1. Which of the following is a contra-revenue account?

a. Utilities Expense

b. Sales Returns

c. Unearned Revenue

d. Interest revenue

2. Which statement is most likely true as receivable accounts go longer with little or no payment?

a. The bad debt probability percentage will increase

b. The bad debt probability percentage will decrease

c. The customers will eventually pay, especially when they see their credit report being affected

3. Which of the following would not be helpful to reduce the potential for bad debt when lending to customers?

a. Obtain a credit report

b. Provide discrete terms of sale

c. Check banking references

d. Check family & friends references

4. Which of the following would not be an example of an item paid out of the petty cash account?

a. Coffee & donuts for a company breakfast

b. Stamps for the office

c. Auto loan payment for company vehicles

5. Having numerous people in charge of your petty cash account is a good idea because almost anyone in your office can get cash quick for random office expenses.

a. True

b. False

6. Which statement best explains the difference between perpetual and periodic inventory systems?

a. In a perpetual system, items are instantly removed from inventory and sales are automatically calculated

b. In a periodic system, items are instantly removed from inventory and sales are automatically calculated

c. Both systems are identical except that periodic inventory systems require a physical inventory check at the end of the period

7. Which of the following is true about the terms 3/12, net 25?

a. A 12% discount will be applied if the full payment is received within 3 days, the total balance is due within 25 days

b. A 4% discount will be applied if the full payment is received within 12 days, the total balance is due within 25 days

c. A 3% discount will be applied if the full payment is received within 12 days, the total balance is due within 25 days

d. A 25% discount will be applied if the full payment is received within 3 days, the total balance is due within 25 days

8. Which of the following is an example of an intangible asset for a soda-beverage company?

a. The sodas they have in inventory for sale

b. The machinery they use to produce the sodas

c. The formula they use for their sodas

9. Hosiery Inc. purchased a manufacturing machine for $500,000 to produce hosiery. Hosiery Inc. paid $1,000 to ship the machinery, $2,500 to install the machinery, and $500 in maintenance costs associated with the machine. What can Hosiery Inc. value the machinery at?

a. $500,000

b. $502,500

c. $500,500

d. $503,500

10. The terms FOB Destination Point means that the ownership of the items being purchased changes when the goods leave the sellers place of business.

a. True

b. False

11. Which statement best describes the concept of ethical accounting practices?

a. Reporting financial information honestly and within the standards of GAAP

b. Following managements supervision and advice, regardless of ethical accounting practices

c. Reporting all information to the SEC, regardless if the information is fraudulent or not