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Principles of Accounting Final Exam Review

Asset, Debit, Balance Sheet
Cash
Liability, Credit, Balance Sheet
Accounts Payable
Asset, Debit, Balance Sheet
Accounts Receivable
Contra Asset, Credit, Balance Sheet
Accumulated Depreciation
Expense, Debit, Income Statement
Advertising Expense
Contra Asset, Credit, Balance Sheet
Allowance for Doubtful Accounts
Expense, Debit, Income Statement
Amortization Expense
Expense, Debit, Income Statement
Bad Debt Expense
Liability, Credit, Balance Sheet
Bonds Payable
Asset, Debit, Balance Sheet
Buildings
Stockholders’ Equity, Credit, Balance Sheet
Common Stock
Asset, Debit, Balance Sheet
Copyrights
Expense, Debit, Income Statement
Cost of Goods Sold
Asset, Debit, Balance Sheet
Debt Investments
Expense, Debit, Income Statement
Depreciation Expense
Contra Liability, Debit, Balance Sheet
Discount on Bonds Payable
Revenue, Credit, Income Statement
Dividend Revenue
Contra Asset, Debit, Retained Earnings Statement
Dividends
Liability, Credit, Balance Sheet
Dividends Payable
Asset, Debit, Balance Sheet
Equipment
Revenue, Credit, Income Statement
Gain on Disposal of Plant Assets
Asset, Debit, Balance Sheet
Goodwill
Expense, Debit, Income Statement
Income Tax Expense
Liability, Credit, Balance Sheet
Income Taxes Payable
Expense, Debit, Income Statement
Insurance Expense
Expense, Debit, Income Statement
Interest Expense
Liability, Debit, Income Statement
Interest Payable
Asset, Debit, Balance Sheet
Interest Receivable
Revenue, Credit, Income Statement
Interest Revenue
Asset, Debit, Balance Sheet
Inventory
Asset, Debit, Balance Sheet
Land
Expense, Debit, Income Statement
Loss on Disposal of Plant Assets
Expense, Debit, Income Statement
Maintenance and Repairs Expense
Liability, Credit, Balance Sheet
Mortgage Payable
Liability, Credit, Balance Sheet
Notes Payable
Asset, Debit, Balance Sheet
Patents
Stockholders’ Equity, Credit, Balance Sheet
Preferred Stock
Liability, Credit, Balance Sheet
Premium on Bonds Payable
Asset, Debit, Balance Sheet
Prepaid Insurance
Expense, Debit, Income Statement
Rent Expense
Stockholders’ Equity, Credit, Balance Sheet and Retained Earnings Statement
Retained Earnings
Expense, Debit, Income Statement
Salaries and Wages Expense
Contra Revenue, Debit, Income Statement
Sales Discounts
Contra Revenue, Debit, Income Statement
Sales Returns and Allowances
Revenue, Credit, Income Statement
Sales Revenue
Expense, Debit, Income Statement
Selling Expenses
Revenue, Credit, Income Statement
Service Revenue
Asset, Debit, Balance Sheet
Short-Term Investments
Asset, Debit, Balance Sheet
Stock Investment
Asset, Debit, Balance Sheet
Supplies
Expense, Debit, Income Statement
Supplies Expense
Stockholders’ Equity, Debit, Balance Sheet
Treasury Stock
Expense, Debit, Income Statement
Utilities Expense
$470,000
Mobile Instruments had retained earnings of $360,000 at December 31, 2013. Net Income for 2014 totaled $200,000 and dividends for 2014 were $90,000. How much retained earnings should Mobile report at December 31, 2014?
Dr: Cash
Dr: Accts. Receivable
Cr: Service Revenue
An attorney performs services of $1,100 for a client and receives $400 cash with the remainder on account. The journal entry for this transaction would be:
Dr: Supplies
Cr: Accts. Payable
Cr: Cash
A doctor purchases medical supplies of $640 and pays $290 cash with the remainder on account. The journal entry for this transaction would be which of the following?
Income Statement
The financial statement that reports revenues and expenses is called the:
Liabilities and Revenues
Which account types normally have a credit balance?
$19,000 (20,000-5,000+4,000)
The beginning Cash balance was $5,000. At the end of the period, the balance was $4,000. If total cash paid out during the period was $20,000, the amount of cash receipts was:
$111,000
The following normal balances appear on the adjusted trial balance of Old Orchard Company:

Equipment……$125,000
Accumulated Depreciation, equipment……$14,000
Depreciation Expense, equipment……$7,000

The book value of the equipment is:

Accumulated Depreciation
Which of the following accounts is not closed?
Have no effect on total assets
Receiving cash for a customer on account will:
Trial Balance
The list of all accounts with their balances is the:
$1,900 Credit
Accounts Payable had a normal beginning balance of $1,500. During the period, there were debit postings of $400 and credit postings of $800. What was the ending balance?
Total assets: $130,000
Liabilities: $26,000
Honor Corporation holds cash of $9,000 and owes $26,000 on accounts payable. Honor has accounts receivable of $41,000, inventory of $20,000, and land that cost $60,000. How much are Honor’s total assets and liabilities?
Net income of $135,000
During the year, FastDry, Inc. has $260,000 in revenues, $125,000 in expenses, and $5,000 in dividend payments. FastDry, Inc. had:
Increased by $52,000
During February, assets increased by $83,000 and liabilities increased by $31,000. Stockholders’ equity must have:
Accumulated Depreciation
Which of the following accounts would not be included in the closing entries?
Dr: Interest Receivable…375
Cr: Interest Revenue…375
Interest earned on a note receivable at December 31 equals $375. What adjusting entry is required to accrue this interest?
Increase both total assets and total liabilities by $75,000
Purchasing a building for $90,000 by paying cash of $15,000 and signing a note payable for $75,000 will:
Total Assets: decrease
Stockholders’ Equity: decrease
What is the effect on total assets and stockholders’ equity of paying the telephone bill as soon as it is received each month?
A credit to prepaid rent for $100
On January 1 of the current year, Ariel Company paid $600 in rent to cover six months (January-June). Ariel recorded this transaction as follows:

Dr: Prepaid rent…..600
Cr: Cash…..600

Ariel adjusts the accounts at the end of each month. Based on these facts, the adjusting entry at the end of January should include:

Balance Sheet: Cash, receivables, payables
Income Statement: Revenues, Expenses
Which accounts appear on which financial statement?
Debit supplies expense $800
Storage, Inc. purchased supplies for $1,500 during 2014. At year-end, Storage had $700 of supplies left. The adjusting entry should:
Historical Cost
Assets are usually reported at their:
Liability
The account Unearned Revenue is a(n):
$89,000 (A=L + S/O)
Smith Company had total assets of $1,555,000 and total stockholders’ equity of $53,000 at the beginning of the year. During the year, assets increased by $46,000 and liabilities increased by $10,000. Stockholders’ equity at the end of the year is:
$585,000
Wilson Company had the following on the dates indicated:

12/31/13:
total assets…..$38,000
total liabilities…..$27,000
12/31/14:
total assets…..$560,000
total liabilities…..$34,000

Wilson had no stock transactions in 2014; thus, the change in stockholders’ equity for 2014 was due to net income and dividends. If dividends were $70,000, how much was Wilson’s net income for 2014? Use the accounting equation and the statements of retained earnings.

False
True or False: Dividends are increased by credits.
True
True or False: Assets are increased by debits.
True
True or False: revenues are increased by credits.
True
True or False: liabilities are decreased by debits.
August (reported, but not collected)
Beryl Strauss began a music business in July 2014. Strauss prepares monthly financial statements and uses the accrual basis of accounting. The following transactions are Strauss Company’s only activities during July through October:

Jul 14…..bought music on account for $25, with payment to the supplier due in 90 days.
Aug 3…..performed a job on account for Jimmy Jones for $40, collectible from Jones in 30 days. used up all the music purchased on July 14.
Sep 16…..collected the $40 receivable from Jones
Oct 22…..paid the $25 owed to the supplier from the July 14 transaction

In which month should Strauss report the $40 revenue on its income statement?

$(12,000)
Pinker Corporation began the year with cash of $147,000 and land that cost $15,000. During the year Pinker earned service revenue of $255,000 and had the following expenses: salaries, $159,000; rent, $87,000; and utilities, $21,000. At year-end Pinker’s cash balance was down to $15,000. How much net income (or net loss) did Pinker experience for the year?
4.00 (current assets/current liabilities)
Here are key figures from the balance sheet of Majorca, Inc., at the end of 2014 (amounts in thousands):

Total assets (of which 40% are current)…..7,000
Current liabilities…..700
Bonds payable (long-term)…..1,200
Common Stock…..1,500
Retained Earnings…..3,600
Total liabilities and stockholders’ equity…..7,000

Majorca’s current ration at the end of 2014 is:

Dr: Unearned rent revenue…..2,800
Cr: Rent revenue…..2,800
On September 1, Seashore Apartments received $2,800 from a tenant for four months’ rent. The receipt was credited to Unearned Rent Revenue. What adjusting entry is needed on December 31?
Assets-Liabilities=Owners’ Equity
The accounting equation can be expressed as:
$400
On January 1 of the current year, Cruella Company paid $2,400 in rent to cover six months (January-June). Cruella recorded this transaction as follows:

Dr: Prepaid Rent…..2,400
Cr: Cash…..2,400

Cruella adjusts the accounts at the end of each month. Cruella’s adjusting entry at the end of February should include a debit to Rent Expense in the amount of:

$237,000
The stockholders’ equity of Gorsky Company at the beginning and end of 2014 totaled $117,000 and $137,000, respectively. Assets at the beginning of 2014 were $145,000. If the liabilities of Gorsky Company increased by $72,000 in 2014, how much were total assets at the end of 2014? Use the accounting equation.
Dr: Management Fee Revenue
Cr: Retained Earnings
The entry to close Management Fee Revenue would be which of the following?
$100,000
Lartex, a new company, completed these transactions. What will Lartex’s total assets equal?

1. Stockholders invested $50,000 cash and inventory with a fair value of $29,000.
2. Sales on account, $21,000

$121
Use the following data of Manatee Sales, Inc.:

Beginning Inventory:
Units…15
Unit Cost…6
Total Cost…90
Purchase on Apr 25:
Units…31
Unit Cost…7
Total Cost…217
Purchase on Nov 16:
Units…11
Unit Cost…9
Total Cost…99
Sales:
Units…40
Unit Cost…?
Total Cost…?

Manatee Sales’ average cost of ending inventory is:

$84
Use the following data of Stingray Sales, Inc.:

Beginning Inventory:
Units…14
Unit Cost…5
Total Cost…70
Purchase on Apr 25:
Units…31
Unit Cost…7
Total Cost…217
Purchase on Nov 16:
Units…11
Unit Cost…8
Total Cost…88
Sales:
Units…40
Unit Cost…?
Total Cost…?

Stingray Sales’ LIFO cost of ending inventory would be:

Credit to interest revenue for $21.00
Venus Ltd. received a four-month 9%, 2,800 note receivable on Mark 1. The adjusting entry on March 31 will include:
$65,900
Trudell Tank Company had the following beginning inventory, net purchases, net sales, and gross profit percentage for the first quarter of 2014:

Beginning inventory: $52,000
Net sales revenue: $93,000
Net purchases: $79,000
Gross profit rate: 30%

By the gross profit method, the ending inventory should be:

$12,860
Joshua Company had the following information in 2014:

Accounts receivable 12/31/14…$14,000
Allowance for uncollectible account 12/31/14 (before adjustment)…750
Credit sales during 2014…38,000
Cash sales during 2014…10,000
Collections from customers on account during 2014…49,000

If uncollectible accounts are determined by the aging-of-receivables method to be $1,140, the uncollectible-account expense for 2014 would be $390. The balance of the allowance account after the adjusting entry would be $1,140. The net realizable value of accounts receivable on the December 31, 2014 balance sheet would be:

d. All of the above
Before paying an invoice for goods received on account, the controller or treasurer should ensure that:

a. the company is paying for the goods it ordered
b. the company is paying for the goods it actually received
c. the company has not already paid this invoice
d. all of the above.

$5,740
Crowe Company uses the aging method to adjust the allowance for uncollectible accounts at the end of the period. At December 31, 2014, the balance of accounts receivable is $220,000, and the allowance for uncollectible accounts has a credit balance of $5,000 (before adjustment). An analysis of accounts receivable produced the following age groups:

Current…..160,000
60 days past due…..54,000
over 60 days past due…..6,000
total: 220,000

Based on past experience, Crowe estimates that the percentage of accounts that will prove to be uncollectible within the three age groups is 3%, 9%, and 18%, respectively. Based on these facts, the adjusting entry for uncollectible accounts should be made in the amount of:

No entry is required
If a bank reconciliation included a deposit in transit of $790, the entry to record this reconciling item would include a:
Increase supplies, $45
Decrease cash, $45
A check was written for $483 to purchase supplies. The check was recorded in the journal as $438. The entry to correct this error would:
Separation of duties
Requiring that an employee with no access to cash do the accounting is an example of which characteristic of internal control?
Deducted from the book balance
In a bank reconciliation, an EFT cash payment is:
$5,200
Linus Company uses the percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $130,000, and management estimates 4% will be uncollectible. Allowance for doubtful accounts prior to adjustment has a credit balance of $1,000. The amount of expense to report on the income statement will be:
An understatement of net income of the next period
An overstatement of ending inventory in one period results in:
$22,560
Frame First Frame Shop wants to know the effect of different inventory costing methods on its financial statements. Inventory and purchases data for June are:

Beginning Inventory (June 1):
Units…2,100
Unit cost…12.00
Total cost…25,200
Purchase (June 4):
Units…1,600
Unit Cost…12.60
Total cost…20,160
Sale (June 9):
Units…(1,900)
Unit Cost…?
Total cost…?

If Frame First Frame Shop uses the FIFOmethod, the cost of the ending inventory will be:

$5,400
Graham Company uses the percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $120,000, and management estimates 2% will be uncollectible. The amount of expense to report on the income statement was $2,400. Allowance for doubtful accounts prior to adjustment has a credit balance of $3,000. The balance of allowance for doubtful accounts, after adjustment, will be:
E. All of the above might be included in “cash equivalents”
Which of the following assets are not included in “cash equivalents” in a typical balance sheet?

a. foreign government securities
b. time deposits
c. certain very low risk equity securities
d. u.s. government securities
e. all of the above might be included in “cash equivalents”

$338
Use the following data of Tortoise Sales, Inc.:

Beginning Inventory:
Units….22
Unit Cost….7
Total Cost…154
Purchase on Apr 25:
Units….33
Unit Cost….8
Total Cost….264
Purchase on Nov 16:
Units….13
Unit Cost….10
Total Cost….130
Sales:
Units….45
Unit Cost….?
Total Cost….?

Tortoise Sales uses a FIFO inventory system. Cost of goods sold for the period is:

FIFO
During a period of rising prices, the inventory method that will yield the highest net income and asset value is:
FIFO
First In First Out; , Cost of oldest inventory goes to COGS, while newest inventory goes to Ending Inventory. The formula is Beginning inventory + Purchases – Ending inventory (sum of all units).
LIFO
Last In First Out; Last costs into inventory go to cost of goods sold (most recent items purchased are assumed to be sold first). Oldest costs go into ending inventory. Examples include donut shops-freshest inventory is sold first, the least fresh inventory will be recorded in ending inventory.
Dr: Land (purchase + costs)
Cr: Note Payable (purchase)
Cr: Cash (costs)
Journal entry for the purchase of land
Capital Expenditures
Expenditures that increase the asset’s capacity or extend its useful life. They are said to be capitalized, which means the cost is added to an asset account and not expensed immediately.
Book Value of a Plant Asset=Cost-Accumulated Depreciation
Formula for plant assets recorded at book value.
Physical wear and tear and obsolescence
Two factors caused by depreciation.
Physical wear and tear
Physical deterioration takes its toll on the usefulness of an asset. Examples of these assets includes airplanes, equipment, delivery trucks, and buildings.
Obsolescence
An asset that is absolute when another asset can do the job more efficiently; an asset’s useful life may be shorter than its physical life. Examples of these assets include computers and other electronic equipment.
Depreciation Expense
Recall that ____________ is reported on the statement, not accumulated depreciation.
Straight-line, units-of-production, double-declining balance
Three methods of depreciation.
(depreciable cost-residual value)/useful life in years
How to calculate straight line depreciation.
Dr: Depreciation Expense: Asset
Cr: Accumulated Depreciation: Asset
Journal Entry to record depreciation
Rate, Depreciable Cost, Yearly Expense
Which parts of the straight line depreciation schedule stay the same?
Increases, decreases
As an asset is used in operations, accumulated depreciation _________ and the book value of an asset __________.
(Depreciable cost-residual value)/useful life, in units of production
How to calculate units-of-production depreciation
$150,000
Steeple Company had cost of goods sold of $145,000. The beginning and ending inventories were $3,000 and $8,000, respectively. Purchases for the period must have been:
When inventory is delivered to a customer
When does the cost of inventory become an expense?
$1,125
On August 1, 2014, Gitores, Inc., sold equipment and accepted a six-month, 9%, 30,000 note receivable. Gitores’ year-end is December 31. How much interest revenue should Gitores accrue on December 31, 2014?

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