Accounting Fundamentals Practice Exam Chs 4-5
Under a perpetual inventory system, acquisition of merchandise for resale is debited to the a. Merchandise Inventory account. b. Purchases account. c. Supplies account. d. Cost of Goods Sold account
A. Merchandise Inventory account.
As an incentive for customers to pay their accounts promptly, a business may offer its customers a. a sales discount. b. free delivery. c. a sales allowance. d. a sales return.
A. a sales discount.
The Freight-in account a. increases the cost of merchandise purchased. b. is contra to the Purchases account. c. is a permanent account. d. has a normal credit balance.
A. increases the cost of merchandise purchased.
A post-closing trial balance will show a. only permanent account balances. b. only temporary account balances. c. zero balances for all accounts. d. the amount of net income (or loss) for the period.
A. only permanent account balances.
West Company has the following account balances: Purchases $30,000 Sales Returns and Allowances 4,000 Purchase Discounts 2,500 Freight-in 1,875 Delivery Expense 2,500 The cost of goods purchased for the period is a. $32,500. b. $29,375. c. $31,875. d. $27,875.
B. $29,375.
Bryan Company purchased merchandise from Cates Company with freight terms of FOB shipping point. The freight costs will be paid by the a. seller. b. buyer. c. transportation company. d. buyer and the seller.
B. buyer.
The information for preparing a trial balance on a work sheet is obtained from a. financial statements. b. general ledger accounts. c. general journal entries. d. business documents.
B. general ledger accounts.
The income statement and balance sheet columns of Pine Company's work sheet reflects the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. $58,000 $45,000 $34,000 $47,000 To enter the net income (or loss) for the period into the above work sheet requires an entry to the a. income statement debit column and the balance sheet credit column. b. income statement credit column and to the balance sheet debit column. c. income statement debit column and the income statement credit column. d. balance sheet debit column and to the balance sheet credit column.
B. income statement credit column and to the balance sheet debit column.
Income from operations is gross profit less a. administrative expenses. b. operating expenses. c. other expenses and losses. d. selling expenses.
B. operating expenses.
The final closing entry to be journalized is typically the entry that closes the a. revenue accounts. b. owner's drawing account. c. owner's capital account. d. expense accounts.
B. owner's drawing account.
The income statement and balance sheet columns of Pine Company's work sheet reflects the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. $58,000 $45,000 $34,000 $47,000 The net income (or loss) for the period is a. $45,000 income. b. $13,000 income. c. $13,000 loss. d. not determinable.
C. 13,000 loss.
Which one of the following is usually prepared only at the end of a company's annual accounting period? a. Preparing financial statements b. Journalizing and posting adjusting entries c. Journalizing and posting closing entries d. Preparing an adjusted trial balance
C. Journalizing and posting closing entries
Which of the following accounts has a normal credit balance? a. Sales Returns and Allowances b. Sales Discounts c. Sales d. Selling Expense
C. Sales
The respective normal account balances of Sales, Sales Returns and Allowances, and Sales Discounts are a. credit, credit, credit. b. debit, credit, debit. c. credit, debit, debit. d. credit, debit, credit.
C. credit, debit, debit.
In terms of liquidity, merchandise inventory is a. more liquid than cash. b. more liquid than accounts receivable. c. more liquid than prepaid expenses. d. less liquid than store equipment.
C. more liquid than prepaid expenses.
A company shows the following balances: Sales $1,000,000 Sales Returns and Allowances 180,000 Sales Discounts 20,000 Cost of Goods Sold 600,000 What is the gross profit percentage? a. 50% b. 75% c. 40% d. 25%
D. 25%
The journal entry to record a credit sale is a. Cash Sales b. Cash Service Revenue c. Accounts Receivable Service Revenue d. Accounts Receivable Sales
D. Accounts Receivable Sales
Tyler Company paid $630 on account to a creditor. The transaction was erroneously recorded as a debit to Cash of $360 and a credit to Accounts Receivable, $360. The correcting entry is a. Accounts Payable ...................... 630 Cash .............................. 630 b. Accounts Receivable ................... 360 Cash .............................. 360 c. Accounts Receivable ................... 360 Accounts Payable .................. 360 d. Accounts Receivable ................... 360 Accounts Payable ...................... 630 Cash .............................. 990
D. Accounts Receivable ................... 360 Accounts Payable ...................... 630 Cash .............................. 990
The account, Supplies, will appear in the following debit columns of the work sheet. a. Trial balance b. Adjusted trial balance c. Balance sheet d. All of these
D. All of these
Which of the following expressions is incorrect? a. Gross profit - operating expenses = net income b. Sales - 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. Operating expenses - cost of goods sold = gross profit
Liabilities are generally classified on a balance sheet as a. small liabilities and large liabilities. b. present liabilities and future liabilities. c. tangible liabilities and intangible liabilities. d. current liabilities and long-term liabilities.
D. current liabilities and long-term liabilities.
Preparing a work sheet involves a. two steps. b. three steps. c. four steps. d. five steps.
D. five steps.
Closing entries are a. an optional step in the accounting cycle. b. posted to the ledger accounts from the work sheet. c. made to close permanent or real accounts. d. journalized in the general journal.
D. journalized in the general journal.
