ACCT 301 Smartbook Chapter 2 Review of the Accounting Process solutions complete answers

ACCT 301 Smartbook Chapter 2 Review of the Accounting Process solutions complete answers 

 

The type of system that integrates the information of departments and functions of a company into a single computer system is called a(n)

 

Which of the following are economic events? (Select all that apply.)

 

Place the steps in the accounting process in the correct order.

 

Millburg Corp. uses the periodic inventory method. Millburg’s beginning inventory is $10,000. During the year, Millburg purchases $8,000 of inventory. Ending inventory is $5,000. Cost of goods sold is

 

Adjusting entries are recorded:

 

True or false: The objective of an Enterprise Resource Planning (ERP) system is to create a customized software program that integrates the information of departments and functions of a company into a single computer system.

 

Adjusting entries help a company accurately measure (Select all that apply.)

 

Economic events cause changes in the:

 

Adjusting entries are recorded for (Select all that apply.)

 

Which of the following steps occurs only at the end of the year?

 

Which of the following is the correct formula to calculate cost of goods sold?

 

Which of the following are examples of prepayments?

 

Entries made at the end of the accounting period before the financial statements are prepared are called       . (Enter only one word.)

 

Prepaid expenses are costs of assets acquired in an accounting period:

 

Adjusting journal entries are needed to record (Select all that apply.)

 

A company paying rent in advance for the month of April records:

 

Adjusting journal entries are necessary for three situations: deferrals, accruals, and       . (Enter only one word.)

 

Place the steps at the end of the accounting period in the correct order.

 

Prepayments occur when:

 

The contra account used to record depreciation is        depreciation. (Enter only one word.)

 

Cost of assets acquired in one accounting period and expensed in a future accounting period are              . (Enter one word per blank.)

 

The normal balance in a contra asset account is

 

When rent is paid in advance for 2 years, it is appropriately recorded as a(n)       , whereas when rent is paid and used during one month, it is appropriately recorded as a(n)       . (Enter one word per blank)

 

Deferred revenue is a(n):

 

To record an adjusting entry when deferred revenue is recognized:

 

Which of the following items is prepared at the end of the accounting period immediately before the financial statements are prepared?

 

Accruals occur when cash flow comes: (Select all that apply.)

 

The balance sheet account that depreciation is recorded to is:

 

Expenses incurred in one accounting period and paid for in a future accounting period are        liabilities. (Enter only one word.)

 

The normal balance of the contra asset accumulated depreciation account is a(n)       . (Enter one word per blank)

 

True or false: The stated interest rate on debt instruments is always stated as an annual rate.

 

A deferred revenue liability appears on the balance sheet for:

 

Accrued receivables involve situations when the revenue is earned in a period ______ the cash receipt.

 

The adjusting journal entry required when deferred revenue is recognized includes a        entry to revenue.

 

Accruals involve transactions where the cash outflow or inflow takes place in a period ______ expense or revenue recognition.

 

Accrued liabilities are costs incurred in an accounting period:

 

How are items classified on the income statement?

 

On October 1, Hill Corporation signed a 6-month note with principal of $10,000 and interest of $600 due in six months. The stated rate of interest on the note is

 

The process in which temporary accounts are reduced to zero balances and transferred to retained earnings is the ______ process.

 

Which of the following is an example of an accrued receivable?

 

Accrual accounting measures:

 

An informal tool used to organize the accounting information needed to prepare adjusting and closing entries and the financial statements is a:

 

Expenses and revenues that relate directly to the principal revenue-generating activities of the company are classified as        items on the income statement. (Enter only one word.)

 

A reversing entry is used: (Select all that apply.)

 

The first step in the closing process is to reduce the balances in the temporary accounts to zero. The second step is to transfer the effects of step 1 to which account?

 

Which accounts most likely use a subsidiary ledger?

 

Cash basis accounting measures income based on

 

A(n)        is an informal tool used to organize the accounting information and to prepare adjusting and closing entries at the end of the period. (Enter only one word.)

 

True or false: If a company makes end-of-year accruals, it must use reversing entries.

 

Which of the following accounts would most likely use a subsidiary ledger?

 

A group of subsidiary accounts associated with a particular general ledger control account is called a:

 

The statement of shareholders’ equity discloses the changes in the shareholder equity accounts during the period from: (Select all that apply)

 

Which accounts should be closed at the end of the period?: (Select all that apply)

 

The accounting system that refers to the effect that each transition has on the accounting system is called a(n):

 

Recognizing revenues before cash flow is an example of:

 

Which accounts are temporary accounts?: (Select all that apply)

 

Inflows and outflows of cash-related to transactions that impact net income are:

 

The normal balance of the contra-asset accumulated depreciation account is a(n) _______________________.

 

Special journals record:

 

Which statement reports the changes in shareholders’ equity during the period that were not a result of transactions be owners?

 

A chronological record of all economic events affirming a firm are recorded in a(n) ________________.

 

For manufacturing firm, the period of time necessary to convert cash to RM, RM to FG, and FG to receivables, and then the receivables back to cash is known as the _________________ cycle.

 

Sales invoices, bills from suppliers, and cash register tapes that relay information to the accountant are referred to as __________________ documents.

 

The income summary account provides a check that all _____________ accounts have been properly closed.

 

The left side of the accounting equation represents _____, while the right side represents _____.

 

True or false: Retained earnings equals net income plus distributions to shareholders. 

 

An event that has a dual effect on the accounting equation is referred to as a(n): 

 

In a double-entry accounting system, each transaction has a        effect on the accounting equation. (Enter only one word.)

 

The accounting equation is: Assets =        + Owners’ Equity.

 

Which of the following make up shareholders’ equity? (Select all that apply.) 

 

A transaction is an event that 

 

A(n)        event is any event that directly affects the financial position of the company. (Enter one word per blank)

 

Which of the following represents the accounting equation? 

 

Each economic event, or transaction, affecting the accounting equation has a(n)        effect because resources must always equal claims. (Enter only one word.)

 

The accounting system that refers to the effect that each transaction has on the accounting system is called a(n):

 

A(n) ______ represents the left side of the account, whereas a(n) ______ represents the right side of the account. 

 

A T-account has space at the top for the account title and two sides for recording ______ and ______ to the account.

 

In a double-entry accounting system, the        represents the left side of the account. (Enter one word per blank)

 

The type of information included in an account includes the account number.

the account title.

 

Beginning inventory was $50,000. Inventory purchased during the year cost $75,000. Inventory on hand at year-end was $40,000. Cost of goods sold was 

 

Lassiter Corp. uses the periodic inventory method. During the year, Lassiter purchases $10,000 of inventory. Ending inventory is $6,000. Cost of goods sold is $12,000. Beginning inventory was: 

 

In a double entry accounting system, the right side of the account is represented by a(n)       . (Enter one word per blank)

 

When are adjusting entries recorded? 

 

One of the purposes of adjusting entries is to

 

Adjusting journal entries are necessary for three situations: deferrals,       , and estimates. (Enter only one word.)



Prepayments are: (Select all that apply.) 

 

Logan Corp. purchases supplies on account and appropriately records the transaction in an asset account. The adjusting journal entry at year-end when accounting for supplies used will require a (Select all that apply.) 

 

Prepaid expenses are the cost of        acquired in one accounting period and        in a future period. (Enter one word per blank.)

 

Supplies expense is ______ and supplies is ______ for the amount of supplies used during the period that were originally recorded as an asset when purchased. 

 

On October 1, Arcelia Corp. pays $24,000 for two years of rent. The transaction is appropriately recorded in a prepaid rent account. On December 31, of the same year Arcelia should make an adjusting entry for the rent expired, which includes (Select all that apply.) credit to prepaid rent $3,000

 

Ragland Corp. purchases supplies on account for $1,000 and appropriately records the transaction in an asset account. A count of inventory at year-end indicates that $300 of supplies are remaining. The adjusting journal entry required at year-end includes (Select all that apply.) 

 

True or false: Prepayments are transactions in which the cash flow follows the expense or revenue recognition. 

 

On January 1, Noonan Company purchases equipment for $100,000. The equipment is expected to have a useful life of 5 years and will have no value at the end of that period. Noonan allocates the cost equally over the period of use so the depreciation expense that must be recognized for the year is 

 

On April 1, Larken Corp. pays $36,000 for 3 years of rent. The transaction is appropriately recorded as prepaid rent. The adjusting entry on December 31, of the same year, will require a (Select all that apply.) 

 

On January 1, Poodle Company purchases equipment for $120,000. The equipment is expected to have a useful life of 4 years and will have no value a the end of that period. Poodle allocates the cost equally over the period of use so the depreciation expense that must be recognized for the year is 

 

An adjusting entry to record depreciation expense for the period will ______ total assets. 

 

Deferred revenue should be classified as a(n) Input Field 1 of 1 k unavailable incorrect        on the balance sheet. (Enter one word per blank) 

 

On September 1, Year 1, Great Lakes Equipment receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Great Lakes Equipment should recognize on the income statement for the year ending December Year 1? 

 

On June 1, Year 1 Oxian Corp. receives $24,000 from a customer for work to be performed evenly over the next 2 years. What is the amount of revenue that Oxian should recognize on the income statement for Year 1? 

 

Accumulated depreciation is (Select all that apply.) 

 

An alternative approach to recording unearned revenue would be to ______ when cash is collected from a customer in advance of providing goods and services. 

 

On May 1, Year 1, Garcia Company paid $1,200 for 12 months of rent and recorded the transaction in an income statement account. The adjusting journal entry required on December 31, Year 1, will require a 

 

A prepayment may be recorded in prepaid rent, a balance sheet account. The alternative method to record the prepayment is to debit the               account. (Enter one word per blank.)

 

On November 1, Year 1, Thomasson paid rent on its building for 2 years in the amount of $12,000. When the transaction was initially recorded, the full $12,000 was recorded as an expense using an alternative approach to record the prepayment. The adjusting journal entry on December 31, Year 1 requires a credit to rent expense 

 

True or false: It is acceptable accounting practice to initially record prepaid rent in either a balance sheet or income statement account. 

 

On October 1, Company B records 1 year of prepaid rent in an income statement account then adjusts for the unexpired prepaid rent at the end of the period. Which of the following statements is true for Company B’s financial statements at December 31 year-end? 

 

On October 1, Year 1, Swift Corporation received $1,200 from customers for services to be performed evenly over the next 12 months. Swift recorded the original transaction in a balance sheet account. The adjusting journal entry on December 31, Year 1, will include which of the following entries? 

 

Mann Corporation signed a note with principal and interest due in 6 months. The stated rate of interest on the note was 8%. If Mann accrues three months of interest at year-end, the formula Mann will use will be: Principal x       % x 3/12.

 

The purpose of the statement of comprehensive income is to report current period changes in equity that arose from

 

On July 1, Perry Company signed a note with principal of $80,000 and a stated interest rate of 4%. The principal and interest are due on April 1 of the following year. Perry will accrue interest on December 31st of 

 

The components of the income statement are usually classified as: (Select all that apply.) non-operating items

 

Which of the following items are classified as operating items on the income statement? (Select all that apply.) 

 

The statement of comprehensive income reports the changes in shareholders’ equity during the period that: 

 

A ______ liability is a liability that will be satisfied in more than 1 year or operating cycle, whichever is longer, in the future.

 

True or false: Shareholders’ equity includes only retained earnings and the accounts associated with retained earnings. 

 

Revenue and expenses on the income statement are classified as: (Select all that apply.) 

 

Operating items include (Select all that apply.) 

 

Which statement reports the changes in shareholders’ equity during the period that were not a result of transactions by owners?

 

Those liabilities that will be satisfied within 1 year or the operating cycle, whichever is longer, are referred to as        liabilities.

 

Shareholders’ equity includes (Select all that apply.) 

 

True or false: The purpose of the statement of cash flows is to summarize the transactions that caused cash to change during the period. 

 

Paid-in-capital of common stock and               are included in shareholders’ equity. (Enter one word per blank.)

 

Interest expense is classified on the income statement as: 

 

______ are those that are cash, will be converted into cash, or will be used up within 1 year or the operating cycle, whichever is longer. 

 

Which of the following make up the major components of retained earnings? (Select all that apply.) 

 

       basis accounting measures income based on accomplishments and resource sacrifices during the period. (Enter only one word.)

 

       basis accounting measures the difference between cash receipts and cash disbursements during a reporting period. (Enter only one word.)