Accounting 1
If the beginning balance of land is $5,000 and the ending balance of land is $20,000, what is the cash flow amount and cash flow classification for the change in the land balance? a. $15,000 cash inflow from investing activities. b. $15,000 cash outflow from financing activities. c. $15,000 cash outflow from investing activities. d. $15,000 cash outflow from operating activities.
$15,000 cash outflow from investing activities.
Anderson Company made the following three inventory purchases: Oct. 1 $200 Oct. 5 $210 Oct. 10 $225 On Oct. 15, Anderson Company sold one of the items. Using the LIFO inventory costing method, what is the Cost of Goods Sold on this sale? a. $200. b. $225. c. $210. d. $211.67.
$225.
The balance sheet of the Hall Company reported assets of $10,000, liabilities of $4,000, and common stock of $3,000. Based on this information only, the amount or balance for retained earnings must be a. $1,000. b. $11,000. c. $17,000. d. $3,000.
$3,000.
If Brock Company has sales of $1,000 during the year and collects $700 from customers and incurs expenses of $400 but only paid $300 on accounts payable, what is the net cash flows from operating activities? a. $600. b. $700. c. $300. d. $400.
$400.
If the beginning balance in common stock is $100,000 and the ending balance in common stock is $150,000, the increase due to issuing common stock would be classified as cash flow amount and classification as follows: a. $50,000 cash inflow from financing activities. b. $150,000 cash inflow from financing activities. c. $50,000 cash outflow from operating activities. d. $50,000 cash inflow from investing activities.
$50,000 cash inflow from financing activities.
Hamilton Company has the following account balances: Sales $100 Accounts Receivable $60 Uncollectible Accounts Expense $20 Allowance for Doubtful Accounts $10 What is the net realizable value of accounts receivable? a. $90. b. $80. c. $40. d. $50.
$50.
The year-end adjusting journal entry to record interest accrued on a note payable but not yet paid includes a. A credit to Interest Expense. b. A credit to cash. c. A debit to Notes Payable. d. A credit to Interest Payable.
A credit to Interest Payable.
The difference between the debit and credit side of a T-account is known as the a. Net income. b. Account balance. c. Equality. d. Trial balance.
Account balance.
When a merchandising business purchases $5,000 merchandise inventory on account and records the transaction as a journal entry, which of the following statements is true? a. Merchandise expense is debited. b. Accounts payable is debited. c. Cash is credited. d. Accounts payable is credited.
Accounts payable is credited.
A typical bank reconciliation format for determining the true cash balance beginning with the unadjusted bank balance includes all of the following items except: a. Unadjusted bank balance. b. Deposits in transit. c. Accounts receivable collections. d. Outstanding checks.
Accounts receivable collections.
Hyde and Associates provided $10,500 of accounting services to its clients. Hyde has completed the work and sent bills to the clients, but has not collected any cash. Which asset account increases when Hyde records the transaction? a. Cash. b. Accounts receivable. c. Retained earnings. d. Land.
Accounts receivable.
Which of the following accounts is increased with a debit? a. Retained earnings. b. Accounts receivable. c. Unearned revenue. d. Common stock.
Accounts receivable.
How is a noncash expense like depreciation handled on the statement of cash flows? a. Subtracted from cash flows from operating activities. b. Added to cash flows from operating activities. c. Added to cash flows from investing activities. d. Subtracted from cash flows from investing activities.
Added to cash flows from operating activities.
Which of the following is considered a period cost? a. Cost of merchandise purchased. b. Transportation cost on goods received from suppliers. c. Administrative salaries expense for the current month. d. None of the above is considered a period cost.
Administrative salaries expense for the current month.
Which of the following items is considered an employee fringe benefit? a. Paid vacation leave. b. Paid sick leave. c. Medical insurance. d. All of the above are employee fringe benefits.
All of the above are employee fringe benefits.
Which of the following is a federal income tax document related to payroll? a. Employee's Withholding Allowance Certificate, W-4. b. Wage and Tax Statement, W-2. c. Employer's Quarterly Federal Tax Return, Form 941. d. All of the above items are federal income tax documents related to payroll.
All of the above items are federal income tax documents related to payroll.
The lower-of-cost-or-market rule can be applied to a. each individual inventory item. b. major classes or categories of inventory. c. the entire stock of inventory in the aggregate. d. Any of the above methods is allowable.
Any of the above methods is allowable.
If the company paid $1,000 cash for equipment, in which of the following categories would the transaction be classified? a. Asset source. b. Asset use. c. Asset exchange. d. Claims exchange.
Asset exchange.
Dart Corporation collected $150,000 from issuing common stock. What type of transaction is described? a. Asset source. b. Asset use. c. Asset exchange. d. None of the above.
Asset source.
In the basic accounting equation, all of the following elements appear on the right side of the accounting equation except: a. Retained earnings. b. Assets. c. Liabilities. d. Common stock.
Assets.
The Accumulated Depreciation account appears on which of the following financial statements? a. Income statement. b. Balance sheet. c. Statement of cash flows. d. Statement of changes in stockholders' equity.
Balance sheet.
The Merchandise Inventory account appears on which of the following financial statements? a. Income statement. b. Statement of changes in stockholders' equity. c. Balance sheet. d. Statement of cash flows.
Balance sheet.
What do companies use to explain the differences between the cash balance reported on the bank statement and the cash balance reported in the depositor's accounting records? a. Proof of cash. b. Bank reconciliation. c. Bank transfer schedule. d. Bank inquiry.
Bank reconciliation.
Which of the following is NOT a type of service typically offered by public accountants? a. Audit services. b. Tax services. c. Budget services. d. Consulting services.
Budget services.
A cash sale of land would appear in which of the following sections of the statement of cash flows? a. Cash inflow from financing activities. b. Cash inflow and cash outflow in a separate schedule of noncash investing and financing activities. c. Cash outflow from operating activities. d. Cash inflow from investing activities.
Cash inflow from investing activities.
On December 31, Tennessee American Water Company recorded accrued salary expense of $50,000. How is this transaction classified? a. Asset source. b. Asset use. c. Asset exchange. d. Claims exchange.
Claims exchange.
All of the following statements are true about the general journal and journal entries except: a. Journals are called books of original entry. b. Transactions are recorded as journal entries before they are entered in ledger accounts. c. Journal entries have at least one debit entry and at least on credit entry. d. Closing journal entries move account balances from permanent accounts to the Retained Earnings account.
Closing journal entries move account balances from permanent accounts to the Retained Earnings account.
All of the following are temporary accounts except for: a. Expenses. b. Dividends. c. Common stock. d. Revenues.
Common stock.
Internal controls are divided into two categories: accounting controls and administrative controls. Which of the following is not considered an accounting control? a. Physical controls over assets. b. Segregation of duties. c. Compliance with company policies and public laws. d. Use of prenumbered documents.
Compliance with company policies and public laws.
Bank statements report all of the following information except: a. Additions for customer deposits made during the period. b. Bank account balance at the end of the period. c. Subtractions for the payments of checks drawn on the account during the period. d. Customer's general ledger (book) balance at the beginning of the period.
Customer's general ledger (book) balance at the beginning of the period.
The left side of a T-account is known as the: a. Equity side. b. Claims side. c. Debit side. d. Credit side.
Debit side.
Which of the following is a noncash expense? a. Salaries expense. b. Depreciation expense. c. Rent expense. d. Insurance expense.
Depreciation expense.
On December 1, 2019, Catherine Company sells merchandise on account to Monroe Company for $12,500. The entry to record the sales transaction by Catherine Company is a. Dr. Sales Revenue 12,500; Cr. Accounts Receivable 12,500 b. Dr. Accounts Receivable 12,500; Cr. Sales Revenue 12,500 c. Dr. Cash 12,500; Cr. Sales Revenue 12,500 d. Dr. Notes Receivable 12,500; Cr. Accounts Receivable 12,500
Dr. Accounts Receivable 12,500; Cr. Sales Revenue 12,500
Charleston Company uses the percent-of-revenue method to estimate uncollectible accounts expense. On December 31, 2019, Charleston Company estimates its uncollectible accounts expense to be $4,000. What is the year-end adjusting journal entry? a. Dr. Sales Revenue 4,000; Cr. Accounts Receivable 4,000 b. Dr. Uncollectible Accounts Expense 4,000; Cr. Allowance for Doubtful Accounts 4,000 c. Dr. Uncollectible Accounts Expense 4,000; Cr. Accounts Receivable 4,000 d. Dr. Accounts Receivable 4,000; Cr. Allowance for Doubtful Accounts 4,000
Dr. Uncollectible Accounts Expense 4,000; Cr. Allowance for Doubtful Accounts 4,000
Business obtain assets from three sources. Which of the following is NOT one of the sources? a. Owners/stockholders. b. Creditors. c. Expenses. d. Profitable operations/customers.
Expenses.
Inventory turnover is the average number of times the balance in the Inventory account is turned over (sold) each year. What type of business would tend to have the highest inventory turnover ratio? a. Home construction company. b. Department store. c. Fast food restaurant. d. Antique store.
Fast food restaurant.
Which of the following taxes is not deducted from an employee's pay? a. Federal income taxes. b. FICA tax - Social security. c. FICA tax - Medicare. d. Federal unemployment taxes.
Federal income taxes.
Which type of accounting information is intended to satisfy the needs of external users of accounting information? a. Cost accounting. b. Financial accounting. c. Tax accounting. d. Managerial accounting.
Financial accounting.
The cost flow method that often parallels the actual physical flow of merchandise is the a. First-in, First-out (FIFO) method. b. Last-in, First-out (LIFO) method. c. Weighted-Average method. d. Gross margin method.
First-in, First-out (FIFO) method.
Financial statements report on which of the following types of year? a. Calendar year. b. Sales year. c. Business year. d. Fiscal year.
Fiscal year.
Of the following companies, which one would not likely use the specific identification method for inventory costing? a. Music store specializing in piano sales. b. Car dealership. c. Grocery store. d. Antique shop.
Grocery store.
Which of the following statements is true about multi-step income statements? a. Assets are stated at historical cost. b. All revenues and gains are summarized in a single line on the income statement. c. Gross margin is calculated. d. Inventory appears on the multi-step income statement for merchandising companies.
Gross margin is calculated.
What tool helps companies estimate ending inventory balances in analyzing the potential for fraud? a. Retail method. b. Gross margin method. c. Specific identification method. d. FIFO method.
Gross margin method.
Which of the following financial statements matches revenue with the expenses that were incurred to generate the revenue? a. Balance Sheet. b. Statement of Changes in Stockholders' Equity. c. Statement of Cash Flows. d. Income Statement.
Income Statement.
For merchandising businesses, Cost of Goods Sold is often the largest single expense reported on which of the following financial statements? a. Income statement. b. Statement of cash flows. c. Balance sheet. d. Statement of changes in stockholders' equity.
Income statement.
Which method of reporting cash flows from operating activities is used by most businesses in preparing the statement of cash flows? a. Accrual method. b. Direct method. c. Indirect method. d. Computational method.
Indirect method.
Which of the following is not one of the fraud triangle components? a. Pressure. b. Rationalization. c. Internal controls d. Opportunity.
Internal controls
Which of the following would be considered as primarily a merchandising business? a. Coleman Consulting Services. b. Deloitte Accounting Services. c. JC Penney department store. d. Wright and Associates Law Office.
JC Penney department store.
During the class lecture on fraud, which internal control weakness was present in a significant number of fraud cases? a. Lack of segregation of duties. b. Lack of required absences. c. No prenumbered documents. d. No employee performance evaluations.
Lack of segregation of duties.
Which inventory costing method will produce an amount for cost of goods sold that is closest to current market value? a. Weighted average. b. Specific identification. c. First-in, First-out (FIFO). d. Last-in, First-out, (LIFO).
Last-in, First-out, (LIFO).
Tyson Company purchased inventory to sell in its merchandising business. The shipping terms for the inventory purchase were FOB shipping point. When Tyson Company records the shipping costs in a journal entry, which of the following statements is true? a. Merchandise inventory is credited. b. Merchandise inventory is debited. c. Transportation-out is debited. d. Transportation-out is credited.
Merchandise inventory is debited.
Which of the following depreciation methods can only be used for U.S. income tax purposes? a. Straight-line. b. Units-of-production. c. Double declining balance. d. Modified accelerated cost recovery system (MACRS).
Modified accelerated cost recovery system (MACRS).
The amount of accounts receivable that is actually expected to be collected in cash is known as: a. Net realizable value. b. Uncollectible accounts expense. c. The present value of accounts receivable. d. Allowance for doubtful accounts.
Net realizable value.
Which of the following is the correct sequence for the major components of the Statement of Cash Flows? a. Investing, Operating, Financing. b. Operating, Investing, Financing. c. Operating, Financing, Investing. d. Financing, Investing, Operating.
Operating, Investing, Financing.
Which of the following is not an adjustment to the book balance to determine the true cash balance beginning with the unadjusted book balance? a. Outstanding checks. b. Bank service charges. c. Interest earned. d. Non-sufficient-funds (NSF) checks.
Outstanding checks.
Storing cash in a company safe is an application of which internal control procedure? a. Segregation of duties. b. Procedures manual. c. Physical control. d. Authority and responsibility.
Physical control.
Which of the following is not an internal control procedure for the control of cash receipts? a. Immediate preparation of records of all cash receipts. b. Customers should be given written receipts for all cash payments to the company. c. Prenumbered checks should be used. d. All cash should be deposited frequently.
Prenumbered checks should be used.
Which of the following transactions would not be reported as a financing activity on the Statement of Cash Flows? a. Borrowing money. b. Issuing stock. c. Paying dividends. d. Purchasing a building.
Purchasing a building.
Which of the following correctly states the proper order of the accounting cycle? a. Record transactions, adjust accounts, prepare statements, close temporary accounts. b. Adjust accounts, record transactions, close temporary accounts, prepare statements. c. Prepare statements, record transactions, close temporary accounts, adjust accounts. d. Adjust accounts, prepare statements, record transactions, close temporary accounts.
Record transactions, adjust accounts, prepare statements, close temporary accounts.
Which of the following is increased with a credit? a. Rent Expense. b. Prepaid Rent. c. Dividends. d. Retained Earnings.
Retained Earnings.
The Statement of Cash Flows classifies cash transactions into three categories. Which of the following is NOT one of the categories? a. Operating activities. b. Financing activities. c. Revenue activities. d. Investing activities.
Revenue activities.
Which of the following accounts is closed at the end of an accounting cycle? a. Liabilities. b. Common stock. c. Revenues. d. Assets.
Revenues.
Which of the following is considered a product cost? a. Rent expense for the current month. b. Salaries paid to employees of a retail company. c. Insurance expense for the current month. d. Shipping costs on goods received from suppliers.
Shipping costs on goods received from suppliers.
What term reflects decreases in inventory for reasons other than sales to customers? a. Overage. b. Transportation costs. c. Shrinkage. d. Sales discounts.
Shrinkage.
Businesses communicate information to stakeholders through four financial statements. All of the following are part of the set of financial statements EXCEPT: a. Income Statement. b. Statement of Changes in Stockholders' Equity. c. Balance Sheet. d. Statement of Cash Flows. e. Statement of Assets.
Statement of Assets.
Which method of depreciation is used by most U. S. companies for financial reporting purposes? a. Straight-line. b. Accelerated. c. Units-of-production. d. Double-declining-balance.
Straight-line.
Southern Company purchased $500 of supplies on account and recorded the transaction using T-accounts. Which of the following statements about the T-accounts is true? a. Supplies Expense increased on the left side. b. Supplies increased on the left side. c. Accounts payable increased on the left side. d. Cash decreased on the right side.
Supplies increased on the left side.
What types of accounts are closed prior to the start of the next accounting cycle? a. Permanent accounts. b. Temporary accounts. c. Assets and equity accounts. d. Liability accounts.
Temporary accounts.
Jones Company uses the allowance method for uncollectible accounts. On December 15, Jones determines that Smith's account will not be collected and writes off the account. When Jones writes off Smith's account in a journal entry, which of the following statements is true? a. The Allowance for Doubtful Accounts is debited. b. The Allowance for Doubtful Accounts is credited. c. Uncollectible Accounts Expense is credited. d. Accounts Receivable is debited.
The Allowance for Doubtful Accounts is debited.
Which of the following statements is true? a. The Uncollectible Accounts Expense is a permanent account. b. The Allowance for Doubtful Accounts is a temporary account. c. The Uncollectible Accounts Expense appears on the balance sheet. d. The Uncollectible Accounts Expense account is closed at the end of the period.
The Uncollectible Accounts Expense account is closed at the end of the period.
Which method of reporting cash flows yields the highest amount of net cash flows from operating activities? a. Accrual method. b. Direct method. c. Indirect method. d. The net cash flows from operating activities is the same whether it is presented using the direct or the indirect method.
The net cash flows from operating activities is the same whether it is presented using the direct or the indirect method.
What type of schedule is prepared to test whether total debits equal total credits? a. Income statement. b. Trial balance. c. Normal balance. d. Special journals.
Trial balance.
On March 1, Shaun Ryan paid Chambliss Law Firm $600 for legal services to be provided for the next 12 months. When a customer pays cash for legal services to be provided in the future, which of the following accounts is affected on March 1, the date of the prepayment? a. Service revenue. b. Legal expense. c. Unearned revenue. d. Accounts receivable.
Unearned revenue.
The Allowance for Doubtful Accounts is a. an asset account. b. a liability account. c. an expense account. d. a contra-asset account.
a contra-asset account.
When we recognize revenues and expenses in the period in which they occur, regardless of when cash is collected or paid, this is called a. cash accounting. b. deferral accounting. c. accrual accounting. d. revenue accounting.
accrual accounting.
The Cost of Goods Sold account is classified as: a. an expense. b. an asset. c. a contra asset. d. a liability.
an expense.
When a company provides services on account, the transaction is classified as a(n) a. asset source. b. asset use. c. asset exchange. d. claims exchange.
asset source.
When a merchandising business purchases $5,000 merchandise inventory on account, how would we classify the transaction? a. asset source. b. asset use. c. asset exchange. d. claims exchange.
asset source.
When the Tennessee Aquarium borrows $300,000 from First Tennessee Bank, the transaction is classified as a(n) _______________ in the Tennessee Aquarium's accounting records. a. asset source. b. asset use. c. asset exchange. d. claims exchange.
asset source.
McKee Foods Corporation purchased $5,000 of office supplies on account. What is the effect of this transaction? a. assets are decreased. b. liabilities are decreased. c. assets are increased. d. equity is increased.
assets are increased.
Walker Company issued common stock for $125,000 cash. As a result of this event, a. assets increased. b. equity increased. c. claims increased. d. assets, claims, and equity increased.
assets, claims, and equity increased.
The Allowance for Doubtful Accounts appears on which of the following financial statements? a. income statement. b. statement of changes in stockholders' equity. c. balance sheet. d. statement of cash flows.
balance sheet.
Substantial amounts spent to improve the quality or extend the life of an asset are described as a. revenue expenditures. b. capital expenditures. c. maintenance expenses. d. replacement expenses.
capital expenditures.
The Committee of Sponsoring Organizations (COSO) developed an integrated internal control framework with five components. The components of internal control include all of the following except a. control environment. b. risk assessment. c. control activities. d. control risks.
control risks.
When using the straight-line depreciation method, depreciable cost is the a. book value of an asset less its salvage value. b. cost of an asset less its salvage value. c. cost of an asset less accumulated depreciation. d. book value of an asset.
cost of an asset less its salvage value.
When we record an equipment purchase, the cost of equipment includes the purchase price and all of the following except a. delivery costs. b. installation costs. c. sales taxes. d. cost of damages.
cost of damages.
The process of expensing natural resources is commonly called a. depreciation. b. depletion. c. amortization. d. repairs.
depletion.
A contingency that is remote a. should be disclosed in the financial statements. b. must be accrued as a loss. c. does not need to be disclosed in the financial statements. d. is recorded as a contingent liability.
does not need to be disclosed in the financial statements.
When a business supervises, directs, and controls an individual's work, the individual is classified as a(n) a. independent contractor of the business. b. stockholder of the business. c. employee of the business. d. customer of the business.
employee of the business.
At the end of the period, the cost of goods available for sale is allocated between cost of goods sold and a. beginning inventory. b. ending inventory. c. net purchases. d. total goods purchased.
ending inventory.
The matching concept refers to the "matching" of: a. expenses and liabilities. b. expenses and revenues. c. assets and equity. d. assets and liabilities.
expenses and revenues.
Which GAAP principle requires that financial statements disclose the inventory costing method chosen by a company? a. matching principle. b. consistency principle. c. conservatism principle. d. full disclosure principle.
full disclosure principle.
Asset exchange transactions a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. do not involve assets.
have no effect on total assets.
Asset source transactions a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. do not involve assets.
increase total assets.
Accumulated Depreciation a. is an expense account. b. has a normal debit balance. c. is a contra-asset account. d. is never shown on the balance sheet.
is a contra-asset account.
Sales taxes collected by the retailer are recorded as a(n) a. revenue. b. liability. c. expense. d. asset.
liability.
All of the following are examples of intangible assets EXCEPT for: a. trademarks. b. patents. c. machinery. d. goodwill.
machinery.
A contingent liability is recorded in the financial records (with a journal entry) when the amount of the potential liability can be reasonably estimated and the likelihood of the contingency is a. remote. b. reasonably possible. c. probable. d. nil or zero.
probable.
Having different individuals receive cash, record cash receipts, and hold the cash is an example of a. bonded employees. b. segregation of duties. c. documentation procedures. d. authority and responsibility.
segregation of duties.
All of the following factors are relevant in calculating depreciation expense EXCEPT for: a. the asset's replacement value. b. the asset's cost. c. the asset's salvage value. d. the asset's estimated useful life.
the asset's replacement value.
In calculating depreciation expense, salvage value is a. the fair value of a plant asset on the date of acquisition. b. subtracted from accumulated depreciation to determine the plant asset's depreciable cost. c. the expected market value of a fully depreciated asset. d. ignored in all the depreciation methods.
the expected market value of a fully depreciated asset.
The percent of revenue method, with its focus on determining the uncollectible accounts expense, is often called a. the balance sheet approach. b. the direct write-off method. c. the income statement approach. d. an aging accounts receivable approach.
the income statement approach.
The maker of a note is sometimes called a. the payee. b. the issuer. c. the receiver. d. the bookkeeper.
the issuer.
An application of good internal control over cash payments is a. when the check is signed, the approved invoice should be stamped "PAID." b. unused blank checks should be stored in the treasurer's unlocked desk. c. each check should be compared with the approved invoice after the check is signed. d. check signers should record the cash payments.
when the check is signed, the approved invoice should be stamped "PAID."