Exam 1 Study Guide

Exam 1 Study Guide

Midterm 1 Practice Questions (Acct 201 Fall 2012) 1. Retained earnings at the end of the period is equal to a. retained earnings at the beginning of the period plus net income minus liabilities. b. retained earnings at the beginning of the period plus net income minus dividends. c. net income. d. assets plus liabilities. 2. Pinson Company began the year with retained earnings of $550,000. During the year, the company recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What was Pinson’s retained earnings at the end of the year? a. 910,000 b. $630,000 c. $1,010,000 d. $480,000 3. Patent would appear in which balance sheet section? a. Intangible assets b. Investments c. Property, plant, and equipment d. Current assets 4. A balance sheet shows a. revenues, liabilities, and stockholders’ equity. b. expenses, dividends, and stockholders’ equity. c. revenues, expenses, and dividends. d. assets, liabilities, and stockholders’ equity. 5. For 2012 Fielder Corporation reported net income of $30,000; net sales $400,000; and average share outstanding 12,000. There were no preferred stock dividends.

What was the 2012 earnings per share? a. $2. 33 b. $0. 40 c. $33. 33 d. $2. 50 6. Use the following data to determine the total dollar amount of assets to be classified as current assets. Koonce Office Supplies Balance Sheet December 31, 2012 Cash$ 130,000Accounts Payable$ 140,000 Prepaid Insurance60,000Salaries Payable20,000 Accounts Receivable100,000Mortgage Payable 160,000 Inventory 140,000 Total Liabilities$320,000 Land held for Investment150,000 Land180,000 Buildings$200,000Common Stock$240,000 Less AccumulatedRetained Earnings 500,000

Depreciation(40,000)160,000 Total Stockholders’ Equity$740,000 Trademarks 140,000 Total Liabilities and Total Assets$1,060,000 Stockholders’ Equity$1,060,000 a. $580,000. b. $430,000. c. $360,000. d. $290,000. 7. Using the following balance sheet and income statement data, what is the total amount of working capital? Current assets$ 14,000Net income$ 24,000 Current liabilities8,000Stockholders’ equity42,000 Average assets 80,000Total liabilities18,000 Total assets 60,000 Average common shares outstanding was 10,000 a. $ 2,000 b. $14,000 . $ 4,000 d. $ 6,000 8. Stockholders’ equity is increased by a. dividends. b. revenues. c. expenses. d. liabilities. 9. McKinney Corporation had beginning retained earnings of $2,292,000 and ending retained earnings of $2,499,000. During the year they issued common stock totaling $141,000. What was their net income for the year? a. $207,000 b. $ 66,000 c. $348,000 d. $273,000 10. The purchase of an asset by paying cash a. increases assets and stockholders’ equity. b. increases assets and liabilities. c. decreases assets and increases liabilities. d. eaves total assets unchanged. 11. Which of the following accounts has a normal debit balance? a. Accounts Payable b. Prepaid Rent c. Retained Earnings d. Common Stock 12. When a company has performed a service but has not yet received payment, it a. debits accounts receivable and credits revenue from services. b. debits revenue from services and credits accounts receivable. c. debits revenue from services and credits accounts payable. d. makes no entry until the cash is received. 13. When a company receives a utility bill but will not pay it right away, it should . debit Utilities Expense and credit Accounts Receivable. b. debit Utilities Expense and credit Accounts Payable. c. debit Accounts Payable and credit Utilities Expense. d. make no entry until the bill is paid. 14. In a service-type business, revenue is considered earned: a. at the end of the month. b. at the end of the year. c. when the service is performed. d. when cash is received. 15. The following is selected information from L Corporation for the fiscal year ending October 31, 2011. Cash received from customers| $300,000| Revenue earned | 370,000|

Cash paid for expenses| 170,000| Cash paid for computers on November 1, 2010 that will be used for 3 years| 48,000| Expenses incurred including any depreciation| 216,000| Proceeds from a bank loan, part of which was used to pay for the computers| 100,000| Based on the accrual basis of accounting, what is L Corporation’s net income for the year ending October 31, 2011? a. $184,000 b. $154,000 c. $152,000 d. $170,000 16. Boyce Company purchased office supplies costing $5,000 and debited Office Supplies for the full amount.

At the end of the accounting period, a physical count of office supplies revealed $1,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: a. debit Office Supplies Expense, $3,600; credit Office Supplies, $3,600. b. debit Office Supplies, $1,400; credit Office Supplies Expense, $1,400. c. debit Office Supplies Expense, $1,400; credit Office Supplies, $1,400. d. debit Office Supplies, $3,600; credit Office Supplies Expense, $3,600. 17. On January 1, 2010, Leardon Inc. urchased equipment for $45,000. The company is depreciating the equipment at the rate of $600 per month. At January 31, 2010, the adjusting entry would be: in Accumulated Depreciation is: a. debit Accumulated Depreciation $600 b. credit Accumulated Depreciation $600 c. cebit Equipment $600 d. credit Depreciation Expense $600 18. The closing entry process consists of closing: a. all asset and liability accounts. b. out the Retained Earnings account. c. all permanent accounts. d. all temporary accounts.