Acct_Modular Exam Review
41. List the four steps in the decision making process.
1.Identify the issue. 2. Gather information. 3. Identify alternatives. 4. Select the option that will most likely result in the desired objective.
Wilbur Company's monthly bank statement showed an ending balance of $36,928. The bank reconciliation included a deposit in transit, $3,274; outstanding checks, $4,340; an "NSF" check, $1,576; a bank service charge, $50; and proceeds of a customer's note collected by the bank, $4,600. The correct cash balance at the end of the month is a.$40,462 b.$40,202 c.$37,484 d.$35,862
36,928+3,274-4,340=$35,862
26) This amount does NOT change during the period and is added to purchases when computing the cost of goods available for sale. A) Beginning inventory B) Ending inventory C) Supplies D) Freight-in
A) Beginning inventory
29) Which of the following is most likely to result in an adjusting entry at the end of the period? A) Payment of two months' insurance in advance B) Payment of one month's rent C) Owner's withdrawals D) Owner's investment
A) Payment of two months' insurance in advance
18) Which of the following transactions would result in an accrual? A) Salary expense has been incurred but unpaid. B) Rent expired for the month. C) Supplies used during the accounting period. D) Owner's withdrawals.
A) Salary expense has been incurred but unpaid.
27) The perpetual inventory method: A) is used by more and more companies, large and small due to increasing computerization. B) is not used by many companies today. C) is used by companies with a variety of merchandise with low unit prices. D) does not ever require a physical inventory.
A) is used by more and more companies, large and small due to increasing computerization.
16) When the adjustment for depreciation is made: A) total assets decrease. B) total expenses decrease. C) total liabilities increase. D) total revenue decreases.
A) total assets decrease.
19) Which of the following would be an example of a contra-asset? A) Depreciation Expense B) Unearned Revenue C) Accumulated Depreciation D) Discount on Bonds
C) Accumulated Depreciation
24) Recording the adjustment for supplies used will: A) increase the total liability and increase the total expenses. B) increase the total assets and increase the total liabilities. C) decrease the total assets and increase the total expenses. D) decrease the merchandise inventory and decrease the total expenses.
C) decrease the total assets and increase the total expenses.
8) NOT recording the Prepaid Rent Expense used causes: A) assets to be too low. B) liabilities to be too high. C) expenses to be too low. D) revenue to be too low.
C) expenses to be too low.
14) When original cost is used in the accounting records, the book value of the asset is: A) the original cost. B) the market value. C) original cost less accumulated depreciation. D) closed out.
C) original cost less accumulated depreciation.
16) After the adjustment for depreciation has been made, the original cost of the equipment: A) increases with a credit. B) decreases with a debit. C) remains the same. D) is transferred to a liability.
C) remains the same.
1) Unearned Rent Revenue results because: A) no fee has been paid, and the service is not complete. B) the fee is earned but not collected. C) the fee has been collected before the service has been provided. D) the fee has been paid, and the service is complete.
C) the fee has been collected before the service has been provided.
29) Interest Expense: A) is a cost of borrowing money. B) is included in the "Other Expenses" on the Income Statement. C) has a normal debit balance. D) All of the above are correct.
D) All of the above are correct.
4) Adjusting entries affect: A) the balance sheet. B) the income statement. C) the cash account. D) Both A and B are correct.
D) Both A and B are correct.
26) Which of the following accounts would most likely NOT need to be adjusted at the end of the year? A) Office Supplies B) Salaries Payable C) Accumulated Depreciation D) Cash
D) Cash
Abbott Company wrote a check for $660, but recorded it in the accounting records as $606. This error would require an adjustment on the bank reconciliation of a. Adding $54 to the balance per the bank statement b. Deducting $54 from the balance per the bank statement c. Adding $54 to the balance per the books d. Deducting $54 from the balance per the books
D. Deducting $54 from the balance per the books
10) A signature card shows the signature of only the person who authorizes others in the company to sign checks.
F: the account holderand new account holder signature
When reconciling a bank statement, direct deposits are a.Added to the balance per the books b.Added to the balance per the bank c.Subtracted from the balance per the books d.Subtracted from the balance per the bank
a.Added to the balance per the books
27. Usually, when accounts receivable are collected, an asset is debited and a. Another asset is debited b. Another asset is credited c. A liability is debited d. A liability is credited
b. Another asset is credited
Alco Corporation's accountant wrote a check to a supplier for $15,000. He then wrote himself a check for $5,000. For the first check he deducted $15,000 from the books, for the second check he wrote "void" in the check register. How would the accountant conceal his theft on the bank reconciliation? a.Overstate deposits in transit b.Overstate outstanding checks c.Understate outstanding checks d.Understate NSF checks
b.Overstate outstanding checks
In preparing a bank reconciliation, interest paid by the bank on the account is a.Added to the bank balance b.Subtracted from the bank balance c.Added to the book balance d.Subtracted from the book balance
c.Added to the book balance
Which of the following items would be added to the book balance on a bank reconciliation? a.Outstanding checks b.A check written for $63 entered as $36 in the accounting records c.Interest paid by the bank d.Deposits in transit
c.Interest paid by the bank
Which of these is NOT one of the most common reasons for differences between the bank cash balance and the book cash balance? a.Accounting errors b.Deposits in transit c.Time period differences d.All of these are common reasons
d.All of these are common reasons
5. Bank statements provide information about all of the following EXCEPT a.Checks cleared during the period b.NSF checks c.Bank charges for the period d.Errors made by the company
d.Errors made by the company
6) The entry to record completing a financial lecture and immediately collecting payment from customers would be: A) Cash 1,400 Lecture Fees 1,400 B) Cash 1,400 Accounts Payable 1,400 C) Lecture Fees 1,400 Cash 1,400 D) Lecture Fees 1,400 Accounts Payable 1,400
A) Cash 1,400 Lecture Fees 1,400
1) A debit memorandum decreases which account on the buyer's books? A) Accounts Payable B) Sales C) Sales Discount D) Accounts Receivable
A) Accounts Payable
7) CSI completed a performance and collected revenue of $12,000 not previously billed or recorded. The journal entry to record the collection would be: A) Accounts Receivable 12,000 Performance Fees 12,000 B) Cash 12,000 Performance Fees 12,000 C) Accounts Receivable 12,000 Cash 12,000 D) Performance Fees 12,000 Cash 12,000
B) Cash 12,000 Performance Fees 12,000
10) Merchandise Inventory is what type of account? A) Liability B) Asset C) Equity D) Contra-asset
B) Asset
9) Prepaid Rent Expense is considered to be a(n): A) liability. B) asset. C) contra-asset. D) contra-revenue.
B) asset.
27) Bailey's received its electric bill for December on December 31 but did not pay nor record it in the general journal. This resulted in: A) understated assets. B) overstated net income. C) overstated liabilities. D) understated net income.
B) overstated net income.
13) Accumulated Depreciation - Buildings should be shown on the: A) Income Statement. B) post-closing trial-balance. C) Statement of Owner's Equity.
B) post-closing trial-balance.
12) The adjustment for Unearned Rent Revenue is recorded when: A) cash is received. B) rent is earned. C) revenue is received. D) payment is made for rent.
B) rent is earned.
21) The estimated value of an item at the end of its useful life is: A) depreciation expense. B) residual value. C) accumulated depreciation. D) book value.
B) residual value.
9) A calendar year is: A) any 12-month period that a business chooses for its accounting year. B) the 12-month period beginning with January. C) the period for when an interim financial statement would be completed. D) All of these answers are correct.
B) the 12-month period beginning with January.
3) An adjustment for Prepaid Rent Expense would indicate: A) the amount originally paid. B) the amount expired. C) the amount of the ending balance. D) the amount of the beginning balance.
B) the amount expired.
3) A debit memorandum decreases which account on the seller's books? A) Accounts Payable B) Merchandise Inventory C) Sales Returns and Allowances D) Accounts Receivable
D) Accounts Receivable
4) Which of the following is NOT an Asset? A) Cash B) Accounts Receivable C) Buildings D) All of the above are Assets.
D) All of the above are Assets.
3) From the following items, which would most likely cause the recording of unearned revenue? A) Receipt of a purchase order B) Purchase of merchandise on account C) Legal fees collected after work is performed D) Subscriptions collected in advance for a magazine
D) Subscriptions collected in advance for a magazine
28) Gross profit less operating expenses equals: A) Cost of Goods Sold. B) general administrative expenses. C) net purchases. D) net income.
D) net income.
20. Which of the following financial statements reports the amount of cash collected and paid out by a company? A. Balance sheet B. Income statement C. Statement of retained earnings D. Statement of cash flows
Statement of cash flows
14) A deposit ticket usually combines checks deposited with coin and currency deposited.
T
26. The current standard-setting board for accounting in the private sector is the A. Financial Accounting Standards Board (FASB) B. Securities and Exchange Commission (SEC) C. International Accounting Standards Board (IASB) D. American Accounting Association (AAA)
A. Financial Accounting Standards Board (FASB)
33. The organization that develops worldwide accounting standards is the A. International Committee on Accounting Standards (ICAS) B. International Accounting Standards Board (IASB) C. International Board of Accounting Standards (IBAS) D. International Accounting Standards Committee (IASC)
B. International Accounting Standards Board (IASB)
15. Which of the following is NOT an important aspect of management accounting? A. Planning B. Product design C. Implementing plans D. Controlling costs
B. Product design
28. The Sarbanes-Oxley Act created the A. Financial Accounting Standards Board B. Public Company Accounting Oversight Board C. American Institute of Certified Public Accountants D. Enron-WorldCom Fraud Committee
B. Public Company Accounting Oversight Board
6. Which of the following is NOT a key component of the definition of accounting? A. Financial B. Qualitative C. Useful D. Decision-oriented
B. Qualitative
6) The claims of creditors against the Assets are: A) Expenses. B) Revenues. C) Liabilities. D) Owner's Equity.
C) Liabilities.
17. Which of the following is NOT one of the three primary financial statements? A. Statement of cash flows B. Income statement C. Statement of retained earnings D. Balance sheet
C. Statement of retained earnings
9. Which of the following is NOT a typical source of monetary resources for a business enterprise? A. Investors B. Creditors C. Business earnings D. Employees
D. Employees
11. The accounting cycle includes all of the following, EXCEPT: A. Recording B. Summarizing C. Analyzing D. Interpreting
D. Interpreting
22. Which of the following is NOT one of the factors that influences the accounting environment? A. International business B. Technology C. The development of generally accepted accounting principles (GAAP) D. Investors
D. Investors
45. Describe the major difference between internal reports and external reports.
Internal reports are dynamic and created to meet the needs of management. These reports may vary greatly among companies. External reports generally consist of general-purpose financial statements and must follow certain standards or guidelines. These reports are more uniform among companies.
46. It is often said that companies must keep two sets of books. Isn't this dishonest? Explain.
No, it is not dishonest. Companies are subject to both the rules governing financial accounting and those governing tax accounting. One set of books must be maintained according to GAAP from which the company's financial statements are prepared. The other set of books is maintained in compliance with income tax regulations, from which the company's tax return is prepared.
39. Identify and describe the functions of an accounting system.
The functions of an accounting system are analysis, bookkeeping, and evaluation. Analysis involves analyzing business transactions to determine what information should be captured by the accounting system. Bookkeeping is tracking activities on a day-to-day basis. Evaluation uses summary information to evaluate the financial health and performance of a business.
22. Equity accounts are increased by a. Debits b. Expenses c. Credits d. The payment of dividends
c. Credits
24. Which of the following is true? a. Assets + liabilities = equity b. Credits = assets c. Debits = credits d. Assets = liabilities equity
c. Debits = credits
3. Which of the following is NOT a step in the accounting cycle? a. Recording the effects of transactions b. Summarizing the effects of transactions c. Forecasting sales d. Preparing reports
c. Forecasting sales
25. The cash account is increased by a. Credits b. Debits c. Either credits or debits d. Neither credits nor debits
b. Debits
15. If a company purchased a building with a cash down payment and the balance with a loan, the accounting equation will show a(n) a. Decrease in assets and increase in liabilities b. Increase in assets and increase in liabilities c. Increase in assets and decrease in liabilities d. Decrease in assets and decrease in liabilities
b. Increase in assets and increase in liabilities
26. The capital stock account is a. Increased with a debit b. Increased with a credit c. Decreased with a credit d. None of these are correct
b. Increased with a credit
23. The debit and credit analysis of a transaction normally takes place a. When the entry is posted to a subsidiary ledger b. When the entry is recorded in a journal c. When the trial balance is prepared d. When the financial statements are prepared
b. When the entry is recorded in a journal
4. Tanner Pty Ltd's bank account balance in its ledger on 31 December 31 2008 was $24,200. In addition, Tanner held the following items in its safe on 31 December. (1) A cheque for $450 from Peters Ltd received 30 December 2008, which was not recorded. (2) An NSF (dishonoured) cheque from Garner Ltd for $700 was returned for lack of sufficient funds on 29 December. Garner Ltd has promised to issue a replacement cheque in January. The original deposit has been included in the 31 December back account balance. (3) Coin and currency on hand amounted to $1,450. The proper amount of cash and cash equivalents to be reported on Tanner's balance sheet for cash at 31 December 2008 is a. $26,100. b. $23,950. c. $25,400. d. $24,950.
$24,200+450-700+1,450=C $25,400
If the month-end bank statement shows a balance of $31,000, outstanding cheques are $12,000, a deposit of $4,000 was in transit at month end, and a cheque for $500 was erroneously charged by the bank against the account, the correct balance in the bank account at month end is a. $22,500. b. $23,500. c. $15,500. d. $37,500.
$31,000-12,000+4,000+500=B. 23,500
6. In preparing its 31 May 2009 bank reconciliation, Dogg & Co. has the following information available: Balance per bank statement, 31/5/09 $32,000 Deposit in transit, 31/5/09 5,400 Outstanding (unpresented) cheques, 31/5/09 4,900 Note collected by bank in May 1,250 The correct balance of cash at 31 May 2009 is a. $32,500. b. $31,250. c. $31,500. d. $33,750.
$32,000+5,400-4,900=A. $32,500
5. The cash account shows a balance of $42,000 before reconciliation. The bank statement does not include a deposit of $2,300 made on the last day of the month. The bank statement shows a collection by the bank of $940 and a customer's cheque for $220 was returned (dishonoured) because it was NSF. A customer's cheque for $450 was recorded on the books as $540, and the company's own cheque payment written for $79 was recorded as $97. The correct balance in the cash account was a. $42,612. b. $42,648. c. $42,828. d. $44,948.
$42,000+$940-220-(540-450)+(18)=$42,648
In preparing its bank reconciliation for the month of February, Jesse Company has available the following information: - Balance per bank statement, February 28: $20,025 - Deposit in transit, February 28: 3,125 - Outstanding checks, February 28: 2,875 - Check erroneously deducted by bank from Jesse's account, February 10: 25 - Bank service charges for February: 25 What is the corrected cash balance at February 28? a.$20,025 b.$20,050 c.$20,175 d.$20,300
20,025+3,125-2,875+25=d.$20,300
If a petty cash fund is established in the amount of $250, and contains $200 in cash and $45 in receipts for disbursements when it is replenished, the journal entry to record replenishment should include credits to the following accounts: a. Petty Cash, $45. b. Petty Cash, $50. c. Cash, $45; Cash Over and Short, $5. d. Cash, $50.
250-200=B.Petty Cash,$50
Assume the following facts for Erich Company: the month-end bank statement shows a balance of $27,200; outstanding checks totaled $2,000; a deposit of $8,000 is in transit at month-end; and a check for $400 was erroneously charged against the account by the bank. What is the correct cash balance at the end of the month? a. $33,600 b.$34,400 c.$45,600 d.$46,400
27,200-2000+8,000+400=A. 33,600
In preparing the bank reconciliation for the month of April 2009, the accounts clerk has available the following information. Balance per bank statement, 30/4/09: $35,140 NSF (dishonoured) cheque returned 26/4/09: 440 Deposits in transit, 30/4/09: 4,000 Outstanding (unpresented) cheques, 30/4/09: 5,200 Bank charges for April 20: What should be the correct balance of cash at bank at 30 April 30 2009? a. $34,380 b. $33,940 c. $33,500 d. $34,460
35,140+4000-5,200=B. 33,940
Thorpe Company has prepared the following partial bank reconciliation for January 2017: Ending balance per bank statement: $37,400 Deposit in transit: 6,800 Outstanding checks: (5,100) Adjusted Balance: $39,100 Balance per books: $38,930 Interest earned: ? Service charge (153) NSF check: (187) Adjusted balance $39,100 Given this information, how much interest was earned? (Assume there are no other adjustments.) a.$170 b.$340 c.$510 d.$680
39,100+(153+187)-38,930=510
14. At the end of the month, a company's Cash account indicates a balance of $9,820. Upon receiving a bank statement, the following amounts are used in the bank reconciliation: deposit in transit, $2,400; outstanding checks, $926; bank service charge, $28; NSF check, $425; proceeds of a customer's note collected by the bank, $4,097. Given this information, what is the corrected Cash balance? a.$13,464 b.$11,993 c.$14,392 d.$11,294
9,820-28-425+4097=A. 13,464
2) The purchase of supplies for cash would affect which account category? A) Assets B) Liabilities C) Capital D) Expense
A) Assets
7) If a display rack was purchased for the store, which of the following accounts would be increased? A) Store Equipment B) Merchandise Inventory C) Capital D) Supplies
A) Store Equipment
6) The normal balance of Rental Income is: A) a credit. B) a debit. C) zero. D) dependent on the circumstances.
A) a credit.
5) The normal balance for Merchandise Inventory is: A) a debit. B) a credit. C) zero. D) It does not have a normal balance.
A) a debit.
25) Freight-in: A) adds to the Cost of Goods Sold. B) reduces the Cost of Goods Sold. C) does not affect Cost of Goods Sold. D) increases operating expenses.
A) adds to the Cost of Goods Sold.
12) If the Supplies account is NOT adjusted: A) assets will be overstated and expenses will be understated. B) assets will be overstated and expenses will be overstated. C) assets will be understated and expenses will be overstated. D) assets will be understated and expenses will be understated.
A) assets will be overstated and expenses will be understated.
30) Assuming no investments were made during the period, the balance of Capital shown on the worksheet is: A) beginning capital. B) ending capital. C) net income. D) equal to owner's withdrawals.
A) beginning capital.
10) The adjustment for supplies used would be to: A) debit Supplies Expense; credit Supplies. B) debit Supplies; credit Cash. C) debit Supplies Expense; credit Inventory. D) debit Inventory; credit Supplies.
A) debit Supplies Expense; credit Supplies.
17) The adjustment that is made to allocate the cost of a building over its expected life is called: A) depreciation expense. B) residual value. C) accumulated depreciation. D) None of the above answers are correct.
A) depreciation expense.
7) If the adjustment for Supplies used during the period was NOT made: A) expenses would be too low. B) assets would be too low. C) expenses would be too high. D) revenue would be too low.
A) expenses would be too low.
5) The financial statement on which Rental Income would appear is the: A) income statement. B) owner's equity statement. C) balance sheet. D) trial balance.
A) income statement.
13) When historical cost is used to record equipment, it would appear as the: A) original cost in an asset account on the balance sheet. B) residual value in the Stockholders Equity account. C) residual value in an asset account on the balance sheet. D) original cost on the income statement.
A) original cost in an asset account on the balance sheet.
2) As the Unearned Rent Revenue is earned: A) the liability account is decreased and the revenue account is increased. B) the asset account is increased and the revenue account is decreased. C) the revenue account is decreased and the revenue account is not affected. D) the liability account is not affected but the revenue account is decreased.
A) the liability account is decreased and the revenue account is increased.
16. The area of accounting that is concerned with providing information for external users is referred to as A. Financial accounting B. Governmental accounting C. Management accounting D. Not-for-profit accounting
A. Financial accounting
21) The physical count of inventory was incorrect, which overstated the ending inventory. This would cause: A) Cost of Goods Sold to be overstated. B) Cost of Goods Sold to be understated. C) gross profit to be understated. D) operating expenses to be understated.
B) Cost of Goods Sold to be understated.
7) Mortgage Payable is what type of account? A) Asset B) Liability C) Revenue D) Contra-Asset
B) Liability
4) A debit memorandum decreases which account on the buyer's books? A) Sales Returns and Allowances B) Merchandise Inventory C) Accounts Receivable D) Sales Discount
B) Merchandise Inventory
6) In the perpetual system, freight charges added to the buyer's invoice are debited to ________ for the buyer. A) Sales Discount B) Merchandise Inventory C) Sales Returns and Allowances D) Freight in
B) Merchandise Inventory
8) When merchandise is bought for resale, which of the following accounts would be increased? A) Store Equipment B) Merchandise Inventory C) Accounts Payable D) Supplies Expense
B) Merchandise Inventory
20) When counting supplies, several boxes were missed. This would cause: A) Supplies to be overstated. B) Supplies Expense to be overstated. C) net income to be overstated. D) Inventory to be understated.
B) Supplies Expense to be overstated.
11) If Prepaid Rent Expense for the period is NOT adjusted: A) assets will be overstated and expenses will be overstated. B) assets will be overstated and expenses will be understated. C) assets will be understated and expenses will be overstated. D) revenue will be understated and expenses will be understated.
B) assets will be overstated and expenses will be understated.
22) As accumulated depreciation is recorded, the net book value: A) increases. B) decreases. C) remains the same. D) equals zero.
B) decreases.
20) Residual value is the: A) estimated value of the asset when it is purchased. B) estimated value of the asset at the end of its useful life. C) cost of the asset. D) same as book value.
B) estimated value of the asset at the end of its useful life.
10) As Prepaid Rent Expense is used, the asset becomes a(n): A) liability. B) expense. C) contra-asset. D) contra-revenue.
B) expense.
23) Depreciation on equipment was recorded twice this period. This would cause: A) expenses to be overstated and total assets to be overstated. B) expenses to be overstated and total assets to be understated. C) expenses to be understated and total assets to be overstated. D) expenses to be understated and total assets to be understated.
B) expenses to be overstated and total assets to be understated.
30) Mortgage Payable: A) has a debit balance. B) has a credit balance. C) shows the amount expected to be paid within the current period. D) is an unsecured loan.
B) has a credit balance.
19) The adjustment for accrued wages was NOT done; this would cause: A) liabilities to be overstated. B) liabilities to be understated. C) assets to be understated. D) net income to be understated.
B) liabilities to be understated.
4) The financial statement on which Unearned Rent Revenue would appear is: A) the income statement. B) the balance sheet. C) the owner's equity statement. D) the trial balance.
B) the balance sheet.
14) An account never used in an adjusting entry is: A) Consulting Fees-Revenue. B) Interest Payable. C) Cash. D) Accumulated Depreciation - Equipment.
C) Cash.
28) Online Service received its telephone bill for January, but is not going to pay the bill until February. What adjustment is needed to record the transaction? A) Debit Telephone Expense; credit Cash B) Debit Accounts Payable; credit Telephone Expense C) Debit Telephone Expense; credit Accounts Payable D) Debit Accounts Payable; credit Cash
C) Debit Telephone Expense; credit Accounts Payable
9) What financial statement shows the amount for Freight-In? A) Balance Sheet B) Statement of Owner's Equity C) Income Statement D) Trial Balance
C) Income Statement
24) What type of account is Salaries Payable? A) Asset B) Contra-Asset C) Liability D) Revenue
C) Liability
2) A debit memorandum increases which account on the seller's books? A) Accounts Payable B) Merchandise Inventory C) Sales Returns and Allowances D) Accounts Receivable
C) Sales Returns and Allowances
6) A contra-asset is: A) a liability. B) an asset with a debit balance. C) an account with an opposite balance of a normal asset. D) a revenue account.
C) an account with an opposite balance of a normal asset.
8) As supplies are used, they become: A) inventory. B) a liability. C) an expense. D) contra-asset.
C) an expense.
9) Tim returned $600 of merchandise within the discount period. The entry to record the return is to: A) debit Merchandise Inventory for $600; credit Accounts Payable for $600. B) debit Merchandise Inventory for $600; credit Sales for $600. C) debit Accounts Payable for $600; credit Merchandise Inventory for $600. D) debit to Accounts Payable for $600; credit Sales for $600.
C) debit Accounts Payable for $600; credit Merchandise Inventory for $600.
23) To record accrued salaries, you would: A) debit Cash and credit Salaries Payable. B) debit Salaries Payable and credit Salaries Expense. C) debit Salaries Expense and credit Salaries Payable. D) debit Salaries Expense and credit Cash.
C) debit Salaries Expense and credit Salaries Payable.
11) The adjustment for Accrued Salaries would be to: A) debit Salaries Expense; credit Cash. B) debit Salaries Payable; credit Prepaid Salaries. C) debit Salaries Expense; credit Salaries Payable. D) debit Salaries Payable; credit Cash.
C) debit Salaries Expense; credit Salaries Payable.
5) The adjustment to record supplies used during the period would be: A) debit Supplies; credit Supplies Expense. B) debit Supplies Expense; credit Cash. C) debit Supplies Expense; credit Supplies. D) debit Supplies; credit Cash.
C) debit Supplies Expense; credit Supplies.
15) The adjustment for salaries is necessary: A) because the employer did not have enough cash to write the paychecks. B) to recognize the revenue in the period earned. C) to recognize the expense in the period incurred. D) only in the month of a holiday.
C) to recognize the expense in the period incurred.
22) The adjustment for depreciation expense was omitted; this would: A) overstate the period's expenses and overstate the period end liabilities. B) overstate the period's expenses and understate the period end liabilities. C) understate the period's expenses and overstate the period's assets. D) understate the period's expenses and understate the period's assets.
C) understate the period's expenses and overstate the period's assets.
9) The basic accounting equation is: A) Assets = Revenues - Expenses. B) Assets = Liabilities - Owner's Equity. C) Profit = Revenues - Expenses. D) Assets = Liabilities + Owner's Equity.
D) Assets = Liabilities + Owner's Equity.
25) The adjustment for wages earned, but not yet paid is: A) Debit Wages Expense, credit Cash. B) Debit Wages Payable, credit Wages Expense. C) Debit Wages Payable, credit Cash. D) Debit Wages Expense, credit Wages Payable.
D) Debit Wages Expense, credit Wages Payable.
18) The goods a company has available to sell to customers are called: A) Supplies. B) Freight-in. C) Cost of Goods Sold. D) Merchandise Inventory.
D) Merchandise Inventory.
15) The cost of an asset less accumulated depreciation equals: A) residual value. B) original cost. C) depreciation expense. D) depreciable value.
D) depreciable value.
6) When adjustments are made to the bank balance when completing a bank reconciliation, a journal entry is needed to bring the bank balance up to date.
F
3) Deposits that have been added to the bank balance but not the checkbook balance are called deposits in transit.
F: DIT is recorded in the book deposit it but not added it to the bank (has yet to be processed and posted to the bank account)
12) The drawee of the check is the person receiving the money.
F: drawee pays a certain amount
11) The drawee writes the check.
F: drawee pays, payor or drawer writes the check
1) On a bank reconciliation, outstanding checks are deducted from the balance per the books.
F: it is deducated in bank, because book cleared it but the bank doesnt know
2) Canceled checks are negotiable at the bank for the face value.
F: its cancelled na, negotiable at bank means u can withdraw it
13) The drawee of a check is normally the company that issues the check.
F: receives the issued check
43. List six users of accounting information and indicate whether they are an internal or an external user.
Internal: Management External: Creditors (Lenders) Investors Suppliers Customers Employees Competitors Government agencies The press
Which of the following is true about the double-entry system of bookkeeping? A. It was developed in the 1300s-1400s in France. B. It was developed in the 1800s in Italy. C. It was developed in the 1300s-1400s in Italy. D. It was developed in the 1800s in the United States.
It was developed in the 1300s-1400s in Italy.
15) Phishing occurs when a bank customer receives an email requesting personal information.
T
4) Deposits in transit result because of a timing difference between the bank records and checkbook records.
T
5) Any adjustment to the depositor's records because of an item on the bank statement requires a journal entry.
T
7) Transferring money without paper checks is called electronic funds transfer.
T
8) If a check marked NSF is returned from the bank, an adjusting entry crediting Cash is needed.
T
9) When a bank credits your account, it is increasing the balance.
T
17. An entry to the left side of an account is always called a(n) a. Debit b. Credit c. Increase d. Decrease
a. Debit
During the month, Wilson received a $1,200 check from Richard for the purchase of his 1994 Ford. Wilson deposited the check in his bank account. At the end of the month, Wilson received his monthly bank statement along with Richard's check returned and marked "NSF." What should Wilson do when reconciling his bank statement? a.Subtract $1,200 from the cash balance per the books b.Add $1,200 to the cash balance per the bank statement c.Subtract $1,200 from the cash balance per the bank statement d.Add $1,200 to the cash balance per the books
a.Subtract $1,200 from the cash balance per the books
10. In preparing a monthly bank reconciliation, which of the following items would be added to the balance reported on the bank statement to arrive at the correct cash balance? a.Outstanding checks b.Bank service charge c.Deposits in transit d.A customer's note collected by the bank on behalf of the depositor
c.Deposits in transit
4. Which of the following is NOT a cash control procedure? a.Separate the handling and recording of cash b.Deposit all cash receipts daily c.Make all cash disbursements by check d.Invest excess cash in high-yielding securities
d.Invest excess cash in high-yielding securities
18. Which of the following financial statements reports a company's resources, obligations, and owner's equity? A. Balance sheet B. Income statement C. Statement of retained earnings D. Statement of cash flows
A. Balance sheet
13. The primary internal group that uses accounting information is A. Government agencies B. Investors C. Management D. Competitors
C. Management
8) The general journal does NOT have a column titled: A) Date. B) Account Titles & Descriptions. C) Dr. and Cr. D) Balance.
D) Balance.
40. The definition of accounting is a system for providing "quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions." List and explain the key components of this definition.
Quantitative - Accounting relates to numbers. Financial -The health and performance of a company are affected and reflected in many dimensions but accounting focuses only on the financial aspect Useful- Accounting exists only because it is useful. Decisions- Accounting is only useful as the past information can be used to impact future decisions.
8. The basic accounting equation a. Is out of balance after each journal entry b. Should always balance c. Is balanced only at the end of the period with closing entries d. Is balanced only at the end of the period with adjusting entries
b. Should always balance
28. When accounts receivable are collected, a. Total assets are increased b. Total assets are decreased c. Total assets remain constant d. Equity increases
c. Total assets remain constant
2. Business documents are used as records of transactions and as the basis for accounting entries. Which of the following is NOT a business document? a. Sales invoice b. Check stubs c. Receipts d. General ledger
d. General ledger
4) Bob's catered a reception. The total price was $600. The customer paid half of the fee in cash and placed the remainder on account. The journal entry to record this transaction is: A) Cash 300 Accounts Receivable 300 Catering Service Fees 600 B) Cash 600 Accounts Receivable 600 C) Cash 600 Catering Service Fees 600 D) Cash 600 Accounts Receivable 300 Catering Service Fees 300
A) Cash 300 Accounts Receivable 300 Catering Service Fees 600
1) During the month of October, Ford advertised on the Internet. Ford received the bill for $500 in October, but waited until November to pay the advertising expense. The journal entry to record the payment in November is: A) Accounts Payable, debit; Cash, credit B) Advertising Expense, debit; Accounts Payable, credit C) Advertising Expense, debit; Cash, credit D) The journal entry is not made in November.
A) Accounts Payable, debit; Cash, credit
3) Sue's Book Review billed customers $550. The journal entry to record this transaction is: A) Accounts Receivable, debit $550; Editing Fees, credit $550 B) Editing Fees, debit $550; Sue, Capital, credit $550 C) Accounts Payable, debit $550; Editing Fees, credit $550 D) Cash, debit $550; Sue, Accounts Receivable, credit $550
A) Accounts Receivable, debit $550; Editing Fees, credit $550
3) Items owned by the business such as land, supplies and equipment are: A) Assets. B) Liabilities. C) Owner's Equity. D) Expenses.
A) Assets.
8) Assets are equal to: A) Liabilities + Owner's Equity. B) Liabilities - Owner's Equity. C) Liabilities - Revenues. D) Revenues - Expenses,
A) Liabilities + Owner's Equity.
5) If total liabilities increased by $10,000 and the assets increased by $10,000 during the accounting period, what is the change in the owner's equity amount? A) No effect on owner's equity B) Decrease of $10,000 C) Increase of $20,000 D) Decrease of $40,000
A) No effect on owner's equity
2) On July 1, Bill's Construction paid six months' insurance in advance. The journal entry to record this transaction is: A) debit Prepaid Insurance; credit Cash B) debit Insurance Expense; credit Accounts Payable C) debit Cash; credit Prepaid Insurance D) debit Cash; credit Insurance Expense
A) debit Prepaid Insurance; credit Cash
4. Which of the following is the most correct definition of accounting? A. A system for providing quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions. B. An entity without a profit objective, oriented toward providing services efficiently and effectively. C. The preservation of a systematic, quantitative record of an activity. D. The procedures and processes used by a company to analyze transactions and handle routine bookkeeping tasks.
A. A system for providing quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions.
10) An acceptable variation of the accounting equation is: A) Assets - Owner's Equity = Liabilities. B) Revenues = Profit - Expenses. C) Assets = Liabilities - Owner's Equity. D) All of these answers are correct.
A. Assets - Owner's Equity = Liabilities.
36. Ethics are especially important in accounting because A. Independent accountants represent the public interest B. Accountants can steal money more easily than other employees C. Accountants have historically committed more company thefts than other employees D. The accounting profession does not have a code of professional conduct
A. Independent accountants represent the public interest
14. Internal reports are generally used by A. Management B. Suppliers C. Lenders D. Employees
A. Management
7) The Owner's Equity of Logan's Company is equal to one-half of the total Assets. Liabilities equal $90,000. What is the amount of Owner's Equity? A) $45,000 B) $90.000 C) $135,000 D) None of these answers is correct.
B) $90.000
2) Bringing account balances up to date before preparing financial reports is called: A) posting. B) adjusting. C) journalizing. D) closing.
B) adjusting.
1) Historical cost is the same as: A) residual value. B) original cost. C) depreciable value. D) salvage value.
B) original cost.
12. If a company paid off a loan, the accounting equation would show a(n) a. Increase in assets and decrease in liabilities b. Decrease in assets and decrease in liabilities c. Increase in liabilities and decrease in assets d. Increase in assets and increase in liabilities
B. Decrease in assets and decrease in liabilities
19. Which of the following financial statements reports the excess of a company's revenues over its expenses? A. Balance sheet B. Income statement C. Statement of retained earnings D. Statement of cash flows
B. Income statement
23. Which of the following is NOT true of the Financial Accounting Standards Board (FASB)? A. It consists of five full-time members B. It is a government agency C. It seeks consistency for its proposed standards D. It has no legal power to enforce the standards it sets
B. It is a government agency
30. Which of the following is NOT a service typically provided by large public accounting firms? A. Performing audits B. Making management decisions C. Redesigning operating procedures D. Establishing accounting systems
B. Making management decisions
27. Which of the following organizations has specific legal authority to establish accounting standards for publicly held companies? A. Financial Accounting Standards Board (FASB) B. Securities and Exchange Commission (SEC) C. Internal Revenue Service (IRS) D. American Institute of Certified Public Accountants (AICPA)
B. Securities and Exchange Commission (SEC)
8. Accounting can be best described as a A. Manufacturing activity B. Service activity C. Retailing activity D. All of these are correct
B. Service activity
Which of the following is NOT typically true of accounting information? A. The information is quantitative in nature. B. The information relates to future time periods. C. The information relates to specific accounting entities. D. The information is primarily financial in nature.
B. The information relates to future time periods
10. Accountants typically perform what action related to the financial results of business activities? A. Report the results of business activities B. Advise on how to structure business activities C. Both report the results of and advise on how to structure business activities D. None of these are correct
C. Both report the results of and advise on how to structure business activities
29. The initials CPA stand for A. Certified Professional Appraiser B. Certified Professional Accountant C. Certified Public Accountant D. Certified Public Auditor
C. Certified Public Accountant
24. Generally accepted accounting principles are A. Natural laws B. Based on scientific proofs C. Developed by accounting rule makers D. None of these are correct
C. Developed by accounting rule makers
5. Which of the following is NOT a function of accounting? A. Accumulating economic information about organizations B. Measuring economic information about organizations C. Executing sales transactions for organizations D. Communicating economic information about organizations
C. Executing sales transactions for organizations
25. The initials GAAP stand for A. General Accounting Administration Practices B. Generally Applied Accounting Procedures C. Generally Accepted Accounting Principles D. Generally Accepted Accounting Practices
C. Generally Accepted Accounting Principles
31. Which of the following is the government agency that stipulates the rules and regulations that govern the collection of taxes in the United States? A. Securities and Exchange Commission B. Federal Accounting Standards Board C. Internal Revenue Service D. American Institute of Certified Public Accountants
C. Internal Revenue Service
34. Standards established by the International Accounting Standards Board are referred to as A. Generally Accepted Accounting Standards B. International Auditing Standards C. International Financial Reporting Standards D. International Financial Accounting Standards
C. International Financial Reporting Standards
12. The emphasis in financial accounting is on which of the following external user groups? A. Management B. Certified public accountants C. Investors and creditors D. Educators
C. Investors and creditors
21. Which of the following is NOT an external user of financial information? A. Competitors B. Employees C. Management D. Suppliers
C. Management
7. Which of the following is NOT a step in the decision making process? A. Identify the issue. B. Identify alternatives. C. Select the option that will result in the greatest financial increase. D. Gather information.
C. Select the option that will result in the greatest financial increase.
37. Which of the following is NOT one of the ways that technology has changed the way accounting is done? A. Technology easily allows companies to collect large amounts of data about transactions B. Technology allows greater access to a company's financial statements and other financial information C. Technology is able to perform the mechanics of accounting therefore, people are not required to understand the mechanics D. Technology allows for large amounts of data to be compiled quickly and accurately
C. Technology is able to perform the mechanics of accounting therefore, people are not required to understand the mechanics
5) Renzi's Volleyball Gym purchased equipment for $1,300. It made a down payment of $500 with the remainder on account. The journal entry to record this transaction is: A) Cash 800 Accounts Receivable 800 B) Accounts Receivable 500 Cash 800 Equipment 1,300 C) Supplies 1,300 Cash 800 Accounts Payable 500 D) Equipment 1,300 Accounts Payable 800 Cash 500
D) Equipment 1,300 Accounts Payable 800 Cash 500
1) Which of the following will decrease Owner's Equity? A) A sale of merchandise B) The purchase of an asset on credit C) An investment by the owner D) A withdrawal by the owner
D) A withdrawal by the owner
10) Interim statements are prepared to: A) notify management of the company's current financial position. B) notify investors of the company's current financial position. C) allow management to make changes to the business before processing year-end financial statements. D) All of the above are correct.
D) All of the above are correct.
3. Businesses use accounting systems to A. Analyze transactions B. Handle routine bookkeeping tasks C. Evaluate the performance and health of the business D. All of these are correct
D. All of these are correct
32. Accountants are MOST concerned with A. Foreign companies operating in the US B. U.S. companies with domestic customers C. U.S. companies with foreign customers D. All of these are correct
D. All of these are correct
38. Which of the following is a reason that you may need to understand accounting information in the future? A. To evaluate an employer's short and long-term potential B. To perform a personal budget C. To perform responsibilities in future employment D. All of these are reasons to study accounting
D. All of these are reasons to study accounting
35. In 2008, the SEC began to A. Allow U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards B. Require U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards C. Require non-U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards D. Allow non-U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards
D. Allow non-U.S. companies trading on the U.S. stock exchange to issue their financial reports using IASB standards
47. FASB, GAAP, SEC, CPA, AICPA, IRS, IASB, IFRS are all acronyms used in accounting. For the preceding list of acronyms, state what the acronym stands for and then give a definition of each acronym
Financial Accounting Standards Board. The private organization responsible for establishing the standards for financial accounting and reporting in the United States. Generally Accepted Accounting Principles. Authoritative guidelines that define accounting practice at a particular time. Securities and Exchange Commission. The government body responsible for regulating the financial reporting practices of most publicly owned corporations in connection with the buying and selling of stocks and bonds. Certified Public Accountant. A special designation given to an accountant who has passed a national uniform examination and has met other certifying requirements. American Institute of Certified Public Accountants. The national organization of CPAs in the United States. Internal Revenue Service. A government agency that prescribes the rules and regulations that govern the collection of tax revenues in the United States. International Accounting Standards Board. The committee formed in 1973 to develop worldwide accounting standards. International Financial Reporting Standards. The accounting standards produced by the IASB and envisioned to be a set of standards that can be used by all companies regardless of where the company is based.
44. Lenders, investors, and management are three potential users of external financial statements. Discuss how the information found in external financial statements can benefit each of these external users.
Lenders want to be repaid. External financial statements help lenders predict the future ability of the borrower to repay the loan. Investors want to be able to estimate how much cash they will receive in the future if they invest in a company now. Financial statements, along with knowledge of business plans, market forecasts, and character of management, can help investors to assess future cash flows. Management can use the information found in external financial statements to state goals, calculate management bonuses, and analyze the company in order to pinpoint weaknesses.
42. Identify the three primary financial statements and discuss the content of each.
The balance sheet reports the assets, liabilities, and owners' equity of a business. The income statement reports the net income or net loss of a company, which represents the difference between revenues and expenses. The statement of cash flows reports the cash inflows and outflows from operating, investing, and financing activities.
18. Liability accounts are increased a. By debits b. By credits c. On the left side d. Below the balance line
b. By credits
6. The basic accounting equation is a. Assets = Liabilities + Equity b. Assets + Equity = Liabilities c. Assets + Liabilities = Equity d. Liabilities Equity = Assets
a. Assets = Liabilities + Equity
19. Equity accounts are decreased with a. Debit entries b. Credit entries c. Liabilities d. Assets
a. Debit entries
9. Which of the following would usually NOT happen in a single transaction? a. Increase assets, decrease liabilities b. Increase assets, increase liabilities c. Increase liabilities, decrease equity d. Decrease assets, decrease equity
a. Increase assets, decrease liabilities
11. If a company purchased equipment for cash, the accounting equation would show a(n) a. Increase in assets and decrease in assets b. Decrease in liabilities and increase in assets c. Increase in liabilities and increase in assets d. Decrease in liabilities and decrease in assets
a. Increase in assets and decrease in assets
14. The purchase of supplies with cash would show a(n) a. Increase in assets and decrease in assets b. Decrease in liabilities and increase in assets c. Increase in assets and increase in liabilities d. Decrease in liabilities and decrease in assets
a. Increase in assets and decrease in assets
30. When a note payable is given to settle an existing account payable, a. There is no net change in assets, liabilities, or equity b. Net assets are increased c. Net liabilities are increased d. Net equity is increased
a. There is no net change in assets, liabilities, or equity
21. An entry to the right side of an account is called a(n) a. Increase b. Credit c. Debit d. Decrease
b. Credit
13. If a company purchased equipment by borrowing money, the accounting equation would show a(n) a. Increase in assets and decrease in assets b. Decrease in liabilities and increase in assets c. Increase in assets and increase in liabilities d. Decrease in liabilities and decrease in assets
c. Increase in assets and increase in liabilities
10. The purchase of supplies on account a. Increases assets and decreases liabilities b. Decreases assets and increases liabilities c. Increases assets and increases liabilities d. Decreases assets and decreases liabilities
c. Increases assets and increases liabilities
1. Which of the following is NOT a reason that business documents are used in a business? a. To confirm that a transaction has occurred b. To facilitate the analysis of business transactions c. To forecast sales d. To establish the amounts to be recorded
c. To forecast sales
5. Which of the following is NOT an advantage of a computerized accounting system over a manual accounting system? a. A computerized system is faster. b. A computerized system is more accurate once the data is correctly entered. c. Data can be managed more easily in a computerized system. d. A computerized system can analyze the information for decision making.
d. A computerized system can analyze the information for decision making.
20. Which of the following types of entries would NOT usually be made? a. A credit to an asset account, a debit to a liability account b. A debit to an asset account, a credit to a liability account c. A debit to an asset account, a credit to an equity account d. A debit to an asset account, a debit to a liability account
d. A debit to an asset account, a debit to a liability account
29. When equipment is purchased with a cash down payment and a signed note for the balance, the net effect will be a. Only an increase in assets b. Only a decrease in liabilities c. Only a decrease in assets d. Both an increase in assets and an increase in liabilities
d. Both an increase in assets and an increase in liabilities
4. Which of the following steps is normally first in the accounting cycle? a. Transactions are journalized. b. Journal accounts are posted. c. A trial balance is prepared. d. Business documents are analyzed.
d. Business documents are analyzed
16. If a company issues stock for cash, the accounting equation will show a(n) a. Increase in liabilities and decrease in equity b. Decrease in liabilities and decrease in equity c. Decrease in assets and increase in equity d. Increase in assets and increase in equity
d. Increase in assets and increase in equity,
7. Borrowing money from a bank a. Increases assets and decreases liabilities b. Increases liabilities and decreases assets c. Decreases assets and decreases liabilities d. Increases assets and increases liabilities
d. Increases assets and increases liabilities