Achievement Test 1: Chapters and Financial and Managerial Accounting, 2e Part Points Name _ Instructor Section # _ Date I II III IV Total 36 26 10 10 100 Score PART I — MULTIPLE CHOICE (36 points) Instructions: Designate the best answer for each of the following questions "GAAP" refers to a General Accounting and Auditing Principles b Guidelines for American Accounting Procedures c General Association of Accounting Practitioners d None of these answer choices are correct The requirement that only transaction data capable of being expressed in terms of money be included in the accounting records relates to the a historical cost principle b monetary unit assumption c economic entity assumption d both the historical cost principle and the monetary unit assumption The initials “CPA” stand for a Certified Practical Auditor b Chartered Public Auditor c Certified Public Accountant d Can't Pass Accounting Which of the following is not an external user of accounting data? a Company officers b Regulatory agency c Labor union d Taxing authority Which of the following is not generally understood to be a major service of a public accounting firm? a Auditing b Taxation c Budgeting d Management consulting AT1- Test Bank for Financial and Managerial Accounting, Second Edition Which of the following presents key aspects of the process of accounting in the correct chronological order? a Totaling, auditing, and budgeting b Budgeting, recording, and communicating c Recording, totaling, and auditing d Identifying, recording, and communicating The process of transferring transaction effects into the appropriate accounts is referred to as a closing b journalizing c recording d posting The following describes the process of identifying the economic events of an organization a Keeping a chronological diary of particular events in an orderly and systematic manner b Selecting the economic activities relevant to a particular organization c Preparing accounting reports, including financial statements d Quantifying events in dollars and cents The current source of "GAAP" in the private sector is the a Accounting Principles Board b Internal Revenue Service c Financial Accounting Standards Board d Securities Exchange Commission 10 Transactions are initially recorded in the a general ledger b trial balance c general journal d balance sheet 11 The retained earnings account had a beginning balance of $40,000 and an ending balance of $50,000 If $10,000 of dividends were paid during the period, net income must have been a $20,000 b $40,000 c $10,000 d $30,000 12 Which of the following is false with regard to a general journal? a It tracks the increases and decreases in an individual account b It provides a chronological record of transactions c It discloses in one place the complete effects of a transaction d It helps to prevent errors since the debit and credit amounts in an individual entry can be readily compared Achievement Test A T 13 Financial statements combining the operations of Sears and J.C Penney would1 violate the a monetary unit assumption b economic entity assumption c historical cost principle d both the monetary unit assumption and the historical cost principle 14 At January 1, 2017, Orion Enterprises reported accounts receivable totaling $14,000 During the month, the company had credit sales of $28,000 and collected cash on accounts of $24,000 At the end of January, the balance in accounts receivable is a $14,000 credit b $38,000 debit c $10,000 credit d $18,000 debit 15 The accounting equation for Ally Elton, Inc is: Assets $120,000 = Liabilities $50,000 + Stockholders’ Equity $70,000 If the company purchases supplies on account for $5,000, the new accounting equation will be: a Assets $115,000 = Liabilities $50,000 + Stockholders’ Equity $70,000 b Assets $125,000 = Liabilities $55,000 + Stockholders’ Equity $70,000 c Assets $125,000 = Liabilities $50,000 + Stockholders’ Equity $75,000 d Assets $120,000 = Liabilities $55,000 + Stockholders’ Equity $65,000 16 Although a separate legal entity, the transactions of the following still must be kept separate from the personal activities of the owners for accounting purposes: a Proprietorship b Partnership c Corporation d Both a proprietorship and a partnership 17 Limited liability is not enjoyed by the owner(s) of a a corporation b partnership c proprietorship d both partnership and proprietorship 18 At June 1, 2017, Larry Levine Company reported Accounts Payable of $15,000 During the month, the company made purchases on account of $51,000 and payments on account of $30,000 At June 30, 2017, the balance in Accounts Payable is a $15,000 debit b $36,000 credit c $66,000 credit d $30,000 debit AT1- Test Bank for Financial and Managerial Accounting, Second Edition PART II — JOURNAL ENTRIES (39 points) The ledger accounts given below, with an identification number for each, are used by Flynn Company Instructions: Indicate the appropriate entries for the month of June by placing the appropriate identification number(s) in the debit and credit columns provided Item is given as an example Write "none" if no entry is appropriate Cash Accounts Receivable Supplies Prepaid Insurance Prepaid Advertising Equipment 10 11 12 Salaries and Wages Payable Accounts Payable Unearned Service Revenue Notes Payable Common Stock Dividends 13 14 15 16 17 18 Service Revenue Equipment Expense Advertising Expense Supplies Expense Rent Expense Salaries and Wages Expense ——————————————————————————————————————————— Entry Account(s) Account(s) No Entry Information Debited Credited June H Flynn invested $25,000 in the business 11 ——————————————————————————————————————————— June Purchased supplies costing $2,000 on account ——————————————————————————————————————————— June Equipment was purchased at a cost of $5,000; a threemonth, 12% note payable was signed for this amount ——————————————————————————————————————————— June Received $7,000 from customers for services rendered during the week ——————————————————————————————————————————— June 10 Flynn agreed to hire B Kiner as an assistant She will be paid at the rate of $4,000 monthly, receiving $2,000 on the 15th and 30th of each month She will begin work June 16 ——————————————————————————————————————————— June 14 Paid $400 cash to the Daily News for advertisements run this past week ——————————————————————————————————————————— June 16 B Kiner began work ——————————————————————————————————————————— June 19 Paid $2,000 in cash to Santo Company for June rent ——————————————————————————————————————————— June 25 Paid supplier for supplies purchased on June ——————————————————————————————————————————— June 26 Paid the Daily News $400 for an advertisement that will run the first week in July ——————————————————————————————————————————— 10 June 27 Received $9,000 from customers for services to be rendered early in July ——————————————————————————————————————————— 11 June 28 Billed customers $6,000 for services rendered but not collected during June ——————————————————————————————————————————— 12 June 30 Flynn paid $900 of dividends ——————————————————————————————————————————— 13 June 30 B Kiner was paid $2,000 cash for her salary ——————————————————————————————————————————— Achievement Test A T PART III — SHORT PROBLEMS (10 points) Instructions: Present the solutions, with appropriate supporting calculations, for each of the following independent problems A Given the following information, compute 2017 net income for Orson Company Stockholders’ equity—January 1, 2017 $120,000 Stockholders’ equity—December 31, 2017 150,000 Stockholder investments during 2017 25,000 Dividends paid during 2017 38,000 B Indicate the impact on the accounting equation of each of the following transactions Item is given as an example Paid dividends to stockholders Ans.; Decreased assets and decreased stockholders’ equity Stockholder investment of cash Purchase of equipment for cash Borrowed money from bank by issuing a note payable Purchase of office furniture for cash Purchase of supplies on account Collect cash from customers for services performed Paid for a 24-month insurance policy Paid monthly payroll AT1- Test Bank for Financial and Managerial Accounting, Second Edition PART IV — TYPES OF ACCOUNTS (5 points) Instructions: Place a check in the appropriate columns to designate whether each of the following accounts: (1) has a debit or credit normal balance; and (2) is an asset, liability, or stockholders’ equity account ——————————————————————————————————————————— (1) (2) Stockholders’ Account Debit Credit Asset Liability Equity ——————————————————————————————————————————— Service Revenue ——————————————————————————————————————————— Salaries and Wages Expense ——————————————————————————————————————————— Supplies ——————————————————————————————————————————— Common Stock ——————————————————————————————————————————— Accounts Payable ——————————————————————————————————————————— Salaries and Wages Payable ——————————————————————————————————————————— Dividends ——————————————————————————————————————————— Accounts Receivable ——————————————————————————————————————————— Prepaid Insurance ——————————————————————————————————————————— 10 Notes Payable ——————————————————————————————————————————— Achievement Test A T - Solutions — Achievement Test 1: Chapters and PART I — MULTIPLE CHOICE (36 points) d b c a c d d b c 10 11 12 c a a 13 14 15 b d b 16 17 18 c d b PART II — JOURNAL ENTRIES (26 points) Account(s) Debited None 15 None Account(s) Credited 11 10 13 None None 10 11 12 13 Account(s) Debited 17 12 18 Account(s) Credited 1 13 1 PART III — SHORT PROBLEMS (10 points) A Ending stockholders’ equity, 12/31/17 Beginning stockholders’ equity, 1/1/17 Increase in stockholders’ equity Dividends paid during 2017 Investments during 2017 Net income in 2017 B Increases assets and increases stockholders’ equity No effect Increases assets and increases liabilities No effect Increases assets and increases liabilities Increases assets and increases stockholders’ equity No effect Decreases assets and decreases stockholders’ equity $150,000 (120,000) 30,000 38,000 68,000 (25,000) $ 43,000 AT1- Test Bank for Financial and Managerial Accounting, Second Edition PART IV — TYPES OF ACCOUNTS (5 points) Debit Credit Asset Liability Stockholders’ Equity Salaries and Wages Expense Supplies Service Revenue Common Stock Accounts Payable Salaries and Wages Payable Dividends Accounts Receivable Prepaid Insurance 10 Notes Payable ... 12 c a a 13 14 15 b d b 16 17 18 c d b PART II — JOURNAL ENTRIES (26 points) Account(s) Debited None 15 None Account(s) Credited 11 10 13 None None 10 11 12 13 Account(s) Debited 17 12 18 Account(s)... $30,000 At June 30, 2 017 , the balance in Accounts Payable is a $15 ,000 debit b $36,000 credit c $66,000 credit d $30,000 debit AT1 - Test Bank for Financial and Managerial Accounting, Second Edition. .. payroll AT1 - Test Bank for Financial and Managerial Accounting, Second Edition PART IV — TYPES OF ACCOUNTS (5 points) Instructions: Place a check in the appropriate columns to designate whether