Accounting Practice Questions

Deborah Company's account balances at December 31 for Accounts Receivable and Allowance for Doubtful Accounts were $2,100,000 and $50,000 (Cr.), respectively. An aging of accounts receivable indicated that $180,000 are expected to become uncollectible. The amount of the adjusting entry for bad debts at December 31 isA)$130,000.B)$180,000.C)$210,000.D)$230,000.

A

Deposits in transit A)have been recorded on the company's books but not yet by the bank. B)have been recorded by the bank but not yet by the company. C)have not been recorded by the bank or the company. D)are checks from customers which have not yet been received by the company.

A

If a check correctly written and paid by the bank for $584 is incorrectly recorded on the company's books for $548, the appropriate treatment on the bank reconciliation would be to A)deduct $36 from the book's balance. B)add $36 to the book's balance. C)deduct $36 from the bank's balance .D)deduct $584 from the book's balance.

A

In the month of May, Kijak Company Inc. wrote checks in the amount of $84,000. In June, checks in the amount of $114,000 were written. In May, $75,000 of these checks were presented to the bank for payment, and $99,000 in June. What is the amount of outstanding checks at the end of May? A)$9,000 B)$15,000 C)$24,000 D)$30,000

A

Physical controls to safeguard assets do not include A)cashier department supervisors .B)vaults .C)employee identification badges. D)security guards.

A

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

A

The use of remittance advices for mail receipts is an example of A)documentation procedures. B)other controls. C)physical controls. D)independent internal verification.

A

Tomko Company purchased machinery with a list price of $96,000. They were given a 10% discount by the manufacturer. They paid $600 for shipping and sales tax of $4,500. Tomko estimates that the machinery will have a useful life of 10 years and a residual value of $30,000. If Tomko uses straight-line depreciation, annual depreciation will beA)$6,150.B)$6,108.C)$9,150.D)$5,640.

A

Under the lower-of-cost-or-market basis in valuing inventory, market is defined as A)current replacement cost. B)selling price. C)historical cost plus 10%. D)selling price less markup.

A

Inventories are estimated A)more frequently under a periodic inventory system than a perpetual inventory system .B)using the wholesale inventory method. C)more frequently under a perpetual inventory system than the periodic inventory system. D)using the net method.

A)more frequently under a periodic inventory system than a perpetual inventory system

.Kill Corporation's unadjusted trial balance includes the following balances (assume normal balances):Accounts Receivable$850,000Allowance for Doubtful Accounts15,000Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record?A)$15,000B)$36,000C)$50,100D)$51,000

B

A company purchased factory equipment on June 1, 2015, for $160,000. It is estimated that the equipment will have a $10,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2015, isA)$15,000.B)$8,750.C)$7,500.D)$6,250.

B

A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account.What is the amount of the finance charge?A)$8B)$20C)$80D)$240

B

An asset was purchased for $250,000. It had an estimated salvage value of $50,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $40,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in year 6 would beA)$30,000.B)$22,000.C)$15,000.D)$21,000.

B

Equipment that cost $420,000 and on which $200,000 of accumulated depreciation has been recorded was disposed of for $180,000 cash. The entry to record this event would include a A)gain of $40,000. B)loss of $40,000 .C)credit to the Equipment account for $220,000. D)credit to Accumulated Depreciation for $200,000.

B

Freight terms of FOBshipping point mean that the A)seller must debit freight out. B)buyer must bear the freight costs. C)goods are placed free on board at the buyer's place of business. D)seller must bear the freight costs.

B

Journal entries are required by the depositor for all of the following except A)collection of a note receivable. B)bank errors. C)bank service charges .D)an NSF check.

B

Kingston Company purchased a piece of equipment on January 1, 2015. The equipment cost $200,000 and had an estimated life of 8 years and a salvage value of $25,000. What was the depreciation expense for the asset for 2016 under the double-declining-balance method?A)$21,667.B)$37,500.C)$50,000.D)$39,063.

B

On January 15, 2015, Craig Company received a two-month, 9%, $9,000 note from William Pentel for the settlement of his open account. The entry by Craig Company on January 15, 2015 would include a: A)debit of $9,135 to Notes Receivable. B)debit of $9,000 to Notes Receivable. C)credit of $9,135 to Accounts Receivable. D)credit of $9,000 to Notes Receivable.

B

Pappy's Staff Junkets has the following inventory information.July1 Beginning Inventory 20 units at $905 Purchases 120 units at $9214 Sale 80 units $21 Purchases 60 units at $9530 Sale 56 units Assuming that a perpetual inventory system is used, what is the ending inventory on a LIFO basis?A)$5,848B)$5,860C)$6,068D)$6,346

B

Priscilla has the following inventory information. July1 Beginning Inventory 20 units at $19$ 3807 Purchases 70 units at $201,40022 Purchases 10 units at $23230 $2,010 A physical count of merchandise inventory on July 31 reveals that there are 35 units on hand. Using the average-cost method, the value of ending inventory isA)$680.B)$704.C)$723.D)$730.

B

The entry to replenish a petty cash fund includes a credit to A)Petty Cash. B)Cash. C)Freight-in. D)Postage Expense.

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

B

The principles of internal control include all of the following except A)establishment of responsibility. B)combining of duties. C)physical, mechanical, and electronic controls. D)independent internal verification.

B

To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a A)debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. B)debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts. C)debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. D)debit to Loss on Credit Sales Revenue and a credit to Accounts Receivable.

B

Under the direct write-off method of accounting for uncollectible accounts A)the allowance account is increased for the actual amount of bad debt at the time of write-off. B)a specific account receivable is decreased for the actual amount of bad debt at the time of write-off. C)balance sheet relationships are emphasized. D)bad debt expense is always recorded in the period in which the revenue was recorded.

B

A company purchased factory equipment on April 1, 2015 for $160,000. It is estimated that the equipment will have a $20,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2015 isA)$16,000.B)$14,000.C)$10,500.D)$12,000.

C

A plant asset cost $90,000 when it was purchased on January 1, 2008. It was depreciated by the straight-line method based on a 9-year life with no salvage value. On June 30, 2015, the asset was discarded with no cash proceeds. What gain or loss should be recognized on the retirement? A)No gain or loss. B)$20,000 loss. C)$15,000 loss. D)$10,000 gain.

C

An aging of a company's accounts receivable indicates that $5,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $900 credit balance, the adjustment to record bad debts for the period will require a A)debit to Bad Debt Expense for $5,000. B)debit to Allowance for Doubtful Accounts for $4,100. C)debit to Bad Debt Expense for $4,100. D)credit to Allowance for Doubtful Accounts for $5,000.

C

Depletion is A)a decrease in market value of natural resources. B)the amount of spoilage that occurs when natural resources are extracted. C)the allocation of the cost of natural resources to expense. D)the method used to record unsuccessful patents.

C

Depreciation is a process of A)asset devaluation. B)cost accumulation. C)cost allocation. D)asset valuation.

C

Don's Copy Shop bought equipment for $450,000 on January 1, 2014. Don estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2015, Don decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2015?A)$150,000B)$ 60,000C)$ 75,000D)$112,500

C

If a mining company extracts 1,500,000 tons in a period but only sells 1,200,000 tons, A)total depletion on the mine is based on the 1,200,000 tons. B)depletion expense is recognized on the 1,500,000 tons extracted. C)depletion expense is recognized on the 1,200,000 tons extracted and sold. D)a separate accumulated depletion account is set up to record depletion on the 300,000 tons extracted but not sold.

C

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

C

In computing depreciation, salvage value is A)the fair value of a plant asset on the date of acquisition. B)subtracted from accumulated depreciation to determine the plant asset's depreciable cost. C)an estimate of a plant asset's value at the end of its useful life .D)ignored in all the depreciation methods.

C

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

C

Natural resources are generally shown on the balance sheet under A)Intangibles. B)Investments. C)Property, Plant, and Equipment. D)Stockholders' Equity.

C

Storing cash in a company safe is an application of which internal control principle? A)Segregation of duties B)Documentation procedures C)Physical controls D)Establishment of responsibility

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 lower-of-cost-or-market basis of valuing inventories is an example of A)comparability. B)the cost principle. C)conservatism. D)consistency.

C

The most important element of the fraud triangle is A)financial pressure. B)incompatible duties. C)opportunity. D)rationalization.

C

Which of the following assets does not decline in service potential over the course of its useful life?A)Equipment B)Furnishings C)Land D)Fixtures

C

Which of the following should be included in the physical inventory of a company? A)Goods held on consignment from another company. B)Goods in transit to another company shipped FOB shipping point. C)Goods in transit from another company shipped FOB shipping point. D)Goods in transit to or from another company shipped FOB shipping point

C)

The LIFO inventory method assumes that the cost of the latest units purchased are A)the last to be allocated to cost of goods sold. B)the first to be allocated to ending inventory. C)the first to be allocated to cost of goods sold. D)not allocated to cost of goods sold or ending inventory.

C)the first to be allocated to cost of goods sold.

A truck was purchased for $180,000 and it was estimated to have a $36,000 salvage value at the end of its useful life. Monthly depreciation expense of $3,000 was recorded using the straight-line method. The annual depreciation rate isA)20%.B)2%.C)8%.D)25%.

D

Allowance for Doubtful Accounts on the balance sheet A)is offset against total current assets .B)increases the cash realizable value of accounts receivable. C)appears under the heading "Other Assets." D)is offset against accounts receivable.

D

An accounts payable clerk also has access to the approved supplier master file for purchases. The control principle of A)establishment of responsibility is violated. B)independent internal verification is violated. C)documentation procedures is violated. D)segregation of duties is violated.

D

Angie's Blooms purchased a delivery van for $40,000. The company was given a $4,000 cash discount by the dealer, and paid $2,000 sales tax. Annual insurance on the van is $1,000. As a result of the purchase, by how much will Angie's Blooms increase its van account?A)$40,000B)$36,000C)$39,000D)$38,000

D

Enos Company has decided to change the estimate of the useful life of an asset that has been in service for 2 years. Which of the following statements describes the proper way to revise a useful life estimate? A)Revisions in useful life are permitted if approved by the IRS .B)Retroactive changes must be made to correct previously recorded depreciation. C)Only future years will be affected by the revision. D)Both current and future years will be affected by the revision.

D

Herman Company has a debit balance of $5,000 in its Allowance for Doubtful Accounts before any adjustments are made at the end of the year. Based on review and aging of its accounts receivable at the end of the year, Herman estimates that $70,000 of its receivables are uncollectible. The amount of bad debt expense which should be reported for the year is:A)$5,000.B)$65,000.C)$70,000.D)$75,000.

D

Ordinary repairs are expenditures to maintain the operating efficiency of a plant asset and are referred to as A)capital expenditures. B)expense expenditures. C)improvements. D)revenue expenditures.

D

The average collection period for accounts receivable is computed by dividing 365 days by A)net credit sales. B)average accounts receivable. C)ending accounts receivable. D)accounts receivable turnover.

D

The collection of an account that had been previously written off under the allowance method of accounting for uncollectibles A)will increase income in the period it is collected. B)will decrease income in the period it is collected. C)requires a correcting entry for the period in which the account was written off. D)does not affect income in the period it is collected.

D

The method of accounting for uncollectible accounts that results in a better matching of expenses with revenues is the A)aging accounts receivable method. B)direct write-off method. C)percentage of receivables method. D)percentage of sales method.

D

The sale of receivables by a business A)indicates that the business is in financial difficulty. B)is generally the major revenue item on its income statement. C)is an indication that the business is owned by a factor. D)can be a quick way to generate cash for operating needs.

D

When an account is written off using the allowance method, the A)cash realizable value of total accounts receivable will increase. B)cash realizable value of total accounts receivable will decrease. C)allowance account will increase. D)cash realizable value of total accounts receivable will stay the same.

D

For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except A)to check the accuracy of the records. B)to determine the amount of wasted raw materials .C)to determine losses due to employee theft. D)to determine ownership of the goods.

D)to determine ownership of the goods.

Pappy's Staff has the following inventory information. July1 Beginning Inventory 20 units at $905 Purchases 120 units at $9214 Sale 80 units 21 Purchases 60 units at $9530 Sale 56 units Assuming that a perpetual inventory system is used, what is the ending inventory on a FIFO basis?A)$5,848B)$5,860C)$6,068D)$6,346

c