Exam 3: The Accounting Cycle

The following information comes from Simon Company's year-end financial statements: Sales $250,000, Cost of goods sold $100,000, Net income $12,500 and Total assets $187,500.The profit margin ratio for the year is closest to?

Which of the following statements about straight-line depreciation is not true?

Which of the following is an example of an unearned revenue adjusting entry?

Which of the following is an example of an adjusting entry?

Under accrual accounting, which of the following statements about revenue recognition is true?

Dogwood Florist just opened for business on March 1^st.The following events happened on March 1^st related to opening the business. i) Paid $2,000 for two months rent. ii) Paid $24,000 for a glass-door fridge to store the flowers in.It is expected to last 10 years.iii) Received $6,000 in flowers for inventory, to be paid for on April 15^th. iv) Received a down payment of $300 as a deposit on a wedding they were doing the flowers for.The wedding is on April 10^th and the balance of $350 will be paid then. v) Hired a part-time sales clerk at $8.50/hr to help on the weekends.By the end of the month she had worked 15 hours and been paid for 10 of them. Required: A) Using journal entries, record the events of March 1^st. B) Record any adjusting entries that would be necessary on March 31^st for Dogwood's first financial statements.

Why do accountants use the matching principle when deciding how to record economic events? Briefly explain the matching principle as it applies to revenues and expenses.

Which of the following would be used to record the purchase of a new piece of equipment during the period?

Manitoba Ltd lent $100,000 to Winnipeg Inc at an interest rate of 5%.Both the loan and all the interest are to be repaid after two years.At the end of the first year what is the entry required on Manitoba's books?

A company made the following entry in their books: Dr.Depreciation expense $15,000, Cr.Accumulated depreciation $15,000.What is the event that most likely occurred?

Canada Corporation has hired a new sales manager to start work next month.She will earn $65,000 per year plus a bonus to be determined at year-end.At the time of the hiring, how would the event be recorded?

The recording of expenses in the same period as that in which the revenue is recorded is the application of which accounting concept?

Which of the following statements about the accounting cycle is true?

Indicate how each of the following transactions will affect the balance sheet equation. A) Company purchases $10,000 worth of goods on credit. B) Company signs a lease and pays the first month's rent of $750. C) Company pays $500 for an ad that appears in the local newspaper. D) Company sells $15,000 worth of goods during the first month; $12,000 for cash and $3,000 on credit.E) Company pays $10,000 for the goods bought in A). F) Company collects $2,000 of the amount owing from customers. G) Owner pays herself a $500 dividend from the first month's earnings.

At the end of the month BBB Ltd determined that the cost to them of goods that had been sold during the month was $125,000.How would this information be recorded?

The manager preparing the financial statements is trying to reduce net income to keep income taxes as low as possible.Which of the following accounting decisions could he use to decrease income?

Which of the following normally has a debit balance?

Li Chan is a friend of yours from university.She recently decided to open her own computer consulting business and has contracted her services to a number of local retailers.She is paid a monthly fee for her services.Li has just received her first set of financial statements from her accountant and is quite upset.The statements show a cash balance of $3,600, but net earnings of only $500.She has written you a letter asking you whether such a situation is possible, or whether she should find another accountant. Required: Write a short letter to your friend and answer her completely, but briefly.Use proper form.

A company reported net income of $22,500, had capital stock of $200,000 and retained earnings of $150,000.The ROE would be closest to?

Which of the following is a temporary account?