UARK Accounting 1 Exam 1

Kelly Company experienced the following events during its first accounting period.

(1) Issued common stock for $10,000 cash.

(2) Earned $8,000 of cash revenue.

(3) Paid $1,000 cash to purchase land.

(4) Paid cash dividends amounting to $500.

(5) Paid $4,400 of cash expenses.

Based on this information, what is the amount of net income?

$3600

Which of the following items would appear in the financing activities section of the statement of cash flows?

A. Cash outflow for the payment of accounts payable

B. Cash inflow from issuance of common stock

C. Cash inflow from sales revenue

D. Cash outflow for the purchase of land

B. Cash inflow from issuance of common stock

Borrowing money from the bank is an example of an asset source transaction.

True or False

True

Liabilities are shown on the:

A. statement of cash flows.

B. balance sheet.

C. statement of changes in stockholders' equity.

D. income statement.

B. balance sheet

Which of the following transactions would be reported on the statement of changes in stockholders' equity?

A. Paid $1,500 cash to pay off a portion of its note payable

B. Purchased land for $2,000 cash

C. Paid a $100 cash dividend to the stockholders

D. Borrowed $5,000 cash from the bank

C. Paid a $100 cash dividend to the stockholders

As of December 31, Year 1, Mason Company had $500 cash. During Year 2, Mason earned $1,200 of cash revenue and paid $800 of cash expenses. What is the amount of cash that would be reported on the balance sheet at the end of Year 2?

$900

The value created by a business may be called assets.

T/F

False

At the beginning of Year 2, X Company had assets of $300, liabilities of $150, and common stock of $50. During Year 2, the company earned revenue of $500, incurred expenses of $200, and paid dividends of $50. All transactions were cash transactions

The amount of total assets reported on X Company's December 31, Year 2 balance sheet would be

$550

Which type of accounting information is intended to satisfy the needs of external users of accounting information?

A. Cost accounting

B. Managerial accounting

C. Financial accounting

D. Tax accounting

C. Financial accounting

As of December 31, Year 2, Bristol Company had $100,000 of assets, $40,000 of liabilities and $25,000 of retained earnings. What percentage of Bristol's assets were obtained from investors?

A. 40%

B. 60%

C. 35%

D. 25%

C. 35%

Financial accounting standards are known collectively as GAAP. What does that acronym stand for?

A. Generally Authorized Auditing Principles

B. Generally Applied Accounting Procedures

C. Governmentally Approved Accounting Practices

D. Generally Accepted Accounting Principles

D. Generally Accepted Accounting Principles

Earning revenue on account would be classified as a/an?

A. claims exchange transaction.

B. asset exchange transaction.

C. asset source transaction.

D. asset use transaction.

C. asset source transaction.

Jason Company paid $7,200 for one year's rent in advance beginning on October 1, Year 1. Jason's Year 1 income statement would report rent expense, and its statement of cash flows would report cash outflow for rent, respectively, of

A. $1,800; $7,200

B. $1,200; $7,200

C. $7,200; $7,200

D. $1,800; $1,800

A. $1,800; $7,200

Sheldon Company began Year 1 with $1,200 in its supplies account. During the year, the company purchased $3,400 of supplies on account. The company paid $3,000 on accounts payable by year end. At the end of Year 1, Sheldon counted $1,400 of supplies on hand. Sheldon's financial statements for Year 1 would show:

A. $1,600 of supplies; $3,400 of supplies expense

B. $1,400 of supplies; $3,200 of supplies expense

C. $1,400 of supplies; $2,000 of supplies expense

D. $1,600 of supplies; $200 of supplies expense

B. $1,400 of supplies; $3,200 of supplies expense

Mary Company collected cash from an account receivable. Which of the following financial statements are affected by this accounting event?

A. Income statement and the statement of cash flows

B. Balance sheet and the statement of cash flows

C. Income statement and the balance sheet

D. Statement of changes in stockholders' equity

B. Balance sheet and the statement of cash flows

Duke Company's unadjusted bank balance at March 31 is $4,510. The bank reconciliation revealed outstanding checks amounting to $670 and deposits in transit of $500. Based on this information, Duke's true cash balance is:

$4340

In a bank reconciliation, a customer's NSF check included with the bank statement is:

A. deducted from the company's cash balance to get the true cash balance.

B. added to the bank's cash balance to get the true cash balance.

C. deducted from the bank's cash balance to get the true cash balance.

D. added to the company's cash balance to get the true cash balance.

A. deducted from the company's cash balance to get the true cash balance.

Which of the following statements concerning internal controls is true?

A. Strong internal controls cannot be circumvented.

B. A system of internal controls is designed to prevent or detect errors and fraud.

C. Internal controls are limited to the policies and procedures used to protect the company from fraud.

D. The control procedure, separation of duties, prohibits the employment of a husband and wife or other closely related parties within the same company

B. A system of internal controls is designed to prevent or detect errors and fraud.

Which of the following is considered a product cost?

A. Utility expense for the current month

B. Salaries paid to employees of a retailer

C. Transportation cost on goods purchased from suppliers

D. Transportation cost on goods shipped to customers

C. Transportation cost on goods purchased from suppliers

Vargas Company sold a piece of land for $39,000 that had originally cost $32,500. This event would:

A. increase cash flows from investing activities by $39,000.

B. not affect operating income.

C. increase net income by $6,500.

D. All of these answer choices are correct

D. All of these answer choices are correct