Entry Exam

Sally enters into a partnership by contributing the following: Cash $15,000; Accounts Receivable $4,500; machinery that cost $3,000 and has a fair market value of $2,125; and Accounts Payable of $1,200. What amount will be recorded in her capital account? a. $20,425 b. $21,300 c. $21,625 d. $22,500

A. $20,425

At December 31, 20xx, the accounting records of Sky Corporation contain the items above. What is the amount of cash owned by Sky at December 31, 20xx? a. $46,000 b. $86,000 c. $94,000 d. $686,000

A. $46,000

A company began the accounting period with $50,000 in owner's capital, ended with $75,000 in owner's capital, and the owner withdrew $30,000 during the period for personal use. What was the company's net income or loss for the period? a. $55,000 net income b. $30,000 net loss c. $5,000 net loss d. $5,000 net income e. none of the options listed

A. $55,000 net income

5. Depreciation is an accounting procedure that: a. Allocates the cost of an asset over its useful life. b. Distributes the market value of an asset over its useful life. c. Records the increase in value of real estate holdings. d. Divides equipment cost over an accounting period.

A. Allocates the cost of an asset over its useful life

What accounting principle governs the timing of revenue recognition? a. Realization principle b. Materiality principle c. Matching principle d. Depreciation principle

A. Realization pinciple

9. Possible future claims against a business are: a. Contingent liabilities. b. Loans. c. Investments. d. Interest income.

A. contingent liabilities

On November 1, Delphi Corporation sold merchandise in return for a 7%, 90-day note receivable in the amount of $30,000. The proper adjusting entry at December 31 (the end of Delphi's fiscal year) includes a a. credit to Interest Revenue of $350 b. credit to Notes Receivable of $525 c. debit to Cash of $350 d. debit to Interest Receivable of $175

A. credit to interest revenue of $350

Johnny's Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000. During the year the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of $10,000. The net income reported by Johnny's Car Repair Shop for the year was a. $35,000. b. $45,000. c. $20,000. d. $90,000. e. none of the options listed

B. $20,000

A company had 130,000 shares of common stock outstanding on January 1 and sold 30,000 additional shares on March 30. Net income for the year was $495,625. What are earnings per share? a. $3.10 b. $3.25 c. $4.58 d. $4.96

B. $3.25

Which of the following credit terms is most advantageous to the buyer? a. 1/10, n/30 b. 5/10, n/60 c. 2/10, n/30 d. 5/10, n/20

B. 5/10, n/60

Which of these is not included as a separate item in the basic accounting equation? A. assets B. revenues C. liabilities D. stockholder's equity

B. revenues

What is the correct order of the accounts in the adjusted trial balance? a. Revenues, expenses, assets, liabilities, owner's equity b. Liabilities, assets, revenues, owner's equity, expenses c. Assets, liabilities, owner's equity, revenues, expenses d. Expenses, liabilities, revenues, assets, owner's equity

C. Assets, liabilities, owner's equity, revenues, expenses

7. Gross profit is calculated as: a. Revenues minus extraordinary items. b. Gross profits divided by net sales X 100. c. Revenues minus cost of goods sold. d. None of the above.

C. Revenues minus cost of goods sold

The difference between the balance of a plant asset account and the related accumulated depreciation account is termed a. market value. b. contra asset. c. book value. d. liability. e. none of the options listed

C. book value

A measure of profitability is the a. current ratio. b. debt to total assets ratio. c. return on assets ratio. d. working capital. e. none of the options listed

C. return on assets ratio

A store that sells expensive custom-made jewelry is most likely to determine its cost of goods sold using a. LIFO b. FIFO c. specific identification d. average cost

C. specific identification

The collection of accounts receivable is recorded by a a. credit to Cash and a credit to Accounts Receivable b. debit to Cash and a debit to Accounts Receivable c. credit to Cash and a debit to Accounts Receivable d. debit to Cash and a credit to Accounts Receivable

D. Debit to cash and a credit to accounts receivable

In preparing a bank reconciliation, a service charge shown on the bank statement should be a. added to the balance per the bank statement b. deducted from the balance per the bank statement c. added to the balance per the depositor's records d. deducted from the balance per the depositor's records

D. Deducted from the balance per the depositor's records

Which account increases equity? A. expenses B. withdrawals C. treasury stock D. revenues

D. revenues

Assets + Capital = Liabilities

False

In a T Account, Debit is on the left side

False

The prime function of accounting is to classify and record business transactions

False

Accounting is more of an information system rather than a mere recording system

True

Capital = Assets - Liabilities

True

Is the accounting entry correct when: (a) Company bought a motor vehicle Debit: Motor Vehicle Credit: Bank (b) Company repaid loan owing to Jim Debit: Jim Credit: Bank

True

Is the following rules of Debit and Credit Correct? Assets = Capital + Liabilities Increase Dr = Cr + Cr Decrease Cr = Dr + Dr

True

Jim brings his private motor car into business, the entry would be: Debit: Motor Car Credit: Capital

True

2. Which one of the following is generally considered an intangible asset? a. Plant, property, and equipment. b. Purchased goodwill. c. Petroleum deposits. d. Mineral rights.

B. purchased goodwill

Asset accounts have what type of balance? A. debit B. credit C. contra D. all of the above

A. debit

Which financial statement displays the revenues and expenses for a company for a period of time? A. income statement B. balance sheet C. cash flow statement D. statement of stockholder's equity

A. income statement

The deferred income tax liability: a. Represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules. b. Is a contingent liability. c. Can result in a deferred income tax asset. d. Is never recorded. e. Is recorded whether or not the difference between taxable income and financial accounting income is permanent or temporary.

A. represents income tax payments that are deferred until future years because of temporary differences between GAAP rules and tax accounting rules

6. General and administrative expenses on the income statement generally do NOT include which of the following? a. Store display costs. b. Telephone and communication costs. c. Heat, light, and power costs. d. Postage and office supplies.

A. store display costs

When stock that was issued by a corporation is later reacquired it is classified as a. treasury stock b. non-participating preferred stock c. restricted stock d. issued shares

A. treasury stock

A company normally sells it products for $20 per unit, which includes a profit margin of 25%. However, the selling price has fallen to $15 per unit. This company's current inventory consists 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of inventory at the lower of cost or market. a. $2,550. b. $2,600. c. $2,700. d. $3,000. e. $3,200.

B. $2,600

At the beginning of the current year, Wilson Corporation had 200,000 shares of $1 par common stock out standing and had retained earnings of $4,800,000. During the year, the company earned $1,675,000 and paid a year-end cash dividend of $3 per share. What were Wilson's retained earnings at the end of the year? a. $4,800,000 b. $5,875,000 c. $6,275,000 d. $6,475,000

B. $5,875,000

The entry to allocate net income among partners requires a a. debit to each partner's capital account b. credit to each partner's capital account c. credit to income summary d. credit to retained earnings

B. Credit to each partner's capital account

Which of the following is not an activity listed in the statement of cash flows? a. Investing Activities b. Funding Activities c. Operating Activities d. Financing Activities e. None of the options listed

B. Funding activities

The percentage of the area under a normal curve that falls between the mean and one standard deviation below the mean is approximately a. the amount paid by the corporation to redeem bonds at maturity date is deductible in computing income subject to corporate income tax b. interest payments are deductible in determining income subject to corporate income tax; dividends are not deductible c. a corporation must pay tax on the sales price of stock issued, but is not taxed on the amount received when bonds are issued d. both interest and dividends paid are deductible in computing taxable income, but since interest must be paid annually, the corporation usually receives a larger tax deduction over the life of the bonds payable

B. Interest payments are deductible in determining income subject to corporate income tax; dividends are not deductible

Which of the following statements best describes the concept of adequate disclosure? a. The accounting department of a business must inform management of the accounting practices used to prepare the financial statements. b. The company must inform users of any significant facts necessary for proper interpretation of the financial statements, including events occurring after the financial statement date. c. The independent auditors must disclose in the financial statements any and all errors detected in the company's accounting records. d. The financial statements must include a comprehensive list of each transaction that occurred during the year.

B. The company must inform users of any significant facts necessary for proper interpretation of the financial statements, including events occurring after the financial statement date

8. Which of the following pieces of information do you need to know to calculate the return on assets for the year? a. The total current assets and the net income at the end of the year. b. The total assets and the net income at the end of the year. c. The total assets and the net operating income at the end of the year. d. The current assets and the net income at the end of the year.

B. The total assets and the net income at the end of the year

Which financial statement uses the expanded accounting equation? A. income statement B. balance sheet C. cash flow statement D. statement of stockholder's equity

B. balance sheet

A contra asset account has what type of balance? A. debit B. credit C. contra D. All of the above

B. credit

The accrual basis of accounting records revenues when they are: A. collected B. earned C. contracted D. readily available for use

B. earned

Working capital is a measure of a. consistency. b. liquidity. c. profitability. d. solvency. e. none of the options listed

B. liquidity

If beginning capital was $25,000, ending capital is $3 7,000, and the owner's withdrawals were $23,000, the amount of net income or net loss for the period was: a. net loss of $35,000 b. net income of $35,000 c. net income of $14,000 d. net loss of $14,000 e. none of the options listed

B. net income of $35,000

What is the main purpose of financial accounting? A. organize financial information B. provide useful, financial information to outsiders C. Keep track of company expenses D. Minimize company taxes

B. provide useful, financial information to outsiders

Net present value is negative when a. the present value of cash inflows is greater than the present value of cash outflows. b. the present value of cash outflows is greater than the present value of cash inflows. c. the future value of cash inflows is greater than the present value of cash outflows. d. the present value of cash outflows is greater than the future value of cash outflows. e. none of the options listed

B. the present value of cash outflows is greater than the present value of cash inflows

A company purchased a POS cash register on January 1 for $5,400. This register has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method? a. $ 500. b. $ 800. c. $ 864. d. $1,000. e. $1,080

C. $864

Which account is not a liability account? A. Accounts Payable B. Accrued expenses C. cash D. notes payable

C. Cash

1. Which one of the following is generally NOT considered a current liability? a. Interest payable. b. Current maturities of long-term debt. c. Mortgages payable. d. Accounts payable .

C. Mortgages payable

A company uses a perpetual inventory system. At year-end the Inventory account has a balance of $275,000, but a complete year-end physical inventory shows goods on hand costing $269,000. What should the company do? a. Reduce its cost of goods sold by $6,000 b. Record a $6,000 current liability c. Reduce the balance in its Inventory controlling account and inventory subsidiary ledger by $6,000 d. Reduce the balance in its Inventory controlling account and record a current liability, both in the amount of $6,000

C. Reduce the balance in its inventory controlling account and inventory subsidiary ledger by $6,000

The account format that displays debits, credits, balances, and headings A. general journal B. general ledger C. T-Account D. ledger account

C. T-Account

Which of the following is a characteristic of a corporation? a. Declaration of a dividend by the stockholders b. Appointment of officers by the stockholders c. Transferability of shares of stock d. Unlimited liability

C. Transferability of shares of stock

3. Zeta Incorporated paid three months' rent in advance on its new store. At the beginning of the next month, one month's rent must be recorded as: a. A prepaid asset. b. A liability. c. An expense. d. Revenue.

C. an expense

Deciding whether to record a sale when the order for services is received or when the services are performed is an example of a a. classification issue. b. valuation issue. c. recognition issue. d. communication issue. e. none of the options listed

C. recognition issue

Which of the following is an example of a deferral? a. Accruing year-end wages b. Recognizing revenues earned but not yet recorded c. Recording prepaid rent d. Recognizing expenses incurred but not yet recorded e. None of the options listed

C. recording prepaid rent

A purchasing agent wants to know the dollar amount of inventory purchased on account during the year from a particular supplier. Where is the easiest place to find this information? a. Inventory subsidiary ledger b. Accounts payable controlling account c. Inventory controlling account d. Accounts payable subsidiary ledger

D. Accounts payable subsidiary ledger

In the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results? a. Notes to the financial statements b. Management discussion and analysis section c. Balance sheet d. Auditor's report e. None of the options listed

D. Auditor's report

Each year the accountant for Northeast Real Estate Company adjusts the recorded value of each asset to its market value. Using these market value figures on the balance sheet violates the a. accounting equation b. stable-dollar assumption c. business entity concept d. cost principle

D. Cost principle

Which accounting assumption assumes that an enterprise will continue in operation long enough to carry out its existing objectives and commitments? a. Monetary unit assumption b. Economic entity assumption c. Time period assumption d. Going concern assumption e. None of the options listed

D. Going concern assumption

10. A major reason for business borrowing is: a. Increase in accounts receivable caused by a decrease in inventory days on hand. b. Growth in inventory caused by a decrease in inventory days on hand. c. Decreases in accounts receivable caused by an increase in inventory days on hand. d. Growth in inventory caused by an increase in inventory days on hand.

D. Growth in inventory caused by an increase in inventory days on hand

4. To a bank, the allowance for loan and lease losses account is similar to: a. Bad debt expense. b. Bad debt accretion. c. Provision expense. d. Allowance for bad debts.

D. allowance for bad debts

The purchase of an office building by issuing long-term notes payable should be reported as a a. cash outflow in the financing section of the statement of cash flows. b. cash outflow in the investing section of the statement of cash flows. c. cash outflow in the operating section of the statement of cash flows. d. noncash investing and financing activity. e. none of the options listed

D. noncash investing and financing activity

A bond that sells at 103 is selling at a. maturity value and yields a 3% interest rate b. a discount c. face value d. a premium

D. premium

Jim introduces additional $100,000 cash into his business. The entries would be: Debit: Cash Credit: Capital

True

To record an increase in any given asset account, that account must be debited

True