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ALEKS Accounting Answer Key
Yes, we will be discussing all ALEKS Accounting topics including all previously asked questions.
Q. Accounts that normally have a credit (Cr.) balance
Ans: Liabilities, Revenues, and Equity.
Ans: Income is generated through providing services or products to customers. When revenue is generated, a revenue account is increased. Example: service revenue, rent revenue, etc…
Ans: Recorded when items are used to operate the business. Expenses decrease Net Income, which in turn decreases Stockholders’ Equity. Examples: Utilities Expense, Rent Expense, Insurance Expense, and Wages Expense.
Q. Other Changes to Stockholders’ Equity (Other than Exp. and Rev.)
Ans: Issuance of Stock and Dividends.
Q. Issuance of Stock
Ans: When the company sells the additional stock. Issuance of a stock increases stockholders’ equity but is not a revenue or expense account.
Ans: The Dividends account is a temporary stockholders’ equity account used to accumulate the amount of cash paid to the stockholders. A dividend decreases stockholders’ equity but is not a revenue or expense account.
Q. Items that do not cause changes to stockholders’ equity
Ans: Assets and Liabilities
Ans: Assets do not cause stockholders’ equity to increase or decrease. Examples: Cash, Accounts Receivable, Inventory, Prepaid Insurance, Supplies, Land, Buildings, and Equipment.
Ans: Liabilities do not cause stockholders’ equity to increase or decrease. Examples: Accounts Payable, Notes Payable, Deferred Revenue, and Wages Payable
Q. Solving for Net Income
Ans: Net change in retained earnings = Net income – Dividends
Net income = Dividends + Net change in retained earnings
Q. Income Statement
Ans: The income statement is used to show all revenue earned and all expenses incurred over a specific period of time. The statement reports the net income (or net loss) as the difference between total revenues and total expenses.
Revenues – Expenses = Net Income
Q. Stockholders’ equity can change in 4 different ways:
1.) The corporation Issues Stock,
2.) The corporation Pays Dividends,
3.) Revenues are earned
4.) Expenses are incurred
Q. Under the accrual basis system of accounting:
Ans: Revenue is recognized when the future cash to be received has been earned (but not necessarily received; it may be owed to the entity). Service Revenue represents revenue earned from work completed. Service Revenue is thus one of four ways that stockholders’ equity can change.
Q. Accounts that normally have a debit (Dr.) balance
Ans: Assets, Expenses, and Dividends.
Q. Balance Sheet
Ans: The balance sheet lists the balances in the Assets, Liabilities, and Stockholders’ Equity accounts at a specific point in time. It proves that the total assets are equal to the total liabilities and stockholders’ equity on that specific date.
Assets = Liabilities + Capital Stock + Retained Earnings
Q. Statement of Changes in Retained Earnings:
Ans: Shows changes in retained earnings over a specific period of time.
Retained earnings (beginning balance) + Net income – Dividends = Retained earnings (ending balance)
Q. FOB Destination
Ans: Seller pays for shipping
Q. FOB Shipping Point
Ans: The buyer must reimburse the seller for the shipping after it was prepaid by the seller
Q. Sales Discounts
Ans: Contra-revenue account.
Q. Accumulated Depreciation
Ans: Contra-asset account
Ans: Expense account
Ans: Expense account
Q. Sales Returns and Allowances
Ans: Contra-revenue account
Q. Purchase Discount (Gross Method)
Ans: In the gross method, when merchandise is purchased, the full amount of the purchase invoice (gross) is debited to Merchandise Inventory.
Q. Permanent accounts
Ans: Balance sheet and equity accounts that carry forward their balances to the following accounting period. Include: Capital Stock, Supplies
Q. Temporary accounts
Ans: Closed at the end of the year and start the beginning of the following year with zero balances. Include: Income Statement accounts, Income Summary, and Dividends. Exp and Rev.
Q. The Ending Balance in the cash account=
Ans: Ending Balance= (Investment of cash by the owner) – (Cash paid for supplies) + (Cash received in advance for revenue to be earned)
Q. Retained Earnings Normal Balance
Q. Change in Stockholder’s Equity=
Ans: Issuance of stock + Net Income – Dividends
Q. Net Income=
Ans: Change in stockholder equity – Issuance of stock + Dividends
Q. COGS (Debit or Credit?)
Q. Sales (Debit or Credit?)
Q. Sales Discounts (Debit or Credit?)
Q. Freight out (Debit or Credit?)
Q. Income Summary with Net Income (Debit or Credit?)
Q. Income Summary with Net Loss (Debit or Credit?)
Q. Unqualified opinion (which annual report)
Ans: Auditor’s report
Q. Discussion of business outlook (which annual report)
Ans: Management discussion and analysis
Q. To determine stockholders’ equity, we use the following equation:
Ans: Stockholders’ Equity (Capital Stock + Retained Earnings)=Total assets – Total liabilities.
Q. To determine retained earnings, we restate the equation as follows:
Ans: Retained Earnings = Total assets – Total liabilities – Capital Stock.
Q. What is the accounting equation?
Ans: Assets= Liabilities+Stockholders Equity
Q. How is REVENUE recognized under ACCRUAL BASIS SYSTEM?
Ans: When the future cash to be received has been earned (not necessarily received; it may be owed to the entity)
Q. What does service revenue represent?
Ans: Revenue earned from work completed (1 of the 4 ways stockholders equity can change)
Q. What does notes payable represent?
Ans: Amounts borrowed/ future obligations (therefore a liability)
Q. What does prepaid insurance represent?
Ans: The cost of insurance paid for in advance of its use and has future benefits (therefore is an asset)
Q. What does accounts payable represent?
Ans: Amounts that the company owes its suppliers and i a future obligation (therefore is a liability)
Q. is prepaid insurance an asset liability or SE
Q. is service revenue an asset liability or SE?
Q. is notes payable an asset liability or SE
Q. is accounts payable an asset liability or SE
Q. Examples of revenue account for business providing service
Ans: service revenue, rent revenue, and subscription revenue
Q. Examples of revenue account for businesses selling products
Ans: sales, furniture sales, automobile sales
Q. Doe s revenue increase or decrease net income? which increases or decreases stockholder’s equity?
Ans: increase; increase
Q. What are expenses?
Ans: Recorded when items are used to operate the business
Q. When does the utility account increase?
Ans: When utilities are used
Q. Does expense inc or dec net income? which inc or dec stockholders equity?
Ans: Decrease; Decrease
Q. What are other changes to stockholder’s equity?
Ans: Issuance of stock and dividends
Q. What is the issuance of stock?
Ans: Occurs when stockholders purchase more stock from the corporation
Q. What is the capital stock account?
Ans: A stockholders equity account used to accumulate investments by stockholders
Q. Issuance of stock inc or dec Stockholders equity
Q. What are dividends?
Ans: Represent payments of cash to stockholders as a sharing of profits.
Q. What is a dividends account?
Ans: A temporary stockholders equity account is used to accumulate an amount of cash paid to the stockholders
Q. Dividends inc or dec stockholders equity
Q. What accounts don’t cause changes to stockholder’s equity?
Ans: Assets and liabilities
Q. What is the purpose of financial statements?
Ans: To provide financial information about the company
Q. Main 3 financial statements
Ans: balance sheet, income statement, statement of changes in retained earnings
Q. 2 principles to find out how transactions affect account
– Any transaction affects at least 2 accounts
– Accounting equation must remain in balance
Note: Accounting questions in ALEKS are prepared by professional accountants whose areas of expertise give the program the ability to ask questions that are both challenging and beneficial to the learning process.
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