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Exam 2: Review of the Accounting Process

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Question 21

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Examples of external transactions include all of the following except:

A) Paying employee salaries.
B) Purchasing equipment.
C) Depreciating equipment.
D) Collecting a receivable.

E) A) and C)
F) C) and D)

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Question 22

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Ace Bonding Company purchased merchandise inventory on account.The inventory costs $2,000 and is expected to sell for $3,000.How should Ace record the purchase?

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Question 23

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Prepare an income statement for China Tea Company for the year ended December 31,2016.

The post-closing trial balance contains only permanent accounts.

Accruals occur when cash flows:

Use the following to answer questions The December 31,2016 (pre-closing)adjusted trial balance for Kline Enterprises was as follows: Required: Assuming no income taxes,compute the following,and place your answer in the space provided: -Kline's 12/31/16 total current assets:

Mary Parker Co.invested $15,000 in ABC Corporation and received capital stock in exchange.Mary Parker Co.'s journal entry to record this transaction would include a:

On June 1,Royal Corp.began operating a service company with an initial cash investment by shareholders of $2,000,000.The company provided $6,400,000 of services in June and received full payment in July.Royal also incurred expenses of $3,000,000 in June that were paid in August.During June,Royal paid its shareholders cash dividends of $1,000,000.What was the company's income before income taxes for the two months ended July 31 under the following methods of accounting?

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. -Received payment for services to be performed next year.

Carolina Mills purchased $270,000 in supplies this year.The supplies account increased by $10,000 during the year to an ending balance of $66,000.What was supplies expense for Carolina Mills during the year?

The income statement summarizes the operating activity of a firm at a particular point in time.

What is the difference between permanent accounts and temporary accounts,and why does an accounting system have both types of accounts?

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 purpose of closing entries is to transfer:

In its first year of operations Best Corp.had income before tax of $500,000.Best made income tax payments totaling $210,000 during the year and has an income tax rate of 40%.What was Best's net income for the year?

What is the purpose of the statement of cash flows? List the three major categories of cash flows and give an example of a cash transaction for each category.

Adjusting journal entries are recorded at the end of any period when financial statements are prepared.

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 a note receivable at maturity,including the interest that had already been accrued.

When converting an income statement from a cash basis to an accrual basis,cash received for services:

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.