ACCOUNTING TEST 1 QUESTIONS

Seidner Store sells expensive watches. An inventory at the beginning of the day showed 46 watches in the store. 7 new watches were added to the inventory during the day. The point-of-sale terminal recorded 3 watches sold. An inventory taken at the end of the day should show how many watches still in the store? 1. 46 2. 50 3. 53 4. cant be determined from data

50 : 46 + 7 - 3 = 50

The Nichols Company borrowed $32,000 from the bank and agreed to keep $3000 on deposit at all times. The stated rate of interest on the loan is 9%. What is the real rate of interest? 1.9.4% 2. 9.9% 3.10.3% 4. 9%

9.9% : 9% X $32,000 = $2,880 ( which your still paying, but on $29,000 not really $32,000 because you cant keep $3000 --> 2880/29,000 = 9.9%

All of the following accounts are closed EXCEPT for: 1. Service revenue 2. dividends 3. Utilities expense 4. Cash

Cash

The following accounts are up-to-date and need no adjustment at the end of the period 1. Cash, Land and common stock 2.Prepaid Rent, Supplies and Unearned Rent Revenue. 3.Cash, Dividends and Unearned Rent Revenue. 4.Cash, Common Stock and Prepaid Rent.

Cash, Land and common stock

Which transaction decreases stockholders equity? 1.Services were performed and cash was immediately received from the customers. 2.Services were performed on account. 3.Employees worked one week and were paid at the end of the week 4. Inventory was purchased on account

Employees worked one week and were paid at the end of the week

Which of the following statements is TRUE for a proprietorship> 1. The business records include the proprietor's personal finances. 2.Legally, a proprietorship is separate from the proprietor. 3. All statements are correct 4. For accounting purposes, a proprietorship is separate from the proprietor

For accounting purposes, a proprietorship is separate from the proprietor

Adjusting Entries: 1. are made before the financial statement can be prepared 2.must be made on a daily basis to record supplies used during that day. 3. are needed for all balance sheet accounts. 4. are needed because errors have been made in previous journal entries

are made before the financial statements can be prepared

As a practical matter most companies prepare financial statements: 1.only when both the balance sheet and income statement are affected. 2. at the end of the accounting period 3. at the close of every business day 4. after every transaction

at the end of every accounting period

The Public Company Accounting Oversight Board was created to oversee the: 1. american institute of certified public accountants 2. audits of public companies 3. SEC 4. management of public companies

audits of public companies

A measure of the companys abilities to pay current liabilities with current assets is the: 1. current ratio 2. liability ratio 3. debt ratio 4. asset ratio

current ratio

The left side of a T-account is always the: 1. increase side 2. decrease side 3. debit side 4.credit side

debit side https://www.youtube.com/watch?v=j71Kmxv7smk

The normal balance of an account: 1. cannot be computed in a manual accounting system 2. must be computed after every transaction 3. falls on the side where the increases are recorded 4. falls on the side where decreases are recorded

falls on the side where increases are recorded

the 2 types of accounting are: 1. financial and management 2. book keeping and decision oriented 3. profit and nonprofit 4. internal and external

financial and management

the assets of a company: 1.include property, plant, and equipment and accounts payable. 2.must equal the liabilities of the company. 3.include short-term investments and notes payable. 4.represent economic resources that are expected to produce a future benefit

represent economic resources that are expected to produce a future benefit

when preparing the balance sheet, the final balancing element of the balance sheet is: 1. cash 2. net income 3. dividends 4. retained earnings

retained earnings

The revenue principle deals with the following: 1.when to record revenue and when to record related expenses. 2. when to record revenue and the amount of revenue to record 3.where to record revenue and the amount of revenue to record. 4. when to record revenue and where to record this revenue

when to record revenue and the amount of revenue to record

Assume the balance in the Retained Earnings account at January 1, 2017 is zero, and no dividends are declared in 2017. If a debit balance of $6000 exists in Retained Earnings after closing out revenues and expenses at the end of 2017, this indicates: 1. the company had a net loss of $6000 2. that the company had net income of $6000. 3. an increase in cash of $6000. 4. a decrease in cash of $6000.

that the company had a net loss of $6000

An account will have a debit balance if: 1. it is a liability account. 2. the account has more debit entries than credit entries. 3. the amount of the debits exceeds the amount of the credits 4.the amount of the credits exceeds the amount of the debits.

the amount of the debits exceeds the amount of the credits

The fair value of a plant asset is equal to: 1. The amount the business could sell the asset for 2.the amount a company can receive for the asset when sold in order to go out of business. 3.the amount of cash paid plus the loan taken out to finance the purchase of the plant asset. 4.the amount of cash paid plus the dollar value of noncash consideration given in exchange for the plant asset at acquisition.

the amount the business could sell the asset for

In a cash budget, if the cash available before new financing falls below the budgeted balance: 1.the company should reduce its cash receipts 2. the company will need new financing 3. the company can invest the excess cash 4. the company is facing bankruptcy

the company will need new financing

For good internal control: 1. the purchasing agent should prepare an EFT for payment 2. the purchasing agent should also approve the invoice for payment 3. the purchasing agent should not receive the goods or approve the invoice for payment 4. the purchasing agent should also receive the goods

the purchasing agent should not receive the goods or approve the invoice for payment

The trial balance is used to determine if: 1. total debits of the balance sheet accounts equal the total credits of the balance sheet accounts. 2.total debits of the income statement accounts equal the total credits of the income statement accounts. 3. total debits of all the accounts equal total credits of all the accounts 4. total assets equal total liabilities.

total debits of all the accounts equal total credits of all the accounts

To obtain a new customer, a business sells merchandise to the customer for $100. Normally, the merchandise sells for $200. For this sale, the business should record revenue of: 1.an average of the two amounts. 2. $200. 3. either amount. 4.$100.

$100

Simmons Company began the month with a balance of $84,000 in Accounts Receivable. An analysis of the account determined that sales on account for the month totaled $112,000. At the end of the month, the balance in Accounts Receivable was $85,000. From this information, it can be determined that Simmons Company had collections from customers on account of: 1. $113,000 2. $28,000 3. $111,000 4. $57,000

$111,000 : 84+ 112 -85 = 111

Connar company reports the following accounts and balances at year end, what is the total amount of current assets at the end of the year? 1. $141,000 2.$113,000 3.$82,000 4. $127,000 Long-Term Notes Payable $150,000 Accounts Receivable $31,000 Accounts Payable $37,000 Building $55,000 Cash and Cash Equivalents $82,000 Salaries Expense $20,500 Common Stock $22,000 Interest Payable $1,500 Land $40,000 Short-term Investments $7000 Income Taxes Payable $14,000 Equipment $59,500 Supplies $7000 Service Revenue $99,000 Supplies Expense $18,000 Utilities Expense $8,500 Income Tax Expense $10,000

$127,000 - 82+ STI 7 + AR 31 + supplies 7 = 127

In 1990, Johnson Company purchased a building for $200,000. In 2017, a real estate professional says the building has a fair value of $1,000,000. In 2017, a similar building down the street recently sold for $900,000. What value, before consideration of accumulated depreciation, is reported for the building on the balance sheet at December 31, 2017? 1. $900,000 2.$600,000 3.$200,000 4. $1,000,000

$200,000 - historical cost principle

Which of the following is a CORRECT statement? 1. Shareholders' equity is also called proprietorship equity. 2. A proprietorship has more than one capital account. 3. A partnership has a separate owner's equity account for each partnership 4.Retained earnings is the owner's investment in the corporation.

A partnership has a separate owners equity account for each partnership

The accounting equation can be stated as: 1. Assets + Liabilities = Stockholders' Equity. 2.Assets = Liabilities - Paid-in Capital - Dividends. 3. Assets = Liabilities + Paid-in Capital - Common Stock. 4. Assets = liabilities + paid in capital + retained earnings

Assets = liabilities + paid in capital + retained earnings

A doctor performed surgery in March and did not receive cash from the patient until July. Under accrual accounting, the doctor recognized the revenue 1.at a time that cannot be determined from the facts 2. in July 3. in either March or July 4. in March

In march ( recognize revenue when earned)

On December 15, 2017, a company receives an order from a customer for services to be performed on December 28, 2017. Due to a backlog of orders, the company does not perform the services until January 3, 2018. The customer pays for the services on January 6, 2018. The revenue principle requires the revenue to be recorded by the company on: 1. January 6, 2018. 2.December 15, 2017. 3. January 3, 2018 4.December 28, 2017.

January 3, 2018

Every journal entry: 1. must debit at least one account and credit at least one account 2.affects both an income statement account and a balance sheet account. 3.must increase at least one account and decrease at least one account. 4.recorded in either the journal or the ledger.

Must debit at least one account and credit at least one account

Which of the following is CORRECT regarding liquidity? 1. Equipment is a highly liquid asset. 2. Liquidity measures how quickly revenue can be earned. 3. Accounts receivable is the most liquid asset. 4.A balance sheet lists assets and liabilities in the order of relative liquidity

a balance sheet lists assets and liabilities in the order of relative liquidity

When total expenses exceed total revenues the result is: 1. a dividend 2. a net loss 3. an increase to retained earnings 4. a net profit

a net loss

complicating factors for a global business include: 1. what is ethical in one country may not be ethical in another country 2. all of the above 3. a foreign government threatening to take over the company's plant 4. what is legal in one country may not be legal in another country

all the above

A record of all the changes in a particular asset during a period of time is found in a(n): 1. prior periods balance sheet 2. transaction 3. trial balance 4.account

account

Examples of liabilities include: 1. accounts payable and note payable 2.accounts payable and common stock. 3.accounts payable and dividends. 4.investments and note payable

accounts payable and note payable

When services are preformed on account 1.revenue will not be recorded until the cash is received from the customer. 2. accounts receivable is increased 3.accounts payable is increased. 4.cash is increases

accounts receivable is increased

The ending balance of cash and cash equivalents is found on the Statement of Cash Flows and the: 1. balance sheet 2. income statement 3. statement of retained earnings 4. statement of stockholders equity

balance sheet

The _____ is elected by the stockholders and is resposnible for setting policy and appointing officers 1. advisory council 2. chief executive officer 3. chief financial officer 4.board of directors

board of directors

When a company borrows money from the bank, which type of account(s) is(are) increased? 1. asset account only 2. retained earning only 3. liability account only 4. both asset and liability accounts

both asset and liability accounts

Which account includes balances in multiple checking accounts? 1. Accounts receivable 2. Notes Receivable 3. Prepaid expenses 4.Cash

cash

The objectives of internal control do NOT include: 1. compliance with standards of social responsibility 2. safeguarding assets 3. compliance with legal requirements 4. promoting operational efficiency

compliance w standards of social responsibility

The book value of a plant asset is the: 1. cost of the asset less the accumulated depreciation 2.accumulated depreciation less the cost of the asset 3. cost of the asset 4. balance in the accumulated depreciation account

cost of the asset less the accumulated depreciation

Deposits that have been recorded on the companys books, but have not yet been recorded by the bank are: 1. deposits in transit 2. outstanding deposits 3. nonsufficient funds deposit 4.electronic funds deposit

deposits in transit

all of the following are expenses EXCEPT: 1. dividends 2. salary expense 3. depreciation expense 4. cost of goods sold

dividends

a disadvantage of a general partnership is: 1. each partner may conduct business in the name of the entity and make agreements that legally bind all partners 2.double taxation of distributed profits. 3.only individuals can be partners. 4.the partnership's assets are commingled with each partner's personal assets.

each partner may conduct business in the name of the entity and make agreements that legally bind all partners

The 3 factors that influence business and accounting decisions are: 1.judgment, cost/benefit analysis, and cultural backgrounds. 2. economic, legal, ethical 3.minimizing costs, maximizing profits and cost/benefit tradeoff. 4.legal implications, socioeconomic backgrounds, profit maximization

economic, legal, ethical

Internal controls are designed to accomplish five objectives that include compliance with legal requirements, promote operational efficiency, safeguard assets, encourage employees to follow company policy and: 1. prevent collusion 2. prevent fraud 3. prevent misappropriation of assets 4. ensure accurate, reliable accounting records

ensure accurate, reliable accounting records

the type of fraud committed by company managers, who make false and misleading entries in the books in order to improve a company's financial statements is called: 1. missappropriation of assets 2. embezzelment 3.fradulent financial reporting 4.collusion

fraudulent financial reporting

Which of the following combos of ratios is preferable? 1. a high current ratio and a low debt ratio 2. a low current ratio and a low debt ratio 3. high current ratio and a high debt ratio 4.a low current ratio and high debt ratio

high current ratio and low debt ratio

A doctor performed surgery in April and did not receive cash payment from the patient until August. Under cash-basis accounting, the doctor recognizes revenue: in April. 1. In April 2.In April or August 3. In August 4. at a time that cant be determined from the facts

in august - recognize revenue when payed

The expense recognition principle requires the recognition of expenses: 1. in the period assets are created 2. in the period in which future benefit for the company occurs 3. in the period they are paid 4. in the same period in which the related revenues are earned

in the same period in which the related revenues are earned

Which financial statement answers the following question: how well did the company preform during the year? 1. statement of retained earnings 2. balance sheet 3. statement of cash flows 4.income statement

income statement

the net income or loss is calculated on which financial statement? 1. income statement 2. dividends statement 3. balance sheet 4. statement of retained earnings

income statement

a company received cash in exchange for issuing stock. This transaction increased assets and: 1. increased expenses 2. increased stockholders equity 3. increased liabilities 4. increased revenues

increased stockholders equity

a fidelity bond is a(n): 1. insurance policy that reimburses a company for any losses due to employee theft 2.contract prohibiting former employees from working for a competitor. 3.promise by a company to safeguard customers' personal information. 4. employment contract for a specified period of time.

insurance policy that reimburses a company for any losses due to employee theft

The process of verifying accounting information in financial statements is undertaken by: 1. internal and external auditors 2. external auditors only 3. the Securities and Exchange commision 4. internal auditors only

internal and external auditors

The primary way that fraud is prevented, detected or corrected is through a proper system of: 1. internal control 2. ethical standards and a code of ethics 3. internal and external audits 4. policies developed by upper management

internal control

net working capital: 1. is computed by subtracting total current liabilities from total current assets 2. should be a negative number to ensure the profitability of the company. 3.represents the company's ability to pay its long-term debts. 4. should be the same for all companies.

is computed by subtracting total current liabilities from total current assets

Cost of goods sold: 1. Is considered a selling expense 2. is the direct cost of the product sold 3. is classified as revenue on the income statement 4. is the same as gross profit

is the direct cost of the product sold

Accounting transactions are initially recorded in the : 1. T-account. 2.financial statements. 3. ledger 4.journal

journal

In order to see a complete transaction in one place, you would need to look at the: 1. financial statements 2. ledger 3. journal 4. trial balance

journal

There are 3 parties to a check. The person who signs the check is the: 1. draftee 2. maker 3. promisee 4. payee

maker

The type of fraud committed by employees of an entity, who steal money from the company and cover it up through erroneous entries in the books is called: 1. collusion 2. fraudulent financial reporting 3. pishing 4. misappropriation of assets

misappropriation of assets

When preparing the financial statements, why is the income statement prepared first? 1. the income statement is the easiest statement to prepare 2.Net income or net loss from the income statement is used for the statement of retained earnings. 3. the income statement is the most important statement to investors and creditors 4. the income statement is used to prepare the balance sheet

net income or net loss from the income statement is used for the statement of retained earnings

Company Z sells land for the same amount it paid for it 3 years ago. When the company recorded this transaction: 1.one liability is increased and another liability is decreased. 2.assets and stockholders' equity are increased. 3. assets are increased and liabilities are decreased. 4. one asset is increased and another asset is decreased

one asset is increased and another asset is decreased

The 3 main components of the fraud triangle are: 1. none of the above. 2. motive, opportunity, rationalization 3.opportunity, motive and lack of ethics. 4.rationalization, opportunity and greed.

opportunity. motive, rationalization

On June 1, 2017, Starbucks paid the rent of $114,000 for 40 of its stores in Washington and California. The rent covers the period, June 1, 2017 through November 30, 2017. On June 1, Starbucks will record ________. On June 30, Starbucks will record ________. 1.nothing; Rent Expense of $19,000 2. Prepaid rent of $114,000 ; Rent expense of $19,000 3. Rent expense of $114,000; nothing 4. nothing; rent expense of $114,000

prepaid rent of $114,000, rent expense of $19,000

Closing entries 1. are the same as adjusting entries 2. are made at the beginning of each accounting period 3. bring all account balances to zero 4. prepare the accounts for the next periods transactions

prepare the accounts for the next periods transactions

Which of the following statements, regarding the rules of debits and credits, is CORRECT? 1. revenue is increased by a credit 2. a liability is increased by a debit 3. an asset is increased by a credit 4. dividends are decreased by debits

revenue is increased by a credit

net income is computed as: 1. revenues + expenses 2. revenues - expenses - dividends 3. revenues - expense + dividends 4.revenues - expenses

revenues - expenses

Which accounts are used in the adjusting entry to record salaries owed to employees, but not paid until the next accounting period? 1.Salaries Payable and Deferred Salaries Expense 2.Salaries expense and salaries payable 3.Unearned Salaries and Salaries Payable 4.Deferred Salaries Payable and Salaries Receivable

salaries expense and salaries payable

Which transaction increases stockholders equity? 1. dividends that are declared and paid 2.payment of operating expenses 3.sale of common stock 4.expenses greater than revenues for the period

sale of common stock

The person who prepares the bank reconcilliaion: 1.should have no other cash duties doodies 2. should also be responsible for cash receipts. 3 should also be responsible for cash disbursements. 4. should be responsible for both cash receipts and cash disbursements.

should have no other cash duties

Which financial statement reports cash payments and cash receipts over a period of time? 1. income statement 2. statement of cash flows 3. statement of retained earnings 4. balance sheet

statement of cash flows