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