Accounting Exam

10. Grove Corp. purchased equipment at a cost of $260,000 in January, 2010. As of January 1, 2014, depreciation of $88,000 had been recorded on this asset. Depreciation expense for 2014 is $22,000. After the adjustments are recorded and posted at December 31, 2014, what are the balances for the Depreciation Expense and Accumulated Depreciation? Depreciation Expense a. $ 22,000 b. $ 22,000 c. $ 110,000 d. $ 110,000 Accumulated Depreciation $ 110,000 $ 88,000 $ 110,000 $ 88,000

A

13. Wentworth Company received advance payments from customers during 2015 of $10,000. At December 31, 2015, $1,000 of the advance payments still December 31, 2015, the balances in Unearned Service Revenue had not been earned. After the adjustments are recorded and posted at the Unearned Service Revenue and Service Revenue accounts will be: a. $ 1,000 b. $ 1,000 c. $ 11,000 d. $ 9,000 Service Revenue $ 9,000 $ 10,000 $ 1,000 $ 10,000

A

17. What happens to the accounting equation when the adjustment for depreciation expense for the accounting period is recorded? a. Assets decrease and stockholders' equity decreases. b. Assets increase and stockholders' equity increases. c. Assets decrease and liabilities decrease. d. Liabilities increase and stockholders' equity decreases.

A

21. Starlight Associates, Inc. recorded salary expense of $100,000 in 2015. However, additional salaries of $5,000 had been earned, but not paid or recorded at December 31, 2015. After the adjustments are recorded and posted at December 31, 2015, the balances in the Salaries Expense and Salaries Payable accounts will be: Salaries Expense a. $ 105,000 b. $ 100,000 c. $ 100,000 d. $ 105,000 Salaries Payable $ 5,000 $ -0- $ 5,000 $ -0-

A

22. On December 1, 2015, Twilight Corporation paid $8,000 rent in advance. The rent per month is $1,000. If Twilight's accounting period ends on December 31, 2015, what will be reported on the financial statements? a. Prepaid Rent of $7,000 on its balance sheet at December 31, 2015 b. Prepaid Rent of $8,000 on its balance sheet at December 31, 2015 c. Rent Expense of $8,000 on its 2015 income statement d. Rent Revenue of $7,000 on its 2015 income statement

A

26. A company forgot to record four adjustments during 2013. Which one of the following omissions of adjustments will understate net income? a. Sales made during the last week of the period are not recorded. b. Interest on monies borrowed has not yet been recorded. c. Prepaid insurance is not reduced for the portion of the policy that has expired during the period. d. Income taxes owed but not yet paid are ignored.

A

28. Longitude Company borrowed on a two-year, 10%, $150,000 note on May 1, with interest and principal to be paid at maturity. How much interest will Longitude report on its income statement for the year ending December 31? a. $ 10,000 b. $ 15,000 c. $ 30,000 d. $ 5,000

A

33. The asset account, Supplies, has a balance of $700 on January 1. During January, the company purchased $16,000 of supplies on account and the liability was appropriately recorded. A count of supplies at the end of January indicates a balance of $900. Which one of the following is a correct amount to be reported on the company's financial statements for the month ending January 31? a. Supplies Expense—$15,800 b. Supplies on Hand—$700 c. Accounts Payable—$15,800 d. Supplies Expense—$16,700

A

35. Which one of the following adjustments decreases net income for the period? a. Recognition of depreciation on plant assets b. Recognition of interest on a note receivable c. Recognition of services that had been provided to customers but the cash has not yet been received d. Recognition of rent as earned that had been received in advance from customers

A

4 When is revenue from the sale of merchandise normally recognized? a. On the date the sale is made. b. When the customer pays for the merchandise. c. Either on the date on which the sale occurs, or the date on which the customer pays d. When the merchandise is sold, if sold for cash, or when payment is received, if sold on credit

A

48. Accumulated Depreciation a. increases when the monthly adjustment for depreciation is recognized. b. decreases when the monthly adjustment for depreciation is recognized. c. is reported on the income statement with the expense accounts. d. is allocated as an expense during future periods.

A

5. As a general rule, revenue is recognized at the point of sale. Which one of the following situations illustrates this rule? a. Products are sold to customers on credit with payment due in 30 days. b. Employees are paid wages the week after the wages are earned. c. Products are purchased for resale purposes. d. Interest is collected from amounts loaned to employees.

A

7. Expenses originate from a. using an asset or recognizing liabilities. b. incurring liabilities or providing services to customers. c. collecting cash from customers. d. paying off liabilities.

A

9 Claxton Corp. purchased equipment at a cost of $320,000 in January, 2010. As of January 1, 2014, depreciation of $160,000 had been recorded on this asset. Depreciation expense for 2014 is $40,000. After the adjustments are recorded and posted at December 31, 2014, what are the balances for the Equipment and Accumulated Depreciation? Adjusting Entries Equipment a. $ 320,000 b. $320,000 c. $ 160,000 d. $ 120,000 Accumulated Depreciation $ 200,000 $ -0- $ 40,000 $ 200,000

A

14Mayfair Book Club Company received advance payments from customers during 2015 of $5,000. At December 31, 2015, $1,200 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2015, what will the balances be in the Unearned Book Revenue and Book Revenue accounts? Unearned Book Revenue a. $ 1,200 b. $ 1,200 c. $ 5,000 d. $ 1,200 Book Revenue $ 5,000 $ 3,800 $ 1,200 $ 6,200

B

16 Norys Corp. received an 8-month, 9% note for $100,000 from its agent on October 1, 2014. The note is due on May 30, 2015. If Norys' accounting period ends on December 31, 2014, how much interest revenue should Norys recognize during 2014 and 2015? 2014 a. $ 3,750 b. $ 2,250 c. $ 9,000 d. $ 3,375 2015 $ 2,250 $ 3,750 $ -0- $ 5,625

B

18. What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded? a. Assets increase and liabilities increase. b. Assets increase and stockholders' equity increases. c. Assets decrease and liabilities decrease. d. Stockholders' equity increases and decreases by the same amount.

B

19. Winston Corp. had $1,800 of supplies on hand at January 1. During the year, supplies with a cost of $4,000 were purchased. At December 31, the actual supplies on hand amount to $1,300. After the adjustments are recorded and posted at December 31, determine the balances in the Supplies and Supplies Expense accounts. Supplies a. $ 1,800 b. $ 1,300 c. $ 5,300 d. $ 1,300 Supplies Expense $ 4,000 $ 4,500 $ 5,800 $ 5,800

B

2 During December, Filmore Inc. purchased $800 of supplies for use in its business. At the end of December, 20% of the supplieswerestillonhand,butonly75%hadbeenpaid.Whatamountswillappearonthecompany'sbalance sheeton December 31? Supplies on Hand a. $800 b. $160 c. $640 d. $160 Accounts Payable $600 $200 $200 $800

B

23.Frank Corporation purchased supplies at a cost of $15,000 during 2015. At January 1, 2015, supplies on hand were $2,000. At December 31, 2015, supplies on hand are $2,500. Calculate supplies expense for 2015. a. $ 15,500 b. $ 14,500 c. $ 15,000 d. $ 17,000

B

25. Which one of the following adjustments will increase assets? a. Interest incurred on money borrowed during the period but not yet paid to the bank is accrued. b. Rent revenue is recorded for amounts owed by a tenant but not yet paid. c. The use of supplies is recorded. d. Depreciation for the period is recorded.

B

27. Doran Systems Corp. has grown significantly over the past year. One area that has plagued the Controller of Doran is the reconciliation of supplies expense. The end-of-year supplies on hand totaled $20, and purchases totaled $500, and supplies on hand at the beginning of the year amounted to $200. How much will Doran Systems report as supplies expense for the current year? a. $ 200 b. $ 680 c. $ 220 d. $ 700

B

3 Stanfield Equipment sells new tractors and pays each salesperson a commission of $1,000 for each tractor sold. During the month of August, a salesperson, Jason, sold 3 new tractors. Stanfield pays Jason on the 10th day of the month following the sale. Jason operates on the cash basis; the tractor dealer operates on the accrual basis. Which of the following statements is true? a. Jason will recognize commission revenue earned in the amount of $3,000 in August. b. Stanfield will recognize commission expense in the amount of $3,000 in August. c. Jason will recognize commission expense in the amount of $3,000 in September. d. Jason will recognize revenue in the same month that the tractor dealer recognizes expense.

B

31. Which one of the following adjustments increases net income for the period? a. Recognition of the amount of supplies used b. Recognition of interest on a note receivable c. Recognition of wages earned, but not paid to employees Adjusting Entries d. Recognition of rent costs that had been paid to the landlord in advance

B

40. Davis Corp. has three employees. Each earns $600 per week for a five day work week ending on Friday. This month the last day of the month falls on a Wednesday. The company should make which of the following adjusting entries? a. Credit Wage Expense for $360 and debit Wages Payable for $360 b. Debit Wage Expense for $1,080 and credit Wages Payable for $1,080 c. Credit Wage Expense for $1,080 and debit Wages Payable for $1,080 d. Debit Wage Expense for $360 and credit Wages Payable for $360

B

47. Deacon Company purchased equipment last year for $30,000. The equipment has an estimated useful life of five years. What amount will appear on the income statement for depreciation expense for the month of March 2014? A. $0 b. $500 c. $6,000 d. $30,000

B

49. Accumulated Depreciation a. increases assets. b. decreases assets. c. increases liabilities. d. decreases liabilities.

B

12. Which one of the following is an example of a deferred revenue? a. Sales are made to customers on credit. b. Interest has been earned by a bank deposit, but it has not been recorded. c. Cash is received prior to providing the services to customers. d. Cash sales are made to customers.

C

30. Esquire Industrial plant operates five days per week with a daily payroll of $4,000. Employees are paid every Saturday for the workweek just completed (Monday through Friday). The last day of the month is Wednesday, March 31. What is the effect of the correct adjustment at March 31? a. Increases stockholders' equity and Wages Payable by $8,000 b. Increases Wages Payable and decreases Cash by $12,000 c. Decreases stockholders' equity and increases Wages Payable by $12,000 d. Increases Wages Payable and increases Wages Expense by $8,000

C

32. Nathan Company's plant operates five days per week with a daily payroll of $50,000. Employees are paid every Tuesday for the prior week's work (Monday through Friday). The last day of the month is Tuesday, April 30. What effect does the accrual at April 30 have on Nathan's net income? a. Increase by $250,000 b. Decrease by $150,000 c. Decrease by $100,000 d. Increase by $150,000

C

37. Failure to record dividends paid would result in which of the following? a. Net income being understated b. An increase in total liabilities c. Stockholders' equity being overstated d. Total assets being understated

C

6. On August 31, Farrell Corporation signed a one-year contract to provide services to Harris Company for $30,000. Harris will pay for the services on September 1. Using the accrual basis of accounting, when should Farrell Corporation recognize revenue? a. September 1 of the current year when the cash is received from Harris b. On August 31 of the next year when all services have been provided c. Throughout the year as the revenue is earned d. At December 31 of the current year, and August 31 of the next year

C

8 Expenses can be matched against revenue a. if the earnings process is not complete. b. when cash is collected from the sale of products. c. through allocation to the accounting periods in which the benefits are recognized. d. when payment is made for costs related to revenue.

C

1 Fox Auto sold merchandise to a customer for $3,000 on credit on March 10. The customer paid Fox Auto the amount due on March 31. Under the accrual basis of accounting, which of the following statements is true? a. Fox Auto will recognize the revenue on March 31. b. The March 10th transaction increases revenue, but has no effect on assets because cash has not been received. c. Revenue is recognized after the cost of the merchandise sold has been paid by Fox Auto. d. The March 31st transaction has no effect on total assets under the accrual basis.

D

11. Which of the following statements is true concerning assets? a. Assets represent future economic sacrifices. b. Assets are expired costs. c. Assets become expenses at the time they are paid in cash. d. Assets become expenses when their economic benefits expire.

D

15 Cuisine Company received a 6-month, 6% note for $10,000 from its president on October 1, 2014. The note is due on March 31, 2015. If Cuisine's accounting period ends on December 31, how much interest revenue should Cuisine recognize during 2014 and 2015? 2014 a. $ 450 b. $ 600 c. $ 300 d. $ 150 2015 $ 150 $ 0 $ 300 $ 150

D

20. Lucky Company purchased a truck at a cost of $12,000 in 2010. As of January 1, 2015, depreciation of $10,000 had been recorded on this asset. Depreciation expense for 2015 is $2,000. After the adjustments are recorded and posted at December 31, 2015, what is the carrying value of the truck? a. $ 2,000 b. $ 5,500 c. $12,000 d. $ -0-

D

24. Windstar Corp. purchased supplies at a cost of $6,000 during the year. At December 31, supplies on hand are $1,400. Supplies expense for the year was $5,200. How much were supplies on hand at January 1? a. $ 2,200 b. $ 11,200 c. $ 1,400 d. $ 600

D

29. Innovate Company borrowed on a one-year, 10%, $150,000 note on May 1, 2014 with interest and principal to be paid at maturity. How much interest should Innovate Company report on its income statement for the year ending December 31, 2015? a. $ 10,000 b. $ 15,000 c. $ 30,000 d. $ 5,000

D

34. Which of the following adjusting entries involves the cash account? a. Deferred Revenue b. Accrued Asset c. Deferred Liability d. None of the Above

D

36. Failure to record accrued interest expense would result in which of the following? a. Assets being overstated b. Assets being understated c. Liabilities being overstated d. Liabilities being understated

D

38. Failure to record amounts earned for services provided to customers but not yet paid results in which of the following a. Net income being overstated b. No effect on total assets c. Stockholders' equity being overstated d. Total assets being understated

D

39. Failure to record depreciation expense for the period results in which of the following? a. Net income being overstated b. No effect on total assets c. Stockholders' equity being overstated d. Both a and c above

D

46. Autumn Resorts purchased guest room furniture on January 1, 2014 for $120,000. The furniture has an estimated useful life of ten years. What amount will appear on Autumn's income statement for depreciation expense for the year ending June 30, 2015? a. $1,000 b. $6,000 c. $10,000 d. $12,000

D