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Accounting 2301 Final

An entity that is organized according to state or federal statutes and in which ownership in divided into shares of stock is a
A. proprietorship
B. Corporation
C. partnership
D. Governmental unit
Corporation
Which of the following is a specialized field of accounting?
A. Social accounting
B. Tax accounting
C. Environmental accounting
D. All are correct
All are correct
The initials GAAP stand for
A. General Accounting Procedures
B. Generally accepted Plans
C. Generally Accepted Accounting Principles
D. Generally accepted accounting practices
Generally accepted accounting principles
Equipment with an estimated market value of $45000 is offered for sale at $65,000. The equipment is acquired for $10,000 in cash and a note payable of $40,000 due in 30 days. The amount used in the buyer’s accounting records to record this acquisition is
A. $50,000
B. $65,000
C. $10,000
D. $45,000
$50,000
The Accounting equation may be expressed as
A. Assets = equities – liabilities
B. Assets + Liabilities = Owner’s equity
C. Assets = Revenues Less Liabilities
D. Assets – Liabilities = Owner’s Equity
Assets – Liabilities = Owner’s Equity
A business paid $9000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to
A. increase one asset, decrease another asset
B. increase an asset, increase a liability
c. decrease an asset, decrease a liability
D. increase an asset, increase owner’s equity
Decrease an asset, decrease a liability
Owner’s withdrawals
A. increase expenses
B. decrease expenses
C. increase cash
D. decrease owner’s equity
Decrease owner’s equity
How does the purchase of supplies on account affect the accounting equation?
A. assets increase; owner’s equity decreases
B. Assets increase; liabilities increase
C. Assets increase; liabilities decrease
D. Liabilities increase; owner’s equity decreases
Assets increase; liabilities increase
There are four transactions that directly affet owner’s equity. Which are the two transactions that decrease owner’s equity?
A. Owner’s withdrawals and expenses
B. Revenues and expenses
C. Owner’s investments and revenues
D. Owner’s Investments and expenses
Owner’s withdrawals and expenses
Rudy Rivers has withdrawn $750 from Rivers Computer Makeover Company’s cash account to deposit in his personal account. How does this transaction affect Rivers Computer Makeover Company’s accounting equation?
A. Increase Assets (accounts receivable) and decrease Assets (cash)
B. Decrease Assets (cash) and decrease Owner’s Equity (Owner’s Withdrawal)
C. Decrease Assets (cash) and decrease liabilities (account payable)
D. Increase Assets (cash) and decrease Owner’s Equity (Owner’s Withdrawal)
Decrease Assets (cash) and decrease Owner’s Equity (Owner’s Withdrawal)
The asset section of the balance sheet normally presents assets in
A. Alphabetical order
B. Order of Largest to smallest dollar amounts
C. In the order what will be converted into cash
D. no order
In the order what will be converted into cash
The gross increases in owner’s equity attributable to business activities are called
A. assets
B. liabilities
C. Revenues
D. Net income
revenues
Which of the following types of accounts have a normal credit balance?
A. Assets and liabilities
B. liabilities and expenses
C. Revenues and liabilities
D. Capital and drawing
revenues and liabilities
Which of the following describes the classification and normal balance of the fees earned account?
A. asset, credit
B. Liability, credit
C. Owner’s equity, debit
D. Revenue, credit
revenue, credit
In which of the following types of accounts are decreases recorded by debits?
A. assets
B. revenues
C. expenses
D. drawing
revenues
Which of the following entries records the withdrawal of cash by Joe, owner of a proprietorship, for personal use?
a. debit Joe, capital; credit Cash
B. debit Joe, Drawing; credit Cash
C. debit Salaries Expense; credit Cash
D. debit Salaries Expense; credit Salaries Payable
Debit Joe, Drawing; Credit Cash
Which of the following entries records the acquisition of office supplies on account?
A. Office Supplies, debit; Cash, credit
B. Cash, debit; Office Supplies, credit
C. Office Supplies, debit; Account Payable, credit
D. Accounts Receivable, debit; Office Supplies, credit
Office Supplies, debit; Accounts Payable, credit
Which of the following abbreviations are correct?
A. Debit “Dr”, Credit “Cd”
B. Debit “Db”, Credit “Cr”
C. Debit “Db”, Credit “Cd”
D. Debit “Dr”, Credit “Cr”
Debit “Dr”, Credit “Cr”
A cash payment is recorded on the cash account as a
A. Neither a debit or a credit
B. credit
C. debit
D. either a debit or a credit
credit
Which of the following group of accounts are all assets?
A. Cash, Accounts Payable, Buildings
B. Accounts Receivable, Revenue, Cash
C. Prepaid Expenses, Buildings, Patents
D. Unearned Revenues, Prepaid Expenses, Cash
Prepaid expenses, Buildings, Patents
The process of recording a transaction in the journal is called
A. recording
B. Journalizing
C. posting
D. summarizing
journalizing
Joe Brown Invests $10,000 into his new business. How would the journal entry for this transaction be entered in the journal.
A. Cash 10,000 (D)
Brown, Capital 10,000 (C)
Invested cash in business
B. Cash 10,000 (C)
Brown, Capital 10,000(C)
Invested cash in business
C. Brown, capital 10,000 (D)
cash 10,000 (C)
Invested cash in business
D. Brown , capital 10,000 (C)
Cash 10,000 (C)
Invested cash in business
Cash 10,000 (D) Brown, Capital 10,000 (C)
The time period assumption states that
A. a transaction can only affect one period of time
B. estimates should not be made if a transaction affects more than one time period.
C. adjustments to the enterprise’s accounts can only be made in the time period when the business terminates its operations
D. the economic life of a business can be divided into artificial time periods
the economic life of a business can be divided into artificial time periods
The fiscal year of a business is usually determined by
A. the IRS
B. A loterry
C. the Business
D. The SEC
the business
The matching principle matches
A. customers with businesses
B. expenses with revenues
C. assets with liabilities
D creditors with businesses
Expenses with revenues
Under accrual-basis accounting
A. cash must be received before revenue is recognized
B. net income is calculated by matching cash outflows against cash inflows
C. events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received
D. The ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles
events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received
Adjusting entries are required
A. because some costs expire with the passage of time and have not yet been journalized.
B. when the company’s profits are below the budget
C. When expenses are recorded in the period in which they are incurred
D. When revenues are recorded in the period in which they are earned
because some costs expire with the passage of time and have not yet been journalized.
An adjusting entry
A. affects two balance sheet accounts
B. affects two income statement accounts
C. affects a balance sheet account and an income statement account
D. is always a compound entry
affects a balance sheet account and an income statement account
Accrued revenues are:
A. received and recorded as liabilities before they are earned
B. earned and recorded as liabilities before they are received
C. earned but not yet received or recorded
D. earned and already received and recorded
earned but not yet received or recorded
Prepaid expenses are
A. paid and recorded in an asset account before they are used or consumed
B. paid and recorded in an asset account after they are used or consumed
C. incurred but not yet paid or recorded
D. incurred and already paid or recorded
paid and recorded in an asset account before they are used or consumed
Unearned revenues are
A. received and recorded as liabilities before they are earned
B. earned and recorded as liabilities before they are received
C. earned but not yet received or recorded
D. earned and already received and recorded
received and recorded as liabilities before they are earned
Depreciation expense for a period is computed by taking the:
A. original cost of an asset – accumulated depreciation
B. depreciable cost / depreciation rate
C. cost of the asset / useful life
D. market value of the asset / useful life
cost of the asset / useful life
for prepaid expense adjusting entries
A. an expense liability account relationship exists
B. prior to adjustment, expenses are overstated and assets are understated
C. the adjusting entry results in a debit to an expense account and a credit to an asset account
D. none of these
the adjusting entry results in a debit to an expense account and a credit to an asset account
Internal controls are concerned with
A. only manual systems of accounting
B. the extent of government regulations
C. safeguarding assets
D. preparing income tax returns
safeguarding assets
Internal control is defined, in part, as a plan that safeguards
A. all balance sheet accounts
B. assets
C. liabilities
D. capital stock
assets
The custodian of a company asset should
A. have access to the accounting records for the asset
B. be someone outside the company
C. not have access to the accounting records for that asset
D. be an accountant
not have access to the accounting records for that asset
When two or more people get together for the purpose of circumventing prescribed controls, it is called
A. a fraud committee
B. collusion
C. a division of duties
D. bonding of employees
collusion
if employees are bonded
A. it means that they are not allowed to handle cash
B. they have worked for the company for at least 10 years
C. They have been insured against misappropriation of assets
D. it is impossible for them to steal from the company
they have been insured against misappropriation of assets
Postage stamps on hand are considered to be
A. cash
B. petty cash
C. cash equivalents
D. a prepaid expense
a prepaid expense
blank checks
A. should be safeguarded
B. should be pre-signed
C. do not need to be safeguarded since they must be signed to be valid
D. should not be prenumbered
should be safeguarded
a petty cash fund is generally established in order to
A. pay for all merchandise purchased on account
B. pay employees’ wages
C. make loans internally to employees
D. pay relatively small expenditures
pay relatively small expenditures
Deposits in transit
A. have been recorded on the company’s books but not yet by the bank
B. have been recorded by the bank but not yet by the company
C. have not been recorded by the bank or the company
D. are checks from customers which have not yet been received by the company
have been recorded on the company’s books but not yet by the bank
a bank reconciliation should be prepared
A. whenever the bank refuses to lend the company money
B. when an employee is suspected of fraud
C. to explain any difference between the depositor’s balance per books and the balance per bank
D. by the person who is authorized to sign checks
to explain any difference between the depositor’s balance per books and the balance per bank
A bank statement
A. lets a depositor know the financial position of the bank as of a certain date
B. is a credit reference letter written by the depositor’s bank
C. is a bill from the bank for services rendered
D. shows the activity which increased or decreased the depositor’s account balance
shows the activity which increased or decreased the depositor’s account balance
The primary source of revenue for a wholesaler is
A. investment income
B. service fees
C. the sale of merchandise
D. the sale of fixed assets the company owns
the sale of merchandise
sales revenue less cost of goods sold is called
A. gross profit
B. net profit
C. net income
D. marginal income
gross profit
The sales returns and allowances account is classified as an
A. asset account
B. contra asset account
C. expense account
D. contra revenue account
Contra revenue account
The credit terms offered to a customer by a business firm are 2/10, n/30, which means that
A. the customer must pay the bill within 10 days
B. the customer can deduct a 2% discount if the bill is paid between the 10th and the 30th day from the invoice date
C. the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date
D. two sales returns can be made within 10 days of the invoice date and no returns thereafter
the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice
All of the following are contra revenue accounts except
A. sales
B. sales allowances
C. Sales discounts
D. sales returns
sales
Income from operations appears on
A. both a multiple-step and a single-step income statement
B. neither a multiple-step nor a single-step income statement
C. a single-step income statement
D. a multiple-step income statement
A multiple-step income statement
Cost of goods available for sale is computed by adding
A. beginning inventory to net purchases
B. beginning inventory to the cost of goods purchased
C. net purchases and freight-in
D. purchases to beginning inventory
Beginning inventory to the cost of goods purchased
Interest is usually associated with
A. accounts receivable
B. notes receivable
C. doubtful accounts
D. bad debts
notes receivable
Bad debts expense is considered
A. an avoidable cost in doing business on a credit basis
B. an internal control weakness
C. a necessary risk of doing business on a credit basis
D. avoidable unless there is a recession
a necessary risk of doing business on a credit basis
The direct write-off method of accounting for bad debts
A. uses an allowance account
B. uses a contra-asset account
C. does not require estimates of bad debt losses
D. is the preferred method under generally accepted accounting principles
does not require estimates of bad debt losses
The sale of receivables by a business
A. indicates that the business is in financial difficulty
B. is generally the major revenue item on its income statement
C. is an indication that the business is owned by a factor
D. can be a quick way to generate cash for operating needs
can be a quick way to generate cash for operating needs
Merchandise inventory is
A. reported under the classification of Property, Plant, and Equipment on the balance sheet
B. often reported as a miscellaneous expense on the income statement
C. reported as a current asset on the balance sheet
D. generally valued at the price for which the goods can be sold
reported as a current asset on the balance sheet
Kershaw bookstore had 500 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows:

Jan 14 375 @ $28 (sales)
Jan 17 250 @ $20 (Purchases)
Jan 25 250 @ $22 (Purchases)
Jan 29 250 @ $32 (sales)

Kershaw does not maintain perpetual inventory records. According to a physical count, 375 units wer on hand at January 31.

The cost of the inventory at January 31, under the FIFO method is:
A. $1000
B. $6750
C. $7750
D. $8000

$8000
The cost of goods available for sale is allocated between
A. beginning inventory and ending inventory
B. beginning inventory and cost of goods on hand
C. ending inventory and cost of goods sold
D. beginning inventory and cost of goods purchased
Ending inventory and cost of goods sold
Graham company uses a periodic inventory system. Details for the inventory account for the month of January, 2010 are as follows:

An end of the month (1/31/10) inventory showed that 120 units were on hand. How many units did the company sell during January, 2010?
A. 80
B. 120
C. 200
D. 280

280
In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the
A. FIFO method
B. LIFO method
C. average-cost method
D. tax method
FIFO method
The consistent application of an inventory costing method is essential for
A. conservatism
B. accuracy
C. comparability
D. efficiency
Comparability
Under the lower-of-cost-or-market basis in valuing inventory, market is defined as
A. current replacement cost
B. selling price
C. historical cost plus 10%
D selling prices less markup
current replacement cost
If beginning inventory is understated by $10,000, the effect of this error in the current period is
Cost of goods sold – Net Income
A. Understated – Understated
B. Overstated – Overstated
C. Understated – Overstated
D. Overstated – Understated
Understated – Overstated
Goods in transit should be included in the inventory of the buyer when the
A. public carrier accepts the goods from the seller
B. goods reach the buyer
C. terms of sale are FOB destination
D. terms of sale are FOB shipping point
terms of sale are FOB shipping point
Land improvements should be depreciated over the useful life of the
A. land
B. buildings on the land
C. land or land improvements, whichever is longer
D. Land improvements
land improvements
The balance in the accumulated depreciation account represents the
A. Cash fund to be used to replace plant assets.
B. amount to be deducted from the cost of the plant asset to arrive at its fair market value
C. amount charged to expense in the current period
D. amount charged to expense since the acquisition of the plant asset
amount charged to expense since the acquisition of the plant asset
Depreciation is the process of allocating the cost of a plant asset over its service life in
A. an equal and equitable manner
B. an accelerated and accurate manner
C. a systematic and rational manner
D. a conservative market-based manner
a systematic and rational manner
In computing depreciation, salvage value is
A. the fair market value of a plant asset on the date of acquisition
B. subtracted from accumulated depreciation to determine the plant asset’s depreciable cost
C. an estimate of a plant asset’s value at the end of its useful life
D. ignored in all the depreciation methods
an estimate of a plant asset’s value at the end of its useful life
Which of the following methods of computing depreciation is production based?
A. straight-line
B. declining-balance
C. units-f-activity
D. None of these
Units-of-activity
Mather Company purchased equipment on January 1, 2010 at a total invoice cost of $224,000; additional costs of $4000 for freight and $20,000 for installation were incurred. The equipment has an estimated salvage value of $8000 and an estimated useful life of five years. The amount of accumulated depreciation at December 31, 2011 if the straight-line method of depreciation is used is:
A. $86,400
B. $88,000
C. $96,000
D. $99,000
$96,000
Natural resources are
A. depreciated using the units-of-activity method
B. Physically extracted in operations and are replaceable only by an act of nature
C. reported at their market value
D. amortized over a period no longer than 40 years
Physically extracted in operations and are replaceable only by an act of nature
Depletion is
A a decrease in market value of natural resources
B. The amount of spoilage that occurs when natural resources are extracted
C. allocation of the cost of natural resources to expense
D. The method used to record unsuccessful patents
The allocation of the cost of natural resources to expse
The relationship between current liabilities and current assets is
A. useful in determining income
B. useful in evaluating a company’s liquidity
C. Called the matching principle
D. useful in determining the amount of a company’s long-term debt
useful in evaluating a company’s liquidity
A current liability is a debt that can reasonably be expected to be paid
A. within one year
B. between 6 months and 18 months
C. out of currently recognized revenues
D. out of cash currently on had
within one year
The entry to record that proceeeds upon issuing an interest-bearing note is
A. Interest Expense (D)
Cash (D)
Notes Payable (C)
B. Cash (D)
Notes Payable (C)
C. Notes Payable (D)
Cash (C)
D. Cash (D)
Notes Payable (D)
Interest payable (C)
Cash (D)
Notes Payable (C)
Sales taxes collected by a retailer are recorded by
A. crediting sales taxes revenue
B. debiting sales taxes expense
C. crediting sales taxes Payable
D. debiting sales Taxes payable
Crediting sales taxes payable
A company receives $132, of which $12 is for sales tax. The journal entry to record the sale would include a
A. Debit to sales tax expense for $12
B. Credit to sales tax payable for $12
C. debit to sales for $132
D. debit to cash for $120
Credit to sales tax payable for $12
Advances from customers are classified as a(n)
A. revenue
B. expense
C. current asset
D. current liability
current liability
If a liability is dependent on a future event, it is called a
A. potential liability
B. hypothetical liability
C. probabilistic liability
D. contingent liability
contingent liability
Which of the following payroll taxes are usually filed and remitted annually?
A. federal unemployment taxes
B. FICA taxes
C. state unemployment taxes
D. Federal and state unemployment taxes
Federal unemployment taxes
A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a
A. corporation is organized for the purpose of making a profit
B. corporation is subject to more federal and satte government regulations
C. corporation is an accounting economic entity
D. corporation’s temporary accounts are closed at the end of the accounting period
corporation is subject to more federal and sate government regulations
Retained earnings
A. is unique to the corporation form of business
B. is an optional account in the partnership form of business
C. reflects cash paid in by stockholders to date
D. is closed at the end of the year
is unique to the corporate form of business
Paid-in capital in excess of sated value
A. is credited when no-par stock does not have a stated value
B. is reported as part of paid-in capital on the balance sheet
C. represents the amount of legal capital
D. Normally has a debit balance
is reported as part of paid-in capital on the balance sheet
Treasury stock should be reported in the financial statements of a corporation as a(n)
A. investment
B. liability
C. deduction from total paid-in capital
D. deduction from total paid-in capital and retained earnings
Deduction from total paid-in capital and retained earnings
Dividends are predominantly paid in
A. earnings
B. property
C. cash
D. stock
cash
Dividends payable is classified as a
A. Long-term liability
B. contra stockholders’ equity account to retained earnings
C. current liability
D. stockholder’s equity account
current liability
A stockholder who receives a stock dividend would
A. expect the market price per share to increase
B. own more shares of stock
C. expect retained earnings to increase
D. expect the par value of the stock to change
Own more shares of stock
If the board of directors authorizes a $100,000 restriction of retained earnings for a future plant expansion, the effect on this action is to
A. decrease total assets and total stockholders’ equity
B. increase stockholder’s equity and decrease total liabilities
C. decrease total retained earnings and increase total liabilities
D. reduce the amount of retained earnings available for dividend declarations
reduce the amount of retained earnings available for dividend declarations

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