Financial Accounting Final (SBU-Wagner)
Hall Company sells merchandise with a one-year warranty. In the current year, sales consisted of 4,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of a. $13,500 b. $31,500 c. $45,000 d. $0
$45,000
The entry to record the issuance of common stock at a price above par includes a debit to a. Cash b. Organizational Expenses c. Paid-In Capital in Excess of Par—Common Stock d. Common Stock
Cash
Which account would normally not require an adjusting entry? a. Accounts Receivable b. Accumulated Depreciation c. Wages Expense d. Cash
Cash
Which of the following asset accounts is increased when a receivable is collected? a. Cash b. Accounts Payable c. Supplies d. Accounts Receivable
Cash
Which of the following is the appropriate general journal entry to record the declaration of cash dividends? . Retained Earnings Cash b. Cash Dividends Cash Dividends Payable c. Cash Dividends Payable Cash d. Paid-In Capital Cash Dividends Payable
Cash Dividends Cash Dividends Payable
All of the following are normally found in a corporation's stockholders' equity section except a. Common Stock b. Retained Earnings c. Dividends in Arrears d. Excess of Issue Price Over Par
Dividends in Arrears
Which of the following is not true with a double-entry accounting system? a. The sum of all debits is always equal to the sum of all credits in each journal entry. b. The accounting equation remains in balance. c. Each business transaction will have two debits. d. Every transaction affects at least two accounts
Each business transaction will have two debits.
Which of the following taxes would be deducted in determining an employee's net pay? a. FUTA taxes b. SUTA taxes c. FICA taxes d. all are correct
FICA taxes
The formula for depreciable cost is a. Initial cost + Residual value b. Depreciable cost = Initial cost c. Initial cost - Accumulated depreciation d. Initial cost - Residual value
Initial cost - Residual value
Which of the following accounts usually has a debit balance? a. Inventory b. Sales c. Sales Tax Payable d. Accounts Payable
Inventory
A bond indenture is a. a contract between the corporation issuing the bonds and the bondholders b. a contract between the corporation issuing the bonds and the underwriters selling the bonds c. the amount for which the corporation can buy back the bonds prior to the maturity date d. the amount due at the maturity date of the bonds
a contract between the corporation issuing the bonds and the bondholders
Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is a. a deduction from the balance per bank statement b. an addition to the balance per company's records c. an addition to the balance per bank statement d. a deduction from the balance per company's records
a deduction from the balance per company's records
When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a. a discount b. their maturity value c. a premium d. their face value
a discount
Which one of the following reflects a weak internal control system? a. a single employee is responsible for comparing a receiving report to an invoice b. all employees are well supervised c. all employees must take their vacations d. a single employee is responsible for collecting and recording of cash
a single employee is responsible for collecting and recording of cash
Earnings per share a. is the earnings available to common shareholders b. must be reported by public company c. helps compare companies of different sizes d. all of the answers are correct
all of the answers are correct
How is treasury stock shown on the balance sheet? a. as an increase in stockholders' equity b. treasury stock is not shown on the balance sheet c. as an asset d. as a decrease in stockholders' equity
as a decrease in stockholders' equity
The current portion of long-term debt should a. be reclassified as a current liability b. not be separated from the long-term portion of debt c. be classified as a long-term liability d. be paid immediately
be reclassified as a current liability
When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity, the bonds are a. debenture bonds b. callable bonds c. convertible bonds d. unsecured bonds
callable bonds
What is the type of account and normal balance of Allowance for Doubtful Accounts? a. contra asset, debit b. asset, debit c. asset, credit d. contra asset, credit
contra asset, credit
The interest rate specified in the bond indenture is called the a. effective rate b. contract rate c. discount rate d. market rate
contract rate
Merchandise with a sales price of $5,000 is sold on account with terms 2/10, n/30. The journal entry to record the sale would include a a. debit to Cash for $5,000 b. credit to Sales for $4,900 c. debit to Customer Refunds Payable for $100 d. debit to Accounts Receivable for $4,880
credit to Sales for $4,900
Inventory is classified on the balance sheet as a a. current liability b. long-term asset c. current asset d. long-term liability
current asset
The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following? a. debit Bad Debt Expense; credit Accounts Receivable b. debit Bad Debt Expense; credit Allowance for Doubtful Accounts c. debit Sales; credit Accounts Receivable d. debit Allowance for Doubtful Accounts; credit Accounts Receivable
debit Bad Debt Expense; credit Accounts Receivable
The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to a. debit Cash, credit Premium on Bonds Payable and Bonds Payable b. debit Cash and Discount on Bonds Payable, credit Bonds Payable c. debit Cash, credit Bonds Payable d. debit Bonds Payable, credit Cash
debit Cash, credit Bonds Payable
The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is a. debit Cash; credit Notes Payable b. debit Notes Payable; credit Cash c. debit Accounts Payable; credit Notes Payable d. debit Cash and Interest Expense; credit Notes Payable
debit Cash; credit Notes Payable
The date on which a cash dividend becomes a binding legal obligation is on the a. date of record b. last day of fiscal year c. declaration date d. payment date
declaration date
Which of the following items that appeared on the bank reconciliation did not require a journal entry? a. a check for $630, recorded in the check register for $360 b. deposits in transit c. NSF checks d. bank service charges
deposits in transit
A trial balance is prepared to a. prove that no errors were made in posting to the ledger b. discover errors that affect the equality of debits and credits c. prove that there were no errors made in recording transactions into the journal d. prove that each account balance is correct
discover errors that affect the equality of debits and credits
One of the main disadvantages of the corporate form is the a. double taxation of dividends b. inability to raise large amounts of capital c. requirement to stock d. charter
double taxation of dividends
The depreciation method that does not use residual value in calculating the first year's depreciation expense is a. straight-line b. units-of-output c. double-declining-balance d. sum-of-the-digits
double-declining-balance
The market interest rate related to a bond is also called the a. stated interest rate b. effective interest rate c. straight-line rate d. contract interest rate
effective interest rate
If a company borrows money from a bank as an installment note, the interest portion of each annual payment will a. remain constant over the term of the note b. increase over the term of the note c. equal the interest rate on the note times the face amount d. equal the interest rate on the note times the carrying amount of the note at the beginning of the period
equal the interest rate on the note times the carrying amount of the note at the beginning of the period
Expected useful life is a. calculated when the asset is sold b. estimated at the time that the asset is placed in service c. determined each year that the depreciation calculation is made d. none of these
estimated at the time that the asset is placed in service
The total earnings of an employee for a payroll period is referred to as a. net pay b. pay net of taxes c. gross pay d. take-home pay
gross pay
The accounts receivable turnover measures a. the fair market value of accounts receivable b. the efficiency of the accounts payable function c. the number of days of accounts receivable outstanding d. how frequently during the year the accounts receivable are converted to cash
how frequently during the year the accounts receivable are converted to cash
Accounts are classified in the ledger a. chronologically b. in accordance with their appearance in the financial statements c. with the accounts used most often listed first d. alphabetically
in accordance with their appearance in the financial statements
Stockholders' equity a. includes paid-in capital and liabilities b. is shown on the income statement c. is usually equal to cash on hand d. includes retained earnings and paid-in capital
includes retained earnings and paid-in capital
Earning revenue a. decreases assets, increases liabilities b. increases assets, decreases stockholders' equity c. increases assets, increases stockholders' equity d. increases one asset, decreases another asset
increases assets, increases stockholders' equity
Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the a. purchase ledger b. inventory ledger c. creditor's ledger d. customer's ledger
inventory ledger
Accumulated Depreciation a. is the same as Depreciation Expense b. is used to show the amount of cost expiration of intangibles c. is used to show the amount of cost expiration of natural resources d. is a contra asset account
is a contra asset account
The direct write-off method of accounting for uncollectible accounts a. emphasizes cash realizable value b. is often used by small companies and companies with few receivables c. emphasizes the matching of expenses with revenues d. emphasizes balance sheet relationships
is often used by small companies and companies with few receivables
Par value a. is established for a share of stock after it is issued b. is the monetary value assigned per share in the corporate charter c. represents the original selling price for a share of stock d. represents what a share of stock is worth
is the monetary value assigned per share in the corporate charter
Treasury stock shares are a. shares held by the U.S. Treasury Department b. issued shares that have been reacquired by a corporation c. part of the total outstanding shares but not part of the total issued shares of a corporation d. unissued shares that are held by the treasurer of the corporation
issued shares that have been reacquired by a corporation
The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n) a. asset b. liability c. payroll expense d. contra account
liability
On December 31, Strike Company sold one of its batting cages for $20,000. The equipment had an initial cost of $310,000 and had accumulated depreciation of $260,000. Depreciation has been recorded up to the end of the year. What is the amount of the gain or loss on this transaction? a. gain of $30,000 b. loss of $20,000 c. gain of $20,000 d. loss of $30,000
loss of $30,000
Estimating and recording product warranty expense in the period of the sale best follows the a. matching concept b. cost concept c. business entity concept d. materiality concept
matching concept
Current assets are usually listed in order a. of liquidity b. of the due date c. alphabetically d. of the size
of liquidity
Which intangible assets are amortized over their useful life? a. trademarks b. goodwill c. patents d. all of these
patents
The inventory system employing accounting records that continuously disclose the amount of inventory is called a. periodic b. perpetual c. physical d. retail
perpetual
The excess of issue price over par of common stock is termed a(n) a. dividend b. income c. premium d. discount
premium
FIFO reports higher gross profit and net income than the LIFO method when a. prices are increasing b. prices are reduced by 50% c. prices are decreasing d. prices remain stable
prices are increasing
The objectives of internal control are to a. prevent fraud, and promote the social interest of the company b. provide control over "internal-use only" reports and employee internal conduct c. provide reasonable assurance that assets are safeguarded and used for business purposes, business information is accurate, and laws and regulations are complied with d. control the internal organization of the accounting department personnel and equipment
provide reasonable assurance that assets are safeguarded and used for business purposes, business information is accurate, and laws and regulations are complied with
A fixed asset's estimated value at the time it is to be retired from service is called a. market value b. residual value c. carrying value d. book value
residual value
Which of the following describes the classification and normal balance of the fees earned account? a. stockholders' equity, debit b. revenue, credit c. asset, credit d. liability, credit
revenue, credit
The stockholders' equity will be reduced by all of the following except a. expenses b. dividends c. revenues d. all of these
revenues
Characteristics of a corporation include a. its inability to own property b. direct management by the shareholders (owners) c. a limited lifespan d. shareholders who have limited liability
shareholders who have limited liability
Taking a physical count of inventory a. has no internal control relevance b. is not necessary when a perpetual inventory system is used c. is not necessary when a periodic inventory system is used d. should be done near year-end
should be done near year-end
Credit memos from the bank a. show that a company has deposited a customer's NSF check b. decrease a bank customer's account c. show the bank has collected a note receivable for the customer d. are used to show a bank service charge
show the bank has collected a note receivable for the customer
A bank statement a. shows a company the financial position of the bank as of a certain date b. shows the activity that increased or decreased the company's account balance c. is a bill from the bank for services rendered d. is a credit reference letter written by the company's bank
shows the activity that increased or decreased the company's account balance
Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items? a. specific identification b. average c. FIFO d. LIFO
specific identification
In the normal operation of business, you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $775 is "NSF." The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will a. add both values to balance according to bank b. subtract both values from balance according to books c. subtract both values from balance according to bank d. add both values to balance according to books
subtract both values from balance according to books
When a corporation completes a 3-for-1 stock split a. the ownership interest of current stockholders is decreased b. the market price per share of the stock is decreased c. the par value per share is decreased d. the market price per share of the stock and the par value per share is decreased
the market price per share of the stock and the par value per share is decreased
Notes or accounts receivable that result from sales transactions are often called a. nontrade receivables b. sales receivables c. trade receivables d. merchandise receivables
trade receivables
Which of the following would most likely be classified as a current liability? a. mortgage payable b. two-year notes payable c. unearned rent d. bonds payable
unearned rent
A characteristic of a fixed asset is that it is a. intangible b. held for sale in the ordinary course of the business c. used in the operations of a business d. a short-term investment
used in the operations of a business
A summary of selected transactions in ledger accounts appears below for Alberto's Plumbing Services for the current calendar year-end. Common Stock 1/1 6,500 Retained Earnings 12/31 3,500 12/31 15,000 Dividends 3/30 1,650 12/31 3,500 9/30 1,850 Net income for the period is a. $25,000 b. $3,500 c. $15,000 d. $21,500
$15,000
Calculate the gross profit for Jefferson Company based on the following: Sales $764,000 Selling expenses 42,500 Cost of goods sold 538,000 a. $495,500 b. $183,500 c. $226,000 d. $721,500
$226,000
Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. Pound Co. paid the invoice within the discount period. What is the sales amount to be recorded in the above transactions? a. $26,010 b. $16,000 c. $24,990 d. $25,500
$24,990
What amount will be paid in full settlement of Invoice 22384, assuming that credit for returns and allowances was received prior to payment and that the invoice was paid within the discount period. Inv. No. Merchandise Freight Paid by SellerFreight Terms Returns and Allowances 22384 $4,500 $140 FOB Shipping Point,2/10, net 30 $1,200 a. $3,234 b. $3,374 c. $4,640 d. $3,440
$3,374
On October 1, Black Company receives a 9% interest-bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of a. $0 b. $450 c. $900 d. $1,800
$450
The inventory data for an item for November are: Nov. 1Inventory20 units at $19 4Sold10 units 10Purchased30 units at $20 17Sold20 units 30Purchased10 units at $21 Using a perpetual system, what is the cost of the goods sold for November if the company uses LIFO? a. $580 b. $600 c. $590 d. $610
$590
Which of the following is not a characteristic of a corporation? a. Ownership is divided into shares of stock. b. Corporations are organized as a separate legal taxable entity. c. Corporations experience an ease in obtaining large amounts of resources by issuing stock. d. A corporation's resources are limited to its individual owners' resources.
A corporation's resources are limited to its individual owners' resources.
Which of the following errors, each considered individually, would cause the trial balance totals to be unequal? a. Cash received from customers on account was posted as a debit of $720 to Cash and a credit of $720 to Accounts Payable. b. A transaction was not posted. c. A payment of $67 for insurance was posted as a debit of $76 to Prepaid Insurance and a credit of $76 to Cash. d. A payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts Payable and a credit of $450 to Cash.
A payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts Payable and a credit of $450 to Cash.
A client has a massage and asks the company bookkeeper to mail her the bill. The bookkeeper should make which entry to record the invoice? a. Fees Earned, debit; Accounts Receivable, credit b. No entry until the cash is received c. Cash, debit; Fees Earned, credit d. Accounts Receivable, debit; Fees Earned, credit
Accounts Receivable, debit; Fees Earned, credit
The accounting equation may be expressed as a. Assets = Liabilities + Stockholders' Equity b. Assets + Liabilities = Stockholders' Equity c. Assets = Expenses − Liabilities d. Assets = Revenues − Liabilities
Assets = Liabilities + Stockholders' Equity
When the perpetual inventory system is used, the inventory sold is debited to a. Cost of Goods Sold b. Sales c. Inventory d. Supplies Expense
Cost of Goods Sold
Which of the following accounts will be credited to close it? a. Accumulated Depreciation b. Fees Earned c. Depreciation Expense d. Rent Revenues
Depreciation Expense
Which one of the following is the authoritative body in the United States having the primary responsibility for developing accounting principles? a. FASB b. AICPA c. SEC d. IRS
FASB
If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are a. consigned b. FOB shipping point c. n/30 d. FOB destination
FOB shipping point
The initials GAAP stand for a. Generally Accepted Accounting Principles b. Generally Accepted Plans c. General Accounting Procedures d. Generally Accepted Accounting Practices
Generally Accepted Accounting Principles
Which of the following companies would be more likely to use the specific identification inventory costing method? a. Lowe's b. Best Buy c. Gordon's Jewelers d. Walmart
Gordon's Jewelers
Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of stockholders' equity (SSE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared? a. SSE, I, B b. B, SSE, I c. I, SSE, B d. B, I, SSE
I, SSE, B
During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of goods sold is a. weighted average b. average cost c. FIFO d. LIFO
LIFO
The inventory method that assigns the most recent costs to cost of goods sold is a. weighted average b. LIFO c. FIFO d. specific identification
LIFO
Which one of the fixed asset accounts listed below will not have a related contra asset account? a. Building b. Office Equipment c. Land d. Delivery Equipment
Land
The following adjusting journal entry found in the journal is missing an explanation. Select the best explanation for the entry. Wages Expense 4,500 Wages Payable 4,500 ???????????????? a. Record wages paid in advance. b. Record wages expense incurred and to be paid next month. c. Record payment of wages. d. Record wages paid last month.
Record wages expense incurred and to be paid next month.
Which of the following account groups are temporary accounts? a. Cash, Dividends, Wages Payable b. Common Stock, Dividends, Retained Earnings c. Prepaid Insurance, Equipment, Fees Earned d. Rent Revenue, Fees Earned, Miscellaneous Expense
Rent Revenue, Fees Earned, Miscellaneous Expense
Which of the following statements is true? a. The balance in the revenue accounts after closing agrees with the revenue shown on the income statement. b. The balance in the dividends account after closing agrees with the amount of dividends reported on the statement of stockholders' equity. c. The balance of Retained Earnings after closing agrees with the amount reported on the statement of stockholders' equity and the balance sheet. d. The trial balance taken after closing can be used to prepare the statement of stockholders' equity and the balance sheet.
The balance of Retained Earnings after closing agrees with the amount reported on the statement of stockholders' equity and the balance sheet.
The classification and normal balance of the accounts payable account is a. revenue with a credit balance b. stockholders' equity with a credit balance c. a liability with a credit balance d. an asset with a credit balance
a liability with a credit balance
The balance of an account is determined by a. always subtracting the debits from the credits b. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum c. adding all of the debits to all of the credits d. always subtracting the credits from the debits
adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum
The amount of cash to be reported on the balance sheet at June 30 is the a. total of the cash column in the cash receipts journal as of June 30 b. adjusted balance appearing in the bank reconciliation for June 30 c. balance as of June 30 on the bank statement d. total of the cash column in the cash payments journal as of June 30
adjusted balance appearing in the bank reconciliation for June 30
When is the adjusted trial balance prepared? a. before the adjusting journal entries are journalized b. after adjusting journal entries are posted c. after the adjusting journal entries are journalized d. before adjusting journal entries are posted
after adjusting journal entries are posted
The statement of stockholders' equity should be prepared a. after the income statement and before the balance sheet b. before the income statement and after the balance sheet c. before the income statement and balance sheet d. after the income statement and balance sheet
after the income statement and before the balance sheet
Too much inventory on hand a. ties up funds that could be used to improve operations b. increases the cost to safeguard the assets c. increases the losses due to price declines d. all of these
all of these
A capital expenditure results in a debit to a. an asset account b. a capital account c. a liability account d. an expense account
an asset account
Balance sheet accounts a. represent amounts accumulated during a specific period of time b. have zero balances after the closing entries have been posted c. are not affected by adjustments d. are called real accounts
are called real accounts
Prepaid rent, representing rent for the next six months' occupancy, would be reported on the tenant's balance sheet as a(n) a. liability b. asset c. stockholders' equity account d. contra liability
asset
Which of the following groups of accounts have a normal debit balance? a. assets and expenses b. liabilities and stockholders' equity c. stockholders' equity and assets d. revenues, liabilities, and stockholders' equity
assets and expenses
Adjusting entries always include a. only income statement accounts b. the cash account c. at least one income statement account and one balance sheet account d. only balance sheet accounts
at least one income statement account and one balance sheet account
Liabilities are reported on the a. statement of stockholders' equity b. income statement c. balance sheet d. statement of cash flows
balance sheet
Unearned Fees appear on the a. balance sheet in the current assets section b. balance sheet in the stockholders' equity section c. income statement as revenue d. balance sheet as a current liability
balance sheet as a current liability
Prior to the adjusting process, accrued revenue has a. been earned and cash received b. not been recorded as revenue but cash has been received c. been earned and not recorded as revenue d. not been earned but recorded as revenue
been earned and not recorded as revenue
Prior to the adjusting process, accrued expenses have a. been incurred, not paid, but have been recorded b. been incurred, not paid, and not recorded c. not yet been incurred, paid, or recorded d. been paid but have not yet been incurred
been incurred, not paid, and not recorded
The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed a. historical cost b. book value c. contra asset d. market value
book value
Multiple-step income statements show a. neither gross profit nor income from operations b. income from operations but not gross profit c. both gross profit and income from operations d. gross profit but not income from operations
both gross profit and income from operations
The ending balance of the retained earnings account appears in a. both the statement of stockholders' equity and the balance sheet b. both the statement of stockholders' equity and the income statement c. only the statement of stockholders' equity d. both the statement of stockholders' equity and the statement of cash flows
both the statement of stockholders' equity and the balance sheet
Accumulated Depreciation and Depreciation Expense are classified, respectively, as a. revenue, asset b. contra asset, expense c. asset, contra liability d. expense, contra asset
contra asset, expense
The classified balance sheet will show which liability subsections? a. present liabilities and tomorrow's liabilities b. current liabilities and other liabilities c. current liabilities and long-term liabilities d. other liabilities and long-term liabilities
current liabilities and long-term liabilities
In recording the cost of goods sold for cash, based on data available from perpetual inventory records, the journal entry is a. debit Accounts Receivable; credit Inventory b. debit Inventory; credit Cost of Goods Sold c. debit Cost of Goods Sold; credit Sales d. debit Cost of Goods Sold; credit Inventory
debit Cost of Goods Sold; credit Inventory
The adjusting entry to record the depreciation of a building for the fiscal period is a. debit Accumulated Depreciation; credit Depreciation Expense. b. debit Building; credit Depreciation Expense. c. debit Depreciation Expense; credit Building. d. debit Depreciation Expense; credit Accumulated Depreciation.
debit Depreciation Expense; credit Accumulated Depreciation.
The entry to record the return of merchandise from a customer would include a a. debit to Estimated Returns Inventory b. credit to Sales c. debit to Customer Refunds Payable d. debit to Sales
debit to Customer Refunds Payable
The journal entry to close the Fees Earned, $750, and Rent Revenue, $175, accounts during the year-end closing process would involve: a. a credit to a general revenue account b. a debit to a general revenue account c. debits to the two revenue accounts d. credits to the two revenue accounts
debits to the two revenue accounts
A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to a. decrease an asset, decrease a liability b. increase an asset, decrease another asset c. increase an asset, increase stockholders' equity d. increase an asset, increase a liability
decrease an asset, decrease a liability
What effect will the following adjusting journal entry have on the accounting records? Depreciation Expense 2,150 Accumulated Depreciation 2,150 a. increase net income b. decrease expenses c. increase revenues d. decrease net book value
decrease net book value
Cash dividends a. increase expenses b. increase cash c. decrease expenses d. decrease stockholders' equity
decrease stockholders' equity
Which of the following is not true regarding depreciation? a. depreciation expense does not measure changes in market value. b. depreciation expense reflects the decrease in market value each year. c. depreciation allocates the cost of a fixed asset over its estimated life. d. depreciation is an allocation not a valuation method.
depreciation expense reflects the decrease in market value each year.
When merchandise sold is assumed to be in the order in which the purchases were made, the company is using a. average cost b. first-in, last-out c. last-in, first-out d. first-in, first-out
first-in, first-out
What is the term applied to the excess of sales over the cost of goods sold? a. net income b. operations c. gross sales d. gross profit
gross profit
Inventory shrinkage is recorded when a. there is a difference between a physical count of inventory and inventory records b. merchandise is returned to a seller c. merchandise is returned by a buyer d. merchandise purchased from a seller is incomplete or short
here is a difference between a physical count of inventory and inventory records
Which of the following best describes accounting? a. records economic data but does not communicate the data to users according to any specific rules b. is an information system that provides reports to users regarding economic activities and condition of a business c. is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements d. is of no use by individuals outside of the business
is an information system that provides reports to users regarding economic activities and condition of a business
The bank reconciliation a. should be prepared by an employee who records cash transactions b. is part of the internal control system c. is for information purposes only d. is sent to the bank for verification
is part of the internal control system
The debit side of an account a. is the left side of the account b. depends on whether the account is an asset, liability, or stockholders' equity c. can be either side of the account depending on how the accountant set up the system d. is the right side of the account
is the left side of the account
The end-of-period spreadsheet a. is a working paper that is required b. is used to summarize account balances and adjustments for the financial statements c. is an integral part of the accounting cycle d. eliminates the need to rewrite the financial statements
is used to summarize account balances and adjustments for the financial statements
The ____ is where a transaction can first be found in the accounting records. a. chart of accounts b. balance sheet c. income statement d. journal
journal
Ending inventory is made up of the oldest purchases when a company uses a. first-in, first-out b. retail method c. last-in, first-out d. average cost
last-in, first-out
Debts owed by a business are referred to as a. stockholders' equity b. accounts receivables c. liabilities d. expenses
liabilities
In which of the following types of accounts are decreases recorded by debits? a. dividends b. liabilities c. expenses d. assets
liabilities
If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the a. manufacturer b. retailer c. consignee d. shipper
manufacturer
Closing entries a. are not needed if adjusting entries are prepared b. need not be posted if the financial statements are prepared from the end-of-period spreadsheet c. need not be journalized if adjusting entries are prepared d. must be journalized and posted
must be journalized and posted
Adjusting entries are a. the same as correcting entries b. needed to bring accounts up to date and match revenue and expense c. optional under generally accepted accounting principles d. rarely needed in large companies
needed to bring accounts up to date and match revenue and expense
Damaged merchandise that can be sold only at prices below cost should be valued at a. LIFO b. net realizable value c. FIFO d. average cost
net realizable value
Which of the following measures the length of time it takes to acquire, sell, and replace inventory? a. retail method of inventory costing b. inventory turnover c. gross profit method of inventory costing d. number of days' sales in inventory
number of days' sales in inventory
In credit terms of 3/15, n/45, the "3" 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
percent of the cash discount
The primary difference between the periodic and perpetual inventory systems is that a a. periodic system determines the inventory on hand only at the end of the accounting period b. periodic system keeps a record showing the inventory on hand at all times c. periodic system provides an easy means to determine inventory shrinkage d. periodic system records the cost of the sale on the date the sale is made
periodic system determines the inventory on hand only at the end of the accounting period
The process of transferring the debits and credits from the journal entries to the accounts is called a. journalizing b. transposing c. sliding d. posting
posting
Net income will result when a. revenues (credits) > expenses (debits) b. expenses (credits) = revenues (debits) c. revenues (credits) = expenses (debits) d. revenues (debits) > expenses (credits)
revenues (credits) > expenses (debits)
The primary objectives of control over inventory are a. safeguarding inventory from damage and reporting inventory in the financial statements b. reporting inventory in the financial statements c. maintaining constant observation of the inventory and reporting inventory in the financial statements d. safeguarding the inventory from damage and maintaining constant observation of the inventory
safeguarding inventory from damage and reporting inventory in the financial statements
Generally, the revenue account for a merchandising business is entitled a. Gross Profit b. Fees Earned c. Gross Sales d. Sales
sales
The matching principle a. addresses the relationship between the journal and the balance sheet b. determines whether the normal balance of an account is a debit or credit c. states that the revenues and related expenses should be reported in the same period d. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance
states that the revenues and related expenses should be reported in the same period
Transactions affecting stockholders' equity include a. stockholder investments, earning of revenues, incurrence of expenses, and collection of accounts receivable b. stockholder dividends, earning of revenues, incurrence of expenses, and purchase of supplies on account c. stockholder investments, dividends, earning of revenues, and incurrence of expenses d. stockholder investments and payment of liabilities
stockholder investments, dividends, earning of revenues, and incurrence of expenses
Profit is the difference between a. the assets purchased with cash contributed by the owner and the cash spent to operate the business b. the amounts received from customers for goods or services and the amounts paid for the inputs (expenses) used to provide the goods or services c. assets and liabilities d. the incoming cash and outgoing cash
the amounts received from customers for goods or services and the amounts paid for the inputs (expenses) used to provide the goods or services
What is the goal of the closing process? a. to make sure all temporary accounts have a zero balance b. to move all equity accounts to Retained Earnings c. to end the accounting period with a profit d. to verify that all adjustments have been made
to make sure all temporary accounts have a zero balance
A chart of accounts is a. used in place of a ledger b. usually a listing of accounts in alphabetical order c. the same as a balance sheet d. usually a listing of accounts in financial statement order
usually a listing of accounts in financial statement order
Using accrual accounting, revenues are recorded a. when cash is received at the time services are performed or products have been delivered to customers b. when cash is received without regard to when the services are performed or products have been delivered to customers c. only if cash is received after the services are performed or products have been delivered to customers d. when a service has been performed or products have been delivered to customers without regard to when cash is received
when a service has been performed or products have been delivered to customers without regard to when cash is received
Debts listed as current liabilities are those that a. will be paid in less than one year b. are owed to the stockholders and will never be paid c. are due to be paid in 5 to 10 years d. are due to be paid in more than one year
will be paid in less than one year
