CP Accounting Mid-Term Exam Review! Part I: Vocabulary Account number Accounting cycle Account classification Accounts Payable Accounts Receivable Accrual Accrued wages Adjusting Entries Assets Book Value Business Entity Capital Cash Chart of Accounts Closing Entries

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Review Compound entry Contra Account Cost principle Credit Creditor Cross reference Debit Depreciation Double Declining Depreciation Double Entry Accounting Equity Expenses Fair market value Financial statement

Fiscal year Fundamental accounting equation General Ledger Income statement Income Summary Journal Journalizing Ledger Account Liabilities Matching Principle Net income Net Loss Normal balance Owner’s Equity

Post-Closing Trial Balance Posting Real/Permanent Accounts Revenues Separate Entity Slide error Sole proprietorship Straight Line Depreciation Temporary/nominal accounts Transposition error Trial balance Withdrawal Work sheet

____1.

Something a company owns- assets

____2.

Assets minus liabilities

____3.

The numbers assigned to accounts according to the chart of account- act numbers

____4.

The book in which a person makes the original record of a business transaction; commonly referred to as a book of original entry- Journal

____5.

A, L, OE, R, E- account classification

____6.

Listing of the ending balances of all ledger accounts that proves the equality of total debits and credits- trial balance

____7.

An account that is deducted from another account (ex. Accumulated Depreciation)- contra account

____8.

The cost of an asset minus its accumulated depreciation- BOOK VALUE

____9.

A type of business owned by one owner. SOLE PROPRIETORSHIP

____10.

An account brought into existence in order to have a debit and credit in each closing entry. This account is closed with closing entries. INCOME SUMMARY

____11.

The listing of final balances of the real accounts at the end of a fiscal period.- PCTB

____12.

The loss of value in an asset at a double rate.- DOUBLE DECLINING DEP.

____13.

The side of the account where it increases. NORMAL

____14.

The financial statement that first indicates if there is a net income or loss INCOME STATEMENT

____15.

A non-permanent form used to organize adjustments and prepare for financial statements. WORKSHEET

- owner’s equity

*Study all vocab terms on this page. This is the same word bank from the midterm exam. On the next page, please handwrite a list of 10 terms and definitions. Please choose the words that you do not know off hand.

CP Accounting Mid-Term Exam Review!

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Part 2 True/False ____16.

The accounting equation is most often stated as Assets + Liabilities = Owner’s Equity.

____17.

When two asset accounts are changed (USED) in a transaction, ONE MUST increase and ONE MUST decrease.

____18.

Detailed information about changes in owner’s equity is needed by owners and managers to make sound business decisions.

____19.

When items are bought and paid for at a future date, another way to state this is to say these items are bought on account.

____20.

A transaction for the sale of goods or services results in a decrease in owner’s equity.

____21.

Keeping separate the financial records for a business and for its owner’s personal belongings is an application of the Business Entity accounting concept.

____22.

An expense is a decrease in owner’s equity resulting from the operation of a business.

____23.

Payments for advertising, equipment repairs, utilities, and rent are liabilities.

____24.

When an owner withdraws cash from the business, the transaction affects both assets and owner’s equity.

____25.

A withdrawal is an expense.

____26.

The balance of an account increases on the same side as the normal balance side.

____27.

Asset accounts decrease on the credit side.

____28.

Each transaction changes the balances in at least two accounts.

____29.

Common accounting practice is to record withdrawals as debits directly in the owner’s capital account.

____30.

The normal balance side of an Accounts Receivable account is a debit.

____31.

Accounts Payable accounts are increased with a debit.

____32.

Decreases to liability accounts are recorded on the credit side.

____33.

A general journal page is complete when there is insufficient space to record any more entries.

____34.

To correct an error in a journal, one can simply erase the incorrect item and write the correct item.

____35.

A transaction recorded in a journal is not considered a permanent record.

____36.

In double-entry accounting, each transaction affects at least two accounts.

____37.

The account number is placed in the Post. Ref. column of the journal as the last step in the posting procedure.

____38.

The post reference should always be recorded in the journal’s Post. Ref. column before amounts are recorded in the ledger.

CP Accounting Mid-Term Exam Review!

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Part 3: Choose the best answer for each of the following questions. ____39.

To become a CPA, an individual a. must have a certain number of college credits in accounting courses. b. pass the Uniform CPA Examination. c. fulfill the experience requirements of the state of practice. d. All of the above.

____40.

Examples of assets are a. Cash and accounts receivable b. Cash and revenue c. Cash and rent expense. d. Investments by the owner and revenue.

____41.

When the owner invests cash in a business, a. assets and revenue increase. b. assets increase and owner's equity decreases. c. liabilities decrease and owner's equity increases. d. assets and owner's equity increase.

____42.

When equipment is purchased on credit, a. assets and liabilities increase. b. assets increase and liabilities decrease. c. assets and owner's equity increase. d. assets and expenses increase.

____43.

When the firm pays its utility bill upon receipt of that bill a. assets and owner's equity increase. b. assets decrease and expenses increase. c. assets and liabilities decrease. d. expenses increase and owner's equity increases.

____44.

A net loss results a. when expenses are greater than revenue. b. when assets are greater than liabilities. c. when revenue is greater than expenses. d. when expenses are greater than assets.

____45.

The income statement shows a. the financial position of a business on a specific date. b. revenue and owner's equity. c. the results of operations for a period of time. d. the total value of the business.

CP Accounting Mid-Term Exam Review!

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____46.

Assume that, after analyzing its business transaction, a firm has the following ending balances: accounts payable $3,400, accounts receivable $2,000, cash $1,000, capital $3,600, equipment $3,000, prepaid rent $600, and supplies $400. What is the total amount of assets that will be reported on the firm's balance sheet? a. $6,400 b. $7,000 c. $9,800 d. $14,000

____47.

When J. Simmons, the owner, invests in her business, the transaction would be entered on the a. right side of the J. Simmons, Capital T account. b. left side of the J. Simmons, Capital T account. c. right side of the Cash T account. d. left side of the J. Simmons, Capital T account and the right side of the Cash T account.

____48.

On November 15, Duffy Company issued a check for $6,000 to pay rent for the months of December and January. That business transaction would be entered on the a. right side of the Cash account and the left side of the Rent Expense account. b. right side of the Cash account and the left side of the Prepaid Rent account. c. left side of the Cash account and the right side of the Rent Expense account. d. left side of the Cash account and the right side of the Prepaid Rent account.

____49.

The normal balance of an account is the a. increase side of the account. b. decrease side of the account. c. the left side of the account. d. the right side of the account.

____50.

Which of the following types of accounts normally have debit balances? a. Assets and revenues b. Assets, Liabilities, and owner’s equity c. Expenses and assets d. Liabilities and owner’s equity

____51.

Which of the following groups contain only accounts that normally have credit balances? a. Accounts Receivable and Fees Income b. Salaries Expense and Accounts Payable c. Fees Income and John Smith, Capital d. Accounts Payable and Equipment

____52.

Which of the following increase owner's equity? a. Expenses b. Revenue c. Withdrawals

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____53.

The three financial statements are linked together because the a. net income from the income statement is used on the statement of owner's equity and the ending balance of the capital account, computed on the statement of owner's equity, is used on the balance sheet. b. net income from the statement of owner's equity is used on the income statement and the ending balance of the capital account, also computed on the statement of owner's equity, is used on the balance sheet c. net income from the income statement is used on the statement of owner's equity and the ending balance of the capital account, computed on the balance sheet, is used on the statement of owner's equity. d. net income from the balance sheet is used on the income statement and the ending balance of the capital account, computed on the statement of owner's equity, is used on the balance sheet.

____54.

Which of the following accounts is not a permanent account? a. Cash b. Accounts payable c. Salaries expenses d. Thomas Bernard, Capital

____55.

When an entry is made in the general journal, a. Assets should be listed first b. Accounts to be debited should be listed first c. Accounts to be increased should be listed first d. Accounts may be in any order

____56.

The journal entry to record the sale of services on credit should include a a. debit to Accounts Receivable and a credit to Capital. b. debit to Cash and a credit to Accounts Receivable. c. debit to Fees Income and a credit to Accounts Receivable. d. debit to Accounts Receivable and a credit to Fees Income.

____57.

The journal entry to record the payment of a monthly utility bill would include a a. debit to Utilities Expense and a credit to Capital. b. debit to Capital and a credit to Cash. c. debit to Utilities Expense and a credit to Cash. d. debit to Utilities Expense and a credit to Accounts Payable.

____58.

The journal entry to record the receipt of cash from clients on account would include a a. debit to Fees Income and a credit to Cash. b. debit to Cash and a credit to Accounts Receivable. c. debit to Accounts Receivable and a credit to Cash.

____59.

The journal entry to record the withdrawal of cash by Sue Snow, the owner, to pay a personal utility bill would include a a. debit to Sue Snow, Capital, and a credit to Cash. b. debit to Utilities Expense and a credit to Cash. c. debit to Sue Snow, Drawing and a credit to Cash. d. debit to Sue Snow, Drawing and a credit to Utilities Expense.

CP Accounting Mid-Term Exam Review!

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____60.

If a transaction is properly analyzed and recorded, a. one account balance will increase and another will decrease. b. one asset account will be debited and one liability account will be credited. c. the total amount debited will equal the total amount credited.

____61.

The process of transferring data from the journal to the ledger is known as a. Journalizing b. Ledgering c. Posting

____62.

An error would be corrected by a. neatly crossing out the incorrect item and writing the correct data above it. b. making a correcting entry to correct the erroneous entry. c. erasing the journal entry or the posting in the ledger accounts. d. Either A or B.

____63.

Centrum Services purchased $36,000 worth of equipment. The equipment has an estimated useful life of five years and no salvage value. Using the straight-line method, the depreciation for the first month is a. $600 b. $720 c. $60 d. $12

____64.

Johnson’s Cleaning Services purchased $42,000 worth of equipment. The equipment has an estimated useful life of four years and no salvage value. Using the double declining balance method of depreciation, the depreciation for the first year is a. $1,750 b. $7,500 c. $10,500 d. $21,000

____65.

On a worksheet, the adjusting entry to account for depreciation of equipment consists of a a. debit to Depreciation Expense and a credit to Equipment. b. debit to Depreciation Expense and a credit to Accumulated Depreciation. c. debit to Equipment and a credit to Accumulated Depreciation. d. debit to Accumulated Depreciation and a credit to Equipment.

____66.

On November 27, 2010, the company paid $24,000 insurance in advance for the six-month period from December 2010 through May 2011. On December 31, 2010, the adjustment for expired insurance would include a a. $4,000 debit to Prepaid Insurance. b. $4,000 credit to Insurance Expense. c. $24,000 debit to Insurance Expense. d. $4,000 credit to Prepaid Insurance.

____67.

The adjusting entry to account for use of supplies consists of a a. debit to Supplies Expense and a credit to Supplies. b. debit to Supplies and a credit to Supplies Expense. c. debit to Supplies and a credit to Accumulated Depreciation. d. debit to Accumulated Depreciation and a credit to Supplies.

CP Accounting Mid-Term Exam Review!

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____68.

If an account has a debit balance in the Trial Balance section of the worksheet, the amount (that is, the adjusted account balance) that will be entered in the Adjusted Trial Balance section a. is the debit balance in the Trial Balance section. b. depends on the nature of the entry in the Adjustments section. c. would be computed by subtracting the entry in the Adjustments section to that debit balance. d. would be computed by adding the entry in the Adjustments section to that debit balance.

____69.

After all account balances have been transferred from the Adjusted Trial Balance section of the worksheet to the financial statement sections, the Income Statement section of the worksheet includes the following totals. The Credit column total is $120,000 and the total of the Debit column is $80,000. The Income Statement section of the worksheet a. is now complete. b. would be completed by entering $40,000 in the Credit column with the words "Net Income" in the Account Name column. c. would be completed by entering $40,000 in the Debit column with the words "Net Income" in the Account Name column. d. must have been completed in error since the two columns do not balance.

____70.

If adjustments are entered on the worksheet, a. the worksheet then becomes part of the permanent accounting record. b. each adjustment must be journalized and posted to the general ledger accounts. c. each adjustment can be posted to the general ledger accounts directly from the worksheet. d. the accounting cycle is complete.

____71.

The Fees Income account is closed by a. debiting Cash and crediting Fees Income. b. debiting Fees Income and crediting Income Summary. c. debiting the owner's capital account and crediting Fees Income. d. debiting Income Summary and crediting Fees Income.

____72.

The owner's drawing account is closed by a. debiting the owner's drawing account and crediting the owner's capital account. b. debiting the owner's capital account and crediting the owner's drawing account. c. debiting Income Summary and crediting the owner's drawing account. d. debiting the owner's drawing account and crediting Income Summary.

____73.

The entry to close the Income Summary account may include a. a debit to Income Summary and a credit to the owner's capital account. b. a debit to Income Summary and a credit to Cash. c. a debit to Cash and a credit to Income Summary. d. a debit to Income Summary and a credit to the owner's drawing account.

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____74.

The entry to transfer a net loss to the owner's capital account would include a debit to a. the owner's capital account and a credit to Cash. b. the owner's drawing account and a credit to the owner's capital account. c. Income Summary and a credit to the owner's capital account. d. the owner's capital account and a credit to Income Summary.

____75.

Which of the following statements about the interpretation of the financial statements is not correct? a. Interpreting the financial statements can only be performed by auditors. b. Interpreting the financial statements is the final step in the accounting cycle. c. To interpret the financial statements means to understand and explain the meaning and importance of information in accounting reports. d. All of the above statements are correct.

____76.

Which of the following statements correctly summarizes the order of the steps in the accounting cycle? a. Analyze transactions, Post the journal entries, Journalize the transactions, Prepare a worksheet, Prepare financial statement, Record adjusting entries, Record closing entries, Prepare a post-closing trial balance, and Interpret the financial information. b. Journalize the transactions, Post the journal entries, Prepare a worksheet, Prepare financial statement, Analyze transactions, Record adjusting entries, Record closing entries, Prepare a post-closing trial balance, and Interpret the financial information. c. Analyze transactions, Journalize the transactions, Post the journal entries, Prepare a worksheet, Prepare financial statement, Record adjusting entries, Record closing entries, Prepare a post-closing trial balance, and Interpret the financial information. d. Analyze transactions, Journalize the transactions, Post the journal entries, Record adjusting entries, Record closing entries, Prepare a worksheet, Prepare financial statement, Prepare a post-closing trial balance, and Interpret the financial information.

Part III –Normal Balances: For each of the following accounts indicate the normal balance. For Debit- fill in A, For Credit, fill in B ____77.

Insurance Expense- Debit

____78.

Accounts Payable- Home Gardens- Credit

____79.

Equipment- debit

____80.

Lucas, Drawing- debit

____81.

Income from Services- credit

Part IV- Account Classifications: For each of the following accounts, label them as follows: Asset (a), Liability (b), Owner’s Equity (c), Revenue (d), Expenses (e) ____82.

Wages Payable- liability

____83.

Accumulated Depreciation- Equipment--- ASSET (CREDIT BALANCE)

____84.

Depreciation Expense- Equipment- Expense

____85.

Income Summary- OE

____86.

Services Income-REV

CP Accounting Mid-Term Exam Review!

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Part VI – Journalizing - Journalize the following transactions for Mars Company in the general journal (page 19). Include descriptions for each entry. For services, use the account “Sales Revenue”. March

5

Sold Services for $600.00 cash, Receipt 46.

7

Kenyon purchased supplies on account from Zarta Supplies, $400.00, I590.

9

Paid the rent for the month, $950.00. C122

12

Sold services on account to Abraham Menendez, SI489, for $350.00.

15

Paid an outstanding bill to Snowplowers-R-Us for money owed- $450.00, check 123.

18 Purchases Equipment ($590.00) and Truck (12,000.00) from Todd’s Trucking, paying $5,000.00 down and the rest to be paid at a later date. Sales invoice 6709. 25

P. Kenyon, the owner invested an additional $10,000.00 in the business, Memo 2.

27

Paid the telephone bill upon receiving it, $120.00, Check 124.

31

Kenyon withdrew $35.00 for his own personal use, c125.

Part VII – Worksheet – Prepare a worksheet & Journalize Adjusting Entries Landon Deliveries is a service business owned by K. Landon. The following are the trial balances given on October 31, 20--. Complete the worksheet and journalize the adjusting entries on page 6 from the data below. Trial Balance as of October 31, 20-Cash Supplies Prepaid Insurance Equipment Accumulate Deprec. Equip Truck Accumulated Deprec. Truck Accounts Payable Wages Payable Landon, Capital Landon, Drawing Income from Services Wages Expense Rent Expense Utilities Expense Telephone Expense Miscellaneous Expense

Adjustment Data $ 45,632 120 $ 1,266 $ 6,000 $ 1,560 $ 2,300 $ 0 $ 2,659 $ 1,000 $ 15,444 $ 2,740 $ 40,230 $ 1,222 $ 690 $ 500 $ 333 $ 90

Data for the year-end adjustments are as follows: a. Wages accrued at October 31, $800. b. Insurance expired during the month, $1000. c. Depreciation of equipment during the month, $1700. d. Depreciation of the truck during the month, $1,500. e. Supplies on hand at the end of the month, $80.

CP Accounting Mid-Term Exam Review!

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Part VIII– Financial Statements Prepare the 3 Financial Statements using the worksheet for Sisco Enterprises shown below: Income Statement, Statement of Owner’s Equity, and a Balance sheet for Sisco Enterprises for the month of October 20--. There were no additional investments during the month.

Part IX – Journalizing and Posting Closing Entries – A partial worksheet is shown for Randall Rakes below. Please complete the closing entries on the journal form- page 3, post these entries to the general ledger, and complete a Post-Closing Trial Balance. (Note- on the exam you are only responsible for the 4 closing entries and the post-closing trial balance. The ledger is there to help you but will not be graded/printed. If you can use the T-charts to calculate ending capital for the PCTB there will be no need for a general ledger.) Randall, Capital

Income Summary