Principles of Accounting Final Exam Multiple-Choice Question Database

The interest on a $20,000, 6%, 60-day note receivable is

A) $1,200. B) $200. C) $400. D) $600.

Gilkey Corporation began the year with retained earnings of $310,000. During the year, the company issued $420,000 of common stock, recorded expenses of $1,200,000, and paid dividends of $80,000. If Gilkey's ending retained earnings was $330,000, what was the company's revenue for the year?

A) $1,220,000 B) $1,300,000 C) $1,640,000 D) $1,720,000

In the first month of operations, the total of the debit entries to the Cash account amounted to $3,000 and the total of the credit entries to the Cash account amounted to $1,800. The Cash account has a

A) $1,800 debit balance. B) $3,000 debit balance. C) $1,200 debit balance. D) $1,200 credit balance.

Hogan Industries had the following inventory transactions occur during 2017: Units Cost/unit Feb. 1, 2017 Purchase 108 $45 Mar. 14, 2017 Purchase 186 $47 May 1, 2017 Purchase 132 $49 The company sold 306 units at $63 each and has a tax rate of 30%. Assuming that a periodic inventory system is used and operating expenses of $1,800, what is the company's after-tax income using FIFO? (rounded to whole dollars)

A) $2,832 B) $3,288 C) $2,302 D) $1,982

The following information is available for Bradshaw Corporation and Newell Corporation: (in millions) Bradshaw Corporation Newell Corporation 2017 2016 2017 2016 Preferred dividends 25 10 0 30 Net income 500 480 490 520 Shares outstanding at the end of the year 200 180 150 200 Shares outstanding at the beginning of the year 180 150 200 220 Based on this information, what is the amount of Bradshaw's earnings per share (rounded to two decimals) for 2017?

A) $2.76 B) $2.50 C) $1.25 D) $1.32

Given the following adjusted trial balance: Debit Credit Cash $ 831 Accounts receivable 1,049 Inventory 1,562 Prepaid rent 43 Equipment 150 Accumulated depreciation-equipment 26 Accounts payable 41 Unearned service revenue 61 Common stock 103 Retained earnings 3,305 Service revenue 184 Interest revenue 28 Salaries and wages expense 80 Travel expense 33 _____ Total $3,748 $3,748 After closing entries have been posted, the balance in retained earnings will be:

A) $3,306. B) $3,220. C) $3,490. D) $3,404.

A credit sale of $3,800 is made on April 25, terms 2/10, net/30, on which a return of $200 is granted on April 28. What amount is received as payment in full on May 4?

A) $3,528 B) $3,724 C) $3,800 D) $3,600

A company has an ending accounts receivable balance of $1,800,000 and it estimates that uncollectible accounts will be 2% of the receivable balance. If Allowance for Doubtful Accounts has a credit balance of $4,000 prior to adjustment, its balance after adjustment will be a credit of

A) $40,000. B) $36,000. C) $35,920. D) $32,000.

At September 1, 2017, Baxter Inc. reported Retained Earnings of $423,000. During the month, Baxter generated revenues of $60,000, incurred expenses of $36,000, purchased equipment for $15,000 and paid dividends of $6,000. What is the balance in Retained Earnings at September 30, 2017?

A) $423,000 debit B) $24,000 credit C) $426,000 credit D) $441,000 credit

At May 1, 2017, Heineken Company had beginning inventory consisting of 300 units with a unit cost of $7. During May, the company purchased inventory as follows: 600 units at $7 900 units at $8 The company sold 1,500 units during the month for $12 per unit. Heineken uses the average cost method. Heineken's gross profit for the month of May is

A) $6,750 B) $11,250 C) $13,500 D) $18,000

Financial information is presented below: Operating expenses $ 28,000 Sales returns and allowances 7,000 Sales discounts 3,000 Sales revenue 150,000 Cost of goods sold 98,000 The net profit margin would be

A) .28. B) .09. C) .30. D) .10.

Using the following balance sheet and income statement data, what is the current ratio? Current assets $ 32,000 Net income $ 42,000 Current liabilities 16,000 Stockholders' equity 78,000 Average assets 160,000 Total liabilities 42,000 Total assets 120,000 Average common shares outstanding was 15,000.

A) 2.0 : 1 B) 2.6 : 1 C) 0.5 : 1 D) 2.9 : 1

Mitchell Corporation has current assets of $1,600,000 million and current liabilities of $750,000. If they pay $350,000 of their accounts payable what will their new current ratio be?

A) 3.1:1 B) 4.0:1 C) 1.5:1 D) 2.1:1

A company shows the following balances: Sales Revenue $ 800,000 Sales Returns and Allowances 75,000 Sales Discounts 25,000 Cost of Goods Sold 490,000 What is the gross profit rate?

A) 61% B) 70% C) 30% D) 39%

Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system?

A) A purchase of merchandise. B) A return of merchandise inventory to the supplier C) Payment of freight costs for goods shipped to a customer D) Payment of freight costs for goods received from a supplier

Which of the following accounts has a normal debit balance?

A) Accounts Payable B) Prepaid Rent C) Retained Earnings D) Common Stock

Which of the following receivables would not be classified as an "other receivable"?

A) Advance to an employee B) Refundable income tax C) Notes receivable D) Interest receivable

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.

The journal entry to record a credit sale ignoring cost of goods sold is

A) Cash Sales Revenue B) Cash Service Revenue C) Accounts Receivable Sales Returns and Allowances D) Accounts Receivable Sales Revenue

Young Company lends Dobson industries $40,000 on August 1, 2017, accepting a 9-month, 9% interest note. If Young accrued interest at its December 31, 2017 year-end, what entry must it make to record the collection of the note and interest at its maturity date?

A) Cash 42,700 Notes Receivable 40,000 Interest Revenue 2,700 B) Cash 42,700 Notes Receivable 42,700 C) Notes Receivable 40,000 Interest Receivable 1,500 Interest Revenue 1,200 Cash 42,700 D) Cash 42,700 Notes Receivable 40,000 Interest Receivable 1,500 Interest Revenue 1,200

Which of the following account's balance will change between the adjusted trial balance and the post-closing trial balance?

A) Common stock B) Prepaid rent C) Unearned service revenue D) Retained earnings

The policy at Adler Corporation is to expense all office supplies at the time of purchase. On the last day of the accounting period, there are $1,100 of unused office supplies on hand and the balance of supplies expense is $3,500. What should the accountant do?

A) Debit Supplies and credit Supplies Expense for $1,100. B) Nothing, company policy says to expense supplies when purchased. C) Convince management to change its policy to avoid problems in the future. D) Debit Supplies Expense for $2,400 and credit Supplies for $2,400.

Given equal circumstances and generally rising costs, which inventory method will increase the tax expense the most?

A) FIFO B) LIFO C) Average cost D) Income tax expense for the period will be the same under all assumptions.

Which of the following is not a common cost flow assumption used in costing inventory?

A) First-in, first-out B) Middle-in, first-out C) Last-in, first-out D) Average cost

In a study session, a classmate makes this statement "Dividends are listed as expenses on the income statement." What is your best response to this statement?

A) I've been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets. B) You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends? C) Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement. D) Dividends are deducted from retained earnings on the balance sheet.

Which of the following describes an accrued expense?

A) Incurred but not yet paid or recorded. B) Paid and recorded in an asset account after they are used or consumed. C) Paid and recorded in an asset account before they are used or consumed. D) Incurred and already paid or recorded.

A gift shop signs a three-month note payable to help finance increases in inventory for the Christmas shopping season. The note is signed on November 1 in the amount of $50,000 with annual interest of 6%. What is the adjusting entry to be made on December 31 for the interest expense accrued to that date, if no entries have been made previously for the interest?

A) Interest Expense 500 Interest Payable 500 B) Interest Expense 750 Interest Payable 750 C) Interest Expense 500 Cash 500 D) Interest Expense 750 Note Payable 750

Which of the following would not be considered an external user of accounting data for the Julian Company?

A) Internal Revenue Service agent B) Management C) Creditors D) Customers

A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in:

A) January. B) February. C) the period when the workers receive their checks. D) either January or February depending on when the pay period ends.

Rosen Company receives a $9,000, 3-month, 6% promissory note from Bay Company in settlement of an open accounts receivable. What entry will Rosen Company make upon receiving the note?

A) Notes Receivable 9,135 Accounts Receivable—Bay Company 9,135 B) Notes Receivable 9,135 Accounts Receivable—Bay Company 9,000 Interest Revenue 135 C) Notes Receivable 9,000 Interest Receivable 135 Accounts Receivable—Bay Company 9,000 Interest Revenue 135 D) Notes Receivable 9,000 Accounts Receivable—Bay Company 9,000

Which of the following is least likely to help a company minimize losses as credit standards are relaxed?

A) Require potential customers to provide bank guarantees. B) Ask a potential customer for references regarding payment history. C) Increase the estimate of uncollectible accounts at the end of each period. D) Check a potential customer's credit rating.

Which one of the following is not an objective of a system of internal controls?

A) Safeguard company assets. B) Enhance the accuracy and reliability of accounting records. C) Fairness of the financial statements. D) Reduce the risks of errors.

Which of the following would not be classified as a contra account?

A) Sales Revenue B) Sales Returns and Allowances C) Accumulated Depreciation D) Sales Discounts

Which account will have a zero balance after closing entries have been journalized and posted?

A) Service revenue. B) Supplies. C) Prepaid Insurance. D) Accumulated Depreciation.

A corporation has which of the following set of characteristics?

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

Under the allowance method, writing off an uncollectible account

A) affects only balance sheet accounts. B) affects both balance sheet and income statement accounts. C) affects only income statement accounts. D) is not acceptable practice.

Each of the following is a feature of internal control except

A) an extensive marketing plan. B) bonding of employees. C) separation of duties. D) recording of all transactions.

The inventory turnover is calculated by dividing cost of goods sold by

A) beginning inventory. B) ending inventory. C) average inventory. D) 365 days.

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

A) called the matching principle. B) called the consistency principle. C) nonexistent; that is, there is no such accounting requirement. D) called the physical flow assumption.

If a company fails to record estimated bad debts expense,

A) cash realizable value is understated. B) expenses are understated. C) revenues are understated. D) receivables are understated.

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except to:

A) check the accuracy of the records. B) determine the amount of wasted raw materials. C) determine losses due to employee theft. D) determine ownership of the goods.

A deposit made by a company will appear on the bank statement as a

A) debit. B) credit. C) debit memorandum. D) credit memorandum.

The assumption that requires only those things that can be expressed in money are included in the accounting records is the

A) economic entity assumption. B) monetary unit assumption. C) going concern assumption . D) periodicity assumption.

It is assumed that the activities of Ford Motor company can be distinguished from those of General Motors because of the

A) going concern assumption. B) economic entity assumption. C) monetary unit assumption. D) periodicity assumption.

The double-entry system requires that each transaction must be recorded

A) in at least two different accounts. B) in two sets of books. C) in a journal and in a ledger. D) first as a revenue and then as an expense.

Dividends are reported on the

A) income statement. B) retained earnings statement. C) balance sheet. D) income statement and balance sheet

All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act except

A) independent outside auditors must attest to the level of internal control. B) companies must develop sound internal controls over financial reporting. C) companies must continually assess the functionality of internal controls. D) independent outside auditors must eliminate redundant internal controls.

The right side of an 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.

The normal balance of any account is the

A) left side. B) right side. C) side which increases that account. D) side which decreases that account.

If a company fails to adjust for accrued revenues:

A) liabilities will be understated and revenues will be understated. B) liabilities will be overstated and revenues will be understated. C) assets will be overstated and revenues will be understated. D) assets will be understated and revenues will be understated.

Each of the following is a feature of internal control except

A) limited access to assets. B) independent internal verifications. C) authorization of transactions. D) generic design of documents.

If a company determines cost of goods sold each time a sale occurs, it

A) must have a computer accounting system. B) uses a combination of the perpetual and periodic inventory systems. C) uses a periodic inventory system. D) uses a perpetual inventory system.

A check returned by the bank marked "NSF" means

A) no service fee. B) no signature found. C) not satisfactorily filled out. D) non sufficient funds.

Related selling activities do not include

A) ordering the merchandise. B) making a sale. C) shipping the goods. D) billing the customer.

Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n)

A) purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance. B) investment of $5,000 cash in the business by the stockholders. C) purchase of office equipment for $5,000 cash. D) repayment of a $5,000 bank loan.

If a company fails to make an adjusting entry to record supplies expense, then:

A) stockholders' equity will be understated. B) expense will be understated. C) assets will be understated. D) net income will be understated.

Under a perpetual inventory system, acquisition of merchandise for resale is debited to

A) the Inventory account. B) the Purchases account. C) the Supplies account. D) the Cost of Goods Sold account.

When goods are returned that relate to a prior cash sale

A) the Sales Returns and Allowances account should not be used. B) the Cash account will be credited. C) Sales Returns and Allowances will be credited. D) Accounts Receivable will be credited.

Under the allowance method of accounting for uncollectible accounts,

A) the cash realizable value of accounts receivable is greater before an account is written off than after it is written off. B) Bad Debt Expense is debited when a specific account is written off as uncollectible. C) the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off. D) Allowance for Doubtful Accounts is closed each year to Income Summary.