MULTIPLE CHOICE

1. (CH 1) Accountants refer to an economic event as a

a. purchase.

b. sale.

c. transaction.

d. change in ownership.

2. (CH 2) The normal balance of any account is the

a. left side.

b. right side.

c. side which increases that account.

d. side which decreases that account.

3. (CH 3) Bee-In-The-Bonnet Company purchased office supplies costing $6,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,400 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be

a. Debit Office Supplies Expense, $2,400; Credit Office Supplies, $2,400.

b. Debit Office Supplies, $3,600; Credit Office Supplies Expense, $3,600.

c. Debit Office Supplies Expense, $3,600; Credit Office Supplies, $3,600.

d. Debit Office Supplies, $2,400; Credit Office Supplies Expense, $2,400.

4. (CH 4) Closing entries are made

a. in order to terminate the business as an operating entity.

b. so that all assets, liabilities, and owner's capital accounts will have zero balances when the next accounting period starts.

c. in order to transfer net income (or loss) and owner's drawing to the owner's capital account.

d. so that financial statements can be prepared.

5. (CH 5) Under a perpetual inventory system, acquisition of merchandise for resale is debited to the

a. Merchandise Inventory account.

b. Purchases account.

c. Supplies account.

d. Cost of Goods Sold account.

6. (CH 6) Kershaw Bookstore had 500 units on hand at January 1, costing $18 each. Purchases and sales during the month of January were as follows:

Date Purchases Sales

Jan. 14 375 @ $28

17 250 @ $20

25 250 @ $22

29 250 @ $32

Kershaw does not maintain perpetual inventory records. According to a physical count, 375 units were on hand at January 31.

The cost of the inventory at January 31, under the FIFO method is:

a. $1,000.

b. $6,750.

c. $7,750.

d. $8,000.

7. (CH 7) If a transaction cannot be recorded in a special journal

a. the company must refuse to enter into the transaction.

b. it is recorded in the general journal.

c. it is recorded directly in the accounts in the general ledger.

d. it is recorded as an adjustment on the work sheet.

8. (CH 8) The cash account shows a balance of $90,000 before reconciliation. The bank statement does not include a deposit of $4,600 made on the last day of the month. The bank statement shows a collection by the bank of $1,880 and a customers check for $640 was returned because it was NSF. A customers check for $790 was recorded on the books as $970, and a check written for $159 was recorded as $195. The correct balance in the cash account was

a. $91,024.

b. $91,096.

c. $91,456.

d. $95,696.

9. (CH 9) Three accounting issues associated with accounts receivable are

a. depreciating, returns, and valuing.

b. depreciating, valuing, and collecting.

c. recognizing, valuing, and disposing.

d. accrual, bad debts, and disposing.

10. (CH 10) A company purchased factory equipment for $250,000. It is estimated that the equipment will have a $25,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be

a. $100,000.

b. $60,000.

c. $90,000.

d. $43,200.

11. (CH 11) The entry to record the payment of an interest-bearing note at maturity after all interest expense has been recognized is

a. Notes Payable

Interest Payable

Cash

b. Notes Payable

Interest Expense

Cash

c. Notes Payable

Cash

d. Notes Payable

Cash

Interest Payable

12. (CH 12) Partners Acer and Barr have capital balances in a partnership of $40,000 and $60,000, respectively. They agree to share profits and losses as follows:

Acer Barr

As salaries $10,000 $12,000

As interest on capital at the beginning of the year 10% 10%

Remaining profits or losses 50% 50%

If income for the year was $50,000, what will be the distribution of income to Barr?

a. $23,000

b. $27,000

c. $20,000

d. $10,000