Mock Test $2$

$1.$ Walker Clothing Store had a balance in the Accounts Receivable account of $$437,500$ at the beginning of the year and a balance of $$500,000$ at the end of the year. Net credit sales during the year amounted to $$3,000,000.$ The average collection period of the receivables in terms of days was

a$.53$ days.

b$.365$ days.

c$.60$ days.

d$.57$ days.

$2.$ The acid$-$test ratio

a$.$ is a quick calculation of an approximation of the current ratio.

b$.$ does not include all current liabilities in the calculation.

c$.$ does not include inventory as part of the numerator.

d$.$ does include prepaid expenses as part of the numerator.

$3.$ Adjusting entries are required

a$.$ yearly.

b$.$ quarterly.

c$.$ monthly.

d$.$ every time financial statements are prepared.

$4.$ Ron's Hot Rod Shop follows the revenue recognition principle. Ron services a car on July $31.$ The customer picks up the vehicle on August $1$ and mails the payment to Ron on August $5.$ Ron receives the check in the mail on August $6.$ When should Ron show that the revenue was earned?

a$.$ July $31$

b$.$ August $1$

c$.$ August $5$

d$.$ August $6$

$5.$ Unearned revenues are

a$.$ received and recorded as liabilities before they are earned.

b$.$ earned and recorded as liabilities before they are received.

c$.$ earned but not yet received or recorded.

d$.$ earned and already received and recorded.

$6.$ Hercules Company purchased a computer for $$4,800$ on December $1.$ It is estimated that annual depreciation on the computer will be $$960.$ If financial statements are to be prepared on December $31,$ the company should make the following adjusting entry:

a$.$ Debit Depreciation Expense, $$960$; Credit Accumulated Depreciation, $$960.$

b$.$ Debit Depreciation Expense, $$80$; Credit Accumulated Depreciation, $$80.$

c$.$ Debit Depreciation Expense, $$3,840$; Credit Accumulated Depreciation, $$3,840.$

d$.$ Debit Office Equipment, $$4,800$; Credit Accumulated Depreciation, $$4,800.$

$7.$ What is the proper adjusting entry at June $30,$ the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $$15,500,$ and unexpired amounts per analysis of policies of $$4,500?$

a$.$ Debit Insurance Expense, $$4,500$; Credit Prepaid Insurance, $$4,500.$

b$.$ Debit Insurance Expense, $$15,500$; Credit Prepaid Insurance, $$15,500.$

c$.$ Debit Prepaid Insurance, $$11,000$; Credit Insurance Expense, $$11,000.$

d$.$ Debit Insurance Expense, $$11,000$; Credit Prepaid Insurance, $$11,000.$

$8.$ The balance in the Prepaid Rent account before adjustment at the end of the year is $$15,000,$ which represents three months$$ rent paid on December$1.$ The adjusting entry required on December $31$ is to

a$.$ debit Rent Expense, $$5,000$; credit Prepaid Rent, $$5,000.$

b$.$ debit Rent Expense, $$10,000$; credit Prepaid Rent $$10,000.$

c$.$ debit Prepaid Rent, $$5,000$; credit Rent Expense, $$5,000.$

d$.$ debit Prepaid Rent, $$10,000$; credit Rent Expense, $$10,000.$

$9.$ The difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the

a$.$ market value of the asset.

b$.$ blue book value of the asset.

c$.$ book value of the asset.

d$.$ depreciated difference of the asset.

$10.$ The Sales Returns and Allowances account is classified as a$($n$)$

a$.$ asset account.

b$.$ contra asset account.

c$.$ expense account.

d$.$ contra revenue account.

$11.$ When goods are returned that relate to a prior cash sale,

a$.$ the Sales Returns and Allowances account should not be used.

b$.$ the cash account will be credited.

c$.$ Sales Returns and Allowances will be credited.

d$.$ Accounts Receivable will be credited.

$12.$ A company shows the following balances:

Sales $$1,000,000$

Sales Returns and Allowances $180,000$

Sales Discounts $20,000$

Cost of Goods Sold $560,000$

What is the gross profit percentage?

a$.56\%$

b$.70\%$

c$.44\%$

d$.30\%$

$13.$ During $2010,$ Yoder Enterprises generated revenues of $$60,000.$ The company$$s expenses were as follows: cost of goods sold of $$30,000,$ operating expenses of $$12,000$ and a loss on the sale of equipment of $$2,000.$

Yoder$$s gross profit is

a$.$ $$60,000.$

b$.$ $$30,000.$

c$.$ $$18,000.$

d$.$ $$16,000.$

$14.$ At January $1,2010,$ LeAnna Industries reported owner$$s equity of $$130,000.$ During $2010,$ LeAnna had a net loss of $$30,000$ and owner drawings of $$20,000.$ At December $31,2010,$ the amount of owner$$s equity is

a$.$ $$130,000.$

b$.$ $$140,000.$

c$.$ $$100,000.$

d$.$ $$80,000.$

$15.$ The usual sequence of steps in the transaction recording process is:

a$.$ journal $$ analyze $$ ledger.

b$.$ analyze $$ journal $$ ledger.

c$.$ journal $$ ledger $$ analyze.

d$.$ ledger $$ journal $$ analyze.

Stahl Consulting started the year with total assets of $$20,000$ and total liabilities of $$5,000.$ During the year, the business recorded $$16,000$ in catering revenues and $$8,000$ in expenses. Stahl made an additional investment of $$3,000$ and withdrew cash of $$5,000$ during the year.

$16.$ The owner$$s equity at the end of the year was

a$.$ $$21,000.$

b$.$ $$18,000.$

c$.$ $$8,000.$

d$.$ $$2,0$