Accounting

Lindsey Inc. purchased shoes valued at $1,000 to add to its inventory on February 1, 2019 and will pay the balance owing in 30 days. In order to record the transaction in a perpetual inventory system the journal entry would include:

A debit to Merchandise Inventory

Linden Inc. purchased merchandise inventory valued at $4,000 to add to its inventory on February 1, 2019. It will pay the balance owing in 30 days. The journal entry to record the transaction in a periodic inventory system includes

A debit to Purchases

An adjusted trial balance is

A listing of accounts after adjusting entries have been recorded and posted

A chart of accounts is

A listing of each general ledger account which is assigned a name and a number

Theft of merchandise inventory is recorded as

A or B

An example of a contra account is

Accumulated depreciation

How is a deposit in transit reflected on the bank reconciliation?

Added to the bank statement ending balance

Closing entries are prepared

After financial statements are prepared

Effective internal controls ensure

All of the above

A note receivable is collected by the bank on behalf of a company. This is discovered during the bank reconciliation process and indicates

An understatement of the Cash account in the general ledger

The Accumulated Depreciation account appears on the

Balance Sheet

Ending amounts on the statement of changes in equity are the same as those on the

Balance sheet

A year‐end physical count of inventory is usually necessary when a company uses the

Both a perpetual and a periodic inventory system

What is the effect on the Cash general ledger account if a check written for $350 is recorded as $530?

Cash general ledger account is understated by $180

Which of the following is not a form of business organization?

Charity

Which of the following items would cause the Cash general ledger balance to be understated?

Collection of notes receivable

When a company sells its merchandise, the cost is debited to which of the following accounts

Cost of goods sold

In a perpetual inventory system the Merchandise Inventory account is used to record all the following except for

Costs of deliveries to customers

When a company uses the income statement method to estimate uncollectible accounts receivable, it uses the following to calculate bad debts expense:

Credit sales

The weighted average cost flow method is best used for what type of inventory item?

Crude oil

If there is a net loss there will be a ___________ balance in the Income Summary account before moving the balance to Retained Earnings

Debit

In establishing a petty cash fund, one of the following will be part of the journal entry

Debit to Petty Cash

Double‐entry accounting requires

Debits to equal Credits

Which of the following is a temporary account?

Dividends

Which of the following is not an expense?

Dividends paid

The following does not describe the matching principle

Expenses are reported on the income statement when cash is paid

When costs of purchases are increasing, which cost flow method results in the highest net income?

FIFO

A document that is used to chronologically record a business's debit and credit transactions is called a

General journal

What of the following is a true statement about depreciation?

It is the allocation of the cost of plant or equipment over the time they are expected to be used

Assume a company writes off the account receivable balance of $1,000 from Wally Inc. A few months later it receives a $300 check from Wally Inc. How should this $300 payment be recorded?

It should be recorded as a credit to Allowance for Doubtful accounts

Amounts are posted from the ________ to the ________

Journal, general ledger

Which of the following is not an example of an internal control over cash?

Keeping a large amount of cash on hand

Which of the following is a non‐depreciable asset?

Land

This accumulates information regarding the increases and decreases in a specific asset, liability, or equity item

Ledger account

Debit means

Left side of an account

Debits always decrease which accounts?

Liabilities, Revenue and Common Stock

Credits always increase which accounts?

Liabilities, Revenues and Common Stock

Under US GAAP, inventory is recorded at

Lower of cost and net realizable value

A company purchases supplies and records these as an asset. As they are used, they are expensed. This is an example of:

Matching

An accounting policy requiring a corporation to capitalize any asset over $5,000 in value would be an example of:

Materiality

Arland Inc. has a debit balance in its Allowance for Doubtful Accounts. This means that

More bad debts occurred in this period than were estimated in the previous period

If a customer's account receivable is converted to a short-term notes receivable, what is the effect on the balance sheet?

No effect

What is the effect on the balance sheet when a company writes off a customer's accounts receivable?

No effect

The statement of cash flows is divided into which sections?

Operating, investing, and financing

On a merchandiser's classified multi‐step income statement, interest expense is usually recorded as

Other revenue and expense

On a merchandiser's classified multi‐step income statement, dividends earned from investments is usually recorded in the

Other revenue and expense section

A __________________________ inventory system keeps inventory balances up-to-date on a real-time basis, while a __________________________ inventory system updates inventory at the end of the accounting period.

Perpetual, periodic

Which of the following is not a liability?

Prepaid expense

The final step in the accounting cycle is to:

Prepare a post‐closing trial balance

Cost outlays are recorded as an expense when they are incurred to earn revenue in the _______________ accounting period

Present

Which of the following best describes a trial balance?

Provides a mathematical check before the financial statements are prepared.

The primary qualitative characteristics of accounting information are:

Relevance and faithful representation

Which of the following general ledger accounts is a permanent account?

Retained earnings`

US GAAP is adopted by

SEC

The cost of inventory is not affected by

Sales

Using the retail inventory method, cost of goods sold is restated to its retail value. This means it equals

Sales revenue

Which of the following methods is usually not used to cost inventory that consists of large number of similar, inexpensive items?

Specific identification

Amounts on the income statement are transferred to the

Statement of changes in equity

The formula to calculate straight‐line depreciation is

(Cost - residual value) / useful life

A journal entry would not be required for which type of reconciling item?

A bank error

Which of the following does not describe a partnership?

A business owned by one or more individuals

ABC Company uses a perpetual inventory system. It paid for transportation charges for the purchase of merchandise. The journal entry to record this transaction is

A debit to Inventory and a credit to Cash

A discount given to a customer that orders a large quantity of goods is referred to as

Trade discount

Assuming that ending inventory was overstated in 2019 by $1,500, what is the effect on the 2020 gross profit?

Understated by $1,500

Customer payments receieved in advance of the product or service being provided is recorded in which general ledger account?

Unearned Revenue

Allowance for Doubtful Accounts is recorded in which section of the financial statements?

assets

An example of an asset is:

cash

Credit means

right side of an account

A short‐term note receivable has the following qualities except that

It is a non‐current asset

Which of the following does not describe a proprietorship?

It is a separate legal entity

Credits always decrease which accounts?

Assets and Expenses

Debits always increase which accounts?

Assets, Dividends, Expenses

When sales revenue exceeds cost of goods sold, the difference is called

Gross profit

A business purchases a vehicle for $35,000. Since the vehicle was advertised for $40,000 the company decided to record the asset at $40,000. This is a violation of which accounting principle?

Historical cost

A company purchased land in 1950 for $10,000. Although the land is now worth $300,000 the accounting records are not changed. This is an applcation of which accounting convention?

Historical cost

In a periodic inventory system, the account Purchases appears on which financial statement?

Income Statement

A company purchased a building worth $500,000 by paying $50,000 in cash and acquiring a bank loan for the remainder. The effect on the accounting equation is:

Increase in assets and liabilities by $450,000

In a perpetual inventory system, which of the following accounts is not closed with a credit entry?

Interest Revenue

Which of the following is not a stockholders' equity account?

Investments

Which of the following describes a corporation?

The owners have limited liability

Once a company chooses an inventory costing method, it must be used every accounting period thereafter. What GAAP principle is being followed?

consistency

If there is a net loss there will be a ___________ balance in the Income Summary account after all closing entries have been posted

zero