Accounting Test 2 ch.4-6

d

1. If a company's ending inventory count was $50,000, cost of goods sold was $27,000, and purchases were $56,000, its beginning inventory must have been: a. $33,000 b. $133,000 c. $79,000 d. $21,000

b

10. When it paid its rent in advance, a company correctly debited Prepaid Rent. As of the end of the accounting year, the prepayment had expired. If no adjustment is made to record this expiration, which of the following will occur? a. Assets will be understated and expenses will be overstated. b. Assets will be overstated and expenses will be understated. c. Liabilities will be overstated and expenses will be understated. d. Liabilities will be understated and expenses will be overstated.

d

11. Which of the following errors at the end of an accounting period causes net income to be understated? a. Employee wages that have been earned but not paid are not recorded. b. Depreciation expense is not recorded. c. Collection of an account receivable is not recorded d. Revenue that has been earned but not yet collected has not been recorded.

b

12. On the balance sheet, accumulated depreciation is a. Added to property and equipment b. Subtracted from property and equipment c. Added to liabilities d. Subtracted from liabilities

c

13. Bunnies R Us buys an automatic bunny feeder on Jan. 1, 2014. The bunny feeder cost $20,000 and is being depreciated over 10 years, so depreciation expense is $2,000 per year. What will the journal entry be that Bunnies R Us makes on Dec. 31, 2017? a. Debit to depreciation expense and credit to accumulated depreciation of $8,000. b. Debit to depreciation expense and credit to accumulated depreciation of $6,000. c. Debit to depreciation expense and credit to accumulated depreciation of $2,000. d. Debit to depreciation expense and credit to accumulated depreciation of πr2, where r is the radius of the bunny feeder.

b

15. If a publicly traded company is trying to appear more attractive to investors, it is most likely to understate which of the following on its balance sheet? a. Assets b. Liabilities c. Revenues d. Shareholders' Equity

b

2. A company starts the period with 100 computers in inventory, purchases 30 more, returns 4 of them to suppliers, and has 83 in inventory at the end of the period. If there is no shrinkage, how many computers were sold? a. 47 b. 43 c. 17 d. 83

d

3. Which of the following statements regarding inventory counts is not correct? a. Companies need to perform a physical count of their inventory at least yearly regardless of which inventory system is being used. b. A perpetual inventory system does not require a physical count during the accounting period to determine cost of goods sold. c. In a perpetual inventory system, the inventory count is compared to the inventory account balance to reveal shrinkage. d. If a company uses a perpetual inventory system and the inventory count at the end of the accounting period is greater than the balance in the inventory ledger account, there must have been shrinkage.

d

4. On April 6, Lopez Co. purchased $5,000 of inventory, terms 1/15, n/30. Lopez Co. uses a perpetual inventory system. The company paid for the purchase on April 26. The entry to record the payment on April 26 includes which of the following? a. A credit to Inventory for $50 b. A debit to Accounts Payable for $4,900 c. A credit to Accounts Payable for $5,000 d. A credit to Cash for $5,000

b

5. A company purchases inventory for $10,000 with terms 2/10, n/30. It then returns $2,000 of the inventory purchased to the supplier and also receives an allowance for defective inventory of $100. The company pays the amount due within the discount period. What is the amount of the discount that will be taken? a. $200 b. $158 c. $160 d. $198

b

6. At the end of the accounting period, a. All accounts are closed. b. Temporary accounts are closed; permanent accounts are not. c. Permanent accounts are closed; temporary accounts are not. d. Wild parties are held, usually with tragic consequences.

a

7. Assume that no dividends were declared during the current year. Which of the following statements about the effect of a net loss on the closing process is correct? a. Ending retained earnings will be less than beginning retained earnings. b. Common stock will be debited as part of the closing entries if a company has a net loss. c. The closing entry will include debits to all revenue accounts, credits to all expense accounts, and a credit to retained earnings. d. The amount of revenues to be closed will be greater than the amount of expenses to be closed in the current period.

b

8. If an expense has been incurred but will be paid later, then a. Nothing is recorded on the financial statements b. A liability account is created or increased, and an expense is recognized c. An asset account is decreased or eliminated, and an expense is recognized d. Both a revenue and an expense account are adjusted.

d

9. What account always appears as part of any journal entry that is made as a result of a bank reconciliation? a. Interest expense b. Bank service charges c. Accounts receivable d. Cash

salary expense salary payable

Adjusting entries Alfred the butler earns 5000 for a 5-day work week monday to friday. December 31, falls on a tuesday

d

Adjusting entries affect: a. only balance sheet accounts. b. only income statement accounts. c. only statement of cash flow accounts. d. both income statement and balance sheet accounts.

b

At the end of the month, the adjusting journal entry to record the use of supplies would include a debit to: a. Supplies and a credit to Supplies Expense. b. Supplies Expense and a credit to Supplies. c. Supplies and a credit to Service Revenue. d. Supplies and a credit to Cash.

b

Boron Company has sales of $60,000, beginning inventory of $7,000, purchases of $35,000, and ending inventory of $5,000. The cost of goods sold is: a. $42,000 b. $37,000 c. $23,000 d. $33,000

c

Cost of goods sold reports the: a. cost of merchandise available to sell b. cost of merchandise purchased c. cost times the quantity of goods sold d. selling price times the quantity of goods sold

Sales - COGS

Gross Profit equation

d

If a company's ending inventory count was $50,000, cost of goods sold was $27,000, and purchases were $56,000, its beginning inventory must have been: a. $33,000. b. $133,000. c. $79,000. d. $21,000.

b

If an expense has been incurred but will be paid later, then: a. nothing is recorded on the financial statements. b. a liability account is created or increased and an expense is recorded. c. an asset account is decreased or eliminated and an expense is recorded. d. a revenue and an expense are accrued.

d

In a retail business that uses a perpetual inventory system, scanning a bar code does not: a. calculate the amount owed by the customer. b. identify the item sold to be removed from the Inventory account. c. identify the item sold to be recorded in the Cost of Goods Sold account. d. calculate the gross profit.

a

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they: a. ensure that revenues and expenses are recognized during the period they are earned and incurred. b. ensure that all estimates of future activities are eliminated from consideration. c. ensure that revenues and expenses are recognized conservatively during the period in which they are paid. d. provide an opportunity to manipulate the numbers to the best advantage of the reporting company.

inventory accounts payable

Purchase journal entry order of t-shirts received 100 tshirts for 20 what is debited what is credited

d

Sales Revenue reports the: a. cost of merchandise available to sell b. cost of merchandise purchased c. cost times the quantity of goods sold d. selling price times the quantity of goods sold

a

The Tuck Shop began the current month with inventory costing $10,000, then purchased inventory at a cost of $35,000. The perpetual inventory system indicates that inventory costing $30,000 was sold during the month for $40,000. If an inventory count shows that inventory costing $14,500 is actually on hand at month-end, what amount of shrinkage occurred during the month? a. $500 b. $5,000 c. $14,495 d. $15,000

a

When existing assets are used up in the ordinary course of business: a. an expense is recorded. b. unearned revenue is recorded. c. an accrual is recorded. d. a prepaid expense is recorded.

d

Your company purchases $50,000 of inventory from a wholesaler who allows you 45 days to pay. In addition, the wholesaler offers a 3% discount if payment is made within 12 days. These payment terms would be expressed as: a. 0.03/12, n/45. b. n/45, 3/12. c. n/45, 0.03/12. d. 3/12, n/45.

purchase discount

_ _ - a cash discount received for prompt payment of a purchase on account

deductions company's books

_ _ _ NSF check bank service charges error in recording check

goods available for sale

_ _ _ _ the sum of beginning inventory and purchases for the period

purchase returns and allowances

_ _ _ _ - a reduction int he cost of inventory purchases associated with unsatisfactory goods

sales returns and allowances

_ _ _ _refunds and price reductions given to customers after goods have been sold and found unsatisfactory

adjusted total balance

_ _ _ a list of all accounts and their adjusted balances which is used to check on the equality of recorded debits and credits

gross profit percentage

_ _ _ a ratio indicating the percentage of profit earned on each dollar of sales after considering the cost of products sold

FOB shipping point

_ _ _ a term of sale indicating that goods are owned by the buyer the moment they leave the seller's premises sale is recorded when the goods leave the seller's shipping department

additions bank statement

_ _ _ deposit in transit

additions company's books

_ _ _ interest from bank EFT from customer

periodic inventory system

_ _ _ inventory records are updated periodically at the end of the accounting period to dtermine how much merchandise has been sold periodic systems require that inventory be physically counted at the end of the period

perpetual inventory system

_ _ _ inventory records are updated perpetually every time inventory is bought sold or returned

deductions bank statement

_ _ _ outstanding checks

multistep income statement

_ _ _ presents important subtotals such as gross profit to help distinguish core operating results from other less significant items

sales discount

_ _ a sales price reduction given to customers for prompt payment of their account balance

deferral adjustments

_ _ an expense or revenue has been deferred if we have postponed reporting it on the income statement until a later period

accrual adjustments

_ _ are needed when a company has earned revenue an expense in the current period but has not yet recorded it because the related cash will not be received or paid until a later period

merchandising company

_ _ sells goods that have been obtained from a supplier

service company

_ _ sells services rather than physical goods

carrying value

_ _ the amount at which an asset or liability is reported in the financial statements

FOB destination

_ _a term of sale indicating that goods are owned by the seller until they are delivered to the buyer the sale is recorded when the goods reach their destination the customer

permanent

_ accounts - carry over to the next year balance sheet accounts that track financial results from year to year by carrying their ending balances into the next year

temporary

_ accounts - income statements accounts and dividends they close accounts that track financial results for a limited period of time by having their balances zeroed out at the end of each accounting year

inventory

_ assets acquired for resale to customers

NSF

_ not sufficient funds checks another name for bouncehd cheks they arise when the check writer does not have sufficient funds to cover the amount on the check are written by the customer to pay the company deduction fro company's books section cash company through it had but doesn't

shrinkage

_ the cost of inventory lost to theft fraud and error

depreciation

_ the process of allocating the cost of buildings vehicles and equipment to the accounting periods in which they are used

post-closing trial balance

_-_ _ _ an internal report prepared to check that debits equal credits and all temporary accounts have been closed

contra-accounts

_-_ an account that is an offset to or reduction of another account

Unearned Revenue sales revenue

a client paid 10,000 in advance for services to be rendered later, which was recorded as unearned revenue. of this amount, 30% was eraned as of 12/31

insurance expense prepaid insurance

a one year insurance policy on the bat cave was purchased for 12,000 on dec. 1 it was recorded correctly as prepaid insurance at that time

total liabilities

accounts payable unearned revenue salaries and wages payable accounts receivable note payable

Supplies Expense Supplies subtract

adjusting entries the bat supplies account balance of 14,000 a count revealed it had 9,400 to find the supplies expense _ what is debited what is credited

C D

bank statement or company's books addition or deduction or no impact A check deposited by your company bounces.

C D

bank statement or company's books addition or deduction or no impact The bank charges your company $6 in service fees.

C A

bank statement or company's books addition or deduction or no impact The bank pays you interest on your account.

C D

bank statement or company's books addition or deduction or no impact Your company failed to record a check that it had written.

B A

bank statement or company's books addition or deduction or no impact Your company has a deposit in transit.

B D

bank statement or company's books addition or deduction or no impact Your company has written one check that has not cleared the bank.

N N

bank statement or company's books addition or deduction or no impact Your company makes three deposits that have been recorded by the bank

N N

bank statement or company's books addition or deduction or no impact Your company writes six checks that clear the bank.

unearned revenue rent revenue

batman received 1500 for 6 months rent on unused cave space the company correctly credited unearned revenue for the 1500 on 10/1/

total assets

cash prepaid insurance supplies equipment account receivable accumulated depreciation - equipment

adjustments

entires made at the end of every accounting period to report revenues and expenses in the proper period and assets and liabilities at appropriate amounts

BI + P - EI

formula for COGS

BRE + NI - DIV

formula for ending retained earnings ____

net sales - COGS/net sales x 100

gross profit percentage equation

gross profit - selling and and general expenses

income from operations equation

bank reconciliation

involves comparing the company's records to the banks statements of account to determine whether they agree company's records can differ from banks because they record things the other doesn't know about

cash

journal entries with bank reconciliations always increase or decrease _

revenue-expense

net income = _ -_

gross profit

net sales minus cost of goods sold it is a subtotal not an account

utilities expense utilities payable

on 12/30 batman received a 1450 electric bill for december the bill is due on jan 15

accounts payable inventory

purchase journal entry 20 of the 100 golf shirts are returned 20x20 what is debited what is credited

accounts payable, inventory cash

purchase journal entry the company paid for the golf shirts what is debited what is credited

accounts payable inventory

purchase journal entry the remaining golf shirts were defective so there was a $100 allowance what is debited what is credited

balance

purchase transactions only affect _ sheet accounts

bank reconcillation

purpose - come up with true balance of bank account what gets added and subtracted

accounts receivable sales revenue

sales journal entry During the first week of October, BSS received student and faculty orders for 80 golf shirts, at a unit price of $37.50, on terms 2/10, n/30. what is debited? what is credited?

sales return and allowances accounts receivable

sales journal entry On October 21, one-half of the golf shirts were returned. what is debited what is credited

inventory cost of goods sold

sales journal entry On October 22, the remaining 40 customers were granted the allowance on account what is debited what is credited

sales returns and allowances accounts receivable

sales journal entry On October 22, the remaining 40 customers were granted the allowance on account what is debited what is credited

cash sales discount, accounts receivable

sales journal entry The customers paid their remaining balances during the week of October 25. what is debited what is credited

cost of goods sold inventory

sales journal entry the golf shirts were delivered to these customers on October 18. Unfortunately, customers were unhappy with the golf shirts, so BSS permitted them to be returned or gave an allowance of $12.50 per shirt. find the cost of goods sold what is debited what is credited this number is the same as the cash they paid for the purchase discounted - the 20 shirts returned - the 30 for the discount - the 100 for the allowance

balance income

sales transactions affect _ sheet and _ statement

ending inventory perpetual system - ending inventory counted

shrinkage equation

false

t/f Adjusting entries often involve cash.

false

t/f FOB shipping point means that ownership of goods passes to the buyer when the goods reach the buyer.

false

t/f If a company forgot to record depreciation on equipment for a period, Total Assets would be overstated and Total Stockholders' Equity would be understated on the balance sheet.

false

t/f In a perpetual inventory system, only one journal entry is required to record the sale of inventory.

true

t/f Inventory shrinkage is the difference between inventory recorded and inventory counted.

true

t/f The asset, liability, and stockholders' equity accounts are referred to as permanent accounts.

false

t/f The carrying value of an asset is an approximation of the asset's market value.

true

t/f The temporary accounts will have zero balances in a post-closing trial balance.

depreciation expense accumulated depreciation

the batmobile depreciates at a rate of 100,000 per year. The vehicle has been owned all year.