Accounting Exam 2: Chapters 4,5 Old exam Barrett

On January 1, 2017, Metlock, Inc. purchased equipment for $48600. The company is depreciating the equipment at the rate of $680 per month. The book value of the equipment at December 31, 2017 is: a. $40440. b. $8160. c. $48600. d. $0.

a. $40440.

Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in which account? a. Inventory b. Freight-Out c. Freight-In d. Freight Expense

a. Inventory

Which types of accounts will appear in the post-closing trial balance? a. Permanent accounts. b. Temporary accounts. c. Accounts shown in the income statement columns of a work sheet. d. None of these.

a. Permanent accounts.

Failure to prepare an adjusting entry at the end of the period to record an accrued expense would cause: a. an understatement of expenses and an understatement of liabilities. b. an overstatement of assets and an overstatement of liabilities. c. net income to be understated. d. an overstatement of expenses and an overstatement of liabilities.

a. an understatement of expenses and an understatement of liabilities.

Adjusting entries are required: a. because some costs expire with the passage of time and have not yet been journalized. b. when the company's profits are below the budget. c. when expenses are recorded in the period in which they are earned. d. none of these answer choices are correct.

a. because some costs expire with the passage of time and have not yet been journalized.

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would a. debit Cost of Goods sold and credit Inventory. b. make no additional entry until the end of the period. c. debit Inventory and credit Cost of Goods Sold. d. debit Cost of Goods Sold and credit Purchases.

a. debit Cost of Goods sold and credit Inventory.

A credit sale of $3400 is made on July 15, terms 4/10, net/30, on which a return of $200 is granted on July 18. What amount is received as payment in full on July 24? a. $3400 b. $3072 c. $3350 d. $3264

b. $3072

Financial information is presented below: Operating expenses $ 46000 Sales returns and allowances 13000 Sales discounts 5000 Sales revenue 176000 Cost of goods sold 86000 The profit margin ratio would be a. 0.13. b. 0.16. c. 0.28. d. 0.46.

b. 0.16.

Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was recognized? a. September 5 b. August 31 c. August 1 d. September 6

b. August 31

Which of the following is a true statement about inventory systems? a. Periodic inventory systems require more detailed inventory records. b. Perpetual inventory systems require more detailed inventory records. c. A periodic system requires cost of goods sold be determined after each sale. d. A perpetual system determines cost of goods sold only at the end of the accounting period.

b. Perpetual inventory systems require more detailed inventory records.

Under a perpetual inventory system, acquisition of merchandise for resale is debited to a. the Cost of Goods Sold account. b. the Inventory account. c. the Purchases account. d. the Supplies account.

b. the Inventory account.

Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system? a. Payment of freight costs for goods received from a supplier b. A purchase of merchandise c. Payment of freight costs for goods shipped to a customer d. A return of merchandise inventory to the supplier

c. Payment of freight costs for goods shipped to a customer

Which of the following is a true statement about closing the books of a corporation? a. Only revenues are closed to the Income Summary account. b. Expenses are closed to the Expense Summary account. c. Revenues and expenses are closed to the Income Summary account. d. Revenues, expenses, and the Dividends account are closed to the Income Summary account.

c. Revenues and expenses are closed to the Income Summary account.

The collection of an $2700 account within the 2 percent discount period will result in a a. credit to Accounts Receivable for $2646. b. credit to Cash for $2646. c. debit to Sales Discounts for $54. d. debit to Accounts Receivable for $2646.

c. debit to Sales Discounts for $54.

In a perpetual inventory system, cost of goods sold is recorded a. on a monthly basis. b. on an annual basis. c. each time a sale occurs. d. on a daily basis.

c. each time a sale occurs.

Unearned revenue is classified as a(n): a. asset account. b. contra revenue account. c. liability. d. revenue account.

c. liability.

Under the expense recognition principle expenses are recognized when a. the invoice is received. b. they are billed by the supplier. c. they contribute to the production of revenue. d. they are paid.

c. they contribute to the production of revenue.

Merchandising companies that sell to retailers are known as a. corporations. b. service firms. c. wholesalers. d. brokers.

c. wholesalers.

Swifty Industries signs a $38400, 8%, 6-month note payable on September 1, 2016. How much interest expense will Swifty report in its 2017 financial statements? a. $1536 b. $0 c. $1024 d. $512

d. $512

The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: a. prepayment. b. asset. c. contra asset. d. accrued.

d. accrued.

If a customer agrees to retain merchandise that is defective because the seller is willing to reduce the selling price, this transaction is known as a sales a. discount. b. return. c. contra asset. d. allowance.

d. allowance.

Metlock, Inc. received a check for $16200 on July 1, which represents a 6-month advance payment of rent on a building it rents to a client. Unearned Rent Revenue was credited for the full $16200. Financial statements will be prepared on July 31. Metlock's should make the following adjusting entry on July 31: a. debit Cash, $16200; credit Rent Revenue, $16200. b. debit Rent Revenue, $2700; credit Unearned Rent Revenue, $2700. c. debit Unearned Rent Revenue, $16200; credit Rent Revenue, $16200. d. debit Unearned Rent Revenue, $2700; credit Rent Revenue, $2700.

d. debit Unearned Rent Revenue, $2700; credit Rent Revenue, $2700.

In the credit terms of 1/10, n/30, the "1" represents the a. number of days in the discount period. b. full amount of the invoice. c. number of days when the entire amount is due. d. percent of the cash discount.

d. percent of the cash discount.

Gross profit equals the difference between a. sales revenue and operating expenses. b. sales revenue and cost of goods sold plus operating expenses. c. net income and operating expenses. d. sales revenue and cost of goods sold.

d. sales revenue and cost of goods sold.