26. The Income Summary account is used: (Points : 2) To adjust and update asset and liability accounts To close the revenue and expense accounts To determine the appropriate dividend amount In some situations to replace the income statement To replace the retained earnings account in some businesses 27. A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year? (Points : 2) $75 $125 $175 $250 $325 28. A trial balance prepared after adjustments have been recorded is called a(n): (Points : 2) Balance sheet Adjusted trial balance Unadjusted trial balance Classified balance sheet Unclassified balance sheet 29. The accrual basis of accounting: (Points : 2) Is generally accepted for external reporting since it is more useful for most business decisions Is flawed because it gives complete information about cash flows Recognizes revenues when received in cash Recognizes expenses when paid in cash Eliminates the need for adjusting entries at the end of each period 30. The main purpose of adjusting entries is to: (Points : 2) Record external transactions and events Record internal transactions and events Recognize assets purchased during the period Recognize debts paid during the period Correct errors 31. Multiple-step income statements: (Points : 2) Are required by the FASB Contain more detail than a simple listing of revenues and expenses Are required for the perpetual inventory system List cost of goods sold as an operating expense Can only be used in perpetual inventory systems 32. The full disclosure principle: (Points : 2) Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made and its effect on net income Requires that companies use the same accounting method for inventory valuation period after period Is not subject to the materiality principle Is only applied to retailers Is also called the consistency principle 33. A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is: (Points : 2) $3,725.00 $3,925.00 $3,995.00 $4,000.50 $4,075.00 34. A company had expenses other than cost of goods sold of $51,000. Determine sales and gross profit given cost of goods sold was $25,000 and net income was $60,000. (Points : 2) Sales: $136,000; Gross Profit: $111,000 Sales: $136,000; Gross Profit: $85,000 Sales: $85,000; Gross Profit: $136,000 Sales: $111,000; Gross Profit: $136,000 Sales: $60,000; Gross Profit: $25,000 35. Days' sales in inventory: (Points : 2) Is also called days' stock on hand Focuses on average inventory rather than ending inventory Is used to measure solvency Is calculated by dividing cost of goods sold by ending inventory Is a substitute for the acid-test ratio 36. Our company has three times as many assets as it does liabilities. If total liabilities are $55,000, what is the amount of owners' equity? (Points : 2) $55,000 $110,000 $165,000 $220,000 Cannot be determined from the given information 37. A remittance advice is: (Points : 2) An explanation for a payment by check A bank statement A voucher An EFT A cancelled check 38. The impact of technology on internal controls includes which of the following: (Points : 2) Reduced processing errors Elimination of the need for regular audits Elimination of the need to bond employees More efficient separation of duties Elimination of fraud 39. A company had $43 missing from petty cash which was not accounted for by petty cash receipts. The correct procedure is to: (Points : 2) Debit Cash Over and Short for $43 Credit Cash Over and Short for $43 Debit Petty Cash for $43 Credit Petty Cash for $43 Credit Cash for $43 40. Toys "R" Us had cost of goods sold of $9,421 million, ending inventory of $2,089 million and average inventory of $1,965 million. The inventory turnover equals: (Points : 2) 0.21 4.51 4.79 76.1 days 80.9 days 41. Cash equivalents: (Points : 2) Are short-term, highly liquid investments Include 6-month CDs Include checking accounts Are recorded in petty cash Include money orders 42. Which inventory valuation method assigns a value to the inventory on the balance sheet that approximates current cost and also mimics the actual flow of goods for most businesses? (Points : 2) FIFO Weighted average LIFO Specific identification First In Still Here 43. A seller of goods or services, usually a manufacturer or wholesaler is known as a: (Points : 2) Vendor Payee Vendee Creditor Debtor 44. A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold? (Points : 2) $120 $124 $128 $130 $140 45. A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 equals: (Points : 2) $200 $1,564 $1,568 $1,600 $1,800 46. The conservatism principle: (Points : 2) Requires that when there are more than one equally likely estimate of amounts expected to be received or paid in the future, then the less optimistic amount should be used Requires that a company use the same accounting methods period after period Requires that revenues and expenses be reported in the period in which they are earned or incurred Requires that all items of a material nature be included in financial statements Requires that all inventory items be reported at full cost 47. A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000,net income totaled $263,500, and cost of goods sold of $420,000. What is the net sales amount for the period? (Points : 2) $1,500,000 $1,275,000 $1,725,000 $1,521,000 $1,479,000 48. ABC Corporation had total quick assets $5,888,000, current assets $11,700,000 and current liabilities $8,000,000. Its acid-test ratio equals: (Points : 2) 0.50 0.68 0.74 1.50 2.20 49. A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12 they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at August 15 after the sale? (Points : 2) $140 $160 $210 $380 $590 50. Which of the following is the most serious limitation of internal controls? (Points : 2) Computer error Human fraud or human error Cost-benefit principle Cybercrime Management fraud