Final Exam ACCT 220

These are selected account balances on December 31, 2017. (picture) What is the total amount of property, plant, and equipment that will appear on the balance sheet? a. $2,250,000 b. $1,950,000 c. $2,700,000 d. $1,725,000

$1,725,000

Entering transactions into the journal is called posting. a. True b. False

False

In a trial balance, all debits are listed before all credits. a. True b. False

False

In a service-type business, revenue is recognized: a. at the end of the month. b. at the end of the year. c. when the service is performed. d. when cash is received.

when the service is performed.

In large companies, the independent internal verification procedure is often assigned to a. computer operators. b. management. c. internal auditors. d. outside CPAs.

internal auditors.

Expenses are incurred a. only on rare occasions. b. to produce assets. c. to produce liabilities. d. to generate revenues.

to generate revenues.

A trial balance does not prove that all transactions have been recorded or that the ledger is correct. a. True b. False

True

Adjustments would not be necessary if financial statements were prepared to reflect net income from: a. monthly operations. b. fiscal year operations. c. interim operations. d. lifetime operations.

lifetime operations.

Intangible assets are a. listed directly under current assets on the balance sheet. b. not listed on the balance sheet because they do not have physical substance. c. listed after property, plant, and equipment. d. listed as a long-term investment on the balance sheet.

listed after property, plant, and equipment.

The periodic inventory system is used most commonly by companies that sell a. low-priced, high-volume merchandise. b. high-priced, high-volume merchandise. c. high-priced, low-volume merchandise. d. high-priced, low and high-volume merchandise.

low-priced, high-volume merchandise.

Accounts often need to be adjusted because: a. there are never enough accounts to record all the transactions. b. many transactions affect more than one time period. c. there are always errors made in recording transactions. d. management can't decide what they want to report.

many transactions affect more than one time period.

Kingman Consulting uses the cash basis of accounting and a fiscal year ending December 31. Beginning on September 1, 2016, Kingman performs services for Renfro International at a rate of $5,000 per month. On February 12, 2017, Renfro pays Kingman $25,000 in full for all services rendered from September 1, 2016 to January 31, 2017. Kingman understated revenues by ________ on its year-end financial statement. a. $20,000 b. $5,000 c. $25,000 d. $15,000

$20,000

Karlin Company gathered the following reconciling information in preparing its April bank reconciliation: (picture) The adjusted cash balance per books on April 30 is a. $24,600. b. $23,520. c. $22,200. d. $24,440.

$22,200.

Dekin Company had checks outstanding totaling $34,000 on its May bank reconciliation. In June, Dekin Company issued checks totaling $212,800. The June bank statement shows that $158,400 in checks cleared the bank in June. A check from one of Dekin Company's customers in the amount of $1,600 was also returned marked "NSF." The amount of outstanding checks on Dekin Company's June bank reconciliation should be a. $86,800. b. $54,400. c. $88,400. d. $20,400.

$88,400.

Use the following data to calculate the current ratio. (picture) a. 2.07 : 1 b. 1.67 : 1 c. 3.00 : 1 d. 2.60 : 1

2.60 : 1

Farwell Company purchased merchandise with an invoice price of $2,000 and credit terms of 2/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms? a. 4% b. 24% c. 36% d. 72%

36%

In a study session, a classmate makes this statement "Dividends are listed as expenses on the income statement." What is your best response to this statement? a. I've been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets. b. You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends? c. Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement. d. Dividends are deducted from retained earnings on the balance sheet.

Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement.

Trademarks would appear in which balance sheet section? a. Intangible assets b. Investments c. Property, plant, and equipment d. Current assets

Intangible assets

On August 15th, 2017, Kinney Industries signs a $200,000, 8%, twelve-month note payable. Which of the following entries correctly records the accrued interest on December 31st, 2017? a. Interest Expense $6,000 Interest Payable $6,000 b. Interest Expense $5,333.33 Interest Payable $5,333.33 c. Interest Expense $16,000 Interest Payable $16,000 d. Interest Expense $10,000 Interest Payable $10,000

Interest Expense $6,000 Interest Payable $6,000

What is a difference between merchandising companies and service enterprises? a. Merchandising companies must prepare multiple-step income statements and service enterprises must prepare single-step income statements. b. Merchandising companies generally have a longer operating cycle than service enterprises. c. Cost of goods sold is an expense for service enterprises but not for merchandising companies. d. All are these choices are differences.

Merchandising companies generally have a longer operating cycle than service enterprises.

Which of the following would not result in unearned revenue? a. Rent collected in advance from tenants. b. Services performed on account. c. Sale of season tickets to football games. d. Sale of two-year magazine subscriptions.

Services performed on account.

Which of the following describes the classification and normal balance of the Retained Earnings account? a. Asset, debit b. Stockholders' equity, credit c. Revenues, credit d. Expense, debit

Stockholders' equity, credit

Notification by the bank that a deposited customer check was returned NSF requires that the company make the following adjusting entry: (picture) a. a b. b c. c d. d

a) Accounts Receivable

A material item is one that is likely to influence an investor's decision. a. True b. False

a. True

If a resource has been consumed but a bill has not been received at the end of the accounting period, then: a. an expense should be recorded when the bill is received. b. an expense should be recorded when the cash is paid out. c. an adjusting entry should be made recognizing the expense. d. it is optional whether to record the expense before the bill is received.

an adjusting entry should be made recognizing the expense.

An investment by the stockholders in a business increases a. assets and stockholders' equity. b. assets and liabilities. c. liabilities and stockholders' equity. d. assets only.

assets and stockholders' equity.

If total liabilities decreased by $4,000, then a. stockholders' equity must have decreased by $4,000. b. assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000. c. assets and stockholders' equity each increased by $2,000. d. assets must have increased by $4,000.

assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000.

If expenses are paid in cash, then a. assets will increase. b. liabilities will decrease. c. stockholders' equity will increase. d. assets will decrease.

assets will decrease.

Kilmer Corporation began the year with retained earnings of $930,000. During the year, the company issued $1,260,000 of common stock, recorded expenses of $3,600,000, and paid dividends of $240,000. If Kilmer's ending retained earnings was $990,000, what was the company's revenue for the year? a. $3,660,000 b. $3,900,000 c. $4,920,000 d. $50,160,000

b. $3,900,000

The primary difference between prepaid and accrued expenses is that prepaid expenses have: a. been incurred and accrued expenses have not. b. not been paid and accrued expenses have. c. been recorded and accrued expenses have not. d. not been recorded and accrued expenses have.

been recorded and accrued expenses have not

In a classified balance sheet, assets are usually classified as a. current assets; long-term assets; property, plant, and equipment; and intangible assets. b. current assets; long-term investments; property, plant, and equipment; and common stocks. c. current assets; long-term investments; tangible assets; and intangible assets. d. current assets; long-term investments; property, plant, and equipment; and intangible assets.

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

Greese Company purchased office supplies costing $7,000 and debited Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,500 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be: a. debit Supplies Expense, $2,500; credit Supplies, $2,500. b. debit Supplies, $4,500; credit Supplies Expense, $4,500. c. debit Supplies Expense, $4,500; credit Supplies, $4,500. d. debit Supplies, $2,500; credit Supplies Expense, $2,500.

debit Supplies Expense, $4,500; credit Supplies, $4,500.

An adjusting entry can include a: a. debit to an asset and a credit to a liability. b. debit to a revenue and a credit to an asset. c. debit to a liability and a credit to a revenue. d. debit to an expense and a credit to a revenue.

debit to a liability and a credit to a revenue

One of the accounting concepts upon which adjustments for prepayments and accruals are based is: a. expense recognition. b. cost. c. monetary unit. d. economic entity.

expense recognition.

The common characteristic possessed by all assets is a. long life. b. great monetary value. c. tangible nature. d. future economic benefit.

future economic benefit.

All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act except a. independent outside auditors must attest to the level of internal control. b. companies must develop sound internal controls over financial reporting. c. companies must continually assess the functionality of internal controls. d. independent outside auditors must eliminate redundant internal controls.

independent outside auditors must eliminate redundant internal controls.

The Dividends account a. appears on the income statement along with the expenses of the business. b. must show transactions every accounting period. c. is increased with debits and decreased with credits. d. is not a proper subdivision of stockholders' equity.

is increased with debits and decreased with credits.

The sale of an asset on credit for what it cost a. increases assets and liabilities. b. decreases assets and liabilities. c. leaves total assets unchanged. d. decreases assets and increases liabilities.

leaves total assets unchanged.

A customer paid $60,000 to Foley Marketing on December 30, 2015, to perform services from January 1, 2016 through December 31, 2019. If Foley fails to record the revenue recognized, ________ would be understated by ________ each year. a. net income, $15,000 b. net income, $12,000 c. liabilities, $15,000 d. assets, $12,000

net income, $15,000

Buying and selling products are examples of a. operating activities. b. investing activities. c. financing activities. d. delivering activities.

operating activities

A purchase invoice is a document that a. provides support for goods purchased for cash. b. provides evidence of incurred operating expenses. c. provides evidence of credit purchases. d. serves only as a customer receipt.

provides evidence of credit purchases.

An income statement shows a. revenues, liabilities, and stockholders' equity. b. expenses, dividends, and stockholders' equity. c. revenues, expenses, and net income. d. assets, liabilities, and stockholders' equity.

revenues, expenses, and net income.

Inventory becomes part of cost of goods sold when a company a. pays for the inventory. b. purchases the inventory. c. sells the inventory. d. receives payment from the customer.

sells the inventory.

The classification and normal balance of the Dividends account is a. revenue with a credit balance. b. an expense with a debit balance. c. a liability with a credit balance. d. stockholders' equity with a debit balance.

stockholders' equity with a debit balance.