Question 1.1. According to the FASB, the primary objective of financial reporting is to provide information _______. (Points : 1)
regarding the assets and liabilities of a business
to the Securities and Exchange Commission
useful for making investing and lending decisions
regarding the revenues and expenses of a business
Question 2.2. Presenting accounting information that is biased and incomplete violates the ________. (Points : 1)
bylaws of the organization
cost principle
faithful representation principle
entity concept
Question 3.3. Earning a revenue on account would _______. (Points : 1)
have no effect on owner’s equity
increase owner’s equity
decrease owner’s equity
decrease total assets
Question 4.4. The financial statement that presents a summary of the assets, liabilities, and owner’s equity as of a specific date is the _______. (Points : 1)
statement of assets
balance sheet
statement of owner’s equity
statement of cash flows
Question 5.5. A written promise for future collections of cash is a _______. (Points : 1)
revenue
account receivable
note receivable
owner withdrawal
Question 6.6. The payment of an account payable would _______. (Points : 1)
have no effect on total assets
decrease assets and increase owner’s equity
decrease assets and decrease liabilities
decrease assets and increase liabilities
Question 7.7. The payment of utilities each month would _______. (Points : 1)
increase total assets
increase owner’s equity
decrease liabilities
increase expenses
Question 8.8. The copying of amounts from the journal to the appropriate ledger accounts is referred to as_______. (Points : 1)
posting
journalizing
analyzing
balancing
Question 9.9. The entry to record the receipt of $650 on account for services previously rendered would be_______. (Points : 1)
Accounts Receivable
650
Service Revenue
650
Service Revenue
650
Accounts Receivable
650
Cash
650
Accounts Payable
650
Cash
650
Accounts Receivable
650
Question 10.10. All of the following are liabilities except_______. (Points : 1)
note payable
accounts receivable
accounts payable
salaries payable
Question 11.11. Table 1
Following is a random list showing the account balances of various assets, liabilities, revenues, and expenses for Michael’s Landscaping at December 31, 20X5, the end of its first year of operations.
Accounts receivable
$25,000
Accounts payable
3,500
Salary expense
4,500
Repairs expense
800
Truck
8,500
Equipment
6,300
Notes payable
8,200
Cash
6,800
Supplies expense
1,600
Service revenue
22,800
Gasoline expense
800
Salary payable
2,200
The owner, Michael Mower, invested $22,600 at the beginning of the year and withdrew $5,000 during the year for personal use.
Refer to Table 1. The statement of owner’s equity would show an ending capital balance of _______. (Points : 1)
$36,600
$3,900
$32,600
$32,700
Question 12.12. ________ is/are an example of a liability. (Points : 1)
Rent expense
Prepaid expense
Mortgage note payable
Owner distributions
Question 13.13. The ________ is the organization that sets standards for financial accounting in the United States. (Points : 1)
PCAOB
FASB
GASB
GAAP
Question 14.14. Paying for supplies purchased In the previous period on account causes _______. (Points : 1)
assets to increase and owner’s equity to decrease
both assets and liabilities to decrease
assets to increase and owner’s equity to increase
no change in total assets
Question 15.15. At the end of the fiscal period, Burton Company omitted the adjusting entry for depreciation on equipment. The effect of this error on the financial statements is to_______. (Points : 1)
understate liabilities
understate owner’s equity
overstate expenses
overstate assets
Question 16.16. At year end, no adjusting entry was made to the supplies inventory account. The general ledger balance for supplies inventory was $5000. The actual balance in inventory was $3000. The omission of this adjusting entry caused ________. (Points : 1)
assets to be overstated and liabilities to be overstated
assets to be understated and liabilities to be understated
assets to be overstated and net income to be overstated
assets to be understated and net income to be understated
Question 17.17. On May 8th, a customer hires Custom Landscaping to do some yard maintenance. Custom Landscaping arrives on May 10th and completes the job on May 12th. The customer pays the invoice from Custom Landscaping on May 25th. Revenue for this job is recorded on ________. (Points : 1)
May 8th
May 10th
May 12th
May 25th
Question 18.18. If a required accrued expense adjustment had not been made, the financial statements would have been affected as follows_______. (Points : 1)
net income understated, assets overstated, liabilities unaffected, and owner’s equity understated
net income understated, assets overstated, liabilities understated, and owner’s equity unaffected
net income overstated, assets unaffected, liabilities understated, and owner’s equity overstated
net income overstated, assets overstated, liabilities understated, and owner’s equity overstated
Question 19.19. The journal entry to record the payment of a telephone bill immediately upon receipt of the bill would_______. (Points : 1)
have no effect on owner’s equity
increase assets
decrease owner’s equity
decrease liabilities
Question 20.20. $300 receipt of cash on account was recorded as a $500 debit to accounts payable and a $500 credit to cash. This error will cause_______. (Points : 1)
cash to be understated by $800
cash to be overstated $500
cash to be understated $500
cash to be overstated by $800
Question 21.21. If the adjusting entry to record revenue earned during the current period when the cash was received in the last accounting period is not recorded_______. (Points : 1)
assets will be overstated
liabilities will be overstated
liabilities will be understated
assets will be understated
Question 22.22. Receiving a check for $1,200 from a customer with an account balance of $2,000 would include a_______. (Points : 1)
debit to cash and a credit to accounts receivable for $1,200
debit to cash and a credit to accounts receivable for $800
debit to accounts payable and a credit to cash for $1,200
debit to accounts receivable and a credit to service revenue for $1,200
Question 23.23. When cash is received from a customer on account, ________ should be credited under the accrual basis of accounting. (Points : 1)
accounts receivable
service revenue
cash
deferred revenue
Question 24.24. If the credit amount of an entry to record the purchase of supplies on account was not posted_______. (Points : 1)
assets would be overstated
assets would be understated
owner’s equity would be overstated
liabilities would be understated
Question 25.25. Under the cash basis of accounting, the receipt of cash from a customer in advance of performing the service would be credited to a_______. (Points : 1)
revenue account
deferred asset account
deferred revenue account
prepaid asset account
Question 26.26. A $75 payment for rent expense was posted as a debit to salary expense and a credit to cash. This error will cause_______. (Points : 1)
the sum of the credits to exceed the sum of the debits
the trial balance to be in balance
the sum of the debits to exceed the sum of the credits by $75
the sum of the debits to exceed the sum of the credits by $150
Question 27.27. The withdrawal of cash by the owner for personal use would include a_______. (Points : 1)
credit to the owner’s capital account
credit to the owner’s withdrawals account
debit to the cash account
debit to the owner’s withdrawals account
Question 28.28. Purchasing office equipment for cash would include a_______. (Points : 1)
debit to office equipment and a credit to note payable
debit to equipment expense and a credit to cash
debit to office equipment and a debit to accounts payable
debit to office equipment and a credit to cash
Question 29.29. A building is financed with a note payable to a bank. This transaction would result in ________. (Points : 1)
a credit to cash and a debit to buildings
a credit to buildings and a debit to cash
a debit to buildings and a credit to notes payable
a credit to buildings and a debit to notes payable
Question 30.30. The account debited when payment is made for equipment purchased previously on account is_______. (Points : 1)
accounts receivable
cash
accounts payable
equipment
Question 31.31. Which of the following accounts should be closed to income summary? (Points : 1)
beginning inventory
sales returns and allowances
owner withdrawals
ending inventory
Question 32.32. In a periodic inventory system, the quantity of ending inventory is determined by_______. (Points : 1)
subtracting units sold from units purchased
a physical inventory count
looking at the balance in the inventory account
subtracting cost of goods sold from the beginning inventory balance
Question 33.33. Table 2
Assume the following data for Smithsonian Company for 20X5:
Beginning inventory
10 units at $70 each
March 18 sale
8 units
June 10 purchase
20 units at $80 each
October 30 sale
15 units
Referring to Table 2, under the perpetual LIFO method, cost of goods sold on the income statement would be_______. (Points : 1)
$1,760
$540
$1,700
$1,186
Question 34.34. Garry Corp uses a perpetual inventory accounting system. Garry Corp has a beginning inventory of 12 units at $15 each on January 1, 20X1. The following inventory transactions occurred during the month of January:
January 2nd – purchased 20 units at $16.50 each
January 10th – sold 7 units
January 17th – purchased 15 units at $17.25 each
January 22nd – sold 25 units
January 30th – purchased 5 units at $17.50 each
Garry Corp will report ________ for cost of goods sold in January using the FIFO inventory costing method. (Points : 1)
$539.25
$317.00
$510.00
$346.25
Question 35.35. A retailer that uses a bar code system to track inventory most likely uses ________. (Points : 1)
a merchandising inventory system
a periodic inventory system
a perpetual inventory system
this cannot be determined from the information provided
Question 36.36. When an unearned revenue is initially recorded as a revenue, the adjusting entry would include a(n) _______. (Points : 1)
credit to a liability
debit to a liability
debit to an asset
credit to revenue
Question 37.37. The inventory account shows an ending balance of $20,800. An actual count of inventory reveals $21,200 of inventory on hand. The adjusting entry involves_______. (Points : 1)
credit to inventory for $20,500
credit to cost of goods sold for $20,100
debit to cost of goods sold for $400
debit to inventory for $400
Question 38.38. If the cost of an item of inventory is $80, the current selling price is $100, and the current replacement cost is $75, the amount shown in inventory on the balance sheet under the lower-of-cost-or- market rule is_______. (Points : 1)
$75
$80
$100
$75 or $80
Question 39.39. Computer programs that link data by means of formulas and functions are referred to as_______. (Points : 1)
inputs
menus
spreadsheets
networks
Question 40.40. Revenues total $10,200, expenses total $7,300, and the owner’s withdrawals account has a balance of $2,600. What is the balance in the income summary account after all closing entries are completed? (Points : 1)
$2,600 credit
$2,900 debit
$2,900 credit
$0
Question 41.41. _______ is a process by which companies produce their financial statements for a specific period. (Points : 1)
Liquidity
The operating cycle
The accounting cycle
Postclosing
Question 42.42. Table 3
Sales revenue
$ 750,000
Cost of goods sold
406,000
Beginning inventory
75,000
Purchase discounts
20,000
Sales returns and allowances
44,000
Operating expenses
99,000
Ending inventory
72,000
Purchases of inventory
415,000
Sales discounts
25,000
William Browning, withdrawals
61,000
Purchase returns and allowances
36,000
Refer to Table 3. Gross profit is_______. (Points : 1)
$275,000
$344,000
$300,000
$319,000
Question 43.43. Inventory held by a business is a(n) _______ and when sold becomes a(n) _______ (Points : 1)
liability, withdrawal
asset, expense
liability, asset
asset, contra asset
Question 44.44. When a prepaid expense is initially recorded as an expense, the adjusting entry has the following effect on net income_______. (Points : 1)
increase
decrease
increase or decrease
no effect
Question 45.45. The journal entry to transfer the cost of purchases to cost of goods sold includes a_______. (Points : 1)
debit to cost of goods sold
debit to inventory
debit to purchases
credit to cost of goods sold
Question 46.46. The trial balance columns in the accounting worksheet include the effects of ________. (Points : 1)
adjusting entries
journal entries made based on transactions that have occurred throughout the period
closing of temporary accounts
the balance of the income summary account being transferred to the capital accounts
Question 47.47. Inventory turnover is calculated as_______. (Points : 1)
cost of goods sold minus average inventory
cost of goods sold divided by average inventory
cost of goods sold times average inventory
cost of goods sold plus average inventory
Question 48.48. Which subtotals appear on a multi-step income statement but do not appear on a single-step income statement? (Points : 1)
Gross profit and Income from operations
Operating expenses and Net income
Cost of goods sold and Net income
Net sales and cost of goods sold
Question 49.49. If a company uses LIFO and prices are rising, large purchases of inventory near the end of the year will_______. (Points : 1)
reduce cost of goods sold
increase income taxes paid
reduce the gross profit
have no effect on the amount of cost of goods sold
Question 50.50. Table 4
The following data are for the RoadRunner Corporation, which uses a perpetual inventory system:
Sales revenue
$600,000
Freight-in
42,000
Beginning inventory
77,000
Purchase discounts
19,000
Sales returns and allowances
33,000
Operating expenses
77,000
Ending inventory
81,000
Purchases of inventory
415,000
Sales discounts
35,000
Joseph RoadRunner, withdrawals
71,000
Purchase returns and allowances
39,000
Refer to Table 4. Gross profit for RoadRunner Company is_______. (Points : 1)
$205,000
$172,000
$60,000
$137,000
Question 51.51. Prepaid rent shows a beginning balance of $500 and an ending balance of $2,800. The rent expense account was debited during the adjusting process for $1,800. How much cash was spent for rent? (Points : 1)
$1,500
$4,100
$1,000
$3,300
Question 52.52. Marshall Corp uses a perpetual inventory accounting system. Marshall Corp has a beginning inventory of 10 units at $20 each on May 1, 20X1. The following inventory transactions occurred during the month of May:
May 2nd – purchased 20 units at $22 each
May 9th – sold 18 units
May 15th – purchased 15 units at $24 each
Marshall Corp will report ________ (rounded) for ending inventory on May 31st using the average-cost inventory costing method. (Points : 1)
$400.00
$600.00
$384.00
$616.00
Question 53.53. Which of the following accounts are not closed to the owner’s capital account? (Points : 1)
revenue accounts
the owner’s withdrawals account
the income summary account
all of the above
Question 54.54. Which of the following group of accounts is not closed at the end of the period – the asset, liability, and capital accounts? (Points : 1)
Permanent accounts
Debit accounts
Credit accounts
Temporary accounts
Question 55.55. A business pays weekly salaries on Friday of $25,000 for a five-day week ending on Friday. Assuming the fiscal period ends on a Thursday, the adjusting entry for accrued salaries would involve a_______. (Points : 1)
debit to salary payable for $5,000
debit to salary expense for $20,000
credit to salary payable for $5,000
credit to salary expense for $25,000
Question 56.56. The inventory system that continually discloses the amount of inventory on hand is called_______. (Points : 1)
perpetual
periodic
physical
specific identification
Question 57.57. A company’s operating cycle is ________. (Points : 1)
the time required to purchase and sell goods and services and collect cash from customers.
the time required to purchase and sell goods and services
the process by which companies produce their financial statements
a fiscal year
Question 58.58. Under a perpetual inventory system, the adjusting entry to account for inventory shrinkage would include a_______. (Points : 1)
credit to miscellaneous expense
credit to cost of goods sold
credit to inventory
debit to miscellaneous expense
Question 59.59. Debts that are due to be paid within one year or within the entity’s operating cycle, whichever is longer, are called_______. (Points : 1)
current liabilities
liquid liabilities
quick liabilities
deferred liabilities
Question 60.60. A company makes a purchase of $2,000 of inventory, subject to credit terms of 3/10 n/45 and returns $500 of inventory prior to payment. What is the amount of the payment assuming payment is made within the discount period? (Points : 1)
$1,500
$1,455
$1,440
$1,560
Question 61.61. The adjusting entry recording depreciation is omitted at year end. This omission affects the balance sheet by ________. (Points : 1)
understating net income
overstating liabilities
overstating assets
understating equity
Question 62.62. A work sheet is a_______. (Points : 1)
formal statement issued to investors
formal document required by the Internal Revenue Service
replacement for the general journal
a multicolumn document used by accountants to aid in the preparation of the financial statements
Question 63.63. Keeping accurate records of accounts receivable is an example of which feature of a good accounting information system? (Points : 1)
favorable cost/benefit relationship
compatibility
control
flexibility
Question 64.64. A purchase of supplies for cash is recorded in the_______. (Points : 1)
cash receipts journal
purchases journal
cash payments journal
general journal
Question 65.65. A computerized accounting information system can facilitate segregation of duties by ________. (Points : 1)
attaching electronic sensors to merchandise that set off alarms when the merchandise is taken out of the store
using pre-numbered documents
limiting which employees have read/write access to certain information within the system
hiring competent employees
Question 66.66. Posting the entries in the sales journal to the accounts receivable subsidiary ledger should be done_______. (Points : 1)
on a weekly basis
only at the end of the accounting period
at the end of each month
on a daily basis
Question 67.67. Assuming the use of special journals, the borrowing of $80,000 from the bank by signing a note payable would be recorded in the_______. (Points : 1)
cash receipts journal
sales journal
cash payments journal
general journal
Question 68.68. The following data are available for Cline Paper Company for March:
Book balance, March 31
$3,620
Service charges
50
Interest revenue
35
Note collected by bank
1,500
Check returned marked NSF
700
What is Cline’s adjusted book balance on March 31 from the above data? (Points : 1)
$4,405
$3,620
$2,905
$4,505
Question 69.69. All of the following would be on the books side of a bank reconciliation except_______. (Points : 1)
bank recorded a $2,000 deposit as $200
collection of note receivable for $1,000
nonsufficient funds check for $75
service fee of $20
Question 70.70. Assuming the use of special journals, the sale of merchandise to Jerri Blackwell on account would be recorded in the_______. (Points : 1)
sales journal
accounts receivable journal
general journal
cash receipts journal
Question 71.71. In a bank reconciliation, a $400 NSF check is_______. (Points : 1)
deducted from the book balance
added to the book balance
deducted from the bank balance
added to the bank balance
Question 72.72. Designating a corporate controller is an example of which characteristic of internal control_______? (Points : 1)
assignment of responsibilities
competent, reliable, and ethical personnel
proper authorization
separation of duties
Question 73.73. The Sawtooth Company received a bank statement showing a balance of $62,300. Reconciling items included outstanding checks of $1,450 and a deposit in transit of $8,500. What is the company’s adjusted bank balance? (Points : 1)
$69,350
$58,850
$68,800
$67,350
Question 74.74. A critical element of internal control over collections of accounts receivable is_______. (Points : 1)
setting up a petty cash account
the separation of cash-handling and cash-accounting duties
using a chck writing machine
depositing the cash from the cash register on a daily basis
Question 75.75. A check for the cash purchase of supplies for $329 was recorded on the books as $239. On a bank reconciliation, this will appear as a(n)_______. (Points : 1)
addition to the book balance
deduction from the bank balance
addition to the bank balance
deduction from the book balance
