Acct 230 1st Edition Lecture 12 Outline of Last Lecture II The Financial Reporting Process a Adjusting Entries i Posting Adjusting Entries b The Reporting Process c The Closing Process Outline of Current Lecture III Exam Review answers Current Lecture 1 A revenue has what effect on the accounting equation A Increase liabilities B Decrease assets C Increase stockholders equity D No effect 2 If a company provides services on account which of the following is true A Expenses increase B Liabilities increase C Stockholders equity increases D Assets decrease 3 Purchasing office equipment on account has what impact on the accounting equation A Stockholders equity decreases and assets increase B Liabilities increase and assets increase C Assets decrease and liabilities decrease D Assets increase and stockholders equity increases 4 Following are transactions of Gotebo Tanners Inc a new company during the month of January 2012 1 Issued 10 000 shares of common stock for 15 000 cash 2 Purchased land for 12 000 signing a note payable for the full amount 3 Purchased office equipment for 1 200 cash These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute 4 Received cash of 14 000 for services provided to customers during the month 5 Purchased 300 of office supplies on account 6 Paid employees 10 000 for their first month s salaries What was the balance of Gotebo s Cash account following these six transactions A 29 800 B 19 300 C 17 800 D 22 400 Cash 15 000 1 200 14 000 10 000 17 800 5 Which of the following accounts would normally have a debit balance A Accounts Payable Service Revenue Common Stock B Salaries Payable Unearned Revenue Utilities Expense C Income Tax Payable Service Revenue Dividends D Cash Delivery expense Dividends 6 Consider the following list of accounts How many of these accounts have a normal debit balance A Four B Five C Six D Seven Cash Salaries Expense Equipment Utilities Expense Accounts Receivable Dividends 7 A company received a bill for newspaper advertising services received 400 The bill will be paid in 10 days How would the transaction be recorded today A Debit Advertising Expense 400 credit Accounts Payable 400 B Debit Accounts Payable 400 credit Advertising Expense 400 C Debit Accounts Payable 400 credit Cash 400 D Debit Advertising Expense 400 credit Cash 400 8 On July 31 ALOE Inc received 5 000 cash from a customer who previously purchased ALOE s products on account What should ALOE Inc record at the time it receives cash A Debit Accounts Receivable 5 000 credit Cash 5 000 B Debit Cash 5 000 credit Accounts Receivable 5 000 C Debit Cash 5 000 credit Accounts Payable 5 000 D Debit Cash 5 000 credit Service Revenue 5 000 9 On July 5 Harris Company purchased supplies from the hardware store for 600 on account On July 10 Harris receives a bill from the hardware store as a reminder about the account balance On July 17 Harris pays the account in full How does Harris record the transaction on July 17 A B C D 10 The Accounts Payable account has a beginning balance of 12 000 and the company purchased 50 000 of supplies on account during the month The ending balance was 10 000 How much did the company pay to creditors during the month A 50 000 B 52 000 C 60 000 D 62 000 12 000 50 000 10 000 52 000 11 Lithuanian Motors has the following balance sheet accounts If the company has total assets of 288 000 what is the balance of the company s Salaries Payable account A 15 000 B 25 000 C 12 000 D Cannot be determined given the information provided Total liabilities Stockholders equity 288 000 Accounts Payable Salaries Payable Notes Payable 88 000 Common Stock 100 000 Retained Earnings 40 000 therefore with two unknowns there is not enough information to solve the problem 12 The matching principle is the principle that states A All costs that are used to generate revenue are recorded in the period the revenue is recognized B All transactions are recorded at the exchange price C The business is separate from its owners D The business will continue to operate indefinitely unless there is evidence to the contrary 13 A customer purchased a drill press on November 14 on account from Sears The drill press was delivered two weeks later The customer paid for the drill press on December 5 When should Sears record the revenue for this transaction according to the revenue recognition principle A November B December C Evenly in each of the two months D One third in November and two thirds in December 14 Consider the following events for Betterment Incorporated Under cash basis accounting what is the appropriate day to record the expenses related to the gasoline A January 1 B January 9 C January 12 D January 13 Cash basis expenses are recorded at the time cash is paid 15 Consider the following events for Sophia Incorporated Under cash basis accounting what is the appropriate day to record the revenues related to the sand volleyball camp A April 5 B April 12 C April 21 D April 23 Cash basis revenues are recorded at the time cash is received 16 Pawn Shops Unlimited recorded the following four transactions during April Which of these transactions would have the same income statement impact in April regardless of whether the company used accrual basis or cash basis accounting A Purchased 500 of office supplies on account supplies were used in May and paid for in May B Paid 1 800 for a six month insurance policy covering the period July 1 December 31 C Paid 700 for an advertisement that appeared in the May 17 edition of the Las Vegas Sun newspaper D Received 300 from customers for services performed in March 17 The following events pertain to Bills Company Using cash basis accounting on which date should Bills Company record revenue for the accounting and tax services A December 30 2012 B December 31 2012 C January 4 2013 D January 11 2013 18 Making insurance payments in advance is an example of A An accrued revenue B An accrued expense C An unearned revenue D A prepaid expense 19 On April 1 a 4 800 premium on a one year insurance policy on equipment was paid and charged to Prepaid Insurance At the end of the year the financial statements would report A Insurance Expense 4 800 Prepaid Insurance 0 B Insurance Expense 3 600 Prepaid Insurance 1 200 C Insurance Expense 3 650 Prepaid Insurance 4 800 D Insurance Expense 1 200 Prepaid Insurance 3 600 4 800 12 months 400 per month 400 9 months 3 600 Insurance