Acct 2210 Zeigler: AQ #1 Solution -Spring 2015 (Chp 1,2) - 15 Pts

Acct 2210 Zeigler: AQ #1 Solution -Spring 2015 (Chp 1,2) - 15 pts

Review for Exam #1 – See me or our GA team with any questions

____1.Rui, Inc. borrowed $5,000 cash from HankinsBank. As a result of this transaction,Rui’s:

a.Assets would increase by $5,000. (Cash increase, Notes (Loan) Payable increase)

b.Liabilities would decrease by $5,000.

c.Equity would decrease by $5,000.

d.Revenue would increase by $5,000.

e. None of the above would occur.

____ 2. Borrowing cash from the bank is an example of which type of transaction?

a.Asset Exchange
b.Claims Exchange
c.Asset Use
d.Asset Source

____3.The accountant for Cronin, Ford & Pease, Inc.recorded a transaction which decreased a liability account for $1,440 and decreased an asset account for $1,440. What type of transaction event would this represent?

a. The cash payment of a current period expense

b. The cash receipt of an account receivable

c. The cash payment of an account payable

d. The cash receipt of revenue

e. None of the above would support thistransaction event.

____ 4. An example of a Statement of Cash Flows“Investing Activity” would be:

a. Purchasing a company truck for cash

b. Buying supplies on account

c. Issuing common stock to an investor (i.e. new stockholder) for cash

d. None of the above would be classified as an investing activity.

____ 5. Which of the following accounts is not closed at the end of an accounting period?

a.Rental Revenue

b.Operating Expenses

c.Dividends

d.Retained Earnings

e. All of the above accounts are closed at the end of an accounting period.

Use the following information to answer the next two questions.

ABC Company received $9,900 cash on February 1, 2014, from XYZ Company as advance payment for services ABC promised to perform for XYZ over the next three years (36 months) on a continuous, ratable basis.

____ 6.On its 2014Income Statement, ABC would report revenue of:

a.$3,300

b.$3,025 ($9,900 / 36 months = 275/month. $275 x 11months = $3,025 earned for the year)

c.$2,750

d.$9,900

____ 7.On its December 31, 2015Balance Sheet,ABC would report liabilities of:

a.$3,575 (23 months passed, 13 months remain * $275 = $3,575 remaining liability)

b.$4,300

c.$6,325

d.$9,900

____ 8.The term "realization" refers to which of the following?
a.The closing of an account.
b.The collection of cash. (Compare this to “recognition” on page 63)
c.The earning of revenue.
d.The correction of an error.

____ 9.Sutton, Hughes & Ritchie Company paid $12,000 cash in advance for a one-year insurance policy on August 1, 2014. The company recorded this purchase as Prepaid Insurance. If the company failsto make the appropriate adjusting entry on December 31, 2014, which of the following is true?

a.Assets will be overstated by $12,000.

b.Assets will be overstated by $7,000.

c.Stockholder’s Equity will be understated by $12,000.

d.Stockholder’s Equity will be overstated by $5,000.

____ 10.Which of the following illustrates how a cash dividend paid affects the company’s financial statements?

____ 11.Adebayo Mills, Inc.borrowed $5,000 fromthe bank on December 1, 2014. The loan had a 6 percent annual rate of interest and a one-year term. The adjusting entry to record accrued interest on December 31, 2014, would:

a.decrease liabilities by $25.

b.decrease stockholder’s equity by $25.

c.increase net income by $25.

d.none of the above.

____ 12.On January 1, 2014, BGSU Services, Inc.began operations and bought $2,000 of office supplies with cash. On December 31st, $300 of these supplies remained. The correctly prepared 12/31 adjusting entry would:

a.decrease assets and equity by $300.

b.decrease assets and liabilities by $300.

c.decrease assets and equity by $1,700. (Supplies Expense increase, Office Supplies decrease)

d.decrease assets and liabilities by $1,700.

____ 13. The McBain Company performed services for the Buchanan Company. Once McBain finished its work, McBain sent Buchanan a bill and recorded revenue on its books, despite having received no cash from Buchanan.

Assuming accrual basis accounting is used by both firms, Buchanan Company should record:

a. an accrued revenue.b. a deferred revenue.c. a deferred expense.d. an accrued expense.

____ 14.FalconCompany mistakenly recorded a cash purchase of land as an expense. As a result of this error:

a.Assets and Stockholder’s Equity will both be overstated.

b.Assets will be understated and equity will be overstated.

c.Assets will be overstated and equity will be understated.

d.Assets and Stockholder’s Equity will both be understated.

____ 15.Which of the following is not a component of the “Fraud Triangle”?
a.Opportunity
b.Rationalization
c.Trust (see pg 87)
d.Pressure

ADDITIONAL QUESTIONS IF TIME PERMITS – NO POINTS/NOT GRADED

Test your knowledge together and review for Examination #1

Thiessen Company started its business by issuing $7,000 of common stock on January 1, 2013. The company performed $18,000 of service for customers on account in 2013. It collected $12,500 of this amount in 2013, recorded expenses on account of $14,500, paid $11,000 of the payables owed, and paid a $300 dividend to the stockholders. Assume the “accrual-basis” of accounting is used.
Required:
1) What is the amount of Total Assets at the end of 2013?

$13,700 ($7,000 + 18,000 - 11,000 - 300 = $13,700 Total Assets)

2) What is the amount of Cash on hand at the end of 2013?
$8,200 ($7,000 + 12,500 - 11,000 - 300 = $8,200 Cash on hand)

3) What is Net Income (i.e. Net Profit) for 2013?

$3,500 ($18,000 - 14,500 = $3,500 Net income)

4) What is the net cash flow from “Financing Activities” for 2013?

$6,700 ($7,000 common stock, less $300 dividend paid = $6,700 net cash inflow from FA)

5) Prepare a Balance Sheet (in good form) at December 31, 2013. Assume all “temporary” accounts have been closed.