Accounting Final Exam

Which of the following financial statements is concerned with the company at a point in time? a. Balance sheet b. Income statement c. Retained earnings statement d. Statement of cash flows

a. Balance sheet

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the a. FIFO method. b. LIFO method. c. average-cost method. d. tax method.

a. FIFO method.

If a purchaser using a perpetual inventory system pays the transportation costs, then the a. Inventory account is increased. b. Inventory account is not affected. c. Freight-Out account is increased. d. Delivery Expense account is increased.

a. Inventory account is increased.

On June 15, Oakley Inc. sells inventory on account to Sunglass Hut (SH) for $1,000, terms 2/10, n/30. On June 20, SH returns to Oakley inventory that SH had purchased for $300. On June 24, SH completely fulfills its obligation to Oakley by making a cash payment. What is the amount of cash paid by SH to Oakley? A) $680 B) $686 C) $700 D) $1,000

1000-300=700x.02=14 700-14= 686 B) $686

During 2016, a company provided services for cash of $21,000 and services on credit of $15,000. The company collected accounts receivable of $8,000 and incurred operating expenses of $22,700, $14,000 of which were paid during the year. The amount of net income (loss) for the year is: A) $13,300 B) ($1,700) C) $22,700 D) $6,300

21000+15000= 36000-22700=13,300 A) $13,300

Sales revenue equals $367,810, sales returns & allowances are $10,000, and sales discounts total $14,180. The cost of goods sold is $216,490, operating expenses are $28,500, and the company incurs $31,640 of income tax expense. Which of the following statements is correct? A) Net sales equal $343,630 and gross profit is $98,640. B) Net sales equal $67,000 and gross profit is $98,640. C) Net sales equal $343,630 and gross profit is $127,140. D) Net sales equal $367,810 and gross profit is $67,000.

367,810-10,000-14,000=343,630-216,490=127,140 C) Net sales equal $343,630 and gross profit is $127,140.

Tony's Market recorded the following events involving a recent purchase of inventory: Received goods for $80,000, terms 2/10, n/30. Returned $1,600 of the shipment for credit. Paid $400 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory a. increased by $76,832. b. increased by $78,800. c. increased by $77,224. d. increased by $77,232.

80,000-1600=78400x.02=1568 78400-1568=76832+400= 77,232 d. increased by $77,232.

On Time Computer Repair uses accrual basis accounting. A computer was repaired on May 15. The customer picked up the computer on June 1 and mailed the payment on June 5. On Time Computer Repair received the check in the mail on June 10. The revenue should be recognized as earned on which date? A) May 15 B) August 1 C) June 5 D) June 10

A) May 15

In a classified balance sheet, assets and liabilities are classified according to whether they are current or noncurrent. Which of the following statements is not correct about current assets? A) They will be acquired within one year. B) They will be converted to cash within one year. C) They will be sold within one year. D) They will be used up within one year.

A) They will be acquired within one year.

The Accounts Payable account: A) has a normal credit balance. B) is increased by a debit. C) is an asset. D) is increased when a company receives cash from customers.

A) has a normal credit balance.

When costs to purchase inventory are rising, using LIFO leads to reporting ______ cost of goods sold and ______ net income than FIFO. A) higher; lower B) higher; higher C) lower; lower D) lower, higher

A) higher; lower

On average, 5% of total accounts receivable has been uncollectible in the past. At the end of the year, the balance of accounts receivable is $100,000 and the allowance for doubtful accounts has an unadjusted credit balance of $500. Credit sales during the year were $150,000. Using the aging of accounts receivable method, the estimated bad debt expense would be: A. $4,500. B. $5,000. C. $7,000. D. $7,500.

A. $4,500. 100,000 x .05= 5,000-500= 4,500 Remember it was asking for bad debt expense not ending balance

Because interest rates have fallen, a company retires bonds which had been issued at their face value of $200,000. The company bought the bonds back at 97. This retirement would be recorded with a: A. debit of $200,000 to Bonds Payable, a credit of $6,000 to Gain on Bond Retirement, and a credit of $194,000 to Cash. B. debit of $194,000 to Bonds Payable, a debit to Gain on Bond Retirement of $6,000, and a credit of $200,000 to Cash. C. debit of $200,000 to Bonds Payable, a credit of $6,000 to Interest Expense, and a credit of $194,000 to Cash. D. debit of $194,000 to Bonds Payable and a credit of $194,000 to Cash.

A. debit of $200,000 to Bonds Payable, a credit of $6,000 to Gain on Bond Retirement, and a credit of $194,000 to Cash. 200,000 x .97= 194,000 200,000-194,000= 6,000 (remember that 97 % bonds back)

Which of the following would not be classified as a current asset? A) Cash B) Accounts Payable C) Supplies D) Inventory

B) Accounts Payable

Revenues: A) decrease assets. B) increase stockholders' equity. C) increase liabilities. D) decrease expenses.

B) increase stockholders' equity.

If total liabilities decreased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same time period? A. $20,000 increase B. $20,000 decrease C. $30,000 increase D. $30,000 decrease

B. $20,000 decrease

On February 16, a company declares a 34¢ dividend to be paid on April 5. There are 2 million shares of common stock issued and 100,000 shares of treasury stock. What does the company record in February? A. A debit to Dividends Payable and a credit to Cash for $680,000. B. A debit to Dividends and a credit to Dividends Payable for $646,000. C. A debit to Dividends Payable and a credit to Cash for $646,000. D. A debit to Dividends and a credit to Dividends Payable for $680,000.

B. A debit to Dividends and a credit to Dividends Payable for $646,000.

Which of the following statements regarding issued and outstanding stock is true? A. Outstanding stock includes all stock issued by a corporation. B. Issued stock equals the sum of outstanding stock and treasury stock. C. Issued stock is equal to authorized stock. D. Outstanding stock includes stock in the hands of investors, as well as treasury stock in the hands of the corporation.

B. Issued stock equals the sum of outstanding stock and treasury stock.

IBM is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15, 2022. If interest rates fall in the economy so that similar financial investments pay 5%, IBM will: A. not be able to issue the bonds because no one will buy them. B. receive a higher issue price as buyers compete for the bonds. C. have to accept a lower issue price to attract buyers. D. have to reprint the bond certificates to change stated interest rate to 5%.

B. receive a higher issue price as buyers compete for the bonds.

12. McLeod Corporation is a merchandising company. The year began with inventory of $27,000, Purchases for the year were $52,000, and the Ending Inventory was $14,000. What is the Cost of Goods Sold that would be reported on the income statement? A) $93,000 B) $39,000 C) $11,000 D) $65,000

BI+P=CGAS-EI=COGS 27,000+52,000=79,000-14,000= 65,000 D) $65,000

Purrfect Pets, Inc. makes a $10,000 payment on account. This would result in a: A) $10,000 credit to Cash and a $10,000 credit to Accounts Payable. B) $10,000 debit to Cash and a $10,000 debit to Accounts Payable. C) $10,000 debit to Accounts Payable and a $10,000 credit to Cash. D) $10,000 debit to Cash and a $10,000 credit to Accounts Payable.

C) $10,000 debit to Accounts Payable and a $10,000 credit to Cash.

On July 1, Darin Company sold inventory costing $4,500 to Dee Company for $6,000, terms 2/10, n/30. Both companies use the gross method. What journal entry will be recorded by Dee Company on July 1? A) Debit Purchases and credit Accounts Payable for $6,000 B) Debit Inventory and credit Accounts Receivable for $6,000 C) Debit Inventory and credit Accounts Payable for $6,000 D) Debit Cost of Goods Sold and credit Inventory for $4,500

C) Debit Inventory and credit Accounts Payable for $6,000

Revenues are recognized when __________, even when cash is collected in a different accounting period than the revenue is earned. A) cash is collected B) bills are paid C) services are performed D) customers prepay for goods/services

C) services are performed

A company issued $300,000, 10-year, 10 percent bonds at 105. Use the information above to answer the following question. What is the issue price of these bonds? A. $300,000 B. $285,000 C. $315,000 D. $330,000

C. $315,000 Cash 315,000(300,000 x 1.05) Premium 15,000 B/P 300,000

A 1-year, $15,000, 12 percent note is signed on April 1. If the note is repaid on September 1 of the same year, how much interest expense is incurred? A. $1,800 B. $900 C. $750 D. $600

C. $750 15,000x.12x(5/12) remember a whole 5 months have gone by

Which of the following would not be reported on the balance sheet? A. Accounts Receivable B. Accounts Payable C. Advertising Expense D. Cash

C. Advertising Expense

The expense recognition principle ("matching") dictates: A) where on the income statement expenses should be presented. B) when revenues are recognized on the income statement. C) the ordering of current assets and current liabilities on the balance sheet. D) when costs are recognized as expenses on the income statement.

D) when costs are recognized as expenses on the income statement.

During the year, a company that uses the allowance method concludes that $6,844 of specific customer accounts will not be collected. These are written off by: A. debiting Accounts Receivable and crediting Allowance for Doubtful Accounts for $6,844. B. debiting Accounts Receivable and crediting Bad Debt Expense for $6,844. C. debiting Bad Debt Expense and crediting Accounts Receivable for $6,844. D. debiting Allowance for Doubtful Accounts and crediting Accounts Receivable for $6,844.

D. debiting Allowance for Doubtful Accounts and crediting Accounts Receivable for $6,844.

Which account will have a zero balance after closing entries have been journalized and posted? a. Service revenue. b. Supplies. c. Prepaid Insurance. d. Accumulated Depreciation.

a. Service revenue.

If goods in transit are shipped FOB destination a. the seller has legal title to the goods until they are delivered. b. the buyer has legal title to the goods until they are delivered. c. the transportation company has legal title to the goods while the goods are in transit. d. no one has legal title to the goods until they are delivered.

a. the seller has legal title to the goods until they are delivered.

Jimmy's Repair Shop started the year with total assets of $300,000 and total liabilities of $240,000. During the year the business recorded $630,000 in revenues, $330,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was a. $360,000. b. $300,000. c. $240,000. d. $270,000.

b. $300,000. (300,000=240,000+60,000{all common stock})beginning retained earnings+ net income-dividends= ending retained earings 300,000-60,000= 240,000+60,000)

Depreciation is the process of: a. valuing an asset at its fair value. b. increasing the value of an asset over the periods in which it is used. c. allocating the cost of an asset to the periods in which it is used. d. writing down an asset to its real value each accounting period.

c. allocating the cost of an asset to the periods in which it is used.

A credit is not the normal balance for which account listed below? a. Common Stock account b. Revenue account c. Liability account d. Dividends account

d. Dividends account

The primary source used in the preparation of the financial statements is the: a. trial balance. b. post-closing trial balance. c. general trial balance. d. adjusted trial balance.

d. adjusted trial balance.

The best definition of assets is the a. cash owned by the company. b. collections of resources belonging to the company and the claims on these resources. c. owners' investment in the business. d. resources belonging to a company that have future benefit to the company.

d. resources belonging to a company that have future benefit to the company.