Accounting FINAL

A lawyer collected $710 of legal fees in advance. He erroneously debate Cash for $170 and credited Accounts Receivable for $170. The correcting entry is

(Debit)Cash 540 (Debit)Accounts Receivable 170 (Credit)Unearned service revenue 710

Which of the following represents the expanded basic accounting equation:

Assets = Liabilities + Common Stock + Retained Earnings + Revenue - Expenses - Dividends

Assets:

Cash, Equipment, Supplies, Accounts Receivable

Which financial statement displays current and long term liabilities? a. Balance Sheet b. Income statement c. Statement of Retained Earnings d. Statement of Cash Flows

a . Balance Sheet

A company purchased office equipment for $40,000 and estimated a salvage value of $8,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining method is used a. 20% b. 25% c. 40% d. 5%

a. 20%

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: a. Accounts Receivable Cash b. Cash Accounts Receivable c. Miscellaneous Expense Accounts Receivable d. No adjusting entry is necessary

a. Accounts Receivable Cash

Which of the following is in accordance with generally accepted accounting principles? a. Accrual-basis accounting b. Cash-basis accounting c. Both accrual-basis and cash-basis accounting d. Neither accrual-basis nor cash-basis accounting

a. Accrual-basis accounting

A candy factory's employees work overtime to finish an order that is sold on February 28. The office sends a statement to the customer in early March and payment is received by mid-March. The overtime wages should be expensed in: a. February b. March c. The period when the workers receive their checks d. Either in February or March depending on when the pay period ends

a. February

ABC Company purchased land in 2008 for $250,000. In 2020, it purchased a nearly identical parcel of land for $500,000. In its 2020 balance sheet, ABC Company valued these two parcels of land at a combined value of $1,000,000. By reporting the land in this manner, ABC Company has violated the a. Historical Cost Principle b. Convergence c. Economic Entity Assumption d. Fair Value Principle

a. Historical Cost Principle

Collection of a $1,000 Accounts Receivable a. Increases an asset $1,000; decreases an asset $1,000 b. Increases an asset $1,000; decreases a liability $1,000 c. Decreases a liability $1,000; increases stockholders' equity $1,000 d. Decreases an asset $1,000; decreases a liability $1,000

a. Increases an asset $1,000; decreases an asset $1,000

Which of the following is not a long-term liability a. Interest Payable b. Bonds Payable c. 18 month Notes Payable d. Mortgages Payable

a. Interest Payable

Revenues would NOT result from a. Issuance of common stock b. Performance of services c. Sale of goods d. Rental of property (as the landlord)

a. Issuance of common stock

Harry's Hot Rod Shop follows the revenue recognition principle. Harry's performs a service a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Harry's on August 5. Harry's receives the check in the mail on August 6. When should Harry show the the revenue was recognized? a. July 31 b. August 1 c. August 5 d. August 6

a. July 31

An accounting time period that is one year in length, but does not begin on January 1, is referred to as: a. a fiscal year b. an interim period c. the time period assumption d. a reporting period

a. a fiscal year

If the market interest rate is less than the contractual (bond) interest rate, bonds will sell a. at a premium b. at face value c. at a discount d. only after the stated interest rate is increased

a. at a premium

Cost incurred to increase the operating efficiency or useful life of a plant asset are referred to as _____. An example of this adding a refrigerated cooling unit to a catering van a. capital expenditures b. expense expenditures c. ordinary repairs d. revenue expenditures

a. capital expenditures

All of the following factors in computing depreciation are estimates EXCEPT a. cost b. number of miles a vehicle will be driven c. salvage value d. useful life

a. cost

An intangible asset a. does not have physical substance, yet often is very valuable b. is worthless because it has no physical substance c. is converted into a tangible asset during the operating cycle d. cannot be classified on the balance sheet because it lacks physical substance

a. does not have physical substance, yet often is very valuable

Net sales revenue less cost of goods sold is called a. gross profit b. net profit c. net income d. marginal income

a. gross profit

An adjusting entry after performing the bank reconciliation is not required for a. outstanding checks b. collection of a note by the bank c. NSF checks d. bank service charges

a. outstanding checks

Prepaid expenses (like prepaid insurance) are: a. paid and recorded in an asset account before they are used or consumed. b. paid and recorded in an asset account after they are used or consumed. c. incurred but not yet paid or recorded. d. incurred and already paid or recorded.

a. paid and recorded in an asset account before they are used or consumed.

Items waiting to be used in production for a manufacturing company are considered to be a. raw materials b. work in progress c. finished goods d. merchandise inventory

a. raw materials

The balance in the income summary account before it is closed will be equal to a. the net income or loss on the income statement b. the beginning balance in the retained earnings account c. the ending balance in the retained earnings account d. zero

a. the net income or loss on the income statement

A current liability is a debt that can be reasonably expected to be paid a. within one year or the operating cycle, whichever is longer b. between 6 months and 18 months c. out of currently recognized revenues d. out of cash currently on hand

a. within one year or the operating cycle, whichever is longer

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revenue at December 31? a. $0 b. $12,000. c. $24,000. d. $36,000.

b. $12,000

The balance in the supplies account on June 1 was $5,200, supplies purchased during June were $3,500, and the supplies on hand at June 30 were $3,000. The amount to be used for the appropriate adjusting entry is: a. $3,500 b. $5,700 c. $6,500 d. $11,700

b. $5,700

A company purchases a $100,000 piece of equipment on December 31, 2021 to be depreciated over 10 years using the straight line method of depreciation. Before the purchase, the company's net income was $500,,000. What is the company's net income after the purchase? a. $400,000 b. $500,000 c. $490,000 d. $510,000

b. $500,000

The maturity value of a $50,000, 9%, 3-month note receivable is a. $50,375 b. $51,125 c. $52,250 d. $54,500

b. $51,125

What is the basic accounting equation? a. Assets - Liabilities - Stockholder's Equity b. Assets = Liabilities + Stockholder's Equity c. Assets + Liabilities = Stockholder's Equity d. Assets - Liabilities = Revenue

b. Assets = Liabilities + Stockholder's Equity

The accounting equation for XYZ Enterprises is as follows: Assets: $120,000 Liabilities: $60,000 Stockholders' Equity: $60,000 If XYZ purchases office equipment on account for $25,000, the accounting equation will change to: a. Assets: $120,000, Liabilities: $60,000, Stockholders' Equity: $60,000 b. Assets: $145,000, Liabilities: $85,000, Stockholders' Equity: $60,000 c. Assets: $145,000, Liabilities: $72,000, Stockholders' Equity: $72,000 d. Assets: $145,000, Liabilities: $60,000, Stockholders' Equity: $85,000

b. Assets: $145,000, Liabilities: $85,000, Stockholders' Equity: $60,000

Which of the following financial statements is prepared as of a specific date? a. Income Statement b. Balance Sheet c. Statement of Cash Flows d. Retained Earnings Statement

b. Balance Sheet

Borch-Mart purchased merchandise from Wally Wholesaler with freight terms of FOB Shipping Point. the freight costs will be paid by a. Wally's Wholesaler b. Borch-Mart c. the transportation company d. both Wally's Wholesaler and Borch-Mart

b. Borch-Mart

The two components of Stockholders' Equity are: a. Assets and liabilities b. Common stock and retained earnings c. Common stock and revenue d. Retained earnings and dividends

b. Common Stock and retained earnings

Beginning inventory plus cost of goods purchased equals a. Cost of goods sold b. Cost of goods available for sale c. Net purchases d. Total goods purchased

b. Cost of goods available for sale

Credits a. Decrease both assets and liabilities b. Decrease assets and increase liabilities c. Increase both assets and liabilities d. Increase assets and decrease liabilities

b. Decrease assets and increase liabilities

Which of the following would be considered an internal user of the accounting data for ABC Company a. Creditors b. Human Resource Manager c. Investors d. Customers

b. Human Resource Manager

Which of the following is NOT one of the main factors that contribute to fraudulent activity? a. Opportunity b. Incompatible duties c. Financial Pressures d. Rationalization

b. Incompatible duties

A buyer would record a payment within a discount period under a perpetual inventory system by crediting a. accounts payable b. inventory c. purchase discounts d. sales discounts

b. Inventory

What type of account is unearned service revenue? a. Asset b. Liability c. Revenue d. Expense

b. Liability

In which order are accounts closed in the closing process? a. Expenses, Revenues, Income Summary, Retained Earnings b. Revenues, Expenses, Income Summary, Dividends c. Revenues, Expenses, Retained Earnings, Income Summary d. Expenses, Revenues, Dividends, Income Summary

b. Revenues, Expenses, Income Summary, Dividends

Which of the following would not result in unearned service revenue under the accrual basis of accounting? a. Rent collected in advance from tenants b. Services performed on account c. Sale of season tickets to football games d. Sale of a two-year magazine subscription

b. Services performed on account

Generally accepted accounting principles are a. Income tax regulations of the Internal Revenue Service b. Standards that indicate how to report economic events c. Theories that are based on physical laws of the universe d. Principles that have been proven correct by the academic researchers

b. Standards that indicate how to report economic events

Which one of the following items is NOT considered a part of the capitalized cost of a truck purchased for business use? a. Sales tax b. Truck license c. Freight charges d. Cost of lettering on side of truck

b. Truck license

Internal Control is defined, in part, as a plan that safeguards a. all income statement accounts b. assets c. liabilities d. capital stock

b. assets

For a multi-million-dollar school expansion, which would be the most appropriate form of financing due to it typically being used to obtain large amounts of capital? a. accounts payable b. bonds c. note payable d. unearned revenue

b. bonds

When two or more people get together for the purpose of circumventing prescribed controls, it is called a. a fraud committee b. collusion c. a division of duties d. bonding of employees

b. collusion

The expense recognition principle matches: a. customers with businesses b. expenses with revenues c. assets with liabilities d. creditors with businesses

b. expenses with revenues

Which of these is an employee only expense/deduction a. federal unemployment taxes b. federal income taxes c. statem unemployment taxes d. FICA

b. federal income taxes

The receivable that is usually evidenced by written document and the charging of interest is a a. trade receivable b. note receivable c. accounts receivable d. income tax receivable

b. note receivable

If error occurs in the recording process, they a. should be corrected as adjustments at the end of the period b. should be corrected as soon as they are discovered c. should be corrected when preparing closing entries d. cannot be corrected until the next accounting period

b. should be corrected as soon as they are discovered

Joe Blow's Service Shop Started the year with total assets of $330,000 and total liabilities of $240,000. During the year, the business recorded $630,000 in revenues, $420,000 in expenses, and paid dividends of $60,000. What was net income reported on the income statement for the year? a. $150,000 b. $210,000 c. $240,000 d. $270,000

b.. $210,000

On June 1, 2020, Lilly's Lunches Inc. reported cash balances of $12,000. During June, Lilly's made deposits of $5,000 and made disbursements totaling $14,000. What is the cash balance at the end of June: a. $3,000 debit balance b. $17,000 debit balance c. $3,000 credit balance d. $2,000 credit balance

c. $3,000 credit balance

Jake's Market recorded the following events involving a recent purchase of merchandise: Received goods for $60,000, terms 2/10, n/30 Returned $1,200 of shipment for credit Paid $300 freight on the shipment Paid the invoice within the discount period As a result of the events, the company's inventory increased by a. $57, 624 b. $57,918 c. $57,924 d. $59,100

c. $57,924

A company purchased land for $90,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. The company received proceeds from scrap sales from the old building of $2,000. Under the historical cost principle, the cost of land would be recorded at a. $104,000 b. $90,000 c. $100,000 d. $102,000

c. 100,000

On February 13, Jason's Juice Corporation purchased supplies of $800 on account. The entry to record the purchase will include: a. A debit to supplies and a credit to accounts receivable b. A debit to supplies and a credit to cash c. A debit to supplies and a credit to accounts payable d. A debit to accounts receivable and a credit to supplies

c. A debit to supplies and a credit to accounts payable

Management could determine the amounts due from customers by examining which ledger account? a. Service Revenue b. Accounts Payable c. Accounts Receivable d. Supplies

c. Accounts Receivable

As the seller, the entry to record the receipt of payment within the discount period on a sale of 2,000 with terms of 2/10, n/30 will include a credit to a. Sales Discounts for $40 b. Cash for $1,960 c. Accounts Receivable for $2,000 d. Sales Revenue for $2,000

c. Accounts Receivable for $2,000

When assets or cash are distributed to the owners (stockholders) of a corporation, these distributions are called a. Depletions b. Consumptions c. Dividends d. A credit line

c. Dividends

Which of the following should be included in the physical inventory of the Katz company? a. Goods Katz Company is holding on consignment from another company b. Goods in transit to another company the Katz shipped FOB shipping point c. Goods in transit to Kats from another company shipped FOB shipping point d. Goods in transit to Katz Company shipped FOB destination

c. Goods in transit to Kats from another company shipped FOB shipping point

Which of the following should be included in the physical inventory of the Katz Company? a. Goods Katz Company is holding on consignment from another company b. Goods in transit to another company that Katz shipped FOB shipping point c. Goods in transit to Katz from another company shipped FOB shipping point d. Goods in transit to Katz Company shipped FOB destination

c. Goods in transit to Katz from another company shipped FOB shipping point

Which of the following would be classified as a current asset? a. Goodwill b. Equipment c. Inventories d. Non-marketable equity investments

c. Inventories

On a bank reconciliation, deposits in transit are a. added to the book balance b. deducted from the book balance c. added to the bank balance d. deducted from the bank balance

c. added to the bank balance

Trade accounts receivable are valued and reported on the balance sheet a. in the investment section b. at gross amounts less sales returns and allowances c. at net (cash) realizable value d. only if they are not past due

c. at net (cash) realizable value

Retailers generally consider sales from the use of a national credit card like MasterCard as a a. credit sale b. collection of an accounts receivable c. cash sale d. collection of a not receivable

c. cash sale

Two categories of expenses for merchandising companies are a. cost of goods sold and financing expenses b. operating expenses and financing expenses c. cost of goods sold and operating expenses d. sales and cost of goods sold

c. cost of goods sold and operating expenses

Sales taxes collected by a retailer are recorded by a. crediting Sales Taxes Revenue b. debiting Sales Tax Expense c. crediting Sales Taxes Payable d. debiting Sales Taxes Payable

c. crediting Sales Taxes Payable

Sales revenue is usually considered recognized when a. cash is received b. an order is received c. goods have been transferred from the seller to the buyer d. adjusting journal entries are made

c. goods have been transferred from the seller to the buyer

The accounting process is correctly sequenced as a. identification, communication, recording b. recording, communication, identification c. identification, recording, communication d. communication, recording, identification

c. identification, recording, communication

Which of the following assets is NOT depreciated a. Equipment b. Land improvements c. land d. buildings

c. land

When the allowance method is used to account for uncollectible accounts, Bad Debt Expense is debited when a. a sales is made b. an account becomes bad and is written off c. management estimates the amount of uncollectible accounts and credits the allowance fro doubtful accounts d. a customer's account becomes past-due

c. management estimates the amount of uncollectible accounts and credits the allowance fro doubtful accounts

Inventory is a. reported under the classification of Property, Plant, and Equipment on the balance sheet b. often reported as miscellaneous expense on the income statement c. reported as a current asset on the balance sheet d. generally valued at the price for which the goods can be sold

c. reported as a current asset on the balance sheet

An enterprise which sells goods to customers is known as a a. proprietorship b. corporation c. retailer d. service firm

c. retailer/merchandiser

Under accrual-basis accounting, in a service-type business, revenue is considered recognized: a. at the end of the month b. at the end of the year c. when the service is performed d. when cash is received

c. when the service is performed

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $630,000, what is the amount of the sales taxed owed to the taxing agency? a. $600,000 b. $630,000 c. $31,500 d. $30,000

d. $30,000

Adjusting entries are made to ensure: a. Expenses are recognized in the period in which they are incurred b. Revenues are recorded in the period in which services are performed c. Balance sheet and income statement accounts have correct balances at the end of the accounting period d. All of the above

d. All of the above

An accountant has debited an asset for $1,200 and credited a liability for $500. What can be done to complete the recording of the transaction? a. Nothing further must be done b. Debit a stockholders' equity account for $700 c. Debit another asset account for $700 d. Credit a different asset account for $700

d. Credit a different asset account for $700

Each of the following accounts is closed to Income Summary except a. Expenses b. Dividends c. Revenues d. All of these are closed to Income Summary

d. Dividends

Of the following companies, which one would not likely use the specific identification method for inventory costing? a. Car dealership b. Farm implement dealership c. Music store specializing in organ sales d. Grocery store

d. Grocery store

Enos company has decided to change the estimate of the useful life of an asset that has been in service for 2 years. which of the following statements describes the proper way to revise a useful life estimate a. Revisions in useful life are permitted if approved by the IRS b. Changes to prior years must be made to correct previously recorded depreciation c. No changes need to be made d. Only current and future years will be affected by the revision

d. Only current and future years will be affected by the revision

The process of transferring journal entries to the ledger accounts is called a. Journalizing b. Analyzing c. Reporting d. Posting

d. Posting

Which of the following accounts is considered a permanent account? a. Income Summary b. Rent Revenue c. Salaries and Wages Expense d. Retained Earnings

d. Retained Earnings

Which of the following increases stockholders equity? a. Net Losses b. Expenses c. Dividends d. Sale of Stock

d. Sale of stock

An error has occurred in the closing process if: a. Revenue and expense accounts have zero balances b. The income summary account is closed to retained earnings c. The dividends account is closed to the retained earnings account d. The balance sheet accounts have zero balances

d. The balance sheet accounts have zero balances

Accumulated Depreciation is a. an expense account b. a stockholders' equity account c. a liability account d. a contra asset account

d. a contra asset account

The book value of an asset is equal to the a. asset's fair market value less its historical cost b. blue book value relied on by secondary markets c. replacement cost of the asset d. asset's cost less accumulated depreciation

d. asset's cost less accumulated depreciation

A $100 petty cash fund has cash of $13 and receipts of $84. The journal entry to replenish the account would include a credit to a. cash for $84 b. petty cash for $87 c. cash over and short for $3 d. cash for $87

d. cash for $87

The Sales Returns and Allowances account is classified as a(n) a. asset account b. contra asset account c. expense account d. contra revenue account

d. contra revenue account

Which of these is an employer only expense/deduction? a. insurance and pensions b. federal income taxes c. FICA taxes d. federal unemployment taxes

d. federal unemployment taxes

As the buyer, the journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit a. accounts payable b. purchases, returns, and allowances c. sales revenue d. inventory

d. inventory

The right side of the account a. is the correct side b. reflects all transactions for the accounting period c. shows all the balances of the accounts in the system d. is the credit side

d. is the credit side

Communication of economic events is the part of the accounting process that involves a. identifying economic events b. quantifying transactions into dollars and cents c. recording and classifying information d. preparing accounting reports

d. preparing accounting reports

Having one person post entries to accounts receivable subsidiary ledger and a different person post to the Accounts Receivable Control account in the general ledger is an example of a. inadequate internal control b. duplication of effort c. external verification d. segregation of duties

d. segregation of duties

A credit memorandum would be issued by the bank for a. a bank service charge b. the issuance of traveler's checks fees c. an NSF check d. the collection of a receivable

d. the collection of a receivable

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except a. to check the accuracy of the records b. to determine the amount of wasted raw materials c. to determine losses due to employee theft d. to determine ownership of the goods

d. to determine ownership of the goods

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except: a. to check the accuracy of the records b. to determine the amount of wasted raw materials c. to determine losses due to employee theft d. to determine ownership of the goods

d. to determine ownership of the goods

The balance in the Accumulated Depreciation account represents the a. cash fund to be used to replace plant assets b. amount to be deducted from the cost of the plant asset to arrive at the selling price c. amount charged to depreciation expense in the current year d. total amount charged to depreciation expense since the assets was purchased

d. total amount charged to depreciation expense since the assets was purchased

in a perpetual inventory system, cost of goods sold is recorded a. on a daily basis b. on a monthly basis c. on a annual basis d. with each sale

d. with each sale

A shoe manufacturer would classify filters in various stages of production as a. finished goods b. merchandise inventory c. raw materials d. work in process

d. work in process

The interest rate specified on any note is for a a. day b. month c. week d. year

d. year