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financing The functions of a business include: Selling common stock Recording the items on the financial statements in dollars is: Monetary unit principle The Maximum Experience Company acquired a building for $500,000. Maximum Experience had an appraisal done and found that the building was worth $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would prescribe that Maximum Experience record the building on its records at $500,000? Cost Principle On December 15, 2008, Myers Legal Services signed a $50,000 contract with a client to provide legal services to the client in 2009. Which accounting principle would require Myers Legal Services to record the legal fees revenue in 2009 and not 2008? Revenue recognition principle A limited partnership: Includes a general partner with unlimited liability Increases in retained earnings from a company's earnings activities are: Revenues A financial statement providing information that helps users understand a company's financial status and which lists the types and amounts of assets, liabilities and equity as of a specific date is called a(n): Balance Sheet Ending Liabilities are 67,000, Beginning Equity was $87,000, Common Stock sold during year totaled $31,000, Expenses for the year were $22,000, Dividends declared totaled $13,000, Ending Equity for the year is $181,000 and Beginning Assets for the year were $222,000. What was Revenue for the year? 181,000 + 13,000 + 22,000 - 31,000 - 87,000 = 98,000 If the liabilities of a business increased $73,000 during a period of time and the equity in the business decreased $35,000 during the same period, the assets of the business must have: Change in Assets = Change in Liabilities + Change in Equity Change in Assets = $73,000 + (-$35,000) = + $38,000 Determine the net income of a company for which the following information is available. Employee salaries expense Interest expense Rent expense Consulting revenue $110,000 7,000 13,000 410,000 Expenses: $110,000 + $7,000 + $13,000 = $130,000 Net income = $410,000 - $130,000 = $280,000 Quiz 2 For what reason do most sellers require customers to have their receipts in order to exchange or return purchased items? Sellers wish to ensure that the sale in question was rung up on the register in the first place An account used to record the owner's investments in the business is called: Common stock The account used to record the transfers of assets from a business to its stockholders is: Retained earnings A written promise to pay a definite sum of money on a specific future date is a(n): Note payable A ledger is: A record containing increases and decreases in a specific asset, liabilitiy, equity, revenue or expense item Which of the following statements about the Cash account is true? The cash account includes the value of any medium of exchange that a bank accepts for deposit Which of the following is the appropriate journal entry if a company purchases equipment costing $100,000 by paying cash of $10,000? Debit to equipment, credit to notes payable, credit to cash What would be the account balance in the revenue ledger account after the following transactions? 15,900 credit What would the be appropriate entry for the following transaction? Bill Co. performed $5,200 in consulting services on account Debits to accounts receivable, credit to revenue The credit purchase of a delivery truck for $4,400 was posted to Delivery Trucks as a $4,400 debit and to Accounts Payable as a $4,400 debit. What effect would this error have on the trial balance? The total of the debit column of the trial balance will exceed the total of the credit column by 8800 Chapter 3 The recurring steps performed each accounting period, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, are referred to as the: Accounting cycle The asset section of a classified balance sheet usually includes: Current assets, investments, plant assets, and intangible assets Profit margin is defined as: Net income divided by net sales Which of the following accounts would be closed at the end of the accounting period? Fees Earned On June 30, 2009, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On June 30, 2009 Apricot should record: A debit to a prepaid expense for 5000 If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is: Debit Unearned Legal Fees and credit Legal Fees Earned Financial statements are typically prepared in the following order: Income statement, statement of retained earnings, balance sheet A company had revenue of $550,000, rent expense of $100,000, utility expense of $10,000, salary expense of $125,500, depreciation expense of $39,000, advertising expense of $40,200, dividends in the amount of $183,000, and an ending balance in retained earnings of $402,300. What is the appropriate journal entry to close income summary? (Revenue) 550,000-(Total expenses) 314,700=(Net Income) 235,300 This amount is closed to retained earnings Income summary 235,300 Retained earnings 235,300 Based on the following information, what would be the total on the Credit side of a post closing trial balance, assuming all accounts have a normal balance? Cash$6,774 Accounts receivable13,753 Office supplies2,645 Land37,173 Office equipment14,555 Accounts payable6,483 Common stock54,510 Dividends$2,020 Consulting fees earned13,738 Rent expense3,693 Salaries expense6,662 Telephone expense580 Miscellaneous expense300 Retained earnings? 6,483 + 54,510 + 13,424 + 483 Based on the following information, what would be the ending balance in the Retained Earnings Account, assuming all accounts have a normal balance? Cash Accounts receivable Office supplies Land Office equipment Accounts payable Common stock Dividends Consulting fees earned Rent expense Salaries expense Telephone expense Miscellaneous expense Retained earnings $6,760 13,739 2,631 37,159 14,541 6,469 54,496 2,006 13,724 3,679 6,648 566 286 ? Total Debits 88,015 - Total Credits 74,689 = RE 13,326 + Change in RE 539 = 13,865 Ending RE ... View Full Document

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