Accounting Final

Optima Company uses a periodic inventory system. On July 1, 2006, Optima purchased 150 units of inventory at a cost of $3.00. On July 15, 2006, Optima purchased 200 units at a cost of $3.50. On July 30, 2006, Optima sold 175 units. If Optima uses a FIFO inventory cost flow assumption, then the cost of goods sold appearing on the income statement for the month ending July 31 would be a. $525.00 b. $537.50 c. $568.75 d. $612.50

B

A Statement of Financial Position is another name for a. the income statement b. the balance sheet c. the statement of cash flows d. the statement of changes in equity

B

A company would repurchase its own stock for all of the following reasons except a. It needs the stock for employee bonuses. b. It wishes to make an investment in its own stock. c. It wishes to prevent unwanted takeover attempts. d. It wishes to improve the company's financial ratios.

B

Bonds are sold at a premium if the a. Issuing company has a better reputation than other companies in the same business. b. Market rate of interest was less than the face rate at the time of issue. c. Market rate of interest was more than the face rate at the time of issue. d. Company will have to pay a premium to retire the bonds.

B

Chaffin Consulting performed consulting services during June 2006 on account and collections for these services were not received until August 2006. What effect did performing these services on June 2006 have on the accounting equation? a. Increase in assets and decrease in stockholder's equity b. Increase in assets and increase in stockholder's equity c. Decrease in assets and decrease in stockholder's equity d. Decrease in assets and increase in stockholder's equity

B

How are purchase discounts and purchase returns recorded by a company using the periodic inventory system? a. As a direct reduction to the Purchasing account. b. In contra accounts to the Purchase account. c. As operating expenses. d. As miscellaneous expenses.

B

If Gracin Corporation issues a bond to an investor at 103, then which of following statements regarding the market rate of interest must be true? a. It is higher than the stated rate of interest on the bond. b. It is lower than the stated rate of interest on the bond. c. It is equal to the stated rate of interest on the bond. d. More information is needed to answer this question.

B

If a company sells a product and provides a warranty to fix any defective parts of that product for a period of time after the sale, then the company must a. record warranty expense when the customer requests repairs b. record an estimated warranty liability in the same period as the product sale c. record an estimated warranty expense in the period following the product sale d. do nothing

B

If the Hannon Corporation buys a new machine for its factory for $6,000 cash, what journal entry will be used to record this purchase? a. Machinery Expense 6,000 Cash 6,000 b. Machinery 6,000 Cash 6,000 c. Machinery 6,000 Machinery Expense 6,000 d. Accounts Payable 6,000 Machinery Expense 6,000

B

Angus Corp. purchased merchandise on account from Herford Corp. on November 18, 2009. On November 21, 2009, Angus returned damaged merchandise to Herford and was granted an adjustment on its account. Angus uses the periodic inventory system. What effect does the merchandise return have on Angus's accounting equation? a. Assets and owners' equity decrease. b. Assets and liabilities decrease. c. Liabilities decrease and owners' equity increases. d. Liabilities and owners' equity decrease.

C

Barlage Enterprises normally pays its employees on the 1st and the 15th of each month. The company's employees had earned $3,725 in salaries during the pay period ending December 31. What journal entry did Barlage need to make to record accrued salaries on its December 31 financial statements? a. Salaries Expense 3,725 Cash 3,725 b. Salaries Payable 3,725 Cash 3,725 c. Salaries Expense 3,725 Salaries Payable 3,725 d. Salaries Payable 3,725 Salaries Expense 3,725

C

If the Ledford Company has a cash balance per bank of $5,493, and has outstanding checks in the amount of $1,598, deposits in transit in the amount of $495, and an NSF check in the amount of $325, what is the adjusted cash balance per bank? a. $7,911 b. $7,586 c. $4,390 d. $3,400

C

Kurth Corporation prepaid rent for one year in the amount of $24,000 on August 31 of Year 1, for the period beginning September 1. When the company prepared its financial statements on December 31, what adjusting entry would Kurth need to reflect the expired rent? a. Rent Expense 24,000 Cash 24,000 b. Rent Revenue 24,000 Rent Expense 24,000 c. Rent Expense 8,000 Prepaid Rent 8,000 d. Prepaid Rent 8,000 Rent Expense 8,000

C

Morgan Company collected $24,000 from a customer who had prepaid for services that had not been performed. At the end of the period, $7,000 worth of those services had still not been performed. What adjusting entry should be prepared? a. Cash 24,000 Unearned Revenue 24,000 b. Service Revenue 17,000 Unearned Revenue 17,000 c. Unearned Revenue 17,000 Service Revenue 17,000 d. Accounts Receivable 7,000 Service Revenue 7,000

C

Of the accounts listed below, which is not considered to be a source of paid in capital? a. Common Stock b. Preferred Stock c. Treasury Stock d. Additional Paid in Capital-Common Stock

C

Owner's Equity is a. a person who owes a debt. b. a business that is owned by two or more people. c. the residual ownership interest in the assets after liabilities are deducted d. calculated by taking revenue minus expenses.

C

The company purchased supplies of $750 on account. One month later, the company paid the account. Show the entry to record the payment in the journal. a. Cash 750 Accounts Receivable 750 b. Cash 750 Accounts Payable 750 c. Accounts Payable 750 Cash 750 d. Supplies 750 Accounts Payable 750

C

The organization that is primarily responsible for setting accounting standards that we call GAAP is the a. SEC (Securities and Exchange Commission) b. PCAOB (Public Companies Accounting Oversight Board) c. FASB (Financial Accounting Standards Board) d. United States Congress

C

The trial balance for Carillo Company indicates that they have $3,250 of supplies on hand; however, a physical count indicates that they only have $1,750 worth of supplies on hand. What adjusting journal entry must be made? a. Supplies Expense 1,750 Supplies 1,750 b. Supplies 1,750 Supplies Expense 1,750 c. Supplies Expense 1,500 Supplies 1,500 d. Supplies 1,500 Supplies Expense 1,500

C

When a company has a bank reconciliation prepared, a customer's NSF check would be a. subtracted from the cash balance on the bank statement b. added to the cash balance on the bank statement c. subtracted from the cash balance on the firm's books d. added to the cash balance on the firm's books

C

. The journal entry to record a bond issued at a discount would be: Debit Credit a. Cash XXX Discount on Bonds Payable XXX Bonds Payable XXX b. Cash XXX Bonds Payable XXX c. Discount on Bonds Payable XXX Cash XXX d. Bonds payable XXX Cash XXX Discount on Bonds Payable XXX

A

Daisy Designs has a gross payroll of $38,000 during July. During this month, federal income taxes withheld amount to $14,400, Social Security taxes withheld amount to $2,900 and employee insurance withheld amounts to $1,200. Based on this information, salaries payable will be shown on the balance sheet as a. $19,500 b. $20,700 c. $23,600 d. $38,000

A

How does the balance sheet differ from the income statement? a. The income statement covers a period of time and the balance sheet is for a specific moment in time. b. The income statement is for a specific moment in time and the balance sheet covers a period of time. c. The income statement reads as of a date and the balance sheet reads for a period ending. d. The income statement and the balance sheet do not differ.

A

If a company manager wants to determine the amount that the company owes to suppliers, to which account would the manager look to determine the amounts owed? a. Accounts Payable b. Accounts Receivable c. Supplies Expense d. Unearned Revenue

A

If a company purchases $3,200 worth of inventory with terms of 2/10, n30 on March 3 and pays March 12, then the amount paid to the seller would be a. $3,136 b. $3,150 c. $3,168 d. $3,200

A

Owens Company purchases equipment for $154,000. The equipment has an estimated useful life of 8 years and a salvage value of $6,000. What is the annual deprecation that will be taken on this equipment using the straight-line method? a. $18,500 b. $19,250 c. $20,000 d. $29,600

A

The Berman Company purchases a machine for $90,000 that it plans to depreciate using the activity method. The machine has a salvage value of $2,000 and a useful life of 5 years. Over the course of its estimated useful life, the machine is expected to produce 550,000 units of product. During Year 1, the machine produces 125,000 units of product. What is the annual depreciation expense for Year 1? a. $20,000 b. $18,000 c. $17,600 d. $16,000

A

The payment of accounts payable results in a(n) a. Decrease in liabilities and a decrease in assets. b. Decrease in liabilities and an increase in assets. c. Increase in liabilities and a decrease in owners' equity. d. Decrease in liabilities and an increase in owners' equity.

A

The pricing of inventory which assumes that the last items purchased were the first items sold is referred to as a. LIFO b. FIFO c. Weighted Average d. Specific Identification

A

Which of the following is not a fixed asset? a. Prepaid rent b. Furniture c. Fencing d. Truck

A

Which of the following represents the number of shares that have been offered and sold to the public? a. Issued Shares b. Authorized Shares c. Outstanding Shares d. Treasury Shares

A

Why is the time period assumption required? a. Inflation exists b. External users of financial statements want statements that accurately reflect net income or earnings for a specific time period. c. The dollar is the monetary unit in the United States. d. The federal government requires it.

A

Optima Company uses a periodic inventory system. On July 1, 2006, Optima purchased 150 units of inventory at a cost of $3.00. On July 15, 2006, Optima purchased 200 units at a cost of $3.50. On July 30, 2006, Optima sold 175 units. If Optima uses a LIFO inventory cost flow assumption, then the ending inventory appearing on the balance sheet on July 31, 2006 would be a. $525.00 b. $537.50 c. $568.75 d. $612.50

B

Riviera Company performs an aging of accounts receivable and determines that it only expects to collect 90% of the company's $725,000 in receivables. How will accounts receivable be presented on the balance sheet? a. Accounts Receivable $725,000 b. Accounts Receivable $725,000 Less: Allowance for Uncollectible Accounts < 72,500> Net Accounts Receivable $652,500 c. Accounts Receivable $675,000 d. Accounts Receivable $725,000 Less: Allowance for Uncollectible Accounts < 75,000> Net Accounts Receivable $650,000

B

The Best Company purchases $1,000 worth of goods with the terms 1/15, n/45 on January 1, 2006. Best Company paid for the goods on January 10, 2006. How would Best record the payment for the goods in his accounting records assuming that the company uses a perpetual inventory system? a. Debit accounts payable for $1,000 and credit cash for $1,000 b. Debit accounts payable for $1,000, credit cash for $990 and credit inventory for $10 c. Debit accounts payable for $990 and credit cash for $990 d. Debit accounts payable for $990, credit cash for $1,000 and debit discount expense for $10

B

The Securities and Exchange Commission (SEC) is concerned with a. All companies in the United States regardless of size. b. United States companies that issue securities to the general public. c. Accounting reports issued by government entities. d. All domestic and international companies that issue accounting reports.

B

The quality of accounting information which allows data companies to compare their financial results to another company's results is a. reliable b. comparable c. understandable d. predictable

B

Tulip Corporation shows the following information on its balance sheet: Preferred Stock ($1 par, 500,000 shares authorized, issued 267,823 shares) Common Stock ($5 par, 1,000,000 shares authorized, issued 613,527 shares, outstanding 359,837 shares) Based on this information, the number of shares of common stock held in the treasury is a. 232,177 b. 253,690 c. 386,473 d. 640,163

B

What adjustment would need to be made to a bank reconciliation to reflect that the firm's controller wrote a check for $2,570, but it cleared the bank for $2,750? a. Subtract from the cash balance on the bank statement b. Add to the cash balance on the bank statement c. Subtract from the cash balance on the firm's books d. Add to the cash balance on the firm's books

B

What are the only accounts on the equity side of the accounting equation that are increased with debits? a. Revenues and dividends b. Expenses and dividends c. Revenues and liabilities d. Expenses and liabilities

B

When a company purchases treasury stock, which of the following statements is true? a. Treasury stock is considered to be an asset because cash is paid for the stock. b. The cost of the treasury stock reduces stockholders' equity. c. Dividends continue to be paid on the treasury stock because it is still issued. d. Since treasury stock is held by the original issuer, it is no longer considered to be issued.

B

When will bonds sell at a discount? a. The credit standing of the issuing company is not as good as other companies in a similar line of business. b. The face rate of interest is less than the market rate of interest at the time of issue. c. The face rate of interest is more than the market rate of interest at the time of issue. d. The issuing company will be able to retire the bonds at less than face at maturity.

B

Which of the following financial statements shows the results of a company's business operations for a particular period of time? a. Balance Sheet b. Income Statement c. Statement of Changes in Owners' Equity d. None of the above show business operations results.

B

Which of the following is the basic principle behind the time value of money concept? a. A dollar that you receive tomorrow is worth more than that same dollar that you could receive today b. A dollar that you receive today is worth more than that same dollar that you could receive sometime in the future c. Both a and b are correct d. Both a and b are incorrect

B

When a firm purchases a long-term asset, all of the following costs are considered to be part of the cost of acquisition except a. Purchase price b. Installation costs c. annual insurance costs to protect the asset d. Taxes paid at time of purchase (for example sales tax)

C

When bonds are issued by a company, the accounting entry shows an a. Increase in liabilities and a decrease in owners' equity. b. Increase in liabilities and an increase in owners' equity. c. Increase in assets and an increase in liabilities. d. Increase in assets and an increase in owners' equity.

C

Which of the following is not considered to be a part of the cost of a vehicle purchased for use in a business? a. Sales tax on purchase of the vehicle b. Delivery charges to ship vehicle to the business c. Tag and license fees d. Cost to paint company logo on the vehicle

C

Which of the following transactions would not affect stockholder's equity? a. Sale of goods to a customer on account b. Sale of stock to an investor c. Collection of accounts receivable d. Payment of a dividend to stockholders on record

C

Holister Corp reported the following for 2006: total assets, $72,000; total liabilities, $27,000; total common stock, $37,000. Based on this information, retained earnings were a. $82,000 b. $62,000 c. $27,000 d. $8,000

D

Information that is important and timely, with the potential to influence decisions is called a. reliable b. comparable c. consistent d. relevant

D

Owners' Equity is increased by a. liabilities b. expenses c. dividends d. revenues

D

Sales revenue less cost of goods sold is called a. net operating income b. net income c. contribution margin d. gross margin

D

Stockholders prefer to invest in preferred stock because a. Preferred stock is very similar to an investment in bonds. b. Preferred stock can always be converted to common stock if they desire. c. The dividends are generally increased each year. d. The dividends are paid on preferred stock before they are paid on common stock.

D

The Allowance for Uncollectible Accounts account is a. an asset b. a liability c. an owners' equity account d. a contra-asset

D

The bond issue price is determined by calculating the a. Present value of the stream of interest payments and the future value of the principal amount. b. Future value of the stream of interest payments and the future value of the principal amount. c. Future value of the stream of interest payments and the present value of the principal amount. d. Present value of the stream of interest payments and the present value of the principal amount.

D

To which of the following entities must a company report if it sells its stock on the organized stock market? a. American Institute of Certified Public Accountants (AICPA) b. American Accounting Association (AAA) c. International Accounting Standards Committee (IASC) d. Securities and Exchange Commission (SEC)

D

What would a journal entry required by a company to record a deposit in transit include? a. Credit to cash b. Debit to note receivable c. Debit to cash d. No entry is necessary

D

When a corporation purchases treasury stock, then a. total assets decrease b. total assets increase c. total equity decreases d. both (a) and (c) are correct

D

Which accounts will normally appear on the income statement? a. Revenues b. Expenses c. Dividends d. Both (a) and (b)

D

Which method of depreciation is more appropriate if the asset is more productive in the early years of its useful life? a. Straight-line method b. Activity method c. Declining balance method d. Both B and C

D

Which of the following is a characteristic of the corporate form of a business organization? a. Ability to sell shares of stock to obtain capital b. Ability to transfer ownership rights c. Corporate charter specifies par value of stock d. All of the above are true

D

Which one of the following is not one of the three activities included in the definition of accounting? a. Communicating b. Identifying c. Measuring d. Operating

D

Which term indicates to a buyer that merchandise is free of transportation charges? a. FOB shipping point b. Freight-In c. Transportation-in d. FOB Destination

D