Sophia Accounting Fundamentals UNIT 1 ALL CHALLENGES : Overview of Accounting

Unit 1 Challenge 1 Which of the following statements is true regarding the regulation of ethics in accounting?  a.) The Sarbanes-Oxley Act determines the standards of financial reporting for state and local government.  b.) The private sector proposed the Sarbanes-Oxley Act as a way to regulate competition within industries.  c.) The IRS created the Sarbanes-Oxley Act in order to prosecute companies who did not pay taxes.  d.) Unethical behavior by major companies prompted the government to create the Sarbanes-Oxley Act. Which of the following statements is true regarding the purpose of the Sarbanes Oxley-Act?  a.) The Sarbanes-Oxley Act regulates financial reporting to prevent fraud or misconduct.  b.) The Sarbanes-Oxley Act standardizes accounting practices across all nations.  c.) The Sarbanes-Oxley Act develops and enforces securities laws.  d.) The Sarbanes-Oxley Act requires financial statements to be relevant, reliable and comparable. Which of the following was created by the government in response to unethical behavior by companies such as Enron and WorldCom?  a.) Generally Accepted Accounting Principles  b.) International Financial Reporting Standards  c.) The Sarbanes-Oxley Act  d.) The Financial Accounting Standards Board Financial reporting standards for state and local government are determined by the governing body known as __________, while international standards are compiled in the governing principles known as __________.  a.) FASB; GAO  b.) SEC; GAAP  c.) AICPA; IRS  d.) GASB; IFRS The governing body __________ is responsible for developing the US governing principles known as __________.  a.) SEC; GAO  b.) IRS; IFRS  c.) FASB; GAAP  d.) GASB; AICPA The __________ is the governing body which investigates and reports on the use of public funds while the __________ is the governing body responsible for collecting taxes.  a.) GAO; IRS  b.) IFRS; FASB  c.) AICPA; GAAP  d.) SEC; GASB Frank and Laura dedicated $250,000 to one of their clients, hoping to receive returns in addition to that $250,000. Frank and Laura's role is that of a(n) __________.  a.) investor  b.) controller  c.) shareholder  d.) auditor Fred is responsible for completing an objective analysis of the accounting processes and financial information for a company. Fred's role is that of a(n) __________.  a.) controller  b.) auditor  c.) bookkeeper  d.) accountant Janice works part-time and her sole responsibility is to document all of the accounting events that take place. Janice's role is that of a(n) __________.  a.) accountant  b.) controller  c.) auditor  d.) bookkeeper Which of the following scenarios correctly describes a LLC?  a.) Kim is not held personally responsible for the liabilities of her bakery.  b.) Jeff uses a 990 form when filing taxes for his employer's organization.  c.) When filing taxes for his gardening business, Pierre uses an 1120S form.  d.) Shares of Jose's retail business cannot be purchased or traded publicly. Which of the following scenarios correctly describes a non-profit organization?  a.) Mike's shoe store does not sell stocks that are publicly traded.  b.) Lonnie uses the profits of his organization to advance its mission.  c.) Sally and her salon are treated the same from a legal perspective.  d.) Bernie is protected from liability for anything beyond his $5,000 investment. Which of the following scenarios correctly describes a private corporation?  a.) Jessica is liable for the total $10,000 invested in her company, but she is not accountable for her partner's behavior.  b.) Craig's sporting goods store does not allow investors to purchase or publicly trade shares.  c.) Brian's company does not pay taxes, but it reinvests income to meet its objectives.  d.) LaShonda and her company are treated the same from a legal perspective. Which of the following statements describes liabilities?  a.) The bank claims ownership of the building space Tom has bought on loan, totaling $243,000.  b.) Lauren can claim ownership of the restaurant equipment and delivery vehicles, totaling $28,000.  c.) Barry spends $38,000 annually on advertising to increase profits.  d.) The profits of all three of Karen's pizzerias total $162,000. Which of the following statements describes assets?  a.) Business resources that are owned or can be claimed by others  b.) Business resources that are owned or that can be claimed by the owner  c.) The financial output incurred by a company to create profits  d.) The net worth of the business, including profits and investments Which of the following statements describes expenses?  a.) Susan recorded $82,000 as profit last year.  b.) Lori paid $12,500 to the bank for her business mortgage payment last year.  c.) Terry recorded $64,000 in costs to operate his pizzerias last year.  d.) Rob calculated the worth of his restaurant equipment to total $27,000. Which of the following is true regarding temporary accounts?  a.) These accounts record the accumulated profits throughout the life of a business.  b.) After determining which assets can be claimed by the owner, these accounts track resources that are owned by others.  c.) After closing at the end of a period, these accounts are reopened at the beginning of the next period.  d.) A rolling balance carries over from one accounting period to the next accounting period. Kyle matched expenses with revenue earned in the current period. Kyle was completing the __________ phase of the accounting cycle.  a.) journalizing  b.) closing  c.) adjusting  d.) analyzing Preparing financial statements is which phase of the accounting cycle?  a.) Reporting  b.) Posting  c.) Closing  d.) Analyzing Unit 1 Challenge 2 If liabilities are debited, which of the following situations occurred?  a.) The bakery earns interest on its investments.  b.) The bakery pays back a bank loan.  c.) The bakery buys five new standing mixers on account.  d.) The bakery issues 100 shares of stock. If equity is credited, which of the following situations occurred?  a.) The company pays cash to buy two new forklifts.  b.) The owner invests $10,000 in the company to help it expand.  c.) A client rents 10 storage units for three months on account.  d.) The company downsizes by selling one building of storage units. If revenues are credited, which of the following situations occurred?  a.) The company runs a promotion for $25 off your first rental.  b.) The company has to pay $500 for repairs to its car lift.  c.) The company takes out a $5,000 loan from the bank.  d.) The company earns $1,000 in interest on its investments. _________ decrease with credit and have a natural debit balance.  a.) Liabilities  b.) Assets  c.) Revenues  d.) Equity Expenses have a natural _____ balance and increase with a debit.  a.) debit  b.) zero  c.) positive  d.) credit Revenues decrease with a debit and have a natural _____ balance.  a.) credit  b.) negative  c.) debit  d.) zero Which illustration below correctly shows the recording of a cash sale on an account?  d.) Which illustration below correctly shows the recording of paying $800 for rent? c) Sarah was recording an expense on a T-account. Cash expenses totaled $1,200, and expenses paid by credit card or check totaled $9,000. Which of the illustrations below correctly shows the recording of an expense on an account? d) A corporate customer stopped by to check in for her reservation for four nights at Redwood Falls Inn. Kevin had already charged the whole amount for the customer's stay to the corporate account, but the customer wanted to pay a $275 deposit for the room. Which T-Account or T-Accounts correctly show how to record a deposit for a sale on account? c) Before closing the office for the day, Lisa took a phone call from a corporate customer who wanted to make a reservation for three nights at Wildwood Inn. The total cost came to $473.00. The customer asked Lisa to charge the total amount to the company's account. Which T-Account or T-Accounts listed below correctly show how a sale on account should be recorded? d) A woman stopped in at the hotel lobby to see if there was room for her tonight and the next night. The hotel manager, Barbara, confirmed that she did have a vacancy. The total cost for the two nights totaled $225.00. The customer paid the total balance using cash. Which T-Account or T-Accounts listed below correctly show how a cash sale should be recorded? b) Which of the following characteristics is associated with a general ledger?  a.) It is the initial documentation of a financial transaction as it originates.  b.) It is categorized by account.  c.) This is also known as the original book of entry.  d.) If it is May, then the accounting transactions for February, March, April and May are listed. Which of the following characteristics is NOT associated a general journal?  a.) Events are listed in chronological order.  b.) It is used daily to record transactions.  c.) Transactions are ordered from greatest to smallest.  d.) The amount credited equals the amount debited. Which of the following characteristics is associated with a general journal?  a.) There are different accounts for accounts receivable and accounts payable.  b.) Tuesday’s records would follow Monday’s records.  c.) Each account contains a rolling balance.  d.) This is also known as the posting book. John owns an apartment complex and hires a roofing contractor to replace a section of a roof on one of the buildings. Which entry correctly shows John paying the contractor $1,500 cash for the future expense of replacing a section of the roof? b) Which of the following journal entries illustrates a situation where an owner writes him/herself a check for $2,000 from the business? d) Dr. Mark Scholz places an order to purchase $300 worth of supplies that he will use in his animal hospital over the next six months. The supplier's terms are COD (Cash on Delivery). Which accounting transaction below is correct? b) On January 9, $500 was paid towards a purchase of Office Supplies on account for $1,000. What is the journal entry for this transaction? b) On January 2, a company purchases office supplies on account for $1,000. What would the journal entry be? b) On January 15, the owner of a sole proprietorship took out $2,000 for their personal use. What would the journal entry for this transaction be? b) General Journal Page 1 Date Account & Explanation P.R. Debit Credit Mar 5 Cash 105 $500 Unearned Revenue 101 $500 How would you post the above journal entry?  a.) The cash entry would be posted as a credit and the unearned revenue as a debit in the amount of $500 to the general ledger.  b.) The unearned revenue amount would be subtracted from the cash amount and then posted to the general ledger.  c.) The cash entry would be posted as a debit and the unearned revenue as a credit in the amount of $500 to the general ledger.  d.) The cash and the unearned revenue amounts of $500 would be summed and posted to the Income Summary. General Journal Page 1 Date Account & Explanation P.R. Debit Credit Feb 4 Prepaid Expense 105 $300 Cash 101 $300 What does the above entry tell us?  a.) Prepaid expense was posted as a debit to account 105 and Cash was credited to account 101 in the general ledger.  b.) The Expense account should be credited and the Cash account should be debited.  c.) Prepaid expense was posted as a credit to account 105 and Cash was debited to account 101 in the general ledger.  d.) The Cash and the Expense were posted on page 1. General Journal Page 1 Date Account & Explanation P.R. Debit Credit Jan 25 Accounts Payable 201 $500 Cash 101 $500 Paid Accounts Payable in full. How would we post the above journal entry?  a.) Cash is debited and Accounts Payable is credited in the Income Summary.  b.) Posting a debit to the Cash account and a credit to the Accounts Payable.  c.) Accounts Payable is debited and Cash is credited in the General Ledger.  d.) Accounts Payable is debited and Cash is credited in the General Journal. On January 9, $500 was paid towards a purchase of office supplies on account for $1,000. What are the posting entries for this transaction? d) On January 15, the owner of a sole proprietorship withdrew $2,000 cash for personal use from the business. How would this entry be posted to the ledger? b) A business purchases office supplies with cash in the amount of $15,000 on January 1. What would the posting entries be? d)