Learn Accounting Understand Business: Course Review Answers

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1 Learn Accounting Understand Business: Course Review Answers 1. What type of accounting measures the activity of the company by looking at economic events regardless of when cash transactions occur? A. Cash Accounting B. Inventory Accounting C. Accrual Accounting D. Economic Accounting 2. When you borrow money to finance a home, how do you record the borrowing in a journal entry? A. Debit Cash, Credit Accounts Receivable B. Debit Accounts Receivable, Credit Accounts Payable C. Debit Accounts Payable, Credit Cash D. Debit Cash, Credit Accounts Payable 3. What are the parts of the statement of cash flows? D. None of the Above 4. What are the parts of the balance sheet? D. None of the Above 5. What are the parts of the Income Statement?

2 D. None of the Above 6. Which of the Following is NOT part of the Accounting Cycle? A. Transactions B. Financial Statements C. Trial Balance D. Inventory Count 7. Which of the following is a common adjustment for booking adjusting entries? A. Adjusting for Prepaids B. Adjusting for Interest C. Adjusting for Depreciation D. All of the Above are Common Adjustments 8. Which of the following information is not needed when calculating depreciation? A. Salvage Value B. Life of Asset C. Original Cost D. Sale Price of Asset 9. Which of the following is not a common inventory management method? A. FIFO B. MIFO C. LIFO D. Weighted Average 10. Assets - Liabilities =? A. Total Equity B. Total Income C. Total Expenses D. Net Amount Borrowed

3 11. What is the journal entry to book current year depreciation expense? A. Debit Accumulated Depreciation, Credit Asset B. Debit Depreciation Expense, Credit Asset C. Debit Depreciation Expense, Credit Accumulated Depreciation D. Debit Accumulated Depreciation, Credit Depreciation Expense 12. Which of the following is not found on a Multi-Step Income Statement? A. Sales B. Cost of Goods Sold C. Liabilities D. Sales, General, and Administrative Expense 13. Which of the following is a common reconciling item in bank/book reconciliations? A. Outstanding Checks B. Deposits in Transit C. Bank Charges D. All of the Above 14. The Current Ratio is found by dividing Current Assets by: A. Current Receivables B. Current Cash on Hand C. Current liabilities D. Total Liabilities 15. Which of the following account will be reset to zero after the books are closed? A. Expenses B. Liabilities C. Assets D. Equity 16. True or False: The central purpose of the trial balance is to ensure debits equal credits. TRUE

4 17. At the end of the accounting cycle, where does Net Income for the period flow to? A. Revenues B. Assets C. Retained Earnings D. Cash 18. Which of the following is not a common payroll tax? A. FICA Tax B. Federal Income Tax C. State Income Tax D. Sales Tax Book the appropriate journal entries for the following scenarios: 19. On 1/1/2014, You open up a bakery by buying an oven for $2,000 on account. Payment is due 2/1/2014. Equipment (Oven) 8,000 Accounts Payable 8, You sign a lease to rent out a space. The lease terms calls for rent of $1,000/month and requires you to pay 6 months worth in advance. 21. Prepaid Rent 6,000 Cash 6, You hire two employees, one as a baker and one as a cashier. They are hired for 8.00/hour with salary payable on the first of each month. No Entry Needed

5 23. You buy baking utensils for $5,000 by paying cash. Supplies Expense 5,000 Cash 5, After the first week of business, you have made $1,000 total in sales. The sales were all made on credit. A/R 1,000 Sales 1, You are paid for the sales you made on credit. Cash 1,000 A/R 1, At 1/31, you find that your employees have worked a total of 120 hours. Salaries Expense 960 Salaries Payable 960