Practice Exam 1 (1)

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Accounting

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May 25, 2024

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Question 3 2/2pts Which of the following is not characteristic of financial accounting? ‘The information is confidential and s intended for use only by company management. Question 4 2/2pts Which of the following events is not a transaction that would be recorded in a company's accounting records? EEEED - oo oy catie

Question 5 2/2pts The principal difference between management accounting and financial accounting is that financial accounting information is: ST - -tcrced primariy for use b decision makers outside the busines orgrizaton Question 6 2/2pts Which one of the following is not considered as one of the three primary financial statements? I oo orbugenns scvises

Correct Answers Question 7 3/3pts At the end of the current year, the owners' equity in Asare Co. is $360,000. During the year, the assets of the business had increased by $68,000 and the liabilities had increased by $118,000. Owners' equity at the beginning of the year must have been: 410,000 410,000 (with margin: 0) Assets = Liabilities + Owner’s Equity --> Change in Assets = Change in Liabilities + Change in Owner’s Equity « If assets increased by $68,000 and liabilities increased by $118,000, this means that Owner’s Equity MUST have decreased by $50,000. Beginning Owner's Equity +/- change during year = Ending Owner's Equity « If ending Owner's Equity is $360,000 and it decreased by $50,000 during the current year, then beginning Owner's Equity must have been $50,000 higher or $410,000.

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Question 8 9/9 pts On April 30, 2021, the balance sheet of Schadewald Corp. showed total assets of $700,000, total liabilities of $400,000, and owners' equity of $300,000. The following transactions occurred in May of 2021: « Capital stock was issued in exchange for $165,000 cash. « The business purchased equipment for $360,000, paying $160,000 cash and issuing a note payable for $200,000. « The business paid $70,000 of its accounts payable. « The business collected $54,000 of its accounts receivable. Total assets on May 31, 2021 is: 995000 Total liabilities on May 31, 2021 is: 530000 Total equity on May 31, 2021 is: | 465000 Total Assets | Total Liabilities | Total Equity Beginning 700,000 400,000 300,000 Balances (4/30) : s S [2 TS +165,000 +165,000 issued Purchased +360,000 equipment for E +200,000 cashandnote | -160,000 Paid a B s 0 0o -70,000 payable Il Collected e — accounts receivable -54,000 Ending balance | $995,000 $530,000 $465,000 6/31) | | You could have also calculated two of the three (assets, liabilities, equity) and used the Accounting Equation (A = L + E) to solve for the third one. For example, total equity = $995,000 - $530,000 = $465.000.

Question 9 3/3pts A revenue transaction may result in all of the following except: B - oo nioiites Question 10 3/3pts During the month of June, Psych Company had the following transactions: « Revenues of $120,000 were earned and received in cash. + Bank loans of $18,000 were paid off. « Equipment of $40,000 was purchased for cash. « Expenses of $73,600 were paid. « Stockholders purchased additional shares for $44,000 cash. A statement of cash flows for June would report an increase in cash of what amount? EED oo Correct Answers ) 32,400 (with margin: 0) Analysis: + Revenues received = cash inflow of $120,000 + Bank loans paid = cash outflow of $18,000 + Equipment purchased = cash outflow of $40,000 + Expenses paid = cash outflows of $73,600 « Stockholders investment = cash inflow of $44,000 Net increase in cash = +120,000 -18,000 -40,000 -73,600 +44,000 = 32,400

Question 11 2/2pts Which of the following is not a step in the accounting cycle? EKEEED oo nosco Question 12 2/2pts The Midnight, Inc., a music group, entertained at a black-tie dinner dance on April 26, and collected the fee in full at the end of the evening. This transaction: BEZEIID 0 cousesaniocrase i assets and revenue, a5 well as an ncrease i owners ety

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Question 13 2/2pts The cash account of Guster Inc. shows the following: « a debit on May 1 for $25,000; + acredit on May 5 for $10,000; « adebit on May 16 for $14,000; and « acredit on May 27 for $8,000. What is the balance in the cash account at the end of May? EEEED oo Debits will increase cash and credits will decrease cash $25,000 + $14,000 - $10,000 - $8,000 = $21,000 debit

Question 14 2/2pts In a ledger, debit entries cause: Question 15 2/2pts Which of the following accounts normally has a credit balance? [ ot R

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Correct Answers Question 18 3/3pts Round all dollar amounts to the nearest dollar. Before any month-end adjustments are made, the net income of Goslinga Company is $38,000. However, the following adjustments are necessary: « office supplies used, $3,160 « services performed for clients but not yet recorded or collected, $3,040 « interest accrued on a note payable to bank, $3,640 After adjusting entries are made for the items listed above, Goslinga Company's net income would be: 34,240 34,240 (with margin: 0) $38,000 - $3,160 + $3,040 - $3,640 = $34,240 Question 19 2/2pts Under accrual accounting, salaries eamed by employees but not yet paid should be expensed: D - o period inwhich theyare cames

Question 21 2/2pts If sales are $270,000, expenses are $220,000 and dividends are $30,000, Income Summary: m Will have a credit balance of $50,000. $270,000 CR - $220,000 DR = $50,000 CR. Dividends are not closed to Income Summary. Question 22 2/2pts After preparing the financial statements for the current year, the accountant for Snowball Inc. closed the Dividends account at year-end by debiting Income Summary and crediting the Dividends account. What is the effect of this error on current-year net income and the balance in the Retained Earnings account at year-end? Net income is understated and the balance in the Retained Earnings account is correct.

Question 23 2/2pts Which of the following accounts will appear on an After-Closing Trial Balance? BT - oo coens Question 24 2/2pts A debit balance in the income summary account indicates: D e

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Question 25 2/2pts The purpose of making closing entries is to: Prepare revenue and expense accounts for the recording of the next period's revenue and expenses. Question 26 2/2pts The normal order in which the financial statements are prepared is: B ¢ o sstemont statement of retsined carnings,balance sheet

IR Question 27 6/6pts Match the accounting terms/concepts with the appropriate definition in the dropdown menu. Special class of stock created by P contract, when stockholders’ sacrifice certain rights in return for other rights or privileges Distribution of cash or other — company assets to the owners of a corporation. The basic type of capital stock e, 5 that represents the residual corporate interest The company’s accumulated earnings, less dividends and other adjustments, that have been achieved since the company’s inception Retained Earnings v Represents the legal capital per share Par Value v The amount of net assets ook valon gt ot 5 represented by each share of stock Other Incorrect Match Options:

Question 28 2/2pts Which of the following is not a characteristic of most preferred stock? EEZED - oo vaoyssi -ome changes.

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Question 29 3/3pts The following is Parrot Inc’s partial balance sheet showing the stockholders’ equity section as of December 31, 2021: Common stock, $1 par, 10,000,000 shares authorized, | ¢ o 80,000 shares issued and outstanding s Preferred stock, 5% dividend rate. $10 par, 10,000 20000 shares authorized, 4,000 shares issued ' |Additional paid-in capital - common stock 640,000 |Additional paid-in capital - preferred stock 52,000 Retained earnings $1,780,000 What was the average issue price PER SHARE of Parrot's common stock? EE» Correct Answers 9 (with margin: 0) The total issue price is the sum of the Common stock balance plus the Additional paid-in capital - common stock = $80,000 + 640,000 = $720,000. 5 , o 720000 The company has issued 80,000 shares, so the average issue price is 555 =$9 per share

Question 30 3/3pts The following is Parrot Inc’s partial balance sheet showing the stockholders' equity section as of December 31, 2021: Common stock, $1 par, 10,000,000 shares authorized, | ¢ 00 80,000 shares issued and outstanding ’ Preferred stock, 5% dividend rate. $10 par, 10,000 40000 shares authorized, 4,000 shares issued ) |Additional paid-in capital - common stock 640,000 |Additional paid-in capital - preferred stock 52,000 Retained earnings $1,780,000 ‘What was the average issue price PER SHARE of Parrot's preferred stock? E» Correct Answers 23 (with margin: 0) The total issue price is the sum of the Preferred stock balance plus the Additional paid-in capital - preferred stock = $40,000 + 52,000 = $92,000. The company has issued 4,000 shares, so the average issue price is Sy =$23 per share

Question 31 2/2pts Which statement is true about a stock split? I - oosnarcvoisers cauty emsins thesame Question 32 2/2pts In computing earnings per share, the number of shares used is: B - e cionics verageofshres outstaning or the et

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Question 35 Dividends become a liability of a corporation: Question 36 On the date the board of directors declares the dividend. 3/3pts During the years 2020 through 2022, Zelda, Inc., reported the following amounts of net income: 2020 $120,000 2021 $150,000 2022 $170,000 Relative to the prior year, the percentage change in net income: Was smaller in 2022 than in 2021 2021:30 + 120 = 25% 2022: 20+ 150 = 13% 2/2pts

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Question 38 3/3pts If a company has a current ratio of 2 to 1, and purchases inventory on credit, what will this do to its current ratio? Current ratio = CA/ CL Can create fictional numbers to illustrate change. Original: CA=2,CL=1 Updated: CA=2+1=3,CL=1+1=2 3/2<2/1

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