Deck 2: Processing Accounting Information

Question 1

The first step in the accounting cycle is to record transactions in a journal.

Answer 1

False

Question 2

The first step in the accounting cycle is to analyze transactions from source documents.

Answer 2

True

Question 3

The first five steps in the accounting cycle occur with equal frequency.

Answer 3

False

Question 4

The accounting cycle step that occurs most frequently is to adjust the general ledger accounts.

Question 5

A company's fiscal year cannot coincide with the calendar year.

Question 6

All companies have a fiscal year ending on December 31.

Question 7

If Howard, Inc. purchased equipment on credit from Roan Company, then the transaction recorded by Howard would include an increase in a liability and an increase in asset.

Question 8

Deferred revenue and unearned revenue both refer to cash that has been received but not yet earned.

Question 9

Under the double-entry accounting system, no more than two accounts can be affected by each transaction.

Question 10

When a firm purchases equipment for cash, both assets and stockholders' equity increase.

Question 11

When money is borrowed, both an asset account and a revenue account are increased.

Question 12

The analysis of each transaction must result in the accounting equation remaining in balance.

Question 13

An account is an individual record of increases and decreases in a specific asset, liability, or stockholders' equity item.

Question 14

The chart of accounts is a tabular record in which business activities are analyzed in terms of debits and credits and recorded in chronological order.

Question 15

A general ledger is a grouping of a firm's permanent accounts.

Question 16

A chart of accounts is a list of the title and numerical code of all accounts in the general ledger.

Question 17

Which of the following is the correct order of the steps in the accounting cycle?

A) Adjust, report, analyze, record, and close
B) Record, report, analyze, adjust, and close
C) Report, analyze, close, record, and adjust
D) Analyze, record, adjust, report, and close

Question 18

A company's fiscal year may:

A) Be any portion of a year including a month or quarter
B) Be for a period either greater or less than 12 months
C) Be the same as the calendar year
D) All of the above are true of a company's fiscal year

Question 19

The first two steps of the accounting cycle, in proper sequence, are:

A) Record transactions in a journal and prepare a trial balance.
B) Analyze transactions from source documents and post journal entries to general ledger accounts.
C) Analyze transactions from source documents and record transactions in a journal.
D) Record transactions in a journal and post journal entries to general ledger accounts.
E) None of the above

Question 20

Which of the following is not among the five major steps in the accounting cycle?

A) Record transactions in a journal
B) Prepare a chart of accounts
C) Adjust the general ledger accounts and prepare an adjusted trial balance
D) Analyze transactions from source documents
E) Prepare financial statements

Question 21

Cash collected on accounts receivable would produce what effect on the balance sheet?

A) Increase liabilities and decrease equity
B) Decrease liabilities and increase equity
C) Increase assets and decrease assets
D) Decrease assets and decrease liabilities

Question 22

Which of the following is one effect of a purchase of $300 of supplies on credit?

A) It would increase liabilities by $300
B) It would decrease retained earnings by $300
C) It would decrease liabilities by $300
D) It would decrease cash asset $300

Question 23

Which of the following will properly record the payment of a two-year insurance policy?

A) Increase assets and increase retained earnings
B) Increase liabilities and decrease retained earnings
C) Increase and decrease assets
D) Decrease assets and decrease liabilities

Question 24

An economic event that requires accounting recognition defines:

A) An income statement
B) An accounting transaction
C) The cost principle
D) An asset
E) None of the above

Question 25

Which of the following does not affect stockholders' equity?

A) Paying wages to employees
B) Receiving an investment of cash from an owner
C) Selling goods to customers with payment due in 30 days
D) Purchasing equipment with payment due in 30 days
E) None of the above

Question 26

Which of the following increases stockholders' equity?

A) Providing services to clients with payment received immediately
B) Purchasing supplies for cash
C) Receiving payment in advance from a client for service to be performed in the future
D) Collecting an amount owed by a client on account
E) None of the above

Question 27

Which of the following decreases stockholders' equity?

A) Purchasing equipment for cash
B) Paying monthly rent in cash
C) Issuing shares of stock
D) Paying cash to settle an account payable
E) None of the above

Question 28

Which of the following has no effect on stockholders' equity?

A) Issuing shares of stock
B) Expenses
C) Paying dividends
D) Revenues
E) None of the above

Question 29

The declaration and payment of a dividend by a corporation causes:

A) A decrease in assets and a decrease in liabilities.
B) A decrease in assets and a decrease in retained earnings
C) A decrease in assets and a decrease in common stock
D) A decrease in assets and an increase in retained earnings
E) None of the above

Question 30

The double-entry system of accounting means that:

A) Two pieces of information must be recorded for each transaction--the date and the dollar amount.
B) Assets will be increased twice as often as liabilities.
C) At least two elements of the accounting equation must be affected for each transaction.
D) Each transaction will be recorded two times, once in the general ledger and once in the balance sheet.
E) None of the above

Question 31

If the beginning Cash account balance was $18,400, the ending balance was $10,200, and total cash received during the period was $44,000, what amount of cash was paid out during the period?

A) $52,200
B) $35,800
C) $ 1,800
D) $42,400
E) None of the above

Question 32

If the beginning Cash account balance was $10,000, the ending balance was $16,800, and the total cash paid out during the period was $32,000, what amount of cash was received during the period?

A) $ 4,800
B) $46,800
C) $37,200
D) $38,800
E) None of the above

Question 33

Beginning and ending Cash account balances were $9,500 and $4,000, respectively. If total cash received during the period was $18,500, what amount of cash was paid out during the period?

A) $23,000
B) $26,500
C) $24,000
D) $15,000
E) None of the above

Question 34

Beginning and ending Cash account balances were $7,000 and $16,000 respectively. If total cash paid out during the period was $15,000, what amount of cash was received during the period?

A) $20,000
B) $18,000
C) $12,000
D) $24,000
E) None of the above.

Question 35

Which of the following transactions will record the payment of an $850 accounts payable originally incurred for Office Supplies?

A) Increase Office Supplies; decrease Cash
B) Increase Office Supplies; increase Accounts Payable
C) Increase Cash; increase Accounts Payable
D) Decrease Accounts Payable; decrease Cash

Question 36

A company bills customers for services rendered on account. Which of the following is one part of recording this transaction?

A) Decrease Service Revenue
B) Decrease Cash
C) Increase Accounts Receivable
D) Increase Unearned Revenue

Question 37

Maxwell Industries recorded and paid $700 advertising for the current month. Which occurred?

A) Current assets increase
B) Current liabilities decrease
C) Net income decreases
D) Retained earnings increases

Question 38

When invoices are sent to customers billing them for services that have been performed, the correct transaction analysis is:

A) Increase Accounts Receivable and increase Service Fees Earned
B) Decrease Accounts Payable and increase Service Fees Earned
C) Decrease Service Fees Earned and decrease Accounts Receivable
D) Increase Cash and increase Service Fees Earned
E) Increase Accounts Receivable and increase Accounts Payable

Question 39

Recording the collection of accounts receivable from customers involves:

A) Increasing Accounts Receivable and decreasing Cash
B) Increasing Cash and increasing Service Fees Earned
C) Increasing Cash and increasing Accounts Payable
D) Increasing Cash and decreasing Accounts Receivable
E) None of the above

Question 40

Recording a stock issuance in exchange for cash involves:

A) Increasing Cash and increasing Notes Payable
B) Increasing Cash and increasing Dividends
C) Increasing Cash and increasing Common Stock
D) Decreasing Common Stock and decreasing Cash
E) None of the above

Question 41

Recording the borrowing of money for which a note is signed involves:

A) Increasing Cash and decreasing Notes Receivable
B) Increasing Cash and increasing Accounts Payable
C) Increasing Cash and increasing Service Fees Earned
D) Increasing Cash and increasing Notes Payable
E) None of the above

Question 42

Paying a previously recorded invoice from a supplier (of supplies) involves:

A) Increasing Supplies and decreasing Cash
B) Decreasing Accounts Payable and decreasing Cash
C) Increasing Supplies and increasing Accounts Payable
D) Increasing Cash and decreasing Supplies
E) None of the above

Question 43

Recording the payment of dividends to shareholders involves:

A) Increasing Dividends and decreasing Cash
B) Increasing Cash and Common Stock
C) Increasing Withdrawal Expense and decreasing Cash
D) Decreasing Notes Payable and decreasing Cash
E) None of the above

Question 44

If a company paid off $100,000 of its accounts payable, the effect of this transaction as reflected in the accounting equation are:

A) Total assets and total liabilities decrease
B) Total assets and total liabilities increase
C) Both total assets, total liabilities and stockholders' equity are unchanged
D) Total assets decrease and total liabilities increase

Question 45

Chaffin Consulting performed consulting services during June on account, and collections for these services were not received until August.
What effect did performing these services have on the accounting equation during June?

A) Increase in assets and decrease in stockholders' equity
B) Increase in assets and increase in stockholders' equity
C) Decrease in assets and decrease in stockholders' equity
D) Decrease in assets and increase in stockholders' equity

Question 46

A company incurred $30,000 (to be paid next year) for the current year's advertising activities. What would the effect of this transaction on the current year's accounting equation?

A) No effect on Assets; $30,000 decrease in Liabilities; $30,000 increase in Stockholders' Equity
B) $30,000 increase in Assets; $30,000 increase in Liabilities; No effect on Stockholders' Equity
C) $30,000 increase in Assets; No effect on Liabilities; $30,000 increase in Stockholders' Equity
D) No effect on Assets; $30,000 increase in Liabilities; $30,000 decrease in Stockholders' Equity

Question 47

Howard Company had a transaction that caused a $15,000 increase in both assets and liabilities. This transaction could have been a(n):

A) Purchase of office equipment for $22,000, paying $7,000 cash and issuing a note payable for the balance
B) Investment of $15,000 cash in the business by the stockholders
C) Purchase of office equipment for $15,000 cash
D) Repayment of a $15,000 bank loan

Question 48

A transaction caused a $100,000 increase in both assets and total liabilities. This transaction could have been:

A) Purchase for office equipment for $100,000 cash
B) Repayment of a $100,000 bank loan
C) Investment of $100,000 cash in the business by the owner
D) Purchase of office equipment for $120,000, paying $20,000 cash and issuing a note payable for the balance

Question 49

An individual person starting a business made an investment of a building, which is valued at $200,000 with an $180,000 outstanding mortgage payable.
The effect of this transaction on the accounting equation of the business would be to:

A) Increase assets by $20,000
B) Increase assets by $180,000
C) Increase stockholders' equity by $20,000
D) Increase stockholders' equity by $200,000

Question 50

The accounting equation for Ellie Enterprises is as follows:

If the company now purchases office equipment on account for $10,000, the accounting equation will change to:

Question 51

During its first month of operations, Donald Company borrowed $100,000 from a bank, and then purchased equipment costing $40,000 by paying cash of $20,000 and signing a long term note for the remaining amount. During the month, the company also purchased Inventory for $30,000 on credit, performed services for clients for $10,000 on account, paid $15,000 cash for accounts payable, and paid $30,000 cash for utilities.
What is the amount of total assets at the end of the month?

A) $125,000
B) $115,000
C) $ 95,000
D) $135,000

Question 52

Mr. Cool Dude started a company (Cool Dude Company) by contributing $50,000 cash, and a building valued at $400,000. The company then purchased a machine by making a $50,000 down payment (which accounted for half its purchase price), and signed a note payable to the bank.
After recording the above transactions, the company's balance sheet will show:

Question 53

On December 31, 2018, the balance sheet of Roberts Realty reported total assets of $200,000. The following transactions occurred during the month of January 2019:
(1) The business purchased land for $250,000, paying $100,000 cash and issuing a note payable for the balance.
(2) The business collected accounts receivable totaling $45,000.
(3) The business sold land (which had cost $50,000) for $60,000 cash.
(4) The business paid off $50,000 of Notes Payable.
What is the amount of the company's total assets on January 31, 2019?

A) $455,000
B) $365,000
C) $460,000
D) $310,000

Question 54

On February 1st, Flora Accounting Services had a cash balance of $5,000, and completed the following transactions during February:
A. Purchased office supplies on account, $300.
B. Completed work for a client on credit, $500.
C. Paid cash for the office supplies purchased in (a ).
D. Completed work for a client and received $800 cash.
E. Received $500 cash for the work described in (b ).
F. Received $1,000 from a client for accounting services to be performed in March.
What was the balance of the company's cash account after these transactions?

A) $7,000
B) $1,700
C) $2,000
D) $2,500

Question 55

When Honest Abe received his paycheck, he realized that his employer made an error in computing his wages, and overpaid him by $1,300. So he promptly returned the excess amount.
When the employer receives a check from Abe for the amount of the overpayment, what is the effect of transaction to the employer?

A) Increase Cash and decrease Wages Expense
B) Increase Wages Expense and decrease Cash
C) Increase Cash and Increase Wages Payable
D) Decrease Wages Payable and decrease Wages Expense

Question 56

Terry Company purchased supplies for $7,000 on credit on January 1. On January 15, they made a cash payment of $2,000 to the supplier, and signed a one-year note for the remaining amount to settle the account.
Terry Company's entry on January 15 will include:

A) Decrease to Notes Payable for $5,000
B) Increase to Accounts Payable for $5,000
C) Increase to Notes Payable for $5,000
D) Increase to Cash for $5,000

Question 57

St. Clair Motor Supplies had the following transactions during December:
$\bullet$ Paid a note of $17,000 owed since March plus $425 for interest.
$\bullet$ Sold $36,525 of merchandise to customers on account. Cost of goods sold was $21,250.
$\bullet$ Paid accounts payable of $2,050.
As a result of these transactions, at year-end, liabilities and stockholders' equity would show a total:

A) Decrease by $4,575
B) Decrease by $4,200
C) Decrease by $4,800
D) Increase by $13,425

Question 58

During January, Wells Corporation purchased $100,000 of inventory; they paid one-fourth in cash, and signed a note for the remaining balance.
This transaction will have the following effect on the accounting equation:

A) Increase Inventory 100,000; decrease Cash 75,000; increase Notes Payable 25,000
B) Increase Inventory 100,000; decrease cash 25,000; increase Accounts Payable 75,000
C) Increase Inventory 100,000; increase Accounts Payable 25,000; decrease Cash 75,000
D) Increase Inventory 100,000; decrease Cash 25,000; increase Notes Payable 75,000

Question 59

Horizon Company, an internet service provider, has 1,000,000 customers. The customers make electronic payments of $70 each for that month's service on the last day of each month. Horizon Company does not send any bills to their customers.
The company's transaction on the day they receive the payment will include:

A) An increase to Internet Service Revenue for $70,000,000
B) An increase to Accounts Receivable for $70,000,000
C) A decrease to Accounts Receivable for $70,000,000
D) A decrease to Internet Service Expense for $70,000,000

Question 60

A customer received and then paid a $9,000 utility bill from Maryland Power Company. The entry by Maryland Power Company to record receipt of the payment would include:

A) An increase to Accounts Payable
B) A decrease to Accounts Receivable
C) An increase to Utilities Revenue
D) An increase to Accounts Receivable

Question 61

Jackson Company purchased a new car for $30,000 by paying $12,000 cash, and trading in an old car with a recorded net cost and market value of $10,000. They also signed a Note for $8,000.
The required journal entry will not:

A) Increase New Car for $30,000
B) Decrease Notes Payable for $8,000
C) Decrease Old Car for $10,000
D) Increase Notes Payable for $8,000

Question 62

Kobe Company provided consulting service to a client on January 1, and billed them for $15,000. On February 1, the client made cash payment of $8,000 and signed a note for $7,000 to settle the account.
What is Kobe Company's entry on February 1?

A) Increase Cash 8,000; Increase Accounts Receivable 7,000; decrease Notes Receivable 15,000
B) Decrease Accounts Payable 15,000; increase Notes Payable 7,000; decrease Cash 8,000
C) Increase Cash 8,000; increase Notes Receivable 7,000; increase Consulting Revenue 15,000
D) Increase Cash 8,000; increase Notes Receivable 7,000; decrease Accounts Receivable 15,000

Question 63

Lipsey Company's Accounts Payable account had a balance of $3,700 on September 1, and a balance of $4,500 on September 30. During September, the company made total payments of $32,800 on accounts payables.
What must have been their total purchases on account during September?

A) $33,600
B) $32,000
C) $37,300
D) $29,100

Question 64

Ludlow Company's Accounts Receivable account had a balance of $7,500 on November 1, and a balance of $10,700 on November 30. During November the company received cash of $19,700 from credit customers.
Determine the amount of sales on account that occurred in November?

A) $26,400
B) $13,000
C) $22,900
D) $20,500

Question 65

Natalie Company had $56,750 of Accounts Payable on March 31. During March, the company made total purchases on account of $96,870, and paid a total of $105,230 cash on accounts payable.
Determine the balance of Accounts Payable on March 1.

A) $48,390
B) $145,350
C) $65,200
D) $65,110

Question 66

On December 31, 2018, Frazier Company had a $61,275 balance in Accounts Receivable. During the year 2019, the company collected $100,000 from its credit customers. The December 31, 2019 balance of the Accounts Receivable was $85,325.
Determine the amount of sales on accounts for 2019.

A) $126,550
B) $ 78,000
C) $124,050
D) $ 78,450

Question 67

Rodwell Company had $14,230 of accounts payable on September 1 and $12,760 on September 30. During September, the company paid total cash of $13,275 on accounts payable.
Determine the total purchases on account during September.

A) $11,805
B) $14,745
C) $13,715
D) $40,265

Question 68

On November 30, Milia Company had Accounts Receivable of $65,140. During the month of December, the company received total payments of $80,000 from credit customers. The Accounts Receivable on December 31 was $43,160.
What was the amount of credit sales during December?

A) $ 98,360
B) $ 31,920
C) $186,680
D) $ 58,020

Question 69

The accountant at Error Prone Company recorded the purchase of $300 of supplies for cash as an increase to Supplies for $300 and an increase to Accounts Payable for $300.
Determine the effect of this error on the accounting equation of Error Prone Company.

A) Total Equity would be overstated by $300
B) Total Liabilities will be understated by $300
C) Total Assets would be overstated by $300
D) Total Equity would be understated by $300

Question 70

An individual record of increases and decreases in specific assets, liabilities, and stockholders' equity is called:

A) An account
B) A normal balance
C) A general ledger
D) A trial balance
E) None of the above

Question 71

Account titles are commonly grouped into what five categories in the chart of accounts?

A) Current assets, Current liabilities, Noncurrent assets, Noncurrent liabilities, Stockholders' equity
B) Assets, Liabilities, Equity, Revenue, Expenses
C) Common stock, Additional paid-in capital, Treasury stock, Retained earnings, Accumulated other comprehensive income or loss
D) Cash, Marketable securities, Accounts payable, Long-term debt, Common stock

Question 72

Which of the following is a source document?

A) Posting reference
B) General ledger
C) Chart of accounts
D) Invoice received from seller
E) Compound journal entry

Question 73

A printed or written form that is generated when a firm engages in a business transaction defines a:

A) Special journal
B) Posting reference
C) General journal
D) Source document
E) None of the above

Question 74

Which of the following is not a source document?

A) Bank check
B) Account in general ledger
C) Lease contract
D) Invoice sent to customer
E) None of the above

Question 75

Why would a company want to have a fiscal year-end that does not match the calendar year-end?

Question 76

Do the steps in the accounting cycle occur with equal frequency? Why or why not?

Question 77

The following balance sheet information is given for Solar, Inc., at June 30, 2019:

Assume that, during the next three days, the following transactions occurred:
July 1 Paid $5,000 on accounts payable.
2 Purchased equipment for $25,000 and gave a note payable for the amount due.
3 Declared and paid a cash dividend, $4,000.
a. What was the amount of retained earnings on June 30, 2019?
b. Assume a balance sheet is prepared on July 3, 2019, after the three transactions have occurred:
(1) What amount of total assets would appear?
(2) What amount of total liabilities would appear?
(3) What amount of stockholders' equity would appear?

Question 78

Compute the unknown amount required in each of the following four independent situations.

a.Total cash received $ _____________
b. Total amount received from credit customers $ _____________
c. Payments on account during the period $ _____________
d. Services rendered for cash $ _____________

Question 79

Match each of the numbered transactions of a corporation with the appropriate letters, indicating the effect of the transactions (increases and decreases

-A shareholder purchased stock.

A) Increase an asset
B) Decrease an asset
C) Decrease a liability
D) Increase a liability
E) Decrease common stock
F) Increase common stock
G) Increase dividends
H) Decease dividends
I) Decrease revenue
J) Increase revenue
K) Increase expense
L) Decrease expense

Question 80

Match each of the numbered transactions of a corporation with the appropriate letters, indicating the effect of the transactions (increases and decreases

-Paid rent for the current month

A) Increase an asset
B) Decrease an asset
C) Decrease a liability
D) Increase a liability
E) Decrease common stock
F) Increase common stock
G) Increase dividends
H) Decease dividends
I) Decrease revenue
J) Increase revenue
K) Increase expense
L) Decrease expense