Exam 1 Review Sheet

Accounting 284 SI

Exam 1 Review Sheet

1. What is the main objective of accounting?
2. To calculate financial information to maximize profit.
3. Collect financial information about an organization for its external decision makers.
4. Collect financial information about an organization for its internal and external decision makers.
5. Collect financial information to fulfill government regulations.

1. Which of the following financial statements fulfill the purpose of “reporting the financial position of an accounting entity at a point of time” ?
2. Statement of Cash Flows
3. Balance Sheet
4. Income Statement
5. Statement of Retained Earnings

1. The purpose of the statement of Retained Earnings is to?
2. Report revenues minus expenses for the accounting period.
3. Report the financial position of the firm.
4. Report how net income and distribution of dividends affected the financial position of the firm.
5. Report inflows and outflows of cash during the accounting period.

1. “Jason paid rent expense with cash” – Which of the financial statements would be affect from the transaction?
2. Income Statement
3. Statement of Retained Earnings
4. Balance Sheet
5. Statement of Cash Flow
6. All of the above would be affected.

1. Amy just started her business in 2009. During that year, she made net income of $1,000 and paid no dividends. In 2010, she had revenue of $6,000, expenses of $2,000 and she paid dividends of $500. What was her ending Retained Earnings in 2010?
2. $3,000
3. $4,000
4. $4,500
5. $5,500

1. At the end of last year, James Corporation had assets of $4,000,000 and liabilities of $2,000,000. This year, James’ assets increased by $2,000,000 and liabilities remained unchanged. What would James’ stockholder’s equity be at the end of this year?
2. $3,000,000
3. $4,000,000
4. $5,000,000
5. $6,000,000

1. Which of the following entities are the rule setting body for GAAP?
2. SEC
3. FASB
4. PCAOB
5. GOV

1. Which of the following parties are responsible for the accuracy in the financial statements?
2. Government
3. Management
4. External auditors
5. Internal auditors

1. All of the following are advantages of a corporation except?
2. Ability to raise capital
3. Ease of transfer of ownership
4. Limited liability of stockholder
5. Double taxation
6. Purchasing equipment would be under which of the following in the statement of cash flows?
7. Investing activities
8. Operating activities
9. Financing activities

1. The Accounts Payable of Sam’s company had a normal balance of $3,000. Over the year, if Sam were to pay off some of his creditors, would he debit or credit the account?
2. Debit
3. Credit
4. Do nothing because Sam pays with cash.

1. All of the answers below are limitations of the income statement, except?
2. Does not indicate amount of cash the company generates.
3. Cannot measure the value of a firm.
4. It is based on estimates rather than true measurements.
5. Net income calculated often defers from actual net income.

1. Prepaid Rent is a(n)
2. Asset
3. Liability
4. Stockholder’s equity
5. Expense

1. Unearned Service Revenue is a(n)
2. Asset
3. Liability
4. Stockholder’s Equity
5. Retained Earnings

1. Prepaid Insurance is typically used when:
2. A customer of ours purchases insurance for a year upfront.
3. A customer of ours purchases insurance from us but decides to put it in hold.
4. We purchase insurance from an insurance company for a year.
5. We agree terms with an insurance broker to purchase insurance in the following month for $4,000.

1. Which basis of accounting is constant with GAAP?
2. Cash Basis
3. Accrual Basis
4. Deferral Basis

1. The Revenue principle states that:
2. Expenses be matched into the period in which the related revenue is recognized.
3. Revenues are recognized when they are earned, usually at the point of sale.
4. Revenues are recognized when cash is received, usually at the point of sale.
5. Requires assets be recorded at the cash-equivalent cost at the date of the transaction.

1. The Matching principle states that:
2. Expenses are recognized in the period in which the related revenue is recognized.
3. Revenues are recognized when they are earned, usually at the point of sale.
4. Revenues are recognized when cash is received, usually at the point of sale.
5. Requires assets be recorded at the cash-equivalent cost at the date of the transaction.

1. Which of the following is not a current liability?
2. Taxes Payable
3. Accounts Payable
4. Unearned Service Revenue
5. Retained Earnings

1. Albert purchases $10,000 worth of equipment by paying half of it wish cash and the rest with a note. The effect of this transaction on the accounting equation is?
2. Assets Increase by $10,000, Liabilities Increase by $10,000
3. Assets Increase by $10,000, Liabilities Increase by $5,000 and Stockholder’s Equity increase by $5,000
4. Assets Increase by $5,000, Liabilities Increase by $5,000
5. Assets Increase by $5,000, Liabilities Increase by $5,000 and stockholder’s equity increase by $5,000

1. Albert issued stock for $80,000. What would the effect of this transaction be on the balance sheet?
2. Cash (asset) +80,000, Notes Payable(liability) +80,000
3. Cash(asset) +80,000, Retained Earnings (S/E/) -80,000
4. Cash(asset) + 80,000, Contributed Capital(S/E) +80,000
5. Contributed Capital (Asset) +80,000, Cash(Asset) -80,000

1. Which of the following scenarios would result in a decrease of assets, decrease in liability and no change in stockholder’s equity?
2. Purchased equipment with by signing a note.
3. Paid off creditors with cash.
4. Recognized revenue by shipping inventory that was paid by a customer in the last fiscal year.
5. Issue stock for cash.

1. In a dividend T-account, if one wished to add to its balance, he/she should do which of the following?
2. Debit the account
3. Credit the account
4. None of the above.

1. The principle of conservatism would suggest which of the following:
2. Avoid overstating assets and overstating liabilities
3. Avoid overstating assets and understating liabilities.
4. Avoid understating assets and understating liabilities
5. Avoid understating assets and overstating liabilities.

1. Principal Corporation pays its employees every 2 weeks. It last paid its employees on Dec 24th for an amount of $1,400.It will pay its employees again on January 7th. Record the adjusting transactions needed for Principal Corporation on Dec 31st.
2. Debit Wages Payable, Credit Retained Earnings $700.
3. Debit Wages Expense, Credit Wages Payable for $700.
4. Debit Wages Payable, Credit Wages Expense for $700
5. Debit Wages Expense, Credit Wages Payable for $1,400.

1. BusinessWeek magazine received $6,000 from customers for a 1 year subscription of its magazine on May 1st. On December 31st the same year, BusinessWeek should:
2. Record Unearned service revenue of $2,000
3. Record Service revenue of $4,000
4. Record Unearned service revenue of $6,000
5. Both a & b.

1. The unadjusted balance of Prepaid Insurance was $50,000 at the end of the year 2010. During the year 2010, insurance expense of $15,000 was incurred and was not adjusted. What would the ending balance in Prepaid Insurance be after adjustments?
2. $65,000
3. $50,000
4. $45,000
5. $35,000

1. The amount of revenue reported on the financial statements would be from which of the following scenarios?
2. Sold a seasonal football ticket to customers for which the 1st match will be played next month.
3. Received cash from customers for goods but goods have not been shipped yet.
4. Received cash for services to be performed in the next fiscal year.
5. Received cash for completing a contract agreement.

1. The beginning Rent Payable was $6,000. During the year, Mike had rent dues of an additional $6,000 which he did not pay. The adjusted ending balance of the Rent Payable was $4,000 for that year. How much did Mike pay off for his rent over the year?
2. $12,000
3. $8,000
4. $10,000
5. $0

1. Wells Fargo pays interest to its customers after 6 months of holding any financial instruments. A customer purchased a 5% $100,000 certificate of deposit from Wells Fargo on Oct 31st. What amount of Interest Payable would WellsFargo record as on December 31st?
2. $833
3. $5,000
4. $0
5. $12,000