Accounting 220 Test 1

Indicate whether the following statements are true or false. Question 1 (4 points)
Generally Accepted Accounting Principles (GAAP) allow companies to issue financial statements, using
either the cash basis or the accrual basis of accounting, depending on their needs.
Question 1 options: True
False
Save Question 2 (4 points)
Adjusting entries are done to make sure that expenses and revenues are recorded in the proper
accounting period.
Question 2 options: True
False
Save Question 3 (4 points)
A single journal entry must debit only one account and credit only one account for the same amount so
that the entry is in balance.
Question 3 options: True
False Save Question 4 (4 points)
The current ratio is cash divided by current liabilities.
Question 4 options: True
False
Save Question 5 (4 points)
Materiality is subjective. One company may consider $1,000 material and another company may not.
Question 5 options: True
False
Save Multiple Choice
Select the best answer for each of the following questions. Question 6 (4 points)
Revenues are recorded when _______________.
Question 6 options: goods or services are delivered to the customer the check has cleared and the money is available for use a check is received from a customer a contract is signed Save Question 7 (4 points)
Which of the following is NOT a liability?
Question 7 options: unearned revenue long-term debt accounts payable accumulated depreciation
Save Question 8 (4 points)
Management failing to reveal a default on a loan agreement will have violated what principle?
Question 8 options: full-disclosure principle matching principle ethics principle cost principle
Save Question 9 (4 points)
Expenses are recorded in the same period that related revenue is recorded, according to the
_______________.
Question 9 options: revenue-recognition principle accounting equation matching principle cost principle
Save Question 10 (4 points)
The percentage-of-completion method recognizes revenue _______________.
Question 10 options: when the contracted work has begun at the end of the entire project for a multi-year contract based on an estimate of the portion of work complete at 10% per month
Save Question 11 (4 points) An asset cost $14,400 and is expected to last 8 years, at which time it will be sold for a scrap value of
$2,400. Using straight-line depreciation, the monthly depreciation journal entry would be
_______________.
Question 11 options: debit accumulated depreciation and credit depreciation expense for $150 debit depreciation expense and credit accumulated depreciation for $125 debit accumulated depreciation and credit depreciation expense for $125 debit depreciation expense and credit accumulated depreciation for $150
Save Question 12 (4 points)
When money is collected from a customer previously billed, we _______________.
Question 12 options: debit cash and credit accounts receivable credit cash and debit accounts receivable credit cash and debit accounts payable credit accounts payable and debit cash
Save Question 13 (4 points)
Which event will have the effect of increasing retained earnings?
Question 13 options: revenue is recognized an expense is paid a customer pays us for a bill we sent last month a dividend is declared
Save Question 14 (4 points)
The income summary account is used to _______________.
Question 14 options: calculate net income zero out expense and revenue accounts at the end of the period set aside earned money available to owners record a history of income items
Save Question 15 (4 points)
The dividends payable account belongs on which statement?
Question 15 options: Statement of retained earnings Income statement Statement of cash flows Balance sheet
Save Journal Entries
Question 16 (4 points)
A newly formed corporation received $20,000 from investors and issued common stocks in exchange.
: Question 17 (4 points)
Purchased photocopier for $5000 on account. Question 18 (4 points)
Bought office supplies for immediate consumption for $200 cash. Question 19 (4 points)
Billed customer $3500 for services performed Question 20 (4 points)
Customer paid $2,000 on account. Question 21 (4 points)
Prepaid insurance account has a $2,400 balance for a twelve-month premium. Month one has ended. Question 22 (4 points)
Office supplies on hand account has a balance of $1,955, and a physical count reveals that there are
$715 worth of supplies remaining at month end. Question 23 (4 points)
A customer had previously paid $500 in advance on an order. The order has now been delivered to the
customer.. Question 24 (4 points)
Sales tax of $100 is collected from a customer to be remitted to the state at a later date. Question 25 (4 points)
At month end, $2,300 of wages are due to employees but not yet paid.