ACCT 210 Practice Exam 1 - UWSP (Ruixue Du)

40. Use the information in the adjusted trial balance presented below to calculate the current ratio for Taron Company: Account Title Dr. Cr. Cash 23,000 Accounts receivable 16,000 Prepaid insurance 6,600 Equipment 100,000 Accumulated Depreciation—Equipment 50,000 Land 95,000 Accounts payable 17,000 Interest payable 2,400 Unearned revenue 5,000 Long-term notes payable 30,000 Z. Taron, Capital 136,200 Totals 240,600 240,600 A. 1.87. B. .54. C. 3.92. D. 1.77. E. 1.60.

*A. 1.87.* B. .54. C. 3.92. D. 1.77. E. 1.60. Current Ratio = Current Assets/Current Liabilities Current Ratio = ($23,000 + $16,000 + $6,600)/($17,000 + $2,400 + $5,000) Current Ratio = $45,600/$24,400 = 1.87

13. Identify the account below that is classified as an asset in a company's chart of accounts: A. Accounts Receivable B. Accounts Payable C. Owner's Capital D. Unearned Revenue E. Service Revenue

*A. Accounts Receivable* B. Accounts Payable C. Owner's Capital D. Unearned Revenue E. Service Revenue

3. Ethical behavior requires that: A. Auditors' pay not depend on the success of the client's business. B. Auditors invest in businesses they audit. C. Analysts report information favorable to their companies. D. Managers use accounting information to benefit themselves. E. Auditors' pay depends on the success of the client's business.

*A. Auditors' pay not depend on the success of the client's business.* B. Auditors invest in businesses they audit. C. Analysts report information favorable to their companies. D. Managers use accounting information to benefit themselves. E. Auditors' pay depends on the success of the client's business.

23. The accrual basis of accounting: A. Is generally accepted for external reporting because it is more useful than cash basis for most business decisions. B. Is flawed because it gives complete information about cash flows. C. Recognizes revenues when received in cash. D. Recognizes expenses when paid in cash. E. Eliminates the need for adjusting entries at the end of each period.

*A. Is generally accepted for external reporting because it is more useful than cash basis for most business decisions.* B. Is flawed because it gives complete information about cash flows. C. Recognizes revenues when received in cash. D. Recognizes expenses when paid in cash. E. Eliminates the need for adjusting entries at the end of each period.

7. The question of when revenue should be recognized on the income statement according to GAAP is addressed by the: A. Revenue recognition principle. B. Going-concern assumption. C. Objectivity principle. D. Business entity assumption. E. Cost principle.

*A. Revenue recognition principle.* B. Going-concern assumption. C. Objectivity principle. D. Business entity assumption. E. Cost principle.

17. J. Brown Consulting paid $2,500 cash for a 5-month insurance policy which begins on December 1. Given the choices below, determine the general journal entry that J. Brown Consulting will make to record this transaction. A. Insurance Expense 2,500 Cash 2,500 B. Cash 2,500 Insurance Expense 2,500 C. Cash 2,500 Prepaid Insurance 2,500 D. Prepaid Insurance 2,500 Cash 2,500 E. Insurance Expense 2,500 Prepaid Insurance 2,500

A. DEBIT: Insurance Expense 2,500 CREDIT: Cash 2,500 B. DEBIT: Cash 2,500 CREDIT: Insurance Expense 2,500 C. DEBIT: Cash 2,500 CREDIT: Prepaid Insurance 2,500 *D. DEBIT: Prepaid Insurance 2,500; CREDIT: Cash 2,500* E. DEBIT: Insurance Expense 2,500 CREDIT: Prepaid Insurance 2,500

18. Gi Gi's Dance Studio provided $150 of dance instruction and rented out its dance studio to the same client for another $100. The client paid immediately. Identify the general journal entry below that Gi Gi's will make to record the transaction. A. Rental Revenue 100 Instruction Revenue 150 Cash 250 B. Accounts Payable 250 Rental Revenue 100 Instruction Revenue 150 C. Cash 250 Rental Revenue 100 Instruction Revenue 150 D. Accounts Receivable 250 Rental Revenue 100 Instruction Revenue 150 E. Unearned Revenue 250 Rental Revenue 100 Instruction Revenue 150

A. DEBIT: Rental Revenue 100 DEBIT: Instruction Revenue 150 CREDIT: Cash 250 B. DEBIT: Accounts Payable 250 CREDIT: Rental Revenue 100 CREDIT: Instruction Revenue 150 *C. DEBIT: Cash 250; CREDIT: Rental Revenue 100 CREDIT: Instruction Revenue 150* D. DEBIT: Accounts Receivable 250 CREDIT: Rental Revenue 100 CREDIT:Instruction Revenue 150 E. DEBIT:Unearned Revenue 250 CREDIT: Rental Revenue 100 CREDIT: Instruction Revenue 150

16. Wiley Consulting purchased $7,000 worth of supplies and paid cash immediately. Which of the following general journal entries will Wiley Consulting make to record this transaction? A. Accounts Payable 7,000 Supplies 7,000 B. Cash 7,000 Supplies 7,000 C. Supplies 7,000 Cash 7,000 D. Supplies 7,000 Accounts Payable 7,000 E. Supplies Expense 7,000 Accounts Payable 7,000

A. DEBIT: Accounts Payable 7,000 CREDIT: Supplies 7,000 B. DEBIT: Cash 7,000 CREDIT: Supplies 7,000 *C. DEBIT: Supplies 7,000; CREDIT: Cash 7,000* D. DEBIT: Supplies 7,000 CREDIT: Accounts Payable 7,000 E. DEBIT: Supplies Expense 7,000 CREDIT: Accounts Payable 7,000

36. A company's December 31 work sheet for the current period appears below. Based on the information provided, what is net income for the current period? Unadjusted Trial Balance Adjustments Debit Credit Debit Credit Cash 1,975 Accounts Receivable 1,000 875 Prepaid insurance 1,600 650 Supplies 330 115 Equipment 8,320 Accumulated depreciation—equipment 720 190 Accounts payable 1,140 Owner, Capital 9,110 Owner, Withdrawals 1,050 Fees earned 7,250 875 Rent expense 1,300 Salaries expense 2,300 Utilities expense 345 Insurance expense 650 Supplies expense 115 Depreciation expense—equipment 190 Totals 18,220 18,220 1,830 1,830 A. $3,305. B. $4,180. C. $2,350. D. $2,540. E. $3,225.

A. $3,305. B. $4,180. C. $2,350. D. $2,540. *E. $3,225.*

19. During the month of February, Victor Services had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the February 1 beginning cash balance? A. $700. B. $1,100. C. $2,900. D. $0. E. $4,300.

A. $700. B. $1,100. *C. $2,900.* D. $0. E. $4,300. Beginning Cash Balance + Cash Receipts - Cash Disbursements = Ending Cash Balance Beginning Cash Balance + $7,500 - $8,600 = $1,800 Beginning Cash Balance - $1,100 = $1,800 Beginning Cash Balance = $2,900

39. The following information is available for the Higgins Travel Agency. After these closing entries what will be the balance in the C. Higgins, Capital account? Net Income $42,500 C. Higgins, Capital 130,000 C. Higgins, Withdrawals 12,000 A. $75,500. B. $184,500. C. $99,500. D. $160,500. E. $130,000.

A. $75,500. B. $184,500. C. $99,500. *D. $160,500.* E. $130,000. Ending Capital Balance = Beginning Capital Balance + Net Income - Withdrawals Ending Capital Balance = $130,000 + $42,500 - $12,000 = $160,500

6. If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000, is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by the purchaser as easily being worth $140,000, and is purchased for $137,000, the land should be recorded in the purchaser's books at: A. $95,000. B. $137,000. C. $138,500. D. $140,000. E. $150,000.

A. $95,000. *B. $137,000.* C. $138,500. D. $140,000. E. $150,000.

20. Happiness Catering has total assets of $385 million. Its total liabilities are $100 million and its equity is $285 million. Calculate its debt ratio. A. 35.1%. B. 26.0%. C. 38.5%. D. 28.5%. E. 58.8%.

A. 35.1%. *B. 26.0%.* C. 38.5%. D. 28.5%. E. 58.8%. Debt Ratio = Total Liabilities/Total Assets Debt Ratio = $100 million/$385 million; Debt Ratio = 0.2597 = 26.0%

26. A company had $7,000,000 in net income for the year. Its net sales were $15,200,000 for the same period. Calculate its profit margin. A. 85.4%. B. 117.1%. C. 53.9%. D. 217.1%. E. 46.1%.

A. 85.4%. B. 117.1%. C. 53.9%. D. 217.1%. *E. 46.1%.* Profit Margin = Net Income/Net Sales Profit Margin = $7,000,000/$15,200,000 = .461 = 46.1%

28. On May 1, Sellers Marketing Company received $1,500 from Franco Marcelli for a marketing campaign effective from May 1 this year to April 30 of the following year. The Cash receipt was recorded as unearned fees and at year-end on December 31, $1,000 of the fees had been earned. The adjusting entry on December 31 would be: A. A debit to Unearned Fees and a credit to Cash for $500. B. A debit to Fees Earned and a credit to Unearned Fees for $500. C. A debit to Unearned Fees and a credit to Fees Earned for $1,000. D. A debit to Fees Earned and a credit to Cash for $1,000. E. A debit to Fees Earned and a credit to Cash for $500.

A. A debit to Unearned Fees and a credit to Cash for $500. B. A debit to Fees Earned and a credit to Unearned Fees for $500. *C. A debit to Unearned Fees and a credit to Fees Earned for $1,000.* D. A debit to Fees Earned and a credit to Cash for $1,000. E. A debit to Fees Earned and a credit to Cash for $500.

11. Identify the account used by businesses to record the transfer of assets from a business to its owner for personal use: A. A revenue account. B. The owner's withdrawals account. C. The owner's capital account. D. An expense account. E. A liability account.

A. A revenue account. *B. The owner's withdrawals account.* C. The owner's capital account. D. An expense account. E. A liability account.

4. The private-sector group that currently has the authority to establish generally accepted accounting principles in the United States is the: A. APB. B. FASB. C. AAA. D. AICPA. E. SEC.

A. APB. *B. FASB.* C. AAA. D. AICPA. E. SEC.

34. The recurring steps performed each reporting period in preparing financial statements, starting with analyzing and recording transactions in the journal and continuing through the post-closing trial balance, is referred to as the: A. Accounting period. B. Operating cycle. C. Accounting cycle. D. Closing cycle. E. Natural business year.

A. Accounting period. B. Operating cycle. *C. Accounting cycle.* D. Closing cycle. E. Natural business year.

12. A credit is used to record an increase in all of the following accounts except: A. Accounts Payable B. Service Revenue C. Unearned Revenue D. Wages Expense E. Owner's Capital

A. Accounts Payable B. Service Revenue C. Unearned Revenue *D. Wages Expense* E. Owner's Capital

24. Which of the following statements is incorrect? A. Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities. B. Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded. C. Adjusting entries can be used to record both accrued expenses and accrued revenues. D. Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time. E. Adjusting entries affect only balance sheet accounts.

A. Adjustments to prepaid expenses and unearned revenues involve previously recorded assets and liabilities. B. Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded. C. Adjusting entries can be used to record both accrued expenses and accrued revenues. D. Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time. *E. Adjusting entries affect only balance sheet accounts.*

10. If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be: A. Assets increase $4,500 and liabilities decrease $4,500. B. Equity decreases $4,500 and liabilities increase $4,500. C. Liabilities decrease $4,500 and assets increase $4,500. D. Assets increase $4,500 and liabilities increase $4,500. E. Equity increases $4,500 and liabilities decrease $4,500.

A. Assets increase $4,500 and liabilities decrease $4,500. B. Equity decreases $4,500 and liabilities increase $4,500. C. Liabilities decrease $4,500 and assets increase $4,500. *D. Assets increase $4,500 and liabilities increase $4,500.* E. Equity increases $4,500 and liabilities decrease $4,500.

25. If a company mistakenly forgot to record depreciation on office equipment at the end of an accounting period, the financial statements prepared at that time would show: A. Assets overstated and equity understated. B. Assets and equity both understated. C. Assets overstated, net income understated, and equity overstated. D. Assets, net income, and equity understated. E. Assets, net income, and equity overstated.

A. Assets overstated and equity understated. B. Assets and equity both understated. C. Assets overstated, net income understated, and equity overstated. D. Assets, net income, and equity understated. *E. Assets, net income, and equity overstated.*

33. The closing process is necessary in order to: A. Calculate net income or net loss for an accounting period. B. Ensure that all permanent accounts are closed to zero at the end of each accounting period. C. Ensure that the company complies with state laws. D. Ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account. E. Ensure that management is aware of how well the company is operating.

A. Calculate net income or net loss for an accounting period. B. Ensure that all permanent accounts are closed to zero at the end of each accounting period. C. Ensure that the company complies with state laws. *D. Ensure that net income or net loss and owner withdrawals for the period are closed into the owner's capital account.* E. Ensure that management is aware of how well the company is operating.

14. Identify the account below that is classified as a liability account: A. Cash B. Accounts Payable C. Salaries Expense D. J. Jackson, Capital E. Equipment

A. Cash *B. Accounts Payable* C. Salaries Expense D. J. Jackson, Capital E. Equipment

22. The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: A. Cash basis accounting. B. The matching principle. C. The time period assumption. D. Accrual basis accounting. E. Revenue basis accounting.

A. Cash basis accounting. B. The matching principle. C. The time period assumption. *D. Accrual basis accounting.* E. Revenue basis accounting.

35. The usual order for the asset subgroups of a classified balance sheet is: A. Current assets, prepaid expenses, long-term investments, intangible assets. B. Long-term investments, current assets, plant assets, intangible assets. C. Current assets, long-term investments, plant assets, intangible assets. D. Intangible assets, current assets, long-term investments, plant assets. E. Plant assets, intangible assets, long-term investments, current assets.

A. Current assets, prepaid expenses, long-term investments, intangible assets. B. Long-term investments, current assets, plant assets, intangible assets. *C. Current assets, long-term investments, plant assets, intangible assets.* D. Intangible assets, current assets, long-term investments, plant assets. E. Plant assets, intangible assets, long-term investments, current assets.

29. An adjusting entry was made on year-end December 31 to accrue salary expense of $1,200. Which of the following entries would be prepared to record the $3,000 payment of salaries in January of the following year? A. Salaries Expense 3,000 Cash 3,000 B. Salaries Payable 3,000 Cash 3,000 C. Salaries Payable 1,200 Cash 1,200 D. Salaries Expense 1,200 Salaries Payable 1,200 E. Salaries Payable 1,200 Salaries Expense 1,800 Cash 3,000

A. DEBIT: Salaries Expense 3,000 CREDIT: Cash 3,000 B. DEBIT: Salaries Payable 3,000 CREDIT: Cash 3,000 C. DEBIT: Salaries Payable 1,200 CREDIT: Cash 1,200 D. DEBIT: Salaries Expense 1,200 CREDIT: Salaries Payable 1,200 *E. DEBIT: Salaries Payable 1,200, DEBIT: Salaries Expense 1,800; CREDIT: Cash 3,000*

38. A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The owner withdrew $8,000 in cash during the same period. Which of the following entries could not be a closing entry? A. Debit Income Summary $13,000; credit Owner's, Capital $13,000. B. Debit Income Summary $75,000; credit Revenues $75,000. C. Debit Revenues $75,000; credit Income Summary $75,000. D. Debit Income Summary $62,000, credit Expenses $62,000. E. Debit Owner's, Capital $8,000, credit Owner's, Withdrawals $8,000.

A. Debit Income Summary $13,000; credit Owner's, Capital $13,000. *B. Debit Income Summary $75,000; credit Revenues $75,000.* C. Debit Revenues $75,000; credit Income Summary $75,000. D. Debit Income Summary $62,000, credit Expenses $62,000. E. Debit Owner's, Capital $8,000, credit Owner's, Withdrawals $8,000.

9. Revenue is properly recognized: A. When the customer makes an order. B. Only if the transaction creates an account receivable. C. At the end of the accounting period. D. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price. E. When cash from a sale is received.

A. When the customer makes an order. B. Only if the transaction creates an account receivable. C. At the end of the accounting period. *D. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.* E. When cash from a sale is received.

27. Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is: A. Debit Office Supplies $105 and credit Office Supplies Expense $105. B. Debit Office Supplies Expense $105 and credit Office Supplies $105. C. Debit Office Supplies Expense $254 and credit Office Supplies $254. D. Debit Office Supplies $254 and credit Office Supplies Expense $254. E. Debit Office Supplies $105 and credit Supplies Expense $254.

A. Debit Office Supplies $105 and credit Office Supplies Expense $105. B. Debit Office Supplies Expense $105 and credit Office Supplies $105. *C. Debit Office Supplies Expense $254 and credit Office Supplies $254.* D. Debit Office Supplies $254 and credit Office Supplies Expense $254. E. Debit Office Supplies $105 and credit Supplies Expense $254.

30. Sanborn Company rents space to a tenant for $2,200 per month. The tenant currently owes rent for November and December. The tenant has agreed to pay the November, December, and January rents in full on January 15 and has agreed not to fall behind again. The adjusting entry needed on December 31 is: A. Debit Rent Receivable, $6,600; credit Rent Earned, $6,600. B. Debit Unearned Rent, $4,400; credit Rent Earned, $4,400. C. Debit Unearned Rent, $2,200; credit Rent Earned, $2,200. D. Debit Rent Receivable, $4,400; credit Rent Earned, $4,400. E. Debit Rent Receivable, $2,200; credit Rent Earned, $2,200.

A. Debit Rent Receivable, $6,600; credit Rent Earned, $6,600. B. Debit Unearned Rent, $4,400; credit Rent Earned, $4,400. C. Debit Unearned Rent, $2,200; credit Rent Earned, $2,200. *D. Debit Rent Receivable, $4,400; credit Rent Earned, $4,400.* E. Debit Rent Receivable, $2,200; credit Rent Earned, $2,200.

37. Tara Westmont, the proprietor of Tiptoe Shoes, had annual revenues of $185,000, expenses of $103,700, and withdrew $18,000 from the business during the current year. The owner's capital account before closing had a balance of $297,000. The entry to close the Income Summary account at the end of the year, after revenue and expense accounts have been closed, is: A. Debit T. Westmont, Capital $297,000; credit Income Summary $297,000 B. Debit T. Westmont, Capital $63,300; credit Income Summary $63,300 C. Debit Income Summary $63,300; credit T. Westmont, Capital $63,300 D. Debit Income Summary $81,300, credit T. Westmont, Capital $81,300 E. Debit T. Westmont, Capital $81,300; credit Income Summary $81,300

A. Debit T. Westmont, Capital $297,000; credit Income Summary $297,000 B. Debit T. Westmont, Capital $63,300; credit Income Summary $63,300 C. Debit Income Summary $63,300; credit T. Westmont, Capital $63,300 *D. Debit Income Summary $81,300, credit T. Westmont, Capital $81,300* E. Debit T. Westmont, Capital $81,300; credit Income Summary $81,300

1. Technology A. Has replaced accounting. B. Has not improved the clerical accuracy of accounting. C. Reduces the time, effort and cost of recordkeeping. D. In accounting has replaced the need for decision makers. E. In accounting is only available to large corporations.

A. Has replaced accounting. B. Has not improved the clerical accuracy of accounting. *C. Reduces the time, effort and cost of recordkeeping.* D. In accounting has replaced the need for decision makers. E. In accounting is only available to large corporations.

21. The accounting principle that requires revenue to be recorded when earned is the: A. Matching principle. B. Revenue recognition principle. C. Time period assumption. D. Accrual reporting principle. E. Going-concern assumption.

A. Matching principle. *B. Revenue recognition principle.* C. Time period assumption. D. Accrual reporting principle. E. Going-concern assumption.

8. The Superior Company acquired a building for $500,000. The building was appraised at a value of $575,000. The seller had paid $300,000 for the building 6 years ago. Which accounting principle would require Superior to record the building on its records at $500,000? A. Monetary unit assumption. B. Going-concern assumption. C. Cost principle. D. Business entity assumption. E. Revenue recognition principle.

A. Monetary unit assumption. B. Going-concern assumption. *C. Cost principle.* D. Business entity assumption. E. Revenue recognition principle.

32. Assets, liabilities, and equity accounts are not closed; these accounts are called: A. Nominal accounts. B. Temporary accounts. C. Permanent accounts. D. Contra accounts. E. Accrued accounts.

A. Nominal accounts. B. Temporary accounts. *C. Permanent accounts.* D. Contra accounts. E. Accrued accounts.

31. Revenues, expenses, and withdrawals accounts, which are closed at the end of each accounting period are: A. Real accounts. B. Temporary accounts. C. Closing accounts. D. Permanent accounts. E. Balance sheet accounts.

A. Real accounts. *B. Temporary accounts.* C. Closing accounts. D. Permanent accounts. E. Balance sheet accounts.

2. External users of accounting information include all of the following except: A. Shareholders. B. Customers. C. Purchasing managers. D. Government regulators. E. Creditors.

A. Shareholders. B. Customers. *C. Purchasing managers.* D. Government regulators. E. Creditors.

15. Identify the statement below that is correct? A. The left side of a T-account is the credit side. B. Debits decrease asset and expense accounts, and increase liability, equity, and revenue accounts. C. The left side of a T-account is the debit side. D. Credits increase asset and expense accounts, and decrease liability, equity, and revenue accounts. E. In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction.

A. The left side of a T-account is the credit side. B. Debits decrease asset and expense accounts, and increase liability, equity, and revenue accounts. *C. The left side of a T-account is the debit side.* D. Credits increase asset and expense accounts, and decrease liability, equity, and revenue accounts. E. In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction.

5. The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the: A. Time-period assumption. B. Business entity assumption. C. Going-concern assumption. D. Revenue recognition principle. E. Cost principle.

A. Time-period assumption. *B. Business entity assumption.* C. Going-concern assumption. D. Revenue recognition principle. E. Cost principle.