Acct 201-Review Questions

d)assets, liabilities, and stockholders' equity

A balance sheet shows: a)revenues, liabilities, and stockholders' equity b)expenses dividends, and stockholders' equity c)revenues, expenses, and dividends d)assets, liabilities, and stockholders' equity

b)consistency

A company using the same accounting principles from year to year is an application of a)timeliness b)consistency c)full disclosure d)materiality

d)dividends account

A credit is not the normal balance for which account listed below a)common stock b)revenue account c)liability account d)dividends account

b)indicates that the actual bad debt write-offs have exceeded previsions for bad debt

A debit balance in the Allowance for Doubtful Accounts a)is the normal balance for that account b)indicates that the actual bad debt write-offs have exceeded previsions for bad debt c)indicates that actual bad write-offs have been less than what was estimated d)cannot occur if the percentage of sales method of estimating bad debts is used

d)service revenue

A debit is not the normal balance for which account listed below a)dividends b)cash c)accounts receivable d)service revenue

a)a distribution of the company's earnings to its stockholders

A dividend is: a)a distribution of the company's earnings to its stockholders b)equal to liabilities minus stockholders' equity c)equal to assets minus stockholders' equity d)equal to revenues less expenses

a)only permanents account balances

A post-closing trial balance will show a)only permanents account balances b)only temporary account balances c)zero balances for all accounts d)the amount of net income (or loss) for the period

c)general ledger accounts and balances

A trial balance is a listing of: a)transactions in a journal b)the chart of accounts c)general ledger accounts and balances d)the totals form the journal pages

d)a contra asset account

Accumulated depreciation is: a)an expense account b)a stockholders' equity account c)a liability account d)a contra asset account

a)because some cost expire with the passage of time and have not yet been journalized

Adjusting entries are required: a)because some cost expire with the passage of time and have not yet been journalized b)when the company's profits are below the budget c)when the expenses are recorded in the period in which they are incurred d)when revenues are recorded in the period of which the services are performed

b)accrual and deferrals

Adjusting entries can be classified as a)postponements and advances b)accrual and deferrals c)deferrals and postponements d)accruals and advances

c)stockholders' equity will increase

All of the financial statements are for a period of time except the a)income statement b)retained earnings statement c)stockholders' equity will increase d)assets will decrease

d)flexibility

All of the following are characteristics of accounting information excerpt: a)faithful representation b)comparability c)relevance d)flexibility

d)is offset against account receivable

Allowance for Doubtful Accounts on the balance sheet a)is offset against total current assets b)increases the cash realizable value of accounts receivable c)appears under the heading "Other assets." d)is offset against account receivable

b)proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made

An adjusted trail balance a)is prepared after the financial statements are completed b)proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made c)is required financial statements under general accepted accounting principles

c)affects a balance sheet account and an income statement account

An adjusting entry: a)affects two balance sheet accounts b)affects two income statement accounts c)affects a balance sheet account and an income statement account d)is always a compound entry

d)presents the revenue and expenses for a specific period of time

An income statement: a)summarizes the changes in retained earnings for a specific period of time b)reports the changes in assets, liabilities, and stockholders' equity over a period of time c)reports the assets, liabilities, and stockholders' equity at a specific date d)presents the revenue and expenses for a specific period of time

a)does not have physical substance, yet often is very valuable

An intangible asset: a)does not have physical substance, yet often is very valuable b)is worthless because it has not a physical substance c)is converted into a tangible asset during the operating cycle d)cannot be classified on the balance sheet because it lacks physical substance

c)it is likely to influence the decision of an investor or creditor

An item is considered material if a)it doesn't cost a lot of money b)it is a tangible good c)it is likely to influence the decision of an investor or creditor

b. cost of goods available

Beginning inventory plus the cost of goods purchased equals a)cost of goods sold b)cost of goods available c)net purchases d)total goods purchased

a)permanent accounts only

Closing entries are necessary for a)permanent accounts only b)temporary accounts only c)both permanent and temporary accounts d)permanent or real accounts only

a. 30%

Company shows the following balances: Sales Revenue $2,500,000 Sales Returns and Allowance $450,000 Sales Discount $50,000 Cost of Goods Sold $1,400,000 a)30% b)44% c)56% d)70%

c)portion of an asset's cost that expired during the period

Depreciation expense for a period is the a)original cost of an asset less accumulated depreciation b)book value of the assets divided by useful life c)portion of an asset's cost that expired during the period d)market value of the asset divided by useful life

b)dividends

Each of the following accounts is closed to Income Summary except a)expenses b)dividends c)revenues d)all of these are closed to Income Summary

b)accrued expenses

Expenses incurred but not yet paid or recorded are called a)prepaid expenses b)accrued expenses c)interim expenses d)unearned expenses

b) standards that indicate how to report economic events

Generally accepted accounting principles are: a) income tax regulations of the Internal Revenue Service b) standards that indicate how to report economic events c)theories that are based on physical laws of the universe d)principles that have been prove correct by academic researchers

a)$8,100

Glenn company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. That is the net cost of the goods if Glenn Company pays within the discount period? a)$8,100 b)$8,280 c)$8,820 d)$9,000

c)credit to the retained earnings account

If Income Summary has a credit balance after revenues and expenses have been closed into the closing entry for Income Summary will include a a)debit to the retained earnings account b)debit to the dividends account c)credit to the retained earnings account d)credit to the dividends account

b)uses a combination of the perpetual and periodic inventory systems

If a company determines cost of goods sold each time a sale occurs, it a)must have a computer accounting system b)uses a combination of the perpetual and periodic inventory systems c)uses a periodic inventory system d)uses a perpetual inventory system

a)cash realizable value is understand

If a company fails to record estimated bad debt expense a)cash realizable value is understand b)expenses are understand c)revenues are understand d)receivables are understand

d)assets will decrease

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

a. the seller has legal title to the goods until they are delivered

If goods in transit are shipped FOB destination a)the seller has legal title to the goods until they are delivered b)the buyer has legal title to the goods until they are delivered c)the transportation company has legal title to the goods while the goods are in transit d)no one has legal title to the goods until they are delivered

b)LIFO

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? a)FIFO b)LIFO c)average cost d)income tax expense for the period will be the same under all assumptions

a) added to the bank balance

In preparing a bank reconciliation, outstanding checks are a) added to the bank balance b)deducted from the bank balance c)added to the book balance d)deducted from the book balance

c. more liquid than prepaid expense

In terms of liquidity, inventory is a)more liquid than cash b)more liquid than accounts receivable c)more liquid than prepaid expense d)less liquid than store equipment

c)safeguarding assets

Internal controls are concerned with a) only manual systems of accounting b)the extent of government regulations c)safeguarding assets d)preparing income tax returns

c. $57,924

Jake's Market recorded the following events involving a recent purchase of merchandise Received goods for $60,000, terms 2/10, n/30 Returned $1,200 of the shipment for a credit Paid $300 freight on the shipment Pai the invoice within the discount period a)$57,624 b)$57,918 c)$57,924 d)$59,100

b)make a compound entry

On June 1, 2018 Ted Leo buys a copier machine for his business and finances this purchase with cash and a note. When jorunalizing the transaction, he will a)use two journal entries b)make a compound entry c)make a simple entry d)list the credit entries first, which is proper form for this type of transaction

b)with the largest dollar amounts first

On a classified balance sheet, current assets are customarily listed a)in alphabetical order b)with the largest dollar amounts first c)in the order of liquidity d)in the order of acquisition

c)corporation

Owners enjoy limited liability in a: a)proprietorship b)partnership c)corporation d)sole proprietorship

b. buyer

Paden Company purchased merchandise for Emmett company with the freight terms of FOB shipping point. The freight costs will be paid by the: a)seller b)buyer c)transportation company d)buyer and the seller

c. the first to be allocated to cost of goods sold

The LIFO inventory method assumes that the cost of the latest units purchased are a)the last to be allocated to cost of goods sold b)the first to be allocated to ending inventory c)the first to be allocated to cost of goods sold d)not allocated to cost of goods sold or ending inventory

a)the net income or loss on the income statement

The balance in the Income Summary account before it is closed will be equal to a)the net income or loss on the income statement b)the beginning balances in the retained earnings account c)the ending balance in the retained earnings account d)zero

a. debit to sales discount for $120

The collection of a $6,000 account with the 2 percent discount period will result in a a)debit to sales discount for $120 b)debit to account receivables for $5,880 c)credit to Cash for $5,880 d)credit to Account Receivable for $5,880

b)accuracy

The consistent application of an inventory costing method is essential for a)conservatism b)accuracy c)comparability d)efficiency

b)independent internal verification

The controls principle related to not having the same person authorize and pay for the goods is know as a)establishment of responsibility b)independent internal verification c)segregation of duties d)rotation of duties

c. the can duduct a 2% discount if the bill is paid within 10 days of the invoice date

The credit terms offered to a customer by a business firm are 2/10,n/30, which means that a)the customer must pay the bill within 10 days b)the customer can deduct 2% discount if the bill is paid between the 10th and 30th day from the invoice date c)the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date d)two sales returns can be made within 10 days of invoice date and no return thereafter

b)percentage of receivables

The existing balance in Allowance for Doubtful Accounts is considered in computing bad debt expense in the a)direct write-off method b)percentage of receivables c)percentage of receivables basis and direct write-off method d)none of these choices are correct

b)cost

The historical cost principles requires that when assets acquired, they be recorded at: a)appraisal cost b)cost c)market price d)book value

d)is a temporary account

The income summary account a)is a permanent account b)appears in the balance sheet c)appears on the income statement d)is a temporary account

a)$60

The interest on a $6,000, 6%, 60-day note receivable is a)$60 b)$120 c)$180 d)$360

c. payment of the freight on the goods sold

The inventory account is used in each of the following except the entry to record: a)goods purchased on account b)the return of goods purchased c)payment of freight on the goods sold d)payment within the discount period

d)financial statement order

The ledger should be arranged in a)alphabetical order b)chronological order c)dollar amount order d)financial statement order

c)conservatism

The lower-of-cost-or -net realizable value basis of valuing inventories is an example of a)comparability b)the historical cost principle c)conservatism d)consistency

c)$71,400

The maturity value of a $70,000, 8%, 3-month note receivable is a)$70,467 b)$70,560 c)$71,400 d)$75,600

a)cash realizable value

The net amount expected to be received in cash from receivables is termed the a)cash realizable value b)cash-good value c)gross cash value d)cash-equivalent value

c)accounts receivable

The receivable that is usually evidenced by a formal instrument of credit is a(n) a)trade receivable b)note receivable c)accounts receivable d)income tax receivable

d. contra revenue account

The sales returns and allowances account is classified as a(n) a)asset account b)contra asset account c)expense account d)contra revenue account

b) Identifying economic events

The starting point of the accounting process is: a)communicating information to users b)identifying economic events c)recording economic events d)none of these answers are correct

b)relevance and faithful representation

The two fundamental qualities of useful information are a)verifiability and timeliness b)relevance and faithful representation c)comparability and flexibility d)understandability and consistency

c)maker and the payee

The two key parties to a promissory note are the a)maker and a bank b)debtor and the payee c)maker and the payee d)sender and the receiver

d)chronological order

Transactions in a journal are recorded in a)account number order b)dollar amount order c)alphabetical order d)chronological order

b)affects both balance sheet and income statements accounts

Under the allowance method, writing off an uncollectible account a)affects only balance sheet accounts b)affects both balance sheet and income statements accounts c)affects only income statement accounts d)is not acceptable practice

b)accounts receivable should be credited

When an account becomes uncollectible and must be written off, a)allowance for doubtful should be credited b)accounts receivable should be credited c)bad debt expense should be credited d)sales revenue should be debited

c)management estimates the amount of uncollectible

When the allowance method is use to account for uncollectible accounts, Bad Debt Expennse is debited when a)a sale is made b)an account becomes bad and is written off c)management estimates the amount of uncollectible d)a customer's account becomes past due

b)collusion

When two or more people get together for the purpose of circumventing prescribed controls, it is called: a)a fraud committee b)collusion c)a division of duties d)bonding of employee

c. sales revenue

Which of the following accounts has a normal credit balance? a)sales return and allowance b)sales discounts c)sales revenue d)selling expense

d) operating expenses - cost of goods sold = gross profit

Which of the following expressions is incorrect? a) Gross profit- operating expenses = net income b)sales revenue- the cost of goods sold- operating expenses = net income c)net income+operating expense= gross profit d) operating expenses - cost of goods sold = gross profit

a)accrual-basis accounting

Which of the following is in accordance with the generally accepted accounting principles? a)accrual-basis accounting b)cash-basis accounting c)both accrual-basis and cash-basis accounting d)neither accrual-basis and cash-basis accounting