Accounting 51-100

Which of the following would not be included in the Equipment account? A) Installation costs. B) Freight costs. C) Cost of trial runs. D) Electricity used by the machine.

D) Electricity used by the machine.

Manufacturers usually classify inventory into all the following general categories except: A) work in process B) finished goods C) merchandise inventory D) raw materials

C) merchandise inventory

Which one of the following is not an accounting problem (issue) associated with accounts receivable? A) Depreciating accounts receivable B) Recognizing accounts receivable C) Valuing accounts receivable D) Accelerating cash receipts from accounts receivable

A) Depreciating accounts receivable

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the A) FIFO method. B) LIFO method. C) average-cost method. D) tax method.

A) FIFO method.

Which of the following would be deducted from the balance per bank on a bank reconciliation? A) Outstanding checks. B) Deposits in transit. C) Notes collected by the bank. D) Service charges.

A) Outstanding checks.

Sales revenue A) may be recorded before cash is collected. B) will always equal cash collections in a month. C) only results from credit sales. D) is only recorded after cash is collected.

A) may be recorded before cash is collected.

The Allowance for Doubtful Accounts is necessary because A) when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay. B) uncollectible accounts that are written off must be accumulated in a separate account. C) a liability results when a credit sale is made. D) management needs to accumulate all the credit losses over the years.

A) when recording uncollectible accounts expense, it is not possible to know which specific accounts will not pay.

Smithson Corporation's unadjusted trial balance includes the following balances (assume normal balances): • Accounts Receivable $3,357,000 • Allowances for Doubtful Accounts $ 63,900 Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debt expense will the company record? A) $201,420 B) $137,520 C) $133,686 D) $205,254

B) $137,520

Conway Company purchased merchandise inventory with an invoice price of $9,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Conway Company pays within the discount period? A) $9,000 B) $8,820 C) $8,100 D) $8,280

B) $8,820

When an account becomes uncollectible and must be written off A) Allowance for Doubtful Accounts should be credited. B) Accounts Receivable should be credited. C) Bad Debt Expense should be credited. D) Sales Revenue should be debited.

B) Accounts Receivable should be credited.

Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? A) Bad Debts Expense 8,000 Allowance for Doubtful Accounts 8,000 B) Bad Debts Expense 6,000 Allowance for Doubtful Accounts 6,000 C) Bad Debts Expense 6,000 Accounts Receivable 6,000 D) Bad Debts Expense 8,000 Accounts Receivable 8,000

B) Bad Debts Expense 6,000 Allowance for Doubtful Accounts 6,000

Which one of the following would not cause a bank to debit a depositor's account? A) Bank service charge. B) Collection of a note receivable. C) Wiring of funds to other locations. D) Checks marked NSF.

B) Collection of a note receivable.

In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure? A) Average cost method B) LIFO method C) FIFO method D) Need more information to answer

B) LIFO method

Which inventory method generally results in costs allocated to ending inventory that will approximate their current cost? A) LIFO B) FIFO C) Average cost method D) Whichever method that produces the highest ending inventory figure

B) FIFO

Which of the following is not one of the main factors that contribute to fraudulent activity? A) Opportunity. B) Incompatible duties. C) Financial pressure. D) Rationalization.

B) Incompatible duties.

Which one of the following is not an objective of a system of internal controls? A) Safeguard company assets. B) Overstate liabilities in order to be conservative. C) Enhance the accuracy and reliability of accounting records. D) Reduce the risks of errors.

B) Overstate liabilities in order to be conservative.

A company maintains the asset account, Cash in Bank, on its books, while the bank maintains a reciprocal account that is A) a contra asset account. C) also an asset account. B) a liability account. D) a stockholders' equity account.

B) a liability account.

A sales invoice is prepared when goods A) are sold for cash. B) are sold on credit. C) sold on credit are returned. D) are sold on credit or for cash.

B) are sold on credit.

Receivables are A) one of the most liquid assets and thus are always considered current assets. B) claims that are expected to be collected in cash. C) shown on the income statement at cash realizable value. D) always the result of revenue recognition.

B) claims that are expected to be collected in cash.

Gross profit equals the difference between net sales and A) operating expenses. B) cost of goods sold. C) net income. D) cost of goods sold plus operating expenses.

B) cost of goods sold.

Inventory costing methods place primary reliance on assumptions about the flow of A) goods. B) costs. C) resale prices. D) values.

B) costs.

The Harris Company purchased equipment for $9,000 on December 1. It is estimated that annual depreciation on the computer will be $1,800. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: A) debit Depreciation Expense, $1,800; credit Accumulated Depreciation, $1,800. B) debit Depreciation Expense, $150; credit Accumulated Depreciation, $150. C) debit Depreciation Expense, $7,200; credit Accumulated Depreciation, $7,200. D) debit Equipment, $9,000; credit Accumulated Depreciation, $9,000.

B) debit Depreciation Expense, $150; credit Accumulated Depreciation, $150.

An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 debit balance, the adjustment to record bad debts for the period will require a A) debit to Bad Debt Expense for $4,500. B) debit to Bad Debt Expense for $6,100. C) debit to Bad Debt Expense for $2,900. D) credit to Allowance for Doubtful Accounts for $4,500.

B) debit to Bad Debt Expense for $6,100.

Karlin Company gathered the following reconciling information in preparing its April bank reconciliation: Cash balance per books, 4/30 13,200 Deposits in transit 1,800 Notes receivable and interest collected by bank 4,440 Bank charge for check printing 150 Outstanding checks 9,000 NSF check 840 The adjusted cash balance per books on April 30 is A) $18,450. B) $17,640. C) $16,650. D) $18,330.

C) $16,650.

Whyte Clinic purchases land for $280,000 cash. The clinic assumes $3,000 in property taxes due on the land. The title and attorney fees totaled $2,000. The clinic had the land graded for $4,400. What amount does Whyte Clinic record as the cost for the land? A) $284,400. B) $280,000. C) $289,400. D) $285,000.

C) $289,400.

Dekin Company had checks outstanding totaling $17,000 on its May bank reconciliation. In June, Dekin Company issued checks totaling $106,400. The July bank statement shows that $79,200 in checks cleared the bank in July. A check from one of Dekin Company's customers in the amount of $800 was also returned marked "NSF." The amount of outstanding checks on Dekin Company's July bank reconciliation should be A) $43,400. B) $27,200. C) $44,200. D) $10,200.

C) $44,200.

Which of the following is not properly classified as property, plant, and equipment? A) Building used as a factory. B) Land used in ordinary business operations. C) A truck held for resale by an automobile dealership. D) Land improvement, such as parking lots and fences.

C) A truck held for resale by an automobile dealership.

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) Sales Returns and Allowances

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory? A) Average cost method B) LIFO method C) FIFO method D) Need more information to answer

C) FIFO method

Which of the following would be added to the balance per books on a bank reconciliation? A) Outstanding checks. B) Deposits in transit. C) Notes collected by the bank. D) check.

C) Notes collected by the bank.

Which of the following statements is correct with respect to inventories? A) The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold. B) It is generally good business management to sell the most recently acquired goods first. C) Under FIFO, the ending inventory is based on the latest units purchased. D) FIFO seldom coincides with the actual physical flow of inventory.

C) Under FIFO, the ending inventory is based on the latest units purchased.

If a resource has been consumed but a bill has not been received at the end of the accounting period, then: A) an expense should be recorded when the bill is received. B) an expense should be recorded when the cash is paid out. C) an adjusting entry should be made recognizing the expense. D) it is optional whether to record the expense before the bill is received.

C) an adjusting entry should be made recognizing the expense.

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) at cash realizable value.

Under the perpetual inventory system, in addition to making the entry to record a sale, a company would A) debit Inventory and credit Cost of Goods Sold. B) debit Cost of Goods Sold and credit Purchases. C) debit Cost of Goods sold and credit Inventory. D) make no additional entry until the end of the period.

C) debit Cost of Goods sold and credit Inventory.

An aging of a company's accounts receivable indicates that $4,500 are estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,600 credit balance, the adjustment to record bad debts for the period will require a A) debit to Bad Debt Expense for $4,500. B) debit to Allowance for Doubtful Accounts for $2,900. C) debit to Bad Debt Expense for $2,900. D) credit to Allowance for Doubtful Accounts for $4,500.

C) debit to Bad Debt Expense for $2,900.

A purchase invoice is a document that A) provides support for goods purchased for cash. B) provides evidence of incurred operating expenses. C) provides evidence of credit purchases. D) serves only as a customer receipt.

C) provides evidence of credit purchases.

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 company purchased land for $350,000 cash. Real estate brokers' commission was $25,000 and $35,000 was spent for demolishing an old building on the land before construction of a new building could start. Under the historical cost principle, the cost of land would be recorded at A) $385,000. B) $350,000. C) $375,000. D) $410,000.

D) $410,000.

Shaffer Company acquires land for $62,000 cash. Additional costs are as follows. Removal of shed $300 Filling and grading 1,500 Salvage value of lumber of shed 120 Broker commission 1,130 Paving of parking lot 10,000 Closing costs 560 Shaffer will record the acquisition cost of the land as A) $62,000. B) $63,690. C) $65,610. D) $65,370.

D) $65,370.

Which one of the following is not a justification for adjusting entries? A) Adjusting entries are necessary to ensure that the revenue recognition principle is followed. B) Adjusting entries are necessary to ensure that the expense recognition principle is followed. C) Adjusting entries are necessary to enable financial statements to be in conformity with GAAP. D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

D) Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

Which of the following items will increase inventoriable costs for the buyer of goods? A) Purchase returns and allowances granted by the seller B) Purchase discounts taken by the purchaser C) Freight charges paid by the seller D) Freight charges paid by the purchaser

D) Freight charges paid by the purchaser

Which of the following would be deducted from the balance per books on a bank reconciliation? A) Outstanding checks. B) Deposits in transit. C) Notes collected by the bank. D) Service charges.

D) Service charges.

Income from operations appears on A) both a multiple-step and a single-step income statement. B) neither a multiple-step nor a single-step income statement. C) a single-step income statement. D) a multiple-step income statement.

D) a multiple-step income statement.

The account Allowance for Doubtful Accounts is classified as a(n) A) liability. B) contra account of Bad Debt Expense. C) expense. D) contra account to Accounts Receivable.

D) contra account to Accounts Receivable.

The Sales Returns and Allowances account is classified as a(n) A) asset account. B) contra asset account. C) expense account. D) contra revenue account.

D) contra revenue account.

Each of the following is a feature of internal control except A) limited access to assets. B) independent internal verifications. C) authorization of transactions. D) generic design of documents.

D) generic design of documents.

Tony's Market recorded the following events involving a recent purchase of inventory: Received goods for $40,000, terms 2/10, n/30. Returned $800 of the shipment for credit. Paid $200 freight on the shipment. Paid the invoice within the discount period. As a result of these events, the company's inventory A) increased by $38,416. B) increased by $39,400. C) increased by $38,612. D) increased by $38,616.

D) increased by $38,616.

Unearned revenue is classified as a(n): A) asset account. B) revenue account. C) contra revenue account. D) liability.

D) liability.

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) revenues to be understated.

A debit memorandum would not be issued by the bank for A) a bank service charge. B) the issuance of traveler's checks. C) the wiring of funds. D) the collection of a notes receivable.

D) the collection of a notes receivable.