ACC 201 ACCC Calculating the Accounting Values Exam Practice

Question Description

A company’s balance of retained earnings on January 1 was

$20

million. During the year, sales revenue was

$75

million, while expenses totaled

$60

million. The company declared and paid

$9

million in cash dividends during the year. What was the balance of retained earnings at the end of the year?

A.

$26

million

B.

$44

million

C.

$164

million

D.

$35

million

A doctor performed surgery in April and did not receive cash payment from the patient until August. Under

cash−basis

accounting, the doctor recognizes revenue:

A.

in August.

B.

in April.

C.

in April or August.

D.

at a time that cannot be determined from the facts.

In a double-entry accounting system,

A.

half of all the accounts have a normal credit balance.

B.

a debit entry is recorded on the left side of a T-account.

C.

liabilities, stockholders’ equity, and revenue accounts all have normal debit balances.

D.

both a and b are correct.

All of the following events at a sandwich shop are transactions except

A.

A representative from the local university contacts the manager of the shop to get a list of catering services.

B.

A delivery of coffee beans purchased on account from the local roaster is received.

C.

A customer purchases a sandwich.

D.

The accountant for the sandwich shop pays the electric bill.

Accounts Receivable will appear on which of the following financial statements?

A.

Statement of cash flows

B.

Income statement

C.

Statement of retained earnings

D.

Balance sheet

Total assets are

$10.0

million, with

$6.0

million being long-term assets. Current liabilities are

$2.0

million and total liabilities are

$6.0

million. The current ratio would be closest to:

A.

1.7.

B.

1.0.

C.

5.0.

D.

2.0.

Information must be sufficiently transparent so that it makes sense to reasonably informed users of the financial statements, such as creditors. This qualitative characteristic of information is called:

A.

verifiability.

B.

faithful representative.

C.

relevant.

D.

understandability.

How would the issuance of common stock for cash affect the accounting equation?

A.

Increase liabilities and decrease stockholders’ equity

B.

Increase assets and increase liabilities

C.

Increase assets and increase stockholders’ equity

D.

Decrease assets and decrease liabilities

The accounting equation can be expressed as

A.

Assets−Liabilities

= Equity.

B.

Assets + Liabilities = Equity.

C.

Assets =

Liabilities−Equity.

D.

Equity−Assets

= Liabilities.

Decreases in stockholders’ equity that result from the cost of operating the business are:

A.

expenses.

B.

assets.

C.

liabilities.

D.

revenues.

Which is the correct sequence for recording transactions and preparing financial statements?

A.

Ledger, trial balance, journal, financial statements

B.

Financial statements, trial balance, ledger, journal

C.

Ledger, journal, trial balance, financial statements

D.

Journal, ledger, trial balance, financial statements

During the year,

EcoDry

Corporation has

$260,000

in revenues,

$105,000

in expenses, and

$11,000

in dividend declarations and payments. Net income for the year was:

A.

$260,000.

B.

$166,000.

C.

$155,000.

D.

$116,000.

Attic

Corporation had a balance of

$1,600

in Prepaid Supplies at the beginning of the year. The company purchased

$950

of supplies during the year. At year end, Prepaid Supplies had a balance of

$1,900.

What is the amount of Supplies Expense that

Attic

Corporation will recognize for the year?

A.

$950

B.

$1,250

C.

$650

D.

What data flows from the statement of retained earnings to the balance sheet?

A.

Assets

B.

Cash

C.

Ending retained earnings

D.

Net income

Advantages of a corporation include:

A.

difficulty in raising large sums of capital.

B.

limited liability of the stockholders for the corporation’s debts.

C.

double taxation of distributed profits.

D.

each stockholder can conduct business in the name of the corporation.

Under accrual accounting, the event that triggers revenue recognition for the sale of goods is the:

A.

delivery of goods to customer.

B.

date the customer orders the goods.

C.

date a contract is signed.

D.

date the customer pays for the goods.

Which of the following accounts would need to be closed at the end of the period?

A.

Accounts receivable

B.

Supplies expense

C.

Unearned revenue

D.

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?

A.

Debit

Supplies

Credit

Accounts Receivable

Credit

Cash

B.

Debit

Supplies

Debit

Accounts Payable

Credit

Cash

C.

Debit

Supplies

Credit

Accounts Payable

Credit

Cash

D.

Debit

Supplies

Debit

Accounts Receivable

Credit

Cash

Prof. Angela

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