record insurance expense on Dec. 31 st . No entries have been made since 9/1/13.
9/1/13 Prepaid Insurance
Cash
900
900 this is the entry they made on Sept. 1 st
23. On Jan. 1, 2013, the balance in the Supplies Account was $310. During the year, on May 5 th
$700 of supplies were purchased. At year end, $300 of supplies are still on hand. Prepare the required adjusting journal entry.
5/5/13 Supplies
Accounts payable
700
700 this is the entry they made on May 5 th
24. On Jan. 1, 2013, the Prepaid Insurance account had a $500 balance. On May 31 st we paid
$2,400 to renew our insurance policy for 2 years (from 6/1/2013 through 5/31/2015). How much
Insurance Expense should we report for 2013?
What is the balance in the Prepaid Insurance Account as of Dec. 31, 2013?
25. Some customers pay Miller Motor Co, in advance of performing the services. During 2013,
Miller Motor Co made the following journal entry when they collected $700 in advance from customers. Prepare the adjusting entry they need to make if Miller Motor Co. has earned $600 of that amount by On Dec. 31 st .
Cash
Unearned revenue
700
700 this is the entry they made when they collected cash

26. You need to accrue salary expense for December 2013. Employees are paid every Friday. The weekly payroll is $750 for a 5 day workweek. What adjusting entry should we make if Dec. 31 st falls on Wednesday?
27. Prepare an Income Statement, WITH PROPER TITLE AND DATING , from Miller Motor Co.’s trial balance.
28. Prepare a Statement of Retained Earnings, WITH PROPER TITLE AND DATING , from Miller Motor
Co.’s trial balance.
29. Prepare a Balance Sheet, WITH PROPER TITLE AND DATING
, from Miller Motor Co.’s trial balance.
Cash
Trial Balance for 2013
Accounts receivable
Supplies
Prepaid rent
Equipment
Accumulated depreciation
Accounts payable
Salaries payable
Income tax payable
Unearned revenue
Common stock
Retained earnings
Dividends
Service revenue
Rent expense
Salary expense
Supplies expense
Deprecaition expense
Utilities expense
Income tax expense
248
25
4
20
240
32
10
18
3
4
5
6
615
4
131
9
6
2
200
188
75
615