Part A Choice Questions

1.A building is offered for sale at $500,000 but is currently assessed at $400,000. The purchaser of the building believes the building is worth $475,000, but ultimately purchases the building for $450,000.The purchaser records the building at: (2)

a. $50,000

b. $400,000

c. $450,000

d. $475,000

e. $500,000

2. Brunswick borrows $50,000 cash from Third National Bank. How does this transaction affect the accounting equation for Brunswick? (2)

a. Assets increase by $50,000; liabilities increase by $50,000; no effect on equity.

b. Assets increase by $50,000; no effect on liabilities; equityincreases by $50,000.

c. Assets increase by $50,000; liabilities decrease by $50,000; no effect on equity.

d. No effect on assets; liabilities increase by $50,000; equity increases by $50,000.

e. No effect on assets; liabilities increase by $50,000; equity decreases by $50,000.

3. Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization's business activities. Classify the following activities as part of the identifying (I), recording (R), or communicating (C) aspects of accounting.

1. Analyzing and interpreting reports. (1)

2. Presenting financial information. (1)

3. Maintaining a log of service costs. (1)

4. Measuring the costs of a product. (1)

5.Preparing financial statements. (1)

6.Establishing revenues generated from a product. (1)

7. Determining employee tasks behind a service. (1)

4. malia Company received its utility bill for the current period of $700 and immediately paid it. Its journal entry to record this transaction includes a (2)

a. Credit to Utility Expense for $700.

b. Debit to Utility Expense for $700.

c. Debit to Accounts Payable for $700.

d. Debit to Cash for $700.

e. Credit to capital for $700.

5. Enter the number for the item that best completes each of the descriptions below.

1.Asset 2.Equity 3.Account 4.Liability 5.Three

a. An is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. (1)

b. Accounts payable, unearned revenue, and note payable are examples of accounts. (1)

c. Accounts receivable, prepaid accounts, supplies, and land are examples of accounts. (1)

d. Accounts are arranged into general categories. (1)

e. Owner, capital and owner, withdrawals are examples of accounts. (1)

6. A company forgot to record accrued and unpaid employee wages of $350,000 at period-end. This oversight would (2)

a. Understate net income by $350,000.

b. Overstate net income by $350,000.

c. Have no effect on net income.

d. Overstate assets by $350,000.

e. Understate assets by $350,000.

7. On May 1, 2013, a two-year insurance policy was purchasedfor $24,000 with coverage to begin immediately. What is theamount of insurance expense that appears on the company's income statement for the year ended December 31,2013? (2)

a. $4,000

b. $8,000

c. $12,000

d. $20,000

e. $24,000

8. In the blank space beside each adjusting entry, enter the letter of the explanation A through F that mostclosely describes the entry.

A. To record this period's depreciation expense. B. To record accrued salaries expense.

C. To record this period's use of a prepaid expense. D. To record accrued interest revenue.

E. To record accrued interest expense. F. To record the earning of previouslyunearned income.

(1)1. Interest Expense2,208

Interest Payable2,208

(1)2.Insurance Expense3,180

Prepaid Insurance3,180

(1)3.Unearned Professional Fees19,250

Professional Fees Earned19,250

(1)4.Interest Receivable3,300

Interest Revenue3,300

(1)5.Depreciation Expense38,217

Accumulated Depreciation38,217

(1)6.Salaries Expense13,280

Salaries Payable13,280

9. Which of the following errors would cause the balance sheet and statement of owner's equity columns of a work sheet to be out of balance? (2)

a. Entering a revenue amount in the balance sheet and statement of owner's equity debit column.

b. Entering a liability amount in the balance sheet and statement of owner's equity credit column.

c. Entering an expense account in the balance sheet and statement of owner's equity debit column.

d. Entering an asset account in the income statement debit column.

e. Entering a liability amount in the income statement credit column.

10. The temporary account used only in the closing process to hold the amounts of revenues and expenses before the net difference is added or subtracted from the owner's capital account is called the (2)

a. Closing account.

b. Nominal account.

c. Income Summary account.

d. Balance Column account.

e. Contra account.

11. The following are common categories on a classified balance sheet.

A. Current assets B. Long-term investments C. Plant assets

D. Intangible assets E. Current liabilities F. Long-term liabilities

For each of the following items, select the letter that identifies the balance sheet category where the item typically would appear.

(1)1. Land not currently used in operations

(1)2. Notes payable (due in five years)

(1)3. Accounts receivable

(1)4.Trademarks

(1)5. Accounts payable

(1)6. Store equipment

(1)7. Wages payable

(1)8.Cash

12. Enter the letter for each term in the blank space beside the definition that it most closely matches. (2)

A. Sales discount E. FOB shipping point H. Purchase discount

B. Credit period F. Gross profit I. Cash discount

C. Discount period G. Merchandise inventory J. Trade discount

D. FOB destination

Use the following information from Marvel Company for the month of July to answer questions 13 through 16.

July 1 Beginning inventory75 units @ $25 each

July 3 Purchase348 units @ $27 each

July 8 Sale300 units

July 15 Purchase257 units @ $28 each

July 23 Sale275 units

13. Perpetual: Assume that Marvel uses a perpetual FIFO inventory system. What is the dollar value of its ending inventory? (2)

a. $2,940 d. $2,852

b. $2,685 e. $2,705

c. $2,625

14. Perpetual: Assume that Marvel uses a perpetual LIFO inventory system. What is the dollar value of its ending inventory? (2)

a. $2,940 d. $2,852

b. $2,685 e. $2,705

c. $2,625

15. Perpetual: Assume that Marvel uses a perpetual specific identification inventory system. Its ending inventory consists of20 units from beginning inventory, 40 units from the July 3 purchase, and 45 units from the July 15 purchase. What is the dol-lar value of its ending inventory? (2)

a. $2,940 d. $2,852

b. $2,685 e. $2,705

c. $2,625

16. Periodic: Assume that Marvel uses a periodic FIFO inventory system. What is the dollar value of its ending inventory? (2)

a. $2,940 d. $2,852

b. $2,685 e. $2,705

c. $2,625