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Exam 2: Review of the Accounting Process

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Question 1

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Use the following to answer questions Using the chart of accounts provided,indicate by account number the account or accounts that would be debited and credited in the following transactions and indicate the type of transaction as: (1)an external transaction, (2)an internal transaction recorded as an adjusting journal entry,or (3)a closing entry.The company uses a perpetual inventory system.All prepayments are initially recorded in permanent accounts. -Sold merchandise to a customer in exchange for a promissory note.

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Question 2

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When the amount of revenue collected in advance decreases during an accounting period:

A) Accrual-basis revenues exceed cash collections from customers.
B) Accrual-basis net income exceeds cash-basis net income.
C) Accrual-basis revenues are less than cash collections from customers.
D) Accrual-basis net income is less than cash-basis net income.

E) A) and C)
F) None of the above

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Question 3

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The balance sheet can be considered a change or flow statement.

Davis Hardware Company uses a perpetual inventory system.How should Davis record the sale of merchandise,costing $620,and sold on account for $960?

Which of the following accounts has a normal debit balance?

Use the following to answer questions Using the chart of accounts provided,indicate by account number the account or accounts that would be debited and credited in the following transactions and indicate the type of transaction as: (1)an external transaction, (2)an internal transaction recorded as an adjusting journal entry,or (3)a closing entry.The company uses a perpetual inventory system.All prepayments are initially recorded in permanent accounts. -Accrued the interest earned but not collected on notes receivable.

Use the following to answer questions Using the chart of accounts provided,indicate by account number the account or accounts that would be debited and credited in the following transactions and indicate the type of transaction as: (1)an external transaction, (2)an internal transaction recorded as an adjusting journal entry,or (3)a closing entry.The company uses a perpetual inventory system.All prepayments are initially recorded in permanent accounts. -Accrued property taxes were paid.

Temporary accounts would not include:

Pat's Custom Tuxedo Shop maintains its records on the cash basis.During this past year Pat's collected $42,000 in tailoring fees,and paid $14,000 in expenses.Depreciation expense totaled $2,000.Accounts receivable increased $1,500,supplies increased $4,000,and accrued liabilities increased $2,500.Pat's accrual basis net income was:

Use the following to answer questions Using the chart of accounts provided,indicate by account number the account or accounts that would be debited and credited in the following transactions and indicate the type of transaction as: (1)an external transaction, (2)an internal transaction recorded as an adjusting journal entry,or (3)a closing entry.The company uses a perpetual inventory system.All prepayments are initially recorded in permanent accounts. -Purchased inventory on account.

Hughes Aircraft sold a four-passenger airplane for $380,000,receiving a $50,000 down payment and a 12% note for the balance.The journal entry to record this sale would include a:

Use the following to answer questions Using the chart of accounts provided,indicate by account number the account or accounts that would be debited and credited in the following transactions and indicate the type of transaction as: (1)an external transaction, (2)an internal transaction recorded as an adjusting journal entry,or (3)a closing entry.The company uses a perpetual inventory system.All prepayments are initially recorded in permanent accounts. -Collected cash on account from customers.

The Hamada Company sales for 2016 totaled $150,000 and purchases totaled $95,000.Selected January 1,2016,balances were: accounts receivable,$18,000;inventory,$14,000;and accounts payable,$12,000.December 31,2016,balances were: accounts receivable,$16,000;inventory,$15,000;and accounts payable,$13,000.Net cash flows from these activities were:

Listed below are five terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the correct term.

The balance in retained earnings at the end of the year is determined by retained earnings at the beginning of the year:

Claymore Corporation maintains its book on a cash basis.During 2016,the company collected $825,000 in fees from its clients and paid $512,000 in expenses.You are able to determine the following information about accounts receivable,supplies,prepaid rent,salaries payable,and interest payable: In addition,2016 depreciation expense on office equipment and furniture is $55,000. Required: Determine accrual basis income for 2016.

On December 31,2016,the end of Larry's Used Cars' first year of operations,the accounts receivable was $53,600.The company estimates that $1,200 of the year-end receivables will not be collected.Accounts receivable in the 2016 balance sheet will be valued at:

Dave's Duds reported cost of goods sold of $2,000,000 this year.The inventory account increased by $200,000 during the year to an ending balance of $400,000.What was the cost of merchandise that Dave's purchased during the year?

Cal Farms reported supplies expense of $2,000,000 this year.The supplies account decreased by $200,000 during the year to an ending balance of $400,000.What was the cost of supplies the Cal Farms purchased during the year?

Describe the difference between external events and internal events,and provide two examples of each.