accounting 1 cumulative
one hundred units of inventory on hand at the end of the year are recorded at their cost of $10 each using LIFO. current replacement cost is $8.00. what amount would be reported as inventory on the balance sheet?
$800
how do the adjusting entries differ from other journal entries?
(all of the above) adjusting entries never affect cash adjusting entries are made only at the end of the period adjusting entries debit or credit at least one income statement account and at least one balance sheet account
acid test ratio: (aka quick ratio or liquidity ratio)
(current assets - inventories) ---------------------------------------- liabilities
a company has $45,600 in current assets; $111,320 in total assets, $67,500 in current liabilities and $188,400 in total liabilities. the company has a current ratio of?
.68
which debt ratio would indicate the BEST overall ability of an organization to pay its debts?
25% (the lower the better)
gross profit percentage: net sales rev- COGS= gross profit gross profit/ total revenue a company's net sales revenue is $540,000. it is the cost of goods sold is $360,000. its gross profit percentage is
33.3%
which of the following is considered a good/safe rule of thumb debt ratio for business?
6 or below
components of internal control
C-R-I-M-E
inventory turnover:
COGS / (avg of beginning and ending inventory)
FIFO (when costs are rising, fifo yields the lowest COGS)
COGS based on the code of the oldest purchases
Corporate ownership is a very popular type of ownership in the United States. Which of the following is a major reason that corporate ownership is popular?
Corporate shareholders have limited liability for the debts of the corporations
Which of the following concepts (principles) would be most likely to require that an item be recorded at the amount actually paid?
Cost principle
Many organizations have contributed to the process of creating and/or using generally accepted accounting principles. Which of the following organizations has the primary responsibility for formulating accounting standards?
FASB
formulates accounting standards
FASB
which of the following deductions must be matched by the employer, resulting in both a deduction from gross pay and an expense to the employer?
FICA taxes
the periodic inventory system keeps a running record of inventory and cps of goods sold. T/F?
False
which of the following statements best defines accounting financial statements?
Financial statements are documents that report on a business in monetary terms, providing information to help people make informed business decisions.
which of the following items is included in the journal entry if a company sells equipment at a price greater than its book value?
a credit to Gain on sale of equipment
which of the following would be included in a journal to record an NSF check?
a debit to accounts receivable and a credit to cash
what is the difference between a sales return and a sales allowance
a sales return involves an adjustment to inventory, but a sales allowance does not
which of the following principles are reflected in the lower-of-cost-or-market rule?
accounting conservatism
Sarbanes- Oxley Act
accounting firms may not both audit a public client and also provide certain consulting services for the same client an outside auditor must evaluate a public company's internal controls
which of the following accounts does not close at the end of the period?
accumulated depreciation
which of the following would be considered a contra-account?
accumulated depreciation
GAAP prefers companies to use the:
allowance method to evaluate bad debts
when a company ships goods to a customer and pays for right out, how is that cost recorded?
as an addition to the cost of inventory as an operating expense
a company's accountant capitalizes a payment that should be recorded as an expense. which of the following are TRUE?
assets are overstated
balance sheet contains:
assets(cash, accounts receivable) and total assets liabilities(accounts payable, unearned service revenue) and total liabilities stockholder's equity common stock retained earnings total stockholders equity total liabilities and stockholder's equity
when is a trial balance usually prepared?
at the end of each accounting period
in a periodic system, inventory balances and the cost of goods sold for the current period are determined
at the time when a physical inventory count is taken
which of he following reports a company's financial position?
balance sheet
which of the following reports a company's financial position?
balance sheet
what is the term for the difference in the equipment account and the accumulated depreciation, equipment account?
book value
The income statement presents a summary of an entity's revenues and expenses for a period of time. Which of the following statements is true?
both A and B are true: There is a net income when total revenues are greater than expenses There is a net loss when total expenses are greater than total revenue
FOB shipping point means that the
buyer normally pays the transportation costs
internal control- separation of duties
cashiers much not have access to accounting records
which of the following describes the internal control procedure separation of duties?
cashiers must not have access to accounting records
the post-closing trial balance lists the accounts from the general ledger in
categorical order, beginning with assets and ending with stockholder equity
which of the following accounts increases with a credit?
common stock
need to raise a large amount of capital and support facilities
corporation
which of the following is used to determine the rate of inventory turnover?
cost of goods sold divided by average inventory
current ratio
current assets ----------------------- current liabilities
what is the key distinction between current and non-current assets?
current assets will be used up or converted to cash within one year or one operating cycle
which of the following measures a company's ability to pay current liabilities with current assets
current ratio
which of the following is TRUE of days' sales in receivables?
days' sales in receivables measures how frequently during the year the accounts receivable are collected.
when a company uses the perpetual inventory method, which of the following would be the entry to adjust inventory to lower-of-cotsporpmarket?
debit cost of goods sold and credit inventory
NSF check journal entry
debit to accounts receivable and a credit to cash
this general ledger shows a balance of $65,300 in the inventory account at the end of the period. a physical inventory shows a count of $67,900. the adjusting entry would be a:
debit to inventory and a credit to cost of goods sold
the entry required to close dividends at the end of the period should include a
debit to retained earnings
the general ledger shows a balance of $23,678 in the inventory account at the end of the period. a physical inventory shows a count of $22,078. the adjusting entry would be a:
debit to the cost of goods sold and a credit to inventory
which of the following items are both reconciling items on the bank side of the reconciliation?
deposit in transit and outstanding checks
which of the following items found on a bank reconciliation does NOT require an adjusting entry?
deposits in transit
which of the following items found on a bank reconciliation does nOT require an adjusting entry?
deposits in transit
direct write offs
dont have adjusting entries to recognize bad debts write off uses "expense"
which depreciation method would you generally prefer to use for income tax purposes?
double-declining-balance because it gives the fastest tax-deductions for depreciation
which of the following taxes does NOT have a limit on the amount of tax paid per individual?
federal income taxes
which of the following is true about freight in?
freight in is added to the cost of merchandise inventory
GAAP represents:
generally accepted accounting principles
which intangible asset is recorded only as a part of the acquisition of another company?
goodwill
gross profit % is
gross profit / total revenue generated
where are closing entries found?
in a company's general journal
which of the following reports a company's results of operations?
income statement
the financial statement should be prepared in what order?
income statement, statement of retained earnings, balance sheet
which of the following correctly describes the rate of inventory turnover?
it is how rapidly inventory is sold
Zorro Company has significant amounts of accounts receivable, and experiences uncollectible accounts from time to time. Zorro uses the direct write-off method. When Zorro Company writes off an uncollectible receivable, what is the effect of that single transaction?
it will reduce net income
how will the carrying value of the bond change over the life of a bond?
it will slowly decrease over the 10 year life
cost principle
item is recorded at the amount actually paid instead of at estimated market value
accountants first recored transactions in the
journal
which of the following asset categories would include the cost of clearing land and removing unwanted buildings?
land
which of the following asset categories would include fencing?
land improvements
debt ratio
liabilities ------------- assets
which of the following is the measure of how quickly an item can be converted to cash?
liquidity
under which of the following categories would building appear?
long term assets
warranty EXPENSES must be recognized in the same period as the related sales REVENUE is recognized
matching principle
cost of goods sold (COGS) =
net sales - gross profit (net sales - COGS = gross profit)
gross profit method to find costs of goods sold:
net sales x (100- % of normal gross profit)
which of the following statements is false?
on a classified balance sheet, building would be considered more liquid than prepaid rent
the accounting process of copying a transaction from the journal to the ledger is called
posting
land cost should include:
purchase and, surveys and legal fees, land cleaning
the income statement states
results of operations over a period of time
statement of retained earnings contains:
retained earnings from begin inning of month/year + net income (dividends) = retained earnings at end of month
income statement contains:
revenues - expenses = net income
which of the following accounts are temporary accounts that must be closed at the end of the year?
revenues, expenses, and dividends
which of the following describes Net sales revenue
sales - sales discounts - sales returns&allowances
Which of the following inventory costing methods is based on the actual cost of each particular unit of inventory?
specific-unit-cost
which of the following inventory costing methods is based on the actual cost of each particular unit of inventory?
specific-unit-cost
an accrued expense is an expense that:
the business has incurred, but not yet paid
which of the following costs related to a company car would NOT be expensed ?
the cost to install an engine with higher horsepower
which account has a balance equal to net income immediately before it is closed?
the income summary account
which of the following accounting principles requires depreciation?
the matching principle
in which of the following periods should the expense for warranty costs be recorded?
the period when the product is sold
in the credit terms of 2/10, n/30, what does the 2/10 mean?
the purchaser may take a 2% discount if the invoice is paid in 10 days
believed to be more than remote, but less than probable, that the lawsuit will result in an actual liability. which action should be taken?
the situation should be described in a note to the financial statements
which of the following is NOT one of the purposes of internal control?
to guarantee that a business makes a profit
which of the following accounting methods is used to compute depletion?
units-of-production
which of the following depreciation methods allocates a fixed amount of depreciation to miles driven, hours used, or some other measure of the asset's utilization?
units-of-production
in a periodic system, inventory balance and the cost of goods sold for the current period are determined:
when a physical inventory count is taken
if a company is using the accrual method of accounting, when is revenue recorded?
when services are rendered, even though cash may be received at a later date
collusion
when two or more people cooperate together to defraud a company
allowance method
write off using "allowance" write off bad debt expense by writing off with "allowance for bad debt"
