Accounting Test

Jamison, Inc. is a regional air cargo carrier. Jamison made a $4,500 improvement to one of its airplanes. If Jamison's accountant expensed this amount, which of the following statements is true? a. The entry will improperly understate net income for the year. b. The entry will improperly overstate net income for the year. c. The entry is the correct treatment. d. The entry will overstate the balance sheet for the year.

a

The Accounts Receivable account has a beginning balance of $52,000 and an ending balance of $74,000. If $42,000 was sold on account during the year, what were the total collections on account? a. $20,000 b. $64,000 c. $74,000 d. $84,000

a

A journal a. contains only asset and liability accounts. b. is a collection of the entire group of accounts maintained by a company. c. provides a chronological record of transactions. d. should show accounts in alphabetical order.

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 following information was available for Camara Company at December 31, 2017: beginning inventory $80,000; ending inventory $120,000; cost of goods sold $630,000; and sales $900,000. Camara's inventory turnover in 2017 was a. 9.0 times. b. 7.9 times. c. 6.3 times. d. 5.3 times.

c

The lower of cost or market basis of valuing inventories is an example of a. comparability. b. the historical cost principle. c. conservatism. d. consistency.

c

The most important information needed to determine if companies can pay their current obligations is the a. net income for this year. b. projected net income for next year. c. relationship between current assets and current liabilities. d. relationship between short-term and long-term liabilities.

c

The normal balance of any account is the a. left side. b. right side. c. side which increases that account. d. side which decreases that account.

c

For 2017 Fielder Corporation reported net income of $32,000; net sales $400,000; and average share outstanding 16,000. There were no preferred dividends. What was the 2017 earnings per share? a. $0.08 b. $0.50 c. $25.00 d. $2.00

d

The statement of cash flows would disclose the payment of a dividend a. nowhere on the statement. b. in the operating activities section. c. in the investing activities section. d. in the financing activities section.

d

These are selected account balances on December 31, 2017. 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

A company that receives money in advance of performing a service a. debits Cash and credits Unearned Service Revenue. b. debits Unearned Service Revenue and credits Accounts Payable c. debits Cash and credits Prepaid Insurance. d. debits Cash and credits Accounts Receivable.

a

A trial balance proves a. the mathematical equality of debits and credits after the posting process. b. the ledger is posted correctly. c. that all transactions have been recorded correctly. d. that all transactions have been posted.

a

Goods purchased for future use in the business, such as supplies, are called: a. prepaid expenses. b. revenues. c. stockholders' equity. d. liabilities.

a

Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n) a. purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance. b. investment of $5,000 cash in the business by the stockholders. c. purchase of office equipment for $5,000 cash. d. repayment of a $5,000 bank loan.

a

Newell Company purchased a machine with a list price of $160,000. They were given a 10% discount by the manufacturer. They paid $1,000 for shipping and sales tax of $7,500. Newell estimates that the machine will have a useful life of 10 years and a salvage value of $50,000. If Newell uses straight-line depreciation, annual depreciation will be a. $10,250. b. $10,180. c. $15,250. d. $9,400.

a

One of the accounting concepts upon which adjustments for prepayments and accruals are based is: a. expense recognition. b. cost. c. monetary unit. d. economic entity.

a

Trademarks would appear in which balance sheet section? a. Intangible assets b. Investments c. Property, plant, and equipment d. Current assets

a

When retained earnings are restricted, total retained earnings a. are unaffected. b. increase. c. decrease. d. may increase or decrease.

a

Which account will have a zero balance after closing entries have been journalized and posted? a. Service revenue. b. Supplies. c. Prepaid Insurance. d. Accumulated Depreciation.

a

Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? a. Reduced legal liability for investors b. Harder to transfer ownership c. Lower taxes d. Most common form of organization

a

Alpha First Company just began business and made the following four inventory purchases in June: June 1 150 units $ 1,040 June 10 200 units 1,560 June 15 200 units 1,680 June 28 150 units 1,320 $5,600 A physical count of merchandise inventory on June 30 reveals that there are 210 units on hand. Using the LIFO inventory method, the value of the ending inventory on June 30 is a. $1,456 b. $1,508 c. $1,848 d. $1,824

b

If a company fails to record estimated bad debts expense, a. cash realizable value is understated. b. expenses are understated. c. revenues are understated. d. receivables are understated.

b

If the market interest rate for a bond 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

Paid-in Capital in Excess of Par Value a. is credited when no-par stock does not have a stated value. b. is reported as part of paid-in capital on the balance sheet. c. represents the amount of legal capital. d. normally has a debit balance.

b

The cost of a long-term asset is expensed a. when it is paid for. b. as the asset benefits the company. c. in the period in which it is acquired. d. in the period in which it is disposed of.

b

Valuing assets at their fair value rather than at their cost is inconsistent with the a. economic entity assumption. b. historical cost principle. c. periodicity assumption. d. full disclosure principle.

b

What is the total stockholders' equity based on the following account balances? Common Stock $2,300,000 Paid-In Capital in Excess of Par 120,000 Retained Earnings 570,000 Treasury Stock 60,000 a. $2,690,000. b. $2,930,000. c. $3,050,000. d. $2,180,000.

b

Aber Company sells merchandise on account for $3,000 to Borth Company with credit terms of 2/10, n/30. Borth Company returns $500 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check? a. $2,440 b. $2,460 c. $2,450 d. $2,250

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

All of the following statements are true regarding the average collection period except: a. it is a popular variant of the accounts receivable turnover b. it is used to assess the effectiveness of a company's credit and collection policies. c. it should generally exceed the credit term period. d. its increase may suggest a decline in the financial health of customers.

c

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

c

An aging of a company's accounts receivable indicates that $9,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $2,400 credit balance, the adjustment to record bad debts for the period will require a a. debit to Bad Debt Expense for $9,000. b. debit to Allowance for Doubtful Accounts for $6,600. c. debit to Bad Debt Expense for $6,600. d. credit to Allowance for Doubtful Accounts for $9,000.

c

An item is considered material if a. it doesn't cost a lot of money. b. it is of a tangible good. c. its size is likely to influence the decision of an investor or creditor. d. the cost of reporting the item is greater than its benefits.

c

External users want answers to all of the following questions except a. Is the company earning satisfactory income? b. Will the company be able to pay its debts as they come due? c. Will the company be able to afford employee pay raises this year? d. How does the company compare in profitability with competitors?

c

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 cash basis of accounting: a. revenue is recognized when services are performed. b. expenses are matched with the revenue that is produced. c. cash must be received before revenue is recognized. d. a promise to pay is sufficient to recognize revenue.

c

Which of the following accounts is classified as a contra revenue account? a. Sales Revenue b. Cost of Goods Sold c. Sales Returns and Allowances d. Purchase Discounts

c

A company receives $348, of which $28 is for sales tax. The journal entry to record the sale would include a a debit to Sales Taxes Expense for $28. b. debit to Sales Taxes Payable for $28. c. debit to Sales Revenue for $348. d. debit to Cash for $348.

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 a relatively short period of time.

d

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause: a. expenses to be overstated. b. net income to be overstated. c. liabilities to be understated. d. revenues to be understated

d

Adjusting entries are made to ensure that: a. expense are recognized in the period in which they are incurred. b. revenues are recorded in the period in which the performance obligation is satisfied. c. balance sheet and income statement accounts have correct balances at the end of an accounting period. d. All of these answer choices are correct.

d

An assumption about cost flow is used a. because it is required by the income tax regulation. b. even when there is no change in the purchase price of inventory. c. only when the flow of goods cannot be determined. d. because prices usually change, and tracking which units have been sold is difficult.

d

Financial information is presented below: Operating expenses $ 45,000 Sales returns and allowances 3,000 Sales discounts 7,000 Sales revenue 160,000 Cost of goods sold 96,000 The profit margin would be a. .36. b. .05. c. .12. d. .06.

d

If a company buys a $700 machine on credit, this transaction will affect the a. income statement and retained earnings statement only. b. income statement only. c. income statement, retained earnings statement, and balance sheet. d. balance sheet only.

d

In a perpetual inventory system, cost of goods sold is recorded a. on a daily basis. b. on a monthly basis. c. on an annual basis. d. each time a sale occurs.

d

The Vintage Laundry Company purchased $8,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $1,500 on hand. The adjusting entry that should be made by the company on June 30 is: a. debit Supplies Expense, $1,500; credit Supplies, $1,500. b. debit Supplies, $7,000; credit Supplies Expense, $7,000. c. debit Supplies, $1,500; credit Supplies Expense, $1,500. d. debit Supplies Expense, $7,000; credit Supplies, $7,000.

d

The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: a. contra asset. b. prepayment. c. asset. d. accrued.

d

The purchase of an asset for cash a. increases assets and stockholders' equity. b. increases assets and liabilities. c. decreases assets and increases liabilities. d. leaves total assets unchanged.

d

Wang Company had the following transactions during 2016: Sales of $10,800 on account Collected $4,800 for services to be performed in 2017 Paid $2,600 cash in salaries for 2016 Purchased airline tickets for $600 in December for a trip to take place in 2017 What is Wang's 2016 net income using accrual accounting? a. $8,800 b. $13,600 c. $13,000 d. $8,200

d