Part 2 Practice Test for Intuit Bookkeeping Professional Certificate

John owns a small retail store that sells clothing. On monday, he sold $500 worth of merchandise to a customer who paid in cash. On Tuesday, he sold $300 worth of merchandise to a customer who paid using a credit card. Question: Which of the following statements correctly describes the effect of these sales transactions on the accounting equation for John's retail store?

Both sales increase assets and owner's equity

What is the formula for calculating COGS sold under the FIFO inventory valuation method?

COGS = beginning inventory + purchases - ending inventory

You're a bookkeeper for The Pet Palace, a company that sells pet paraphernalia online. You use the periodic inventory system to account for merchandise inventory. At the end of each month, you record the sale of merchandise inventory for cash based on the sales invoices and the cost of goods sold based on the inventory records. Answer a series of question pertaining to this scenario. Question 4 of 4: What entry should be made to correct the accounting equation?

Credit to Merchandise Inventory

You're a bookkeeper for Office and More, a small company that sells office supplies. You use the direct write-off method to account for uncollectible accounts. At the end of the year, you review the accounts receivable ledger and identify three customers who have not paid their invoices for more than six months. The total amount of these invoices is $1,500. You discuss the accounts with the business owner and together decide to write off these accounts as bad debts. Question: Which of the following statements are true regarding the direct write-off method and the scenario above?

The direct write-off method is required for income tax purposes because it recognizes bad debts only when specific accounts are uncollectible. The direct write-off method involves debiting the bad debts expense account and crediting the accounts receivable account for the amount of the uncollectible accounts

Intangible assets

assets that have no physical form, such as goodwill, patents, and software

which of the following are considered current assets?

cash. AR. inventory, marketable securities. Prepaid expenses. Etc.

You're a bookkeeper for The Pet Palace, a company that sells pet paraphernalia online. You use the periodic inventory system to account for merchandise inventory. At the end of each month, you record the sale of merchandise inventory for cash based on the sales invoices and the cost of goods sold based on the inventory records. Answer a series of question pertaining to this scenario. Question 2 of 4: What is the journal entry to record the purchase of merchandise inventory on credit?

Debit Merchandise Inventory; Credit Accounts Payable

You're a bookkeeper for Jen's Delectable Desserts, a small dessert catering company. You are responsible for recording the depreciation of the company's fixed assets, such as computers, furniture, vehicles, and equipment. You use the straight-line method of depreciation, which allocates the cost of an asset evenly over its service life. Last month Jen purchased a new refrigerated delivery van for $28,000. Jen expects the van to be in service for approximately 10 years. Answer a series of questions pertaining to this scenario. Question 3 of 4: Jen estimates the salvage value of the van at the end of its useful life at 10% of the original cost. What is the salvage value for her refrigerated delivery van?

$2,800

You're a bookkeeper for Jen's Delectable Desserts, a small dessert catering company. You are responsible for recording the depreciation of the company's fixed assets, such as computers, furniture, vehicles, and equipment. You use the straight-line method of depreciation, which allocates the cost of an asset evenly over its service life. Last month Jen purchased a new refrigerated delivery van for $28,000. Jen expects the van to be in service for approximately 10 years. Answer a series of questions pertaining to this scenario. Question 1 of 4: What is the cost of the van that will be depreciated?

$28,000

what accounts have a natural debit balance

Cash, accounts receivable, inventory, expenses

You're the Bookkeeper for Between the Covers Booksellers, a small book resale business. The company uses the accrual accounting method. You receive the following sales transaction detail (Note, for this question we are not posting transactions for inventory to COGS): -On January 1, the company sells 250 books for $20 each to John, who pays in cash. The sales tax rate is 10%. -On January 2, the company sells 300 books for $15 each to Mary, who agrees to pay within 30 days. The sales tax rate is 10%. Question: How should these transactions be recorded in the accounting records?

Debit Cash $5,500 and Accounts Receivable $4,950, Credit Sales Revenue $5,000 and $4,500, Credit Sales Tax Payable $500 and $450

You're a bookkeeper for Gadgets Galore Inc., a company that sells small electronics online. You use the FIFO inventory valuation method and the perpetual inventory system to account for your inventory transactions. -On January 1, you had 100 units of Product X in stock at a cost of $50 per unit. -On January 15, you purchased 200 units of Product X at a cost of $60 per unit. -On January 31, you sold 250 units of Product X at a price of $100 per unit. Question: What journal entry must you make on January 31 to record the cost of goods sold and adjust the inventory asset account?

Debit Cost of Goods Sold for $14,000; Credit Inventory for $14,000

Between the Covers Booksellers, sold a pallet of books to a local library for $100,000 on account. The terms of the sale were 2/10, n/60, meaning that the library could get a 2% discount if it paid within 10 days or pay the full amount within 60 days. However, the library failed to pay within the credit period. After 90 days of nonpayment, the bookshop agreed to convert the account receivable into a note receivable. The note receivable was for the amount due plus a 5% penalty fee, and it had a maturity date of six months from the date of issue. The note also carried an annual interest rate of 12%. Question: How would you record this transaction in its accounting records? Choose the best answer from the options given.

Debit Notes Receivable for $105,000, credit Accounts Receivable for $100,000, and Penalty Revenue for $5,000

Which statements are true about the differences between inventory and supplies?

Inventory is a stock of goods that is held for resale, while supplies are consumable items used in operations. Inventory is directly used to manufacture or sell products, while supplies do not directly appear in the goods or services sold to customers. Inventory is intended to be sold or used to produce goods, while supplies are items that support the business's operations

You're a bookkeeper for Jen's Delectable Desserts, a small dessert catering company. You are responsible for recording the depreciation of the company's fixed assets, such as computers, furniture, vehicles, and equipment. You use the straight-line method of depreciation, which allocates the cost of an asset evenly over its service life. Last month Jen purchased a new refrigerated delivery van for $28,000. Jen expects the van to be in service for approximately 10 years. Answer a series of questions pertaining to this scenario. Question 2 of 4: What is the service life of the van, and how does it affect depreciation?

The service life of the van is 10 years, and it affects depreciation by determining the annual depreciation expense based on its cost and salvage value

Assets

resources that belong to a business and help it earn economic benefits in the future. They include current, capital, and intangible assets

merchandise on hand

the value of goods that are currently available for sale, including finished goods inventory

You're a bookkeeper for Jen's Delectable Desserts, a small dessert catering company. You are responsible for recording the depreciation of the company's fixed assets, such as computers, furniture, vehicles, and equipment. You use the straight-line method of depreciation, which allocates the cost of an asset evenly over its service life. Last month Jen purchased a new refrigerated delivery van for $28,000. Jen expects the van to be in service for approximately 10 years. Answer a series of questions pertaining to this scenario. Question 4 of 4: How would you report the depreciation expense of the van on the income statement?

As a non-cash expense that reduces net income by $2,520 every year for 10 years

Long-term assets

Capital assets that are used for continuing or long-term operations, such as buildings, plant and equipment, and land

how does depreciating property and equipment affect the accounting equation?

Decreases one asset and equity by the same amount

how does purchasing property and equipment with cash affect the accounting equation?

Decreases one asset and increases another asset by the same amount

how does selling property and equipment for cash affect the accounting equation?

Increases one asset and decreases another asset by the same amount if sold at book value

how does purchasing property and equipment with credit affect the accounting equation?

Increases one asset and one liability by the same amount

You're a bookkeeper for The Pet Palace, a company that sells pet paraphernalia online. You use the periodic inventory system to account for merchandise inventory. At the end of each month, you record the sale of merchandise inventory for cash based on the sales invoices and the cost of goods sold based on the inventory records. Answer a series of question pertaining to this scenario. Question 1 of 4: What is the effect of purchasing merchandise inventory with credit on the accounting equation?

Merchandise inventory increases assets and increases liabilities

You're a bookkeeper for The Pet Palace, a company that sells pet paraphernalia online. You use the periodic inventory system to account for merchandise inventory. At the end of each month, you record the sale of merchandise inventory for cash based on the sales invoices and the cost of goods sold based on the inventory records. Answer a series of question pertaining to this scenario. Question 3 of 4: You review the journal entry that was made to record the cash sale of $5,000 in merchandise inventory in June. Is the journal entry correct? (Cash debit $5,000. Sales Rev Credit $5,000. GOGS debit $5,000)

No

Which statements are true about the differences between notes receivable and accounts receivable?

Notes receivable are interest-bearing assets, while accounts receivable are non-interest-bearing assets. Notes receivable are written promises that an outside entity will pay the business on or before a specified date, while accounts receivable are invoices with short term due dates. Notes receivable are long-term assets, while accounts receivable are current assets

Which of the following transactions change the accounting equation?

Purchasing property and equipment with cash, purchasing property and equipment with credit, and selling property and equipment for cash all change the accounting equation

Which of the following transactions increase equity?

Selling property and equipment for a gain

Current assets

assets that can be converted into cash within one year, such as cash, accounts receivable, and inventories

You're the bookkeeper for the Pampered Pooch, a small mobile dog grooming business. The business received a $1,000 loan from their local credit union and signed a promissory note. How should you record this transaction in the accounting records?

debit the cash account by $1,000 and credit the notes payable account by $1,000