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148. Which two broad account categories are used to determine net income? Define each category and list two examples of each type. 149. How and why is the matching rule applied to the cost of a building? 150. Susan Kane won the mayoral election in the City of Ashley partly on the basis of her.
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180. Given the adjusted trial balance below, prepare (in good form) an income statement, statement of retained earnings, and balance sheet. The name of the business is Palo Verde Landscaping Services and the accounting period coincides with the calendar year. Palo Verde Landscaping Services Adjusted Trial Balance December 31, 20x5 Cash $   795 Accounts Receivable 1,800 Supplies 30 Prepaid Insurance 30 Office Equipment 3,000 Accumulated.
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71. Relevance is comprised of all of the following except A. NeutralityB. MaterialityC. Predictive valueD. Confirmative value 72. ___________ is related to both the nature of an item and its size. A. NeutralityB. MaterialityC. VerifiabilityD. Timeliness 73. Which of the following statements best describes predictive value? A. Helps capital providers make decisions about future actions.B. Provides all information necessary for a reliable decision.C. Enables users to identify similarities and.
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133. Using the following transactions, calculate the ending balance of (A) total assets, (B) total liabilities, (C) Cash, and (D) Stockholders’ Equity. Indicate whether each balance is debit or credit. a. Began doing business by selling shares of common stock to investors for $72,000 in cash.b. Paid one year's insurance in.
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175. In the journal provided, prepare year-end adjustments for the following situations. Omit explanations.a. Accrued interest on notes receivable is $560.b. Of the $7,200 received in advance of earning a service, two-thirds was still unearned by year end.c. Two years of rent, totaling $24,000, was paid in advance. By year end,.
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174. Following are the total assets and liabilities at the beginning and end of the year for Hagedorn Company: Assets Liabilities Beginning of the year $  70,000 $45,000 End of the year 108,000 40,000 Determine the net income or loss for the year in each of the following situations:a.       There were no additional stock issues and no dividends were.
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61. The convention of consistency refers to consistent use of accounting principles A. among firms.B. within a given accounting period.C. within industries.D. among accounting periods. 62. A practical decision to expense a $120 printer rather than record it as property, plant, and equipment and depreciate it probably is made on the basis of the convention of A. conservatism.B. consistency.C. materiality.D. full disclosure. 63. The accounting.
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54. Which of the following transactions results in the recognition of an expense? A. Expiration of the usefulness of equipment during the accounting period.B. Payment on an account payable.C. Declaration and payment of dividends.D. Payment on the principal portion of a loan. 55. Revenues A. are decreases in equity resulting from rendering services.B. are a cost of doing business.C. are called expired.
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58. When a business reports an asset at an inflated dollar amount, is has violated the measurement issue of A. recognition.B. valuation.C. classification.D. realization. 59. Which of the following is not a measurement issue in accounting? A. When to record a business transaction.B. How to classify the items of a business transaction.C. When to classify the items of a business transaction.D. Where to.
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101. Use this balance sheet and income statement to answer the following question. Use ending balances whenever average balances are required for computing ratios. National Textile Balance Sheet December 31, 20x5 Assets Liabilities Current assets $ 12,000 Current liabilities $ 8,000 Investments 2,000 Long-term liabilities    2,000 Property, plant, and equipment 16,000 Total liabilities $ 10,000 Intangible assets    10,000 Stockholders' Equity Common stock   30,000 Total liabilities and Total assets $40,000 stockholders' equity $40,000 National Textile Income Statement For the.
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104. What is the adjusting entry for that portion of revenue received in advance which has now been earned? A. Unearned Revenue – Debit; Cash – CreditB. Unearned Revenue – Debit; Service Revenue – CreditC. Service Revenue – Debit; Unearned Revenue – CreditD. Cash – Debit; Unearned Revenue – Credit 105. An adjusting entry made to record salaries.
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21. The cash basis of accounting is prohibited for income tax purposes.  22. Adjusting the accounts is a technique used to accomplish accrual accounting  23. Revenue should be recognized, even when collectibility is not reasonably assured.  24. In order for revenue to be recognized, the seller’s price to the buyer must be fixed or determinable.  25. One application of.
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156. Quality Heating Company has the following liabilities at year end: Notes Payable $20,000 Accounts Payable 15,000 Unearned Contract Revenue 9,000 Wages Payable 2,900 Interest Payable 700 a. Which of these accounts probably was/were created at the end of the fiscal year as a result of an accrual? Which probably was/were adjusted at year end? Explain your answer.b. Which adjustments probably reduced.
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31. Adjusting entries affect cash flows in the current period.  32. Recording incurred but unpaid expenses is an example of an accrual.  33. A contra account is an account whose balance is subtracted from an associated account in the financial statements.  34. Expenses that have been paid for and recorded are called accrued expenses.  35. As an asset's depreciation.
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179. Prepare year-end adjusting entries for each of the following situations.a. The Office Supplies account showed a beginning debit balance of $800 and purchases of $1,000. The ending debit balance was $400.b. Depreciation on buildings is estimated to be $7,600.c. A one-year insurance policy was purchased for $6,000. Five months have.
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170. Indicate by letter (a–g) the agency that applies to each statement. 171. Newberry Company's stockholders' equity equals one-fourth of the company's total assets. The company's liabilities are $309,000. What is the amount of the company's stockholders’ equity? 172. Chin Company's stockholders’ equity equals one-third of the company's total assets. The company's liabilities are $120,000..
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94. Which of the following is an example of an accrual? A. Purchase of equipment.B. Prepaid insurance.C. Salaries earned but not yet paid.D. All of these choices. 95. Which of the following is an example of an accrual? A. Debit Office Supplies Expense, credit Office SuppliesB. Debit Wages Expense, credit Wages PayableC. Debit Rent Expense, credit Prepaid RentD. Debit Unearned Revenue, credit Service.
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123. Use this journal entry to answer the following question. Nov. 16 Accounts Payable 685 Cash 685 Recorded payment of a liability Explain how the above journal entry relates to the measurement issues of (a) recognition, (b) valuation, and (c) classification. 124. Why is the Dividends account increased by a debit? Explain in terms of its relationship to stockholders' equity. 125. For each.
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139. Provide explanations for the following related journal entries: a. Cash 6,000 Common Stock 6,000 b. Law Library 3,400 Accounts Payable 3,400 c. Cash 600 Accounts Receivable 1,000 Legal Fees Earned 1,600 d. Cash 500 Accounts Receivable 500 e. Accounts Payable 3,400 Cash 3,400 140. Provide explanations for the following related journal entries: a. Prepaid Rent 4,000 Cash 4,000 b. Trucks 36,000 Notes Payable 36,000 c. Cash 600 Accounts Receivable 600 d. Notes Payable 18,000 Cash 18,000 e. Cash 2,500   Unearned Fees 2,500 .
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122. Match each item with the correct statement below. 1. Refers to the decision as to when to record a business transaction.      Recognition    2. Left side.      Valuation    3. A series of steps that measure and communicate useful information to decision makers.      Classification    4. Basic storage unit for accounting data and used to accumulate amounts from similar transactions.      Accounting cycle    5. A device used to ensure.
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167. Distinguish between profitability and liquidity. 168. Explain why each of the following persons or groups would be interested in seeing the financial statements of a company. Also state whether each has a direct or indirect financial interest.a.       Potential investorb.       Internal Revenue Servicec.       A labor uniond.       Securities and Exchange.
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91. Intangible assets could include all except A. TrademarkB. Land held for future useC. PatentD. Goodwill 92. The debt to equity ratio equals A. stockholders' equity divided by total liabilities.B. stockholders' equity divided by long-term liabilities.C. total liabilities divided by stockholders' equity.D. current liabilities divided by average stockholders' equity. 93. The profit margin equals A. net sales divided by net income.B. gross margin divided by net income.C. net income.
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51. All of the following must certify that a public company's financial statements are accurate, complete, and not misleading, except for the A. chief financial officer.B. director of human resources.C. chief executive officer.D. independent auditor. 52. General-purpose external financial statements are not primarily intended for A. management.B. investors.C. suppliers of goods and services.D. lending institutions. 53. Financial statements are audited by outside accountants A. because it is.
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177. Use the following unadjusted trial balance to prepare adjusting entries, given the additional information below it. Assume that financial statements are prepared quarterly. Omit explanations. Pat Collar Realty Services Trial Balance September 30, 20x5 Cash $ 30,000 Accounts Receivable 9,600 Office Supplies 1,600 Prepaid Rent 5,400 Office Furniture 14,400 Accumulated Depreciation–Office Furniture $      600 Accounts Payable 22,200 Unearned Revenue 3,000 Common Stock 30,600 Consulting Revenue 18,000 Salaries Expense 11,000 Insurance Expense 2,400 _______ $74,400 $74,400 a. Of the revenue received in.
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64. The recording of an expense could result in a corresponding increase in A. stockholders' equity.B. revenue.C. a liability.D. an asset. 65. When expenses exceed revenues, A. a liability is created.B. a net loss occurs.C. stockholders' equity increases.D. All of these choices. 66. Expenses are incurred A. to generate revenue.B. to produce liabilities.C. only during the adjustment process.D. to produce assets. 67. Net income A. is accumulated in Retained Earnings.B. is reported on the income.
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41. Financial statements may be prepared from an adjusted trial balance.  42. An adjusted trial balance must be prepared before the adjusting entries can be recorded.  43. An adjusted trial balance proves the balance of the ledger accounts after the adjusting entries have been posted.  44. An adjusted trial balance will probably list fewer accounts than are.
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124. A company recorded office supplies in an asset account when the supplies were purchased. Failure to take inventory and make an adjusting entry will result in an A. understatement of liabilities.B. understatement of stockholders' equity.C. understatement of assets.D. overstatement of stockholders' equity. 125. A company's five-day weekly payroll of $890 is paid on Fridays. Assume that the.
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74. Equipment might be depreciated over 15 years because A. it will lose most of its market value in 15 years.B. it will be paid for in 15 years.C. it will help to generate revenue for the company over 15 years.D. income tax provisions require depreciation over 15 years. 75. When a direct cause-and-effect relationship cannot be established.
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162. 1. Absent evidence to the contrary, accountants assume the business is a going concern and will continue to operate indefinitely. Continuity 2. A type of deferral. Fiscal year 3. Affect one balance sheet account and one income statement account. Matching rule 4. The manipulation of revenues and expenses to achieve a specific outcome. Adjusting entries 5. Net increase in stockholders’ equity that results.
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84. Which of the following is correct regarding accrual accounting? A. Adjusting the accounts is a technique used to accomplish accrual accounting.B. Revenues are recorded when received.C. Expenses are recorded when earned.D. Net income is the difference between cash receipts from customers and cash payments for expenses. 85. Which of the following accounts would likely not need to.
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81. An investment is classified as short term or long term based on A. whether the investment can be sold immediately.B. the length of time the investor expects to hold it.C. the purpose for which it is held.D. the dollar amount of the investment. 82. Which of the following accounts is most likely to appear on the balance.
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163. Gravel Manufacturing had supplies on hand costing $480 on December 31. During the same year, supplies costing $320 were purchased, and $640 in supplies were consumed during the year. What was the cost of supplies on hand on January 1 of that year? 164. Custom Enterprises had supplies on hand costing $3,840.
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1. Accounting periods of greater than a year are called interim periods.  2. If a company is expected to survive, it is considered a going concern.  3. Net income results when expenses exceed revenues.  4. When a net loss occurs, it is subtracted from the balance in the Retained Earnings account.  5. All increases to stockholders’ equity are from.
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166. Mike’s Manufacturing purchased equipment for $300,000. The equipment has an estimated useful life of six years and will be worthless at the end of that time. In the partial balance sheet below, show exactly how the equipment would be disclosed after it has been used for three years. Also calculate.
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134. Which of the following accounts probably would be greater in amount on an adjusted trial balance than on a trial balance? A. Wages PayableB. Unearned RevenueC. Prepaid AdvertisingD. Painting Supplies 135. Which of the following accounts probably would contain a smaller dollar amount on the adjusted trial balance than on the trial balance? A. Office SuppliesB. Accumulated Depreciation–EquipmentC. CashD. Wages Expense 136. Which of.
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1. The valuation issue deals with how the components of a transaction should be categorized.  2. Business transactions are economic events that should be recorded in the accounting records.  3. In accounting, to recognize means to record a transaction or event.  4. Generally accepted accounting principles state that all business transactions should be valued at fair value.
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159. During the performance of the steps in the accounting cycle, the trial balance and the adjusted trial balance are prepared at two key points. Using specific names where applicable, discuss the time of preparation and the purpose served by each of these trial balances. 160. The following steps in the accounting cycle.
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136. From the following alphabetical list of account balances, all of which are normal, for Cannon Company on September 30, 20x5, prepare a trial balance in proper form (the amount of dividends paid by Cannon Company must be computed) . Accounts Payable $  780 Accounts Receivable 460 Cash 400 Equipment 1,380 Prepaid Advertising 20 Revenue Earned 1,000 Common Stock 1,200 Dividends ? Wages Expense 60 Wages Payable 20 137. Record the following.
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11. A company's fiscal year need not correspond to the calendar year.  12. Accounting periods should be of equal length to facilitate comparisons between periods.  13. The continuity assumption states that the business will continue to operate indefinitely.  14. When preparing financial statements, the accountant assumes that the business will continue to operate for at least 5.
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170. In the journal provided, prepare adjusting entries for the following items. Omit explanations.a. Depreciation on machinery is $940 for the accounting period.b. Interest incurred on a loan but not paid or recorded is $635.c. Office supplies of $600 were on hand at the beginning of the period. Purchases of office.
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1. The objective of financial reporting established by the FASB is to provide information that is useful to potential customers.  2. To be useful for decision making, financial reporting must enable the user to assess cash flow prospects and assess management’s stewardship.  3. Financial statements are often audited by management to increase confidence in the.
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182. The 20x5 income statement for Almond Company showed rent expense of $10,800 and salaries expense of $7,200. The related balance sheet account balances at year end for last year and this year were as follows: December 31, 20x5 December 31, 20x4 Prepaid rent $1,200 $   0 Salaries payable 400 800 a. Compute cash paid for rent during the year.b..
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114. Use this information to answer the following question.The trial balance for Nowwick Company appears as follows: Nowwick CompanyTrial BalanceDecember 31, 20x5 Cash $  240 Accounts Receivable 1,000 Prepaid Insurance 100 Supplies 300 Office Equipment 800 Accumulated Depreciation–Office Equipment $  400 Accounts Payable 600 Common Stock 1,200 Service Revenue 1,000 Salaries Expense 200 Rent Expense 400 ______ $3,200 $3,200 If the estimated depreciation for office equipment were $350, the adjusting entry would contain a A. debit to Accumulated Depreciation–Office Equipment.
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151. Custom Realty Services sold a house for a client and will be paid a commission for its services.  Using the SEC’s four conditions or revenue recognition, explain why Custom Realty Services either should or should not recognize the revenue now. 152. What is the purpose of adjusting entries? 153. Distinguish between a deferral and.
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143. Given the following ledger account and postings, complete the Balance column. Assume no previous postings in the account Accounts Receivable Account No. 113 Date Item Post.Ref. Debit Credit Balance Debit Credit 2014 Mar. 1 J2 3,420 3 J3 640 9 J3 1,400 14 J3 820 144. During the most recent month, Ostriker Company began operations with a cash balance of $0 and made cash sales of $81,000.  During this same time period, the company paid $32,000.
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141. Given the following ledger account and postings, complete the Balance column. Assume no previous postings in the account Unearned Rent Revenue Account No. 226 Date Item Post.Ref. Debit Credit Balance Debit Credit 2014 Nov. 1 J1 6,200 7 J1 1,400 8 J2 1,000 12 J2 400 142. Given the following ledger account and postings, complete the Balance column. Assume no previous postings in the account Accounts Payable Account No. 212 Date Item Post.Ref. Debit Credit Balance Debit Credit 20x5 Dec. 1 J1 8,200 7 J1 2,800 8 J2 600 12 J2 800 .
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