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Accounting Exam 1 Practice Test Q’s

If the credit to record the payment of an account payable is not posted,

A) cash will be overstated
B) Cash will be understated
C) Expenses will be understated
D) Liabilities will be understated

A) cash will be overstated
The journal entry to record the purchase of supplies on account

A) credits supply and debits accounts payable
B) credits supplies and debits cash
C) debits supplies and credits accounts payable
D) debits supplies expense and credits supplies

C) debits supplies and credits accounts payable
Assets are usually reported at their

A) current market value
B) historical cost
C) appraised value
D) none of the above

B) historical cost
How do you find the book value of something?
equipment- accumulated depreciation- accumulated depreciation= book value
A doctor purchases medical supplies of $640 and pays $290 cash with the remainder on account. The journal entry for this transaction would be which of the following?

A) Supplies
Accounts payable
Cash
B) Supplies
Accounts payable
Cash
C) Supplies
Accounts Receivable
Cash
D) Supplies
Cash
Accounts payable

B) Supplies, accounts payable, cash (accounts payable and cash are indented together)
An adjusting entry that debits an expense and credits a liability is which type?

A) Cash expense
B) Accrued expense
C) Depreciation expense
D) Prepaid expense

B) accrued expense
Which account type normally have a credit balance?
A) Expenses
B) Liabilities
C) Revenues
D) both B and C
D) both b and c
Accounts payable had a normal beginning balance of $1,400. During the period there were debit postings of $300 and credit postings of $800. What was the ending balance?

A) $900 credit
B) $900 debit
C) $1,900 credit
D) $1,900 debit

C) $1,900 credit

(Ending balance: beginning balance + credit- debit)

1400+ 800-300= 1900

Albany Corporation holds cash of $5,000 and owes $28,000 on accounts payable. Albany has accounts receivable of $49,000, inventory of $36,000?, and land that cost $60,000. How much are Albany?’s total assets and? liabilities?

A) 150,000 assets, 64,000 liabilities
B) 150,000 assets, 28,000 liabilities
C) 90,000 assets, 88,000 liabilities
D) 114,000 assets, 64,000 liabilities

B) 150,000 assets, 28,000 liabilities
The valuation of assets on the balance sheet is generally based on

A) selling price
B) what it would cost to replace
C) current fair market value as established by independent appraisers
D) historical cost

D) historical cost
How wold net income be most likely to affect the accounting equation?

A) decrease assets and decrease liabilities
B) increase liabilities and decrease stockholders’ equity
C) Increase assets and increase liabilities
D) Increase assets and increase stockholders’ equity

D) Increase assets and increase stockholders’ equity
Which of the following is the most accurate statement regarding ethic as applied to decision making in accounting?

A) It is impossible to learn ethical decision making, since it is just something you decide to do or not to do
B) Ethics involves making difficult choices under pressure and should be kept in mind in making every decision, including those involving accounting
C) Ethics has no place in accounting, since accounting deals purely with numbers
D) Ethics is becoming less and less important as a field of study in business

B) Ethics involves making difficult choices under pressure and should be kept in mind in making every decision, including those involving accounting
Which of the following accounts is not closed?

A) Interest Revenue
B) Dividends
C) Accumulated Depreciation
D) Depreciation Expense

C) Accumulated Depreciation
Young Company had total assets of $215,000 and total? stockholders’ equity of $78,000 at the beginning of the year. During the? year, assets increased by $38,000 and liabilities increased by $7,000. ?Stockholders’ equity at the end of the year is

A) 116,000
B) 123,000
C) 126,000
D) 109,000

D) 109,000
Purchasing computer equipment for cash will

A) increase both total assets and total liabilities
B) have no effect on total assets, total liabilities, or equity
C) decrease both total assets and equity
D) decrease both total liabilities and equity

B) have no effect on total assets, total liabilities, or equity
Salary Payable at the beginning of the month totals $28,000. During the month salaries of $124,000 were accrued as expense. If ending Salary Payable is $13,000?, what amount of cash did the company pay for salaries during the? month?

A) 83,000
B) 138,000
C) 165,000
D) 139,000

D) 139,000

(Beginning month totals+ accrued expense- ending salary payable)= cash payable)

28,000+124,000-13000= 139,000

Which of the following transactions will increase an asset and increase stockholders’ equity?

A) Collecting cash from a customer on accounts receivable
B) Borrowing money from a bank
C) Purchasing supplies on account
D) Performing a service on account for a customer

D) Performing a service on account for a customer
CullenCullen?’s Catering began with cash of $15,000. Cullen then bought supplies for $2,500 on account.? Separately, Cullen paid $7,200 for equipment. Answer these questions.
a. How much in total assets does CullenCullen ?have?
b. How much in liabilities does CullenCullen ?owe?
17500 in assets
(7,800+2500+7200= 17500)

2500 in liabilities

Purchasing a building for $120,000 by paying cash of $25,000 and signing a note payable for $95,000 will

A) decrease total assets and increase total liabilities by $25000
B) increase both total assets and total liabilities by 95000
C) increase both total assets and total liabilities by 120000
D) decrease both total assets and total liabilities by 25000

B) increase both total assets and total liabilities by 95000
In a double-entry system,

A) liabilities, owners’ equity, and revenue accounts all have normal debit balances
B) half of all the accounts have a normal credit balance
C) a debit entry is recorded on the left side of a t-account
D) both a and b are correct

C) a debit entry is recorded on the left side of a t-account
Quartz Instruments had retained earnings of 350,000 at Dec. 31, 2013. Net income for 2014 totaled 200,000 and dividends for 2014 were 60,000. How much retained earning should Quartz report at Dec. 31?

A) 550
B) 410
C) 490
D) 350

C) 490
In which month should revenue be recorded?

A) in the month that cash is collected from the customer
B) In the month that goods are shipped to the customer
C) In the month that the invoice is mailed to the customer
D) In the month that the goods are ordered by the customer

B) In the month that goods are shipped to the customer
The nature of an asset is best described as

A) an economic resource representing cash or the right to receive cash in the future
B) something with physical form that valued at cost in the accounting records
C) something owned by a business that has a ready market value
D) an economic resource that’s expected to benefit future operations

D) an economic resource that’s expected to benefit future operations
Performing a service on account will

A) increase stockholder’s equity
B) increase total assets
C) increase total liabilities
D) both a and b

D) both a and b
The financial statement that reports revenues and expenses is called

A) balance sheet
B) statement of cash flows
C) income statement
D) statement of retained earnings

C) income statement
Which of the following is not an asset account?

A) common stock
B) service revenue
C) salary expense
D) None of the above accounts is an asset

C) salary expense
What is the effect on total assets and stockholders’ equity of paying the telephone bill as soon as it is received each month?

A) decreases assets, decreases equity
B) decreases assets, no effect on equity
C) No effect on assets, decreases equity
D) No effect on assets or equity

A) decreases assets, decreases equity
A major purpose of preparing closing entries is to

A) zero out the liability accounts
B) update the Retained Earnings account
C) adjust the asset accounts to their correct current balances
D) close out the supplies account

B) update the Retained Earnings account
Which financial statement covers a period of time?

A) Income statement
B) Balance sheet
C) Statement of cash flows
D) Both a and c

D) Both a and c
How do you calculate earned revenue for the year?
unearned revenue, beginning+ advance payments- unearned revenue, ending
During the year a company has $270,000 in revenues, $135,000 in expenses, and $7,000 in dividend payments. Stockholders’ equity changed by how much?
$128,000

revenues (270,000) – expenses (135,000) = net income (135,000)

Net income (135,000) – dividends (7,000)= change in retained earnings (128,000)

On Oct. 1, an apartment complex received $4,800 from a tenant for four month’s rent. The receipt was credited to unearned rent revenue. What adjusting entry is needed on December 31?

A) unearned Rent Revenue, 1,200 and rent revenue 1,200
B) Cash 1,200, and rent revenue 1,200
C) Rent revenue 1,200, and unearned rent revenue 1,200
D) Unearned rent revenue 3,600, and rent revenue 3,600

D) Unearned rent revenue 3,600, and rent revenue 3,600

Adjusting entry: [($4,800/ 4 months paid rent) x 3 months expired] = $3,600

A business’ receipt of a $120,000 building, with a $90,000 mortgage payable, and issuance of $30,000 of common stock will

A) decrease assets by $90,000
B) increase stockholders’ equity by $120,000
C) increase assets by $30,000
D) increase stockholders’ equity by $30,000

D) increase stockholders’ equity by $30,000
The Unearned Revenue account of Assistant Incorporated began 2014 with a normal balance of $5,500 and ended 2014 with a normal balance of $17,000. During 2014?, the Unearned Revenue account was credited for $25,000 that Assistant will earn later. Based on these? facts, how much revenue did Assistant earn in 2014??

A) 13,500
B) 25,000
C) 36,500
D) 2,500

A debit entry to an account

A) increases assets
B) increases stockholder’s equity
C) increases liabilities
D) both B and C

A) increases assets
Unadjusted net income equals $6,000. Calculate what net income will be after the following adjustments:
1) salaries payable to employees, $540
2) interest due on note payable at the bank, $150
3) unearned revenue that has been earned, $950
4) supplies used, $175
6000-540-159+950-175= 6,085
Net income appears on which financial statements?

A) Balance sheet
B) Income statement
C) Statement of retained earnings
D) Both B and C

D) Both B and C
Accounts payable had a normal beginning of $2000. During the period, there were debit points of $500, and credit posting os $1000. What was the ending balance?
2000+1000-500= 2,500
Purchasing a laptop computer on account will

A) have no effect on equity
B) increase total assets
C) increase total liabilities
D) all of the above

D) all of the above
Beryl Strauss began a music business in July 2014. Strauss prepares monthly financial statements and uses the accrual basis of accounting. The following transactions are StraussStrauss ?Company’s only activities during July through? October:
Jul 14: Bought music on account for $25, with payment to other supplier due in 90 days
Aug 3: Performed a job on account for Jimmy Jones, for $40, collectable from Jones in 30 days. Used up all the music purchased on July 14
Sept 16: Collected the $40 receivable from Jones
Oct 22: Paid the $25 owed to the supplier from July 14 transaction

In which month should Strauss record the coast of the music as one expense?

August
A financial statement that reports revenue and expenses is called the

A) balance sheet
B) statement of cash flows
C) statement of retained earnings
D) income statement

D) incomes statement
If the credit to record the purchase of supplies on account is not posted,

A) assets will be understated
B) stockholders’ equity will be understated
C) expenses will be overstated
D) liabilities will be understated

D) liabilities will be understated
The journal entry to record a payment on account will
A) debit cash and credit expenses
B) debit expenses and credit cash
C) debit accounts payable and credit cash
D) debit accounts payable and credit retained earnings
C) debit accounts payable and credit cash
The amount a company expects to collect from customers appears on the

A) balance sheet in the stockholders’ equity section
B) balance sheet in the current assets section
C) statement of cash flows
D) income statement in the expenses section

B) balance sheet in the current assets section
An attorney performs services of? $1,100 for a client and receives? $400 cash with the remainder on account. The journal entry for this transaction would

A) debit cash, debit accounts receivable, credit service revenue
B) debit cash, credit accounts receivable, credit service revenue
C) debit cash, debit service revenue, credit accounts receivable
D) debit cash, credit service revenue

A) debit cash, debit accounts receivable, credit service revenue
Adjusting entries

A) are needed to measure the period’s net income or net loss
B) update the accounts
C) do not debit or credit cash
D) all of the above

D) all of the above
If a real estate company fails to accrue commission revenue,

A) assets are understated, and net income is understated
B) net income is understated, and stockholders’ equity is overstated
C) revenues are understated, and net income is overstated
D) liabilities are overstated, and owners’ equity is understated

A) assets are understated, and net income is understated
The primary objective of financial reporting is to provide information

A) about the profitability of the enterprise
B) on the cash flows of the company
C) useful for making investment and credit decisions
D) to the federal government

C) useful for making investment and credit decisions
Receiving cash from a customer on account will

A) increase stockholders’ equity
B) decrease liabilities
C) increase total assets
D) have no effect on total assets

D) have no effect on total assets
For 2014, a company had revenues in excess of expenses. Which statement describes the company’s entries at the end of 2014 (assume there is only one closing entry for both revenue and expenses)?

A) Revenues will be debited, expenses will be credited, and retained earnings will be credited
B) Revenues will be credited, expenses will be debited, and retained earnings will be debited
C) Revenues will be debited, expenses will be credited, and retained earnings will be debited
D) Revenues will be credited, expenses will be debited, and retained earnings will be debited

A) Revenues will be debited, expenses will be credited, and retained earnings will be credited
All of the following statements are true except one. Which statement is false?

A) adjusting entries are required for a business that uses the cash basis
B) Accrual accounting produces better information than cash-basis accounting
C) The expense recognition principle directs accountants to identify and measure all expenses incurred and deduct them from revenues earned during the same period
D) A fiscal year may end on some date other than December 31

A) adjusting entries are required for a business that uses the cash basis
Which of the following will increase an asset and increase stockholders’ equity?

A) Performing a service on account for a customer
B) Borrowing money from a bank
C) Collecting cash from a customer on accounts receivable
D) Purchasing supplies on account

A) Performing a service on account for a customer
All of the following statements are true except one. Which statement is false?

A) A proprietorship is a business with several owners
B) Bookkeeping is only a part of accounting
C) Professional accountants are held to a high standard of ethical conduct
D) The organization that formulates generally accepted accounting principles in the United States is the financial accounting standards board

A) A proprietorship is a business with several owners
Net income appears on which financial statement?

A) Balance sheet
B) Statement of retained earnings
C) Income statement
D) Both B and C

D) Both B and C
Smith, Inc., purchased supplies for $1,300 during 2014. At year-end, Smith had $500 of supplies left. The adjusting entry should

A) debit Supplies $800
B) debit Supplies $500
C) debit Supplies Expense 800
D) credit supplies $500

C) debit Supplies Expense 800

($1,300=$500)= $800

The accounting equation can be expressed as

A) Assets + Liabilities= Owners’ equity
B) Assets= Liabilities – Owners’ equity
C) Assets- Liabilities= Owners’ equity
D) Owners’ equity- Assets= Liabilities

C) Assets- Liabilities= Owners’ equity
Dixie Duck Corporation made sales of $750 million during 2014. Of this? amount, Dixie Duck collected cash for all but $31 million. The? company’s cost of goods sold was $280 ?million, and all other expenses for the year totaled $275 million. Also during 2014?, Dixie Duck paid $430 million for its inventory and $255 million for everything else. Beginning cash was $85 million. Dixie Duck?’s top management is interviewing you for a job and they ask two? questions:
a. How much was Dixie Duck?’s net income for 2014??
b. How much was Dixie Duck?’s cash balance at the end of 2014??
a) sales revenue (750) – cost of goods sold (280)- all other expenses (257)= net income (195)

b) beginning cash (85) + collections (719) – payments for inventory (430) – payment for other expenses (255)= ending cash (119)

Which statement is false?

A) Dividends are increased by credits
B) Revenues are increased by credits
C) Liabilities are decreased by debits
D) Assets are increased by debits

A) Dividends are increased by credits
Revenues are

A) Increased in paid-in capital resulting from the owners investing in the business
B) decreases in liabilities resulting from paying off loans
C) increases in retained earnings resulting from selling products or performing services
D) All of the above

C) increases in retained earnings resulting from selling products or performing services
If the credit to record the purchase of supplies on account is not posted,

A) liabilities will be understated
B) stockholders’ equity will be understated
C) expenses will be overstated
D) assets will be understated

A) liabilities will be understated
The journal entry to record the purchase of supplies on account

A) credits supplies and debits accounts payable
B) debits supplies and credits accounts payable
C) credits supplies and debits cash
D) debits supplies expense and credits supplies

B) debits supplies and credits accounts payable
Garret, a new company, completed these transactions. What will Gartex’s total assets equal?
1) Stockholders invested $49,000 cash and inventory with a fair value of $26,000
2) Sales on account, $18,000
Which account types normally have a credit balance?

A) Expenses
B) Revenues
C) Liabilities
D) Both B and C

D) Both B and C
Which financial statement covers a period of time?

A) Income Statement
B) Balance Sheet
C) Statement of cash flows
D) Both A and C

All of the following are current assets except:

A) Inventory
B) Accounts Receivable
C) Sales Revenue
D) Cash

The list of all accounts with their balances is the

A) Journal
B) Chart of accounts
C) balance sheet
D) trial balance

The journal entry to record the receipt of land and a building and the issuance of common stock

A) debits land, and building, and credits common stock
B) debits land, building, and common stock
C) debits land and credits common stock
D) debits common stock an credits land and building

The basic summary device of accounting is

A) account
B) journal
C) trial balance
D) ledger

A) account

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