Accounting I Final Question and Answers:
Which of the following is not a step in providing accounting information to stakeholders?
prepare accounting surveys
Equipment with an estimated market value of $45,000 is offered for sale at $65,000. The
equipment is acquired for $10,000 in cash and a note payable of $40,000 due in 30 days.
The amount used in the buyer's accounting records to record this acquisition is ________.
$50,000
The assets and liabilities of the company are $155,000 and $60,000 respectfully.
Owner’s equity should equal ________.
$95,000
If total liabilities decreased by $25,000 during a period of time and owner's equity
increased by $30,000 during the same period, the amount and direction (increase or
decrease) of the period's change in total assets is ________.
$5,000 increase
If total assets decreased by $47,000 during a period of time and owner's equity increased
by $24,000 during the same period, then the amount and direction (increase or decrease)
of the period's change in total liabilities is ________.
$71,000 decrease
The Kennedy Company sold land for $60,000 in cash. The land was originally purchased
for $40,000, and at the time of the sale, $15,000 was still owed to First National Bank on
that purchase. After the sale, The Kennedy Company paid off the loan to First National
Bank. What is the effect of the sale and the payoff of the loan on the accounting
equation?
assets increase $5,000; liabilities decrease $15,000; owner's equity increases $20,000
Which of the following applications of the rules of debit and credit is true?
increase Supplies Expense with a debit and the normal balance is a debit
XYZ Hospital purchased X-ray equipment for $3,000, paid $750 down, with the
remainder to be paid later. The correct entry would be __________.
Equipment
3,000
Accounts Payable
2,250
Cash
750
June
23 Cash
Able, Capital
Invest cash in Able,
Co.
6,000
6,000
The journal entry will _________.
Increase Cash and increase Capital
July
14 Accounts Payable
1,000
Cash
Paid creditors on
account
Decrease accounts payable, decrease cash
1,000
June
26 Equipment
14,000
Cash
4,000
Notes Payable
10,000
?????????
Purchased equipment, paid cash of $4,000, with the remainder to be paid in
payments
The accounts in the ledger of Mickeys Park Co. are listed below. All accounts have
normal balances.
Accounts Payable
500 Fees Earned
2,000
Accounts Receivable 800 Insurance Expense 300
Common Stock
1,000 Land
2,000
Cash
1,600 Wages Expense 400
Withdrawals
200 Retained Earnings 1,800
The total of all the assets is:
4,400
The accounts in the ledger of Mickeys Park Co. are listed below. All accounts have
normal balances.
Accounts Payable
500
Accounts Receivable 800
Common Stock
1,000
Cash
1,600
Withdrawals
200
Fees Earned
2,000
Insurance Expense 300
Land
2,000
Wages Expense 400
Retained Earnings 1,800
Prepare a trial balance. The total of the debits is _________.
$5,300
An overpayment error was discovered in computing and paying the wages of a Bartson
Repair Shop employee. When Bartson receives cash from the employee for the amount
of the overpayment, which of the following entries will Bartson make?
Cash, debit; Wages Expense, credit
Which of the following errors, each considered individually, would cause the trial
balance totals to be unequal?
a payment of $311 to a creditor was posted as a debit of $3,111 to Accounts Payable
and a debit of $311 to Accounts Receivable
The balance in the prepaid rent account before adjustment at the end of the year is
$15,000, which represents three months' rent paid on December 1. The adjusting entry
required on December 31 is _______.
debit Rent Expense, $5,000; credit Prepaid Rent, $5,000
The balance in the office supplies account on June 1 was $5,200, supplies purchased
during June were $2,500, and the supplies on hand at June 30 were $2,000. The amount
to be used for the appropriate adjusting entry is _________.
$5,700
What is the proper adjusting entry at June 30, the end of the fiscal year, based on a
prepaid insurance account balance before adjustment, $15,500, and unexpired amounts
per analysis of policies, $4,500?
debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000
A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that
day. The adjusting entry necessary at the end of the fiscal period ending on Thursday is
________.
debit Salary Expense, $16,000; credit Salaries Payable, $16,000
If the prepaid rent account before adjustment at the end of the month has a debit balance
of $1,600, representing a payment made on the first day of the month, and if the monthly
rent was $800, the amount of prepaid rent that would appear on the balance sheet at the
end of the month, after adjustment, is ________.
$800
The following adjusting journal entry was found on page 4 of the journal. Select the best
explanation for the entry.
Wages Expense
2,555
Wages Payable
2,555
????????????????
Record wages expense incurred and to be paid next month
The balance in the supplies account, before adjustment at the end of the year is $625.
The proper adjusting entry if the amount of supplies on hand at the end of the year is
$325 would be ________.
debit Supplies Expense $300, credit Supplies $300
When is the adjusted trial balance prepared?
After adjusting journal entries are posted
In the accounting cycle, the last step is _________.
preparing a post-closing trial balance
What is the major difference between the Unadjusted Trial Balance and the Adjusted
Trial Balance?
The Adjusted Trial Balance includes the postings of the adjustments for the period
in the balance of the accounts.
Once the adjusting entries are posted, the Adjusted Trial Balance will prepared to
________.
verify that the debits and credits are in balance
The income statement is prepared from the _________.
either the adjusted trial balance or the income statement columns of the work sheet
When preparing the Statement of Owner’s Equity the beginning balance should be
followed by ____ to arrive at the ending balance of owner’s equity.
investments plus net income (loss) less withdrawals
Long-term liabilities are those liabilities that ________.
are due to be paid in more than one year
The owner’s equity is ________.
added to liabilities and the two are equal to assets
On which financial statement will Income Summary be shown?
No financial statement
There are four closing entries. The first one is to close ____, the second one is to close
____, the third one is to close ____, and the last one is to close ____.
Revenues, expenses, income summary, drawing account
The entry to close the appropriate insurance account at the end of the accounting period is
_______.
debit Income Summary; credit Insurance Expense
A summary of selected ledger accounts appear below for Ted's Auto Services for the
2007 calendar year end.
12/31
Ted, Capital
7,000 1/1
12/31
5,000
17,000
6/30
11/30
Ted, Drawing
2,000 12/31
5,000
7,000
12/31
12/31
Income Summary
15,000 12/31
17,000
32,000
Net income for the period is ________.
$17,000
Red Rock Stone purchased a one-year liability insurance policy on January 1st of this
year for $3,600 and recorded it as a prepaid expense. From the selections of a. through d.,
select the value that would be utilized in the closing entry for insurance expense and
prepaid insurance during the closing process at the end of the first fiscal period on
January 31st.
$300
Account Title
Cash
Accounts Receivable
Supplies
Equipment
Accumulated DeprEquip
Accounts Payable
Wages Payable
L. Mantle, Capital
L. Mantle, Drawing
Mantle Company
Worksheet
For the Year Ended December 31, 2008
Adjusted Trial
Income Statement Balance Sheet
Balance
Debit
Credit
Debit Credit
Debit
Credit
16,000
16,000
6,000
6,000
2,000
2,000
19,000
19,000
6,000
6,000
10,000
2,000
11,000
1,000
10,000
2,000
11,000
1,000
Fees Earned
Wages Expense
Rent Expense
Depreciation Expense
Totals
Net Income (Loss)
47,000
21,000
6,000
5,000
76,000
21,000
6,000
5,000
76,000 32,000
15,000
47,000
47,000
47,000
44,000
47,000
44,000
29,000
15,000
44,000
The journal entry to close revenues would be: _________.
debit Fees Earned $47,000; credit Income Summary $47,000
The proper sequence for the steps in the accounting cycle is a follows: ________.
analyze and record transactions, post transactions to the ledger, prepare a trial
balance, analyze adjustment data, prepare adjusting entries, prepare financial
statements, journalize closing entries and post to the ledger
The following are steps in the accounting cycle. Of the following, which would be
prepared last?
An adjusted trial balance is prepared.
The fiscal year selected by companies _________.
begins with the first day of the month and ends on the last day of the twelfth month
A fiscal year ________.
ordinarily begins on the first day of a month and ends on the last day of the
following twelfth month
The natural business year _______.
is a fiscal year that ends when business activities are at its lowest point
A company using the periodic inventory system has the following account balances:
Merchandise Inventory at the beginning of the year, $4,000; Transportation-In, $450;
Purchases, $12,000; Purchases Returns and Allowances, $2,300; Purchases Discounts,
$220. The cost of merchandise purchased is equal to _______.
$9,930
Using the following information, what is the amount of cost of merchandise sold?
Purchases
Merchandise inventory
April 1
Sales returns and
allowances
Purchases returns and
allowances
25,780
$28,000
6,500
750
1,000
Purchases discounts
Merchandise inventory
April 30
Sales
Transportation In
$800
7,800
57,000
880
Using the following information, what is the amount of merchandise available for sale?
Purchases
Merchandise inventory
April 1
Sales returns and
allowances
Purchases returns and
allowances
33,580
$28,000
6,500
750
1,000
Purchases discounts
Merchandise inventory
April 30
Sales
Transportation In
$800
7,800
57,000
880
A retailer purchases merchandise with a catalog list price of $10,000. The retailer
receives a 25% trade discount and credit terms of 2/10, n/30. What amount should the
retailer debit to the Merchandise Inventory account?
$7,500
Which account will be included in both service and merchandising companies closing
entries?
Sales
Taking a physical count of inventory ________.
is a detective control
Which of the following is not true about taking physical inventories?
Physical inventories are taken when inventory levels are at their highest.
The Baby Company sells blankets for $30 each. The following was taken from the
inventory records during July.
Product T
Units
Cost
5
3
10
6
3
10
$15
Date
July 3
July 10
July 17
July 20
July 23
July 30
Purchase
Sale
Purchase
Sale
Sale
Purchase
$17
$20
Assuming that the company uses the perpetual inventory system, determine the cost of
merchandise sold for the sale of July 20 using the Lifo inventory cost method.
$102
Beginning inventory, purchases and sales data for tennis rackets are as follows:
Feb 3
11
Inventory
Purchase
12 units
13 units
@
@
$15
$17
14
21
25
Sale
Purchase
Sale
18 units
9 units
10 units
@
$20
Assuming the business maintains a perpetual inventory system, calculate the cost of
merchandise sold and ending inventory under First-in, first-out: _______.
cost of merchandise sold 461; ending inventory 120
The following lots of a particular commodity were available for sale during the year:
Beginning inventory
First purchase
Second purchase
Third purchase
10 units at $50
25 units at $53
30 units at $54
15 units at $60
The firm uses the periodic system and there are 20 units of the commodity on hand at the
end of the year. What is the amount of inventory at the end of the year according to the
first-in, first-out method?
$1,170
The following lots of a particular commodity were available for sale during the year:
Beginning inventory
First purchase
Second purchase
Third purchase
10 units at $60
25 units at $63
30 units at $64
15 units at $70
The firm uses the periodic system and there are 20 units of the commodity on hand at the
end of the year. What is the amount of the inventory at the end of the year according to
the lower of cost or market, using the first-in, first-out method, if the current replacement
cost is $64 a unit?
$1,280
During a period of falling prices, which of the following inventory methods generally
results in the lowest balance sheet amount for inventory?
FIFO method
During the taking of its physical inventory on December 31, 2008, Albert’s Bike Shop
incorrectly counted its inventory as $210,000 instead of the correct amount of $180,000.
The effect on the balance sheet and income statement would be as follows: _________.
assets and retained earnings overstated by $30,000; net income overstated by
$30,000
If, while taking a physical inventory, the company counts their inventory figures more
than the actual amount. How will the error affect their bottom line?
Net income will be overstated