Accounting 255 Multiple Choice

Beginning Inventory 100 units @ $8.00 = $ 800 Purchase #1 200 units @ $6.00 = 1,200 Purchase #2 100 units @ $12.00 = 1,200 Total 400 units $ 3,200 Units sold during the period were 250 units, leaving 150 units in ending inventory. What is ending inventory under the average cost method? a) $ 1,200 b) $ 2,000 c) $ 300 d) $ 500 What is the cost of goods sold under LIFO? a) $ 1,100 b) $ 1,700 c) $ 1,500 d) $ 2,100 What is the cost of goods sold under FIFO? a) $ 1,500 b) $ 1,100 c) $ 1,700 d) $ 2,100

$1,200 $2,100 $1,700

The general ledger account for Accounts Receivable shows a debit balance of $50,000. The Allowance for Doubtful Accounts has a credit balance of $1,000. If management estimates that 5% of Accounts Receivable will prove uncollectible, Bad Debts expense would be recorded for a) $1,500 b) $2,540 c) $2,500 d) $3,500

$1,500

The following accounts appear in the ledger of Saphire Corporation on December 31 Preferred Stock $30,000 Common Stock 60,000 Paid-in Capital in Excess of Par Value, Preferred 7,000 Paid-in Capital in Excess of Par Value, Common 18,000 Retained Earnings 40,000 Treasury Stock 5,000 A balanced sheet prepared on December 31 would report total paid-in capital of a) $115,000 b) $90,000 c) $155,000 d) $160,000

$115,000

Interest on a 3-month, 10 percent, $10,000 note receivable is a) $250 b) $2,500 c) $288 d) $1,000

$250

What is the amount of the Income from Operations that a company should report on its multiple-step income statement based on the following data? Cost of Goods Sold $ 500,000 Income taxes expense $ 100,000 Interest expense $ 50,000 Net sales $ 1,200,000 Selling, General & Administrative expenses $ 300,000 a) $700,000 b) $400,000 c) $350,000 d) $250,000

$400,000

Nicholas purchases a piece of equipment on for $60,000. The equipment has an estimated useful life of eight years or 50,000 units of production and an estimate salvage value of $6,000. The amount of depreciation to be recorded for YEAR 2 using the STRAIGHT-LINE method of calculating depreciation, is a) $7,500 b) $6,750 c) $15,000 d) $13,500 The amount depreciated to be recorded in YEAR 1 using the DOUBLE-DECLINING BALANCE method, is a) $13,500 b) $6,00 c) $15,000 d) $12,000 The amount depreciation to be recorded in YEAR 1 using the UNITS-OF-ACTIVITY method and assuming that 6,500 units are produced, is a) $4,680 b) $7,800 c) $5,200 d) $7,020

$6,750 $15,000 $5,200

Bonds with a face value of $10,000 were issued at 97. The journal entry to record the issuance of bonds would debit the Cash account for a) $970 b) $10,097 c) $10,000 d) $9,700

$9,700

If Saphire Corporation has 80,000 shares of common stock authorized, 50,000 shares of common stock issued, and holds 4,000 shares of common stock as treasury stock, the total number of outstanding common shares is a) 34,000 b) 76,000 c) 46,000 d) 30,000

46,000

The following data exist for Kohler Company: | 2017 | 2016 | Accounts Receivable | $80,000 | $90,000 | Sales | 484,500 | 410,000 | Recall that Receivable turnover = Net Sales / Average Accounts Receivable. Kohler Company's receivable turnover for 2017 is: a) 0.2 times b) 5.7 times c) 6.1 times d) 4.6 times

5.7 times

Which of the following errors will cause an trial balance to be out of balance? a) A debit to Office Equipment is incorrectly debited to Office Supplies b) The bookkeeper forgot to journalize a transaction c) The bookkeeper forgot to post a journal entry to the ledger d) A credit was posted to an account as a debit

A credit was posted to an account as a debit

The primary purpose of the statement of cash flows is to provide information a) Regarding the results of operations for a period of time b) Regarding a company's financial position at the end of an accounting period c) About a company's cash receipts and cash payments during an accounting period d) About a company's investing and financing activities

About a company's cash receipts and cash payments during an accounting period

Which of the following should be classified as a current asset? a) Accounts Receivable b) Accumulated Depreciation c) Franchises d) Land Held for Future Use

Accounts Receivable

Operating Activities (2nd Title)

Adjustment to reconcile net income to net cash provided by operating activities:

A company purchased land by issuing a note payable. What was the effect on the account equation (NE = no effect)? Assets | Liabilities | Equity a) (-) (-) (NE) b) (+) (+) (NE) c) (+) (NE) (+) d) (-) (NE) (-)

Assets | Liabilities | Equity (+) (+) (NE)

A company issued common stock for cash. What was the effect on the accounting equation (NE = no effect)? Assets | Liabilities | Equity a) (+) (NE) (+) b) (-) (NE) (-) c) (+) (+) (NE) d) (-) (-) (NE)

Assets | Liabilities | Equity (+) (NE) (+)

A physical inventory is usually taken a) At the peak of the busy season b) In the middle of the fiscal year c) When the perpetual inventory system, but not the periodic inventory system, is being used d) At the end of the fiscal year

At the end of the fiscal year

Which of the following financial statements presents information regarding the financial position of an enterprise at a point in time? a) Retained Earnings Statement b) Balanced Sheet c) Income Statement d) Statement of Cash Flows

Balance Sheet

On June 30, Riddle Corporation issued $500,00 of 8%, 5-year bonds at 100. Interest is payable semi-annually. The journal entry record the semiannual interest PAYMENT on December 31 would credit a) Interest Expense for $20,000 b) Cash for $20,000 c) Cash for $200,000 d) Bonds Payable for $500,000

Cash for $20,000

The accounting convention that requires a company to use the same accounting principles from one period to the next is a) Consistency b) Faithful representation c) Materiality d) Periodicity assumption

Consistency

Gross Profit equals the difference between net sales and a) Net Income b) Operating Expenses c) Cost and Goods Sold plus Operating Expenses d) Cost of Goods Sold

Cost of Goods Sold

Which of the following should NOT be included in the cost of land? a) Cost of clearing an old building from land b) Legal fees c) Commission paid to real estate agent d) Cost of paving land for parking

Cost of paving land for parking

When a magazine company receives advance payment for a subscription, it... a) Debits Cash and Credits Subscriptions Revenue b) Debit Cash and Credits Unearned Subscriptions Revenue c) Debits Unearned Subscriptions Revenue and Credits Cash d) Debits Prepaid Subscriptions and Credits Cash

Debit Cash and Credits Unearned Subscriptions Revenue

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would a) Make no additional entry until the end of the period b) Debit Cost of Goods Sold and Credit Inventory c) Debit Cost of Goods Sold and Credit Purchases d) Debit Inventory and Credit Cost of Goods Sold

Debit Cost of Goods Sold and Credit Inventory

A company's weekly payroll of $750 is paid on Fridays. There are five days in a pay period. Assume that the last day of the month falls on Wednesday. Which of the following is the required adjusting entry? a) Debit Unpaid Salaries & Wages and Credit Salaries & Wages Payable for $450 b) Debit Salaries & Wages Expense and Credit Salaries & Wages Payable $450 c) Debit Salaries & Wages Expense and Credit Salaries & Wages Payable $300 d) Debit Salaries & Wages Payable and Credit Salaries & Wages Payable $450

Debit Salaries & Wages Expense and Credit Salaries & Wages Payable $450

The supplies account had a $360 balance at the end of the accounting period prior to adjusting entries. If $80 of unused supplies were on hand, which of the following is the required adjusting entry? a) Debit Supplies $280 and Credit Supplies Expense $280 b) Debit Supplies Expense $280 and Credit Supplied $280 c) Debit Supplies $80 and Credit Supplies Expense $80 d) Debit Supplies Expense $80 and Credit Supplies $80

Debit Supplies Expense $280 and Credit Supplied $280

Jones borrowed $960 from the bank, issuing 12.5%, 4-month promissory note. Assuming that the note is issued and paid in the same accounting period, Jones' entry on the date of payment will include a a) Debit to Notes Payable for $960 b) Debit to Interest Payable for $40 c) Credit to Cash for $960 d) Debit to Interest Receivable for $40

Debit to Notes Payable for $960

Jones Company accepted a sales return from a customer. The journal entry to record the transaction would include a a) Debit to Sales Revenue b) Credit to Sales Revenue c) Credit to Sales Returns and Allowances d) Debit to Sales Returns and Allowances

Debit to Sales Returns and Allowances

Cash was collected from a customer on account. Which accounts were debited and credited? Debit | Credit a) Accounts Receivable, Cash b) Cash, Service Revenue c) Cash, Accounts Receivable d) Cash, Accounts Payable

Debit | Credit Cash, Accounts Receivable

Martinez Corporation has 30,000 shares of $10 par value common stock outstanding. On March 17, the Board of Directors declared 10 percent stock dividend. Market value of the stock was $13 on March 17. The effect of the declaration and issuance of the stock dividend for Martinez would include a a) Decrease to Cash for $39,000 b) Decrease to Retained Earnings for $39,000 c) Decrease to Retained Earnings for $30,000 d) Increase to Common Stock for $39,000

Decrease to Retained Earnings for $39,000

Discount on bonds payable should be reported on the balance sheet of the issuing corporation as a(n) a) Direct deduction from the face amount of the bonds payable in the long-term liability section b) Direct deduction from retained earnings in the stockholders' equity section c) Asset d) Direct addition to the face amount of the bonds payable in the long-term liability section

Direct deduction from the face amount of the bonds payable in the long-term liability section

DEALOR

Dividends Expenses Assets Liabilities Owners Equity (Stockholder's Equity) Revenues

An accountant is preparing adjusting journal entries. Which of the following entries could NOT possibly be a correct adjusting journal entry? a) Rent Expense 5,000 Rent Payable 5,000 b) Accounts Receivable 5,000 Service Revenue 5,000 c) Interest Expense 5,000 Interest Revenue 5,000 d) Unearned Revenue 5,000 Service Revenue 5,0000

Interest Expense 5,000 Interest Revenue 5,000

Under the perpetual inventory system, the entry to record a purchase return would increase a credit to a) Cost of Goods Sold b) Inventory c) Accounts Payable d) Purchase Returns and Allowances

Inventory

The inventory costing method that matches recent costs with recent revenues is a) Last-in, First-out (LIFO) b) First-in, First-out (FIFO) c) Average Cost d) Specific Identification

Last-in, First-out (LIFO)

Which pair of accounts is increases by recording a credit? a) Common Stock and Rent Expense b) Cash and Accounts Receivable c) Treasury Stock and Common Stock d) Notes Payable and Service Revenue

Notes Payable and Service Revenue

For each item listed in the questions below, indicate where the item is most likely to be located in a corporation's annual report as follows: A. Management discussion and analysis B. Financial statements C. Auditor's Report D. Notes to financial statements A summary of significant accounting policies (.....) A discussion and analysis of the company's results of operations and financial condition (.....) An opinion as to the fairness of the presentation of the company's financial statements (.....)

Notes to Financial Statements Management Discussion and Analysis Auditor's Report

Which of the following is NOT an application of accrual accounting? a) Recording service revenue at the time the work is done b) Recording telephone expense in the accounting period covered by the monthly bill c) Adjusting unearned revenues to the proper balance at the end of the month d) Recording service revenue only when the cash payment is received

Recording service revenue only when the cash payment is received

Which of the following is the most likely to appear on the balance sheet as a current liability? a) Bonds Payable b) Accumulated Depreciation c) Long-term Notes Payable d) Salaries & Wages Payable

Salaries & Wages Payable

An important purpose of closing entries is to a) Set temporary (nominal) account balances to zero to begin the next period b) Help in preparing financial statements c) Adjust the accounts in the ledger d) Set permanent (real) account balances to begin the next period

Set temporary (nominal) account balances to zero to begin the next period

The Paid-in Capital in Excess of Par Value account normally is credited in a journal entry to record the issuance of stock when a) The earnings per share of stock exceeds par value b) The number of shares issued exceeds the par value c) Stock is sold at an amount greater than par value d) The stated value of the capital stock is greater than the par value

Stock is sold at an amount greater than par value

Revenues should be recorded when a) They are earned. b) A contract is signed. c) Work has begun on the job. d) Cash is received from a customer.

They are earned.

A corporation sold 5,000 shares of its $2 par value common stock for $10 per share and later repurchased 200 of those shares for $12 per share. Which of the following will be debited to record the repurchase of the 200 shares? a) Treasury stock for $400 b) Treasury stock for $2,400 c) Common stock for $2,400 d) Cash for $2,400

Treasury stock for $2,400

The Allowance for Doubtful Accounts is necessary because a) Uncollected accounts that are written off must be accumulated in a separate account b) When recording Bad Debts Expense, it is not possible to predict specifically which accounts will not be collected c) Management should know how much in credit losses have occurred over the years d) A liability results when a credit sale is made

When recording Bad Debts Expense, it is not possible to predict specifically which accounts will not be collected