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210 Exam AC 1 Name: ______________________________________ Version A CWID: ____________________ 1. A company pays its workforce on Fridays for a five day workweek (Monday through that Friday). The payroll for a week is $100,000 ($20,000 per day). If the accounting year-end 2011 falls on a Tuesday, the adjusting journal entry on December 31, 2011 to record the $40,000 accrual of wages for 2011 will include a A. debit to Salaries Payable of $100,000. B. debit to Salaries Expense of $40,000. C. credit to Salaries Payable of $60,000. D. credit to Cash of $40,000. E. debit to Salaries Payable of $40,000. The Statement of Cash Flows for the current year contained the following: The change in cash for the current year was an increase of $14,000. 2. What was the amount of Cash Flows from Investing Activities? A. Cash Outflow of $1,000 B. Cash Outflow of $40,000 C. Cash Outflow of $10,000 D. Cash Inflow of $10,000 E. None of the above 3. Recording an adjusting journal entry to recognize depreciation would cause which of the following? A. An increase in liabilities and expenses, and a decrease in stockholders' equity. B. A decrease in assets and stockholders' equity, and an increase in expenses. C. A decrease in assets, an increase in liabilities, and an increase in expenses. D. An increase in assets, an increase in liabilities, and a decrease in expenses 4. Which of the following would be reported on the income statement for the current year? A. In the current year, the company sold goods to customers who agreed to pay next year. B. In the current year, the company received payment in cash for goods that were sold to customers last year. C. In the current year, the company borrowed money from the bank which is to be used in the business activities this year. D. In the current year, the company issued stock to owners and received cash immediately. E. More than one of the above. 5. At the end of the current year, a company paid cash to acquire a storage facility with plans to use it in its business activities for several years. Choose the TRUE statement. A. In the current year, total assets will decrease and stockholders' equity will decrease. B. In the current year, total assets will decrease and stockholders' equity will increase. C. In the current year, total assets and total stockholders equity will remain unchanged. D. This year, this activity will not result in any changes of any kinds to the balance sheet or the income statement. E. None of the above; all the above are false statements. The following accounts are taken from the December 31, 2011 financial statements of a company. 6. What is the amount of total liabilities at the end of 2011? A. $7,075 B. $10,075 C. $9,075 D. $12,975 E. None of the above 7. The first year of operations for a company was 2010. The net income for the year 2010 was $20,000 and dividends of $12,000 were paid. In 2011, the company reported net income of $34,000 and paid dividends of $5,000. At the end of 2010, the company had total assets of $150,000, and at the end of 2011, total assets were $240,000. The company sold its stock for $100,000 during the year 2010. What was the amount of retained earnings at the end of 2010? A. $20,000 B. $8,000 C. $37,000 D. $137,000 E. $108,000 8. On December 31, 2010, interest of $500 is owed on a bank loan that will not be paid until June 30, 2011. What is the necessary adjusting journal entry on December 31, 2010? A. Option A B. Option B C. Option C D. Option D 9. On April 30, 2011, a three-year insurance policy was purchased with a cash payment of $18,000. Coverage began immediately. What is the amount to be reported on the balance sheet as Prepaid Insurance at December 31, 2011? A. $16,000 B. $2,000 C. $6,000 D. $18,000 E. $14,000 10. A company incurred $5,000 in wages for employees for the year. $4,500 of these wages were paid by the end of the year. Choose the TRUE statement. A. Wages payable on the income statement will be $4,500 at the end of the year. B. Wages expense on the income statement will be $500 for the year. C. Wages expense on the balance sheet will be $5,000 at the end of the year. D. Wages payable on the balance sheet will be $500 at the end of the year. E. Wages payable on the balance sheet will be $4,500 at the end of the year. 11. Which of the following statements is TRUE? A. If a company uses $100 million in cash to pay off debt, its stockholders' equity will rise $100 million. B. If total assets increase, then either liabilities or stockholders' equity also must increase. C. Journal entries show the effects of transactions on the elements of the accounting equation, as well as the amount of the account balances after the entries are made. D. The acquisition of equipment in an exchange for a company's stock would increase the current ratio of the company. E. The current ratio can be used to evaluate a company's ability to pay liabilities in the shortterm, and in general, a lower ratio means better ability to pay. 12. A company purchased land costing $27,000 by making a 25 percent cash down payment and signing a 90-day note for the balance. The entry to record this transaction would A. Increase total assets. B. Decrease total liabilities. C. Decrease contributed capital. D. Increase retained earnings. E. Decrease retained earnings 13. When accounts receivable are collected A. Stockholders' equity increases. B. Total assets increase overall. C. Total assets decrease overall. D. The amount of total assets is unchanged overall. E. Total liabilities decrease. 14. A company was recently formed with $60,000 cash contributed to the company by its owners. The company then borrowed $30,000 from a bank and bought $10,000 of inventory and paid cash for it. The company also purchased $70,000 of equipment by paying $10,000 in cash and issuing a note for the remainder. What is the amount of the total liabilities to be reported on the balance sheet after these transactions? A. $60,000 B. $0 C. $90,000 D. $80,000 E. $150,000 15. A company reported the following information at December 31, 2010: What is the amount of current assets on the classified balance sheet? A. $113,540 B. $64,040 C. $23,490 D. $37,580 E. none of the above 16. On December 1, 2010, B. Darin Company received from $3,600 S. Dee Company for rent of an office owned by B. Darin Company. The $3,600 is for the period from December 1, 2010 through January 31, 2011. B. Darin Company recorded this as unearned rent revenue when it was received on December 1. The adjusting entry on December 31 includes A. A credit to Rent Revenue of $1,800. B. A credit to Unearned Rent Revenue of $1,800. C. A debit to Rent Revenue of $1,800. D. A debit to Rent Expense of $3,600. E. A credit to Prepaid Rent of $1,800. 17. A company started the year with a normal balance of $68,000 in the Inventory account. During the year the following amounts were posted to the account: Debits of $45,000 and credits of $55,000. Choose the TRUE statement. A. After these amounts are posted, the balance in the Inventory account is a credit balance of $58,000. B. The normal balance of the Inventory account is a credit balance. C. The inventory account is decreased by debits. D. The debits and credits posted to the Inventory account caused it to decrease by $10,000. E. More than one of the above statements are true. 18. A company entered into the following transactions: - Borrowed $5,000 from the bank by signing a promissory note - Issued stock to owners for $10,000 - Purchased $1,000 of supplies, on account - Paid $400 to suppliers as payment on account for the supplies purchased What is the amount of total assets after these transactions? A. $16,000 B. $5,600 C. $15,000 D. $15,600 19. A company started the year with $1,500 of supplies on hand. During the year the company purchased additional supplies of $800 and recorded them as increase to the supplies asset. At the end of the year the company determined that only $300 of supplies are still on hand. What is the adjusting journal entry to be made at the end of the period? A. Option A B. Option B C. Option C D. Option D 20. Which of the following is TRUE about accrual basis accounting and cash basis accounting? A. Net Income is always smaller under accrual basis accounting than cash basis accounting. B. GAAP does not require accrual basis accounting be used for external reports, although it is recommended. C. Accrual basis accounting and cash basis accounting will always produce the same results for the same year. D. Accrual basis accounting provides a better measure of operating performance than does cash basis accounting. E. All of the above are true. 21. In the previous month, Seconds Best Company sold goods to a customer for $10,000 cash and $60,000 on credit. The correct entry by Seconds Best to record the sale in the previous month is: A. Option A B. Option B C. Option C D. Option D 22. Which of the following would not be reported on the Income Statement in the current period? A. Utilities expense in the amount of a bill received for utilities used during the current period but unpaid as of the end of the period. B. Rent expense in the amount of rent paid during the period for use of a storage facility in the current period. C. Revenue in the amount of services provided to customers who promise to pay in the next period. D. Cost of land, paid in cash, and purchased for future use. 23. The following transactions occurred during July: 1. Received $800 cash for services rendered during July. 2. Received $5,000 from issuance of stock to investors. 3. Received $400 from a customer in payment of accounts receivable from the prior month. 4. Billed customers for services performed in July, $3,500. 5. Borrowed $2,500 from the bank, giving a promissory note in exchange. 6. Received $1,000 from a customer for services to be performed next year. What is the amount of Revenue for July? A. $5,300 B. $5,700 C. $4,300 D. $7,200 E. $4,700 24. In 2011 A to Z Advertising Company billed customers $55,000 for advertising services rendered during that month. Which of the following is the journal entry to record the activity? A. Option A B. Option B C. Option C D. Option D 25. The following activities occurred during the current year, 2010, for the Maverick Law Firm. - On February 1, 2010, received cash of $5,000 from clients in payment of their accounts from 2009. - In 2010, received cash of $13,000 for law services rendered in 2010. - At the end of 2010, billed customers $4,000 for services rendered in 2010. This amount was unpaid as of the end of the year. - In November of 2010, received cash of $2,000 from clients as a deposit on law services to be performed in 2011. What is the amount of Law Services Revenue to be reported on the Income Statement for the year 2010? A. $19,000 B. $22,000 C. $24,000 D. $17,000 E. $13,000 26. A dance studio accepts $1,500 to provide a series of dance lessons to a youth group during the month of July. The studio decides to record the revenue in July. The studio decided to record the July expenses of rent, utilities and salaries in August, when it pays for them. One or both of these decisions: A. violate the matching principle. B. are an example of accrual accounting. C. violate the revenue principle. D. violate the accounting equation. E. are acceptable under US GAAP. 27. Which of the following statements is TRUE? A. As a company uses supplies, an adjustment should be made to decrease an asset account and increase an expense account. B. Adjusting entries are not needed when assets are used up gradually over several accounting periods after being purchased. C. A contra account is added to the account it offsets. D. The amount charged for a good or service provided to a customer on account is posted to a revenue account only after the payment is received. E. None of the above; all are false statements. 28. Presented below are selected accounts from the unadjusted trial balance of Sneetch Star Makers Inc., a talent agency, at 12/31/10 (year-end) (debit and credit labels have been omitted; assume all balances are normal). The insurance policy covers four years and was purchased by Sneetch on 1/1/10. No previous adjustments have been made during the year. The adjusting entry on December 31 would include A. a debit to prepaid insurance for $1,200. B. a credit to prepaid insurance for $1,200. C. a debit to insurance expense for $3,600. D. a credit to prepaid insurance for $3,600. E. a credit to insurance expense for $1,200. ... View Full Document

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