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accounting for non majors multiple choice 417463

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1. As time passes, fixed assets, other than land, lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called (Points : 2)

equipment allocation.
depreciation. x
accumulation.
matching.

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2. Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become __________ over time. (Points : 2)

Liabilities
Assets
stockholders’ equity
Expenses

3. Accrued revenues would appear on the balance sheet as (Points : 2)

assets.
liabilities.
stockholders’ equity.
prepaid expenses.

4. The __________ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis. (Points : 2)

accounting equation
retained earnings statement
intangible asset section
classified balance sheet

5. Unearned rent, representing rent paid for the next six months’ occupancy, would be reported on the landlord’s balance sheet as a(n) (Points : 2)

asset.
x liability.
capital stock.
revenue.

6. Current liabilities are usually due within (Points : 2)

one month or less.
one week or less.
one year or less.
more than one year.

7. Updating accrual accounting records prior to preparing financial statements is called (Points : 2)

the closing process.
converting to cash basis accounting.
x the adjustment process.
going concern adjustments.

8. A&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M’s accounts? (Points : 2)

Increase accounts receivable and cash by $1,000,000 each
Increase accounts receivable and revenues by $1,000,000 each
Increase accounts receivable and unearned revenues by $1,000,000 each
No effect at this time

9. On April 1, Tule, Inc. paid $3,600 for an insurance premium on a three year insurance policy. How does this transaction affect Tule’s accounts? (Points : 2)

Increase insurance expense and decrease cash by $3,600 each
x Increase prepaid insurance and decrease cash by $3,600 each
Increase unearned insurance and decrease cash by $3,600 each
No effect at this time

10. Using accrual accounting, revenue is recorded and reported only (Points : 2)

when cash is received without regard to when the services are rendered.
x when the services are rendered without regard to when cash is received.
when cash is received at the time services are rendered.
if cash is received after the services are rendered.

Assume the November transactions for Hoover Co. are as follows:
a. Provided services of $15,600 on account.
b. Purchased supplies on account $800.
c. Received cash of $10,900 from clients for services previously billed.
d. Paid $2,400 for a one year insurance policy.
e. Paid dividends of $1,500 to stockholders.

Record the transactions, using the integrated financial statement framework that follows:
Assets = Liabilities + Stockholders’ Equity

11. For transaction A, what is the effect of the transaction on the accounting equation? (Points : 3)

Cash is increased $15,600, Accounts Receivable is increased $15,600
Accounts Receivable is increased $15,600, Retained Earnings is increased $15,600
Accounts Payable is increased $15,600, Retained Earnings is increased $15,600
Cash is decreased $15,600, Accounts Receivable is decreased $15,600

12. For transaction B, what is the effect of the transaction on the accounting equation? (Points : 3)

Supplies is decreased $800, Note Payable is decreased $800
Cash is decreased $800, Supplies is increased $$800
Supplies is increased $800, Accounts Payable is increased $800
Cash is decreased $800, Note Payable is decreased $800

13. For transaction C, what is the effect of the transaction on the accounting equation? (Points : 3)

Cash is increased $10,900, Accounts Receivable is decreased $10,900
Cash is increased $10,900, Capital Stock increased $10,900
Cash is increased $10,900, Note Payable is decreased $10,900
Cash is increased $10,900, Retained Earnings is increased $$10,900

14. For transaction D, what is the effect of the transaction on the accounting equation? (Points : 3)

Cash is increased $2,400, Retained Earnings is decreased $2,400
Cash is decreased $2,400, Prepaid Insurance is increased $2,400
Cash is decreased $2,400, Retained Earnings is increased $2,400
Cash is increased $2,400, Equipment is decreased $2,400

15. For transaction E, what is the effect of the transaction on the accounting equation? (Points : 3)

Cash is decreased $1,500, Note Payable is decreased $1,000
Cash is decreased $1,500, Capital Stock is decreased $1,500
Cash is decreased $1,500, Retained Earnings is decreased $1,500
Cash is increased $1,500, Retained Earnings is increased $1,500

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