Acct Final Review

Closing entries: A) cause the revenue and expense accounts to have zero balances. B) summarize the activity in every account. C) are prepared before the financial statements. D) reduce the number of permanent accounts.

A) cause the revenue and expenses accounts to have zero balancers

Which of the following would be added to the balance per books on a bank reconciliation? A) Outstanding checks. B) NSF check. C) Notes collected by the bank. D) Deposits in transit.

A) outstanding checks

The term "receivables" refers to A) cash to be paid to creditors. B) amounts due from individuals or companies. C) merchandise to be collected from individuals or companies. D) cash to be paid to debtors.

B) amount due from individuals or companies

Stockholders' equity A) is usually equal to cash on hand. B) is equal to liabilities and retained earnings. C) includes retained earnings and common stock. D) is shown on the income statement.

C) includes retained earnings and common stock

Gazers sold merchandise for $57,000 cash during the month of July. Returns that month totaled $2,100. If the company's gross profit rate is 40%, Grazers will report monthly net sales revenue and cost of goods sold of: A)$55,800 and $33,480. B)$57,000 and $34,200. C)$54,900 and $21,960 D)$57,000 and $34,200.

??

Under the accrual basis of accounting: A) events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. B) cash must be received before revenue is recognized. C) the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. D) net income is calculated by matching cash outflows against cash inflows.

A)

Davis Corporation began the year with retained earnings of $340,000 and recorded expenses of $1,200,000, revenue of $3,200,000 and paid dividends of $80,000. What is ending retained earnings for the year? A) $2,260,000 B) $1,270,000 C) $2,340,000 D) $2,000,000

A) 2,260,000

Piper, Inc. purchases land for $240,000 cash. The Piper, Inc.assumes $3,000 in property taxes due on the land. The title and attorney fees totaled $2,000. The clinic had the land graded for $4,000. What amount does Piper, Inc. record as the cost for the land? A) $249,000. B) $240,000. C) $249,400. D) $245,000.

A) 249,000

Equipment with a cost of $150,000 has an estimated salvage value of $20,000 and an estimated life of 4 years or 10,000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2,700 hours? A) $35,000 B) $32,500 C) $36,250 D) $37,800

A) 35,000

A company just starting in business purchased three merchandise inventory items at the following prices. First purchase $80; Second purchase $90; Third purchase $85. If the company sold two units for a total of $240 and used FIFO costing, the gross profit for the period would be A) $70. B) $50. C) $60. D) $62.

A) 70

A company sells a plant asset that originally cost $300,000 for $110,000 on December 31, 2012. The accumulated depreciation account had a balance of $120,000 after the current year's depreciation of $30,000 had been recorded. The company should recognize a A) $70,000 loss on disposal B) $190,000 loss on disposal C) $80,000 loss on disposal D) $70,000 gain on disposal

A) 70,000 loss

Jermtex Company sells $800 of merchandise on account to Gala with credit terms of 3/10, n/30. If Gala remits a check taking advantage of the discount offered, what is the amount of Jermtex's check? A) $776 B) $800 C) $784 D) $720

A) 776

Stager, Inc reported net income of $100,000 for the year. During the year, accounts receivable increased by $14,000, accounts payable decreased by $6,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year is A) $90,000. B) $78,000. C) $70,000. D)V$60,000.

A) 90,000

Adjusting entries are made to ensure that: A) All of the above. B) balance sheet and income statement accounts have correct balances at the end of an accounting period. C) revenues are recorded in the period in which they are earned. D) expense are recognized in the period in which they are incurred.

A) All of the above

The term "FOB" denotes: A) free on board B)free only (to) buyer. C)freight on board. D) freight charge on buyer.

A) Free on board

The date on which a cash dividend becomes a binding legal obligation is on the A) declaration date. B) payment date. C) last day of the fiscal year end. D) date of record.

A) declaration date

In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is A) deducted from net income. B) added to net income. C) ignored because it does not affect cash. D) not reported on a statement of cash flows.

A) deducted from net income

Liabilities are classified as current or long-term based on their A) due date. B) amount. C) payment terms. D) description.

A) due date

Each of the following is a major type (or category) of adjusting entry except: Question 24 options: A) earned expenses. B) accrued expenses. C) accrued revenues. D) prepaid expenses.

A) earned expenses

The par value of a stock A) is legally significant. B) is indicative of the worth of the stock. C) reflects the most recent market price. D) is selected by the SEC.

A) is legally significant

Goodwill can be recorded A) only when there is an exchange transaction involving the purchase of an entire business. B) when the company acquires a good location for its business. C) when the company has exceptional management. D) when customers keep returning because they are satisfied with the company's products.

A) only when there is an exchange transaction involving the purchase of an entire business.

The two ways that a corporation can be classified by ownership are A) publicly held and privately held. B) inside and outside. C) stock and non-stock. D) majority and minority.

A) publicly held and privately held

When an asset is sold, a gain occurs when the A) sale price exceeds the book value of the asset sold. B) book value exceeds the sale price of the asset sold. C) sale price exceeds the original cost of the asset sold. D) sale price exceeds the depreciable cost of the asset sold.

A) sale price exceeds the book value of the asset sold

Jon Company sells merchandise on account for $1,800 to Siesta Company with credit terms of 2/10, n/30. Siesta returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What entry does Jon Company make upon receipt of the check? A) DR Cash 1,176DR Sales Returns and Allowances 600DR Sales Discounts 24CR Accounts Receivable 1,800 B) DR Cash 1,764DR Sales Discounts 36DR Sales Returns and Allowances 600CR Accounts Receivable1,200 C) DR Cash 1,200CR Accounts Receivable 1,200 D) DR Cash 1,176DR Sales Returns and Allowances 624CR Accounts Receivable 1,800

B

Romaine Corporation issues 20,000 shares of $90 par value preferred stock for cash at $110 per share. The entry to record the transaction will consist of a debit to Cash for $2,200,000 and a credit or credits to A) Paid-in Capital from Preferred Stock for $2,200,000. B) Preferred Stock for $1.800,000 and Paid-in Capital in Excess of Par Value-Preferred Stock for $400,000. C) Preferred Stock for $2,000,000 and Retained Earnings for $200,000. D) Preferred Stock for $2,200,000.

B)

If a loss of $62,000 is incurred in selling (for cash) office equipment having a book value of $200,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is A) $200,000. B) $138,000. C) $262,000. D) $62,000.

B) 138,000

Use the following data to calculate the current ratio. Gaddis, Inc. Balance Sheet December 31, 2012 Cash $50,000 Accounts Payable 50,000 Prepaid Insurance 30,000 Salaries Payable 10,000 Accounts Receivable 40,000 Mortgage Payable 90,000 Inventory 70,000 Land held for investment 80,000 Land 75,000 Buildings 110,000 Common Stock 120,000 Retained Earnings 250,000 Accumulated Depreciation (20,000) Trademarks 70,000 A) 2.92 : 1. B) 3.17 : 1. C) 3.45 : 1. D) 1.85 : 1.

B) 3.17: 1

On January 1, 2010, Gates Inc. purchased equipment for $45,000. The company is depreciating the equipment at the rate of $650 per month. At January 31, 2011, the balance in Accumulated Depreciation is: A) $600 debit B) $8,450 credit C) $7,800 credit D) $39,900 debit

B) 8450 credit

Bee Bop Record Shop follows the revenue recognition principle. Bee Bop services equipment on August 30. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Bee Bop receives the check in the mail on September 6. When should Bee Bop show that the revenue was earned? A) September 5 B) August 30 C) August 1 D) September 6

B) August 30

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? A) Income tax expense for the period will be the same under all assumptions. B) LIFO C) FIFO D) Average Cost Method

B) LIFO

Working capital is a measure of A) consistency. B) liquidity. C) profitability. D) solvency.

B) Liquidity

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the A) LIFO method. B) FIFO method. C) tax method. D) average cost method.

B) FIFO Methond

Net income results when A) Assets > Liabilities. B) Revenues > Expenses. C) Revenues = Expenses. D) Revenues < Expenses.

B) Revenues>Expenses

Expenses that are associated with sales are classified as A) administrative expenses. B) selling expenses. C) general expenses. D) other expenses.

B) Selling expenses

A trial balance will not balance if A) a transaction is not posted at all. B) a $50 cash dividend is debited to dividends for $500 and credit to cash for $50. C) a correcting journal entry is posted twice. D) a $300 payment on accounts payable is debited to accounts payable for $30 and credited to cash for $30.

B) a $50 cash dividend is debited to dividends for $500 and credit to cash for $50.

Samter Inc. purchased a 6-month insurance policy on March 1, 2011 for $1,200. At March 31, 2011, the adjusting journal entry to record expiration of this asset will include: A) a debit to Prepaid Insurance and a credit to Cash for $1,200. B) a debit to Insurance Expense and a credit to Prepaid Insurance for $200 C) a debit to Insurance Expense and a credit to Cash for $100. D) a debit to Prepaid Insurance and a credit to Insurance Expense for $120.

B) a debit to insurance expense and a credit to Prepaid insurance for $200

Which of the following is not classified properly as a current asset? A) A fund to be used to purchase a building within the next year B) A receivable from the sale of an asset to be collected in two years C) Marketable securities D) Supplies

B) a receivable from the sale of an asset to be collected in two years

A perpetual inventory system would most likely be used by a(n) A) drugstore. B) automobile dealership. C) convenience store. D) hardware store.

B) automobile dealership

Liabilities are generally classified on a balance sheet as A) tangible liabilities and intangible liabilities. B) current liabilities and long-term liabilities. C) present liabilities and future liabilities. D) small liabilities and large liabilities.

B) current liabilities and long-term liabilities

The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that: A) cash payments should be matched with cash receipts. B) efforts should be matched with accomplishments. C) assets should be matched with liabilities. D) dividends should be matched with stockholder investments.

B) efforts should be matched with accomplishments

The declaration of a stock dividend will A) change the total of stockholders' equity. B) increase paid-in capital. C) increase total liabilities. D) increase total assets.

B) increase paid-in capital

A revenue account A) has a normal balance of a debit. B) is increased with a credit. C) is decreased with a credit. D) is increased with a debit.

B) is increased with a credit

The right side of an account A) is the correct side. B) is the credit side. C) shows all the balances of the accounts in the system. D) reflects all transactions for the accounting period.

B) is the credit side

Par value A) represents the original selling price for a share of stock. B) is the value assigned per share in the corporate charter. C) is established for a share of stock after it is issued. D) represents what a share of stock is worth.

B) is the value assigned per share in the corporate charter

The Unearned Service Revenue account is classified as a(n) A) expense. B) liability. C) revenue. D) asset.

B) liability

An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of A) Independent internal verification is violated B) separation of duties is violated C) establishment of responsibility is violated D) documentation procedures is violated

B) separation of duties is violated

A corporation has which of the following set of characteristics? A) Simple to set up and maintains control with founder B) Shared control, tax advantages, increased skills and resources C) Easier to transfer ownership and raise funds, no personal liability D) Harder to raise funds and gives owner control

C)

The maturity value of a $14,000, 6%, 60-day note receivable dated February 10th is A) $14,240. B) $14,020. C) $14,140. D) $14,000.

C) 14,140

Patrick, Inc. purchased a new van for floral deliveries on January 1, 2012. The van cost $40,000 with an estimated life of 4 years and $10,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used. What is the depreciation expense for 2012? A) $10,000 B) $16,000 C) $20,000 D) $26,000

C) 20,000

A bond with a face value of $200,000 and a quoted price of 102 has a selling price of A) $240,450 B) $204,050 C) $204,000 D) $200,000

C) 204,000

The interest on a $10,000, 9%, 90-day note receivable is A) $135 B) $540 C) $225. D) $95.

C) 225

Financial information is presented below: Operating Expenses $45,000 Sales Returns and Allowances 13,000 Sales Discounts 6,000 Sales Revenue 160,000 Cost of Goods Sold 77,000 Gross Profit would be: A) $77,000. B) $83,000. C) $64,000. D) $70,000.

C) 64,000

Hamett Company purchased merchandise inventory with an invoice price of $7,500 and credit terms of 2/10, n/30. What is the net cost of the goods if Hamett Company pays within the discount period? A) $7,380 B) $7,500 C) $7,350 D) $6,000

C) 7350

Beale reports net income of $50,000 and cost of goods sold of $300,000. Beale's gross profit rate was 60%, net sales were: A) $500,000. B) $800,000. C) 750,000. D) $550,000.

C) 750,000

The accounting equation may be expressed as: A) Assets = Stockholders' Equity - Liabilities. B) Assets + Liabilities = Stockholders' Equity. C) Assets = Liabilities + Stockholders' Equity. D) Assets + Stockholders' Equity = Liabilities.

C) Assets = Liabilities + Stockholders' Equity

Which one of the following is not an objective system of internal controls? A) Reduce the risk of errors B) Enhance the accuracy and reliability of accounting records C) Fairness of financial statements D) Safeguard company assests

C) Fairness of financial statements

Which of the following expressions is incorrect? A) Net income + operating expenses = gross profit B) Sales - cost of goods sold - operating expenses = net income C) Operating expenses - cost of goods sold = gross profit D) Gross profit - operating expenses = net income

C) Operating Expenses- Cost of Goods Sold = Gross Profit

Which accounts normally have credit balances? A) Revenues, liabilities, and assets. B) Revenues, liabilities, and expenses. C) Revenues, liabilities, and retained earnings. D) Revenues, liabilities, and dividends.

C) Revenues, liabilities, and retained earnings

If the market rate of interest is lower than the contractual interest rate, the bonds will sell at A) a discount. B) an unknown amount. C) a premium. D) face value.

C) a premium

The book value of a plant asset is the difference between the A) replacement cost of the asset and its historical cost. B) proceeds received from the sale of the asset and its original cost. C) cost of the asset and the accumulated depreciation to date. D) cost of the asset and the amount of depreciation expense for the year.

C) cost of the asset and the accumulate depreciation to date

Accrued revenues are: A) earned and recorded as liabilities before they are received. B) earned and already received and recorded. C) earned but not yet received or recorded. D) received and recorded as liabilities before they are earned.

C) earned but not yet received or recorded

Posting is performed by transferring information from the A) ledger to the journal. B) source documents to the ledger. C) journal to the ledger. D) source documents to the journal.

C) journal to the ledger

In developing the cash flows from operating activities, most companies in the United States A) use the direct method. B) prepare the operating activities section on the accrual basis. C) use the indirect method. D) present both the indirect and direct methods in their financial reports.

C) use the indirect method

The interest charged on a $200,000 note payable, at the rate of 12%, on a 60-day note would be A) $12,000. B) $2,000. C) $6,000. D) $4,000.

D)

Zen Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $48,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is 0. What is the depreciation cost per unit? A) $0.44. B) $4.80. C) $4.40. D) $0.48.

D) 0.48

On January 1, 2012, $1,000,000, 20-year, 10% bonds, were issued for $970,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization amount is A) $125 B) $3,000 C) $9,700 D) $250

D) 250

A corporation issues $400,000, 8%, 5-year bonds on January 1, 2012, for $416,800. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized in December 31, 2012's adjusting entry is A) $35,360. B) $32,000. C) $3,360. D) $28,640.

D) 28,640

Letty Company has the following inventory data:July 1 Inventory20 units at $19=$ 380July 7 Purchases 70 units at $20=$1,400July 22 Purchases 10 units at $22=$220$2,000A physical count of merchandise inventory on July 30 reveals that there are 60 units on hand. Using the LIFO inventory method, the amount allocated to cost of goods sold for July is A) $1190. B) $970 C) $1,450 D) $820

D) 820

Bonds that may be exchanged for common stock at the option of the bondholders are called A) options. B) callable bonds. C) stock bonds. D) convertible bonds.

D) Convertible bonds

An advantage of the single-step income statement over the multiple-step form is A)its use in computing ratios. B)its comprehensiveness. C)the amount of information it provides. D) its simplicity.

D) Its simplicity

When a company has performed a service but has not yet received payment, it A) debits revenue from services and credits accounts payable. B) makes no entry until the cash is received. C) debits revenue from services and credits accounts receivable. D) debits accounts receivable and credits revenue from services.

D) debits accounts receivable and credits revenue from services

A patent A) is rarely subject to litigation because it is an exclusive right. B) is not amortized. C) can be renewed indefinitely. D) has a legal life of 20 years.

D) has a legal life of 20 years

A credit to a liability account A) indicates a decrease in the amount owed to creditors. B) is an error. C) must be accompanied by a debit to an asset account. D) indicates an increase in the amount owed to creditors.

D) indicates an increase in the amount owed to creditors

The recording process occurs A)infrequently in a manual accounting system. B) once a month. C) once a year. D) repeatedly during the accounting period.

D) repeatedly during the accounting period

When a service has been performed, but no cash has been received, which of the following statements is true? A) The entry includes a credit to unearned revenue. B) The entry includes a debit to accounts payable. C) No journal entry is made. D) The entry includes a debit to accounts receivable.

D) the entry includes a debit to accounts receivable

I have followed all final exam security procedures. I have not given or received any assistance on the exam. I did not attempt to copy any part of the exam. I understand that violating the honesty policy will result in course failure. True False

True

The financial statement that summarizes the changes in retained earnings for a specific period of time is the A) statement of cash flows. B) retained earnings statement. C) income statement. D) balance sheet.

b) retained earnings statement

The Allowance for Doubtful Accounts is necessary because A) uncollectible accounts that are written off must be accumulated in a separate account. B) management needs to accumulate all the credit losses over the years. C) when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay. D) a liability results when a credit sale is made.

c) when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay

The group of users of accounting information charged with achieving the goals of the business is its A)investors. B) creditors. C) auditors. D) managers.

d) managers