Accounting 101 Final

The trial balance of Clooney Company had accounts with the following normal balances: Cash $5,000, Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Common Stock $42,000; Dividends $15,000; Equipment $61,000. In preparing a trial balance, the total in the debit column is

$131,000

Rickety Company purchased 1,000 widgets and has 200 widgets in its ending inventory at a cost of $91 each and a current replacement cost of $80 each. The ending inventory under lower-of-cost-or-market is

$16,000

Baylor Inc. has a gross profit rate of 45%. During the year the company had net sales of $400,000 and goods available for sale of $260,000. Beginning inventory was $35,000. Compute the dollar amount of the ending inventory.

$40,000

The following information is available for Tye Company at December 31: Beginning inventory $80,000; Ending inventory $120,000; Cost of goods sold $1,200,000; and Sales Revenue $1,600,000. Tye's inventory turnover is

12 times

Posting a credit to Accounts Receivable as a credit to Cash will cause the Accounts Receivable account and the Cash account to have incorrect balances, but the trial balance will still be in balance. Which of the following errors will not cause a trial balance to be out of balance?

A credit to Accounts Receivable was posted as a credit to Cash.

Which of the following is not one of the credit columns in the cash receipts journal?

Accounts Payable

Which of the following statements is true under IFRS?

All of the answer choices are correct.

Which of the following is the correct sequence of steps in the recording process?

Analyzing, journalizing, posting

Which of the following statements correctly describes the reporting of cash?

Cash is listed first in the current assets section.

Cecil gives goods on consignment to Jerry who agrees to try to sell them for a 20% commission. At the end of the accounting period, which of the following parties includes the consigned goods in its inventory?

Cecil

when two or more people get together for the purpose of circumventing prescribed controls, it is called?

Collusion

Madrid Industries purchased supplies for $1,200. They paid $500 in cash and agreed to pay the balance in 30 days. The journal entry to record this transaction would include a debit to an asset account for $1,200, a credit to a liability account for $700. Which of the following would be the correct way to complete the recording of the transaction?

Credit an asset account for $500

Payment of the salaries and wages in the subsequent period must account for the amount accrued in the previous period. The difference between the actual amount paid and the amount accrued in the previous period will be expensed as a current period expense. ($60,000 actual amount paid - $45,000 amount accrued in the previous period = $15,000 current period expense) Alpha Company shows a balance in its Salaries and Wages Payable account of $45,000 at the end of the month. The next payroll amounting to $60,000 is to be paid in the following month. Which of the following represents the journal entry to record the payment of the salaries and wages?

Debit to Salaries and Wages Expense, $15,000, debit to Salaries and Wages Payable, $45,000, and credit to Cash, $60,000.

Which statement is incorrect regarding the general journal?

Dual postings are always required in the general journal.

Which of the following is not a major type (or category) of adjusting entries?

Earned revenues.

On August 13, 2016, Accounting Services Co. purchased office equipment for $1,700 and office supplies of $300 on account. Which of the following journal entries is recorded correctly and in the standard format?

Equipment . ....................................................................1,700 Supplies .......................................................................... 300 Accounts Payable. . .................................................. 2,000

Which of the following statements is not true?

Expenses increase owner's equity

In a perpetual inventory system,

FIFO cost of goods sold will be the same as in a periodic inventory system.

A current liability must be paid out of current earnings.

False

A worksheet is a device that eliminates the need to prepare financial statements.

False

Contingent liabilities should be recorded in the accounts if there is a remote possibility that the contingency will actually occur.

False

FICA taxes and federal income taxes are levied on employees' earnings without limit.

False

Internal control over payroll is not necessary because employees will complain if they do not receive the correct amount on their payroll checks.

False

The employer incurs a payroll tax expense equal to the amount withheld from the employees' wages for federal income taxes.

False

The relationship between current liabilities and current assets is important in evaluating a company's ability to pay off its long-term debt.

False

Under LIFO, companies determine the cost of the ending inventory by taking the cost of the latest goods available for the sale and working backward until all the units in ending inventory has been assigned a value.

False

Working capital is current assets divided by current liabilities.

False

Which statement is correct about IFRS?

IFRS uses more fair value measurement than GAAP.

In a multi-column purchases journal, debits are made in which columns?

Inventory and Supplies

Which of the following is false about a journal?

It keeps in one place all the information about changes in specific account balances

Which of the following is not an element of the fraud triangle?

Segregation of duties

A company whose current liabilities exceed its current assets may have a liquidity problem.

True

A contingent liability is a liability that may occur if some future event takes place.

True

A trial balance is the same under IFRS and GAAP.

True

An adjusting entry for accrued expenses increases an expense and also increases a liability account.

True

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

True

FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.

True

High-quality international accounting requires both high-quality accounting standards and high-quality auditing standards.

True

In concept, the estimating of Warranty Expense when products are sold under warranty is similar to the estimating of Bad Debt Expense based on credit sales.

True

Notes payable usually require the borrower to pay interest.

True

The current ratio permits analysts to compare the liquidity of different sized companies.

True

The timekeeping function includes supervisors monitoring hours worked through time cards and time reports.

True

The use of subsidiary ledgers and control accounts are the same under GAAP and IFRS.

True

Information is verifiable if independent observers, using the same methods, obtain similar results. This is one of the enhancing qualities of useful information. Which of the following is not a fundamental quality of useful accounting information?

Verifiability

A sales journal will be used for Credit Sales Cash Sales Sales Discounts

Yes. No. No.

A trial balance will not balance if

a $100 cash drawing by the owner is debited to Dividends for $1,000 and credited to Cash for $100.

Posting

accumulates the effects of journalized transactions in the individual accounts

If a check written and paid by the bank for $638 is incorrectly recorded on the company's books at $683, the appropriate treatment on the bank reconciliation would be to

add $45 to the book's balance.

Companies generally prepare closing entries directly from the

adjusted balances in the ledger.

Adjusting entries are made to ensure that

all of the answer choices are correct.

Under IFRS, inventory is defined as

all of the answer choices are correct.

The usual sequence of steps in the transaction recording process is

analyze journal ledger

The first step in the recording process is to

analyze each transaction for its effect on the accounts

A chart of accounts usually starts with

asset accounts

Beethoven Company provided consulting services and billed the client $3,600. As a result of this event,

assets and owner's equity both increased by $3,600

The order of the accounts in the ledger is

assets, liabilities, owner's capital, owner's drawings, revenues, expenses.

Customarily, a trail balance is prepared

at the end of an accounting period

Journal entries are required by the depositor for all of the following except

bank errors

In recording business transactions, evidence that an accounting transaction has taken place is obtained from

business documents

A purchase of equipment using cash is recorded in the

cash payments journal.

The correct order of presentation in a classified balance sheet for the following current assets is

cash, accounts receivable, inventories, prepaid insurance.

Cost of goods available for sale consists of two elements: beginning inventory and

cost of goods purchased.

two categories of expense for merchandising companies are

cost of goods sold and financing expenses

Phast Mail Service purchased equipment for $2,000. Phast paid $500 in cash and signed a note for the balance. Phast debited the Equipment account, credited Cash and

credited a liability account for $1,500

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 Cash Over and Short for $5.

Adjustments for prepaid expenses

decrease assets and increase expenses.

Co. pays its employees twice a month, on the 7 th and the 21 st . On June 21, Boise Co. paid employee salaries of $6,000. This transaction would

decrease net income for the month by $6,000

The first step in posting involves

entering in the appropriate ledger account the date, journal page, and debit amount shown in the journal

The principle or assumption dictating that expenses be matched with revenues is the

expense recognition principle.

The ledger accounts should be arranged in

financial statement order.

If a customer returns goods for credit, the selling company normally makes an entry in the

general journal

A credit to a liability account indicates a(n)

increase in the liability.

An internal auditor reconciling the bank statement monthly is an example of

independent internal verification.

A ledger

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

The owner's drawings account

is increased with debits and decreased with credits

The proper order of the following steps in the accounting cycle is

journalize transactions, post to ledger accounts, prepare unadjusted trial balance, journalize and post adjusting entries.

The second step in the recording process is

journalizing a transaction.

After a business transaction has been analyzed and entered in the book of original entry, the next step in the recording process is to transfer the information to

ledger accounts

A chart of accounts for a business firm

lists the accounts and account numbers that identify their location in the ledger.

Postings from the sales journal to the general ledger are done

monthly

Fair value is relied on

more under IFRS than under GAAP

After journal entries are posted, the reference column

of the general ledger will show journal page numbers.

Euler Company made an inventory count on December 31, 2014. During the count, one of the clerks made the error of counting an inventory item twice. For the balance sheet at December 31, the effects of this error are

overstated. no effect. overstated.

A company would not likely use subsidiary ledgers for

owner's capital

The basic principles of an accounting information system include all of the following except

periodicity.

IFRS allow depreciation based on revaluation of assets, which is not permitted under GAAP. Depreciation based on revaluation of items such as buildings is

permitted under IFRS.

Controls that enhance the accuracy and reliability of the accounting records are

physical controls.

The procedure of transferring journal entries to the ledger accounts is called

posting

Cash equivalents include all of the following except

restricted cash

Failure to make an adjusting entry will result in an overstatement of revenues and an understatement of liabilities. If cash received for future services is initially recorded in revenue accounts and the company has not yet performed all of the required services at the end of the accounting period, then failure to make an adjusting entry will cause

revenues to be overstated.

Which of the following is an optional step in the accounting cycle?

reversing entries

When two accounts are required in one journal entry, the entry is referred to as a

simple entry

All of the following would be classified as inventory except

supplies

A number in the reference column in a general journal indicates

that the entry has been posted to a particular account.

A list of accounts and their balances at a given point in time is called a

trial balance