Accounting

43. Shipping costs incurred by a seller on merchandise sold to customers will cause an increase A) in operating expenses for the seller. B) to a contra-revenue account of the seller. C) in the selling expenses of the buyer. D) to the cost of goods sold of the seller.

A) in operating expenses for the seller.

48. Two categories of expenses in merchandising companies are A) cost of goods sold and operating expenses. B) cost of goods sold and financing expenses. C) sales and cost of goods sold. D) operating expenses and financing expenses.

A) cost of goods sold and operating expenses.

35. Using the average cost method, the amount allocated to the ending inventory on June 30 is A) $1,200. B) $1,170. C) $1,320. D) $1,260.

A) $1,200.

45. Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before adjustment, what is the amount of bad debt expense for the period? A) $21,000. B) $35,000. C) $7,000. D) $28,000.

A) $21,000.

17. A company purchased factory equipment on April 1, 2005, for $48,000. It is estimated that the equipment will have a $3,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2005, is A) $3,375. B) $3,750. C) $4,800. D) $4,500.

A) $3,375.

29. Equipment with a cost of $160,000 has an estimated salvage value of $25,000 and an estimated life of 12,000 hours. It is to be depreciated using the units of activity method. What is the amount of depreciation for the first full year, during which the equipment was used 3,300 hours? A) $37,125. B) $44,000. C) $40,000. D) $43,750.

A) $37,125

36. A corporation purchases 20,000 shares of its own $20 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity? A) Decrease by $400,000. B) Increase by $400,000. C) Decrease by $700,000. D) Increase by $700,000.

A) Decrease by $400,000.

22. Indicate the respective effects of the declaration of a cash dividend on the following balance sheet sections: Total Assets Total Liabilities Total Stockholders' Equity A) No change Increase Decrease B) Decrease No change Increase C) Increase Decrease No change D) Decrease Increase Decrease

A) No change Increase Decrease

11. Which of the following would not result in unearned revenue? A) Services performed on account. B) Sale of two-year magazine subscriptions. C) Rent collected in advance from tenants. D) Sale of season tickets to next year's football games.

A) Services performed on account.

1. When an account is written off using the allowance method, accounts receivable A) decreases and the allowance account decreases. B) is unchanged and the allowance account increases. C) decreases and the allowance account increases. D) increases and the allowance account increases.

A) decreases and the allowance account decreases.

3. In the balance sheet, the account Treasury Stock, is A) deducted from stockholders' equity. B) added to stockholders' equity. C) has no impact on total stockholders' equity. D) classified as a liability account.

A) deducted from stockholders' equity.

7. Recording depreciation each period is necessary in accordance with the A) matching principle. B) asset valuation principle. C) cost principle. D) going concern principle.

A) matching principle.

Use the following to answer question 2: Claire's Accessory Shop started the year with total assets of $70,000 and total liabilities of $40,000. During the year the business recorded $110,000 in revenues, $55,000 in expenses, and dividends of $20,000. 2. Stockholders' equity at the end of the year was A) $35,000. B) $65,000. C) $60,000. D) $55,000.

B) $65,000.

14. What organization issues U.S. accounting standards? A) International Auditing Standards Committee. B) Financial Accounting Standards Board. C) International Accounting Standards Committee. D) Security Exchange Commission.

B) Financial Accounting Standards Board.

41. If Garden Company issues 20,000 shares of $5 par value common stock for $140,000, the account A) Paid-in capital in excess of par value will be credited for $140,000. B) Paid-in capital in excess of par value will be credited for $40,000. C) Cash will be debited for $100,000. D) Common stock will be credited for $140,000.

B) Paid-in capital in excess of par value will be credited for $40,000.

12. Which types of accounts will appear in the post-closing trial balance? A) Accounts shown in the income statement columns of a work sheet. B) Permanent accounts. C) Temporary accounts. D) None of the above.

B) Permanent accounts.

50. Which of the following is the most appropriate and modern definition of accounting? A) Communication of vast amounts of information. B) The information system that identifies, records, and communicates the economic events of an organization to interested users. C) A means of collecting information. D) The interconnected network of subsystems necessary to operate a business.

B) The information system that identifies, records, and communicates the economic events of an organization to interested users.

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

B) cost of the asset and the accumulated depreciation to date.

46. Inventory becomes part of cost of goods sold when a company A) purchases the inventory. B) sells the inventory. C) receives payment from the customer. D) pays for the inventory.

B) sells the inventory.

47. In recording an accounting transaction in a double-entry system A) there must always be entries made on both sides of the accounting equation. B) the amount of the debits must equal the amount of the credits. C) only two accounts are affected by any transaction. D) the number of debit accounts must equal the number of credit accounts.

B) the amount of the debits must equal the amount of the credits.

37. Which accounts normally have debit balances? A) Assets, expense, and retained earnings. B) Assets, liabilities, and dividends. C) Assets, expenses, and dividends. D) Assets, expenses, and revenues.

C) Assets, expenses, and dividends.

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

C) amounts due from individuals or companies.

40. Inventory costing methods place primary reliance on assumptions about the flow of A) resale prices. B) values. C) costs. D) merchandise.

C) costs.

30. An account will have a credit balance if the A) first transaction entered was a credit. B) last transaction entered was a credit. C) credits exceed the debits. D) debits exceed the credits.

C) credits exceed the debits.

6. When a company receives a utility bill but will not pay it right away, it should A) debit accounts payable and credit utilities expense. B) make no entry until the bill is paid. C) debit utilities expense and credit accounts payable. D) debit utilities expense and credit accounts receivable.

C) debit utilities expense and credit accounts payable.

23. The LIFO inventory method assumes that the cost of the latest units purchased are A) the first to be allocated to ending inventory. B) the first to be allocated to cost of goods sold. C) not allocated to cost of goods sold or ending inventory. D) the last to be allocated to cost of goods sold.

C) not allocated to cost of goods sold or ending inventory.

25. On July 15, Wholesaler sells merchandise to Malley Company for $900, terms 2/10, net/30. On July 18, Malley returns $50 worth of merchandise. On July 24, how much should Malley pay Wholesaler? A) $850. B) $882. C) $833. D) $900.

C) not allocated to cost of goods sold or ending inventory.

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

D) All of the above.

Use the following to answer questions 33-35: A company just starting business made the following four inventory purchases in June: June 1 150 units $ 780 June 10 200 units 1,170 June 15 200 units 1,260 June 28 150 units 990 A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand. 33. Using the LIFO inventory method, the value of the ending inventory on June 30 is A) $1,320.00 B) $1,305.00 C) $1,040. D) $1,072.50

D) $1,072.50

34. Using the FIFO inventory method, the amount allocated to ending inventory for June is A) $1,320.00 B) $1,040.00 C) $1,072.50 D) $1,305.00

D) $1,305.00

19. A company sells a plant asset that originally cost $180,000 for $60,000 on December 31, 2005. On December 31, 2005, the accumulated depreciation account had a balance of $90,000. The company should recognize a A) $30,000 gain on disposal. B) $60,000 loss on disposal. C) $60,000 gain on disposal. D) $30,000 loss on disposal.

D) $30,000 loss on disposal.

38. What is the total stockholders' equity based on the following account balances? Common Stock $500,000 Paid-in Capital in Excess of Par 40,000 Retained Earnings 190,000 Treasury Stock 20,000 A) $690,000. B) $750,000. C) $630,000. D) $710,000.

D) $710,000.

31. Which of the following statements reflects the transferability of ownership rights in a corporation? A) A stockholder must obtain permission from at least three other stockholders before selling shares. B) A stockholder must obtain permission of the board of directors before selling shares. C) If a stockholder decides to transfer ownership, he must transfer all of his shares. D) A stockholder may dispose of part or all of his shares.

D) A stockholder may dispose of part or all of his shares.

13. Which of the following most likely would be classified as a current liability? A) Bonds payable in 5 years. B) Three-year notes payable. C) Mortgage payable as a single payment in 10 years. D) Accounts payable.

D) Accounts payable.

8. Which accounting concept assumes that an enterprise is viewed as separate from its owners, creditors, or other stakeholders? A) Cost concept. B) Objectivity concept. C) Unit of measure concept. D) Business entity concept.

D) Business entity concept.

44. Trademarks would appear in which balance sheet section? A) Investments. B) Property, plant, and equipment. C) Current assets. D) Intangible assets.

D) Intangible assets.

27. On November 30, a flower shop sells flowers for $1,000 to Bartley. On December 5, the flower shop mails the invoice to Bartley. On December 10, Bartley mails $500 to the flower shop. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned? A) December 1. B) December 5. C) December 10. D) November 30.

D) November 30.

32. The best definition of assets is the A) owners' investment in the business. B) cash owned by the company. C) resources belonging to a company that have future benefit to the company. D) collections of resources belonging to the company and the claims on these resources.

D) collections of resources belonging to the company and the claims on these resources.

16. Unearned Rental Revenue is A) debited when rent is received in advance. B) a contra account to Rental Revenue. C) a revenue account. D) credited when rent is received in advance.

D) credited when rent is received in advance.

4.Under the allowance method, Bad Debt Expense is recorded A) several times during the accounting period. B) when an individual account is written off. C) when the loss amount is known. D) for an amount that the company estimates it will not collect.

D) for an amount that the company estimates it will not collect.

10. Reporting a net income of $95,000 will A) decrease retained earnings. B) increase common stock. C) decrease common stock. D) increase retained earnings.

D) increase retained earnings.

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

D) paid and recorded in an asset account before they are used or consumed.