Accounting Final possible MC questions

Book Side of Reconciliation

*Add*-Bank collection of dividend revenue, Interest revenue of bank balance, EFT receipt from customer Less:correction of book error, service charge, cost of printed checks, *NSF checks*

Prepaid Rent is an expense account that appears on the income statement.

false

An​ invoice, with payment terms of 5​/10​, ​n/30, was issued on April 28 for $ 235.00. If the payment was made on May​ 12, the amount of payment will be

$ 235.00

Which of the following is the correct order of preparation of financial​ statements?

Income statement ---statement of​ owner's equity ------balance sheet ----statement of cash flows

The statement of​ owner's equity informs users about changes in the​ owner's capital account over a period of time

True

A liability created when a business receives cash from customers in advance of providing services or delivering goods is called​ a(n)

Unearned Revenue

A company that uses the perpetual inventory system purchases inventory for $ 62,000 on​ account, with terms of 3​/10, ​n/30. Which of the following is the journal entry to record the payment made within 10​ days?

a debit to Accounts Payable for $ 62,000​, a credit to Merchandise Inventory for $ 1,860​, and a credit to Cash for $ 60,140

Which of the following would be included in the journal to record an NSF​ check?

a debit to Accounts Receivable and a credit to Cash

The bank statement reveals an EFT payment made to one of the​ company's suppliers that has not yet been recorded in the journal. How would this information be included on the bank​ reconciliation?

a deduction on the book side

Revenues and the​ owner's contributions in the business increase​ owner's equity

true

The useful life of a plant asset is the length of the service period expected from the asset.

true

The​ Gonzalez, Capital account is a permanent account.

true

The​ units-of-production method allocates a varying amount of depreciation each year based on an​ asset's usage.

true

Deffered Revenue

unearned revenue

Which of the following depreciation methods allocate a varying amount of depreciation to expense each year based on an​ asset's usage?

units of production method

During a period of declining inventory​ costs, which of the following inventory costing methods should be used by a company that intends to minimize its income tax​ expenses?

​first-in, first-out

Equity Accounts- Expenses,Capital, Withdraws, Revenues

True

An expenditure that increases the capacity or efficiency of a plant asset or that extends the​ asset's life is known as a revenue expenditure.

false

Deffered Expense

An asset created when a business makes advance payments of future expenses.

Credits in a trail balance

Accts. Payable, Revenue, Capital, Notes Payable

An asset was purchased for $ 30,000 on January​ 1, 2019. The​ asset's estimated useful life was five​ years, and its residual value was $ 12,000. The straight-line method of depreciation was used. Calculate the gain or loss if the asset is sold for $ 24,000 on December​ 31, 2019, the last day of the accounting period.

loss of 2,400

Gross profit is calculated as​

net sales revenue less cost of goods sold

The Sales Discounts Forfeited account​

represents the discount lost when a customer does not pay within the discount period

Which of the following inventory valuation methods should be used for unique​ items?

specific identification

Journal entries are required for the reconciling items on the book side because​

those transactions have not yet been recorded on the​ company's books

Accounts Receivable is listed above merchandise Inventory on the balance sheet

true

Adjusting entries either credit a revenue account or debit an expense account.

true

If the bank reconciliation includes a bank service​ charge, a journal entry is​ required, which debits Bank Expense and credits Cash.

true

In a bank​ reconciliation, a NSF check will be shown on the book side of the reconciliation.

true

Accounting Equation

(Assets = Liabilities + Equity) The equation consists of three​ categories: assets,​ liabilities, and equity. Each category of the accounting equation contains accounts. The equation is the basic tool of accounting.

A company using the perpetual inventory system purchased inventory worth $ 24,000 on account with terms of 3​/10, ​n/30. Defective inventory of $ 3,000 was returned two days​ later, and the accounts were appropriately adjusted. If the invoice is paid 10 days after the invoice​ date, the amount of the purchase discount that would be available to the company is?

24,000-3,000= 21,000. 21,000x.03= *630 dollars*

Tulip Company purchased equipment for $ 59000 on January​ 1, 2017. On December​ 31, 2019, the equipment was sold for $ 23000. Accumulated Depreciation as of December​ 31, 2019 was $ 29000. Calculate gain or loss on the sale.

7,000 loss

A company purchased inventory for $ 72,000 from a vendor on​ account, FOB shipping​ point, with terms of 4​/10, ​n/30. The company paid the shipper $ 1,700 cash for freight in. The company paid the vendor nine days after the invoice date. If there was no beginning​ inventory, the cost of inventory would be​ ________.

72,000x.04=2,880 72,000-2,880=69,120 69,120+1,700=*70,820 dollars*

In reconciling a bank​ statement, the bank balance is​ $1,500, and the checkbook balance is​ $2,105. Which of the following is the most probable reason for the checkbook balance being larger than the bank​ balance?

A deposit in transit was made at the end of the month.

Mercury Company established a petty cash fund with a $ 700 balance. Which of the following statements is​ incorrect?

A journal entry is needed to debit the Cash account and credit the Petty Cash account for $ 700.

accured revenue

A revenue that has been earned but for which the cash has not yet been collected.

Dickens Services Company performed accounting services for a client in December. A bill was mailed to the client on December 30. The company received a check by mail on January 5. Which of the following accounts should appear on the balance sheet as of December 31 as related to the services​ performed?

Accounts Receivable

Westwood Supply Services received​ $1,000 cash from a​ customer; the amount was owed to the business from the previous month. Which of the following accounts will decrease as a result of this​ transaction?

Accounts Receivable

A​ customer's promise to pay in the future for services or goods sold is called​ a(n)

Accounts Recievable

Which of the following is a contra​ account?

Accumulated depreciation

Wilson Furniture Company is a sole proprietorship. Wilson contributed​ $40,000 of cash in exchange for capital. Which of the following accounts will be​ debited?

Cash

Debits in a trial balance

Cash, Expenses, Furniture, accounts receivable

Under which of the following categories would bonds held as an investment for less than a year​ appear?

Current Asset

The entry to record depreciation includes a debit to the​ ________ account.

Depreciation Expense

Which of the following accounts has an ending balance equal to net income immediately before it is​ closed?

Income Summary

Which of the following financial statements reports expenses in decreasing order of their​ amounts, by stating the largest expense​ first?

Income Statement

Which of the following is true of freight​ in?

It is the transportation cost on purchases.

Buildings, land, and equipment are classified as

Long term assets

A check for which a​ maker's bank account has inadequate money to pay the check is known as a

NSF check

A​ company's accountant capitalized a payment that should have been recorded as a revenue expenditure. How will this error affect the​ company's financial​ statements?

Net income will be overstated

Which of the following accounts will be closed by debiting the Income Summary​ account?

Salaries Expense

A journal entry for a $ 80 payment for rent expense was posted as a debit to Salaries Expense and a credit to Cash. Which of the following statements correctly states the effect of the error on the trial​ balance?

The sum of the credits will equal the sum of the debits.

Liabilities represent​ creditors' claims on the​ business's assets.

True

Permanent accounts are not closed at the end of the accounting period

True

accured liabilities

amounts owed that are not yet paid

Which of the following is included in the cost of a plant​ asset?

amounts paid to make the asset ready for its intended use

The bank recorded a​ $3,000 deposit as​ $300. How would this information be included on the bank​ reconciliation?

an addition on the bank side

The bank statement reveals an EFT received from a customer that has not yet been recorded in the journal. How would this information be included on the bank​ reconciliation?

an addition on the book side

Accounts Receivable is​ a(n) ________ account and has a normal​ ________ balance.

asset, debit

Rosewood Company purchased land for $ 120,000 by making a cash payment of $ 32,000, and promising to pay the remaining amount in a later accounting period. What is the net effect of this transaction on​ Rosewood's accounting​ equation?

assets and liabilities increase by $ 88,000

Saturn Company paid $ 10,000 on accounts payable. How does this transaction affect the accounting equation of​ Saturn?

assets decrease by $ 10,000 and liabilities decrease by $ 10,000

Lance Gomez is the owner of a sole proprietorship. Lance withdrew​ $5,000 cash from the business for personal use. Which of the following accounts is​ credited?

cash

Increase to Accounts Receivable- DR Decrease to Unearned Revenue- DR Decrease to Cash- CR Increase to Interest Expense- DR Increase to Salaries Payable- CR Decrease to Prepaid Rent- CR Increase to Proudfoot, Capital- CR Increase to Notes Receivable- DR Decrease to Accounts Payable- DR Increase to Interest Revenue- CR

changes

a. Accounts Payable Balance sheet b. Cash Cash flow Balance sheet c. Owner, Capital Owners Equity Balance sheet d. Accounts Receivable Balance sheet e. Rent Expense Income Statement f. Service Revenue Income statement g. Office Supplies Balance sheet h. Owner, Withdrawals Owners equity i. Land Balance sheet j. Salaries Expense Income statement

changes

Cash received in advance of providing the service is called​

deferred revenues

Which of the following items are reconciling items on the bank side of the​ reconciliation?

deposit in transit and outstanding checks

Bank Side of Reconciliation

deposits in transit, outstanding checks, bank errors

For​ expenses, the category of account and its normal balance is​

equity and a debit balance

accured expenses

expenses incurred but not yet paid in cash or recorded

A payable involves a future receipt of cash

false

All plant assets are depreciated.

false

An accounting firm collected cash on account. As a result of this​ transaction, assets and revenues increase.

false

Given the same purchase and sales​ data, and assuming the cost of inventory is​ rising, the costing methods for inventory will result in different amounts for sales revenue.

false

In a period of rising​ costs, the​ last-in, first-out​ (LIFO) method results in a lower cost of goods sold and a higher net income than the​ first-in, first-out​ (FIFO) method.

false

The balance sheet of a business summarizes an​ entity's revenues and expenses.

false

The field of accounting that focuses on providing information for external decision makers is​

financial accounting

Which of the following inventory costing methods results in the highest value of ending inventory during a period of rising inventory​ costs?

first-in, first-out

Which of the following inventory costing methods yields the highest net income during a period of rising inventory​ costs?

first-in, first-out

A check payment for​ $658 was incorrectly entered in the Cash account as​ $856. Which of the following adjustments needs to be​ made?

increase the book balance

Which one of the following account groups normally has a credit​ balance?

liabilities and revenues

In a bank​ reconciliation, a deposit in transit will be shown on the bank side of the reconciliation

true

In a trial​ balance, total debits must always equal total credits.

true