1. (True or False)

The investment of cash by stockholders into a business is treated as a loan because the cash might be used for purchases of equipment, payment of expenses, or other business purposes.

2. (Multiple Choice)

The Income Summary account:

A. will always have a credit balance. B. will appear on a company's balance sheet. C. will receive entries only during the closing process. D. both A and C. E. None of these.

3. (Multiple Choice)

Which of the following statements is true?

A. In a capital lease, the lessee records the asset on its books. B. A lessee will record depreciation expense for an operating lease. C. An operating lease results in the recording of a liability and interest. D. All of these. E. None of these.

4. (Multiple Choice)

In considering how much merchandise inventory to stock, one should consider numerous cost-benefit factors. In general, which of the following statements is true?

A. Marketing would tend to want to stock more inventory than finance personnel. B. Marketing would tend to want to stock less inventory than finance personnel. C. Marketing would tend to want to stock the same inventory as finance personnel. D. The amount of inventory to stock would be irrelevant to finance personnel. E. None of these.

5. (True or False)

Under the retail inventory method, the retail value of ending inventory is determined by counting the ending inventory, referring to invoices to determine that inventory's cost, and multiplying the cost amount by the cost to retail percentage.

6. (Multiple Choice)

On March 1, 20X3, Jimenez purchased a one-year insurance policy for $2,400. On that date, Jimenez debited Prepaid Insurance for $2,400. If Jimenez desires to prepare financial statements at the end of March, the adjusting journal entry would include a:

A. debit to Insurance Expense for $2,400. B. debit to Insurance Expense for $200. C. credit to Insurance Expense for $2,200. D. credit to Prepaid Insurance for $2,200. E. None of these.

7. (Multiple Choice)

In a post-closing trial balance:

A. debits should equal credits.. B. no balances remain in the Dividends, Revenue, and Expense accounts. C. Retained earnings includes net income. D. All of the above. E. None of these.

8. (True or False)

In preparing a bank reconciliation, outstanding checks should be added back to the ending balance per the bank statement.

9. (Multiple Choice)

Which of the following is false?

A. Cost less accumulated depreciation equals depreciable base. B. "Depreciation expense" and "accumulated depreciation" are synonymous. C. Depreciation expense normally increases over the service life of an asset.. D. All of the above. E. None of these.

10. (Multiple Choice)

Richards Hospital was incorporated on August 1. The initial capital was raised by issuing $2,000,000 of stock. The appropriate journal entry for this transaction is:

A. Debit Cash/Credit Revenue. B. Debit Capital Stock/Credit Revenue. C. Debit Capital Stock/Credit Cash. D. Debit Cash/Credit Capital Stock. E. None of these.

11. (Multiple Choice)

Hernandez Company accrued wages of $350 on December 31. The company makes reversing entries. The proper entry on payday, January 5, to record a $1,200 payroll includes:

A. a credit to Wage Expense of $1,200. B. a credit to Wages Payable of $350. C. a credit to Wage Expense of $850. D. a credit to Wages Payable of $1,200. E. None of these.

12. (Multiple Choice)

Richards Hospital was incorporated on August 1. The initial capital was raised by issuing $2,000,000 of stock. The appropriate journal entry for this transaction is:

A. Debit Cash/Credit Revenue. B. Debit Capital Stock/Credit Revenue. C. Debit Capital Stock/Credit Cash. D. Debit Cash/Credit Capital Stock. E. None of these.

13. (True or False)

Under the accrual basis of accounting, revenues are recognized when goods are sold and delivered, or services are rendered.

14. (Multiple Choice)

On July 1, 20X1, a company borrows $100,000 on a 5% note, due in one year. Assume accrued interest was recorded on December 31. What accounts would be impacted at the time of repayment of the note and interest on June 30, 20X2?

A. Interest Expense, by $5,000. B. Notes Payable, by $105,000. C. Cash, by $100,000. D. Interest Payable, by $2,500. E. None of these.

15. (True or False)

The investment of cash by stockholders into a business is treated as a loan because the cash might be used for purchases of equipment, payment of expenses, or other business purposes.

16. (Multiple Choice)

Eastland Company regularly sells goods to customers who use American City bank credit cards. Credit card sales on July 8 amounted to $1,000 and were subject to a 2% bank fee. Eastland should record sales of:

A. $980. B. $998. C. $1,000. D. $1,020. E. None of these.

17. (True or False)

All intangibles are amortized over a period, not to exceed 40 years.

18. (Multiple Choice)

Jordan erroneously credited a liability account rather than a revenue account. Therefore:

A. total assets are not affected. B. expenses are understated. C. ending stockholders' equity will be overstated. D. liabilities are understated.. E. None of these.

19. (True or False)

A stock split will reduce par value, but a stock dividend will not.

20. (Multiple Choice)

Purchasing an item of equipment for cash will cause total assets, total liabilities, and stockholders equity to:

A. increase, increase, and remain unchanged, respectively. B. remain unchanged, remain unchanged, and remain unchanged, respectively. C. increase, remain unchanged, and increase, respectively. D. increase, remain unchanged, and decrease, respectively. E. None of these.