Accounting Final Exam Fall 2017

The gross profit rate is computed by dividing gross profit by:

Net Sales

What is the order in which assets are generally listed on a classified balance sheet?

Current; long-term investments; property, plant, and equipment; intangible assets

Barley Company developed the following information about its inventories in applying the lower-of-cost-or-market (LCM) basis in valuing inventories: Product Cost Market A $115,000 $120,000 B 80,000 73,000 C 158,000 162,000 If Barley applies the LCM basis, the value of the inventory reported on the balance sheet would be:

$346,000

A credit balance in Cash Over and Short is reported as a(n):

Miscellaneous Revenue

After gross profit is calculated, operating expenses are deducted to determine:

Net Income

An error in the physical count of goods on hand at the end of a period resulted in a $18,000 overstatement of the ending inventory. The effect of this error in the current period is:

Cost of Goods Sold..........Understated Net Income.........Overstated

Cost of goods available for sale consists of two elements: beginning inventory and:

Cost of goods purchased

When the physical count of Barr Company Inventory had a cost of $4,380 at year end and the unadjusted balance in Inventory was $4,600, Barr will have to make the following entry:

Cost of Goods Sold.........................220 Inventory...............................................220

Accounts Payable

Credit

Owner's Capital

Credit

Service Revenue

Credit

An accountant has debited an asset account for $1,400 and credited a liability account for $500. What can be done to complete the recording of the transaction?

Credit a different asset account for $900

Yocum Company purchased equipment on January 1st at a list price of $120,000, with credit terms 2/10, n/30. Payment was made within the discount period and Yocum was given a $2,400 cash discount. Yocum paid $4,000 to pour a concrete slab on which to place the equipment. What is the total cost of the new equipment?

$129,360

On July 1, 2017, Hale Kennels sells equipment for $220,000. The equipment originally cost $600,000, had an estimated 5-year life and an expected salvage value of $100,000. the accumulated depreciation account had a balance of $350,000 on January 1. 2017, using the straight-line method. The gain or loss on disposal is:

$20,000 Gain

Luis Consulting started the year with total assets of $60,000 and total liabilities of $17,000. During the year, the business recorded $48,000 in consulting revenues and $36,000 in expenses. Luis made an additional investment of $8,000 and withdrew cash of $9,000 during the year. The net income reported by Luis Consulting for the year was:

$12,000

If beginning inventory is $60,000, cost of goods purchased is $380,000, and ending inventory is $50,000, cost of goods sold is:

$330,000

As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $325,000 at December 31, 2017. This count did not take into consideration the following facts: Railway purchased $22,000 of goods that were shipped on December 27, FOB Destination, that will be received by Railway on January 3. Rogers Consignment store currently has goods worth $47,000 on its sales floor that belong to Railway but are being sold on consignment by Rogers. The selling price of these goods is $75,000. Determine the correct amount of inventory that Railway should report.

$372,000

Nicholson Company purchased equipment on January 1, 2015, for $80,000 with an estimated salvage value of $20,000 and estimated useful life of 8 years. On January 1, 2017, Nicholson decided the equipment will last 12 years from the date of purchase. The salvage value is still estimated at $20,000. Using the straight-line method the new annual depreciation will be:

$4,500

The balance in the supplies account on June 1st was $5,000, supplies purchased during June were $3,000, and the supplies on hand at June 30th were $3,500. The amount to be used for the appropriate adjusting entry is:

$4,500

Cosmos Company on July 15 sells merchandise on account to Cajon Co. for $6,000, terms 2/10, n/30. On July 20 Cajon Co. returns merchandise worth $1,000 to Cosmos Company. On July 24 payment is received from Cajon Co. for the balance due. What is the amount of cash received?

$4,900

Mantle Company's accounting records show the following at the year ending on December 31, 2016: Purchase Discounts $16,500 Freight-In 22,100 Purchases 413,000 Beginning Inventory 47,000 Ending Inventory 57,600 Purchase Returns 15,600 Using the periodic system, the cost of goods purchased is:

$403,000

If total liabilities decreased by $30,000 and Owner's equity decreased by $15,000 during a period of time, then total assets must change by what amount and direction during the same period?

$45,000 decrease

A credit sales of $750 is made on June 13, terms 2/10, net/30. A return of $50 is granted on June 16. The amount received as payment in full on June 23 is:

$686

If sales revenues are $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, the gross profit is:

$90,000

The financial statements of Daye Manufacturing Company report net sales of $720,000 and accounts receivable of $70,000 and $90,000 at the beginning and end of the year, respectively. What is the accounts receivable turnover for Daye?

9 times

The declining-balance method of depreciation produces:

A decreasing expense each period

Two individuals at a retail store work the same cash register. You evaluate this situation as:

A violation of establishment of responsibility

When a note receivable is dishonored:

Accounts Receivable is debited if eventual collection is expected

The cost of successfully defending a patent in an infringement suit should be:

Added to the cost of the patent

Under the allowance method, writing off a uncollectible account

Affects only balance sheet accounts

A post-closing trial balance is prepared:

After closing entries have been journalized and posted

Which one of the following could represent the expanded basic accounting equation?

Assets + Owner's Drawings + Expenses = Liabilities + Owner's Capital + Revenues

An account will have a credit balance if the:

Credits exceed the Debits

The reconciling item in a bank reconcilliation that will result in an adjusting entry by the depositor is:

Bank Service Charges

The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the:

Book value of the asset

Costs incurred to increase the operating efficiency or useful life of a plant asset are referred to as:

Capital Expenditures

From an internal control standpoint, the asset most susceptible to improper diversion and use is:

Cash

Jere Retailers accepted $57,000 of Maxi-bank Visa credit card charges for merchandise sold July 1. Maxi-bank charges 3% for its credit card use. The entry to record this transaction by Jere Retailers will include a credit to Sales Revenue of $57,000 and a debit(s) to:

Cash $55,290 and Service Charge Expense $1,710

The net amount expected to be received in cash from receivables is termed the:

Cash Realizable Value

The retailer considers Visa and MasterCard sales as:

Cash Sales

Income Summary Rent Expense Depreciation Expense Salaries and Wages Expense

Closing Entries

Owner's Capital Income Summary

Closing Entries

Service Revenue Income Summary

Closing Entries

Depreciation is a process of:

Cost Allocation

When there is a change in estimated depreciation:

Current and Future Years' depreciation should be revised

Accounts Receivable

Debit

Cash

Debit

Equipment

Debit

Owner's Drawings

Debit

Prepaid Insurance

Debit

Salaries and Wages Expense

Debit

Utilities Expense

Debit

Which of these would cause the inventory turnover to increase the most?

Decreasing the amount of inventory on hand and increasing sales

Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using:

FIFO will have the highest ending inventory

Euqene Cement Corporation reported $35 million for sales when it only had $20 million of actual sales. Which of the following qualities of useful information has Jackson most likely violated?

Faithful Representation

The private sector organization involved in developing accounting principles is the:

Financial Accounting Standards Board

All of the following are characteristics of accounting information EXCEPT:

Flexibility

GAAP stands for:

Generally Accepted Accounting Principles

Receivables might be sold to:

Generate cash quickly

Which of the following should not be included in the physical inventory of a company?

Goods held on consignment from another company

Which of the following should be included in the physical inventory of a company?

Goods in transit from another company shipped FOB shipping point

The sales revenue account has a credit balance of $367,200 at the end of the period. After closing entries are made , the account will have:

Have a zero balance

International standards are referred to as:

IFRS

The accounting process is correctly sequenced as:

Identification, Recording, Communication

A loss on disposal of a plant asset is reported in the financial statements:

In the Other Expenses and Losses section of the income statement

The revenue recognition principle dictates that revenue be recognized in the accounting period

In which the performance obligation is satisfied

Reconciling the bank statement monthly is an example of:

Independent Internal Verification

All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act EXCEPT:

Independent outside auditors must eliminate redundant internal controls

Allowance for Doubtful Accounts on the balance sheet:

Is offset against accounts receivable

The managers of Venice Company receive performance bonuses based on the net income of the firm. Which inventory costing method are they likely to favor in periods of declining prices?

LIFO

Claims for which formal instruments of credit are issued as proof of the debt are:

Notes receivable

Goodwill can be recorded:

Only when there is an exchange transaction involving the purchase of an entire business

A company spends $20 million dollars for an office building. Over what period should the cost be written off?

Over the useful life of the building

A credit is NOT the normal balance for which account listed below?

Owner's Drawings Account

Cash equivalents include each of the following EXCEPT:

Petty Cash

IFRS, compared to GAAP, tends to be more

Principles-Based

When goods are purchased for resale by a company using a periodic inventory system:

Purchases on account are debited to Purchases

An organization uses internal control to enhance the accuracy and reliability of accounting records and to:

Safeguard Assets

The Independent Internal Verification principle involves each of the following EXCEPT the_______________ of data prepared by other employees:

Segregation

Jared is warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates:

Segregation of duties is violated

If the sum of the debit column equals the sum of the credit column in a trial balance, it indicates:

The mathematical equality of the accounting equation

Which of the following accounts would be classified as a current liability?

Unearned Revenue

The income statement for the year 2016 of Bugati. Co contains the following information: Revenues $73,000 Expenses: Salaries and Wages Expense $43,000 Rent Expense $12,000 Advertising Expense $11,000 Supplies Expense $6,000 Utilities Expense $3,500 Insurance Expense $4,000 Total Expenses $79,500 Net Income (loss): $(6,500) The entry to close Income Summary to Owner's Capital includes:

a credit to Income Summary for $6,500

Purrfect Pets has made all the year-end adjustments. Its expense accounts total $130,000, and its revenue accounts total $190,000. The closing journal entry to close the income summary accounts for the year will:

be a debit to Income Summary, and a credit to Owner's Capital for $60,000

Eastwood Post Pavilion received a $650 check form a customer for the balance due. The transaction was erroneously recorded as a debit to Cash $560 and a credit to Service Revenue $560. The correcting entry is:

debit Cash, $90 and Service Revenue, $560; credit Accounts Receivable, $650

Adjusting entries are required:

every time financial statements are prepared

Freight costs paid by a seller on merchandise sold to customers will cause an increase:

in operating expenses for the seller

Closing entries are made:

in order to transfer net income (or loss) and owner's drawings the the owner's capital account

Relevant accounting information:

is information that is capable of making a difference in a business decision

Pauline Company overstated its inventory by $15,000 at December 31, 2016. It did not correct the error in 2016 or 2017. As a result, Pauline's owner's equity was:

overstated at December 31, 2016, and properly stated at December 31, 2017.

If the total debit column exceeds the total credit column of the income statement columns on a worksheet, then the company has:

suffered a net loss for the period

After closing entries are posted, the balance in the owner's capital account in the ledger will be equal to:

the amount of the owner's capital reported on the balance sheet

To record the sale of goods for cash in a perpetual inventory system:

two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and reduction of inventory