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principles financial accounting

Questions and Answers of Principles Financial Accounting

Match each term with its definition.1 alternative hypothesis a in design, making a visualization easy to interpret and understand.2 categorical data b an approach to examining data that seeks to
4. The balance in accounts receivable of the Grant Corp. is $150,000, and the balance in the allowance for uncollectibles is a credit of $5,000. An aging of the receivables at year endindicates that
3. TomKat Corporation estimates from past experience that 4% of credit sales become uncollectible. If the company's credit sales were $452,000 in 2006, the entry to record bad debt expense using the
2. On a bank reconciliation, the following items should appear as adjustments to the bank balance:a. Deposits in transitb. Outstanding checksc. Neither a nor bd. Both a and b
1. Foxy Company's bank statement shows a balance of $40,000 on February 1, 2007. As of February 1, there are $5,000 of deposits in transit and $6,500 of outstanding checks. The adjusted cash balance
8. What are the main provisions of Sarbanes-Oxley?
7. What is COSO and what did it do?
6. Why was there so much attention placed on internal controls in SarbanesOxley?
5. What is the function of internal controls?
4. Why is the direct write-off method not used?
3. What is an "aging" ? What ages are we talking about?
2. Why are accounts receivable shown at net realizable value?
1. If you are using the allowance method for uncollectible accounts expense,what difference does it make if you use the balance sheet or the income statementapproach ?
10. If the adjusting entry for an accrued expense is not made, thena. assets will be overstated.b. expenses will be overstated.c. liabilities will be understated.d. owners' equity will be understated.
9. An adjusting entry would normally not include a debit toa. an expense account and a credit to an asset account.b. an expense account and a credit to a liability account.c. a liability account and
8. Which of the following statements about a trial balance is incorrect?a. Its primary purpose is to prove the mathematical equality of the debits and credits after posting.b. It uncovers errors in
7. An account that reduces an asset, liability, or owners' equity account is calleda. an adjunct account.b. a contra-account.c. accounts receivable.d. a balance account.
6. The journal entry to accrue an expense isa. debit interest expense and credit interest payable.b. debit interest payable and credit interest expense.c. debit revenue and credit unearned revenue.d.
5. A ballet company sells season tickets to 500 people for $450 each cash. The entry for the sale of season tickets isa. Unearned Ticket Revenue $225,000 Ticket Revenue $225,000b. Ticket Revenue
4. How would you make an adjusting entry to recognize unearned revenue that has been earned?a. Debit unearned revenue and credit revenue.b. Debit revenue and credit unearned revenue.c. Debit unearned
3. Each general journal entry consists ofa. the account(s) and amount(s) to be debited.b. the account(s) and amount(s) to be credited.c. a date and an explanation.d. all of the above as they are all
1. Which of the following statements about accrual accounting is true?a. It provides a poor indication of a company's present and continuing ability to generate positive cash flows.b. Revenues are
2. All asset and expense accounts are increaseda. on the right (or credit side).b. on the left (or debit side).c. on the top of the balance sheet.d. at the bottom of the balance sheet.
9. What is meant by the phrase "debits by the window and credits by the door" ?
8. What are contra-accounts?
7. On the balance sheet, why do we show the cost ofplant assets in one accountand the accumulated depreciation in another account? Why not just show the net amount?
6. Why are the current assets always listed in the same order?
5. Why is the journal entry to record cost ofgoods sold both an adjusting entry and a closing entry?
4. If the trial balance balances, does that mean that no errors have been made?
3. What is the purpose ofclosing entries? Why aren't the balance sheet accounts closed, as well as the income statement accounts?
2. Does every company need to make adjusting entries? Why don't they record everything during the period instead of waiting until the end of the period?
1. Why is there so much attention paid to journal entries? Why are journal entries so important?
8. The financial statements are prepared from the balances in the accounts in the ledger.
7. A postclosing trial balance may be prepared.
6. Closing entries are prepared to close all the income statement accounts to the income summary account, which is then transferred to the retained earnings account. The balance sheet accounts are
5. A trial balance is prepared to check that the total debits equal the total credits.
4. At the end of each period, adjusting entries are recorded in the journal and posted to the ledger.
3. At the end of the period, all the journal entries are posted to the ledger.
2. All business transactions are entered in the journal on a chronological basis.
1. The entity engages in business transactions.
10. Which of the following is an objective of financial reporting?a. To show the market value of all the assetsb. To show the investment in all company resources, including human resourcesc. To
9. John's department store was completely destroyed by a fire. How would this event be reported?a. Unusual gain or lossb. Extraordinary itemc. Discontinued operationsd. Prior period adjustment
8. Which of the following is a proper income statement format?a. Single stepb. Multiple stepc. Consolidated income statementd. All of the above
7. All of the following are elements of the balance sheet excepta. assets.b. liabilities.c. revenues.d. equity.
6. Which of the following items would be reported on the right (or credit) side of the balance sheet?a. Property, Plant, and Equipmentb. Long-term investmentsc. Capital stockd. Current assets
5. Argiielles, Inc., had the following events occur during the year:A $400,000 loss was incurred upon the closing of one of the company's branches. Dueto a competitor's innovation, $500,000 worth of
4. Which of the following are elements of the balance sheet?a. Assets and expensesb. Gains and lossesc. Assets, liabilities, and owners' equityd. Liabilities, gains, and losses
3. Welldone Co. has 200,000 shares of common stock outstanding on January 1 . The companyhas 30,000 shares of preferred stock outstanding, and the company paid the regular $2 per share dividend to
2. The gain or loss from disposal of a segment of the business is shown as a(n)a. unusual gain or loss.b. part of discontinued operations.c. extraordinary item.d. prior period adjustment.
1. Material transactions that are both unusual and infrequent are calleda. changes in accounting principle.b. extraordinary items.c. discontinued operations.d. unusual gains and losses (not
10. How do the three basic financial statements articulate? What does thatmean ?
9. Why are there so many choices in accounting principles? Why isnt therejust one way to do everything?
8. Does conservatism mean that the goal ofaccounting is to report the minimumincome ?
7. Why do we use historical cost to value assets when current market valueseems much more relevant?
6. Does the balance in retained earnings mean that the company has that muchcash on hand?
5. On the statement ofcashflows, how does cashfrom operating activities differ from net income?
4. What do we mean by matching? What is the matching principle?
3. Are assets the opposite of liabilities?
2. What is meant by owners' equity?
1. Why is the balance sheet dated on a specific day, while the income statementand statement of cash flows are datedfor a period of time, such as a year?
If you are looking at the balance sheet of a manufacturing company with negative net cash, which of the following types of financial structure would you generally expect to find?(Note: WC ¼ Working
In the situation described in the diagram above, the percentage of control (voting rights) of P in C2 is(a) 10%(b) 20%(c) 30%(d) 27%(e) None of these AppendixLO1 70% CI 10% P C2 20%
Q: Suppose that Robert Jones purchases a $100 gift card at Best Buy on December 24,2007, and gives it to his wife, Devon, on December 25,2007. On January 3,2008, Devon uses the card to purchase $100
Q: What if the expenses are recognized over a period that is longer than that used for revenues?Q: Why might the new accounting method cause companies sometimes to spend less on advertising?
Q: How will financial results be affected if the expenses are recognized over a period that is less than that used for revenues?
Q: What accounting principle does this example illustrate?
(c) Can Cathi accrue revenues and defer expenses and still be ethical?
(b) What are the ethical considerations of (1) the president’s request and (2) Cathi’s dating the adjusting entries December 31?
(a) Who are the stakeholders in this situation?
E3-17 At Natasha Company, prepayments are debited to expense when paid, and unearned adjusting entries. revenues are credited to revenue when received. During January of the current year, the
E3-16 Colin Mochrie Company has the following balances in selected accounts on December(SO 8) 31,2008.Consulting Revenue $40,000 Insurance Expense 2,100 Supplies Expense 2,450 All the accounts have
E3-15 The following data are taken from the comparative balance sheets of Girard Billiards Club, which prepares its financial statements using the accrual basis of accounting.
E3-14 The adjusted trial balance for Garcia Company is given in E3-13.Instructions Prepare the income statement and a retained earnings statement for the year and the balance sheet at August 31.
E3-13 The trial balances before and after adjustment for Garcia Company at the end of its fiscal year are presented below.
E3-12 Selected accounts ofTabor Company are shown below and on page 127.
E3-11 A partial adjusted trial balance of Sila Company at January 31,2008,shows the following.SILA COMPANY Adjusted Trial Balance January 31 , 2008 Debit Credit Supplies $ 850 Prepaid Insurance 2,400
E3-10 The income statement of Benning Co. for the month of July shows net income of $1,400 based on Service Revenue $5,500, Wages Expense $2,300, Supplies Expense $1,200, and Utilities Expense $600.
E3-9 The trial balance for Pioneer Advertising Agency is shown in Illustration 3-3, p. 98. In lieu of the adjusting entries shown in the text at October 31, assume the following adjustment data.1.
E3-8 Andy Wright, D.D.S., opened a dental practice on January 1,2008. During the first month of operations the following transactions occurred.1. Performed services for patients who had dental plan
E3-7 The ledger of Piper Rental Agency on March 31 of the current year includes the follow¬ing selected accounts before adjusting entries have been prepared.
E3-6 Affleck Company accumulates the following adjustment data at December 31.1. Services provided but not recorded total $750.2. Store supplies of $300 have been used.3. Utility expenses of $225 are
7. Emeril performed consulting services for a client in December 2008. On December 31, it billed the client $1,200.8. Emeril paid cash for an expense and recorded an asset until the item was used
E3-4 Emeril Corporation encounters the following situations:1. Emeril collects $1,000 from a customer in 2008 for services to be performed in 2009.2. Emeril incurs utility expense which is not yet
E3-3 Conan Industries collected $100,000 from customers in 2008. Of the amount collected,$25,000 was from revenue earned on account in 2007. In addition, Conan earned $40,000 of rev¬enue in 2008,
E3-2 On numerous occasions, proposals have surfaced to put the federal government on the ac¬crual basis of accounting.This is no small issue. If this basis were used, it would mean that billions in
E3-1 Jo Seacat has prepared the following list of statements about the time period assumption. Explain the time period 1. Adjusting entries would not be necessary if a company’s life were not
BE3-11 Duncan Company records all prepayments in income statement accounts. At April 30, the trial balance shows Supplies Expense $2,800, Service Revenue $9,200, and zero balances in related balance
BE3-10 Partial adjusted trial balance data for Harmony Company, Inc. is presented in BE3-9.The balance in Common Stock is the balance as ofJanuary 1. Prepare a retained earnings statement for the
BE3-9 The adjusted trial balance of Harmony Company, Inc. at December 31, 2008, includes the following accounts: Common Stock $15,600; Dividends $6,000; Service Revenue $35,400;Salaries Expense
BE3-8 The trial balance of Bair Company includes the following balance sheet accounts.Identify the accounts that may require adjustment. For each account that requires adjustment, indicate (a) the
BE3-7 The bookkeeper for Oglesby Company asks you to prepare the following accrued adjusting entries at December 31.1. Interest on notes payable of $400 is accrued.2. Services provided but not
BE3-5 On July 1,2008, Spahn Co. pays $18,000 to Randle Insurance Co. for a 3-year insurance contract. Both companies have fiscal years ending December 31. For Spahn Co., journalize and post the entry
BE3-4 At the end of its first year, the trial balance of Denton Company shows Equipment$30,000 and zero balances in Accumulated Depreciation—Equipment and Depreciation Expense. Depreciation for the
BE3-3 Windsor Advertising Company’s trial balance at December 31 shows Advertising Supplies $6,700 and Advertising Supplies Expense $0. On December 31, there are $2,700 of sup¬plies on hand.
BE3-2 Nunez Company accumulates the following adjustment data at December 31. Indicate(a) the type of adjustment (prepaid expense, accrued revenues and so on), and (b) the status of accounts before
BE3-1 The ledger of Dey Company includes the following accounts. Explain why each account may require adjustment.(a) Prepaid Insurance (c) Unearned Revenue(b) Depreciation Expense (d) Interest Payable
22. Adel Company debits Supplies Expense for all purchases of supplies and credits Rent Revenue for all advanced rentals. For each type of adjustment, give the adjusting entry.
21. Why is it possible to prepare financial statements directly from an adjusted trial balance?
20. “An adjusting entry may affect more than one balance sheet or income statement account.” Do you agree? Why or why not?
19. One-half of the adjusting entry is given below. Indicate the account title for the other half of the entry.(a) Salaries Expense is debited.(b) Depreciation Expense is debited.(c) Interest Payable

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