Section 2: Multiple-Choice Questions (25 points)

Question 7 (1 point)

After the bank reconciliation is prepared, the entry to record bank service charges would have a credit to

_______________.

Question 7 options:

Bank Service Charge Expense

Cash

Petty Cash

Cash Short and Over

None of the above

Save

Question 8 (1 point)

Malloy Company estimates uncollectible accounts using the percentage-of-receivables method and

expects that 5 percent of outstanding receivables will be uncollectible for 2015. The balance in Accounts

Receivable is $200,000, and the allowance account has a $3,000 credit balance before adjustment at

year end. The uncollectible accounts expense for 2015 will be _______________.

Question 8 options:

$7,000

$10,000

$13,000

$9,850

None of the above

Save

Question 9 (1 point)

Malloy Company issued its own $10,000, 90-day, non-interest-bearing note to a bank. The only payment

Malloy will ever make to the bank will be for $10,000 at the maturity date of the loan as the bank

discounts the note at 10 percent. The proceeds to Malloy are _______________.

Question 9 options:

$10,000

$9,000

$9,750

$10,250

None of the above

Save

Question 10 (1 point)

Malloy company uses a calendar year. On 2015 July 1, Malloy Company purchased equipment for

$400,000, and installation and testing costs totaled $40,000. The equipment has an estimated useful life

of 10 years and an estimated salvage value of $40,000. If Malloy uses the double-declining-depreciation

method, the depreciation expense for 2015 is _______________.

Question 10 options:

$88,000

$72,000

$36,000

$44,000

$40,000

Save

Question 11 (1 point)

The result of recording a capital expenditure as a revenue expenditure is an _______________.

Question 11 options:

overstatement of current year's expense

understatement of current year's expense

understatement of subsequent year's net income

overstatement of current year's net income

None of the above

Save

Question 12 (1 point)

Cole Inc., a new company, purchases a two-year insurance policy for $12,000. Six months later, the

correct balance in the prepaid insurance account would be _______________.

Question 12 options:

$12,000

$6,000

$9,000

None of the above

Save

Question 13 (1 point)

Which of the following is not an advantage of the corporate form of organization?

Question 13 options:

continuous existence of the entity

limited liability of stockholders

government regulation

easy transfer of ownership

Save

Question 14 (1 point)

Treasury stock should be shown on the balance sheet as a(n) _______________.

Question 14 options:

reduction of the corporation's stockholders' equity

current asset

current liability

investment asset

Save

Question 15 (1 point)

When the stockholders invest cash in the business, what is the effect on the accounting equation?

Question 15 options:

Liabilities increase and stockholders' equity increases.

Both assets and liabilities increase.

Both assets and stockholders' equity increase.

None of the above

Save

Question 16 (1 point)

The ending balance in retained earnings is shown in the _______________.

Question 16 options:

income statement

statement of retained earnings

balance sheet

both (b) and (c)

both (a) and (c)

(a), (b), and (c)

Save

Question 17 (1 point)

A cash dividend of $500 was declared and paid to stockholders simultaneously. The correct journal entry

to record the declaration and payment simultaneously is _______________.

Question 17 options:

debit Capital Stock 500 and credit Cash 500

debit Cash 500 and credit Dividends 500

debit Dividends 500 and credit Cash 500

debit Cash 500 and credit Capital Stock 500

Save

Question 18 (1 point)

If $3,000 has been earned but not yet paid to a company's workers since the last payday within an

accounting period, the necessary adjusting entry at the end of that accounting period would be

_______________.

Question 18 options:

debit an expense and credit a liability

debit an expense and credit an asset

debit a liability and credit an asset

debit a liability and credit an expense

Save

Question 19 (1 point)

The accrual basis of accounting _______________.

Question 19 options:

recognizes revenues only when cash is received

is used by almost all companies

recognizes expenses only when cash is paid out

recognizes revenues when sales are made or services are performed, and recognizes expenses only when

cash is paid out

Save

Question 20 (1 point)

The need for adjusting entries is based on _______________.

Question 20 options:

the matching principle

source documents

the cash basis of accounting

activity that has already been recorded in the proper accounts

Save

Question 21 (1 point)

Which of the following statements is false regarding the closing process?

Question 21 options:

The Dividends account is closed to Income Summary.

The closing of expense accounts results in a debit to Income Summary.

The closing of revenues results in a credit to Income Summary.

The Income Summary account is closed to the Retained Earnings account.

Save

Question 22 (1 point)

Which of the following statements is true regarding the classified balance sheet?

Question 22 options:

Current assets include cash, accounts receivable, and equipment.

Plant, property, and equipment is one category of long-term assets.

Current liabilities include accounts payable, salaries payable, and notes receivable.

Stockholders' equity is subdivided into current and long-term categories.

Save

Question 23 (1 point)

The underlying assumptions of accounting include all the following except _______________.

Question 23 options:

business entity

going concern

matching

money measurement and periodicity

Save

Question 24 (1 point)

Malloy Company began the accounting period with $60,000 of merchandise, and the net cost of

purchases was $240,000. A physical inventory showed $72,000 of merchandise unsold at the end of the

period. The cost of goods sold of Malloy Company for the period is _______________.

Question 24 options:

$300,000

$228,000

$252,000

$168,000

None of the above

Save

Question 25 (1 point)

A classified income statement consists of all of the following major sections except _______________.

Question 25 options:

Operating revenues

Cost of goods sold

Operating expenses

Non-operating revenues and expenses

Current assets

Save

Question 26 (1 point)

A business purchased merchandise for $12,000 on account; terms are 2/10, n/30. If $2,000 of the

merchandise was returned and the remaining amount due was paid within the discount period, the

purchase discount would be _______________.

Question 26 options:

$240

$200

$1,200

$1,000

$3,600

Save

Question 27 (1 point)

Malloy Company began the accounting period with inventory of 3,000 units at $30 each. During the

period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the

use of periodic inventory procedure. The cost of ending inventory using weighted-average is

_______________.

Question 27 options:

$114,750

$157,600

$122,400

$109,650

None of the above

Save

Question 28 (1 point)

Malloy Company began the accounting period with inventory of 3,000 units at $30 each. During the

period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the

use of periodic inventory procedure. The cost of goods sold using weighted-average is

_______________.

Question 28 options:

$147,200

$160,350

$155,250

$114,000

None of the above

Save

Question 29 (1 point)

During a period of rising prices, which inventory method might be expected to give the highest net

income?

Question 29 options:

Weighted-average

FIFO

LIFO

Specific identification

Cannot determine

Save

Question 30 (1 point)

The following information is related to the bank reconciliation of the Acme Company:

Balance per bank

statement

Balance per ledger

Deposits in transit

Outstanding checks

NSF check

Service charges

$1,951.2

0

1,869.60

271.20

427.80

61.20

13.80

The adjusted/correct cash balance is _______________.

Question 30 options:

$1,794.60

$1,719.60

$1,638.00

$1,713.00

$1,876.20

Save

Question 31 (1 point)

In a bank reconciliation, deposits in transit should be _______________.

Question 31 options:

deducted from the balance per books

deducted from the balance per bank statement

added to the balance per ledger

added to the balance per bank statemen