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Accounting final - Principles of Accounting Final Exam...

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Unformatted text preview: Principles of Accounting Final Exam Study Guide Fall 2009 Multiple Choice Identiļ¬Ā» the choice that best completes the statement or answers the question. 1. What is the term applied to the excess of net revenue from sales over the cost of merchandise sold? a. gross proļ¬t b. income from operations c. net income (1. gross sales 2. The term "inventory" indicates a. merchandise held for sale in the normal course of business b. materials in the process of production or held for production 0. Supplies d. both (a) and (b) 3. A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330. The cost of merchandise purchased is equal to a. $12,670 b. $9,070 0. $8,420 d. $17,230 4. Merchandise inventory is classiļ¬ed on the balance sheet as a a. Current Liability b. Current Asset c. Longā€”Term Asset d. Longā€”Tenn Liability 5. When comparing a retail business to a service business, the ļ¬nancial statement that changes the least is the a. Balance Sheet b. Income Statement 0. Retained Earnings Statement d. Statement of Cash Flow 6. Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a a. debit to Sales b. debit to Merchandise Inventory c. credit to Merchandise Inventory (1. credit to Sales 7. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are n/30 FOB shipping point FOB destination Consigned 99.0ā€œ?ā€ 10. 11. 12. 13. Cumberland Co. sells $1,200 of inventory to Hancock Co.for cash. Cumberland paid $850 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded? a. Cash 1,200 Dr, Merchandise Inventory 850 Cr b. Cash 1,200 Dr, Sales 1,200 Cr, Cost of Merchandise Sold 850 Dr, Merchandise Inventory 850 Cr. 0. Cash 1,200 Dr, Sales 1,200 Cr (1. Accounts Receivable 1,200 Dr, Sales 1,200 Cr, Cost of Merchandise Sold 850 Dr, Merchandise Inventory 850 Cr. Use the following information to answer questions 9-11. 1. $7,000 of merchandise inventory was ordered on September 2, 2009 . $3,000 of this merchandise was received on September 5, 2009 3. On September 6, 2009, an invoice dated September 4, 2009, with terms of 3/10, net 30 for $3,250 which included a $250 prepaid freight cost, was received. 4. On September 10, 2009, $800 of the merchandise was returned to the seller. Based on the above information, what would the journal entry for September 10, 2009 include? a. Debit to Merchandise Inventory $800 b. Debit to Purchases Returns $800 c. Credit to Merchandise Inventory $800 (1. Credit to Accounts Payable $800 Based on the above information, by what date does the invoice need to be paid in order to take the advantage of the discount? a. September 15, 2009 b. September 16, 2009 0. September 10, 2009 d. September 14, 2009 Based on the above information, what would be the cash payment if the company decides to pay the invoice on September 30, 2009? a. $2,450 b. $2,384 c. $3,250 (1. $3,000 Under the perpetual inventory system, all purchases of merchandise are debited to the account entitled a. Merchandise Inventory b. Cost of Merchandise Sold c. Cost of Merchandise Available for Sale d. Purchases The proper journal entry to record the receipt of inventory purchased on account in a perpetual inventory system would be: a. Jan 1 Inventory 540.00 Accounts Payable 540.00 b. Jan 1 Ofļ¬ce Supplies 540.00 Accounts Payable 540.00 0. Jan 1 Purchases 540.00 Accounts Payable 540.00 d. Jan] Purchases 540.00 Accounts Receivable 540.00 14. The inventory method that considers the inventory to be composed of the units of merchandise acquired earliest is called ļ¬rstā€”in, ļ¬rst-out last-in, first-out average cost retail method 9.0 9ā€˜!Ā» Use the following information for Questions 15 & 16. The inventory data for an item for September are: Sep. 1 Inventory 20 units at $20 4 Sold 10 units 10 Purchased 30 units at $25 17 Sold 20 units 30 Purchased 10 units at $30 15. Using the perpetual system, costing by the last-in, ļ¬rst-out method, what is the cost of the merchandise inventory of 30 units on September 30? a. $800 b. $650 0. $750 d. $700 16. Under a perpetual inventory system, when a shortage is discovered a. Merchandise Inventory is debited b. Cost of Merchandise Sold is credited 0. Inventory Shortages is credited d. Merchandise Inventory is credited Use the following information to answer Question 26. The Boxwood Company sells blankets for $60 each. The following was taken from the inventory records during May. May 10 May 20 May 23 May 17 ā€”_ Mayao ā€”ā€” $40 17. Assuming that the company uses the perpetual inventory system, determine the ending inventory for the month of May the LIFO inventory cost method. a. $362 b. $548 c. $520 (1. $494 18. 19. 20. 21. 22. 23. 24. The following lots of a particular commodity were available for sale during the year: Beginning inventory 10 units at $30 First purchase 25 units at $32 Second purchase 30 units at $34 Third purchase 10 units at $35 The ļ¬rm uses the periodic system and there are 20 units of the commodity on hand at the end of the year. What is the amount of inventory at the end of the year according to the last-in, ļ¬rstā€”out method? a. $655 b. $620 c. $690 d. $659 During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is a. FIFO b. LIFO c. average cost d. weighted average Which one of the following below reļ¬‚ects a weak internal control system? a. all employees are well supervised b. a single employee is responsible for comparing a receiving report to an invoice c. all employees must take their vacations d. a single employee is responsible for collecting and recording of cash The debit balance in Cash Short and Over at the end of an accounting period is reported as a. an expense on the income statement b. income on the income statement 0. an asset on the balance sheet (1. a liability on the balance sheet Which of the following is y_o_t an internal control activity for cash? a. The number of persons who have access to cash should be limited. b. All cash receipts should be recorded promptly. c. The functions of record keeping and maintaining custody of cash should be combined. d. Surprise audits of cash on hand should be made occasionally. Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is a. a deduction from the balance per company's records b. an addition to the balance per bank statement c. a deduction from the balance per bank statement d. an addition to the balance per company's records Receipts from cash sales of $7,500 were recorded incorrectly in the cash receipts journal as $5,700. What entry is required in the company's accounts? a. debit Sales; credit Cash b. debit Cash; credit Accounts Receivable c. debit Cash; credit Sales d. debit Accounts Receivable; credit Cash 25. 26. 27. 28. 29. 30. Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company's accounts? a. debit Other Income; credit Cash b. debit Cash; credit Other Income c. debit Cash; credit Accounts Receivable d. debit Accounts Receivable; credit Cash Which of the following would be subtracted from the balance per books on a bank reconciliation? a. Outstanding checks b. Deposits in transit 0. Notes collected by the bank d. Service charges Meredith Company gathered the following reconciling information in preparing its May bank reconciliation: l-_ā€” -ā€”ā€” -_ā€” =_ 4 - Outstanding checks 1,800 NSF check The adjusted cash balance per books on May 31 is a. $2,970. b. $3,120. 0. $5,280. d. $1,320. The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. The entry to write off an account that has been determined to be uncollectible would be as follows: a. debit Uncollectible Accounts Expense; credit Accounts Receivable b. debit Sales Returns and Allowance, credit Accounts Receivable c. debit Uncollectible Accounts Expense; credit Allowance for Doubtful Accounts (1. debit Accounts Receivable, credit Uncollectible Accounts Expense If the allowance method of accounting for uncollectible receivables is used, what general ledger account is credited to write off a customer's account as uncollectible? a. Uncollectible Accounts Expense b. Accounts Receivable c. Allowance for Doubtful Accounts d. Interest Expense Allowance for Doubtful Accounts has a debit balance of $1,100 at the end of the year (before adjustment), and an analysis of customers' accounts indicates doubtful accounts of $12,900. Which of the following entries records the proper provision for doubtful accounts? - a. debit Uncollectible Accounts Expense, $14,000; credit Allowance for Doubtful Accounts, $14,000 b. debit Allowance for Doubtful Accounts, $14,000; credit Uncollectible Accounts Expense, $14,000 0. debit Allowance for Doubtful Accounts, $11,800; credit Uncollectible Accounts Expense, $11,800 d. debit Uncollectible Accounts Expense, $11,800; credit Allowance for Doubtful Accounts, 31. $11,800 Tanning Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $300,000 and credit sales are $1,000,000. An aging of accounts receivable shows that 5% will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? a. Bad Debts Expense 13,000 Allowance for Doubtful Accounts 13,000 Bad Debts Expense 15,000 Allowance for Doubtful Accounts 15,000 Bad Debts Expense 13,000 Accounts Receivable 13,000 Bad Debts Expense 15,000 Accounts Receivable 15,000 b. C. d. A capital expenditure results in a debit to a. an expense account b. a stockholdersā€™ equity account c. a liability account d. an asset account Which of the following below is an example of a capital expenditure? a. cleaning the carpet in the front room b. tuneā€”up for a company truck c. replacing an engine in a company car (1. replacing all burned-out light bulbs in the factory All leases are classified as either a. capital leases or longā€”term leases b. capital leases or operating leases c. operating leases or current leases d. long-term leases or current leases The most widely used depreciation method is a. straightā€”line b. sum-of-the-yearsā€”digits c. declining-balance d. unitsā€”ofā€”production A fixed asset with a cost of $30,000 and accumulated depreciation of $28,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the ļ¬xed asset? a. $2,000 loss b. $1,500 loss c. $3,500 gain (1. $2,000 gain When a company discards machinery that is fully depreciated, this transaction would be recorded with the following entry a. debit Accumulated Depreciation; credit Machinery 10. 11. 12. 13. 14. b. debit Machinery; credit Accumulated Depreciation c. debit Cash; credit Accumulated Depreciation d. debit Depreciation Expense; credit Accumulated Depreciation When a company sells machinery at a price equal to its book value, this transaction would be recorded with an entry that would include the following: a. debit Cash and Accumulated Depreciation; credit Machinery b. debit Machinery; credit Cash and Accumulated Depreciation c. debit Cash and Machinery; credit Accumulated Depreciation d. debit Cash and Depreciation Expense; credit Accumulated Depreciation The process of transferring the cost of metal ores and other minerals removed from the earth to an expense account is called a. Depletion b. Deferral c. Amortization d. Depreciation The term applied to the amount of cost to transfer to expense resulting from a decline in the utility of intangible assets is a. Amortization b. Depletion c. Depreciation d. Allocation The exclusive right to use a certain name or symbol is called a a. Franchise b. Patent c. Trademark d. Copyright Fixed assets are ordinarily presented in the balance sheet a. at current market values b. at replacement costs c. at cost less accumulated depreciation d. in a separate section along with intangible assets Current liabilities are a. due, but not receivable for more than one year b. due, but not payable for more than one year 0. due and receivable within one year d. due and payable within one year On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co. What is the due date of the note? a. October 8 b. October 7 0. October 6 d. October 5 On June 8, Alton Co. issued an $90,000, 6%, 120-day note payable to Seller Co. What is the maturity value of the note? a. $90,450 15. 16. 17. 18. 19. 20. 21. 22. b. $90,000 0. $91,800 (1. $95,400 The interest charged by the bank, at the rate of 9%, on a 90-day, discounted note payable for $100,000 is a. $9,000 b. $2,250 c. $750 (1. $1,000 The journal entry a company uses to record the issuance of a note for the purpose of converting an existing account payable would be a. debit Cash; credit Accounts Payable b. debit Accounts, Payable; credit Cash 0. debit Cash; credit Notes Payable d. debit Accounts Payable; credit Notes Payable The journal entry a company uses to record the issuance of a note for the purpose of borrowing funds for the business is a. debit Accounts Payable; credit Notes Payable b. debit Cash; credit Notes Payable c. debit Notes Payable; credit Cash d. debit Cash and Interest Expense; credit Notes Payable A current liability is a debt that can reasonably expected to be paid a. between 6 months and 18 months. b. out of currently recognized revenues. 0. within one year. d. out of cash currently on hand. The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n) a. payroll expense b. contra account 0. Asset (1. Liability Which statement below is 113g a determinate in calculating the amount of federal income taxes Withheld from an individuals pay? a. filing status b. types of earnings c. gross pay d. number of exemptions For which of the following taxes is there no ceiling on the amount of employee annual earnings subject to the tax? a. only Social Security tax b. only Medicare tax 0. only unemployment compensation tax d. none of the above Most employers are required to withhold from employees which of the following employment taxes? a. FICA tax b. FICA tax, state and federal unemployment compensation tax c. only state unemployment compensation tax (1. only federal unemployment compensation tax 23. An employee receives an hourly rate of $40, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $100,000; and Medicare tax rate, 1.5% on all earnings. What is the gross pay for the employee? a. $775.00 b. $1,840.00 c. $1,960.00 (1. $1,562.60 24. One of the main disadvantages of the corporate form is the a. professional management b. double taxation of dividends 0. Charter d. corporation must issue stock 25. Under the corporate form of business organization a. ownership rights are easily transferred. b. a stockholder is personally liable for the debts of the corporation. 0. stockholdersā€™ acts can bind the corporation even though the stockholders have not been appointed as agents of the corporation. d. stockholders wishing to sell their corporation shares must get the approval of other stockholders. 26. The term deļ¬cit is used to refer to a debit balance in which of the following accounts of a corporation? a. Retained Earnings b. Treasury Stock 0. Organizational Expenses d. Common Stock 27. Stockholders' equity a. is usually equal to cash on hand b. includes paid-in capital and liabilities 0. includes retained earnings and paid-in capital d. is shown on the income statement 28. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 45,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? a. 5,000 b. 45,000 0. 40,000 d. 50,000 29. A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for a. $15,000 b. $32,000 0. $17,000 d. $2,000 30. 31. If common stock is issued for an amount greater than par value, the excess should be credited to a. Retained Earnings. b. Cash. 0. Legal Capital. d. Paidā€”in Capital in Excess of Par Value. The journal entry to issue 1,000,000 shares of $6 par common stock for $8.00 per share on January 2nd would be: a. Jan2 Cash 8,000,000 Common Stock 6,000,000 Paidā€”In Capital in Excess of Par ā€” C/S 2,000,000 b. Jan 2 Cash 6,000,000 Common Stock 6,000,000 c. Jan 2 Cash 6,000,000 Paid-In Capital in Excess of Par - C/S 2,000,000 Common Stock 8,000,000 d. Jan 2 Cash 1,000,000 Common Stock 1,000.000 Which of the items below is gilt a business entity? a. entrepreneurship b. proprietorship c. partnership d. corporation Select the type of business that is most likely to obtain large amounts of resources by issuing stock. a. Partnership b. Corporation 0. Proprietorship d. None 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 Owned resources of a business are referred to as a. assets b. liabilities c. equities d. revenues Debts owed by a business are referred to as a. accounts receivables b. equities c. stockholdersā€™ equity d. liabilities 6. The accounting equation may be expressed as a. Assets = Equities - Liabilities b. Assets + Liabilities = Stockholdersā€™ Equity 0. Assets = Revenues less Liabilities d. Assets - Liabilities = Stockholdersā€™ Equity 7. Which of the following is n_ot an asset? a. Investments b. Cash c. Inventory (1. Stockholdersā€™ Equity 8. The assets and liabilities of the company are $175,000 and $40,000, respectively. Stockholdersā€™ equity should equal a. $215,000 b. $135,000 0. $175,000 d. $40,000 9. Earning revenue will cause which of the following; a. increases assets, increases stockholdersā€™ equity. b. increases assets, decreases stockholdersā€™ equity c. increases one asset, decreases another asset d. decreases assets, increases liabilities 10. The asset created by a business when it makes a sale on account is termed a. accounts payable b. prepaid expense 0. unearned revenue (1. accounts receivable 11. The debt created by a business when it makes a purchase on account is referred to as an a. account payable b. account receivable c. asset d. expense payable 12. Which of the following accounts is a stockholders' equity account? a. Cash b. Accounts Payable c. Prepaid Insurance d. Capital Stock 13. The debit side of an account a. depends on whether the account is an asset, liability or stockholdersā€™ equity b. can be either side of the account depending on how the accountant set up the system c. is the right side of the account (1. is the left side of the account 14. A debit may signify a(n) a. decrease in asset accounts b. decrease in liability accounts c. increase in the capital stock account (1. decrease in the dividends account 15. Which of the following types of accounts have a normal credit balance? a. assets and liabilities 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. b. liabilities and expenses c. revenues and liabilities (1. capital stock and dividends Which of the following groups of accounts have a normal debit balance? a. revenues, liabilities, capital stock b. capital stock, assets c. liabilities, expenses d. assets, expenses A credit signiļ¬es a decrease in a. expense b. liabilities 0. capital stock d. revenue A debit signiļ¬es a ...
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