Question
Question 1 The Sales Returns and Allowances A. on the income statement as an addition to Sales. B. on the income statement as a deduction
Question 1
The Sales Returns and Allowances
A. | on the income statement as an addition to Sales. |
B. | on the income statement as a deduction from Sales. |
C. | on the balance sheet as a deduction from Capital. |
D. | account is presented on the balance sheet as a deduction from Accounts Receivable. |
Question 2
If a firm had sales of $50,000 during a period and sales returns and allowances of $4,000, its net sales were
A. | $46,000 |
B. | $50,000 |
C. | $4,000 |
D. | $54,000 |
Question 3
The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes:
A. | a debit to Return Expense and a credit to Accounts Receivable. |
B. | a debit to Sales Returns and Allowances and a credit to Accounts Receivable. |
C. | a debit to Sales and a credit to Sales Returns and Allowances. |
D. | debit to Accounts Receivable and a credit to Sales Returns and Allowances. |
Question 4
With the accrual basis of accounting, it is appropriate to recognize revenue from a credit sale
A. | on the date the account is collected in full. |
B. | each time a payment on an account balance is received. |
C. | on the date of the sale. |
D. | either on the date of the sale or when the amount of the sale is collected. |
Question 5
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An age analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
A. | $800. |
B. | $1,200 |
C. | $1,000. |
D. | $200 |
Question 6
When the allowance method of recognizing losses from uncollectible accounts is used, the entry to record the write-off ofa specific account consists of
A. | a debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable. |
B. | a debit to Uncollectible Accounts Expense and a credit to Accounts Receivable. |
C. | a debit to Accounts Receivable and a credit to Allowance for Doubtful Accounts. |
D. | a debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts. |
Question 7
A firm reported sales of $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectible accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for
A. | $1,500 |
B. | $3,000. |
C. | $1,200 |
D. | $1,800. |
Question 8
When a firm uses the allowance method to provide for losses, the collecting of an account previously written off as uncollectible requires an entry
A. | to increase the balance of the Sales account. |
B. | to reinstate the account receivable. |
C. | to reduce the balance of Uncollectible Accounts Expense. |
D. | to decrease the balance of the Allowance for Doubtful Accounts. |
Question 9
On December 31, prior to adjustments, the balance of Accounts Receivable is $16,000 and allowance for Doubtful Accounts has a credit balance of $95. The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
A. | $895. |
B. | $800. |
C. | $95. |
D. | $705. |
Question 10
The adjusting entry to record accrued interest on a note receivable requires
A. | a debit to Interest Income and a credit to Notes Receivable. |
B. | a debit to Interest Revenue and a credit to Interest Receivable. |
C. | a debit to Interest Revenue and a credit to Cash. |
D. | a debit to Interest Receivable and a credit to Interest Revenue. |
Question 11
When a company issues a promissory note, the accountant records an entry that includes a credit to Note Receivable for
A. | the maturity value of the note. |
B. | the face value less the interest that will accrue. |
C. | the face value of the note. |
D. | the face value of the note plus the interest that will accrue. |
Question 12
How much interest will accrue on a $20,000 face value, 60-day note that bears interest at 9 percent a year (based on a 360 day year)?
A. | $900 |
B. | $300 |
C. | $450. |
D. | $1,800 |
Question 13
Notes payable which are to be satisfied with current assets and are due within one year are usually shown
A. | in the Other Expenses section of the income statement. |
B. | in the Current Liabilities section of the balance sheet, |
C. | in the Long-Term Liabilities section of the balance sheet. |
D. | in the Current Assets section of the balance sheet. |
Question 14
Upon collection of the amount due on a $6,000 face value, 90-day note with interest at 10 percent a year, the Note Receivable account is
A. | credited for $6,000. |
B. | credited for $6,150. |
C. | debited for $6,600. |
D. | debited for $6,000. |
QuesTion 15
The balance sheet shows
A. | the amount of net income or loss. |
B. | the financial position of a business at a given time. |
C. | the results of business operations. |
D. | all revenues and expenses. |
Question 16
Amounts that a business must pay in the future are known as
A. | stock. |
B. | accounts receivable. |
C. | accounts payable. |
D. | expenses. |
Question 17
Examples of assets are
A. | cash and accounts receivable. |
B. | investments by the owner and revenue. |
C. | cash and revenue. |
D. | cash and rent expense. |
Question 18
A net loss results
A. | when expenses are greater than assets. |
B. | when expenses are greater than revenue. |
C. | when assets are greater than liabilities. |
D. | when revenue is greater than expenses. |
Question 19
The income statement shows
A. | revenue and stockholders equity. |
B. | the total value of the business. |
C. | the results of operations for a period of time. |
D. | the financial position of a business on a specific date. |
Question 20
If liabilities are $4,000 and stockholders equity is $15,000, assets are
A. | $19,000. |
B. | 15,000. |
C. | $4,000. |
D. | $9,000. |
Question 21
Assets and liabilities are reported on
A. | the statement of stockholders equity. |
B. | the balance sheet. |
C. | both the balance sheet and the income statement. |
D. | the income statement. |
Question 22
The rent paid for future months is a (n)
A. | revenue. |
B. | expense. |
C. | liability. |
D. | asset. |
Question 23
Credits are used to record
A. | increases in liabilities and stockholders equity. |
B. | decreases in assets, liabilities, and stockholders equity. |
C. | decreases in liabilities and increases in assets and stockholders equity. |
D. | decreases in assets and stockholders equity and increases in liabilities. |
Question 24
Debits are used to record increases in
A. | revenue and stockholders equity. |
B. | assets and revenue. |
C. | assets and expenses. |
D. | assets and liabilities. |
QUestion 25
A firm paid cash to apply against a debt. To record this transaction, the accountant would
A. | debit Cash and credit Accounts Payable. |
B. | debit Accounts Receivable and credit Cash. |
C. | Debit Cash and credit Accounts Receivable. |
D. | debit Accounts Payable and credit Cash. |
Question 26
When charge customers pay cash to apply against their accounts, the amount is recorded
A. | on the debit side of the Accounts Payable account and the credit side of the Cash account. |
B. | on the debit side of the Accounts Receivable account and the credit side of the Cash account. |
C. | on the debit side of the Cash account and the credit side of the Fees Income account. |
D. | on the debit side of the Cash account and the credit side of the Accounts Receivable account. |
Question 27
The account used to record increases in stockholders equity from the sale of goods or services is
A. | the Cash account. |
B. | the stock account. |
C. | the revenue account. |
D. | the dividends account. |
Question 28
Which of the following types of accounts normally have debit balances?
A. | expenses and assets. |
B. | assets, liabilities, and stockholders equity. |
C. | liabilities and Stockholders equity. |
D. | assets and revenue. |
Question 29
Which of the following groups contain only accounts that normally have credit balances?
A. | accounts payable and equipment. |
B. | salaries expense and accounts payable. |
C. | accounts receivable and fees income. |
D. | fees income and stock. |
Question 30
The journal entry to record the sale of services on credit should include
A. | debit to Accounts Receivable and a credit to Stock. |
B. | a debit to Accounts Receivable and a credit to Fees Income. |
C. | a debit to Fees Income and a credit to Accounts Receivable. |
D. | a debit to Cash and a credit to Accounts Receivable. |
Question 31
The journal entry to record the purchase of equipment for a $100 cash down payment and abalance of $400 due in 30 days would include
A. | a debit to Equipment for $100 and a credit to Cash for $100. |
B. | a debit to Equipment for $500, a credit to Cash for $100, and a credit to Accounts Payable for $400. |
C. | a debit to Equipment for $100 and a credit to Accounts Payable for $400. |
D. | debit to Equipment for $500 and a credit to Cash for $500. |
Question 32
The journal entry to record the payment of the current month utility bill would include
A. | a debit to Utilities Expense and a credit to Stock. |
B. | a debit to Utilities Expense and a credit to Cash. |
C. | a debit to Utilities Expense and a credit to Accounts Payable. |
D. | a debit to stockholders equity and a credit to Cash. |
Question 33
The journal entry to record the payment of dividends for the month is:
A. | a debit to dividends and a credit to common stock. |
B. | a debit to Common Stock and a credit to Cash. |
C. | a debit to cash and a credit to dividends. |
D. | a debit to dividends and a credit to Cash. |
Question 34
The journal entry to record the payment of salaries should include
A. | a debit to Cash and a credit to Salaries Expense. |
B. | a debit to Salaries Expense and a credit to Accounts Payable. |
C. | a debit to Stock and a credit to Cash. |
D. | debit to Salaries Expense and a credit to Cash. |
Question 35
On a balance sheet, Accumulated DepreciationEquipment is reported
A. | as a deduction from the cost of the equipment. |
B. | as a deduction from the total of the assets. |
C. | as an expense. |
D. | as a liability. |
Question 36
If the prepaid expenses are not adjusted, assets on the balance sheet
A. | may be either overstated or understated. |
B. | will not be affected. |
C. | will be understated. |
D. | will be overstated. |
Question 37
If long-term assets are not adjusted, expenses on the income statement
A. | will be overstated. |
B. | will not be affected. |
C. | may be either overstated or understated. |
D. | will be understated. |
Question 38
The entry to replenish a petty cash fund includes
A. | debits to various expense accounts and a credit to Petty Cash Fund. |
B. | debits to various expense accounts and a credit to Cash. |
C. | a debit to Cash and a credit to Petty Cash. |
D. | a debit to Petty Cash Fund and a credit to Cash. |
Question 39
On May 1, 20--, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense associated with this policy for 20is
A. | $600. |
B. | $1,200. |
C. | $1,800. |
D. | $1,050. |
Question 40
To arrive at an accurate balance on a bank reconciliation statement, outstanding checks should be
A. | deducted from the bank statement balance. |
B. | deducted from the book balance. |
C. | added to the bank statement balance. |
D. | added to the book balance. |
Question 41
A firm appropriately wrote a check for $78 but entered the amount as payment of $87. On a bank reconciliation statement this error would be shown as
A. | a deduction of $9 from the bank statement balance. |
B. | deduction of $9 from the book balance. |
C. | an addition of $9 to the book balance. |
D. | an addition of $9 to the bank statement balance. |
Question 42
The entry to record a purchase of merchandise on credit using a perpetual inventory system Includes
A. | a credit to Merchandise Inventory and a debit to Accounts Payable. |
B. | a debit to Accounts Payable and a credit to Purchases. |
C. | a debit to Merchandise Inventory and a credit to Accounts Payable. |
D. | a debit to Purchases (COGS) and a credit to Accounts Payable. |
Question 43
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $28,000. Early in the year, 10,000 units were purchased at $9 each. Using FIFO, what is the value of the ending inventory of 3,000 units?
A. | $36,000 |
B. | $21,000 |
C. | $27,000 |
D. | $24,000 |
Question 44
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000 Early in the year, 8,000 units were purchased at $6 each. Using LIFO, what is the value of the ending inventory of 2,000 units?
A. | $24,000 |
B. | $8,000 |
C. | $10,000 |
D. | $12,000 |
Question 45
Which of the following is allowed under generally accepted accounting principles?
A. | A company was offered $60,000 for land that it had purchased for $15,000. The company did not sell the land but increased the Land account to $60,000. |
B. | The Equipment ledger account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000. |
C. | A large company recorded the $20 cost of a tool as an expense, although the item is expected to be used for 3 years. |
D. | An owner lists the full cost of his or her personal automobile, which is occasionally used for business purposes, on the company's balance sheet. |
Question 46
An accountant who records revenue when a credit sale is made rather than waiting for the receipt of cash from the customer is
A. | following the consistency principle. |
B. | following the conservatism convention. |
C. | violating generally accepted accounting principles. |
D. | following the accrual principle. |
Question 47
The FASB has concluded that financial reporting rules should
A. | concentrate on providing helpful information to management. |
B. | help companies minimize the taxes they must pay. |
C. | be in compliance with income tax law. |
D. | concentrate on providing helpful information to present and potential investors and creditors. |
Question 48
Keeping the personal assets of the owner of a business separate from the assets of the firm is an example of
A. | applying the realization principle. |
B. | following the separate entity assumption. |
C. | applying the conservatism convention. |
D. | following the going concern assumption. |
Question 49
Internal control is:
A. | The reconciliation of the banks cash balance to the books cash balance. |
B. | The process that helps a business achieve its objectives such as operating efficiently and effectively. |
C. | The act of stealing a business' assets. |
D. | The preparation of fraudulent financial statements. |
Question 50
Separation of duties refers to separating all of these functions except which of the following?
A. | Keeping accounting records |
B. | Authorizing transactions |
C. | Maintaining custody of assets |
D. | Hiring personnel |
Question 51
Which of the following is not a control activity?
A. | Mandatory vacations |
B. | Proper authorization |
C. | Security measures |
D. | Risk assessment |
Question 61
Which of the following is NOT a factor in the fraud triangle?
A. | Perceived Risk |
B. | Perceived Pressure |
C. | Perceived opportunity |
D. | Rationalization |
Question 62
A company may be limited in their internal control procedures because the cost of hiring enough people to implement the procedures:
A. | has nothing to do with the effectiveness of the internal control system. |
B. | outweighs the benefits of the system. |
C. | can limit employee distractions. |
D. | can prevent collusion. |
Question 63
Which element of internal control deals with establishing procedures for things such as handling of incoming checks?
A. | Control environment |
B. | Monitoring |
C. | Risk assessment |
D. | Control activities |
Question 64
Which element of internal control deals with identifying weaknesses of the internal control system?
A. | Control environment |
B. | Risk assessment |
C. | Information and communication |
D. | Monitoring |
Question 65
To arrive at an accurate balance on the bank reconciliation statement, deposits in transit should be:
A. | Added to the bank statement balance |
B. | Added to the book balance |
C. | Deducted from the book balance |
D. | Deducted from the bank statement balance |
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