Acc 101

"Richard Redden contributed $70,000 in cash and land worth $130,000 to open a new business, RR Consulting, Inc. Which of the following general journal entries will RR Consulting, Inc. make to record this transaction?" "Debit Assets $200,000; credit Common Stock, $200,000" "Debit Cash and Land, $200,000; credit Common Stock, $200,000" "Debit Cash $70,000; debit Land $130,000; credit Common Stock, $200,000" "Debit Common Stock, $200,000; credit Cash $70,000; credit Land, $130,000" "Debit Common Stock, $200,000; credit Assets, $200,000"

"Debit Cash $70,000; debit Land $130,000; credit Common Stock, $200,000"

"Kline Company, Inc. accrued wages of $7,350 that were earned by employees unpaid at the end of 2014. Assuming Kline uses reversing entries, which of the following entries is appropriate for reversing the accrued wages at the beginning of 2015?" "Debit Wages Expense $7,350; credit Cash $7,350" "Debit Wages Expense $7,350; credit Wages Payable $7,350" "Debit Wages Payable $7,350; credit Cash $7,350" "Debit Cash $7,350; credit Wages Expense $7,350" "Debit Wages Payable $7,350; credit Wages Expense $7,350"

"Debit Wages Payable $7,350; credit Wages Expense $7,350

"If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:" Debit Cash and credit Legal Fees Earned Debit Cash and credit Unearned Legal Fees Debit Unearned Legal Fees and credit Legal Fees Earned Debit Legal Fees Earned and credit Unearned Legal Fees Debit Unearned Legal Fees and credit Accounts Receivable

Debit Unearned Legal Fees and credit Legal Fees Earned

"On July 1, a company paid the $2,400 premium on a one-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the current year ended December 31?" "$1,200 " "$2,400 " "$1,000 " $400 "$1,400 "

1,200

"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:" "95,000" "$137,000 " "$138,500 " "$140,000 " "$150,000 "

137,000

"Fragment Company, Inc. is a wholesaler that sells merchandise in large quantities. Its catalog indicates a list price of $300 on a particular product and a 40% trade discount is offered for quantity purchases of 50 units or more. The cost of shipping the merchandise is $7 per unit under terms FOB shipping point. If a customer purchases 100 units of this product, what is the amount of sales revenue that Fragment will record from this sale?" "$18,000 " "$30,000 " "$18,700 " "$29,300 " "$30,700 "

18,000

"A company pays its employees $4,000 each Friday, which amounts to $800 per day for the five-day workweek that begins on Monday. If the monthly accounting period ends on Thursday and the employees worked through Thursday, the amount of salaries earned but unpaid at the end of the accounting period is" "$4,000 " $800 "$1,600 " "$2,400 " "$3,200 "

3,200

"A company earned $3,000 in net income for October. Its net sales for October were $10,000. Its profit margin is" 3% 30% 33% 333% "$7,000 "

30%

"On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of stockholders' equity as of May 31 of the current year?" "$8,300 " "$13,050 " "$20,500 " "$31,100 " "$40,400 "

31,100

The Unadjusted Trial Balance columns of a company's work sheet shows the Store Supplies account with a balance of $750. The Adjustments columns shows a credit of $425 for supplies used during the period. The amount shown as Store Supplies in the Balance Sheet columns of the work sheet is: $325 debit $325 credit $425 debit $750 debit $425 credit

325 debit

"A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:" "$3,725.00 " "$3,925.00 " "$3,995.00 " "$4,000.50 " "$4,075.00 "

4,000.50

"A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:" "($417,000)" "$695,000 " "$278,000 " "$417,000 " "$973,000 "

417,000

"Cushman Company, Inc. had $800,000 in net sales, $350,000 in gross profit, and $200,000 in operating expenses. Cost of goods sold equals" "$150,000 " "$450,000 " "$800,000 " "$350,000 " "$200,000 "

450,000

"At the beginning of January of the current year, Little Mikey's Catering ledger reflected a normal balance of $52,000 for accounts receivable. During January, the company collected $14,800 from customers on account and provided additional services to customers on account totaling $12,500. Additionally, during January one customer paid Mikey $5,000 for services to be provided in the future. At the end of January, the balance in the accounts receivable account should be:" "$54,700 " "$49,700 " "$2,300 " "$54,300 " "$49,300 "

49,700

"Avanti purchases inventory from overseas and incurs the following costs: the merchandise cost is $50,000, credit terms 2/10, n/30 that apply only to the $50,000; FOB shipping point freight charges are $1,500; insurance during transit is $500; and import duties are $1,000. Avanti paid within the discount period and incurred additional costs of $1,200 for advertising and $5,000 for sales commissions. Compute the cost that should be assigned to the inventory" "$50,000 " "$53,000 " "$52,000 " "$51,500 " "$53,200 "

52,000

"A company's net sales were $676,600, its cost of goods sold was $236,810 and its net income was $33,750. Its gross margin ratio equals:" 5% 9.60% 35% 65% 285.70%

65%

A corporation is A business legally separate from its owners Controlled by the FASB Not responsible for its own acts and own debts The same as a limited liability partnership Not subject to double taxation

A business legally separate from its owners

"On July 1 Plum Co. paid $7,500 cash for management services to be performed over a two-year period. Plum follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. On July 1 Plum should record:" "A debit to an expense and credit to a prepaid expense for $7,500" "A debit to an expense and credit to Cash for $7,500" "A debit to a prepaid expense and a credit to Cash for $7,500" "A credit to a prepaid expense and a debit to Cash for $7,500" "A debit to Cash for $7,500 and a credit to an expense for $7,500"

A debit to a prepaid expense and a credit to Cash for $7,500

"Lu Lu's Catering has a debt ratio equal to .3 and its competitor, Able's Bakery, has a debt ratio equal to .7. Determine the statement below that is correct" Able's Bakery has a smaller percentage of its assets financed with liabilities as compared to Lu Lu's Able's Bakery's financial leverage is less than Lu Lu's Able's Bakery's financial leverage is greater than Lu Lu's Lu Lu's has a higher risk from its financial leverage Higher financial leverage involves lower risk.

Able's Bakery's financial leverage is greater than Lu Lu's

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" Accounting period Operating cycle Accounting cycle Closing cycle Natural business year

Accounting cycle

Which of the following accounts are permanent (real) accounts? Fees earned Office supplies expense Interest revenue Accounts payable Salaries expense

Accounts payable

If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30, in preparing the September 30 bank reconciliation, the company should Deduct the deposit from the bank statement balance Send the bank a debit memorandum Deduct the deposit from the September 30 book balance and add it to the October 1 book balance Add the deposit to the book balance of cash Add the deposit to the bank statement balance

Add the deposit to the bank statement balance

Merchandise inventory includes All goods owned by a company and held for sale All goods in transit All goods on consignment Only damaged goods Only non-damaged goods

All goods owned by a company and held for sale

When closing entries are made All ledger accounts are closed to start the new accounting period All temporary accounts are closed but permanent accounts are not closed All real accounts are closed but nominal accounts are not closed All permanent accounts are closed but nominal accounts are not closed All balance sheet accounts are closed

All temporary accounts are closed but permanent accounts are not closed

The accounting process begins with: Analysis of business transactions and source documents Preparing financial statements and other reports Summarizing the recorded effect of business transactions Presentation of financial information to decision-makers Preparation of the trial balance

Analysis of business transactions and source documents

Damaged and obsolete goods that can be sold Are never counted as inventory Are included in inventory at their full cost Are included in inventory at their net realizable value Should be disposed of immediately Are assigned a value of zero

Are included in inventory at their net realizable value

Physical counts of inventory Are not necessary under the perpetual system Are necessary to adjust the Inventory account to the actual inventory available Must be taken at least once a month Requires the use of hand-held portable computers Are not necessary under the cost-to-benefit constraint

Are necessary to adjust the Inventory account to the actual inventory available

Cash equivalents Include 6-month certificates of deposit Include checking accounts Are recorded in petty cash Include money orders Are short-term, highly liquid investment assets

Are short-term, highly liquid investment assets

Payments made for products and services that do not ever expire Classified as liabilities on the balance sheet Decreases in equity Promises of payments by customers Assets that represent prepayments of future expenses

Assets that represent prepayments of future expenses

Managers place a high priority on internal control systems because the systems assist managers in all of the following except: Promoting efficient operations Protect assets Urging adherence to company policies Ensuring reliable accounting Assuring that no loss will occur

Assuring that no loss will occur

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:" Time-period assumption Business entity assumption Going-concern assumption Revenue recognition principle Cost principle

Business entity assumption

To include the personal assets and transactions of a business's stockholders in the records and reports of the business would be in conflict with the: Objectivity principle Monetary unit assumption Business entity assumption Going-concern assumption Revenue recognition principle

Business entity assumption

An account used to record the stockholders' investments in a business is called a(n) Dividends account Common stock account Revenue account Expense account Liability account

Common stock account

An account linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is a(n): Accrued expense Contra account Accrued revenue Intangible asset Adjunct account

Contra account

Internal controls that should be applied when a business takes a physical count of inventory should include all of the following except: Prenumbered inventory tickets A manager confirms that all inventories are ticketed only once "Counters confirm the validity of inventory existence, amounts, and quality" Second counts by a different counter Counters of inventory should be those who are responsible for the inventory

Counters of inventory should be those who are responsible for the inventory

"A company had revenues of $75,000 and expenses of $62,000 for the accounting period. The company paid $8,000 cash in dividends to the owner (sole shareholder). Which of the following entries could not be a closing entry?" "Debit Income Summary $13,000; credit Retained Earnings $13,000" "Debit Income Summary $75,000; credit Revenues $75,000" "Debit Revenues $75,000; credit Income Summary $75,000" "Debit Income Summary $62,000; credit Expenses $62,000" "Debit Retained Earnings $8,000; credit Dividends $8,000"

Debit Income Summary $75,000; credit Revenues $75,000

"Tara Westmont, the stockholder of Tiptoe Shoes, Inc., had annual revenues of $185,000, expenses of $103,700, The company paid $18,000 cash in dividends to the owner (sole stockholder). The retained earnings 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" "Debit Retained Earnings $297,000; credit Income Summary $297,000 " "Debit Retained Earnings $63,300; credit Income Summary $63,300 " "Debit Income Summary $63,300; credit Retained Earnings $63,300" "Debit Income Summary $81,300; credit Retained Earnings $81,300 " "Debit Retained Earnings $81,300; credit Income Summary $81,300 "

Debit Income Summary $81,300; credit Retained Earnings $81,300

Accounting is an information and measurement system that does all of the following except Identifies business activities Records business activities Communicates business activities Eliminates the need for interpreting financial data Helps people make better decisions

Eliminates the need for interpreting financial data

Two clerks sharing the same cash register is a violation of which internal control principle? Establish responsibilities Maintain adequate records Insure assets Bond key employees Apply technological controls

Establish responsibilities

"During a period of steadily rising costs, the inventory valuation method that yields the highest reported net income is" Specific identification method Average cost method Weighted-average method FIFO method LIFO method

FIFO method

The amount recorded for merchandise inventory includes all of the following except: Purchase discounts Returns and allowances Freight costs paid by the buyer Freight costs paid by the seller Trade discounts

Freight costs paid by the seller

"The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the:" Going-concern assumption Business entity assumption Objectivity principle Cost Principle Monetary unit assumption

Going-concern assumption

Which of the following is not one of the policies and procedures that make up an internal control system? Protect assets Ensure reliable accounting Guarantee a return to investors Urge adherence to company policies Promote efficient operations

Guarantee a return to investors

Closing the temporary accounts at the end of each accounting period does all of the following except: Serves to transfer the effects of these accounts to the retained earnings account on the balance sheet Prepares the dividends account for use in the next period Brings the revenue and expense accounts to zero balances Has no effect on the retained earnings account Causes retained earnings to reflect increases from revenues and decreases from expenses and dividends

Has no effect on the retained earnings account

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the retained earnings account is the: Income Summary account. Closing account Balance column account Contra account Nominal account

Income Summary account

Merchandise inventory: Is a long-term asset Is a current asset Includes supplies the company will use in future periods Is classified with investments on the balance sheet Must be sold within one month

Is a current asset

The total amount of depreciation recorded against an asset over the entire time the asset has been owned: Is referred to as depreciation expense Is referred to as accumulated depreciation Is shown on the income statement of the final period Is only recorded when the asset is disposed of Is referred to as an accrued asset

Is referred to as accumulated depreciation

Liquidity problems are likely to exist when a company's acid-test ratio Is less than the current ratio equals 1 Is substantially lower than 1 Is higher than 1 Is higher than the current ratio

Is substantially lower than 1

Cost of goods sold: Is another term for merchandise sales Is the term used for the expense of buying and preparing merchandise for sale. Is another term for revenue Is also called gross margin Is a term only used by service firms

Is the term used for the expense of buying and preparing merchandise for sale.

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is" Specific identification method Average cost method Weighted-average method Correct FIFO method LIFO method

LIFO method

The inventory valuation method that results in the lowest taxable income in a period of inflation is Specific identification method Average cost method Weighted-average method FIFO method LIFO method

LIFO method

A business's source documents may include all of the following except: Sales tickets Ledgers Checks Purchase orders Bank statements

Ledgers

A properly designed internal control system Lowers the company's risk of loss Insures profitable operations Eliminates the need for an audit Requires the use of non-computerized systems Is not necessary if the company uses a computerized system

Lowers the company's risk of loss

Profit margin is defined as Revenues divided by net sales Net sales divided by assets Net income divided by net sales Net income divided by assets Net sales divided by net income

Net income divided by net sales

A company's formal promise to pay (in the form of a promissory note) a future amount is a(n): Selected Answer: Incorrect [None Given] Answers: Unearned revenue Prepaid expense Credit account Note payable Account receivable

Note payable

A classified balance sheet Measures a company's ability to pay its bills on time Organizes assets and liabilities into important subgroups that provide more information "Broadly groups items into assets, liabilities and equity" "Reports operating, investing, and financing activities" Reports the effect of profit and dividends on retained earnings

Organizes assets and liabilities into important subgroups that provide more information

Basic bank services do not include Bank accounts Bank deposits Checking Electronic funds transfer Petty cash management

Petty cash management

Which of the following is the usual final step in the accounting cycle? Journalizing transactions Preparing an adjusted trial balance Preparing the financial statements Preparing a work sheet Preparing a post-closing trial balance

Preparing a post-closing trial balance

The consistency concept "Prescribes a company use the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting" Requires a company to use one method of inventory valuation exclusively Requires that all companies in the same industry use the same accounting methods of inventory valuation Is also called the full disclosure principle Is also called the matching principle

Prescribes a company use the same accounting method of inventory valuation, an exception being when a change from one method to another will improve its financial reporting

Preparing a bank reconciliation on a monthly basis is an example of Establishing responsibility Separation of duties Protecting assets by proving the accuracy of cash records A technological control Poor internal control

Protecting assets by proving the accuracy of cash records

The primary objective of financial accounting is to: Serve the decision-making needs of internal users Provide accounting information that serves external users Monitor and control company activities Provide information on both the costs and benefits of looking after products and services. "Know what, when, and how much product to produce"

Provide accounting information that serves external users

An asset created by prepayment of an insurance expense is Recorded as a debit to Unearned Revenue. Recorded as a debit to Prepaid Insurance Recorded as a credit to Unearned Revenue Recorded as a credit to Prepaid Insurance Not recorded in the accounting records until the insurance period expires

Recorded as a debit to Prepaid Insurance

The impact of technology on internal controls includes Reduced processing errors Elimination of the need for regular audits Elimination of the need to bond employees Elimination of separation of duties Elimination of fraud

Reduced processing errors

Technology: Has replaced accounting Has not improved the clerical accuracy of accounting "Reduces the time, effort and cost of recordkeeping" In accounting has replaced the need for decision makers In accounting is only available to large corporations

Reduces the time, effort and cost of recordkeeping"

Revenues, expenses, and dividend accounts, which are closed at the end of each accounting period are" Real accounts Closing accounts Permanent accounts Balance sheet accounts Temporary accounts

Temporary accounts

A bank statement provided by the bank includes A list of outstanding checks A list of petty cash amounts The beginning and the ending balance of the depositor's account A listing of deposits in transit A reconciliation to the depositor cash account

The beginning and the ending balance of the depositor's account

Identify the account used by businesses to record the transfer of assets from a business to its owner for personal use: A revenue account The dividends account The common stock account An expense account A liability account

The dividends account

The conceptual framework that the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are attempting to converge and enhance includes the following broad areas to guide standard setting except: Objectives Qualitative characteristics Uniformity Elements Recognition and measurement

Uniformity

The inventory valuation method that tends to smooth out erratic changes in costs is Specific identification method Average cost method Weighted-average method FIFO method LIFO method

Weighted-average method