Accounting Final
1) If a company is considering the purchase of a parcel of land that was acquired by the seller for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by the purchaser as easily being worth $140,000 and is purchased for $137,000, the land should be recorded in the purchaser's books at: a) $137,000 b) $95,000 c) $140,000 d) $150,000 e) $138,500
a) $137,000
1) On May 31 of the current year, the assets and liabilities of Riser, Inc. are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of equity as of May 31 of the current year? a) $31,100 b) $13,050 c) $40,400 d) $49,700 e) $20,500
a) $31,100
1) On October 1, Goodwell Company rented warehouse space to a tenant for $2,500 per month and received $12,500 for five months' rent in advance on that date, with the lease beginning immediately. The cash receipt was credited to the Unearned Rent account. The company's annual accounting period ends on December 31. The Unearned Rent account balance at the end of December, after adjustment, should be: a) $5,000 b) $2,500 c) $10,000 d) $7,000 e) $12,000
a) $5,000
1) Internal control procedures for cash receipts do not require that: a) All collections for sales are received immediately upon making the sales b) Cash sales should be recorded on a cash register at the time of each sale c) Clerks having access to cash in a cash register should not have access to the register tape or file d) An employee with no access to cash receipts should compare the total cash recorded by the register with the record of cash receipts e) Custody over cash is kept separate from its recordkeeping
a) All collections for sales are received immediately upon making the sales
1) An understatement of ending inventory will cause: a) An understatement of assets and equity on the balance sheet b) An overstatement of assets and equity on the balance sheet c) An understatement of assets and an overstatement of equity on the balance sheet d) An overstatement of assets and an understatement of equity on the balance sheet e) No effect on the balance sheet
a) An understatement of assets and equity on the balance sheet
1) Acceptable methods of assigning specific costs to inventory and cost of goods sold include all of the following except: a) Retail method b) FIFO method c) Weighted average method d) Specific identification method e) LIFO method
a) Retail method
1) Goods in transit are included in a purchaser's inventory: a) When the goods are shipped FOB shipping point b) After the half-way point between the buyer and the seller c) When the supplier is responsible for freight charges d) If the goods are shipped FOB destination e) At any time during transit
a) When the goods are shipped FOB shipping point
1) On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the maturity value (principal plus interest) of the note on March 1? (Use 360 days a year) a) $9,000 b) $9,240 c) $9,720 d) $9,120 e) $720
b) $9,240
1) Frisco Company's Merchandise Inventory account at year-end has a balance of $62,115, but a physical count reveals that only $61,900 of inventory exists. The adjusting entry to record this $215 of inventory shrinkage is: a) Inventory shrinkage expense 215(d) Cost of goods sold 215(c) b) Cost of goods sold 215(d) Merchandise Inventory 215(c) c) Cost of goods sold 215(d) Purchases discounts 215(c) d) Purchases discounts 215(d) Cost of goods sold 215(c) e) Merchandise Inventory 215(d) Inventory shrinkage expense 215(c)
b) Cost of goods sold 215 (d) Merchandise Inventory 215 (c)
1) The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the: a) Cost principle b) Expense recognition (matching) principle c) Recognition principle d) Cash basis of accounting e) Time period principle
b) Expense recognition (matching) principle
1) Net income: a) Equals assets minus liabilities b) Is the excess of revenues over expenses c) Represents the amount of assets stockholders put into a business d) Decreases equity e) Represents stockholders claims against assets
b) Is the excess of revenues over expenses
1) Temporary accounts include all the following except: a) Consulting revenue b) Prepaid rent c) Dividends d) Rent expense e) Income summary
b) Prepaid rent
1) In order to be reported, liabilities must: a) Involve an outflow of cash b) Sometimes be estimated c) Always have a definite date for payment d) Be for a specific amount e) Be certain
b) Sometimes be estimated
1) On November 1, Alan Company signed a 120-day, 8% note payable, with a face value of $9,000. What is the adjusting entry for the accrued interest at December 31 on the note? (Use 360 days a year) a) No adjusting entry is required b) Debit Interest Payable $120; credit Interest Expense $120 c) Debit Interest Expense $120; credit Interest Payable $120 d) Debit Interest Payable $240; credit Interest Expense $240 e) Debit Interest Expense $720; credit Interest Payable $720
c) Debit Interest Expense $120; credit Interest Payable $120
1) Generally accepted accounting principles require that the inventory of a company be reported at: a) Retail value b) Replacement cost c) Lower of cost or market d) Market value e) Historical cost
c) Lower of cost or market
1) Sellers allow customers to use bank (or third-party) credit cards for all of the following reasons except: a) To avoid having to decide who gets credit and how much b) To avoid the risk of customers not paying c) To be able to charge more due to fees and interests d) To increase total sales e) To speed up receipt of cash from the credit sale
c) To be able to charge more due to fees and interests
1) Estimated liabilities commonly arise from all of the following except: a) Warranties b) Vacation benefits c) Unearned revenues d) Pension benefits e) Employee benefits
c) Unearned revenues
1) Holman Company owns equipment with an original cost of $95,000 and an estimated salvage value of $5,000 that is being depreciated over a 5-year useful life. How much is the depreciation for each year? a) $19,000 b) $20,000 c) $5,000 d) $18,000 e) $25,000
d) $18,000
1) The current FUTA tax rate is 0.6% and the SUTA tax rate is 5.4%. Both taxes are applied to the first $7,000 of an employee's pay. Assume that an employee earned total wages of $9,900. What is the amount of total unemployment taxes the employer must pay on this employee's wages? a) $594.00 b) $336.00 c) $534.60 d) $420.00 e) $0.00
d) $420.00
1) If assets are $300,000 and liabilities are $192,000, then equity equals: a) 792,000 b) 492,000 c) 300,000 d) 108,000 e) 192,000
d) 108,000
1) Prepaid accounts (also called prepaid expenses) are generally: a) Payments made for products and services that never expire b) Promises of payments by customers c) Classified as liabilities on the balance sheet d) Assets that represent prepayments of future expenses e) Decreases in equity
d) Assets that represent prepayments of future expenses
1) Sales taxes payable is reported as a(n): a) Estimated liability b) Business expense c) Contingent liability d) Current liability e) Long-term asset
d) Current liability
1) The inventory valuation method that tends to smooth out erratic changes in costs is: a) Specific Identification b) FIFO c) LIFO d) Weighted average e) WIFO
d) Weighted average
1) The interest accrued on $7,500 at 6% for 90 days is: (Use 360 days a year) a) $11.25 b) $450.00 c) $1,800.00 d) $37.50 e) $112.50
e) $112.50
1) An error in ending inventory causes an error in the next period's: a) Accounts payable b) Shipping costs c) Accounts receivable d) Sales e) Beginning inventory
e) Beginning inventory
1) The employer should record deductions from employee pay as: a) Wages payable b) Employee receivables c) Employee payables d) Payroll taxes e) Current liabilities
e) Current liabilities
1) A merchandiser: a) Receives fees only in exchange for services b) Buys products from consumers c) Earns profit from fares only d) Earns profit from commissions only e) Earns net income by buying and selling merchandise
e) Earns net income by buying and selling merchandise
1) A 90-day note issued on April 10 matures on: a) July 11 b) July 13 c) July 10 d) July 12 e) July 9
e) July 9
1) In applying the lower of cost or market method to LIFO inventory valuation, market is defined as: a) FIFO b) Historical cost c) Current replacement cost d) LIFO e) Current sales price
c) Current replacement cost
1) A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is an $800 credit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for: a) $2,800 b) $3,568 c) $4,400 d) $3,600 e) $3,632
a) $2,800
1) Trey Morgan is an employee who is paid monthly for the month of January of the current year, he earned a total of $4,538. The FICA tax for social security is 6.2% of the first $128,400 earned each calendar year, and the FICA tax rate for Medicare is 1.45% of all earnings for both the employee and the employer. The amount of federal income tax withheld from his earnings was $680.70. His net pay for the month is: a) $3,510.14 b) $3,857.30 c) $3,162.98 d) $4,538.00 e) $4,190.84
a) $3,510.14
1) Which of the following is an accounting method that (1) estimates and reports bad debts expense from credit sales during the period the sales are recorded, and (2) reports accounts receivable at the estimated amount of cash to be collected? a) Allowance method of accounting for bad debts b) Aging of notes receivable method c) Cash basis method of accounting for bad debts d) Adjustment method for uncollectible debts e) Direct write-off method of accounting for bad debts
a) Allowance method of accounting for bad debts
1) Interest earned on the cash balance in the bank is recorded by the bank as: a) An increase in the depositor's bank account b) An increase in the bank's expense account c) A decrease in the bank's asset account d) An increase in the bank's asset account e) A decrease in the depositor's bank account
a) An increase in the depositor's bank account
1) An accountant linked with another account that has an opposite normal balance and is subtracted from the balance of the related account is (an): a) Contra account b) Accrued revenue c) Adjunct account d) Accrued expense e) Intangible asset
a) Contra account
1) If a company has advance ticket sales totaling $2,000,000 for the upcoming football season, the receipt of cash would be journalized as: a) Debit Cash, credit Unearned Revenue b) Debit Sales, credit Unearned Revenue c) Debit Unearned Revenue, credit Cash d) Debit Cash, credit Ticket Sales Payable e) Debit Unearned Revenue, credit Sales
a) Debit Cash, credit Unearned Revenue
1) Uniform Supply accepted a $4,800, 90-day, 10% note from Tracy Janitorial on October 17. What entry should Uniform Supply make on December 31, to record the accrued interest on the note? a) Debit Interest Receivable $100; credit Interest Revenue $100 b) Debit Interest Receivable $20; credit Interest Revenue $20 c) Debit Cash $20; credit Notes Receivable $20 d) Debit Cash $100; credit Notes Receivable $100 e) Debit Cash $120; credit Interest Revenue $100; credit Interest Receivable $20
a) Debit Interest Receivable $100; credit Interest Revenue $100
1) On a bank reconciliation, a bank fee for check printing not yet recorded by the company is: a) Deducted from the book balance of cash b) Noted as a memorandum only c) Added to the bank balance of cash d) Deducted from the bank balance of cash e) Added to the book balance of cash
a) Deducted from the book balance of cash
1) Extraordinary repairs: a) Extend the useful life of an asset beyond its original estimate b) Are credited to accumulated depreciation c) Are additional costs of plants assets that do not materially increase the asset's life d) Are revenue expenditures e) Are expensed when incurred
a) Extend the useful life of an asset beyond its original estimate
1) Which of the following accounts could not be classified as a current liability? a) Notes payable (due in 5 years) b) Unearned revenues c) Current portion of long-term note payable d) Accounts payable e) Notes payable (due in 11 months)
a) Notes payable (due in 5 years)
1) The materiality constraint, as applied to bad debts: a) Permits the use of the direct write-off method when bad debts expenses are relatively small b) Requires that bad debts not be written off c) Requires use of the direct write-off method d) Requires use of the allowance method for bad debts e) Requires that expenses be reported in the same period as the sales they helped produce
a) Permits the use of the direct write-off method when bad debts expenses are relatively small
1) Which of the following accounts would be closed at the end of the accounting period with a debit? a) Sales b) Sales discounts c) Operating expenses d) Sales returns and allowances e) Cost of goods sold
a) Sales
1) A simple tool that is widely used in accounting to represent a ledger account and to understand how debits and credits affect an account balance is called a: a) T-account b) Common Stock account c) Dividends account d) Balance column sheet e) Asset account
a) T-account
1) Separate accounts receivable information for each customer is important because it reveals all of the following except: a) When the customer intends to pay outstanding balances b) The basis for sending bills to customers c) How much each customer still owes d) How much each customer has paid e) How much each customer has purchased on credit
a) When the customer intends to pay outstanding balances
1) An asset's book value is $18,000 on December 31, Year 5. The asset has been depreciated at an annual rate of $3,000 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,000, the company should record: a) A gain on sale of $12,000 b) A loss on sale of $3,000 c) Neither a gain nor a loss is recognized on this transaction d) A gain on sale of $3,000 e) A loss on sale of $12,000
b) A loss on sale of $3,000
1) Decisions management must make in accounting for inventory cost include all of the following except: a) Items included in inventory and their costs b) Customer demand for inventory c) Perpetual or periodic inventory system d) Damage or obsolescence e) Costing method
b) Customer demand for inventory
1) Majesty Productions accepted a $7,200, 120-day, 6% note from Swartz Studio on March 1. On the date the note matures, Swartz is unable to pay, but Majesty intends to continue collection efforts. What entry should Majesty record on the maturity date for this dishonored note? a) Debit Accounts Receivable $7,200; credit Allowance for Doubtful Accounts $7,200 b) Debit Accounts Receivable $7,344; credit Interest Revenue $144; credit Notes Receivable $7,200 c) Debit Accounts Receivable $7,200; credit Notes Receivable $7,200 d) Debit Accounts Receivable $7,056; debit Interest Revenue $144; credit Notes Receivable $7,200 e) Debit Bad Debt Expense $7,344; credit Notes Receivable $7,344
b) Debit Accounts Receivable $7,344; credit Interest Revenue $144; credit Notes Receivable $7,200
1) A company sold $12,000 worth of bicycles with an extended warranty. The company's experience is that warranty expense averages 2% of sales. The current period's entry to record the warranty expense is: a) Debit Prepaid Warranties $240; credit Warranty Expense $240 b) Debit Warranty Expense $240; credit Estimated Warranty Liability $240 c) Debit Sales Allowances $240; credit Estimated Warrant Liability $240 d) Debit Estimated Warranty Liability; credit Cash $240 e) Debit Warranty Expense $240; credit Cash $240
b) Debit Warranty Expense $240; credit Estimated Warranty Liability $240
1) When a petty cash fund is in use: a) Cash is debited when funds are replenished b) Expenses paid with petty cash are recorded when the fund is replenished c) Petty cash is debited when funds are replenished d) Expenses are not recorded e) Petty cash is credited when funds are replenished
b) Expenses paid with petty cash are recorded when the fund is replenished
1) The Cash Over and Short account a) Can never have a debit balance b) Is used to record the income effects of errors in making change and/or processing petty cash transactions c) Is not necessary in a computerized accounting system d) Can never have a credit balance e) Is used when the cash account reports a credit balance
b) Is used to record the income effects of errors in making change and/or processing petty cash transactions
1) The current period's ending inventory is: a) The current period's beginning inventory b) The next period's beginning inventory c) The current period's net purchases d) The current period's cost of goods sold e) The prior period's beginning inventory
b) The next period's beginning inventory
1) One characteristic of plant assets is that they are: a) Long-term investments b) Used in operations c) Natural resources d) Current assets e) Intangible
b) Used in operations
1) A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is: a) $0.875 b) $6.00 c) $0.625 d) $8.00 e) $0.75
c) $0.625
1) A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $ 375,000 debit Allowance for uncollectible accounts $ 500 debit Net Sales $ 800,000 credit All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared? a) $1,275 b) $4,500 c) $4,800 d) $1,775 e) $5,500
c) $4,800
1) The credit terms 2/10, n/30 are interpreted as: a) 2% discount if paid within 30 days b) 30% discount if paid within 10 days c) 2% discount if the amount is paid within 10 days or the balance due in 30 days d) 30% discount if paid within 2 days e) 10% cash discount if the amount is paid within 2 days, or the balance due in 30 days
c) 2% discount if the amount is paid within 10 days or the balance due in 30 days
1) Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is: a) Accounts Receivable - A. Hopkins 2,000 (debit) Allowance for Doubtful Accounts 2,000 (credit) b) Allowance for Doubtful Accounts 2,000 (debit) Bad debts expense 2,000 (credit) c) Allowance for Doubtful Accounts 2,000 (debit) Accounts Receivable - A. Hopkins 2,000 (credit) d) Accounts Receivable - A. Hopkins 2,000 (debit) Bad debts expense 2,000 (credit) Cash 2,000 (debit) Accounts Receivable - A. Hopkins 2,000 (credit) e) Cash 2,000 (debit) Accounts Receivable - A. Hopkins 2,000 (credit)
c) Allowance for Doubtful Accounts 2,000 (debit) Accounts Receivable - A. Hopkins 2,000 (credit)
1) Revenue expenditures: a) Extend the asset's useful life b) Substantially benefit future periods c) Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities d) Are known as balance sheet expenditures because they relate to plant assets e) Are debited to asset accounts when incurred
c) Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities
1) Damaged obsolete goods that could be sold: a) Are never counted as inventory b) Are included in inventory at their full cost c) Are included in inventory at their net realizable value d) Should be disposed of immediately e) Are assigned a value of zero
c) Are included in inventory at their net realizable value
1) Physical counts of inventory: a) Must be taken at least once a month b) Requires the use of hand-held portable computers c) Are necessary to adjust the Inventory account to the actual inventory available d) Are not necessary under the perpetual system e) Are not necessary under the cost-to benefit constraint
c) Are necessary to adjust the Inventory account to the actual inventory available
1) The total cost of an asset less its accumulated depreciation is called: a) Replacement cost b) Current (market) value c) Book value d) Present value e) Historical cost
c) Book value
1) A company pledges their receivables so they may a) Increase sales b) Charge a factoring fee c) Borrow money d) Collect a pledge fee e) Recognize a sale
c) Borrow money
1) An asset can be disposed of by all of the following except: a) Selling it b) Discarding it c) Continuing to use it after it is fully depreciated d) Donating it to charity e) Exchanging it for another asset
c) Continuing to use it after it is fully depreciated
1) Spencer C. has a $200 petty cash fund. At the end of the first month of the accumulated receipts represent $43 for delivery expenses, $127 for merchandise inventory, and $12 for miscellaneous expenses. The fund has a balance of $18. The journal entry to record the reimbursement of the account includes a: a) Debit to Cash Over and Short for $18 b) Debit to Petty Cash for $200 c) Credit to Cash $182 d) Credit to Cash Over and Short for $18 e) Credit to Inventory for $127
c) Credit to Cash $182
1) Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between a) Ending inventory and beginning inventory b) Beginning inventory and net purchases during the period c) Ending inventory and cost of goods sold d) Beginning inventory and cost of goods sold e) Net purchases during the period and ending inventory
c) Ending inventory and cost of goods sold
1) During a period of steadily rising costs, the inventory valuation method that yields the highest reported net income is: a) Average cost method b) LIFO method c) FIFO method d) Weighted-average method e) Specific identification method
c) FIFO method
1) Expenses that support the overall operations of a business and include the expenses relation to accounting, human resource management, and financial management are called: a) Purchasing expenses b) Non-operating activities c) General and administrative expenses d) Selling expenses e) Cost of goods sold
c) General and administrative expenses
1) If a check correctly written and paid by the bank for $272 is incorrectly recorded in the company's books for $227, how should this error be treated on the bank reconciliation?? a) Subtract $45 from the bank's balance and add $45 to the book's balance b) Subtract $45 from the bank's balance c) Subtract $45 from the book balance d) Add $45 to the book balance e) Add $45 to the bank's balance
c) Subtract $45 from the book balance
1) The useful life of a plant asset is: a) Its productive life, but not to exceed one year b) Never related to its physical life c) The length of time it is productively used in a company's operations d) Determined by law e) Determined by the FASB
c) The length of time it is productively used in a company's operations
1) The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called: a) Modified accelerated cost recovery system (MACRS) depreciation b) Declining-balance depreciation c) Units-of-production depreciation d) Accelerated depreciation e) Straight-line depreciation
c) Units-of-production depreciation
1) A company purchased a delivery van $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1? a) $1,400 b) $1,250 c) $2,067 d) $1,667 e) $5,000
d) $1,667
1) Prentice Company had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Prentice's net sales for this period equal: a) $177,725 b) $174,250 c) $94,275 d) $172,550 e) $176,025
d) $172,550
1) A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals: a) $695,000 b) $(417,000) c) $973,000 d) $417,000 e) $278,000
d) $417,000
1) If cash is received from customers in payment for products or services that have not yet been delivered to customers, the business would record the cash receipt as: a) No entry s required at the time of collection b) A debit to a prepaid expense account c) A debit to an unearned revenue account d) A credit to an unearned revenue account e) A credit to a prepaid expense account
d) A credit to an unearned revenue account
1) Employer payroll taxes: a) Are paid by the employee b) Represent the social security taxes withheld from employees c) Represent the federal taxes withheld from employees d) Are added expenses beyond that for the wages and salaries earned by employees e) Are payable for up to a maximum $128,400 of employee earnings
d) Are added expenses beyond that for the wages and salaries earned by employees
1) If a company purchases equipment cost $4,500 on credit, the effect of the accounting equation would be: a) Liabilities decrease $4,500 and assets increase $4,500 b) Equity increases $4,500 and liabilities decrease $4,500 c) Assets increase $4,500 and liabilities decrease $4,500 d) Assets increase $4,500 and liabilities increase $4,500 e) Equity decreases $4,500 and liabilities decrease $4,500
d) Assets increase $4,500 and liabilities increase $4,500
1) At the end of the current year, using the aging of receivable method, management estimated that $15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $375. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? a) Bad Debts Expense 16,125 (debit) Allowance for Doubtful Accounts 16,125 (credit) b) Accounts Receivable 15,750 (debit) Bad Debts Expense 375 (debit) Sales 16,125 (credit) c) Bad Debts Expense 15,750 (debit) Allowance for Doubtful Accounts 15,750 (credit) d) Bad Debts Expense 15,375 (debit) Allowance for Doubtful Accounts 15,375 (credit) e) Accounts Receivable 16,125 (debit) Allowance for Doubtful Accounts 16,125 (credit)
d) Bad Debts Expense 15,375 (debit) Allowance for Doubtful Accounts 15,375 (credit)
1) Cash, not including cash equivalents, includes: a) Postage stamps b) Two-year certificates of deposits c) IOUs d) Customer checks, cashier checks, and money offers e) Money market funds
d) Customer checks, cashier checks, and money offers
1) Spencer Co. decides to establish a petty cash fund with a beginning balance of $200. The company decides that any purchase under $25 can be processed through petty cash instead of the voucher system. The journal entry to record establishing the account is: a) Debit Cash $200 and credit Cash Over and Short $200 b) Debit Cash $200 and credit Petty Cash Over and Short $200 c) Debit Cash $200 and credit Petty Cash $200 d) Debit Petty Cash and credit Cash $200 e) Debit Petty Cash; credit Cash $175; and credit Cash Over and Short $25
d) Debit Petty Cash and credit Cash $200
1) Which of the following would be classified as a natural resource? a) Land improvements b) Goodwill c) Land held as an investment d) Diamond mine e) Patent on an oil extraction process
d) Diamond mine
1) The voucher system of control: a) Is required in large companies but not beneficial for small to mid-sized companies b) Establishes procedures for receiving checks for the sale of verified, approved, and recorded activities c) Is a set of procedures and approvals designed to control cash receipts and the acceptance of liabilities d) Establishes procedures for verifying, approving, and recording liabilities for eventual cash payment e) Applies only when multiple purchases are made from the same supplier
d) Establishes procedures for verifying, approving, and recording liabilities for eventual cash payment
1) Lower of cost or market: a) Is only applicable to companies using LIFO b) Reports all inventory items at full cost c) Is only applicable to companies using FIFO d) Is applied to each individual item, major categories of items, or the whole inventory e) Records only an increase in inventory value
d) Is applied to each individual item, major categories of items, or the whole inventory
1) Sales less sales discounts, less sales returns and allowances equals: a) Net income b) Cost of goods sold c) Net purchases d) Net sales e) Gross profit
d) Net sales
1) Two accounting principles central to accrual accounting basis that are relied on in the adjusting process are: a) Expense recognition (matching) and business entity b) Expense recognition (matching) and cost c) Revenue recognition and monetary unit d) Revenue recognition and Expense recognition (matching) e) Revenue recognition and going-concern
d) Revenue recognition and Expense recognition (matching)
1) Amortization is: a) The process of allocating the cost of natural resources to periods when they are consumed b) An accelerated form of expensing an asset's cost c) Also called depletion d) The systematic allocation of the cost of an intangible asset to expense over its estimated useful life e) The process of allocating to expense the cost of a plant asset to the accounting periods benefiting from its use
d) The systematic allocation of the cost of an intangible asset to expense over its estimated useful life
1) The following transactions occurred during July: --Received $900 cash for services provided to a customer during July --Received $2,200 cash investment from Bob Johnson, the owner of the business --Received $750 from a customer in partial payment of his account receivable which arose from sales in June --Provided services to a customer on credit, $375 --Borrowed $6,00 for the bank by signing a promissory note --Received $1,250 cash from a customer for services to be rendered next year What was the amount of revenue for July? a) $11,100 b) $900 c) $3,275 d) $2,525 e) $1,275
e) $1,275
1) Garza Company had sales of $135,000, sales discounts of $2,000, and sales returns of $3,200. Garza Company's net sales equals: a) $140,200 b) $5,200 c) $135,000 d) $133,000 e) $129,800
e) $129,800
1) The following information is available for Fenton Manufacturing Company at June 30: Cash in bank account $11,455 Inventory of postage stamps $74 Money market fund balance $10,400 Petty cash balance $350 NSF checks from customers returned by bank $867 Postdates checks received from customers $791 Money orders $290 A nine-month certificate of deposit maturing on December 31 of current year $6,000 Based on this information, Fenton Manufacturing Company should report Cash and Cash equivalents on June 30 of: a) $23,286 b) $29,286 c) $28,495 d) $12,095 e) $22,495
e) $22,495
1) If Regent Tax Services' office supplies account balance on March 1 was $1,400, the company purchased $675 of supplies during the month, and a physical count of supplies on hand at the end of March indicated $1,250 unused, what is the amount of the adjusting entry for office supplies on March 31? a) $1,975 b) $1,250 c) $675 d) $525 e) $825
e) $825
1) A machine originally had an estimated useful life of 6 years, but after 4 complete years, it was decided that the original estimate of useful life should have been 10 years. At the point the remaining cost to be depreciated should be allocated over the remaining: a) 2 years b) 4 years c) 16 years d) 10 years e) 6 years
e) 6 years
1) On January 1 of the current year, Jimmy's Sandwich Company reported stockholders' equity totaling $122,500. During the current year, total revenues were $96,000 while total expenses were $85,500. Also, during the current year paid $20,000 in cash dividends. No other changes in equity occurred during the year. If, on December 31 of the current year, total assets are $196,000, the change in total stockholders' equity during the year was: a) A decrease of $30,500 b) An increase of $73,500 c) An increase of $30,500 d) An increase of $9,500 e) A decrease of $9,500
e) A decrease of $9,500
1) The depreciation method that produces larger depreciation expense during the early years of an asset's life and smaller expense in the later years is a(an); a) Straight-line depreciation method b) Book value depreciation method c) Units-of-production depreciation method d) Unrealized depreciation method e) Accelerated depreciation method
e) Accelerated depreciation method
1) Managers place a high priority on internal control systems because the systems assist managers in all of the following except: a) Promoting efficient operations b) Upholding company policies c) Protecting assets d) Ensuring reliable accounting e) Assuring that no loss will occur
e) Assuring that no loss will occur
1) A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200 worth of merchandise. On July 28, it paid the full amount due. Assuming the company uses a perpetual inventory system, and records purchases using the gross method. The correct journal entry to record the purchase on July 5 is: a) Debit Merchandise Inventory $1,600; credit Cash $1,600 b) Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600 c) Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800 d) Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600 e) Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800
e) Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800
1) The closing process is necessary in order to: a) Calculate net income or net loss for an accounting period b) Ensure that management is aware of how well the company is operating c) Ensure that the company complies with state laws d) Ensure that all permanent accounts are closed to zero at the end of each accounting period e) Ensure that the net income or net loss and dividends for the period are closed to the retained earnings account
e) Ensure that the net income or net loss and dividends for the period are closed to the retained earnings account
1) All of the following are true of known liabilities except: a) Are measurable b) Can arise from agreements or contracts c) Can arise from laws d) Include accounts payable, notes payable, and payroll e) May depend on some future event occurring
e) May depend on some future event occurring
1) Beginning inventory plus net purchases is: a) Ending inventory b) Cost of goods sold c) Shown on the balance sheet d) Sales e) Merchandise (goods) available for sale
e) Merchandise (goods) available for sale
1) The principles of internal control include: a) Use only computerized systems b) Require automated sales systems c) Bond all employees d) Maintain minimal records e) Separate recordkeeping from custody of assets
e) Separate recordkeeping from custody of assets
1) An income statement that includes cost of goods sold as another expense and shows only one subtotal for total expenses is a: a) Balanced income statement b) Simplified income statement c) Combined income statement d) Multiple-step income statement e) Single-step income statement
e) Single-step income statement
1) The inventory valuation method that identifies each item in ending inventory with a specific purchase and invoice is the: a) Last-in, first-out method b) Weighted average inventory method c) Retail inventory method d) First-in, first-out method e) Specific identification method
e) Specific identification method
1) An adjusting entry could be made for each of the following except: a) Prepaid expenses b) Accrued expenses c) Depreciation d) Unearned revenues e) Stockholder investments
e) Stockholder investments
1) Contingent liabilities must be recorded if: a) The future event is remote b) The amount owed cannot be reasonably estimated c) The future event is reasonably possible but not estimable d) The future event is probable but not estimable e) The future event is probable, and the amount owed can be reasonably estimated
e) The future event is probable, and the amount owed can be reasonably estimated