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A corporation is legally separate and distinct from its owners.
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Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management.
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ACC-101 Final Exam
Accounting Final Exam Chapter 1-12
| Term | Definition |
|---|---|
| A corporation is legally separate and distinct from its owners. | True |
| Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management. | True |
| The cost principle is the basis for entering the purchase price into the accounting records. | True |
| If the liabilities owed by a business total $300,000 and stockholders' equity is equal to $300,000, then the assets also total $300,000. | False |
| If net income for a company was $50,000, $20,000 in cash dividends were paid and the shareholders invested $10,000 in cash, the stockholders' equity increased by $40,000. | False |
| Receiving payments on an account receivable increases both equity and assets. | False |
| Dividends paid to stockholders decrease assets and increase equity. | True |
| Purchasing supplies on account increases liabilities and decreases equity. | True |
| Revenue is earned only when money is received. | True |
| The primary financial statements of a corporation are the income statement, the statement of stockholders' equity, and the balance sheet. | True |
| The balance sheet represents the accounting equation | True |
| Profit is the difference between | the amounts received from customers for goods or services and the amounts paid for the inputs used to provide the goods or services |
| Accounts are records of increases and decreases in individual accounting equation elements. | True |
| The chart of accounts should be the same for each business. | False |
| Consuming goods and services in the process of generating revenues results in expenses. | True |
| Accounts in the ledger are usually maintained in alphabetical order. | False |
| The right side of a T account is known as a debit and the left side is known as a credit. | False |
| The cash account will always be debited. | False |
| The accounts payable account is listed in the chart of accounts as an asset. | False |
| When an account receivable is collected in cash, the total assets of the business increase. | False |
| Dividends Decrease Stockholders Equity and are listed on the income statement as deduction from revenue | False |
| The normal balance of revenue accounts is a credit. | True |
| The process of recording a transaction in the journal is called journalizing. | True |
| Expenses are assets that are used up during the process of earning revenue. | True |
| A retained earnings statement reports all changes in the cash for a period of time | False |
| The Accumulated Depreciation's account balance is the sum of the depreciation expense recorded in past periods. | False |
| A company depreciates its land’s value over 10 years | False |
| Accumulated Depreciation is reported on: | The balance sheet |
| Prepaid expenses are an example of an expense. | False |
| The unearned revenues account is an example of a liability. | True |
| A company pays an employee $3,000 for a five day work week, Monday - Friday. The adjusting entry on December 31, which is a Wednesday, is: | Debit Wages Expense, $1,800 and credit Wages Payable, $1,800. |
| The matching concept requires expenses be recorded in the same period that the related revenue is recorded. | True |
| The stockholders' right to the assets of the business is presented on the income statement below the Liabilities section. | False |
| Once the adjusted trial balance is in balance, the flow of accounts will now go into the financial statements. | True |
| After analyzing transactions, the next step would be to post the transactions in the ledger. | False |
| The income statement is prepared from the adjusted trial balance. | True |
| There is really no benefit in preparing financial statements in any particular order. | False |
| The last step to the accounting cycle is the closing entries are journalized and posted to the ledger. | False |
| All Revenue, Expense, & Retained Earnings accounts are closed to zero during the closing process. | False |
| Cash and other assets that may reasonably be expected to be realized in cash, sold, or consumed through the normal operations of a business, usually longer than one year, are called current assets. | False |
| Liabilities that will be due within one year or less and that are to be paid out of current assets are called current liabilities. | True |
| One of the most important differences between a service business and a retail business is in what is sold. | True |
| Cost of merchandise sold is the amount that the merchandising company pays for the merchandise it intends to sell. | True |
| In the perpetual inventory system, purchases of merchandise for resale are debited to the Purchases account. | False |
| In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory. | False |
| As we compare a merchandise business to a service business, the financial statement that changes the most is the Balance Sheet | False |
| The ending merchandise inventory for 2019 is the same as the beginning merchandise inventory for 2020. | True |
| Net sales is equal to sales minus cost of merchandise sold. | False |
| Inventory is reported as a current asset on the balance sheet. | True |
| The single-step income statement is easier to prepare, but a criticism of this format is that gross profit and income from operations are not readily available. | True |
| During periods of increasing costs, the use of the FIFO method of costing inventory will yield an inventory amount for the balance sheet that is higher than LIFO would produce. | True |
| When the LIFO method is used, the cost of goods on hand at the end of the period is made up of the earliest costs. | True |
| When comparing the direct write-off method and the allowance method of accounting for uncollectible receivables, a major difference is that the direct write-off method | is used primarily by small companies with few receivables |
| Under the allowance method of accounting for uncollectible receivables, writing off an uncollectible account | affects only balance sheet accounts |
| When a company uses the allowance method of accounting for uncollectible receivables, the entry to reinstate a previously written off account would include: | A credit to Allowance for Doubtful Accounts |
| The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which | debit Bad Debt Expense; credit Accounts Receivable |
| On October 1, Black Company receives a 9% interest bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of $0 | $450 |
| A capital expenditure results in a debit to | an asset account |
| Which of the following below is an example of a capital expenditure? | replacing an engine in a company car |
| All property, plant, and equipment assets are depreciated over time. | False |
| A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have a cost basis of | $93,000 |
| The calculation for annual depreciation using the straight-line depreciation method is | depreciable cost / estimated useful life |
| A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have a cost basis of | $93,000 |
| The depreciation method that does not use residual value in calculating the first year's depreciation expense is | double-declining-balance |
| Current liabilities are due | and payable within one year |
| On May 18, Rodriguez Co. issued an $84,000, 6%, 120-day note payable on an overdue account payable to Wilson Company. Assume that the fiscal year of Rodriguez ends on June 30. Which of the following relationships is true? | Rodriguez is the borrower and debits Accounts Payable |
| Assuming a 360-day year, when a $50,000, 90-day, 9% interest-bearing note payable matures, total payment will be | $51,125 |
| The journal entry to record the payment of an interest-bearing note is | debit Notes Payable and Interest Expense; credit Cash |
| Assuming a 360-day year, when a $20,000, 90-day, 5% interest-bearing note payable matures, total payment will be | $20,250 |
| The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called | depletion |
| Expected useful life is | estimated at the time that the asset is placed in service |
| The total earnings of an employee for a payroll period, including any overtime pay, are called___________. From this amount is subtracted one or more deductions to arrive at the ___________. | gross pay, net pay |
| Stockholders' equity | includes retained earnings and paid-in capital |
| The excess of issue price over par of common stock is termed a(n) | premium |
| The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called | authorized stock |
| Under the corporate form of business organization | ownership rights are easily transferred |
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