Exam recovery assignment

SPRING 2020 Exam 1 Version 1 Last Name: First Name: Student ID:

Circle Section # Section # Class Time

1 9:10pm 2 1:10pm 3 2:10am

Instructions:

1. On your scantron: Fill in your Last Name, space, First Name, space, Middle Initial. Be sure to darken the BLANK circle for spaces! In the column labeled grade fill in your section # do not fill in a zero before your section #.

2. At the bottom of the scantron form fill in your Student ID # and put your exam #1 and Version #1 under special codes.

Column O=1 Column P=1

3. Only use an approved 4-function calculator and a #2 lead pencil. MAKE SURE YOUR NAME, WSU ID NUMBER, AND SECTION NUMBER ARE COMPLETED ON THE SCANTRON SHEET USING A #2 PENCIL.

4. Read each question carefully. Often a careful reading eliminates much unnecessary work.

There are 30 multiple choice (4 points each) = 120 points.

Question #31 is worth a total of 7 extra credit points. 5. Identify the letter of the choice that BEST completes the statement or answers

the question and fill in the corresponding circle on your scantron answer sheet. REMEMBER: Only the answers provided on the scantron sheet will be graded! The exam document itself will NOT be graded, so make sure you fill in the scantron sheets correctly with your answers. Completely darken the space in pencil corresponding to your answer for each question. If you erase, do so completely or your test may not be scored correctly!

2. Which of the following is a feature of the corporate form of business

ownership? A. Unlimited liability.

B. Lower tax rates.

C. Limited resources.

D. Ease of transferring ownership.

E. None of the choices are correct.

3. Which of the following is the most appropriate and modern definition of accounting?

A. The interconnected network of subsystems necessary to operate a business.

B. Communicates business economic events of an organization to interested users.

C. Provides information for internal users.

D. An information system that identifies, measures and records economic events of an organization.

E. Both B. and D.

4. Expenses are best defined as:

A. Amounts owed to creditors.

B. Amounts the owners have invested in the business.

C. Costs of providing products and services.

D. Distributions to stockholders.

E. None of the choices are correct.

1. Which of the following questions is most likely to be asked by a creditor?

A. What are the company’s terms of credit with its suppliers?

B. What is the amount of taxes owed to the government?

C. Will the company be able to repay its debt when it is due? D. Will the company’s stock increase in value?

E. None of the choices are correct.

5. A Company recorded the following cash transactions for the year: Paid $90,000 for salaries. Paid $40,000 to purchase office equipment. Paid $10,000 for utilities. Paid $4,000 in dividends. Collected $140,000 from customers. Recorded $3,000 in depreciation expense. What was the net cash provided by operating activities?

A. $37,000.

B. $0.

C. ($3,000).

D. $50,000.

E. None of the choices are correct.

6. A Corporation began the year with retained earnings of $155,000. During the year, the company issued $210,000 of common stock, recorded expenses of $600,000, and paid dividends of $40,000. If the company’s ending retained earnings was $165,000, what was the company's revenue for the year?

A. $860,000.

B. $650,000.

C. $610,000.

D. $820,000.

E. None of the choices are correct.

7. The assets of a company represent:

A. Resources that will be used to benefit the company in the future. B. Amounts owed to creditors.

C. Investments by stockholders.

D. Sales of goods or services to customers.

E. The amount equal to the equity of the company.

8. Which of the following statement(s) is not true?

A. Liabilities are recorded when accruing expenses at the end of the period.

B. Liabilities are recorded when cash is received before it is earned.

C. Liabilities are claims that require a future sacrifice of a company’s resources.

D. Liabilities are only recorded when a claim must be paid off with cash.

9. Which type of business activity involves acquiring property, plant and equipment assets to run the business operations?

A. Operating.

B. Investing.

C. Acquiring.

D. Financing.

E. None of the choices are correct.

10. The principal of expense recognition (matching) in accounting refers to:

A. Expenses should be recognized in the period they are paid.

B. Accrual basis accounting follows GAAP and Cash Basis does not.

C. All costs that are used to generate revenue are recorded in the period the revenue is recognized.

D. None of the choices are correct.

11. Which of the following best explains the meaning of total stockholders' equity?

A. The amount of common stock less dividends over the life of the company. B. The amount of capital invested by stockholders plus the profits retained over the life of the

company. C. The difference between total revenues and total expenses, less dividends for the year. D. All revenues, expenses, and dividends over the life of the company. E. None of the Choices are correct.

12. External journal entries would include all the following except:

A. Collecting an accounts receivable.

B. Paying rent.

C. Purchasing equipment.

D. Using up pre-paid insurance.

E. None of the choices are correct.

13. The organization primarily responsible for establishing accounting and reporting standards in the United States is the Financial Accounting Standards Board (FASB).

A. True.

B. False.

14. A corporation purchases land for $200,000 by paying a down payment of $20,000 and by signing a note payable for the remainder of the purchase price. Which of the following statements correctly shows the effect of this transaction on the accounting equation?

A. Assets will increase by $200,000; liabilities will increase by $180,000 and stockholders' equity will increase by $20,000.

B. Assets will increase by $180,000; liabilities will increase by $200,000 and stockholders' equity will decrease by $20,000.

C. Assets will increase by $180,000; liabilities will remain unchanged and stockholders' equity will increase by $180,000.

D. Assets will increase by $180,000; liabilities will increase by $180,000 and stockholders' equity remains unchanged.

E. None of the choices are correct.

15. The Income Statement:

A. The net income reported on the Income Statement usually reflects the same net amount of cash flow for the period when a company uses the accrual basis of accounting.

B. Reports results of operating activities for the period and includes revenue, expense and dividend amounts for the period.

C. The income statement would include any dividend revenue earned from the purchase and ownership interest in a corporation that paid a dividend.

D. The Income Statement must be prepared first in order to include the net income for the period when updating the retained earnings account at the end of the period.

16. When the company pays stockholders a dividend, what is the effect on the accounting equation for that company?

A. Decreases assets and decreases liabilities. B. Decreases assets and decreases stockholders' equity. C. Decreases stockholders' equity and increases assets. D. Increases liabilities and increases assets. E. None of the choices are correct.

17. A company received $600,000 cash in advance from customers. Which of the following statements correctly shows the effect of this transaction on the accounting equation?

A. Assets will increase by $600,000; liabilities will remain unchanged and stockholders' equity will increase by $600,000.

B. Assets will increase by $600,000; liabilities will increase by $600,000 and stockholders' equity will remain unchanged.

C. Assets will decrease by $600,000; liabilities will remain unchanged and stockholders' equity will decrease by $600,000.

D. Assets will remain unchanged; liabilities will increase by $600,000 and stockholders' equity will increase by $600,000.

E. None of the choices are correct.

18. A corporation received $2,000 for interest earned on a note for a loan made to an employee in the current year. How would this transaction be recorded and what type of activity would this be classified under?

A. Debit Accounts Receivable $2,000, credit Interest Revenue $2,000; Financing.

B. Debit Cash $2,000, credit Interest Revenue $2,000; Financing.

C. Debit Cash $2,000, credit Interest Revenue $2,000; Operating.

D. Debit Cash $2,000, credit Note Receivable $2,000; Operating.

E. None of the choices are correct.

19. The balance sheet provides information that is helpful in determining a company’s profitability for the period.

A. True. B. False.

20. A company borrows $40,000 on a note payable. In posting this transaction to the T-accounts, which of the following will be required?

A. Post $40,000 on the right side of the Cash T-account. B. Post $40,000 on the right side of the Notes Payable T-account. C. Post $40,000 on the left side of the Notes Payable T-account. D. Post $40,000 on the left side of an Expense Account. E. None of the choices are correct.

21. Expenses ______ retained earnings; therefore, to increase recorded expenses, one would ______ the expense account. (fill in blanks)

A. Increase; Debit. B. Decrease; Debit. C. Increase; Credit. D. Decrease; Credit. E. None of the choices are correct.

22. Adjusting Entries are not required:

A. When expenses are paid in the same period they contribute to earnings.

B. At the end of the accounting period to adjust to the accrual basis of accounting.

C. When a cost occurs with the passage of time and has yet to be recorded in the period.

D. When service is provided that was previously paid for.

E. All the choices are correct.

23. Which of the following would not typically be used as an adjusting entry?

A. Utility Expense

Utilities Payable

B. Supplies

Accounts Payable

C. Interest Expense

Interest Payable

D. Accounts Receivable

Service Revenue

E. All are typically used as an adjusting entry.

24. An awareness of the normal balances of accounts would help you spot which of the following had an error in posting a transaction?

A. A credit balance in a expense account. B. A credit balance in a revenue account. C. A debit balance in the dividends account. D. A credit balance in a liabilities account.

25. At the beginning of December, a corporation had $5,000 in supplies on hand. During the month, supplies purchased amounted to $2,000, but by the end of the month the supplies balance was only $600. What is the appropriate month-end adjusting entry at the end of December?

A. Debit Cash $600, credit Supplies $600. B. Debit Supplies Expense $6,400, credit Supplies $6,400. C. Debit Accounts Payable $2,000, credit Supplies $2,000. D. Debit Supplies $6,400, credit Accounts Payable $6,400.

26. In recording accounting transactions in a double-entry system:

A. There must only be two account affected by any transaction.

B. The amount of the debits recorded must equal the amount of the credits recorded.

C. The number of accounts debited must equal the number of accounts credited.

D. There must always be entries made on both sides of the balance sheet accounting equation.

27. The following financial information is from a company. All debt is due within one year unless stated otherwise

Retained Earnings $52,000

Supplies 37,000

Equipment 72,000

Accounts Receivable 8,600

Deferred Revenue 7,000

Accounts Payable 15,000

Common Stock 25,000

Notes Payable (due in 18 months) 35,000

Interest Payable 7,000

Cash 22,400 What is the amount of current liabilities?

A. $29,000. B. $22,000. C. $64,000. D. $37,600. E. None of the choices are correct.

28. The following table contains financial information for a company. Before closing entries: Cash $12,000

Supplies 4,500

Deferred Revenue 5,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Cost of Goods Sold 20,000

Dividends 4,000

Accounts Payable 5,000

Common Stock 64,000

Retained Earnings 13,000 What is the amount of the company’s total stockholders' equity at the end of the period?

A. $73,000. B. $83,500. C. $87,500. D. $78,500.

29. Below are the account balances for a corporation at the end of December. The Income Statement ending net income would be:

Accounts Balances Service revenue 9,400

Cash $5,200 Common stock 8,000

Salaries expense 2,300 Deferred Revenue 2,000

Sales Revenue 15,000 Accounts payable 2,200

Advertising expense 1,200 Cost of Goods Sold 6,000

Equipment 12,400 Retained earnings 2,500 A. $17,500. B. $14,900. C. $20,900. D. $16,900. E. None of the choices are correct.

30. Consider the following transactions. Based on the Accrual-Basis of Accounting place an X in the column that each transaction would record as Revenue or Expense or Neither. Then answer the question below:

Accrual-Basis

Transaction Revenue Expense Neither

1. Record employees' salaries incurred in current month but not yet paid, $800. X

2. Paid for advertising placed in local newspaper last month $700. X

3. Received bill for utilities used the current month that will not be paid until next month, $750.

X

4. Receive cash from customers in advance, $1,500. X

5. Purchase office supplies on account, $400. X

6. Paid dividends to stockholders, $200. X

7. Used up supplies previously purchased on account, $400. X

8. Used up on month of insurance on one-year policy that cost $3,600. X

9. Receive cash from customers for services performed in the current period, $1,800.

X

10. Provide services to customers on account, $2,100. X

30. Cont.

What was the total number recorded as Revenue, Expense or Neither?

Revenue Expense Neither A. 1 4 5

B. 2 3 5

C. 2 4 4

D. 1 3 6

31. Given the following information, fill-in the MISSING correct dollar amounts ($) into the blank cells in each of the three financial statements below:

Income Statement Statement of Stockholders’ Equity December 31, 2020 December 31, 2020

Service Revenue $ 93,600 Common Stock

Retained Earnings

Total Stockholders’

Equity Expenses:

Salaries $ 48,100 January 1 $ 67,000 $ 135,000 $ 202,000 Supplies 7,500 Issue stock $ 6,000 Cost of Goods Sold

$ Net income $ $

Total Expenses $ Dividends (4,000) (4,000)

Net income $ December 31 Ending balance $ 73,000 $ $

Balance Sheet Assets: Liabilities:

Cash $ 52,900 Accounts payable $ 5,200 Accounts receivable $ Deferred Revenue 1,000 Supplies 6,500 Total Current Liabilities $ Pre-Paid Rent 11,600 Long-Term Liabilities $

5,000 Total Current Assets $ Stockholders’ Equity:

Equipment 160,000 Common stock $ 73,000 Accum. Depreciation (18,000) Retained earnings $ Total Stockholders’ Equity $ Total Assets $ 245,000 Total Liabilities and Stockholders’

Equity $

NEXT INSERT THE MISSING NUMBERS into the table below: (Just enter on number in each line) Inventory $

Total Current Assets

Total Liabilities and Stockholders’ Equity

Total Stockholders’ Equity (2 entries)

Retained Earnings (2)

Total Current Liabilities

Ending Common Stock

Issued Common Stock

Net Income (3)

Total Expenses

Insurance Expense Total 14 entries