ACCT 2113 1st Edition Test Review 1 Self Study Questions Chapter 1 1 Based on the introductory section of this chapter which course is most like financial accounting a College algebra b Foreign language c Molecular biology d Physical education 2 Financial accounting serves which primary functions a Measures business activities b Communicates business activities to interested parties c Makes business decisions on behalf of interested parties d Both a and b are functions of financial accounting 3 Financing activities of a company include which of the following a Selling products or services to customers b Using cash to purchase long term assets such as machinery c Borrowing money from the bank d Paying salaries to employees 4 Investing activities of a company include which of the following a Paying salaries to workers b Using cash to purchase long term assets such as equipment c Issuing common stock to investors d Borrowing money from the bank 5 Which financial statement conveys a company s ability to generate profits in the current period a Income statement b Statement of cash flows c Balance sheet d Statement of stockholders equity 6 Which financial statement shows that a company s resources equal claims to those resources a Income statement b Statement of stockholders equity 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 c Balance sheet d Statement of cash flows 7 Why does financial accounting have a positive impact on our society a It entails a detailed transaction record necessary for filing taxes with the Internal Revenue Service IRS b It allows investors and creditors to redirect their resources to successful companies and away from unsuccessful ones c It prevents competitors from being able to steal the company s customers d It provides a system of useful internal reports for management decision making 8 The body of rules and procedures that guide the measurement an communication of financial accounting and information is known as a Standards of Professional Compliance SPC b Code of Ethical Decisions COED c Rules of Financial Reporting RFP d Generally Accepted Accounting Principles GAAP Chapter 2 1 Which of the following transactions causes an increase in total assets a Pay workers salaries for the current month b Receive cash payment from a customer billed in the previous period c Issue common stock in exchange for cash d Purchase office equipment for cash 2 Which of the following causes an increase in stockholders equity a Pay dividends to stockholders b Obtain cash by borrowing from a local bank c Provide services to customers on account d Purchase advertising on a local radio station 3 Which of the following causes the accounting equation not to balance a Increase assets increase liabilities b Decrease assets increase expenses c Increase assets increase dividends d Decrease liabilities increase revenues 4 A debit is used to increase which of the following accounts a Utilities expense b Accounts payable c Service revenue d Common stock 5 A credit is used to increase which of the following accounts a Dividends b Insurance expense c Cash d Service revenue 6 Providing services to customers on account for 100 is recorded as a Accounts receivable 100 Service revenue 100 b Cash 100 Accounts receivable 100 c Service revenue 100 Accounts receivable 100 d Service expense 100 Accounts payable 100 7 Posting is the process of a Analyzing the impact of the transaction on the accounting equation b Obtaining information about external transactions from source documents c Transferring debit and credit information from the journal to individual accounts in the general ledger d Listing all accounts and their balances at a particular date and showing the equality of total debits and total credits 8 A trial balance can best be explained as a list of a The income statement accounts used to calculate net income b Revenue expense and dividend accounts used to show the balances of components of retained earnings c The balance sheet accounts used to show the equality of the accounting equation d All accounts and their balances at a particular date Chapter 3 1 On May 5 Johnson Plumbing receives a phone call from a customer needing a new water heater and schedules a service visit for May 7 On May 7 Johnson installs the new water heater The customer pays for services on May 10 According to the revenue recognition principle on which date should Johnson record service revenue a May 5 date of phone call b May 7 date of service c May 10 date of cash receipt d Evenly over the three dates 2 On January 17 Papa s Pizza signs a contract with Bug Zappers for exterminating services related to a recent sighting of cockroaches in the restaurant Papa s pays for the extermination on January 29 and Bug Zappers sprays for bugs on February 7 According to the matching principle on which date should Papa s Pizza record the extermination expense 3 4 5 6 7 8 a January 17 date of the contract b January 29 date4 of cash payment c February 7 date of extermination service d Evenly over the three dates Refer to the information in self study question 1 Using cash basis accounting on which date should Johnson record service revenue a May 5 date of phone call b May 7 date of service c May 10 date of cash receipt d Evenly over the three dates Refer to the information in self study question 2 Using cash basis accounting on which date should Papa s Pizza record the extermination expense a January 17 date of the contract b January 29 date of the cash payment c February 7 date of the extermination service d Evenly over the three dates Which of the following is not a characteristic of adjusting entries a Reduce the balances of revenue expense and dividend accounts to zero b Allow for proper application of the revenue recognition principle revenues or the matching principle expenses c Are part of accrual basis accounting d Are recorded at the end of the accounting period Ambassador Hotels purchases one year of fire insurance coverage on December 1 for 24 000 2 000 per month debiting prepaid insurance On December 31 Ambassador would record the following year end adjusting entry a Insurance expense 24 000 Prepaid insurance 24 000 b Insurance expense 2 000 prepaid insurance 2 000 c Insurance expense 22 000 prepaid insurance 22 000 d No entry is required on December 31 because full cash payment was made on December 1 and the