Accounting Exam 2 Study Set

37. Henry Corp. had outstanding checks totaling $1,098 on its September bank reconciliation. In October, Henry issued checks totaling $7,960. The October bank statement shows that $5,530 in checks cleared the bank in October. The amount of outstanding checks on Henry's October bank reconciliation should be: A) $3,528. B) $1,332. C) $2,430. D) $1,098.

A) $3,528

10. As of December 31, 2018, Tiger Corporation's Retained Earnings was $30,000. During 2019, the company earned revenue of $33,000, declared dividends of $1,000, and reported December 31, 2019 Retained Earnings of $50,000. Based on this information, Tiger Corporation's 2019 expenses must have been: A) $12,000 B) $33,000 C) $20,000 D) $21,000

A) $12,000

76. Ogel Company started the year with beginning inventory of $1,800, purchased $4,000 of inventory during the year, had sales of $7,000, and ended the year with $1,600 in inventory on hand. What should the cost of goods sold be on Ogel Company's end of the year income statement? A) $4,200 B) $7,000 C) $5,800 D) $7,400

A) $4,200

2. Which of the following statements about adjusting journal entries (adjustments) is NOT TRUE? A) Adjusting entries ensure that the financial results reflect management's objectives for operating performance. B) Without adjustments, the financial statements present an incomplete and misleading picture of the company. C) Adjustments help the financial statements present the best picture of whether the company's activities were profitable for the period. D) Adjustments help the financial statements present the economic resources that the company owns and owes at the end of the period.

A) Adjusting entries ensure that the financial results reflect management's objectives for operating performance.

68. Maisie Pics sold goods (that cost $2,800) on credit for $3,500 with terms of 2/10 n/30. Payment is received from the buyer 7 days after the purchase. How would the payment be recorded? A) Debit Sales Revenue for $70, debit Cash for $3,430, and credit Accounts Receivable for $3,500. B) Debit Accounts Receivable for $3,500, and credit Sales Revenue for $3,500. C) Debit Cash for $3,430, credit Sales Revenue for $70 and credit Accounts Receivable for $3,500. D) Debit Cash for $3,500 and credit Accounts Receivable for $3,500.

A) Debit Sales Revenue for $70, debit Cash for $3,430, and credit Accounts Receivable for $3,500.

8. When existing deferred revenue is earned in the ordinary course of business: A) a deferral adjustment is recorded. B) an accrual adjustment is recorded. C) a revenue is recorded, and the corresponding asset account is decreased. D) a prepaid expense is recorded, and the corresponding liability is decreased.

A) a deferral adjustment is recorded.

53. Closing journal entries do not: A) adjust for accrual and deferral transactions. B) bring the balances in all revenue and expense accounts down to zero for the next accounting period. C) close temporary accounts. D) transfer Revenue, Expenses and Dividends to Retained Earnings.

A) adjust for accrual and deferral transactions.

54. Adjusting journal entries: A) adjust for accrual and deferral transactions. B) bring the balances in all equity, liability, revenue, and expense accounts down to zero for the next accounting period. C) close permanent and temporary accounts. D) transfer Revenue, Expenses and Dividends to Retained Earnings.

A) adjust for accrual and deferral transactions.

15. Adjustments ensure that ____ balances are reported at amounts representing the economic resources that remain at the end of the period and will be consumed or used up in future periods. A) asset B) revenue C) liability D) prepaid

A) asset

43. When prepaid expense on the books is consumed, which of the following is credited? A) asset B) liability C) revenue D) expense

A) asset

27. At the end of the year, a deferral adjusting entry could include a: A) debit to an expense and a credit to an asset. B) debit to an asset and a credit to a revenue. C) debit to cash and a credit to Common Stock. D) debit to an expense and a credit to a revenue.

A) debit to an expense and a credit to an asset.

31. Failing to record an adjustment to an expense account at the end of the accounting period violates accrual accounting, specifically the ______ principle. A) expense recognition ("matching") B) revenue recognition C) cost recognition D) asset recognition

A) expense recognition ("matching")

6. Which of the following is not an activity common to the operations of merchandising, manufacturing, and service companies? A) producing and selling a product B) incurring operating expenses C) buying economic resources D) earning revenues

A) producing and selling a product

12. A series of activities that incurs expenses and pays cash to creditors is called: A) the operating cycle. B) the financing cycle. C) the accounting cycle. D) the perpetual cycle.

A) the operating cycle.

80. Under the gross method, purchase and sales discounts are recorded: A) when the cash is paid or received. B) as an increase to the purchase or sales price. C) at the time of initial purchase or sale. D) as an increase to Cost of Goods Sold or to Inventory.

A) when the cash is paid or received.

70. Orange Inc. purchased a one-year insurance policy for $18,000 on December 1, 2019. On Dec 31, 2019, what should Orange report as the amount of insurance expense on the Income Statement? A) $18,000 B) $1,500 C) $16,500 D) $0

B) $1,500

9. As of December 31, 2018, Tiger Corporation's Retained Earnings was $150,000. During 2019, the company incurred expenses of $60,000, declared dividends of $5,000, and reported December 31, 2019 Retained Earnings of $250,000. Based on this information, Tiger Corporation's 2019 revenues must have been: A) $215,000 B) $165,000 C) $100,000 D) $105,000

B) $165,000

36. Henry Corp. had outstanding checks totaling $549 on its June bank reconciliation and outstanding checks totaling $1,764 on its July bank reconciliation. In July, Henry issued checks totaling $3,980. The July bank statement shows that how much in checks cleared the bank in July? A) $1,764. B) $2,765. C) $1,215. D) $549.

B) $2,765.

77. Ogel Company started the year with beginning inventory of $1,800, purchased $4,000 of inventory during the year, had sales of $7,000, and ended the year with $1,600 in inventory on hand. What should the gross profit be on Ogel Company's end of the year income statement? A) $4,200 B) $2,800 C) $1,200 D) $5,400

B) $2,800

22. On Friday September 30, Clem Inc. calculated an unadjusted profit of $5,000 for the month of Sept. What will Clem's net income be based on the following information: Clem's employees earned $1,000 wages that have not yet been paid and services of $2,500 were completed in September but have not yet been billed. A) $7,500 B) $6,500 C) $5,000 D) $4,000

B) $6,500

21. If a cashier rang up sales totaling $450, but had $445 to deposit, which journal entry would be recorded? A) A debit to Sales for $450, a debit to Cash Overage for $5, and a credit to Cash for $445. B) A debit to Cash for $445, a debit to Cash Shortage for $5, and a credit to Sales Revenue for $450. C) A debit to Cash for $450, a credit to Cash Shortage for $5, and a credit to Sales Revenue for $445. D) A debit to Cash for $445, a debit to Accounts Receivable for $5, and a credit to Sales Revenue for $450.

B) A debit to Cash for $445, a debit to Cash Shortage for $5, and a credit to Sales Revenue for $450.

67. CL Builders purchased goods on credit costing $17,000 with terms of 3/10 n/30. Payment is made to the seller 7 days after the purchase. How would the payment be recorded? A) Debit Inventory for $510, debit Cash for $16,490, and credit Accounts Payable for $17,000. B) Debit Accounts Payable for $17,000, credit Cash for $16,490, and credit Inventory for $510. C) Debit Accounts Payable for $17,000 credit Cash for $16,490, and credit Cost of Goods Sold for $510. D) Debit Accounts Payable and credit Cash for $17,000.

B) Debit Accounts Payable for $17,000, credit Cash for $16,490, and credit Inventory for $510.

64. A and E Co. issued a Note Receivable on October 1, 2019 that will pay $450 interest on December 31, 2019. Which of the following adjusting entries would be made on October 31? A) Debit Interest Receivable and credit Interest Revenue for $450. B) Debit Interest Receivable and credit Interest Revenue for $150. C) Debit Interest Revenue and credit Interest Receivable for $150. D) No entry will be made until December 31, 2019.

B) Debit Interest Receivable and credit Interest Revenue for $150.

47. Emery Enterprises declared and paid a dividend of $800 this year. The entry to close the Dividend account at the end of the year will include a debit to: A) Dividends and a credit to Cash for $800. B) Retained Earnings and a credit to Dividends for $800. C) Dividends and a credit to Retained Earnings for $800. D) Dividends and a credit to Dividends Payable for $800.

B) Retained Earnings and a credit to Dividends for $800.

59. The Office Supplies account had a balance of $400 at the end of November. Based on a year-end count, $250 of supplies are on hand at Dec. 31. The company made an adjusting entry to record December Supplies Expense of $1,750. Based on this information, which of the following statements is TRUE? A) $1,600 of supplies was used during December. B) Supplies has a $250 debit balance on the Dec. 31 adjusted trial balance. C) Supplies was credited for $250 in December. D) Supplies expense was debited for $1,600 in December.

B) Supplies has a $250 debit balance on the Dec. 31 adjusted trial balance.

51. The balance of which of the following accounts appear in the credit column of an adjusted trial balance? A) Supplies B) Wages Payable C) Prepaid Rent D) Depreciation Expense

B) Wages Payable

4. Which of the following statements about adjusting journal entries (adjustments) is NOT FALSE? A) Adjusting entries ensure that the financial results adequately reflect all financing and investing activities. B) Without adjustments, the financial statements present an incomplete and misleading picture of the company. C) Adjustments help the company to maximize its net income for the period. D) Adjustments help the financial statements present the cash-basis accounting results for the company at the end of the period.

B) Without adjustments, the financial statements present an incomplete and misleading picture of the company.

18. Which one of the following statements is TRUE? A) accrual adjustments only affect income statement accounts and deferral adjustments only affect balance sheet accounts. B) accrual adjustments increase a balance sheet account and deferral adjustments decrease a balance sheet account. C) deferral adjustments are made under the cash basis of accounting and accrual adjustments are made under the accrual basis of accounting. D) accrual adjusting entries increase one account and decrease the other account and deferral adjusting entries increase both accounts.

B) accrual adjustments increase a balance sheet account and deferral adjustments decrease a balance sheet account.

42. LBP, Inc. pays its workforce on Fridays for a five-day workweek ending on that day. The payroll for an entire week is $30,000. If the accounting year-end falls on a Wednesday, the adjusting journal entry to record this will include a: A) debit to Salaries and Wages Expense and a credit to Cash for $18,000. B) debit to Salaries and Wages Expense and a credit to Salaries and Wages Payable for $18,000. C) debit to Salaries and Wages Payable and a credit to Salaries and Expense of $18,000. D) debit to Salaries and Wages Payable and a credit to Cash of $18,000.

B) debit to Salaries and Wages Expense and a credit to Salaries and Wages Payable for $18,000.

29. At the end of the year, a deferral adjusting entry could include a: A) debit to a revenue and a credit to an asset. B) debit to a liability and a credit to a revenue. C) debit to an asset and a credit to Common Stock. D) debit to an expense and a credit to cash.

B) debit to a liability and a credit to a revenue.

26. At the end of the year, an accrual adjusting entry could include a: A) debit to an expense and a credit to an asset. B) debit to an asset and a credit to a revenue. C) debit to cash and a credit to Common Stock. D) debit to an expense and a credit to a revenue.

B) debit to an asset and a credit to a revenue.

34. The adjusting entry to record a revenue earned that previously had been received in advance will: A) increase liabilities and increase revenues B) decrease liabilities and increase revenues C) increase liabilities and increase revenues D) decrease liabilities and decrease revenues

B) decrease liabilities and increase revenues

63. The journal entry to record the replenishment of the petty cash fund may involve debiting ______ and crediting________. A) Petty Cash; Petty Cash Expense B) expense accounts; Cash C) Petty Cash; Cash D) Petty Cash Expense; expense accounts

B) expense accounts; Cash

72. Assume that a company uses a perpetual inventory system and records the return of inventory previously sold on account with a debit to Cost of Goods Sold and a credit to Inventory. This entry is: A) incorrect and will cause assets to be overstated. B) incorrect and will cause assets to be understated. C) incorrect and will cause liabilities to be overstated. D) correct.

B) incorrect and will cause assets to be understated.

5. Which of the following is an activity common to the operations of merchandising, manufacturing, and service companies? A) producing the product B) incurring operating expenses C) buying goods or raw materials D) selling a physical product

B) incurring operating expenses

14. Adjustments ensure that ____ balances are reported at amounts representing the obligations that remain at the end of the period and will be earned in future periods. A) asset B) liability C) revenue D) prepaid

B) liability

46. When deferred revenue on the books is earned, which of the following is debited? A) asset B) liability C) revenue D) expense

B) liability

32. The objectives of a company's system of internal control include which of the following: A) protecting assets by eliminating the risk of fraud. B) producing reliable and timely accounting information for use by people internal and external to the organization. C) reducing the need for timely accounting information for use by people external to the organization. D) identifying ways to circumvent applicable laws and regulations.

B) producing reliable and timely accounting information for use by people internal and external to the organization.

30. Failing to record an adjustment to a revenue account at the end of the accounting period violates accrual accounting, specifically the ______ principle. A) expense recognition ("matching") B) revenue recognition C) cost recognition D) liability recognition

B) revenue recognition

23. Which of the following statements about inventory is TRUE? A. Inventory is reported on the income statement at the merchandiser's total cost of acquiring the goods. B. Cost of Goods Sold is reported on the income statement as the cost of inventory that a merchandiser sold during the current accounting period. C. Inventory is a non-current asset. D. Once inventory is sold, it is reported as a "selling, general, and administrative expense" on the multi-step income statement.

B. Cost of Goods Sold is reported on the income statement as the cost of inventory that a merchandiser sold during the current accounting period.

48. As of December 30, XYZ's bank statement shows an ending balance of $5,930 and their books have an ending cash balance of $5,500. XYZ's bank reconciliation contains: outstanding checks of $618, $160 for an EFT in payment of a customer's account, a customer's returned NSF check for $16, deposits in transit of $344, a bank service charge of $8, and a check written by XYZ that was properly processed by the bank for $2,510 but recorded in XYZ's books as $2,530. Given this information what should be the cash balance on the December 30 balance sheet? A) $ 6,205 B) $ 5,615 C) $ 5,656 D) $ 5,636

C) $ 5,656

69. Orange Inc. purchased a one-year insurance policy for $18,000 on October 1, 2019. On Dec 31, 2019, what should Orange report as the balance for insurance on the Balance Sheet? A) $18,000 B) $4,500 C) $13,500 D) $0

C) $13,500

73. On Friday September 30, Van Inc. calculated an unadjusted profit of $2,000 for the month of Sept. What will Van's net income be based on the following information: Van's employees earned $400 wages that have not yet been paid and services of $1,000 were completed in September but have not yet been billed. A) $3,000 B) $2,000 C) $2,600 D) $1,600

C) $2,600

20. If a cashier rang up sales totaling $420, but had $435 to deposit, which journal entry would be recorded? A) A debit to Sales for $420, a debit to Cash Overage for $15, and a credit to Cash for $435. B) A debit to Cash for $420 and a credit to Sales Revenue for $420. C) A debit to Cash for $435, a credit to Cash Overage for $15, and a credit to Sales Revenue for $420. D) A debit to Cash for $435, a credit to Accounts Receivable for $15, and a credit to Sales Revenue for $420.

C) A debit to Cash for $435, a credit to Cash Overage for $15, and a credit to Sales Revenue for $420.

3. Which of the following statements about adjusting journal entries (adjustments) is FALSE? A) Adjusting entries ensure that the financial results reflect resources earned and consumed. B) Without adjustments, the financial statements present an incomplete and misleading picture of the company. C) Adjustments help the financial statements present the best picture of whether all the company's cash flows were recorded for the period. D) Adjustments help the financial statements present the economic resources that the company owns and owes at the end of the period.

C) Adjustments help the financial statements present the best picture of whether all the company's cash flows were recorded for the period.

75. Which of the following statements about the perpetual inventory method of tracking inventory is TRUE: A) The perpetual inventory system is less complex and informative than the periodic system. B) The perpetual system tells what inventory a company should have only at certain points in time. C) It is easier to detect shrinkage in a perpetual inventory system than in a periodic inventory system. D) Companies using a perpetual inventory system never need to complete inventory counts.

C) It is easier to detect shrinkage in a perpetual inventory system than in a periodic inventory system.

50. The balance of which of the following accounts appear in the debit column of an adjusted trial balance? A) Deferred Revenue B) Salaries Payable C) Prepaid Insurance D) Accumulated Depreciation

C) Prepaid Insurance

60. The Office Supplies account had a balance of $1,000 at the end of November. $4,000 of supplies was purchased during December. Based on a year-end count, $2,750 of supplies are on hand at Dec. 31. Based on this information, which of the following statements is TRUE? A) The company made an adjusting entry to record December Supplies Expense of $4,000. B) Supplies has a $2,750 credit balance on the Dec. 31 adjusted trial balance. C) Supplies expense was debited for $2,250 in December. D) Supplies was debited for $2,750 in December.

C) Supplies expense was debited for $2,250 in December.

57. The Office Supplies account had a balance of $400 at the end of November. Based on a year-end count, $250 of supplies are on hand at Dec. 31. The company made an adjusting entry to record December Supplies Expense of $1,750. Based on this information, which of the following statements is FALSE? A) $1,600 of supplies was purchased during December. B) Supplies has a $250 debit balance on the Dec. 31 adjusted trial balance. C) Supplies was debited for $250 in December. D) Supplies expense was debited for $1,750 in December.

C) Supplies was debited for $250 in December.

38. How many of the following statements about a trial balance are TRUE? A. The temporary accounts will have zero balances in a post-closing trial balance. B. The values of all the accounts reported on the balance sheet can be taken directly from the adjusted trial balance. C. Accounts are listed on an unadjusted trial balance in the following order: assets, liabilities, stockholders' equity, dividends, revenues and expenses. D. An unadjusted trial balance is completed to check that debits still equal credits after the income statement is prepared. A) Zero B) One C) Two D) Three E) Four

C) Two

17. One major similarity between deferral and accrual adjustments is that: A) accrual and deferral adjustments only affect income statement accounts. B) accrual and deferral adjustments always increase net income. C) accrual and deferral adjustments increase an income statement account. D) accrual and deferral adjusting entries increase one account and decrease another account.

C) accrual and deferral adjustments increase an income statement account.

65. Which of the following statements concerning electronic funds transfers (EFT) is TRUE? A) businesses sometimes receive payments from creditors via EFT. B) because EFTs are deposited directly into a company's bank account, they require no internal control procedures. C) an EFT occurs when customers electronically transfer funds from their bank account to a company's bank account. D) to process an EFT, a journal entry is made to debit Office Expense and credit Accounts Receivable.

C) an EFT occurs when customers electronically transfer funds from their bank account to a company's bank account.

79. Under the net method, purchase and sales discounts are recorded: A) when the cash is paid or received. B) as an increase to the purchase or sales price. C) at the time of initial purchase or sale. D) as an increase to Cost of Goods Sold or to Inventory.

C) at the time of initial purchase or sale.

28. At the end of the year, an accrual adjusting entry could include a: A) debit to an expense and a credit to an asset. B) debit to cash and a credit to a revenue. C) debit to expense and a credit to a liability. D) debit to an expense and a credit to a revenue.

C) debit to expense and a credit to a liability

35. The adjusting entry to record an expense incurred that previously had been paid in advance will: A) increase assets and increase expenses B) increase assets and decrease expenses C) decrease assets and increase expenses D) decrease assets and decrease expenses

C) decrease assets and increase expenses

44. When deferred revenue on the books is earned, which of the following is credited? A) asset B) liability C) revenue D) expense

C) revenue

13. A series of activities that generates revenues and collects cash from customers is called: A) the accounting cycle. B) the financing cycle. C) the operating cycle. D) the perpetual cycle.

C) the operating cycle.

49. As of December 30, XYZ's bank statement shows an ending balance of $5,930 and their books have an ending cash balance of $5,500. XYZ's bank reconciliation contains: outstanding checks of $618, $160 for an EFT in payment of a customer's account, a customer's returned NSF check for $16, deposits in transit of $344, a bank service charge of $8, and a check written by XYZ that was improperly processed by the bank for $2,510 but properly recorded in XYZ's books as $2,530. Given this information what should be the cash balance on the December 30 balance sheet? A) $ 6,205 B) $ 5,615 C) $ 5,656 D) $ 5,636

D) $ 5,636

40. Which of the following statements about the multistep income statement is TRUE? A) Income from Operations and Net Income are the same thing. B) Any revenues and/expenses from activities other than the company's main business are peripheral results and are included in Income from Operations. C) Multistep income statements are required when the perpetual inventory method is used. D) A key measure available on a multistep income statement is the amount of profit earned over the cost of goods sold.

D) A key measure available on a multistep income statement is the amount of profit earned over the cost of goods sold.

1. Which of the following statements about adjusting journal entries (adjustments) is TRUE? A) Adjusting entries ensure that the financial results reflect management's objectives for operating performance. B) Without adjustments, the financial statements present an incorrect balance for the cash account. C) Adjustments help the balance sheet present the best picture of profitability for the period. D) Adjustments help the financial statements present the economic resources that the company owns and owes at the end of the period.

D) Adjustments help the financial statements present the economic resources that the company owns and owes at the end of the period.

74. Which of the following statements about the perpetual inventory method of tracking inventory is FALSE: A) The perpetual inventory system is more complex than the periodic system. B) The perpetual system tells what inventory a company should have at any point in time. C) It is easier to detect shrinkage in a perpetual inventory system than in a periodic inventory system. D) Companies using a perpetual inventory system never need to complete inventory counts.

D) Companies using a perpetual inventory system never need to complete inventory counts.

41. Which of the following statements about the multistep income statement is FALSE? A) A key measure available on a multistep income statement is the amount of profit earned over the cost of goods sold. B) Income from Operations and Net Income are not the same thing. C) Any revenues and/expenses from activities other than the company's main business are peripheral results and are included after Income from Operations. D) Multistep income statements are required when the perpetual inventory method is used.

D) Multistep income statements are required when the perpetual inventory method is used.

78. How do Sales Returns and Allowances and Sales Discounts impact Gross Sales in order to calculate Net Sales? A) Sales Returns and Allowances and Sales Discounts are added to Gross Sales to calculate Net Sales. B) Sales Returns and Allowances are deducted from Gross Sales and Sales Discounts are added to Gross Sales to calculate Net Sales. C) Sales Returns and Allowances are added to Gross Sales and Sales Discounts are deducted from Gross Sales to calculate Net Sales. D) Sales Returns and Allowances and Sales Discounts are deducted from Gross Sales to calculate Net Sales.

D) Sales Returns and Allowances and Sales Discounts are deducted from Gross Sales to calculate Net Sales.

11. A small company would have the most difficulty in implementing which of the following internal control principles? A) Documenting procedures. B) Restricting access to cash or information. C) Establishing responsibilities. D) Segregating duties.

D) Segregating duties.

58. The Office Supplies account had a balance of $1,000 at the end of November. $4,000 of supplies was purchased during December. Based on a year-end count, $2,750 of supplies are on hand at Dec. 31. Based on this information, which of the following statements is FALSE? A) The company made an adjusting entry to record December Supplies Expense of $2,250. B) Supplies has a $2,750 debit balance on the Dec. 31 adjusted trial balance. C) Supplies expense was debited for $2,250 in December. D) Supplies was debited for $2,750 in December.

D) Supplies was debited for $2,750 in December.

39. How many of the following statements about a trial balance are TRUE? A. The temporary accounts will have zero balances in a post-closing trial balance. B. The values of all the accounts reported on the income statement can be taken directly from the adjusted trial balance. C. Accounts are listed on an unadjusted trial balance in the following order: assets, liabilities, stockholders' equity, dividends, revenues and expenses. D. An adjusted trial balance is completed to check that debits still equal credits after the balance sheet is prepared. A) Zero B) One C) Two D) Three E) Four

D) Three

55. How many of the statements below concerning bank reconciliations are FALSE? · Journal entries need to be made for all reconciling items. · They are external reports prepared to report the cash balance to investors and creditors. · A difference between the cash balance per the books and the bank statement balance indicates an error or fraud. · They are internal reports prepared to verify the accuracy of the bank statement and the cash account on the books. A) Zero B) One C) Two D) Three E) Four

D) Three

7. When existing assets are used up in the ordinary course of business: A) an accrual is recorded. B) nothing is recorded on the financial statements until they are completely used up. C) a prepaid expense is recorded, and the corresponding liability account is decreased. D) an expense is recorded, and the corresponding asset is decreased.

D) an expense is recorded, and the corresponding asset is decreased.

56. How many of the statements below concerning bank reconciliations are FALSE? · Journal entries need to be made for all reconciling items. · They are external reports prepared to report the cash balance to investors and creditors. · A difference between the cash balance per the books and the bank statement balance indicates an error or fraud. · They are internal reports prepared to guarantee that the cash balance is not affected by fraud. A) Zero B) One C) Two D) Three E) Four

E) Four

66. Which of the following statements concerning electronic funds transfers (EFT) is FALSE? A) businesses sometimes receive payments from customers via EFT. B) an EFT occurs when customers electronically transfer funds from their bank account to a company's bank account. C) to process an EFT, a journal entry is made to debit Cash and credit Accounts Receivable. D) because EFTs are deposited directly into a company's bank account, they require additional internal control procedures.

D) because EFTs are deposited directly into a company's bank account, they require additional internal control procedures.

71. Assume that a company uses a perpetual inventory system and records the return of inventory previously purchased on account with a debit to Accounts Payable and a credit to Inventory. This entry is: A) incorrect and will cause assets to be overstated. B) incorrect and will cause assets to be understated. C) incorrect and will cause liabilities to be overstated. D) correct.

D) correct.

16. One major difference between deferral and accrual adjustments is that: A) accrual adjustments only affect income statement accounts and deferral adjustments only affect balance sheet accounts. B) deferral adjustments increase net income and accrual adjustments decrease net income. C) deferral adjustments are made under the cash basis of accounting and accrual adjustments are made under the accrual basis of accounting. D) deferral adjusting entries increase one account and decrease the other account and accrual adjusting entries increase both accounts.

D) deferral adjusting entries increase one account and decrease the other account and accrual adjusting entries increase both accounts.

62. Which of the following is not an example of internal control? A) using a "Duo" password process to access company computer systems B) performing regular bank reconciliations C) using prenumbered checks and purchase order forms D) duplication of responsibilities E) all of the above are internal controls

D) duplication of responsibilities

45. When prepaid expense on the books is consumed, which of the following is debited? A) asset B) liability C) revenue D) expense

D) expense

33. The objectives of a company's system of internal control include all of the following except: A) completing work efficiently and effectively and protecting assets by reducing the risk of fraud. B) producing reliable and timely accounting information for use by people internal and external to the organization. C) producing reliable and timely accounting information for use by people external to the organization. D) identifying ways to circumvent applicable laws and regulations.

D) identifying ways to circumvent applicable laws and regulations.

52. Closing journal entries: A) adjust for accrual and deferral transactions. B) bring the balances in all equity, liability, revenue, and expense accounts down to zero for the next accounting period. C) close permanent and temporary accounts. D) transfer Revenue, Expenses and Dividends to Retained Earnings.

D) transfer Revenue, Expenses and Dividends to Retained Earnings.

61. Which of the following is an example of internal control? A) performing regular bank reconciliations B) using a "Duo" password process to access company computer systems C) segregation of responsibilities D) using prenumbered checks and purchase order forms. E) all of the above are internal controls

E) all of the above are internal controls

24. Which of the following statements about inventory is FALSE? a. Inventory is reported on the balance sheet at the merchandiser's total cost of acquiring the goods that it has not yet sold. b. Cost of Goods Sold is reported on the income statement as the cost of inventory that a merchandiser sold during the current accounting period. c. Inventory is a current asset. d. Once inventory is sold, it is reported as a "selling, general, and administrative expense" on the multi-step income statement.

d. Once inventory is sold, it is reported as a "selling, general, and administrative expense" on the multi-step income statement.

25. Which of the following statements about inventory is TRUE? a. Inventory is reported on the income statement at the merchandiser's total cost of acquiring the goods. b. Cost of Goods Sold is reported on the income statement as the cost of inventory that a merchandiser sold during the current accounting period. c. Inventory is a current asset. d. Once inventory is sold, it is reported as a "selling, general, and administrative expense" on the multi-step income statement. e. Both b and c are true.

e. Both b and c are true.