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accounting test Questions| Reliablepapers
Credits are used to record:
A) decreases in assets and owner’s equity and increases in liabilities.
B) decreases in assets, liabilities, and owner’s equity.
C) decreases in liabilities and increases in assets and owner’s equity.
D) increases in liabilities and owner’s equity.
Which of the following types of accounts normally have debit balances?
A) assets and revenue
B) assets, liabilities, and owners equity
C) expenses and assets
D) liabilities and owner’s equity
On November 1, 20–, a firm accepted a 4-month, 10 percent note for $900 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 20–, is (assume a 360 day year)
A) $75
B) $30
C) $15
D) $90
The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes:
A) a credit to Sales and a debit to Accounts Receivable
B) a debit to Sales and a credit to Sales Returns and Allowances
C) a debit to Sales Returns and Allowances and a credit to Accounts Receivable
D) a debit to Accounts Receivable and a credit to Sales Returns and Allowances
If a firm had sales of $50,000 during a period and sales returns and allowances of $4,000, its net sales were:
A) $54,000
B) $50,000
C) $46,000.
D) $4,000
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An aged analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
A) $800
B) $1,000
C) $1,200
D) $200
A firm reported net credit sales of $225,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $100. The firm estimated its losses from uncollectible accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for
A) $1,225
B) $1,125
C) $ 900
D) $2,250
Upon collection of the amount due on a $6,000 face value, 90-day note with interest at 10 percent a year, the Note Receivable account is:
A) debited for $6,600
B) credited for $6,000
C) credited for $6,150
D) debited for $6,000
The entry to record a purchase of merchandise on credit using a periodic inventory system includes
A) a debit to Merchandise Inventory and a credit to Accounts Payable
B) a credit to Merchandise Inventory and a debit to Accounts Payable
C) a debit to Accounts Payable and a credit to Purchases
D) a debit to Purchases (COGS) and a credit to Accounts Payable
The entry to record a purchase of merchandise on credit using a perpetual inventory system includes:
A) a debit to Merchandise Inventory and a credit to Accounts Payable
B) a credit to Merchandise Inventory and a debit to Accounts Payable
C) a debit to Accounts Payable and a credit to Purchases
D) a debit to Purchases (COGS) and a credit to Accounts Payable
The total of the balances in the creditor’s accounts should agree with the balance of:
A) the Purchases account in the general ledger
B) the Accounts Receivable account in the general ledger
C) the Accounts Payable account in the general ledger
D) the Sales account in the general ledger
A firm purchased equipment for $6,000 on credit and issued a 120-day note bearing interest at 9 percent. To record this transaction, the accountant would:
A) debit Equipment for $6,000 and credit Notes Payable for $6,000
B) debit Equipment for $6,180, credit Interest Expense for $180, and credit Notes Payable for $6,000
C) debit Equipment for $6,000, debit Interest Expense for $180, and credit Notes Payable for $6,180
D) credit Equipment for $6,000 and debit Accounts Payable for $6,000
When a company issues a promissory note, the accountant records an entry that includes a credit to Note Payable for:
A) the face value of the note
B) the face value of the note plus the interest that will accrue
C) the face value less the interest that will accrue
D) the maturity value of the note
How much interest will accrue on a $20,000 face value, 60-day note that bears interest at 9 percent a year? (assume a 360 day year)
A) $300
B) $1,800
C) $450
D) $900
Notes payable due within one year are usually shown:
A) in the Current Assets section of the balance sheet
B) in the Current Liabilities section of the balance sheet
C) in the Other Expenses section of the income statement
D) in the Long-Term Liabilities section of the balance sheet
The maturity value of a 90-day note for $4,000 that bears interest at 10 percent a year is (assume a 360 day year)
A) $4,400
B) $4,000
C) $3,900
D) $4,100
Lisa Ramos has a regular hourly rate of $10.75. In a week when she worked 40 hours and had deductions of $55 for federal income tax, $26.75 for social security tax, and $6.25 for Medicare tax, her net pay was
A) $430
B) $342
C) $375
D) $397
The amount debited to Wages Expense when a payroll is recorded is the:
A) Regular gross earnings (not including overtime)
B) Earnings after taxes
C) Net earnings
D) Total gross earnings
Each type of deduction made from the employees’ earnings is recorded in a separate:
A) asset account
B) expense account
C) liability account
D) revenue account
To record the deposit of FUTA tax, the accountant would:
A) debit Payroll Taxes Expense and credit Federal Unemployment Tax Payable.
B) debit Payroll Taxes Expense and credit Cash.
C) debit Federal Unemployment Tax Payable and credit Cash.
D) debit Social Security Taxes Payable and credit Cash.
The adjusting entry to record accrued interest on a note payable requires:
A) a debit to Interest Income and a credit to Notes Payable
B) a debit to Interest Payable and a credit to Interest Expense
C) a debit to Interest Expense and a credit to Cash
D) a debit to Interest Expense and a credit to Interest Payable
On May 1, 20–, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense associated with this policy for 20—is
A) $600
B) $1,200
C) $1,800
D) $1,050
An asset that cost $14,000 was sold for $9,000 cash. Accumulated depreciation on the asset was $7,000. The entry to record this transaction includes the recognition of:
A) a gain of $2,000
B) a loss of $5,000
C) neither a gain nor a loss
D) a loss of $2,000
An adjusting entry is usually not required for an expense item:
A) when it is paid for and recorded in one period but not fully used until a later period
B) when it is used in one period but not paid for or recorded until a later period
C) when it is paid for, recorded, and used in one period
D) when it is budgeted but not paid for or used during the period
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $28,000. Early in the year, 10,000 units were purchased at $9 each. Using FIFO, what is the value of the ending inventory of 3,000 units?
A) $27,000
B) $24,000
C) $21,000
D) $36,000
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000. Early in the year, 8,000 units were purchased at $6 each. Using LIFO, what is the value of the ending inventory of 2,000 units?
A) $12,000
B) $10,000
C) $8,000
D) $24,000
A matching of the most recent costs to revenue results from the use of:
A) the LIFO method
B) the FIFO method
C) the average cost method
D) the lower of cost or market method
On January 2, 20–, a firm purchased equipment for $8,500. Depreciation expense for 20–, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is:
A) $1,500
B) $1,700
C) $1,200
D) $1,400
A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the double-declining-balance method, the depreciation expense for the first year of the asset’s useful life is:
A) $9,000
B) $18,000
C) $10,000
D) $20,000
The method of depreciation that results in the same amount of depreciation expense each year is the:
A) units-of-output method
B) straight-line method
C) sum-of-the-years’-digits method
D) declining-balance method
An accountant who records revenue when a credit sale is made rather than waiting for the receipt of cash from the customer is:
A) following the accrual principle
B) following the conservatism convention
C) violating generally accepted accounting principles
D) following the consistency principle
Depreciating equipment over its useful life is an example of:
A) following the objectivity assumption
B) applying the matching principle
C) applying the realization principle
D) applying the conservatism convention
Keeping the personal assets of the owner of a business separate from the assets of the firm is an example of:
A) following the going concern assumption
B) applying the realization principle
C) following the separate entity assumption
D) applying the conservatism convention
A firm has sales of $40,000 in 2004 and $45,000 in 2005. The increase in sales from 2004 to 2005 is:
A) 25%
B) 20%
C) 125%
D) 12.5%
A firm has liabilities of $60,000 and stockholders’ equity of $180,000. The percentage of total liabilities to total assets is:
A) 25 percent
B) 20 percent
C) 50 percent
D) 75 percent
The current ratio is calculated by:
A) dividing current assets by total liabilities
B) dividing net working capital by current liabilities
C) dividing current assets by current liabilities
D) dividing total assets by current liabilities
A company’s January 1 balance in Accounts Receivable is $70,000. The December 31 balance is $80,000. If the company has credit sales of $600,000, the accounts receivable turnover is:
A) 8.0 times
B) 7.5 times
C) 4.0 times
D) 7.0 times
Stockholders’ equity:
A) is usually equal to cash on hand
B) includes paid-in capital and liabilities
C) includes retained earnings and paid-in capital
D) is shown on the income statement
The charter of a corporation authorizes 100,000 shares of common stock. Assume that 50,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?
A) $50,000
B) $5,000
C) $100,000
D) $45,000
If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be:
A) equal to $100,000
B) greater than $100,000
C) less than $100,000
D) greater than or less than $100,000, depending on the maturity date of the bonds
The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be:
A) debit Cash, credit Premium on Bonds Payable and Bonds Payable
B) debit Bonds Payable, credit Cash
C) debit Cash and Discount on Bonds Payable, credit Bonds Payable
D) debit Cash, credit Bonds Payable
Jack and Jill share income and losses in a 2:1 ratio after allowing for salaries to Jack of $24,000 and $30,000 to Jill. Net income for the partnership is $66,000. Income should be divided as follows:
A) Jack, $24,000; Jill, $30,000
B) Jack, $24,000; Jill, $34,000
C) Jack, $30,000; Jill, $36,000
D) Jack, $32,000; Jill, $34,000
The liability for a dividend is recorded on which of the following dates?
A) the date of record
B) the date of payment
C) the date of announcement
D) the date of declaration
The journal entry to issue 1,000,000 shares of $5 par common stock for $7.00 per share on January 2nd would be:
A)
| Jan 2 | Cash | 7,000,000 | ||
| Common Stock | 5,000,000 | |||
| Paid-in Capital in Excess of Par – C/S | 2,000,000 |
B)
| Jan 2 | Cash | 5,000,000 | ||
| Common Stock | 5,000,000 |
C)
| Jan 2 | Cash | 5,000,000 | ||
| Common Stock | 2,000,000 | |||
| Paid-in Capital in Excess of Par – C/S | 7,000,000 |
D)
| Jan 2 | Cash | 1,000,000 | ||
| Common Stock | 1,000,000 |
Which types of inventories does a manufacturing business report on the balance sheet?
A) Finished goods inventory and work in process inventory
B) Direct materials inventory and work in process inventory
C) Direct materials inventory, work in process inventory, and finished goods inventory
D) Direct materials inventory and finished goods inventory
In a job order cost accounting system, the entry to record the flow of direct materials into production is:
A) debit Work in Process, credit Materials
B) debit Materials, credit Work in Process
C) debit Factory Overhead, credit Materials
D) debit Work in Process, credit Supplies
Based on the following production and sales estimates for May, determine the number of units expected to be manufactured in May:
| Estimated inventory (units), May 1 | 10,000 |
| Desired inventory (units), May 31 | 15,000 |
| Expected sales volume (units): | |
| South region | 30,000 |
| West region | 40,000 |
| North region | 20,000 |
| Unit sales price | $10 |
A) 85,000
B) 95,000
C) 90,000
D) 105,000
If fixed costs are $250,000, the unit selling price is $105, and the unit variable costs are $65, what is the break-even sales (units)?
A) 3,846 units
B) 2,381 units
C) 10,000 units
D) 6,250 units
The entry to transfer a net income to the owner’s capital account would include:
A) a debit to the owner’s capital account and a credit to Cash
B) a debit to the owner’s drawing account and a credit to the owner’s capital account
C) a debit to Income Summary and a credit to the owner’s capital account
D) a debit to the owner’s capital account and a credit to Income Summary
The entry to close the appropriate insurance account at the end of the accounting period is:
A) debit Income Summary; credit Prepaid Insurance
B) debit Prepaid Insurance; credit Income Summary
C) debit Insurance Expense; credit Income Summary
D) debit Income Summary; credit Insurance Expense
Which of the following accounts ordinarily appears in the post-closing trial balance?
A) Unearned Rent
B) Bill Smith, Drawing
C) Supplies Expense
D) Fees Earned
John, age 25, is a full time student at a state university. John lives with his sister, Ann, who provides over half of his support. His only income is $4,000 of wages from a part-time job at the college book store. What is Ann’s filing status?
A) Single
B) Head of Household
C) Married, filing separately
D) Qualifying widow
Wesley owns and operates the Cheshire Chicken Ranch in Turpid, Nevada. The income from this ranch is $49,000. Wesley wishes to use the easiest possible tax form. He may file:
A) Form 1040EZ
B) Form 1040A
C) Form 1040
D) Form 1040C
Which of the following would be a business debt if it were uncollectible?
A) A taxpayer loans his father $1,000 to start a business
B) A taxpayer loans his son $10,000 to purchase a rental house
C) A dentist, using the accrual basis of accounting, extends credit to a patient for services provided
D) A taxpayer loans his brother $3,000 to purchase a truck for use in his brother’s business
Which of the following tax credits can exceed the amount of the taxpayer’s tax liability?
A) Child and dependent care credit
B) HOPE credit
C) Alternative minimum tax credit
D) Earned income credit
Sol purchased land as an investment on January 12, 2004 for $85,000. On January 31, 2008 Sol sold the land for $90,000 cash. What is the nature of the gain or loss?
A) long-term capital loss
B) long-term capital gain
C) short-term capital loss
D) short-term capital gain
Which of the following is a benefit of computerized accounting systems?
A) Time consuming
B) Posting and journalizing separate functions
C) Accuracy
D) No subsidiary ledgers
Trading Securities normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Depreciation Expense normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Leased Equipment normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Dividends Payable normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Gain on Sale of Equipment normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Prepaid Rent normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Accumulated Depreciation – Leased Asset normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Unearned Revenue normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
You must use the spreadsheet that you downloaded earlier to complete the following questions:
| Pastina Co. | ||||
| Trial Balance | ||||
| For the Period Ended January 31, 20xx | ||||
| January 1 Balances | January 31 Balances | |||
| Account Title | Debit | Credit | Debit | Credit |
| Cash | 25,000 | 41,900 | – | |
| Accounts Receivable | 7,000 | 24,500 | – | |
| Allowance | 1,750 | – | 3,500 | |
| Trading Securities | 1,000 | 3,000 | – | |
| Inventory | 35,000 | 28,000 | – | |
| Notes Receivable | 5,000 | 18,000 | – | |
| Interest Receivable | 1,200 | 4,000 | – | |
| Prepaid Rent | 5,000 | 7,000 | – | |
| Prepaid Insurance | 1,000 | 2,000 | – | |
| Patent | 17,000 | 21,000 | – | |
| Equipment | 38,500 | 42,000 | – | |
| Accumulated Depreciation – Equipment | – | 14,000 | ||
| Leased Equipment | – | 120,000 | ||
| Accumulated Depreciation – Leased Equipment | – | 4,000 | ||
| Accounts Payable | 21,000 | 17,500 | ||
| Wage Payable | 8,000 | 5,500 | ||
| Long-term Note Payable | 35,000 | 59,850 | ||
| Taxes Payable | 4,000 | 6,900 | ||
| Interest Payable | 500 | – | ||
| Discount on Notes Payable | 3,500 | 2,800 | ||
| Lease Payable | – | 120,000 | ||
| Unearned Revenue | 7,000 | – | ||
| Common Stock | 30,000 | 45,000 | ||
| Paid in Captial in Excess of Par – Common | 16,700 | 17,500 | ||
| Retained Earnings | 13,250 | ? | ||
| Sales Revenue | – | 147,000 | ||
| Interest Revenue | – | 1,400 | ||
| Cost of Goods Sold | – | 84,000 | ||
| Wage Expense | – | 14,600 | ||
| Rent Expense | – | 10,000 | ||
| Depreciation Expense | – | 9,000 | ||
| Interest Expense | – | 4,200 | ||
| Supplies Expense | – | 6,400 | ||
| Insurance Expense | – | 600 | ||
| Bad Debt Expense | – | 3,000 | ||
| Rent Payable | 1,000 | 5,000 | ||
| Advertising expense | – | 4,500 | ||
| Amortization Expense | – | 6,000 | ||
| Dividends Payable | 1,000 | 800 | ||
| Gain on sale of equip | – | 1,500 | ||
| Income tax Expense | – | 6,900 | ||
| Treasury Stock | – | 3,000 | ||
| Gain on Sales of Trading Securities | – | 2,000 | ||
| Total | 139,200 | 139,200 | 466,400 | 451,450 |
What is the amount of cash collected from customers if Pastina wrote off $1,250 of Accounts Receivable as Uncollectible?
A) $121,250
B) $128,250
C) $170,250
D) $145,750
What are the total current liabilities?
A) $16,780
B) $23,000
C) $35,700
D) $85,700
What would be the ending Retained Earnings balance if Pastina declared $1,000 in dividends?
A) $14,950
B) $12,950
C) $12,250
D) $11,500
How much cash was paid for taxes?
A) $2,900
B) $4,000
C) $6,900
D) $10,900
What are the cash flows from the sale of common stock?
A) $15,000
B) $15,800
C) $18,800
D) $62,500
How much cash was paid for inventory?
A) $80,500
B) $74,500
C) $50,000
D) $28,000
What is the gross profit?
A) $147,000
B) $84,000
C) $63,000
D) $64,400
What is the total Stockholder’s Equity?
A) $74,450
B) $72,450
C) $73,450
D) $75,450
What is the value of total assets?
A) $191,400
B) $289,900
C) $292,900
D) $311,400
What is the book value of the equipment?
A) $42,000
B) $63,000
C) $49,000
D) $28,000
Credits are used to record:
A) decreases in assets and owner’s equity and increases in liabilities.
B) decreases in assets, liabilities, and owner’s equity.
C) decreases in liabilities and increases in assets and owner’s equity.
D) increases in liabilities and owner’s equity.
Which of the following types of accounts normally have debit balances?
A) assets and revenue
B) assets, liabilities, and owners equity
C) expenses and assets
D) liabilities and owner’s equity
On November 1, 20–, a firm accepted a 4-month, 10 percent note for $900 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 20–, is (assume a 360 day year)
A) $75
B) $30
C) $15
D) $90
The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes:
A) a credit to Sales and a debit to Accounts Receivable
B) a debit to Sales and a credit to Sales Returns and Allowances
C) a debit to Sales Returns and Allowances and a credit to Accounts Receivable
D) a debit to Accounts Receivable and a credit to Sales Returns and Allowances
If a firm had sales of $50,000 during a period and sales returns and allowances of $4,000, its net sales were:
A) $54,000
B) $50,000
C) $46,000.
D) $4,000
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An aged analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
A) $800
B) $1,000
C) $1,200
D) $200
A firm reported net credit sales of $225,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $100. The firm estimated its losses from uncollectible accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for
A) $1,225
B) $1,125
C) $ 900
D) $2,250
Upon collection of the amount due on a $6,000 face value, 90-day note with interest at 10 percent a year, the Note Receivable account is:
A) debited for $6,600
B) credited for $6,000
C) credited for $6,150
D) debited for $6,000
The entry to record a purchase of merchandise on credit using a periodic inventory system includes
A) a debit to Merchandise Inventory and a credit to Accounts Payable
B) a credit to Merchandise Inventory and a debit to Accounts Payable
C) a debit to Accounts Payable and a credit to Purchases
D) a debit to Purchases (COGS) and a credit to Accounts Payable
The entry to record a purchase of merchandise on credit using a perpetual inventory system includes:
A) a debit to Merchandise Inventory and a credit to Accounts Payable
B) a credit to Merchandise Inventory and a debit to Accounts Payable
C) a debit to Accounts Payable and a credit to Purchases
D) a debit to Purchases (COGS) and a credit to Accounts Payable
The total of the balances in the creditor’s accounts should agree with the balance of:
A) the Purchases account in the general ledger
B) the Accounts Receivable account in the general ledger
C) the Accounts Payable account in the general ledger
D) the Sales account in the general ledger
A firm purchased equipment for $6,000 on credit and issued a 120-day note bearing interest at 9 percent. To record this transaction, the accountant would:
A) debit Equipment for $6,000 and credit Notes Payable for $6,000
B) debit Equipment for $6,180, credit Interest Expense for $180, and credit Notes Payable for $6,000
C) debit Equipment for $6,000, debit Interest Expense for $180, and credit Notes Payable for $6,180
D) credit Equipment for $6,000 and debit Accounts Payable for $6,000
When a company issues a promissory note, the accountant records an entry that includes a credit to Note Payable for:
A) the face value of the note
B) the face value of the note plus the interest that will accrue
C) the face value less the interest that will accrue
D) the maturity value of the note
How much interest will accrue on a $20,000 face value, 60-day note that bears interest at 9 percent a year? (assume a 360 day year)
A) $300
B) $1,800
C) $450
D) $900
Notes payable due within one year are usually shown:
A) in the Current Assets section of the balance sheet
B) in the Current Liabilities section of the balance sheet
C) in the Other Expenses section of the income statement
D) in the Long-Term Liabilities section of the balance sheet
The maturity value of a 90-day note for $4,000 that bears interest at 10 percent a year is (assume a 360 day year)
A) $4,400
B) $4,000
C) $3,900
D) $4,100
Lisa Ramos has a regular hourly rate of $10.75. In a week when she worked 40 hours and had deductions of $55 for federal income tax, $26.75 for social security tax, and $6.25 for Medicare tax, her net pay was
A) $430
B) $342
C) $375
D) $397
The amount debited to Wages Expense when a payroll is recorded is the:
A) Regular gross earnings (not including overtime)
B) Earnings after taxes
C) Net earnings
D) Total gross earnings
Each type of deduction made from the employees’ earnings is recorded in a separate:
A) asset account
B) expense account
C) liability account
D) revenue account
To record the deposit of FUTA tax, the accountant would:
A) debit Payroll Taxes Expense and credit Federal Unemployment Tax Payable.
B) debit Payroll Taxes Expense and credit Cash.
C) debit Federal Unemployment Tax Payable and credit Cash.
D) debit Social Security Taxes Payable and credit Cash.
The adjusting entry to record accrued interest on a note payable requires:
A) a debit to Interest Income and a credit to Notes Payable
B) a debit to Interest Payable and a credit to Interest Expense
C) a debit to Interest Expense and a credit to Cash
D) a debit to Interest Expense and a credit to Interest Payable
On May 1, 20–, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense associated with this policy for 20—is
A) $600
B) $1,200
C) $1,800
D) $1,050
An asset that cost $14,000 was sold for $9,000 cash. Accumulated depreciation on the asset was $7,000. The entry to record this transaction includes the recognition of:
A) a gain of $2,000
B) a loss of $5,000
C) neither a gain nor a loss
D) a loss of $2,000
An adjusting entry is usually not required for an expense item:
A) when it is paid for and recorded in one period but not fully used until a later period
B) when it is used in one period but not paid for or recorded until a later period
C) when it is paid for, recorded, and used in one period
D) when it is budgeted but not paid for or used during the period
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $28,000. Early in the year, 10,000 units were purchased at $9 each. Using FIFO, what is the value of the ending inventory of 3,000 units?
A) $27,000
B) $24,000
C) $21,000
D) $36,000
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000. Early in the year, 8,000 units were purchased at $6 each. Using LIFO, what is the value of the ending inventory of 2,000 units?
A) $12,000
B) $10,000
C) $8,000
D) $24,000
A matching of the most recent costs to revenue results from the use of:
A) the LIFO method
B) the FIFO method
C) the average cost method
D) the lower of cost or market method
On January 2, 20–, a firm purchased equipment for $8,500. Depreciation expense for 20–, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is:
A) $1,500
B) $1,700
C) $1,200
D) $1,400
A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the double-declining-balance method, the depreciation expense for the first year of the asset’s useful life is:
A) $9,000
B) $18,000
C) $10,000
D) $20,000
The method of depreciation that results in the same amount of depreciation expense each year is the:
A) units-of-output method
B) straight-line method
C) sum-of-the-years’-digits method
D) declining-balance method
An accountant who records revenue when a credit sale is made rather than waiting for the receipt of cash from the customer is:
A) following the accrual principle
B) following the conservatism convention
C) violating generally accepted accounting principles
D) following the consistency principle
Depreciating equipment over its useful life is an example of:
A) following the objectivity assumption
B) applying the matching principle
C) applying the realization principle
D) applying the conservatism convention
Keeping the personal assets of the owner of a business separate from the assets of the firm is an example of:
A) following the going concern assumption
B) applying the realization principle
C) following the separate entity assumption
D) applying the conservatism convention
A firm has sales of $40,000 in 2004 and $45,000 in 2005. The increase in sales from 2004 to 2005 is:
A) 25%
B) 20%
C) 125%
D) 12.5%
A firm has liabilities of $60,000 and stockholders’ equity of $180,000. The percentage of total liabilities to total assets is:
A) 25 percent
B) 20 percent
C) 50 percent
D) 75 percent
The current ratio is calculated by:
A) dividing current assets by total liabilities
B) dividing net working capital by current liabilities
C) dividing current assets by current liabilities
D) dividing total assets by current liabilities
A company’s January 1 balance in Accounts Receivable is $70,000. The December 31 balance is $80,000. If the company has credit sales of $600,000, the accounts receivable turnover is:
A) 8.0 times
B) 7.5 times
C) 4.0 times
D) 7.0 times
Stockholders’ equity:
A) is usually equal to cash on hand
B) includes paid-in capital and liabilities
C) includes retained earnings and paid-in capital
D) is shown on the income statement
The charter of a corporation authorizes 100,000 shares of common stock. Assume that 50,000 shares were originally issued and 5,000 were subsequently reacquired. What is the amount of cash dividends to be paid if a $1 per share dividend is declared?
A) $50,000
B) $5,000
C) $100,000
D) $45,000
If the market rate of interest is 8%, the price of 6% bonds paying interest semiannually with a face value of $100,000 will be:
A) equal to $100,000
B) greater than $100,000
C) less than $100,000
D) greater than or less than $100,000, depending on the maturity date of the bonds
The journal entry a company records for the issuance of bonds when the contract rate is greater than the market rate would be:
A) debit Cash, credit Premium on Bonds Payable and Bonds Payable
B) debit Bonds Payable, credit Cash
C) debit Cash and Discount on Bonds Payable, credit Bonds Payable
D) debit Cash, credit Bonds Payable
Jack and Jill share income and losses in a 2:1 ratio after allowing for salaries to Jack of $24,000 and $30,000 to Jill. Net income for the partnership is $66,000. Income should be divided as follows:
A) Jack, $24,000; Jill, $30,000
B) Jack, $24,000; Jill, $34,000
C) Jack, $30,000; Jill, $36,000
D) Jack, $32,000; Jill, $34,000
The liability for a dividend is recorded on which of the following dates?
A) the date of record
B) the date of payment
C) the date of announcement
D) the date of declaration
The journal entry to issue 1,000,000 shares of $5 par common stock for $7.00 per share on January 2nd would be:
A)
| Jan 2 | Cash | 7,000,000 | ||
| Common Stock | 5,000,000 | |||
| Paid-in Capital in Excess of Par – C/S | 2,000,000 |
B)
| Jan 2 | Cash | 5,000,000 | ||
| Common Stock | 5,000,000 |
C)
| Jan 2 | Cash | 5,000,000 | ||
| Common Stock | 2,000,000 | |||
| Paid-in Capital in Excess of Par – C/S | 7,000,000 |
D)
| Jan 2 | Cash | 1,000,000 | ||
| Common Stock | 1,000,000 |
Which types of inventories does a manufacturing business report on the balance sheet?
A) Finished goods inventory and work in process inventory
B) Direct materials inventory and work in process inventory
C) Direct materials inventory, work in process inventory, and finished goods inventory
D) Direct materials inventory and finished goods inventory
In a job order cost accounting system, the entry to record the flow of direct materials into production is:
A) debit Work in Process, credit Materials
B) debit Materials, credit Work in Process
C) debit Factory Overhead, credit Materials
D) debit Work in Process, credit Supplies
Based on the following production and sales estimates for May, determine the number of units expected to be manufactured in May:
| Estimated inventory (units), May 1 | 10,000 |
| Desired inventory (units), May 31 | 15,000 |
| Expected sales volume (units): | |
| South region | 30,000 |
| West region | 40,000 |
| North region | 20,000 |
| Unit sales price | $10 |
A) 85,000
B) 95,000
C) 90,000
D) 105,000
If fixed costs are $250,000, the unit selling price is $105, and the unit variable costs are $65, what is the break-even sales (units)?
A) 3,846 units
B) 2,381 units
C) 10,000 units
D) 6,250 units
The entry to transfer a net income to the owner’s capital account would include:
A) a debit to the owner’s capital account and a credit to Cash
B) a debit to the owner’s drawing account and a credit to the owner’s capital account
C) a debit to Income Summary and a credit to the owner’s capital account
D) a debit to the owner’s capital account and a credit to Income Summary
The entry to close the appropriate insurance account at the end of the accounting period is:
A) debit Income Summary; credit Prepaid Insurance
B) debit Prepaid Insurance; credit Income Summary
C) debit Insurance Expense; credit Income Summary
D) debit Income Summary; credit Insurance Expense
Which of the following accounts ordinarily appears in the post-closing trial balance?
A) Unearned Rent
B) Bill Smith, Drawing
C) Supplies Expense
D) Fees Earned
John, age 25, is a full time student at a state university. John lives with his sister, Ann, who provides over half of his support. His only income is $4,000 of wages from a part-time job at the college book store. What is Ann’s filing status?
A) Single
B) Head of Household
C) Married, filing separately
D) Qualifying widow
Wesley owns and operates the Cheshire Chicken Ranch in Turpid, Nevada. The income from this ranch is $49,000. Wesley wishes to use the easiest possible tax form. He may file:
A) Form 1040EZ
B) Form 1040A
C) Form 1040
D) Form 1040C
Which of the following would be a business debt if it were uncollectible?
A) A taxpayer loans his father $1,000 to start a business
B) A taxpayer loans his son $10,000 to purchase a rental house
C) A dentist, using the accrual basis of accounting, extends credit to a patient for services provided
D) A taxpayer loans his brother $3,000 to purchase a truck for use in his brother’s business
Which of the following tax credits can exceed the amount of the taxpayer’s tax liability?
A) Child and dependent care credit
B) HOPE credit
C) Alternative minimum tax credit
D) Earned income credit
Sol purchased land as an investment on January 12, 2004 for $85,000. On January 31, 2008 Sol sold the land for $90,000 cash. What is the nature of the gain or loss?
A) long-term capital loss
B) long-term capital gain
C) short-term capital loss
D) short-term capital gain
Which of the following is a benefit of computerized accounting systems?
A) Time consuming
B) Posting and journalizing separate functions
C) Accuracy
D) No subsidiary ledgers
Trading Securities normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Depreciation Expense normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Leased Equipment normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Dividends Payable normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Gain on Sale of Equipment normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Prepaid Rent normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Accumulated Depreciation – Leased Asset normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
Unearned Revenue normally appears on which of the following statements?
A) Balance Sheet
B) Income Statement
C) Statement of Owner’s Equity
D) Account does not appear on any statement
You must use the spreadsheet that you downloaded earlier to complete the following questions:
| Pastina Co. | ||||
| Trial Balance | ||||
| For the Period Ended January 31, 20xx | ||||
| January 1 Balances | January 31 Balances | |||
| Account Title | Debit | Credit | Debit | Credit |
| Cash | 25,000 | 41,900 | – | |
| Accounts Receivable | 7,000 | 24,500 | – | |
| Allowance | 1,750 | – | 3,500 | |
| Trading Securities | 1,000 | 3,000 | – | |
| Inventory | 35,000 | 28,000 | – | |
| Notes Receivable | 5,000 | 18,000 | – | |
| Interest Receivable | 1,200 | 4,000 | – | |
| Prepaid Rent | 5,000 | 7,000 | – | |
| Prepaid Insurance | 1,000 | 2,000 | – | |
| Patent | 17,000 | 21,000 | – | |
| Equipment | 38,500 | 42,000 | – | |
| Accumulated Depreciation – Equipment | – | 14,000 | ||
| Leased Equipment | – | 120,000 | ||
| Accumulated Depreciation – Leased Equipment | – | 4,000 | ||
| Accounts Payable | 21,000 | 17,500 | ||
| Wage Payable | 8,000 | 5,500 | ||
| Long-term Note Payable | 35,000 | 59,850 | ||
| Taxes Payable | 4,000 | 6,900 | ||
| Interest Payable | 500 | – | ||
| Discount on Notes Payable | 3,500 | 2,800 | ||
| Lease Payable | – | 120,000 | ||
| Unearned Revenue | 7,000 | – | ||
| Common Stock | 30,000 | 45,000 | ||
| Paid in Captial in Excess of Par – Common | 16,700 | 17,500 | ||
| Retained Earnings | 13,250 | ? | ||
| Sales Revenue | – | 147,000 | ||
| Interest Revenue | – | 1,400 | ||
| Cost of Goods Sold | – | 84,000 | ||
| Wage Expense | – | 14,600 | ||
| Rent Expense | – | 10,000 | ||
| Depreciation Expense | – | 9,000 | ||
| Interest Expense | – | 4,200 | ||
| Supplies Expense | – | 6,400 | ||
| Insurance Expense | – | 600 | ||
| Bad Debt Expense | – | 3,000 | ||
| Rent Payable | 1,000 | 5,000 | ||
| Advertising expense | – | 4,500 | ||
| Amortization Expense | – | 6,000 | ||
| Dividends Payable | 1,000 | 800 | ||
| Gain on sale of equip | – | 1,500 | ||
| Income tax Expense | – | 6,900 | ||
| Treasury Stock | – | 3,000 | ||
| Gain on Sales of Trading Securities | – | 2,000 | ||
| Total | 139,200 | 139,200 | 466,400 | 451,450 |
What is the amount of cash collected from customers if Pastina wrote off $1,250 of Accounts Receivable as Uncollectible?
A) $121,250
B) $128,250
C) $170,250
D) $145,750
What are the total current liabilities?
A) $16,780
B) $23,000
C) $35,700
D) $85,700
What would be the ending Retained Earnings balance if Pastina declared $1,000 in dividends?
A) $14,950
B) $12,950
C) $12,250
D) $11,500
How much cash was paid for taxes?
A) $2,900
B) $4,000
C) $6,900
D) $10,900
What are the cash flows from the sale of common stock?
A) $15,000
B) $15,800
C) $18,800
D) $62,500
How much cash was paid for inventory?
A) $80,500
B) $74,500
C) $50,000
D) $28,000
What is the gross profit?
A) $147,000
B) $84,000
C) $63,000
D) $64,400
What is the total Stockholder’s Equity?
A) $74,450
B) $72,450
C) $73,450
D) $75,450
What is the value of total assets?
A) $191,400
B) $289,900
C) $292,900
D) $311,400
What is the book value of the equipment?
A) $42,000
B) $63,000
C) $49,000
D) $28,000
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