exam for accounting

At September 1, 2017, Kern Enterprises reported a cash balance of $140000. During the month, Kern collected cash of $60000 and made disbursements of $100000. At September 30, 2017, the cash balance is A. $40000 credit. B. $100000 credit. C. $100000 debit. D. $200000 debit.

$100000 debit.

Windsor, Inc. sells merchandise on account for $1700 to Flint Company with credit terms of 2/7, n/30. Flint Company returns $300 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? Entry field with correct answer A. $1334 B. $1366 C. $1372 D. $1250

$1372

Thayer Company purchased a building on January 2 by signing a long-term $3360000 mortgage with monthly payments of $30800. The mortgage carries an interest rate of 10 percent. The amount owed on the mortgage after the first payment will be A. $3329200. B. $3357200. C. $3360000. D. $3332000

$3357200

On October 1, 2017, Mann Company places a new asset into service. The cost of the asset is $120000 with an estimated 5-year life and $30000 salvage value at the end of its useful life. What is the depreciation expense for 2017 if Mann Company uses the straight-line method of depreciation? A. $6000. B. $12000. C. $4500. D. $24000.

$4500

Bonds with a face value of $600000 and a quoted price of 104.25 have a selling price of A. $624000. B. $625500. C. $624150. D. $602550.

$625500

Correct! Cost is compared to market for each inventory category as follows: iPods $20,400 + cell phones $18,000 + DVDs $25,600 = $64,000. Hagger Sounds has accumulated the following cost and market data on March 31: Cost Data Market Data iPods $24,000 $20,400 Cell phones 18,000 19,000 DVDs 28,000 25,600 Using the lower-of-cost-or-market, how much is the value of the ending inventory? (Apply LCM to each category) Entry field with correct answer A. $71,000 B. $64,000 C. $65,000 D. $70,000

$64,000

Equipment with a cost of $300000 has an estimated salvage value of $20000 and an estimated life of 4 years or 10000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 2700 hours? $72500. $75600. $75000. $70000.

$70000.

Lankston Company began the year by issuing $120000 of common stock for cash. The company recorded revenues of $1100000, expenses of $960000, and paid dividends of $60000. What was Lankston's net income for the year? A. $260000 B. $140000 C. $200000 D. $80000

140000

Barnes Company showed the following balances at the end of its first year: Cash $14000 Prepaid insurance 700 Accounts receivable 3500 Accounts payable 2800 Notes payable 4200 Common stock 5400 Dividends 700 Revenues 29000 Expenses 17500 What amount did Barnes Company show as total credits? Entry field with correct answer A. $41400 B. $42800 C. $42100 D. $40700

41400

The financial statements of the Cheyenne Corp. reports net sales of $300000 and accounts receivable of $54000 and $22800 at the beginning of the year and end of year, respectively. What is the average collection period for accounts receivable in days? A. 46.7 B. 56.8 C. 87.2 D. 36.

46.7

The following information came from the income statement of the Wilkens Company at December 31, 2017: sales revenue $1,800,000; beginning inventory $160,000; ending inventory $240,000; and gross profit $600,000. Inventory turnover is 6 times per year. What is Wilkens' days in inventory for 2017? Entry field with correct answer A. 121.7 days B. 60.8 days C. 146 days D. 97.3 days

60.8 days

Why do generally accepted accounting principles require the application of the revenue recognition principle? A. Failure to apply the revenue recognition principle could lead to a misstatement of revenue. B. It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. C. Recording revenue when cash is received is an objective application of the revenue recognition principle. D. Accounting software has made the revenue recognition easy to apply.

Failure to apply the revenue recognition principle could lead to a misstatement of revenue.

Which of the following methods will result in the highest depreciation in the first year? A. Straight-line. B. Sum-of-year's-digits. C. Time valuation. D. Declining-balance.

Declining-balance

Which of the following is not a principal type of business activity? A. Operating B. Delivering C. Investing D. Financing

Delivering

If cash is restricted as to its use, and is expected to be used within the next year, how is it reported? A. Included in the Cash and Cash Equivalents line on the balance sheet. B. Reported as a current liability on the balance sheet. C. Reported as a non-current asset on the balance sheet. D. Reported as a current asset separate from Cash and Cash Equivalents on the balance sheet.

Reported as a current asset separate from Cash and Cash Equivalents on the balance sheet--

An aging of a company's accounts receivable indicates that $8200 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $3400 debit balance, the adjustment to record bad debts for the period will require a A. credit to Allowance for Doubtful Accounts for $8200. B. debit to Bad Debt Expense for $4800 C. debit to Bad Debt Expense for $8200. D. debit to Bad Debt Expense for $11600.

debit to Bad Debt Expense for $11600

Over the term of the bonds, the balance in the Discount on Bonds Payable account will A. fluctuate up and down if the market is volatile. B. increase. C. decrease. D. be unaffected until the bonds mature

decrease

The net effects on the corporation of the declaration and payment of a cash dividend are to A. increase assets and increase stockholders' equity. B. increase stockholders' equity and decrease liabilities. C. decrease assets and decrease stockholders' equity. D. decrease liabilities and decrease stockholders' equity.

decrease assets and decrease stockholders' equity

Adjustments for unearned revenue: A. increase liabilities and increase revenues. B. increase assets and increase revenues. C. decrease revenues and decrease assets. D. decrease liabilities and increase revenues

decrease liabilities and increase revenues.

The acquisition of treasury stock by a corporation A. decreases its total assets and total stockholders' equity. B. requires that a gain or loss be recognized on the income statement. C. has no effect on total assets and total stockholders' equity. D. increases its total assets and total stockholders' equity.

decreases its total assets and total stockholders' equity

The use of prenumbered checks is an example of A. establishment of responsibility. B. independent internal verification. C. segregation of duties. D. documentation procedures.

documentation procedures.

If bonds are issued at a premium, the stated interest rate is A. higher than the market rate of interest. B. too low to attract investors. C. adjusted to a higher rate of interest. D. lower than the market rate of interest.

higher than the market rate of interest

The calculation of depreciation using the declining-balance method A. multiplies a declining percentage times a constant book value. B. ignores salvage value in determining the amount to which a constant rate is applied. C. multiplies a constant percentage times the previous year's depreciation expense. D. yields an increasing depreciation expense each period.

ignores salvage value in determining the amount to which a constant rate is applied

The statement of cash flows would disclose the payment of a dividend A. in the operating activities section. B. in the financing activities section. C. in the investing activities section. D. nowhere on the statement.

in the financing activities section

The expense recognition principle relates to credit losses by stating that bad debt expense should be recorded A. in the period of the sale. B. in the period of the loss. C. in the same period as allowed for tax purposes. D. for an exact amount.

in the period of the sale.

A customer paid $60000 to Foley Marketing on December 30, 2015, to perform services from January 1, 2016 through December 31, 2019. If Foley fails to record the revenue recognized, ________ would be understated by ________ each year. A. liabilities, $15000 B. net income, $12000 C. net income, $15000 D. assets, $12000

net income, $15000

A post-closing trial balance will show: A. zero balances for balance sheet accounts. B. only balance sheet accounts. C. only income statement accounts. D. zero balances for all accounts.

only balance sheet accounts

Goodwill can be recorded A. only when there is an exchange transaction involving the purchase of an entire business. B. when customers keep returning because they are satisfied with the company's products. C. when the company acquires a good location for its business. D. when the company has exceptional management.

only when there is an exchange transaction involving the purchase of an entire business.

Joe is a warehouse custodian and also maintains the accounting record of the inventory held at the warehouse. An assessment of this situation indicates A. establishment of responsibility is violated. B. documentation procedures are violated. C. independent internal verification is violated. D. segregation of duties is violated

segregation of duties is violated

A measure of a company's solvency is the A. current ratio. B. times interest earned. C. asset turnover ratio. D. acid-test ratio.

times interest earned

Information that is presented in a clear fashion, so that users of that information can interpret it is an example of A. relevance. B. faithful representation. C. understandability. D. comparability.

understandability.

A revenue generally A. leaves total assets unchanged. B. increases assets and stockholders' equity. C. increases assets and decreases stockholders' equity. D. increases assets and liabilities.

increases assets and stockholders' equity.

The authorized stock of a corporation A. is indicated in its charter. B. only reflects the initial capital needs of the company. C. is indicated in its by-laws. D. must be recorded in a formal accounting entry.

is indicated in its charter

If the retained earnings account increases from the beginning of the year to the end of the year, then A. a net loss is less than dividends. B. net income is less than dividends. C. additional investments are less than net losses. D. net income is greater than dividends.

net income is greater than dividends.

If sales revenues totals $400,000, cost of goods sold is $310,000, and operating expenses are $60,000, how much is the gross profit? A. $340,000 B. $30,000 C. $400,000 D. $90,000

$90,000

Financial information is presented below: Operating expenses $ 33000 Sales returns and allowances 8000 Sales discounts 5000 Sales revenue 162000 Cost of goods sold 110000 The profit margin ratio would be A. 0.24. B. 0.14. C. 0.26. D. 0.04.

0.04.

Which of the following correctly identifies normal balances of accounts? Assets Debit Liabilities Credit Common Stock Credit Revenues Debit Expenses Credit Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Credit Assets Credit Liabilities Debit Common Stock Debit Revenues Credit Expenses Debit Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit

Assets Debit Liabilities Credit Common Stock Credit Revenues Credit Expenses Debit

Which of the following should not be included in the physical inventory of a company? A. Goods in transit from another company shipped FOB shipping point B. Goods held on consignment from another company C. Goods shipped on consignment to another company D. All of the answer choices are correct

Goods held on consignment from another company

Which of the following is not an accounting assumption? A. Integrity B. Going concern C. Periodicity D. Economic entity

Integrity

Correct! Because the bank considers the depositor's account balance to be a liability, a credit memo causes an increase in the bank account and a debit memo causes a decrease. Interest earned increases the liability of the bank and is accomplished with a credit memo. For which item below might a bank issue a credit memorandum to a depositor's account? A. Interest earned B. Monthly service charges C. Outstanding checks D. An NSF check

Interest earned

Which of the following should be classified as an "other" receivable? A. Interest receivable B. Notes receivable C. Accounts receivable D. Trade receivables

Interest receivable

With the assumption of costs and prices generally rising, which of the following is correct? A. FIFO provides the closest cost of goods sold to replacement cost. B. LIFO provides the closest valuation of inventory on the balance sheet to replacement cost. D. Specific identification method provides the closest cost of goods sold to replacement cost on the income statement. C. LIFO provides the closest valuation of cost of goods sold to replacement cost of inventory sold.

LIFO provides the closest valuation of cost of goods sold to replacement cost of inventory sold.

If a company fails to adjust an Unearned Rent Revenue account for rent that has been recognized, what effect will this have on that month's financial statements? A. Liabilities will be overstated and revenues will be understated. B. Assets will be overstated and revenues will be understated. C. Assets will be understated and revenues will be understated. D. Liabilities will be understated and revenues will be understated.

Liabilities will be overstated and revenues will be understated.

Correct! NSF checks are deductions made by the bank from the company's account that must be removed from the company's accounting records with an adjusting entry that credits Cash and debits Accounts Receivable. For which of the following will an adjusting entry be required as the result of a bank reconciliation? A. Deposits in transit B. Outstanding checks C. Bank errors D. NSF checks

NSF checks

Which is true if the ending inventory is overstated? A. Net income will be overstated and the stockholders' equity will be understated. B. Net income will be overstated and the stockholders' equity will be overstated. C. Net income will be understated and the stockholders' equity will be overstated. D. Net income will be understated and the stockholders' equity will be understated.

Net income will be overstated and the stockholders' equity will be overstated.

On March 1, 2017, Freeze Company hires a new employee who will start to work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not A.Yes, failure to record the event would cause the financial statements to be misleading. B. Yes, the company is now obligated to pay the employee, thus that event must be recorded. C. No, hiring an employee is an important event; however it is not an economic event that should be recorded. D. No, the financial position of the company has been changed, however, the dollar amount of the transaction is not yet known

No, hiring an employee is an important event; however it is not an economic event that should be recorded.

Which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system? A. Payment of freight costs for goods received from a supplier B. Payment of freight costs for goods shipped to a customer C. A purchase of merchandise D. A return of merchandise inventory to the supplier

Payment of freight costs for goods shipped to a customer

Which of the following statements concerning users of accounting information is incorrect? A. Present creditors are considered external users. B. Management is considered an internal user. C. Regulatory authorities are considered internal users. D. Taxing authorities are considered external users.

Regulatory authorities are considered internal users.

Ace Company is a retail store. Due to competition, it is having trouble selling its products. Thus, inventory has been building up. Ace's current ratio has not changed for the past three years, in spite of the inventory build up. Which of the following statements is true? A. The management of Ace should consider the effect of slow moving inventory on its liquidity. B. As long as the current ratio remains constant, there is no need for concern. C. The composition of current assets and current liabilities does not matter. D. Since inventory is a current asset, any increases should automatically cause the current ratio to rise.

The management of Ace should consider the effect of slow moving inventory on its liquidity.

Which one of the following is not an ownership right of a stockholder in a corporation? A. To share in assets upon liquidation. B. To vote in the election of directors. C. To declare dividends on the common stock. D. To share in corporate earnings.

To declare dividends on the common stock

Which statement is true when recording the sale of goods for cash in a perpetual inventory system? A. Two journal entries are necessary: one to record the receipt of cash and reduction of inventory, and one to record the the cost of goods sold and sales revenue. B. Two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and to reduce inventory. C. Only one journal entry is necessary. It will record cost of goods sold and reduce of inventory. D. Only one journal entry is necessary. It will record the receipt of cash and sales revenue.

Two journal entries are necessary: one to record the receipt of cash and sales revenue, and one to record the cost of goods sold and to reduce inventory

The balance in the Accumulated Depreciation account represents the A. amount to be deducted from the cost of the plant asset to arrive at its fair market value. B. amount charged to expense since the acquisition of the plant asset. C. cash fund to be used to replace plant assets. D. amount charged to expense in the current period.

amount charged to expense since the acquisition of the plant asset.

Liabilities are generally classified on a balance sheet as A. tangible liabilities and intangible liabilities. B. present liabilities and future liabilities. C. current liabilities and long-term liabilities. D. small liabilities and large liabilities

current liabilities and long-term liabilities

Sales taxes collected by a retailer are reported as A.expenses. B. contingent liabilities. C. current liabilities. D. revenues.

current liabilities.

A current liability is a debt that can reasonably be expected to be paid A. within one year, or the operating cycle, whichever is longer. B. out of cash currently on hand. C. between 6 months and 18 months. D. out of currently recognized revenues.

within one year, or the operating cycle, whichever is longer.