Accounting 207 Final Exam
3. What is the value of the cost of goods sold if periodic FIFO is used? a) $2,500 b) $1,000 c) $1,700 d) $1,800
d) $1,800
Linkin Park has a $7,800 liability to Motorhead. When Linkin Park makes a partial payment of $2,800 on this liability, which of the following is true about the journal entry made by Linkin to record this transaction? a) Retained Earnings is credited for $2,800 b) Accounts Payable is credited for $5,000 c) Cash is debited for $2,800 d) Accounts payable is debited for $2,800
d) Accounts payable is debited for $2,800
1. Which statement is false? a) Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory on hand. b) No matter whether a periodic or perpetual inventory system is used, all companies need to determine inventory quantities at the end of each accounting period. c) An inventory count is generally more accurate when goods are not being sold or received during the counting. d) Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period.
d) Companies that use a perpetual inventory system must take a physical inventory to determine inventory on hand on the balance sheet date and to determine cost of goods sold for the accounting period.
5. The payroll for the last four work days of 2014 has neither been recorded nor paid. It is $4,000. Your adjusting entry at 12/31/14 should include a: a) Credit to Cash of $5,000 b) Debit to Salaries Expense of $5,000 c) Debit to Salaries Payable of $4,000 d) Debit to Salaries Expense of $4,000
d) Debit to Salaries Expense of $4,000
5. Turkey Dressing and Salad Company sells merchandise on account for $20,000 to Pilgrim's Market with credit terms 2/10, n30 on October 15. Pilgrim's Market returns $5,000 worth of merchandise along with a check to settle the account on October 20. What is the amount of the check? a. $15,000 b. $19,600 c. $19,610 d. $14,700
d. $14,700
23. The amount of uncollectible accounts at the end of the year is estimated to be $25,000 using the Aging Schedule for Accounting Receivable and the Allowance Method. The Allowance for Doubtful Accounts account has an $8,000 credit before adjustment. What should the balance in the Allowance for Doubtful Accounts account be after adjustment? a. $8,000 b. $17,000 c. $33,000 d. $25,000
d. $25,000
5. Our company started September with total Retained Earnings of $272,000. You are the accountant for our company. You recorded $40,000 in revenues, $24,000 in expenses, equipment that was purchased for $10,000, and dividends of $4,000 were distributed from the business. What was the total you recorded for Retained Earnings at September 30, 2011? a. $272,000 debit b. $16,000 credit c. $274,000 credit d. $284,000 credit
d. $284,000 credit
36. Given the data below for Flo's Flower Shop in 2011, its first year of operation, determine net income under the Accrual basis of accounting for the year ending 2011. Sales of $5,400 on account Collected $2,400 for services to be performed in 2012 Paid $1,550 cash in salaries for 2011 Purchased airline tickets for $300 in December to attend a flower show in Las Vegas in January 2012 a. $4,150 b. $6,550 c. $6,250 d. $3,850
d. $3,850
37. On November 1, Maize Products Company purchased a new lawn mower for the maintenance and ground crew. The company paid $5,000 cash for the mower. Other costs associated with the mower were: transportation costs, $300; sales tax paid $200; and installation of a mulching attachment, $100. The cost recorded for the machine was: a. $5,000. b. $5,200. c. $5,500. d. $5,600.
d. $5,600.
7. A company shows the following balances: Sales $500,000 Sales Returns and Allowances $125,000 Sales Discounts $ 45,000 Bad Debt Expense $ 30,000 Cost of Goods Sold $ 150,000 What is the gross profit rate? (Round your answer, if necessary.) a. 60% b. 50% c, 70% d. 55%
d. 55%
39. Adjusting entries are made to ensure that a. Expenses are recognized in the period in which they are incurred b. Revenues are recorded in the period in which they are earned c. Balance Sheet and Income Statement accounts have correct balances at the end of an accounting period d. All of the above
d. All of the above
26. Which of the following statements is true? a. When operating income is positive, revenue is greater than expenses. b. When net income is negative, retained earnings fall, all other things equal. c. When net income is positive, shareholders' equity increases, all other things equal. d. All of the above.
d. All of the above.
8. Which of the following statements is true? a. Publicly traded U.S. companies must provide an annual report to their shareholders when operating conditions change significantly. b. Notes to the financial statements do not need to be included in the annual report because that information is only for internal users. c. Both A and B are True d. Both A and B are False
d. Both A and B are False
29. Which of these accounts would normally never be affected by an adjusting journal entry? a. Supplies b. Revenues c. Expenses d. Cash
d. Cash
44. Reeses Candy Corn Company is taking a physical inventory on October 31, the last day of its fiscal year. Which of the following must be included in this inventory count? a. Goods in transit to Reeses, FOB destination. b. Goods that Reeses is holding on consignment for Hershey Company c. Goods in transit that Reeses has sold to Crystal Candy, FOB shipping point d. Goods that Reeses is holding in inventory on October 31 for which the related Accounts Payable is 15 days past due.
d. Goods that Reeses is holding in inventory on October 31 for which the related Accounts Payable is 15 days past due.
4. All of the following requirements about internal controls were enacted under the Sarbanes Oxley Act of 2002 except a. Independent outside auditors must attest to the level of internal control b. Companies must develop sound internal controls over financial reporting c. Companies must continually assess the functionality of internal controls d. Independent outside auditors must eliminate redundant internal control
d. Independent outside auditors must eliminate redundant internal control
24. Our company's president donates a large amount of her own money to charity and receives significant publicity that includes the company's name. How would this appear in the balance sheet? a. It would appear as a current asset. b. It would appear as a liability. c. It would appear as goodwill. d. It would not appear in the balance sheet.
d. It would not appear in the balance sheet.
35. On September 1, 2011, Alpha Corporation paid $48,000 cash for equipment that will be used in business operations. The equipment will be used for four years. Alpha records depreciation expense of $48,000 for the calendar year ending December 31, 2011. Which accounting principle has been violated? a. Depreciation Principle b. No Principle has been violated c. Revenue Recognition Principle d. Matching Principle or Expense Recognition Principle
d. Matching Principle or Expense Recognition Principle
38. The primary difference between accrued revenues and unearned revenues is that accrued revenues have: a. Not been earned and accrued revenues have been earned b. Been paid and unearned revenues have not been paid c. Been recorded and unearned revenues have not been recorded d. Not been recorded and unearned revenues have been recorded
d. Not been recorded and unearned revenues have been recorded
16. Porteus Company prepares quarterly reports, which it distributes to all shareholders and other entities that rely on its accounting information. Which of the following is the key assumption in financial reporting that Porteus follows? a. Monetary Unit Assumption b. Going Concern Assumption c. Economic Entity Assumption d. Periodicity Assumption
d. Periodicity Assumption
40. An accounting firm earned $2,000 for audit services with the $2,000 to be paid in the future. No entry was made at the time the audit services were provided. If the $2,000 has not been received by the end of the accounting period and no adjusting entry is made, this would cause: a. Revenues to be overstated b. Net Income to be overstated c. Liabilities to be understated d. Revenues to be understated
d. Revenues to be understated
53. On a multiple step Income Statement, the amount of Sales Returns and Allowances is a. Added into Selling Expenses b. Subtracted from Gross Profit to determine Net Sales c. Added in the calculation of Cost of Goods Sold d. Subtracted from Gross Sales to determine Net Sales
d. Subtracted from Gross Sales to determine Net Sales
17. The New Age Software Company sold $11 million of computer games in the second quarter. The company received payment for $7.5 million of these before the end of the quarter. a. The company's Income Statement would show sales revenue of $7.5 million. b. The company's Income Statement would show accounts receivable of $3.5 million. c. The company's Income Statement would show expenses $3.5 million. d. The company's Income Statement would show sales revenue of $11 million.
d. The company's Income Statement would show sales revenue of $11 million.
34. Which of the following statements most appropriately describes the purpose of depreciating a long lived tangible asset? a. To indicate how the asset has physically deteriorated b. To show that the asset will eventually and gradually become obsolete c. To record that the asset's market value declines over time d. To match the cost of the asset to the period in which it generates revenues
d. To match the cost of the asset to the period in which it generates revenues
15. Different companies using the same accounting principles is an application of a. consistency b. materiality c. full disclosure d. comparability
d. comparability
7. The information needed to determine whether a company is using accounting methods similar to those of its competitors would be found in the a. auditor's report b. balance sheet c. management discussion and analysis section d. notes to the financial statements
d. notes to the financial statements
40. Recording depreciation expense a. reduces both net operating income and the amount of cash generated by a company. b. does not affect net operating income or the amount of cash generated by a company. c. reduces net operating income and increases the amount of cash generated by a company. d. reduces net operating income but does not affect the amount of cash generated by a company
d. reduces net operating income but does not affect the amount of cash generated by a company
7. Given the following information, find net income: Accounts Receivable $98,000 *Income Tax Expense 69,000 Retained Earnings 252,000 *Sales Revenue 495,000 *Advertising Expense 15,000 Unearned Revenue 176,000 Accounts Payable 50,000 *Supplies Expense 46,000 *Utilities Expense 3,000 *Cost of Goods Sold 5,000 Net Income is: a) $357,000 b) $347,000 c) $360,000 d) $342,000
a) $357,000
4. Which one of the following would not cause a bank to debit a depositor's account? a) Collection of a note receivable. b) Bank service charge. c) Wiring of funds to other locations. d) Checks marked NSF.
a) Collection of a note receivable.
You issued 1,000 shares of Common Stock for $100,000. The entry includes a: a) Credit to Common Stock b) Debit to Common Stock c) Credit to Cash d) None of the above
a) Credit to Common Stock
Supplies is a (an): a) Current Asset b) Expense c) Revenue d) Liability
a) Current Asset
6. You borrow $10,000 on October 1, 2014. The interest and principal are not due until 7/31/18, but interest costs of $500 have been incurred as of 12/31/14. The adjusting entry should include a: a) Debit to Interest Expense of $500 b) Credit to Cash of $500 c) Debit to Interest Revenue of $500 d) Credit to Interest Revenue of $500
a) Debit to Interest Expense of $500
3. Autumn Candy Company recorded the following cash transactions for the year: Paid $180,000 for salaries Paid $80,000 to purchase office equipment Paid $20,000 for utilities Paid $8,000 in dividends Collected $300,000 from customers What was Autumn Candy's net cash provided by operating activities? a. $100,000 b. $20,000 c. $120,000 d. $92,000
a. $100,000
48. Welsh company purchased an item for inventory that cost $15 per unit and was marked to sell at $25. It was determined that the replacement cost is $14 per unit. No purchases in the near future are anticipated. Using the lower-of-cost -or market rule, the per unit valuation for inventory should be a. $14 b. $25 c. $15 d $10
a. $14
24 . In reviewing Accounts Receivable, Net Accounts Receivable is $17,000 before writing off a $1,500 account. What is Net Accounts Receivable after the write off? a. $17,000 b. $ 1,500 c. $18,500 d. $15,500
a. $17,000
29 . The maturity value of a $2,000, 6%, 2 month Note Receivable dated October 10th is a. $2,020. b. $2,010. c. $2,000. d. $2,120.
a. $2,020.
37. Refer back to the information given in the previous question. What is Flo's 2011 Net Income using Cash basis accounting? a. $550 b. $1,150 c. $6,250 d. $850
a. $550
2. The liability created by a business when it purchases yellow highlighters and paperclips on credit from suppliers is termed a(n) a. Accounts Payable b. Accounts Receivable c. Supplies d. Unearned Revenue
a. Accounts Payable
18. Jack's O'Lantern Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and ending inventory was overstated by $12,000. What would be the effect of this error? a. Income would be overstated. b. Income would be understated. c. Ending Retained Earnings would be understated. d. Cost of Goods Sold would be overstated.
a. Income would be overstated.
9. Kilo Industries unpacks a $5,000 shipment of already recorded microchips and finds that $200 worth of them are defective. Kilo agrees to keep the microchips in exchange for a $100 discount. a. Kilo credits Inventory $100 and debits Accounts Payable $100. b. Kilo debits Inventory $100 and credits Accounts Payable $100. c. Kilo credits Inventory $4,900 and debits Accounts Payable $4,900. d. Kilo debits Inventory $4,900 and credits Accounts Payable $4,900.
a. Kilo credits Inventory $100 and debits Accounts Payable $100.
18. In 2007, the Dallas Leather Goods Company bought a stitching machine that cost $20,000. In 2011, a new stitching machine of the same model sells for $28,000 and the company's used machine is worth $18,000. a. On the Balance Sheet for 2011 the machine would be listed for $20,000. b. On the Balance Sheet for 2011 the machine would be listed for $28,000. c. On the Balance Sheet for 2011 the machine would be listed for $18,000. d. On the Balance Sheet for 2011 the machine would be listed for the average of the
a. On the Balance Sheet for 2011 the machine would be listed for $20,000.
28. One major difference between prepaid and accrual adjustments is: a. Prepaid adjustments involve previously recorded transactions and accruals new transactions. b. Prepaid adjustments are made after taxes and accrual before taxes. c. Prepaid adjustments are made annually and accrual monthly. d. Prepaid adjustments are influenced by estimates of future events and accruals are not
a. Prepaid adjustments involve previously recorded transactions and accruals new transactions.
45. A Purchase Allowance refers to a(n) a. Reduction in price for damaged or defective goods b. Discount for paying for goods on time c. Increase in units purchased d. Decrease in units purchased
a. Reduction in price for damaged or defective goods
13. Two of the major characteristics that make accounting information useful are a. Relevance and Faithful Representation b. Verifiability and Timeliness c. Comparability and Flexibility d. Understandability and Consistency
a. Relevance and Faithful Representation
10. Which of the following is a true statement? a. Sales Discounts is a contra account to revenue. b. Purchase Discounts is a contra account to revenue. c. Purchase Discounts is a contra account to inventory. d. Sales Discounts is a contra account to inventory. e. None of the above is a true statement.
a. Sales Discounts is a contra account to revenue.
33. The Bach Corporation has $3.5 million in Plant Assets and has an accumulated depreciation account of $1.1 million. Which of the following statements is true? a. The book value of Plant Assets is $2.4 million. b. The market value of Plant Assets is $3.5 million. c. The carrying value of Plant Assets is $3.5 million. d. The resale value of Plant Assets is $2.4 million.
a. The book value of Plant Assets is $2.4 million.
2. What is the value of ending inventory if periodic LIFO is used? a) $1,700 b) $1,000 c) $2,500 d) $1,800
b) $1,000
10. Chicago Pizza reports Net Sales of $1,000,000. Gross Profit of $550,000, and Net Income of $80,000. Chicago's Cost of Goods Sold is: a) $370,000 b) $450,000 c) $920,000 d) $630,000
b) $450,000
9. Kid Rock purchased $5,000 of inventory on account but decided to return it all. Using the perpetual method to record the return, Kid Rock would: a) Debit Inventory b) Credit Inventory c) Credit Purchase Discount d) Credit Purchase Allowance
b) Credit Inventory
8. Dave Matthews had the following transactions: 1/1/14 Purchased 200 hair dryers from Hootie for $10 each 1/5/14 Sold 40 of the above hair dryers for $40 each Using the perpetual method, the entry from January 5 to record the removal of the inventory from the store would include: a) Credit to Cost of Goods Sold for $400 b) Debit to Cost of Goods Sold for $400 c) Debit to Inventory for $400 d) Credit to Sales for $400
b) Debit to Cost of Goods Sold for $400
You paid your car insurance six months in advance, paying $4,800 on October 1, 2014. The adjusting entry on 12/31/2014 for October through December should include a: a) Debit to Insurance Expense of $1,200 b) Debit to Insurance Expense of $2,400 c) Credit to Prepaid Insurance of $4,800 d) Debit to Prepaid Insurance of $2,400
b) Debit to Insurance Expense of $2,400
11. Delta Company sold an asset for $15,000 in cash and had a gain on sale of $5,000. How much cash did Delta receive when the asset was sold? (Ignore Income taxes) a. $0 b. $15,000 c. $10,000 d. $5,000
b. $15,000
32. Maple Syrup Industries showed the following balances at the end of its first year: Cash $11,000 Debit Prepaid Insurance $700 Debit Accounts Receivable $3,500 Debit Accounts Payable $2,800 Credit Notes Payable $4,200 Credit Common Stock $5,400 Credit Dividends $700 Debit Revenues $21,000 Credit Expenses $17.500 Debit What did Maple Syrup Industries show as total credits on its trial balance? a. $34,100 b. $33,400 c. $32,700 d. $34,800
b. $33,400
22. Cash had a beginning balance of $68,900. During the month, we credited $16,000 and debited $18,300. At the end of the month, the balance is: a. $2,300 b. $71,200 c. $66,600 d. ($2,300)
b. $71,200
4. Which of the following is TRUE? a. Amounts received from issuing stock are revenues. b. Amounts paid out as dividends are not expenses. c. Amounts paid out as dividends are reported on the Income Statement d. Amounts received from issued stock are reported on the Income Statement
b. Amounts paid out as dividends are not expenses.
25. Top Notch Lawn Service bought $4,000 worth of grass fertilizer, (part of supplies) in June. This will be applied equally from June through the month of September. If the Lawn Service's accountant forgets to make the appropriate adjusting entry for the use of the fertilizer in the month of September, what impact would this have on the Lawn Service's September financial statements? a. Assets are understated, Shareholder's Equity is understated. b. Assets are overstated, Shareholder's Equity is overstated. c. Expenses are overstated. d. Liabilities are overstated.
b. Assets are overstated, Shareholder's Equity is overstated.
32. The Plymouth Convenience Store Chain buys new coffee machines for $450,000 and pays an additional $50,000 for installation. One half of the total cost is paid in cash; the other half is financed. How should the company record this transaction? a. Debit Cash for $250,000, debit Notes Payable for $250,000, and credit Equipment for $500,000. b. Debit Equipment for $500,000, credit Cash for $250,000, and credit Notes Payable for $250,000. c. Debit Cash for $250,000, debit Notes Payable for $250,000 credit Equipment for $450,000, and credit Expenses for $50,000. d. Debit Equipment for $450,000, debit Expenses for $50,000, credit Cash for $250,000, and credit Notes Payable for $250,000.
b. Debit Equipment for $500,000, credit Cash for $250,000, and credit Notes Payable for $250,000.
2. Which of the following is NOT one of the main factors that contribute to fraudulent activity? a. Opportunity b. Incompatible Duties c. Financial Pressure d. Rationalization
b. Incompatible Duties
35. A truck costing $12,000 and on which $9,000 of accumulated depreciation has been recorded was disposed of for $2,000 cash. The entry to record this event would include a: a. Gain of $1,000. b. Loss of $1,000. c. credit to the Truck account for $3,000. d. credit to Accumulated Depreciation for $9,000
b. Loss of $1,000.
3. John Cabot Company received an order from a customer on October 1. The order was shipped on October 18 FOB Shipping Point and received by the customer on October 20. The customer sent a check for full payment on November 10. John Cabot Company received the check on November 12 and deposited it in its bank account. John Cabot Company should record Sales Revenue related to this series of transactions on a. October 1. b. October 18. c. October 20. d. November 12.
b. October 18.
46. Which of the following transactions will NOT require an entry to adjust the merchandise inventory account in a perpetual inventory system? a. An approved Purchase Allowance for poor quality goods purchased. b. Payment of freight charges for goods shipped to a customer c. A Purchase Discount taken on goods ordered from a vendor d. Payment of freight charges for goods ordered from a vendor
b. Payment of freight charges for goods shipped to a customer
6. The management discussion and analysis ("MD&A") section of the annual report covers all the following aspects except a. The ability of the company to pay near-term obligations b. The certification criteria of the company's auditors c. The company's ability to fund operations and expansion d. The results of the company's operations
b. The certification criteria of the company's auditors
39. In 2010, Acme Delivery Service made an ordinary repair to a delivery truck at a cost of $300. Acme Delivery's accountant debited the asset account, Delivery Vehicles. Was this treatment an error, and if so, what will be the effect on the financial statements of Acme Delivery? a. The repair was accounted for correctly. b. The error increased assets and net income in 2010. c. In the years following 2010, net income will be too high. d. The error decreased net income in 2010.
b. The error increased assets and net income in 2010.
1. Which of the following is NOT an internal control activity for cash? a. The number of persons who have access to cash should be limited. b. The functions of record keeping and maintaining custody of cash should be combined. c. Surprise audits of cash on hand should be made occasionally. d. All cash receipts should be recorded promptly.
b. The functions of record keeping and maintaining custody of cash should be combined.
50. 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 employees
b. collusion
14. In order for accounting information to be relevant, it must a. have very little cost b. help predict future events or confirm prior expectations c. not be reported to the public d. be used by a lot of different firms
b. help predict future events or confirm prior expectations
52. A debit balance in the Allowance for Doubtful Accounts a. is the normal balance for that account b. indicates that actual bad debt write offs have exceeded previous provisions for bad debts c. indicates that actual bad debt writeoffs have been less than what was estimated d. cannot occur if the percentage of receivables method of estimated bad debts is used
b. indicates that actual bad debt write offs have exceeded previous provisions for bad debts
43. Goodwill should a. be written off as soon as possible against retained earnings. b. not be amortized because it has an indefinite life. c. written off as soon as possible as an expense. d. amortized over a maximum of thirty years.
b. not be amortized because it has an indefinite life.
If goods in transit are shipped FOB shipping point a. the seller has legal title to the goods until they are delivered. b. the buyer has legal title to the goods while the goods are in transit. 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. the buyer has legal title to the goods while the goods are in transit.
38. Which of the following is FALSE? a. Replacement of a truck's tires would be treated as a Revenue Expenditure. b. The cost of painting a classroom in Purnell Hall would be a Revenue Expenditure. c. Cost of replacing a roof on "The Bob" would be a Capital Expenditure. d. All of the above are false. e. None of the above are false. All are true.
e. None of the above are false. All are true.
20. The Cost of Goods Sold account is a/an: a. asset. b. contra asset. c. contra revenue. d. liability. e. expense.
e. expense.
6. Michael Scott Corp. has a $10,000 credit balance in the Allowance for Doubtful Accounts. If Scott uses the % of sales method, it assumes that bad debts will be 1% of sales. If sales are $1,000,000, the adjusting entry for Bad Debt Expense would include a: e) Debit to Bad Debt Expense of $20,000 f) Debit to Bad Debt Expense of $30,000 g) Debit to Bad Debt Expense of $10,000 h) Credit to Bad Debt Expense of $20,000
g) Debit to Bad Debt Expense of $10,000
7. Schrute, Inc. has a $8,000 credit balance in the Allowance for Doubtful Accounts. If Schrute uses the Aging of Accounts Receivable method, which tells them that $16,000 in accounts receivable will be uncollectible, the adjusting entry should include a: i) Debit to Bad Debt Expense of $16,000 j) Credit to Bad Debt Expense of $8,000 k) Debit to Bad Debt Expense of $8,000 l) Credit to Bad Debt Expense of $16,000
k) Debit to Bad Debt Expense of $8,000
9. A loss on the disposal of equipment is recorded when: m) The book value of the equipment is greater than the value received n) The book value of the equipment is less than the value received o) A salvage value exists p) A gain should not be recognized on the disposal of an asset
m) The book value of the equipment is greater than the value received
5. Nilson Company gathered the following reconciling information in preparing its August bank reconciliation: Cash balance per books, 8/31 $7,000 Deposits in transit 300 Notes receivable and interest collected by bank 1,700 ADD Bank charge for check printing 40 SUBTRACT Outstanding checks 4,000 NSF check 340 SUBTRACT The adjusted cash balance per books on August 31 is: a) $4,620. b) $8,020. c) $8,320 d) $4,920.
c) $8,320
8. The cost of an asset less its accumulated depreciation is called its: a) Net realizable Value b) Salvage Value c) Book Value d) Adjusted Cost
c) Book Value
21. Our company buys a $2 million warehouse paying $300,000 in cash and issuing $1.7 million in promissory notes. This will be posted as: a. $2 million credited and $300,000 debited to assets; $1.7 million debited to liabilities. b. $2 million debited to assets and $2 million credited to liabilities. c. $2 million debited and $300,000 credited to assets; $1.7 million credited to liabilities. d. $2 million credited to assets and $2 million debited to liabilities.
c. $2 million debited and $300,000 credited to assets; $1.7 million credited to liabilities.
9. Texas Tea Company has assets of $3.6 million, common stock of $936,000 and retained earnings of $571,000. What are the creditors' claims on their assets? a. $3,235,000 A = L + SE b. $1,507,000 c. $2,093,000 L = A-SE d. $3,965,000
c. $2,093,000
20. The Practical Pest Control Company has 10,000 gallons of insecticide supplies that cost $300,000, $100,000 of which has not yet been paid. The company expects to earn $800,000 for its services when it uses the insecticide. The company would report: a. $300,000 in Assets under Supplies and no Accounts Payable. b. $200,000 in Assets under Supplies and no Accounts Payable. c. $300,000 in Assets under Supplies and $100,000 in Liabilities under Accounts Payable. d. $800,000 in Assets under Inventory, $100,000 in liabilities under Accounts Payable and $500,000 in Shareholders' Equity.
c. $300,000 in Assets under Supplies and $100,000 in Liabilities under Accounts Payable.
41. Standish Company disposed of an asset at the end of year 8 of the asset's life originally estimated to be 10 years. The original cost was $50,000 with an estimated salvage value of $5,000 and it was being depreciated under the straight line method. It was sold for $10,000 cash. What was the gain or loss on the disposal at the end of year 8? a. No gain or loss b. $1,000 gain c. $4,000 loss d. $10,000 gain
c. $4,000 loss
8. Jamestown Company had the following information taken from its 2010 adjusted trial balance: Sales $200,000 Sales Discounts $ 4,000 Beginning Inventory $ 10,000 Purchases $140,000 Net Sales = $200,000 - 4,000 = $196,000 Net Sales - CGS = Gross Profit 196,000 - 130,000 = $66,000 A physical count of the merchandise on hand at the end of the year showed $20,000. Compute the gross profit that would appear in the income statement. a. $70,000 b. $74,000 c. $66,000 d. $62,000
c. $66,000
31. The matching principle states that: a. A company's procedures for calculating financial results should match industry standards. b. Revenues should only be recorded when there is a reasonable expectation of payment. c. A company should record expenses in the period in which it generates revenue. d. The dollar amount of debits should match the dollar amount of credits.
c. A company should record expenses in the period in which it generates revenue.
34. If the totals of a trial balance are not equal, it could be due to a. A failure to record a transaction or to post a transaction. b. Recording the same erroneous amount for both the debit and the credit parts of a transaction. c. An error in calculating the account balances. d. Recording the transaction more than once.
c. An error in calculating the account balances.
19. In order to determine whether generally accepted accounting principles were followed in the preparation of financial statements, which of the following processes is used? a. An examination of tax documents by the IRS. b. An examination of the annual report by the SEC. c. An examination of the financial statements and documents by an independent auditor. d. An examination of the financial statements by the FASB.
c. An examination of the financial statements and documents by an independent auditor.
36. Company A uses an accelerated depreciation method while Company S used the straight line method for an asset of the same cost and useful life. Other things being equal, which of the following is true? a. Company A will have higher net income in the early years but Company S will have higher net income towards the end of the asset's useful life. b. Company A will consistently have the larger net income until salvage value is reached. c. Company S will have higher net income in the early years but company A will have higher net income towards the end of the asset's useful life. d. Company S will consistently have the larger net income until salvage value is reached.
c. Company S will have higher net income in the early years but company A will have higher net income towards the end of the asset's useful life.
30. Josie Prickett has performed $500 of IT services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Josie make? a. Debit Cash and credit Unearned Revenue b. Debit Accounts Receivable and credit Unearned Revenue c. Debit Accounts Receivable and credit Service Revenue d. Debit Unearned Revenue and credit Service Revenue
c. Debit Accounts Receivable and credit Service Revenue
33. A company that receives money in advance of performing a service a. Debits Cash and credits Prepaid Revenue b. Debits Unearned Revenue and credits Accounts Payable c. Debits Cash and credits Unearned Revenue d. debits Cash and credits Accounts Receivable
c. Debits Cash and credits Unearned Revenue
31. If a company capitalizes (Capital Expenditure) costs that should be expensed (Revenue Expenditure), how is its income statement for the current period impacted? a. Net income will be lower than it should be. b. Revenues will be lower than they should be. c. Expenses will be lower than they should be. d. Assets will be lower than they should be.
c. Expenses will be lower than they should be.
12. Two companies report the same Cost of Goods Available for Sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using a. LIFO will have the highest ending Inventory. b. FIFO will have the highest Cost of Goods Sold. c. FIFO will have the highest ending Inventory. d. LIFO will have the lowest Cost of Goods Sold.
c. FIFO will have the highest ending Inventory.
47. For a jewelry retailer, which is an example of Other Revenues and Gains? a. Repair Revenue b. Unearned Revenue c. Gain on Sale of Display Cases d. Discount received for paying for Merchandise Inventory within the discount period
c. Gain on Sale of Display Cases
22. Net Accounts Receivable is: a. Gross Accounts Receivable minus Cost of Goods Sold. b. also know as Operating Income. c. Gross Accounts Receivable minus Allowance for Doubtful Accounts. d. also know as Net Income.
c. Gross Accounts Receivable minus Allowance for Doubtful Accounts.
12. Which of the following organizations issues accounting standards for countries outside the United States? a. SEC b. GAAP c. IASB d. FASB
c. IASB
54. Rupert Company is a retailer. On October 14, 2011, Rupert purchased merchandise inventory of a cost of $36,000. Credit terms were 2/10, n/30. The inventory was sold on account for $60,000 on October 21, 2011. Credit terms were 1/10, n/30. The Accounts Payable was settled on October 23, 2011 and the Accounts Receivables were settled on October 30, 2011. Which statement is correct? a. Cash flows were affected on October 14, and October 21. b. Gross Profit Percentage is 60%. c. On October 30, 2011, Customers should remit cash in the amount of $59,400. d. There is not enough information available to answer the question.
c. On October 30, 2011, Customers should remit cash in the amount of $59,400.
27. In September, a customer signed a contract to have his house painted and paid for the job in October. The company bought the paint in August on credit and paid the bill in September. The company painted the house in November. According to the revenue and matching principles, the revenue and expenses of this transaction should be recorded as: a. Revenue in November and expense in September. b. Revenue and expense in September. c. Revenue and expense in November d. Revenue in September and expense in August.
c. Revenue and expense in November
1. Which of the following statements is NOT true regarding the Sarbanes-Oxley Act ("SOX") of 2002? a. The Act calls for increased oversight responsibilities for boards of directors. b. The Act has resulted in increased penalties for financial fraud by top management. c. The Act calls for decreased independence of outside auditors reviewing corporate financial statements. d. The Act is meant to decrease the likelihood of unethical corporate behavior.
c. The Act calls for decreased independence of outside auditors reviewing corporate financial statements.
23. Cash $4,000 Notes Receivable 6,000 Equipment $10,000 Which of the following scenarios could explain the above journal entry? a. The company buys $10,000 of equipment for $4,000 in cash and $6,000 on credit. b. The company pays $4,000 in cash and $6,000 in notes payable to buy $10,000 in equipment, c. The company sells $10,000 in equipment, for $4,000 in cash and $6,000 on credit. d. The company sells $10,000 in equipment for $4,000 in cash and pays off $6,000 it owes on the equipment.
c. The company sells $10,000 in equipment, for $4,000 in cash and $6,000 on credit.
51. Notes or Accounts Receivables that result from Sales transactions are often called a. Sales Receivables b. Non-Trade Receivables c. Trade Receivables d. Merchandise Receivables
c. Trade Receivables
19. Under the perpetual inventory system: a. One entry is required to record a sales return b. Cost of Goods Sold cannot be determined unless a physical inventory is taken c. Two entries are required to record a sale d. None of the Above
c. Two entries are required to record a sale
25. Accrual accounting requires that the loss resulting from the failure of credit customers to pay their bills should a. not be recorded until cash is collected from the customer in settlement of the account because that is the only sure event. b. be estimated in the period in which sales are made but should not be recorded until the customer defaults because of the matching principle. c. be estimated and recorded in the period in which sales are made so that the period's expenses are matched with the period's revenues. d. be recognized in the period in which the account receivable proves to be uncollectible because that is the only date when the loss will really be known.
c. be estimated and recorded in the period in which sales are made so that the period's expenses are matched with the period's revenues.
27. Which of the following is NOT an accurate description of Allowance for Doubtful Accounts? a. contra account. b. asset account. c. shareholders' equity account. d. All of the above correctly describe Allowance for Doubtful Accounts
c. shareholders' equity account.