Accounting Final Multiple Choice

In the month of November, Kinsey Company Inc. wrote checks in the amount of $18,500. In December, checks in the amount of $25,316 were written. In November, $16,936 of these checks were presented to the bank for payment, and $21,766 were presented in December. What is the amount of outstanding checks at the end of November? $4,830 $6,816 $5,114 $1,564

$1,564

The maturity value of a $50,000, 9%, 60-day note receivable dated July 3 is $50,750. $54,500. $59,000. $50,000.

$50,750.

Glenn Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays within the discount period? $8,100 $8,280 $8,820 $9,000

$8,820

The interest on a $10,000, 8%, 1-year note receivable is $10,800. $800. $10,000. $10,080.

$800.

Days in inventory is calculated by dividing 365 days by the inventory turnover. 365 days by average inventory. the inventory turnover by 365 days. average inventory by 365 days.

365 days by the inventory turnover.

A company purchased office equipment for $40,000 and estimated a salvage value of $8,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is 5%. 20%. 25%. 40%.

40%

The account, Supplies, will appear in the following debit columns of the worksheet. All of these answer choices are correct Trial balance. Adjusted trial balance. Balance sheet.

All of these answer choices are correct

Which of the following time periods would not be referred to as an interim period? Quarterly Semi-annually Annually Monthly

Annually

The basic accounting equation cannot be restated as Owner's Equity + Liabilities = Assets. Assets + Liabilities = Owner's Equity. Assets - Liabilities = Owner's Equity. Assets - Owner's Equity = Liabilities.

Assets + Liabilities = Owner's Equity.

Which of the following is not a basic principle of designing and developing an effective accounting information system? Approval by the SEC Usefulness Cost-effectiveness Flexibility

Approval by the SEC

The entry to replenish a petty cash fund includes a credit to Freight-in. Cash. Postage Expense. Petty Cash.

Cash.

Which of the following is not an advantage of computerized accounting systems? Data is entered only once in computerized accounting systems. Computerized accounting systems eliminate many errors resulting from human intervention. Computerized accounting systems provide up-to-date information. Computerized accounting systems eliminate entering of transaction information.

Computerized accounting systems eliminate entering of transaction information.

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the tax method. FIFO method. LIFO method. average-cost method.

FIFO method.

The cost flow method that often parallels the actual physical flow of merchandise is the LIFO method. average-cost method. gross profit method. FIFO method.

FIFO method.

Which of the following would not be considered an internal user of accounting data? President of the company Controller of the company Production manager Internal Revenue Service

Internal Revenue Service

In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? FIFO LIFO average Cost income tax expense for the period will be the same under all assumptions

LIFO

Which of the following is not a common cost flow assumption used in costing inventory? Last-in, first-out Average cost Middle-in, first-out First-in, first-out

Middle-in, first-out

Which of the following is shown on the income statement of both merchandising and service companies? Cost of goods sold Operating expenses Sales revenue Gross profit

Operating expenses

Which of the following statements is incorrect? Gross profit - operating expenses = net income. Net income + operating expenses = gross profit. Sales revenue - the cost of goods sold - operating expenses = net income. Operating expenses - the cost of goods sold = gross profit.

Operating expenses - cost of goods sold = gross profit.

A debit is not the normal balance for which of the following? Expense account. Asset account. Owner's Capital account. Owner's drawings account.

Owner's Capital account.

Each of the following accounts is closed to Income Summary except Expenses. Owner's Drawings. Revenues. All of these are closed to Income Summary.

Owner's Drawings.

Which of the following is not an element of the fraud triangle? Opportunity. Financial pressure. Segregation of duties. Rationalization.

Segregation of duties.

Which of the following is a true statement about manual and electronic accounting systems? The design and structure of manual and electronic systems are fundamentally different. Few small companies begin with manual systems. Many companies convert from electronic to manual systems. The design and structure of manual and electronic systems are essentially the same

The design and structure of manual and electronic systems are essentially the same.

Which one of the following items is not considered a part of the cost of a truck purchased for business use? Freight charges Truck license Cost of lettering on side of truck Sales tax

Truck license

Which of the following is not a step in the accounting process? Recording Verification Communication Identification

Verification

On November 2, 2014, Kasdan Company has cash sales of $ 6,000 from merchandise having a cost of $ 3,600. The entries to record the day's cash sales will include: a $6,000 debit to Accounts Receivable. a $3,600 credit to Inventory. a $3,600 credit to Cost of Goods Sold. a $6,000 credit to Cash.

a $3,600 credit to Inventory.

Accumulated Depreciation is an owner's equity account. a liability account a contra asset account. an expense account.

a contra asset account.

The one characteristic that all entries recorded in a cash payments journal have in common is a debit to the accounts payable or purchases accounts. that they all represent purchases of merchandise. a credit to the cash account. that they are all posted to the accounts payable subsidiary ledger.

a credit to the cash account

A subsidiary ledger is used in place of the general ledger if the general ledger is destroyed or stolen. a group of accounts with a common characteristic that provides detailed information about a control account in the general ledger. a group of accounts used by branches and subsidiaries of a corporate business. used to post excess transactions if a general ledger account becomes full during an accounting period.

a group of accounts with a common characteristic that provides detailed information about a control account in the general ledger.

Bad Debt Expense is considered an avoidable cost in doing business on a credit basis. an internal control weakness. avoidable unless there is a recession. a necessary risk of doing business on a credit basis.

a necessary risk of doing business on a credit basis.

Liabilities of a company would not include salaries and wages payable. notes payable. accounts receivable. accounts payable.

accounts receivable.

Adjusting entries can be classified as postponements and advances. deferrals and postponements. accruals and advances. accruals and deferrals.

accruals and deferrals.

Posting should be performed in account number order. accumulates the effects of journalized transactions in the individual accounts. involves transferring all debits and credits on a journal page to the trial balance. is accomplished by examining ledger accounts and seeing which ones need updating.

accumulates the effects of journalized transactions in the individual accounts.

On a bank reconciliation, deposits in transit are deducted from the bank balance. added to the book balance. added to the bank balance. deducted from the book balance.

added to the bank balance.

An adjusting entry is always a compound entry. affects a balance sheet account and an income statement account. affects two balance sheet accounts. affects two income statement accounts.

affects a balance sheet account and an income statement account.

The intent of the Sarbanes Oxley Act is to all of these answer choices are correct. increase severity of penalties for fraudulent financial activity. decrease likelihood of future corporate scandals. reduce unethical corporate behavior.

all of these answer choices are correct.

The closing entry process consists of closing out the owner's capital account. all temporary accounts. all permanent accounts. all asset and liability accounts.

all temporary accounts.

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

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

The term "receivables" refers to cash to be paid to debtors. amounts due from individuals or companies. cash to be paid to creditors. merchandise to be collected from individuals or companies.

amounts due from individuals or companies.

Accounts that normally have debit balances are assets, liabilities, and owner's drawings. assets, expenses, and owner's capital. assets, owner's drawings, and expenses. assets, expenses, and revenues.

assets, owner's drawings, and expenses.

the resources a business owns are called liabilities. owner's equity. revenues. assets.

assets.

A perpetual inventory system would more likely be used by a(n) automobile dealership. drugstore. hardware store. convenience store.

automobile dealership.

The financial statement that reports assets, liabilities, and owner's equity is the statement of cash flow. income statement. owner's equity statement. balance sheet.

balance sheet.

The ending owner's equity amount is shown on the statement of cash flows only. both the balance sheet and the owner's equity statement. owner's equity statement only. balance sheet only.

both the balance sheet and the owner's equity statement.

The units-of-activity method is generally not suitable for factory machinery. airplanes. buildings. delivery equipment.

buildings.

Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the buyer and the seller. seller. buyer. transportation company.

buyer.

Unearned revenues are revenue for services performed and recorded as liabilities before they are received. revenue for services performed and already received in cash and recorded. cash received and a liability recorded before services are performed. revenue for services performed but not yet received in cash or recorded.

cash received and a liability recorded before services are performed.

Retailers generally consider sales from the use of national credit card sales as a cash sale. collection of a note receivable. credit sale. collection of an accounts receivable.

cash sale.

Accounts Receivable and Accounts Payable are examples of both nominal accounts and controlling accounts. controlling accounts. subsidiary ledger accounts. nominal accounts.

controlling accounts.

If companies have identical inventoriable costs but use different inventory flow assumptions when the price of goods have not been constant, then the cost of goods available for sale of the companies will be identical. cost of goods sold of the companies will be identical. ending inventory of the companies will be identical. net income of the companies will be identical.

cost of goods available for sale of the companies will be identical.

A petty cash fund of $200 is replenished when the fund contains $5 in cash and receipts of $190. The entry to replenish the fund would debit Miscellaneous Expense for $5. credit Cash Over and Short for $5. credit Petty Cash for $190. debit Cash Over and Short for $5.

debit Cash Over and Short for $5.

Payment of accounts payable decreases assets and decreases liabilities. decreases owner's equity and decreases liabilities. increases assets and decreases liabilities. decreases assets and increases owner's equity.

decreases assets and decreases liabilities.

In a bank reconciliation, a bank service charge is deducted from the bank balance. added to the bank balance. deducted from the book balance. added to the book balance.

deducted from the book balance.

Two methods of accounting for uncollectible accounts are the allowance method and the net realizable method. direct write-off method and the accrual method. direct write-off method and the allowance method. allowance method and the accrual method.

direct write-off method and the allowance method.

An intangible asset does not have physical substance, yet often is very valuable. cannot be classified on the balance sheet because it lacks physical substance. is converted into a tangible asset during the operating cycle. is worthless because it has no physical substance.

does not have physical substance, yet often is very valuable.

The cost of goods available for sale is allocated between beginning inventory and cost of goods purchased. beginning inventory and ending inventory. beginning inventory and cost of goods on hand. ending inventory and cost of goods sold.

ending inventory and cost of goods sold.

The expense recognition principle matches expenses with revenues. assets with liabilities. customers with businesses. creditors with businesses.

expenses with revenues.

In a manufacturing business, inventory that is ready for sale is called raw materials inventory. finished goods inventory. store supplies inventory. work in process inventory.

finished goods inventory.

Preparing a worksheet involves four steps. two steps. five steps.

five steps.

In a worksheet, net income is entered in the income statement (Cr) and balance sheet (Cr) columns. income statement (Dr) and balance sheet (Dr) columns. income statement (Cr) and balance sheet (Dr) columns. income statement (Dr) and balance sheet (Cr) columns.

income statement (Dr) and balance sheet (Cr) columns.

Revenues and expenses are reported on the balance sheet. owner's equity statement. statement of cash flows. income statement.

income statement.

Debits decrease assets and increase liabilities. increase assets and decrease liabilities. decrease both assets and liabilities. increase both assets and liabilities.

increase assets and decrease liabilities.

Credits decrease both assets and equity. increase liabilities and decrease assets. decrease both assets and liabilities. increase both assets and liabilities.

increase liabilities and decrease assets.

The investment of cash by the owner decreases assets. increases owner's equity. increases revenues. decreases expenses.

increases owner's equity.

Physical controls do not include locked warehouses for inventories. safes and vaults to store cash. bank safety deposit boxes for important papers. independent bank reconciliations.

independent bank reconciliations.

A credit to a revenue account is an error. indicates an increase in revenues earned. indicates a decrease in revenues earned. must be accompanied by a debit to an expense account.

indicates an increase in revenues earned.

A subsidiary ledger frees the general ledger from details of individual balances. external transactions. internal transactions. the control account.

individual balances.

Monthly and quarterly time periods are called fiscal periods. calendar periods. interim periods. quarterly periods.

interim periods.

A ledger should show accounts in alphabetical order. contains only asset and liability accounts. is a collection of the entire group of accounts maintained by a company. is a book of original entry.

is a collection of the entire group of accounts maintained by a company.

The left side of an account is always the debit side. is always the credit side. is always the balance side. may represent the debit side or the credit side.

is always the debit side.

A revenue account is increased by debits. has a normal balance of a debit. is decreased by credits. is increased by credits.

is increased by credits.

Entering transaction data in the journal is known as journalizing. posting. balancing. recording.

journalizing.

he four subdivisions for plant assets are intangibles, land, buildings, and equipment. furnishings and fixtures, land, buildings, and equipment. land, land improvements, buildings, and equipment. property, plant, equipment, and land.

land, land improvements, buildings, and equipment.

Plant assets decline in service potential over their useful lives except for land improvements. equipment. land. buildings.

land.

A petty cash fund should not be used for loans to the petty cash custodian. customer lunches. taxi fares. postage due.

loans to the petty cash custodian.

The Sarbanes-Oxley Act requires that all major U.S. corporations maintain a petty cash fund. prepare bank reconciliations monthly. maintain an adequate system of internal control. must file reports with the National Commission on Fraudulent Financial Reporting.

maintain an adequate system of internal control.

The balance of a control account in the general ledger is always greater than the composite balance of individual accounts in a related subsidiary ledger. must equal the composite balance of individual accounts in a related subsidiary ledger. must always be zero. must equal the amount of total assets.

must equal the composite balance of individual accounts in a related subsidiary ledger.

Claims for which formal instruments of credit are issued as proof of the debt are accounts receivable. other receivables. interest receivable. notes receivable.

notes receivable.

Interest is usually associated with bad debts. accounts receivable. notes receivable. doubtful accounts.

notes receivable.

A sales journal is used to record credit sales of merchandise, sales returns and allowances, and sales discounts. only cash sales of merchandise. sales of all assets on credit and for cash. only credit sales of merchandise.

only credit sales of merchandise.

Net income is gross profit - other expenses and losses. selling expenses. administrative expenses. operating expenses.

operating expenses.

In order to close the owner's drawings account, the owner's capital account should be credited. owner's capital account should be debited. income summary account should be debited. income summary account should be credited.

owner's capital account should be debited.

A company would not likely use subsidiary ledgers for inventory. accounts receivable. equipment. owner's capital.

owner's capital.

Prepaid expenses are paid and recorded in an asset account before they are used or consumed. paid and recorded in an asset account after they are used or consumed. incurred and already paid or recorded. incurred but not yet paid or recorded.

paid and recorded in an asset account before they are used or consumed.

The cost of land includes all of the following except accrued property taxes. parking lots. real estate brokers' commissions. closing costs.

parking lots.

If a company is given credit terms of 2/10, n/30, it should hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time. recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price. pay within the discount period and recognize a savings. pay within the credit period but don't take the trouble to invest the cash while waiting to pay the bill.

pay within the discount period and recognize a savings.

Equipment is classified in the balance sheet as a current asset. a long-term investment. an intangible asset. property, plant, and equipment.

property, plant, and equipment.

An adjusted trial balance is prepared after the financial statements are completed. is a required financial statement under generally accepted accounting principles. cannot be used to prepare financial statements. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.

proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.

Bookkeeping, as opposed to accounting, usually involves only recording. reporting. identifying. communicating.

recording.

Inventory is reported as a current asset on the balance sheet. generally valued at the price for which the goods can be sold. often reported as a miscellaneous expense on the income statement. reported under the classification of Property, Plant, and Equipment on the balance sheet.

reported as a current asset on the balance sheet.

An enterprise which sells goods to customers is known as a proprietorship. corporation. service firm. retailer.

retailer.

Accrued revenues are revenue for services performed but not yet received in cash or recorded. cash received and a liability recorded before services are performed. revenue for services performed and already received in cash and recorded. revenue for services performed and recorded as liabilities before they are received.

revenue for services performed but not yet received in cash or recorded.

Net income will result during a time period when assets exceed revenues. assets exceed liabilities. expenses exceed revenues. revenues exceed expenses.

revenues exceed expenses.

Gross profit will result if operating expenses are greater than cost of goods sold. sales revenue are greater than operating expenses. sales revenue are greater than cost of goods sold. operating expenses are less than net income.

sales revenue are greater than cost of goods sold.

Having different individuals receive cash, record cash receipts, and hold the cash is an example of establishment of responsibility. documentation procedures. segregation of duties. independent internal verification.

segregation of duties.

The best managed companies will have a very strict credit policy. some accounts that will prove to be uncollectible. a very lenient credit policy. no uncollectible accounts.

some accounts that will prove to be uncollectible.

If a company sells its accounts receivables to a factor, the factor pays a commission to the seller. the seller defers recognition of sales revenue until the account is collected. the seller pays a commission to the factor. there is a gain on the sale of the receivables.

the seller pays a commission to the factor.

Accountants refer to an economic event that affects a company's financial statements as a recording event. purchase event. transaction. sale event.

transaction.

The owner's drawings account appears in which column(s) of the worksheet? trial balance, adjusted trial balance, and balance sheet columns. trial balance and adjusted trial balance columns only. adjusted trial balance and balance sheet columns only. balance sheet column only.

trial balance, adjusted trial balance, and balance sheet columns.

An auto manufacturer would classify vehicles in various stages of production as merchandise inventory. raw materials. work in process. finished goods.

work in process.