8 Answered Test Questions:
1. Gerald's had opening total stockholders' equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Their net income was $180,000. No additional investments were made. However, some amount was paid as dividend during the year. What was the amount of the dividend paid?
Answers:
• $20,000.
• $60,000.
• $140,000.
• $220,000.
2. '2/10, net 30' is an example of:
Answers:
• Terms
• Methods
• Systems
• None of the above.
3. A check issued by you, but not yet passed through the banking system, is:
Answers:
• an outstanding check
• a credit transfer
• a dishonored check
• a standing order
4. Documents used to control a bank account include the following except
Answers:
• a bank statement
• electronic funds transfer (EFT)
• prenumbered checks
• a signature card
5. Account books are typically closed on a _________ basis.
Answers:
• Weekly
• Monthly
• Quarterly
• Yearly
6. Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in them (Retained Earnings)?
Answers:
• Net loss.
• Net income.
• Dividends.
• Investments by stockholders.
7. A multiple-step income statement is thought to be more beneficial to financial users because of the revelation of important relationships. Which of the following is not separately identified in a multiple-step income statement?
Answers:
• Gross profit
• Net income
• Income taxes
• Total costs and expenses
8. Accounts payable refer to the current
Answers:
• Liability of a business or an organization
• Asset of a business or an organization
• Expense of a business or organization
• Income of a business or organization
87 NOT Answered Yet Test Questions:
(hold on, will be updated soon)9. The correct journal entry to reconcile an NSF check returned by the bank is:
Answers:
• Debit Accounts Receivable, Credit NSF
• Debit Cash, Credit Accounts Receivable
• Debit NSF Expense, Credit Cash
• Debit Accounts Receivable, Credit Cash
10. Trade accounts receivable:
Answers:
• arise from the sale of a company's products or services.
• are reported in the non-current asset section of the balance sheet.
• include deposits with utilities
• generally comprise the minority of the total receivables balance.
11. Which of the following is a liability?
Answers:
• Creditors for Goods
• Machinery
• Cash at Bank
• Motor Vehicles
12. Refer to the given image:
Hefty Co. wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year.
Sales during the year were 2,700 units at $5.00. If Hefty used the periodic LIFO method, cost of goods sold would be:
Answers:
• $2,780
• $3,960
• $9,700
• $10,880
13. Of the following manufacturing operations, which is best suited to the utilization of a job order system?
Answers:
• Helicopter manufacturing.
• Soft drink bottling operation.
• Crude oil refining.
• Plastic molding operation.
14. What is the purpose of applying overhead costs to work in process?
Answers:
• To meet the legal requirements of the IRS
• To reduce the Expense line on the profit & loss statement
• To accurately apply costs to WIP so that the cost of the finished product reflects all the costs incurred to produce it
• To hide costs from the auditors
15. Refer to the given image:
On March 1, Zekew & Co. purchased $1,000 worth of merchandise, terms 1%10 net 30 days. They use the net method of recording purchases. Payment of the accounts payable was made on March 4. Which of the following journal entries would be appropriate for the March 4 transaction?
Answers:
• 1
• 2
• 3
• 4
16. Under normal circumstances, the Work in Process account used in a job costing system:
Answers:
• will include charges for direct labor, direct materials, and applied overhead.
• will include only charges for direct materials and applied overhead. The labor is charged to expense as incurred.
• will include charges for direct labor, direct materials, and actual overhead.
• will include only charges for direct labor and direct materials.
17. An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the final inventory valuation is:
Answers:
• FIFO
• LIFO
• Retail
• Weighted-average
18. By which of the following formulas should interest on a loan be computed?
Answers:
• (principal x rate)/time
• (principal x rate x time)
• (principal x time)/rate
• (principal x time)/time
19. Which of the following inventory methods will always produce the same results under both a periodic and a perpetual system?
Answers:
• FIFO
• LIFO
• Average
• All of these
20. The correct journal entry to reconcile the interest earned on a bank balance is:
Answers:
• Debit Cash, Credit Interest Revenue
• Debit Cash, Credit Accounts Payable
• Debit Cash, Credit Accounts Receivable
• Debit Accounts Receivable, Credit Cash
21. A payment of cash for the purchases of services should be recorded in the:
Answers:
• cash payments journal
• purchases journal
• revenue journal
• cash receipts journals
22. Refer to the given image:
On February 1, Crown & Co. purchased $2,000 worth of merchandise, terms 2%/ 10 net 30 days. They use the gross method of recording purchases. Payment of the accounts payable was made on February 26. Which of the following journal entries would be appropriate for the February 26 transaction?
Answers:
• 1
• 2
• 3
• 4
23. The sales account and the purchase account should include:
Answers:
• only cash sales and purchases of merchandise.
• only credit sales and credit purchases of merchandise.
• both cash and credit sales and credit purchases of merchandise.
• not only merchandise transactions, but also purchases and other assets used in the business.
24. What is accounts payable aging report?
Answers:
• a sorting of a company's accounts payable by bill date.
• a sorting of a company's accounts payable by due date.
• a sorting of a company's accounts payable by posted date.
• None of above.
25. Refer to the given image:
Lynn Lippincott invested land valued at $5,000 in her business. This transaction would be recorded by:
Answers:
• 1
• 2
• 3
• 4
26. Refer to the given image:
Dodd & Co. uses the periodic inventory accounting system. They had the opening inventory of $59,000, the closing inventory of $37,000, and made net purchases of $123,000. Which of the following components should be included in the year-end closing entries prepared by them?
Answers:
• 1
• 2
• 3
• 4
27. Which of the following best describes the meaning of 'Purchases'?
Answers:
• Goods paid for
• Goods bought for resale
• Items bought
• Goods bought on credit
28. How often can a company change its inventory valuation methodology and still be compliant with GAAP?
Answers:
• Once per month
• Any number of times; there are no rules
• Once per year, but not every year
• Never; you decide once and only once.
29. Sorting the accounts Payable into current, 1-30 days past due, 31-60 days past due, and so on, is known as
Answers:
• Aging Report
• Pending Report
• Payable Report
• Other Report.
30. The basic sequence in the accounting process can best be described as:
Answers:
• Transaction, journal entry, source document, ledger account, trial balance.
• Source document, transaction, ledger account, journal entry, trial balance.
• Transaction, source document, journal entry, trial balance, ledger account.
• Transaction, source document, journal entry, ledger account, trial balance.
31. Of the following account types, which would be increased by a debit?
Answers:
• Liabilities and expenses.
• Assets and equity.
• Assets and expenses.
• Equity and revenues.
32. Refer to the given image:
Hefty & Co. wants to know the effect of different inventory methods on financial statements. Given below is the information about the opening inventory and purchases for the current year.
Sales during the year were 2,700 units at $5.00. If they used the weighted-average method, the gross profit would be:
Answers:
• $3,255
• $3,415
• $10,245
• $13,500
33. Why would a company choose to invoice customers weekly rather than monthly?
Answers:
• It keeps the accounting staff busy
• It increases cash flow
• Customers expect it
• It is required by law
34. The accounting profession can be divided into three major categories; specifically, the public accounting, private accounting, and governmental accounting. A somewhat unique and important service of public accountants is _____.
Answers:
• financial accounting.
• managerial accounting.
• auditing.
• cost accounting.
35. Wilson & Co. owns land which has cost it $100,000. If a "quick sale" of the land were necessary to generate cash, the Co. feels it would receive only $80,000. The Co. continues to report the asset on the balance sheet at $100,000. Under which of the following concepts is it justified?
Answers:
• The historical-cost principle.
• The objectivity principle.
• Neither of the above.
• Both "a" and "b".
36. Which of the following transactions would have no impact on the stockholders' equity?
Answers:
• Purchase of land from the proceeds of a bank loan.
• Dividends to stockholders.
• Net loss.
• Investments of cash by stockholders.
37. Home Depot. Inc. had net purchases of $50,000, closing inventory of $25,000, net sales of $100,000, and gross profit of $32,000. How much was their opening inventory?
Answers:
• $7,000
• $43,000
• $93,000
• $143,000
38. Gerber Departmental Store uses the retail inventory method. Their opening inventory had cost $140,000 and its retail price was fixed at $280,000. Purchases for the period amounted to $390,000 and were priced to sell at twice that amount. Sales for the period, all at the normal retail price, were $600,000. How much is the estimated cost of their closing inventory?
Answers:
• $115,000
• $150,000
• $230,000
• $300,000
39. How does a company ensure that their physical inventory matches what is there in the account books?
Answers:
• It assumes it to be correct if it has been received properly in the system
• It holds the warehouse manager accountable
• It counts every item daily
• It uses some form of physical inventory count - either annual or cyclical
40. The theoretically correct method of allocating under or over applied overhead is to:
Answers:
• allocate the amount to cost of goods sold.
• allocate the amount to finished goods.
• allocate the amount to work in process and finished goods.
• allocate the amount among work in process, finished goods, and cost of goods sold.
41. If a bank account does not reconcile, what's the best thing to do?
Answers:
• Book the difference as an adjustment regardless of the magnitude
• Let it remain unreconciled and hope it will clear up in the following month
• Start from scratch to see if the discrepancy can be found
42. The purpose of Accrued Expenses is:
Answers:
• to accurately reflect expenses in the periods during which they are incurred
• to keep account of the vendors who never send invoices
• to make the financial statements more complicated
• to reflect the amounts owed to the company
43. Ritz & Co. agreed to purchase certain inventory items from Hostess Corporation. The Hostess shipped the goods F.O.B. destination. On December 31, the Ritz's accounting year-end, they were aware that the goods had been shipped and would be received any day.
Answers:
• TheRitz should include the goods in its inventory calculated on December 31.
• TheRitz should include the goods in its inventory calculated on December 31 but should not record the obligation to pay for them.
• TheRitz should not include the goods in its inventory calculated on December 31 but should include the related payable on its balance sheet on December 31.
• TheRitz should not include the goods in its inventory calculated on December 31 and should not include the related payable on its balance sheet on December 31.
44. Which of the following statements concerning job cost sheets is incorrect?
Answers:
• A job cost sheet would show the direct materials used on that specific job.
• A job cost sheet would reveal the selling costs associated with a particular job.
• The total costs recorded on a job cost sheet should also be reflected in the Work in Process account in the general ledger.
• The amount of overhead on a job cost sheet is the applied factory overhead rather than the actual factory overhead.
45. With the job order cost system, a credit balance in the Factory Overhead account at the end of an accounting period would indicate:
Answers:
• that an error in the job cost system has occurred.
• that the company lost money during the period.
• the presence of under-applied overhead.
• the presence of over-applied overhead.
46. The following statements are true regarding the Cash short and Over account except
Answers:
• "Cash Short and Over also acts as an internal control device."
• "There is rarely a difference between actual cash receipts and that day's record of cash receipts."
• "A large balance signals the accountant to investigate."
• "Honest errors can result in an entry to this account."
47. Using the following information, determine the adjusted bank balance: bank statement balance $5,000, bank service charges $15, NSF check $500, checks outstanding $1,000, deposits in transit $2,000.
Answers:
• $6,000
• $5,000
• $5,485
• None of the above
48. Which of the following regulatory bodies would a publicly traded company be much more involved with than a private company?
Answers:
• SEC
• GAAP
• IRS
• FCC
49. Failure to record the receipt of a utility bill for services already received will result in _____.
Answers:
• an overstatement of assets.
• an overstatement of liabilities.
• an overstatement of equity.
• an understatement of assets.
50. The entry to record the payment of dividends is:
Answers:
• debit Cash, credit Dividend Expense
• debit Dividend Expense, credit Cash
• debit Dividends, credit Dividend Payable
• debit Dividend Payable, credit Cash
51. An increase in a firm's receivable turnover ratio means that:
Answers:
• it is collecting credit sales more quickly than before
• cash sales have decreased
• it has initiated more liberal credit terms
• it's inventories have increased
52. The amount of cash reported in the financial statements is the closing balance of cash reported in the ______________.
Answers:
• check register before Bank Reconcilation
• Bank Reconcilation
• bank statement before Bank Reconcilation
• None of the above
53. What is the primary goal of an Accounts Payable department?
Answers:
• To pay invoices immediately to avoid collection calls
• To short pay invoices, knowing that some clients will not notice
• To maintain an accurate AP record and pay invoices according to the company policy
• To tell people who call that their check is in the mail, when it is not, in order to buy time
54. If merchandise purchased on account is returned, the buyer may inform the seller of the details by issuing:
Answers:
• a credit memorandum
• a bill
• a debit memorandum
• an invoice
55. Which of the following is NOT a fundamental of accounting?
Answers:
• Materiality
• Timeliness
• Matching
• Magnitude
56. Which of these items would be accounted for as an expense?
Answers:
• Repayment of a bank loan.
• Dividends to stockholders.
• Purchase of land.
• Payment of the current period's rent.
57. The following comments relate to the recording of journal entries. Which statement is true?
Answers:
• For any given journal entry, debits must exceed credits.
• It is customary to record credits on the left and debits on the right.
• The chart of accounts reveals the amount to debit and credit to the affected accounts.
• Journalization is the process of converting transactions and events into the debit/credit format.
58. Refer to the given image:
The proper journal entry to record Ransom & Co.'s billing of clients for $500 of services rendered is:
Answers:
• 1
• 2
• 3
• 4
59. Why do companies hold back paying invoices until due?
Answers:
• They forget to pay
• They are managing their cash flow
• They don't like taking discounts and saving money
• They might decide not to pay if the vendor doesn't call
60. Which of the following statements is true?
Answers:
• Cash discounts are used to reduce the invoice price below the stated list price.
• The expression 2/30,n/60.means that a 2% cash discount is available if the invoice is paid within 30 to 60 days.
• Cash discounts may not be used in conjunction with trade discounts.
• Cash discounts normally apply to the invoice price of the merchandise, excluding freight charges.
61. Remington Inc. has provided the following information about its balance sheet:
Cash $ 100
Accounts receivable $ 500
Stockholders' equity $ 700
Accounts payable $ 200
Bank loans $ 1,000
Based on the information provided, how much do their liabilities amount to?
Answers:
• $200.
• $900.
• $1,200.
• $1,700.
62. Refer to the given image:
Bernstein Corporation Ltd.recently experienced a fire which destroyed its entire inventory. The following data have been reconstructed from the partial accounting information available, and pertain to the year up to the date of the fire.
Using the gross profit method, estimate the dollar amount of the inventory which was destroyed in the fire.
Answers:
• $17,000
• $33,000
• $47,000
• $65,000
63. Office Mart's financial statements revealed an uncollectible accounts expense of $8,000, accounts receivable of $140,000, and allowance for uncollectible accounts of $12,000. The net realizable value of Office Mart's accounts receivable is:
Answers:
• $128,000
• $132,000
• $136,000
• $152,000
64. Which of the following equations properly represents a derivation of the fundamental accounting equation?
Answers:
• Assets + liabilities = owner's equity.
• Assets = owner's equity.
• Cash = assets.
• Assets - liabilities = owner's equity.
65. Refer to the given image:
The proper journal entry to record $1,000 of Dividend paid by Myer's Corporation Ltd. is:
Answers:
• 1
• 2
• 3
• 4
66. Which of the following would not be included in a balance sheet?
Answers:
• Accounts receivable.
• Accounts payable.
• Sales.
• Cash.
67. Which of the following is a typical prepaid expense?
Answers:
• Rent
• Insurance
• Wages
• Office Supplies
68. Refer to the given image:
Hefty & Co. wants to know the effect of different inventory methods on financial statements. Given below is the information about the opening inventory and purchases for the current year.
Sales during the year were 2,700 units at $5.00. If they used the first-in, first-out method, the closing inventory would be:
Answers:
• $2,780
• $3,960
• $9,700
• $10,880
69. Wonder Corporation Ltd. failed to record the purchase of merchandise in their account books. The merchandise and related accounts payable should have been recorded but were not. What would be the effect of these errors on assets, liabilities, retained earnings, and net income respectively?
Answers:
• Understated, understated, no effect, no effect
• Understated, understated, understated, understated
• Understated, overstated, overstated, understated
• Overstated, overstated, understated, overstated
70. What are the adjustments most common to bank reconciliation?
Answers:
• Interest earned and bank fees
• Bank errors
• Unidentified transactions
• Checks cleared but not in the accounting system
71. Purchasers of merchandise may be dissatisfied with the quality of goods purchased on account, and return the goods to the seller with an indication that payment will not be forthcoming. In such a case, the document prepared by the purchaser is called:
Answers:
• a debit memorandum.
• a credit memorandum.
• a receiving report.
• an invoice.
72. Why is cyclical counting a better method of inventory taking than the annual count?
Answers:
• It results in accurate ongoing inventory
• It lets the company incur adjustment costs on a monthly rather than annual basis
• It allows the company to look for and correct ongoing discrepancies
• All of the above
73. Which of the following statements concerning job costing systems is incorrect?
Answers:
• Cost drivers are those items which cause actual overhead to exceed applied overhead.
• Job costing systems are appropriate to both manufacturing and service businesses.
• Traditionally, direct labor has been a very popular overhead application base.
• In a service business, indirect costs of providing a service are treated as overhead and applied in a manner similar to that for factory overhead.
74. What does Accounts Payable show?
Answers:
• Credit Balance
• Debit Balance
• No Balance
• None of the above
75. The appropriate journal entry to record the application of overhead in a job costing system involves a debit to Work in Process and a credit to:
Answers:
• Cost of Goods Sold
• Factory Overhead
• Cash
• Income Summary
76. The entry to record the declaration of dividends is:
Answers:
• debit Cash, credit Dividend Expense
• debit Dividend Expense, credit Cash
• debit Dividends, credit Dividend Payable
• debit Retained Earnings, credit Dividend Payable
77. Mike is the payee of a $20,000, 180-day, 8% note. On maturity, the note maker fails to pay. How much interest income should Mike receive on the dishonored note?
Answers:
• $0
• $800
• $1,600
• $10,800
78. The overhead application rate is calculated by:
Answers:
• dividing the estimated factory overhead by the estimated application base.
• dividing estimated per unit factory overhead by the sum of the per unit cost for direct labor and direct materials.
• multiplying the estimated factory overhead by the estimated application base.
• dividing the estimated application base by the estimated factory overhead.
79. The primary private sector agency that oversees external financial reporting standards is the______.
Answers:
• Financial Accounting Standards Board
• Federal Bureau of Investigation.
• General Accounting Office.
• Internal Revenue Service.
80. If you want to make sure that your money should remain safe when checks sent are lost in the post, you should:
Answers:
• cross your checks 'Account Payee only, Not Negotiable'
• not use the postal service in future
• always pay by cash
• always take the money in person
81. If the supplies account (assets), before adjustment on May 31, indicated a balance of $2,250, and the supplies on hand on May 31 totaled $950, the adjusting entry would be:
Answers:
• Debit supplies, $1,300; credit supplies expense, $1,300
• Debit supplies, $950; credit supplies expense, $950
• Debit supplies expense, $950; credit supplies, $950
• Debit supplies expense, $1,300; credit supplies, $1,300
82. The correct journal entry to reconcile an EFT payment of insurance expense is:
Answers:
• Debit Cash, Credit Interest Revenue
• Debit Accounts Payable, Credit Cash
• Debit Bank Charge Expense, Credit Cash
• Debit Insurance Expense, Credit Cash
83. If a customer is not paying their invoices, the best first step to encourage them to pay is:
Answers:
• Send them to collections immediately
• Write them a letter and threaten to cut off their line of credit
• Begin charging interest on their open balance
• Send a statement with copies of the open invoices
84. Lundstrom & Co. began making sales on credit during 20X1. The Co. used the direct write-off method for uncollectible accounts. A material amount of uncollectible accounts resulting from the sales made during 20X1 were written off during 20X2. What was the effect of this write-off on the net income for 20X1 and 20X2?
20X1 20X2
Answers:
• Overstate Overstate
• Overstate Understate
• Understate Overstate
• Understate Understate
85. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our competitors, is likely to result in:
Answers:
• an increase in the average collection period
• a decrease in bad debt losses
• an increase in sales
• higher profits
86. The trial balance __________.
Answers:
• is a formal financial statement.
• is used to prove that there are no errors in the journal or ledger.
• provides a listing of every account in the chart of accounts.
• provides a listing of the balance of each account in active use.
87. Russell Merchandising Ltd. uses the perpetual inventory system. Which of the following statements would be correct?
Answers:
• When they record a sale, it should also debit inventory.
• When they record a sale, it should also credit inventory.
• When they record a sale, it should also credit cost of goods sold.
• When they record a sale, it should also debit cost of goods available for sale.
88. Using the following information, determine the adjusted book balance: cash account balance on the books $27,000, bank service charges $200, NSF check $2,000, checks outstanding $3,000, deposits in transit $1,000.
Answers:
• $24,800
• $25,800
• $25,000
• None of the above.
89. The Sales Day Book is best described as:
Answers:
• a book containing customers' accounts
• a book containing real accounts
• a list of credit sales
• a part of the double entry system
90. Why is the Accounts Receivable function important?
Answers:
• All companies have it; so it must be important
• It is good to have someone people can call with invoice questions
• It turns the receivables into cash
• Sales would go down without an AR department
91. Which of the following is a personal account?
Answers:
• Building
• Wages
• Debtors
• Rent
92. The best inventory method to adopt for a company that sells a product in large quantities, for example nails, would be:
Answers:
• FIFO
• LIFO
• Average Cost
• Specific Cost
93. Which of the following errors will be disclosed in the preparation of a trial balance?
Answers:
• Recording transactions in the wrong account.
• Duplication of a transaction in the accounting records.
• Posting only the debit portion of a particular journal entry.
• Recording wrong amount for a transaction to both the account debited and the account credited.
94. Lindy & Co. use an allowance method to account for bad debts. They estimate that 5% of the outstanding accounts receivable will be uncollectible. At the end of the year, they have outstanding accounts receivable of $750,000, and a debit balance in the Allowance for Uncollectible Accounts of $9,000. They should record an uncollectible accounts expense of:
Answers:
• $28,500
• $37,500
• $46,500
• $55,500
95. In which section of the balance sheet should inventory accounts be classified?
Answers:
• Current assets
• Investments
• Property, plant, and equipment
• Intangible assets
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