Accounting final exam
Bonds with a face value of $500,000 and a quoted price of 102.25 have a selling price of A) $601,125 B) $510,125 C) $510,013 D) $511,250
D
Which one of the following is not an objective of a system of internal controls? A) Safeguard company assets B) Enhance the accuracy and reliability of accounting records C) Fairness of the financial statements D) Eliminate the risk of error
D
An intangible asset A) derives its value form the rights and privileges it provides the owner B) is worthless because it has no physical substance C) is converted into a tangible asset during the operating cycle D) cannot be classified on the balance sheet because it lacks physical substance
A
Which statement is false? A) Taking a physical inventory involves actually counting, weighing, or measuring each kind of inventory by hand B) No matter whether 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 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
N3 corporation has assets of $4,200,000, common stock of $1,092,000 and retained earnings of $665,000. What are the creditors' claims on their assets? A) $3,773,000 B) $1,757,000 C) $2,443,000 D) $4,627,000
C
Under the accrual basis of accounting: A) Cash must be received before revenue is recognized B) Net income is calculated by matching cash outflows against cash inflows C) Events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received D) The ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles
C
Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? A) Yes, they are treated as revenue at the time of receipt because the company has access to the cash B) No, the amount of revenue cannot be adequately determined until the company completes the work C) Yes, the intent of the company is to perform the work and the customer is confident that the services will be completed D) No, revenue cannot be recognized until the performance obligation is satisfied
D
At December 31, 2022, Howell Company's inventory records indicated a balance of $878,000. Upon further investigation it was determined that this amount included the following $168,000 in inventory purchases made by Howell shipped from the seller 12/27/22 terms FOB destination, but not due to be received until January 2 $111,000 in goods sold by Howell with terms FOB destination on December 27. The goods are not expected to reach their destination until January 6 $9,000 of goods received on consignment from Westwood company What is Howell's correct ending inventory balance at December 31, 2022? A) $710,000 B) $869,000 C) $590,000 D) $701,000
D
In a classified balance sheet, assets are usually classified as A) Current assets; long-term assets; property, plant, and equipment; intangible assets B) Current assets; long-term investments; property, plant, and equipment; and common stocks C) Current assets; long-term investments; tangible assets; and intangible assets D) current assets; long-term investments; property, plant, and equipment; and intangible assets
D
A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in: A) January B) February C) The period when the workers receive their checks D) Either January or February depending on when the pay period ends
A
A paid dividend A) decreases assets and stockholders' equity B) increases assets and stockholders' equity C) increases assets and decreases stockholders' equity D) decreases assets and increases stockholders' equity
A
Collection of a $600 Accounts Receivable A) Increases an asset $600; decreases an asset $600 B) Increases an asset $600; decreases a liability $600 C) Decreases a liability $600; increases stockholders' equity $600 D) Decreases an asset $600; decreases a liability $600
A
Expenses are recognized when A) They contribute to the production of revenue B) They are paid C) They are billed by the supplier D) The invoice is received
A
Goods held on consignment are A) Never owned by the consignee B) Included in the consignee's ending inventory C) Kept for sale on the premises of the consignor D) Included as part of no one's inventory
A
Having one person responsible for the related activities of ordering merchandise, receiving goods, and paying for them A) Increases the potential errors and fraud B) Decreases the potential fore errors and fraud C) Is an example of good internal control D) Is a good example of safeguarding the company's assets
A
If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck, A) Assets will be increased by $10,000 B) Equity will be reduced by $40,000 C) Assets will be increased by $40,000 D) Assets will be unchanged
A
If a company reports a net loss, it A) May still have a net increase in cash B) Will not be able to pay cash dividends C) Will not be able to get a loan D) Will not be able to make capital expenditures
A
If goods in transit are shipped FOB destination A) The seller has legal title of the goods until they are delivered B) The buyer has legal title of the goods until they are delivered C) the transportation company has legal title to the goods while the goods are in transit D) No one has legal title to the goods until they are delivered
A
Internal controls are not designed to safeguard assets from A) Natural disasters B) Employee theft C) Robbery D) Unauthorized use
A
Otto's Tune-Up Shop follows the revenue recognition principle. Otto services a car on August 31. The customer picks up the vehicle on September 1 and mails the payment to Otto on September 5. Otto receives the check in the mail on September 6. When should Otto show that the revenue was recognized? A) August 31 B) August 1 C) September 5 D) September 6
A
Powers Corporation received a cash advance of $500 from a customer. As a result of this event, A) Assets increased by $500 B) Equity increased by $500 C) Liabilities decreased by $500 D) Both assets and equity increased by $500
A
The Allowance for Doubtful Accounts is necessary because A) When Recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay B) Uncollectible accounts that are written off must be accumulated in a separate account C) A liability results when a credit sale is made D) Management needs to accumulate all the credit losses over the years
A
The acquisition of land by issuing common stock is A) A noncash transaction that is not reported in the body of a statement of cash flows B) A cash transaction and would be reported in the body of a statement of cash flows C) A noncash transaction and would be reported in the body of statement of cash flows D) Only reported if the statement of cash flows is prepared using the direct method
A
The amount of stock that may be issued according to the corporation's charter is referred to as the A) Authorized stock B) Issued stock C) Unissued stock D) Outstanding stock
A
The order of presentation of activities on the statement of cash flows is A) Operating, investing, and financing B) Operating, financing, and investing C) Financing, operating, and investing D) Financing, investing, and operating
A
The par value of a stock A) Is legally significant B) Reflects the most recent market price C) Is selected by the SEC D) Is indicative of the worth of the stock
A
The present value of a $10,000, 5-year bond, will be less than $10,000 if A) Contractual rate of interest is less than the market rate interest B) Contractual rate of interest is greater than the market rate interest C) Bond is convertible D) Contractual rate of interest is equal to the market rate of interest
A
Using accrual accounting, expenses are recorded and reported only A) When they are incurred whether or not cash is paid B) When they are incurred and paid at the same time C) If they are paid before they are incurred D) If they are paid after they are incurred
A
The term "FOB" denotes A) Free on board B) Freight on board C) Free only (to) buyer D) Freight charge on buyer
A
Under a perpetual inventory system, A) Accounting records continuously disclose the amount of inventory B) Increases in inventory resulting from purchases are debited to purchases C) There is no need for a year-end physical count D) The account purchase returns and allowances is credited when goods are returned to vendors
A
Under the allowance method, writing off an uncollectible account A) Affects only balance sheet accounts B) Affects both balance sheet and income statement accounts C) Affects only income statement accounts D) Is not an acceptable practice
A
When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory? A) To check the accuracy of the perpetual inventory records B) To determine cost of goods sold for the accounting period C) To compute inventory ratios D) All are a purpose of taking a physical inventory when a perpetual inventory system is used
A
When collection is made on Accounts Receivable, A) total assets will remain the same B) stockholders equity will increase C) total assets will increase D) total assets will decrease
A
Which of the follow is the most appropriate definition of accounting? A) The information system that identifies, records, and communicates the economic events of an organization to interested users B) A means of collecting information C) The interconnected network of subsystems necessary to operate a business D) Electronic collection, organization, and communication of vast amounts of information
A
Which of the following should not be included in the physical inventory of a company? A) Goods held on consignment from another company B) Goods in transit from another company shipped FOB shipping point C) Goods shipped on consignment to another company D) All of these answer choices should be included
A
Which of the following would not be classified as a long-term liability? A) Current maturities of long-term debt B) Bonds payable C) Mortgage payable D) Lease liabilities
A
Which one of the following items is not generally used in preparing a statement of cash flows? A) Adjusted trial balance B) Comparative balance sheets C) Current income statement D) Additional information
A
A corporation issues $300,000, 10%, 5-year bonds on January 1, 2020, for $287,400. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of the bond interest expense to be recognized in December 31, 2020's adjusting entry is A) $32,520 B) $30,000 C) $27,480 D) $2,520
A ($300,000 x .1) + ($12,600/5)
McLaughlin Company issued common stock for proceeds of $558,000 during 2022. The company paid dividends of $99,000 and issued a long-term note payable for $375,000 in exchange for equipment during the year. The company also purchased treasury stock that had a cost of $81,000. The financing section of the statement of cash flows will report net cash inflows of A) $378,000 B) $834,000 C) $459,000 D) $753,000
A ($558,000 - $99,000 - $81,000)
A corporation has the following account balances: Common Stock, $1 par value, $80,000; Paid-in Capital in Excess of Par Value, $2,700,000. Based on this information, the A) Legal capital is $2,780,000 B) Number of shares issued is 80,000 C) Number of shares outstanding is 2,780,000 D) Average price per share issued is $3.48
B
A disadvantage of the corporate form of organization is A) Professional management B) Tax treatment C) Ease of transfer of ownership D) Lack of mutual agency
B
A revenue generally A) Increases assets and liabilities B) Increases assets and stockholders' equity C) Increases assets and decreases stockholders' equity D) leaves total assets unchanged
B
Buildings are classified on the balance sheet as A) A current asset B) Property, plant, and equipment C) An intangible asset D) A long-term investment
B
Carson Company on July 15 sells merchandise on account to Tayler Co. for $3,000, terms 2/10, n/30. On July 20, Tayler Co. returns merchandise worth $1,200 to Carson Company. On July 24, payment is received from Tayler Co. for the balance due. What is the amount of cash received? A) $1,800 B) $1,764 C) $1,740 D) $3,000
B
Detailed records of goods held for resale are not maintained under a A) Perpetual Inventory System B) Periodic Inventory System C) Double entry accounting system D) Single entry accounting system
B
During the year, Megan's Pet Shop's merchandise inventory decreased by $60,000. If the company's cost of goods sold for the year was $900,000, purchases would have been A) $960,000 B) $840,000 C) $780,000 D) Unable to determine
B
Financial information is presented below: Operating expenses ($28,000) Sales return and allowances ($7,000) Sales discounts ($3,000) Sales Revenue ($150,000) Cost of goods sold ($91,000) Gross profit would be A) $56,000 B) $49,000 C) $52,000 D) $59,000
B
Financial information is presented below: Operating expenses ($28,000) Sales return and allowances ($7,000) Sales discounts ($3,000) Sales Revenue ($150,000) Cost of goods sold ($91,000) The gross profit rate would be A) .33 B) .35 C) .65 D) .27
B
Gross profit equals the difference between A) Net income and operating expenses B) Sales revenue and cost of goods sold C) Sales revenue and operating expenses D) Sales revenue and cost of goods sold plus operating expenses
B
If the market interest rate for a bound is higher than the stated interest rate, the bond will sell at A) A premium B) A discount C) Par D) Either a discount or premium
B
If total liabilities decreased by $4,000, then A) Stockholders' equity must have decreased by $4,000 B) Assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000 C) Assets and stockholders' equity each increased by $2,000 D) Assets must have increased by $4,000
B
Incurring an expense A) Decreases assets and liabilities B) Decreases stockholders' equity C) Leaves stockholders' equity unchanged D) Is basically the same as a liability
B
Inventory costing methods place primary reliance on assumptions about the flow of A) Goods B) Costs C) Resale prices D) Values
B
On January 15, Nifty Company sells merchandise on account to Martinez Associates for $5,000 with terms 3/10, n/30. On January 20, Martinez returns merchandise worth $1,000 to Nifty. On January 24, payment is received from Martinez for the balance due. What is the amount of cash received? A) $4,000 B) $3,880 C) $3,850 D) $2,800
B
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) Decrease C) Increase D) Be unaffected until the bonds mature
B
The expense recognition principle A) Requires that all credit losses be recorded when an individual customer cannot pay B) Necessitates the recording of an estimated amount for bad debts C) Results in the recording of a known amount for bad debt loss D) Is not involved in the decision of when to expense a credit loss
B
The factor which determines whether or not goods should be included in a physical count of inventory is A) Physical possession B) legal title C) Management's judgment D) Whether or not the purchase price has been paid
B
The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method? A) Sales Revenue B) Cost of Goods Sol C) Purchases D) Accounts Receivable
B
The following is selected information from L Corporation for the fiscal year ending October 31, 2022 Cash received from customers ($300,000) Revenue Recognized ($440,000) Cash paid for expenses ($170,000) Cash paid for computers on November 1, 2021 that will be used for 3 years ($48,000) Expenses incurred including any depreciation ($216,000) Proceeds from a bank loan, part of which was used to pay for computers ($100,000) Based on the accrual basis of accounting, what is L Corporation's net income for the year ending October 31, 2022? A) $254,000 B) $224,000 C) $208,000 D) $270,000
B
The interest expense recorded on an interest payment date is increased A) By the amortization of premium on bonds payable B) By the amortization of discount on bonds payable C) Only if the bonds were sold at face value D) Only if the market rate of interest is less than the stated rate of interest on that date
B
The partnership of a business organization A) Is a separate legal entity B) is a common form of organization for service-type business C) enjoys an unlimited life D) has limited liability
B
The present value of a bond is also known as its A) Face value B) Market price C) Future value D) Deferred value
B
The revenue recognition principle dictates that the revenue should be organized in the accounting records: A) When cash is received B) When the performance of the obligation is satisfied C) At the end of the month D) In the period that income taxes are paid
B
The statement of cash flows A) Must be prepared on a daily basis B) Summarizes the operating, financing, and investing activities of an entity C) Is another name for the income statement D) Is a special section of the income statement
B
The term legal capital is a descriptive term for A) Stockholders' equity B) Par value C) Residual equity D) Market value
B
Tomlinson Packaging Corporation began business in 2020 by issuing 50,000 shares of $5 par common stock for $8 per share and 5,000 shares of 6%, $10 par preferred stock for par. At year-end, the common stock had a market value of $10. On its December 31, 2020 balance sheet, Tomlinson Packaging would report A) Common Stock $500,000 B) Common Stock of $250,000 C) Common Stock of $400,000 D) Paid-in Capital of $330,000
B
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
Which of the following factors does not affect the initial market price of a stock? A) The company's anticipated future earnings B) The par value of the stock C) The current state of the economy D) The expected dividend rate per share
B
Which of the following is not considered an asset? A) Equipment B) Dividends C) Accounts receivable D) Inventory
B
A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized? A) December 5 B) December 10 C) November 30 D) December 1
C
Accounts receivable are valued and reported on the balance sheet A) In the investments section B) At gross amounts less sales returns and allowances C) At cash realizable value D) Only if they are not past due
C
Alt Corp. issues 5,000 shares of $10 par value common stock at $14 per share. When the transaction is recorded, credits are made to: A) Common Stock $50,000 and Paid-in Capital in Excess of Stated Value $20,000 B) Common Stock $70,000 C) Common Stock $50,000 and Paid-in Capital in Excess of Par Value $20,000 D) Common Stock $50,000 and Retained Earnings $20,000
C
Cash receipts from interest and dividends are classified as A) Financing activities B) Investing activities C) Operating activities D) either financing or investing activities
C
During 2022, Lowes Company sold equipment with a book value of $120,000 for proceeds of $145,000. The company purchased new equipment for $320,000 by signing a long-term note payable. No other transactions impacted long-term asset accounts during 2022. The investing section of the statement of cash flows will report A) Net cash outflows of $295,000 B) Net cash outflows of $175,000 C) Net cash inflows of $145,000 D) Net cash inflows of $25,000
C
Financing activities involve A) Lending money B) Acquiring investments C) Issuing debt D) Acquiring long-lived assets
C
If Norben Company issues 6,000 shares of $5 par value common stock for $210,000, the account A) Common Stock will be credited for $210,000 B) Paid-in Capital in Excess of Par Value will be credited for $30,000 C) Paid-in Capital in Excess of Par Value will be credited for $180,000 D) Cash will be debited for $180,000
C
If an individual asset is increased, then A) there could be an equal decrease in a specific liability B) there could be an equal decrease in stockholders' equity C) there could be an equal decrease in another asset D) none of these answer choices are correct
C
If services are rendered on account, then A) Assets will decrease B) Liabilities will increase C) Stockholders' equity will increase D) Liabilities will decrease
C
If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount A) Less than face value B) Equal to face value C) Greater than face value D) That cannot be determined
C
Internal controls are concerned with A) Only manual systems of accounting B) The extent of government regulations C) Safeguarding assets D) Preparing income tax returns
C
On a classified balance sheet, short-term investments are classified as A) intangible assets B) property, plant, and equipment C) current assets D) long-term investments
C
The authorized stock of a corporation A) Only reflects the initial capital needs of the company B) Is indicated in its by-laws C) Is indicated in its charter D) Must be recorded in a formal accounting entry
C
The carrying value of bonds will equal the market price A) At the close of every trading day B) At the end of the fiscal period C) On the date of issuance D) Every six months the date interest is paid
C
The custodian of a company asset should A) Have access to the accounting records for that asset B) Be someone outside the company C) Not have access to the accounting records for that asset D) Be an accountant
C
The payment of a cash dividend would be classified as a(n) A) Operating activity B) Investing activity C) Financing activity D) Significant noncash activity
C
The primary purpose of the statement of cash flows is to A) Provide information about the investing and financing activities during a period B) Prove that revenues exceed expenses if there is a net income C) Provide information about the cash receipts and cash payments during a period D) Facilitate banking relationships
C
Under the allowance method, Bad Debt Expense is recorded A) When an individual account is written off B) When the loss amount is known C) For an amount that the company estimates it will not collect D) Several times during the accounting period
C
Under the concept of establishment of responsibility, how many people should have the ultimate responsibility? A) Everyone in the organization B) An individual and his/her supervisor C) Only one individual D) The CEO
C
When using the periodic system the physical inventory count is used to determine A) Only the sales value of goods in the ending inventory B) Both the cost of the goods in ending inventory and the sales value of goods sold during the period C) Both the cost of the goods sold and the cost of ending inventory D) Only the cost of merchandise sold during the period
C
Which of the following transactions has no effect on retained earnings? A) Incurred expense B) Paid dividends C) Purchased land D) Earned revenue
C
A consequence of separation of duties is that A) Theft by employees becomes impossible B) Operations become extremely inefficient because of the constant training of employees C) More employees will need to be bonded D) Theft is still possible when several employees are invovled
D
A current asset is A) the last asset purchased by a business B) an asset which is currently being used to produce a product or service C) usually found as a separate classification in the income statement D) expected to be converted to cash or used in the business within one year or one operating cycle, whichever is longer
D
APS Company issued 20,000 shares of $1 par common stock for $40 per share during 2022. The company paid dividends of $48,000 and issued long-term notes payable of $440,000 during the year. What amount of cash flows from financing activities will be reported on the statement of cash flows? A) $12,000 net cash inflow B) $352,000 net cash inflow C) $705,000 net cash outflow D) $1,192,000 net cash inflow
D
Gomez Corporation issues 900, 10-year, 8%, $1,000 bonds dated January 1, 2020, at 96. The journal entry to record the issuance will show a A) Debit to Cash for $900,000 B) Credit to Discount on Bonds Payable for $36,000 C) Credit to Bonds Payable for $864,000 D) Debit to cash for $864,000
D
If Pratt Company issues 5,000 shares of $5 par value common stock for $210,000, the account A) Common Stock will be credited for $185,000 B) Paid-in Capital in Excess of Par Value will be credited for $210,000 C) Paid-in Capital in Excess of Par Value will be credited for $235,000 D) Cash will be debited for $210,000
D
La More Company had the following transactions during 2021: Sales of $9,000 on account Collected $4,000 for services to be performed in 2022 Paid $3,750 cash in salaries for 2021 Purchased airline tickets for $500 in December for a trip to take place in 2022 What is La More's 2021 net income using accrual accounting? A) $5,750 B) $9,750 C) $9,250 D) $5,250
D
On January 1, 2020, $3,000,000, 10-year, 10% bonds were issued for $2,910,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize discount on bonds payable, the monthly amortization is A) $29,1000 B) $9,000 C) $2,424 D) $750
D
Reeves Company is taking a physical inventory on March 31, the last day of its fiscal year. Which of the following must be included in this inventory count? A) Goods in transit to Reeves, FOB destination B) Goods that Reeves is holding on consignment for Parker Company C) Goods in transit that Reeves has sold to Smith Company, FOB shipping point D) Goods that Reeves is holding in inventory on March 31 for which the related Accounts Payable is 15 days past due
D
The issuance of debt to purchase assets would be classified as a(n) A) Operating activity B) Investing activity C) Financing activity D) None of these answers are correct
D
These are selected account balances on December 31, 2012. Land $150,000 Land (held for future use) 225,000 Buildings 1,200,000 Inventory 300,000 Equipment 675,000 Furniture 150,000 Accumulated Depreciation 450,000 What is the total amount of property, plant, and equipment that will appear on the balance sheet? A) $2,250,000 B) $1,950,000 C) $2,700,000 D) $1,725,000
D
Which of the following companies would be most likely to use a perpetual inventory system? A) Grain company B) Beauty salon C) Clothing store D) Fur dealer
D
Which of the following is incorrect A) Gross profit - Operating expenses = Net Income B) Sales revenue - Cost of goods sold - Operating expenses = Net income C) Net income + Operating expenses = Gross profit D) Operating expenses - Cost of goods sold = Gross profit
D
Which of the following is not one of the three forms of business organization? A) Corporations B) Partnerships C) Proprietorships D) Investors
D
On January 1, 2020, $4,000,000, 5-year, 10% bonds were issued for $4,240,000. Interest is paid annually on January 1. If the issuing corporation uses the straight-line method to amortize premium on bonds payable, the monthly amortization amount is A) $35,332 B) $48,000 C) $4,800 D) $4,000
D ($4,240,000 - $4,000,000) / ( 5 years x 12 months)