輔仁大學管理學院
會考日期
105 年
11/16（星期三）
106 年
4/26（星期三）
會考時間
必修科目
考試範圍
考試題型
佔分比例
13:30~15:30
企業管理
概論
管理功能：「規劃」
、「組織」
、「領導」
、「控制」
。
開放式問答題，共 4 題。
中英文對照試題。
20%
13:30~15:30
企業管理
概論
管理功能：「規劃」
、「組織」
、「領導」
、「控制」。 開放式問答題，共 4 題。
中英文對照試題。
20%
08:30~10:00
10:30~12:00
106 年
105 學年度 基礎必修課程-各科「會考」日期及注意事項一覽
選擇題，共 20 題。
英文試題。
10%
經濟學
以積分為主要考試範圍，包含對數、指數、多項
式、變數變換法、以及部分積分法等五個部份，
不含三角函數，外加 1 題商管領域之應用題，共
六個部分。
(1)一個母體平均數檢定、(2)一個母體比例數檢
定、(3)兩個母體獨立平均數檢定、(4)兩個母體獨
立比例檢定、(5)配對樣本檢定等五個部份。
部份個體及部份總體範圍，包含課程大綱之 1、2、
5、6、7、8 項，避開總體不同學派部份。
選擇題，共 50 題。
英文試題。
15%
會計學
會計循環、買賣業會計、存貨、現金及內部控制、 選擇題，共 40 題。
應收款項及不動產、廠房及設備。
英文試題。
15%
微積分
統計學
5/20（星期六）
13:30~15:00
15:30~17:00
計算題，共 10 題。
英文試題。
10%
備註：
(1)
(2)
(3)
(4)
(5)
管院基礎必修課程(企概、微積分、統計學、經濟學、會計學)之會考，凡修讀該課程的學生皆須參加。
會考成績於各科學期成績的佔分比例，原則上如上表所述（係由各科基礎課程討論會議決議），學期總成績仍依照各授課老師規範與評定之。
考試教室：最遲將於各會考日期之考前 1 週公告。請詳見管理學院網頁及佈告欄。
會考請假：因故無法出席會考者，須依「輔仁大學學生考試請假規則」辦理請假，方可進行補考；補考成績打 8 折。
請假單及佐證資料，請於考試前交與管理學院-雅英助教（LM210）辦理。(病假或其他不可抗力原因，且有充分證明者，得於考試後三日內辦理。)
管理學院 2016/10/4
CH1
1. Accounting is an information and measurement system that does all of the
following except:
A. Identifies business activities.
B. Records business activities.
C. Communicates business activities.
D. Does not use technology to improve accuracy in reporting
.
D
2. Technology
A. Has replaced accounting.
B. Has not changed the work that accountants do.
C. Has closely linked accounting with consulting, planning, and other financial
services.
D. In accounting has replaced the need for decision makers.
C
3. The area of accounting aimed at serving the decision making needs of internal users
is:
A. Financial accounting.
B. Managerial accounting.
C. External auditing.
D. SEC reporting.
B
4. Ethical behavior requires:
A. That auditors' pay not depend on the success of the client's business.
B. Auditors to invest in businesses they audit.
C. Analysts to report information favorable to their companies.
D. Managers to use accounting information to benefit themselves.
A
5. A corporation:
A. Is a business legally separate from its owners.
B. Is controlled by the IASB.
C. Has shareholders who have unlimited liability for the acts of the corporation.
D. Is the same as a partnership.
A
6. Marian Mosely is the owner of Mosely Accounting Services. Which accounting
principle requires Marian to keep her personal financial information separate from the
financial information of Mosely Accounting Services?
A. Monetary unit assumption.
B. Going-concern assumption.
C. Cost principle.
D. Business entity assumption.
D
7. Which of the following accounting principles prescribes that a company record its
expenses incurred to generate the revenue reported?
A. Going-concern assumption.
B. Matching principle.
C. Cost principle.
D. Business entity assumption.
B
8. Revenue is properly recognized:
A. When the customer's order is received.
B. Only if the transaction creates an account receivable.
C. At the end of the accounting period.
D. Upon completion of the sale or when services have been performed and the
business obtains the right to collect the sales price.
D
9. If a parcel of land that was originally purchased for $85,000 is offered for sale at
$150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as
easily being worth $140,000, and is sold for $137,000, the land account transaction
amount to handle the sale of the land in the seller's books is:
A. $85,000 increase.
B. $85,000 decrease.
C. $137,000 increase.
D. $137,000 decrease.
B
10.
If a parcel of land that was originally purchased for $85,000 is offered for sale at
$150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as
easily being worth $140,000, and is sold for $137,000. What is the effect of the sale
on the accounting equation for the seller?
A. Assets increase $52,000; owner's equity increases $52,000.
B. Assets increase $85,000; owner's equity increases $85,000.
C. Assets increase $137,000; owner's equity increases $137,000.
D. Assets increase $140,000; owner's equity increases $140,000.
A
11.
An example of an operating activity is:
A. Paying wages.
B. Purchasing office equipment.
C. Borrowing money from a bank.
D. Selling shares.
A
12. If equity is $300,000 and liabilities are $192,000, then assets equal:
A.$108,000.
B.$192,000.
C.$300,000.
D.$492,000.
D
13.
Resources that are expected to yield future benefits are:
A. Assets.
B. Revenues.
C. Liabilities.
D. Owner's Equity.
A
14.
If assets are $99,000 and liabilities are $32,000, then equity equals:
A. $32,000.
B. $67,000.
C. $99,000.
D. $131,000.
B
15.
The assets of a company total $700,000; the liabilities, $200,000. What are the
claims of the owners?
A. A. $900,000.
B. B. $700,000.
C. C. $500,000.
D. D. $200,000.
C
16.
Assets created by selling goods and services on credit are:
A. Accounts payable.
B. Accounts receivable.
C. Liabilities.
D. Expenses.
B
17.
If the liabilities of a business increased $75,000 during a period of time and the
owner's equity in the business decreased $30,000 during the same period, the assets of
the business must have:
A. Decreased $105,000.
B. Decreased $45,000.
C. Increased $30,000.
D. Increased $45,000.
D
18. If the assets of a business increased $89,000 during a period of time and its
liabilities increased $67,000 during the same period, equity in the business must have:
A. Increased $22,000.
B. Decreased $22,000.
C. Increased $89,000.
D. Decreased $156,000.
A
19. Reston had income of $150 million and average invested assets of $1,800 million.
Its return on assets is:
A. 8.3%.
B. 83.3%.
C. 12%.
D. 120%.
A
20. Nick's had income of $350 million and average invested assets of $2,000 million.
Its ROA is:
A. 1.8%.
B. 35%.
C. 17.5%.
D. 5.7%.
C
21.
The statement of cash flows reports all of the following except:
A. Cash flows from operating activities.
B. Cash flows from investing activities.
C. Cash flows from financing activities.
D. The net increase or decrease in assets for the period reported.
D
22. The statement of changes in equity:
A. Reports how equity changes at a point in time.
B. Reports how equity changes over a period of time.
C. Reports on cash flows for operating, financing, and investing activities over a
period of time.
D. Reports on cash flows for operating, financing, and investing activities at a point in
time.
B
23. A financial statement providing information that helps users understand a
company's financial status, and which lists the types and amounts of assets, liabilities,
and equity as at a specific date, is called a(n):
A. Balance sheet or statement of financial position.
B. Income statement or statement of profit or loss and other comprehensive income.
C. Statement of cash flows.
D. Statement of changes in equity.
A
24.
Use the following information as at December 31 to determine equity.
Liabilities..........................
Cash..................................
Equipment.........................
Buildings...........................
$141,000
57,000
206,000
175,000
A. $57,000. B. $141,000. C. $297,000. D. $438,000.
C
25. A company's statement of financial position shows: cash $22,000, accounts
receivable $16,000, office equipment $50,000, and accounts payable $17,000. What is
the amount of owner's equity?
A. $17,000.
B. $29,000.
C. $71,000.
D. $88,000.
C
26. Rent expense that is paid with cash appears on which of the following statements?
A. Statement of financial position.
B. Income statement.
C. Statement of changes in equity.
D. Income statement and statement of cash flows.
A
27. Flash has beginning equity of $257,000, net profit of $51,000, withdrawals of
$40,000 and investments by owners of $6,000. Its ending equity is:
A. $223,000.
B. $240,000.
C. $268,000.
D. $274,000.
D
28. Flash had cash inflows from operations $62,500; cash outflows from investing
activities of $47,000; and cash inflows from financing of $25,000. The net change in
cash was:
A. $40,500 increase.
B. $40,500 decrease.
C. $134,500 decrease.
D. $134,000 increase.
A
29.
A company acquires equipment for $75,000 cash. This represents a(n)
A. Operating activity.
B. Investing activity.
C. Financing activity.
D. Revenue activity.
B
30. On June 30 of the current year, the assets and liabilities of Phoenix, Inc. are as follows:
Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000;
Accounts Payable, $9,300. What is the amount of owner's equity as at July 1 of the
current year?
A. $8,300
B. $13,050
C. $20,500
D. $31,100
D
31.If a parcel of land that was originally acquired for $85,000 is offered for sale at
$150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as
easily being worth $140,000, and is sold for $137,000, the land should be recorded in
the purchaser's books at:
A. $95,000. B. $137,000. C. $138,500. D. $140,000.
B
CH2
1. The accounting process begins with:
A. Analysis of business transactions and source documents.
B. Preparing financial statements and other reports.
C. Summarizing the recorded effect of business transactions.
D. Presentation of financial information to decision-makers.
A
2. Source documents:
A. Include the ledger.
B. Are the sources of accounting information.
C. Must be in electronic form.
D. Are based on accounting entries.
B
3. An account used to record the owner's investments in the business is called a(n):
A. Withdrawals account.
B. Capital account.
C. Revenue account.
D. Expense account.
B
4. The account used to record the transfers of assets from a business to its owner is:
A. A revenue account.
B. The owner's withdrawals account.
C. The owner's capital account.
D. An expense account.
B
5. Unearned revenues are:
A. Revenues that have been earned and received in cash.
B. Revenues that have been earned but not yet collected in cash.
C. Liabilities created when a customer pays in advance for products or services before
the revenue is earned.
D. Recorded as an asset in the accounting records.
C
6. Prepaid expenses are:
A. Payments made for products and services that do not ever expire.
B. Classified as liabilities on the statement of financial position.
C. Decreases in equity.
D. Assets that represent prepayments of future expenses.
D
7. A debit:
A. Always increases an account.
B. Is the right-hand side of a T-account.
C. Always decreases an account.
D. Is the left-hand side of a T-account.
D
8. Which of the following statements is incorrect?
A. The normal balance of accounts receivable is a debit.
B. The normal balance of owner's withdrawals is a debit.
C. The normal balance of unearned revenues is a credit.
D. The normal balance of an expense account is a credit.
D
9. A simple account form widely used in accounting as a tool to understand how
debits and credits affect an account balance is called a:
A. Withdrawals account.
B. Capital account.
C. Drawing account.
D. T-accoun.
D
10. Of the following accounts, the one that normally has a credit balance is:
A. Cash.
B. Office Equipment.
C. Wages Payable.
D. Owner, Withdrawals.
C
11.
Double-entry accounting is an accounting system:
A. That records each transaction twice.
B. That records the effects of transactions and other events in at least two accounts
with equal debits and credits.
C. In which each transaction affects and is recorded in two or more accounts but that
could include two debits and no credits.
D. That may only be used if T-accounts are used.
B
12. Management Services, Inc. provides services to clients. On May 1, a client
prepaid Management Services $60,000 for 6-months services in advance.
Management Services' general journal entry to record this transaction will include a
A. Debit to Unearned Management Fees for $60,000.
B. Credit to Management Fees Earned for $60,000.
C. Credit to Cash for $60,000.
D. Credit to Unearned Management Fees for $60,000.
D
13. Wisconsin Rentals purchased office supplies on credit. The general journal entry
made by Wisconsin Rentals will include a:
A. Debit to Accounts Payable.
B. Debit to Accounts Receivable.
C. Credit to Cash.
D. Credit to Accounts Payable.
D
14. A liability created by the receipt of cash from customers in payment for products
or services that have not yet been delivered to the customers is:
A. Recorded as a debit to an unearned revenue account.
B. Recorded as a debit to a prepaid expense account.
C. Recorded as a credit to an unearned revenue account.
D. Recorded as a credit to a prepaid expense account.
C
15. On April 30, Holden Company had an Accounts Receivable balance of $18,000.
During the month of May, total credits to Accounts Receivable were $52,000 from
customer payments. The May 31 Accounts Receivable balance was $13,000. What
was the amount of credit sales during May?
A. $5,000. B. $47,000. C. $52,000. D. $57,000.
B
16. During the month of February, Hoffer Company had cash receipts of $7,500 and
cash disbursements of $8,600. The February 28 cash balance was $1,800. What was
the January 31 beginning cash balance?
A. $700.
B. $1,100.
C. $2,900.
D. $0.
C
17. The following transactions occurred during July:
1. Received $900 cash for services provided to a customer during July.
2. Received $2,200 cash investment from Barbara Hanson, the owner of the business.
3. Received $750 from a customer in partial payment of his account receivable which
arose from sales in June.
4. Provided services to a customer on credit, $375.
5. Borrowed $6,000 from the bank by signing a promissory note.
6. Received $1,250 cash from a customer for services to be rendered next year.
What was the amount of revenue for July?
A. $900.
B. $1,275.
C. $2,525.
D. $3,275.
B
18. At the beginning of January of the current year, Thomas Law Center's ledger
reflected a normal balance of $52,000 for accounts receivable. During January, the
company collected $14,800 from customers on account and provided additional services
to customers on account totaling $12,500. Additionally, during January one customer
paid Thomas $5,000 for services to be provided in the future. At the end of January, the
balance in the accounts receivable account should be:
A. $54,700.
B. $49,700.
C. $2,300.
D. $54,300.
B
18. During the month of March, Cooley Computer Services made purchases on
account totaling $43,500. Also during the month of March, Cooley was paid $8,000 by
a customer for services to be provided in the future and paid $36,900 of cash on its
accounts payable balance. If the balance in the accounts payable account at the
beginning of March was $77,300, what is the balance in accounts payable at the end of
March?
A. $83,900.
B. $91,900.
C. $6,600.
D. $75,900.
A
19. Which of the following is the formula used to calculate the debt ratio?
A. Total Equity/Total Liabilities.
B. Total Liabilities/Total Equity.
C. Total Liabilities/Total Assets.
D. Total Assets/Total Liabilities.
C
20.
Stride Along has total assets of $425 million. Its total liabilities are $110 million.
Its equity is $315 million. Calculate the debt ratio.
A. 38.6%.
B. 13.4%.
C. 34.9%.
D. 25.9%.
D
21. Stride Along has total assets of $385 million. Its total liabilities are $100 million
and its equity is $285 million. Calculate its debt ratio.
A. 35.1%.
B. 26.0%.
C. 38.5%.
D. 28.5%.
B
22. Which of the following statements describing the debt ratio is false?
A. It is of use to both internal and external users of accounting information.
B. A relatively high ratio is always desirable.
C. The dividing line for a high and low ratio varies from industry to industry.
D. Many factors such as a company's age, stability, profitability and cash flow
influence the determination of what would be interpreted as a high versus a low
ratio.
B
23.
At the end of the current year, Norman Company reported total liabilities of
$300,000 and total equity of $100,000. The company's debt ratio on the last year-end
was:
A. 300%.
B. 33.3%
C. 75.0%.
D. $400,000.
C
24. At the beginning of the current year, Taunton Company's total assets were
$248,000 and its total liabilities were $175,000. During the year, the company
reported total revenues of $93,000, total expenses of $76,000 and owner withdrawals
of $5,000. There were no other changes in owner's capital during the year and total
assets at the end of the year were $260,000. Taunton Company's debt ratio at the end
of the current year is:
A. 70.6%.
B. 67.3%.
C. 32.7%.
D. 48.6%.
B
25.
The process of transferring general journal information to the ledger is:
A. Double-entry accounting.
B. Posting.
C. Balancing an account.
D. Journalizing.
B
26. A column in journals and ledger accounts used to cross reference journal and
ledger entries is the:
A. Account balance column.
B. Debit column.
C. Posting reference column.
D. Credit column.
C
27.
The record in which transactions are first recorded is the:
A. Account balance.
B. Ledger.
C. Journal.
D. Trial balance.
C
28.
balance column ledger account is:
A. An account entered on the statement of financial position.
B. An account with debit and credit columns for posting entries and another
column for showing the balance of the account after each entry is posted.
C. Another name for the withdrawals account.
D. An account used to record the transfers of assets from a business to its owner.
B
29.
A general journal is:
A. A ledger in which amounts are posted from a balance column account.
B. Not required if T-accounts are used.
C. A complete record of any transaction and the place from which
transaction amounts are posted to the ledger accounts.
D. Not necessary in electronic accounting systems.
C
30. A record in which the effects of transactions are first recorded and from which
transaction amounts are posted to the ledger is a(n):
A. Account.
B. Trial balance.
C. Journal.
D. T-account.
C
31.
Which of the following statements is true?
A. If the trial balance is in balance, it proves that no errors have been made
in recording and posting transactions.
B. The trial balance is a book of original entry.
C. Another name for the trial balance is the chart of accounts.
D. The trial balance is a list of all accounts from the ledger with their balances at
a point in time.
D
32. While in the process of posting from the journal to the ledger a company
failed to post a $500 debit to the Office Supplies account. The effect of this error
will be that:
A. The Office Supplies account balance will be overstated.
B. The trial balance will not balance.
C. The error will overstate the debits listed in the journal.
D. The total debits in the trial balance will be larger than the total credits.
B
33. A $15 credit to Sales was posted as a $150 credit. By what amount is Sales in
error?
A. $150 understated.
B. $135 overstated.
C. $150 overstated.
D. $15 understated.
B
34. The credit purchase of a delivery truck for $4,700 was posted to Delivery
Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect
would this error have on the trial balance?
A. The total of the Debit column of the trial balance will exceed the total of the
Credit column by $4,700.
B. The total of the Credit column of the trial balance will exceed the total of the
Debit column by $4,700.
C. The total of the Debit column of the trial balance will exceed the total of the
Credit column by $9,400.
D. The total of the Credit column of the trial balance will exceed the total of the
Debit column by $9,400.
C
35. Of the following errors, which one by itself will cause the trial balance to be
out of balance?
A. A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to
Salaries Expense.
B. A $100 cash receipt from a customer in payment of his account posted as a $100
debit to Cash and a $10 credit to Accounts Receivable.
C. A $75 cash receipt from a customer in payment of his account posted as a $75
debit to Cash and a $75 credit to Cash.
D. A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment
and a $50 credit to Cash.
B
36. Of the following errors, which one by itself will cause the trial balance to be
out of balance?
A. A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to
Salaries Expense.
B. A $100 cash receipt from a customer in payment of his account posted as a $100
debit to Cash and a $10 credit to Accounts Receivable.
C. A $75 cash receipt from a customer in payment of his account posted as a $75
debit to Cash and a $75 credit to Cash.
D. A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment
and a $50 credit to Cash.
B
37. A $130 credit to Office Equipment was credited to Fees Earned by mistake.
By what amounts are the accounts under- or overstated as a result of this error?
A. Office Equipment, understated $130; Fees Earned, overstated $130.
B. Office Equipment, understated $260; Fees Earned, overstated $130.
C. Office Equipment, overstated $130; Fees Earned, overstated $130.
D. Office Equipment, overstated $130; Fees Earned, understated $130.
C
38.
All of the following are asset accounts except:
A. Accounts Receivable.
B. Buildings.
C. Supplies expense.
D. Cash.
C
39. Hal Smith opened Smith's Repairs on March 1 of the current year. During
March, the following transactions occurred and were recorded in the company's
books:
1. Smith invested $25,000 cash in the business.
2. Smith contributed $100,000 of equipment to the business.
3. The company paid $2,000 cash to rent office space for the month.
4. The company received $16,000 cash for repair services provided during March.
5. The company paid $6,200 for salaries for the month.
6. The company provided $3,000 of services to customers on account.
7. The company paid cash of $500 for monthly utilities.
8. The company received $3,100 cash in advance of providing repair services to a
customer.
9. Smith withdrew $5,000 for his personal use from the company.
Based on this information, net profit for March would be:
A.$10,300.
B.$13,400.
C. $5,300.
D. $8,400.
A
CH3
1. A broad principle that requires identifying the activities of a business with specific
time periods such as months, quarters, or years is the:
A. Operating cycle of a business.
B. Time period assumption.
C. Going-concern assumption.
D. Matching principle.
B
2. Adjusting entries:
A. Affect only income statement accounts.
B. Affect only statement of financial position accounts.
C. Affect both income statement and statement of financial position accounts.
D. Affect only cash flow statement accounts.
C
3. The main purpose of adjusting entries is to:
A. Record external transactions and events.
B. Record internal transactions and events.
C. Recognize assets purchased during the period.
D. Recognize debts paid during the period.
B
4. The broad principle that requires expenses to be reported in the same period as the
revenues that were earned as a result of the expenses is the:
A. Recognition principle.
B. Cost principle.
C. Cash basis of accounting.
D. Matching principle.
D
5. The system of preparing financial statements based on recognizing revenues when the
cash is received and reporting expenses when the cash is paid is called:
A. Accrual basis accounting.
B. Operating cycle accounting.
C. Cash basis accounting.
D. Revenue recognition accounting.
C
6. The approach to preparing financial statements based on recognizing revenues
when they are earned and matching expenses to those revenues is:
A. Cash basis accounting.
B. The matching principle.
C. The time period assumption.
D. Accrual basis accounting.
D
7. The accrual basis of accounting:
A. Is generally accepted for external reporting because it is more useful than cash
basis for most business decisions.
B. Is flawed because it gives complete information about cash flows.
C. Recognizes revenues when received in cash.
D. Recognizes expenses when paid in cash.
A
8. An adjusting entry could be made for each of the following except:
A. Prepaid expenses.
B. Depreciation.
C. Owner withdrawals.
D. Unearned revenues.
C
9. A company made no adjusting entry for accrued and unpaid employee wages of
$28,000 on December 31. This oversight would:
A. Understate net profit by $28,000.
B. Overstate net profit by $28,000.
C. Have no effect on net profit.
D. Overstate assets by $28,000.
B
10. If a company failed to make the end-of-period adjustment to remove from the
Unearned Management Fees account the amount of management fees that were
earned, this omission would cause:
A. An overstatement of net profit.
B. An overstatement of assets.
C. An overstatement of liabilities.
D. An overstatement of equity.
C
11.
A company had $9,000,000 in net profit for the year. Its net sales were
$13,200,000 for the same period. Calculate its profit margin.
A. 17.5%. B. 28.0%.C. 62.5%.D. 68.2%
D
12. On June 30 Apricot Co. paid $7,500 cash for management services to be
performed over a two-year period. Apricot follows a policy of recording all prepaid
expenses to asset accounts at the time of cash payment. On June 30 Apricot should
record:
A. A credit to an expense for $7,500.
B. A debit to an expense for $7,500.
C. A debit to a prepaid expense for $7,500.
D. A credit to a prepaid expense for $7,500.
C
13.
On June 30 of the current calendar year, Apricot Co. paid $7,500 cash for
management services to be performed over a two-year period. Apricot follows a policy
of recording all prepaid expenses to asset accounts at the time of cash payment. The
adjusting entry on December 31 for Apricot would include:
A. A debit to an expense for $5,625.
B. A debit to a prepaid expense for $5,625.
C. A debit to an expense for $1,875.
D. A debit to a prepaid expense for $1,875.
C
14.
Accrued revenues:
A. At the end of one accounting period often result in cash receipts from customers in
the next period.
B. At the end of one accounting period often result in cash payments in the next
period.
C. Are also called unearned revenues.
D. Are listed on the statement of financial position as liabilities.
A
15. The total amount of depreciation recorded against an asset or group of assets
during the entire time the asset or assets have been owned:
A. Is referred to as depreciation expense.
B. Is referred to as accumulated depreciation.
C. Is shown on the income statement of the final period.
D. Is only recorded when the asset is disposed of.
B
16. The periodic expense created by allocating the cost of plant and equipment to the
periods in which they are used, representing the expense of using the assets, is called:
A. Accumulated depreciation.
B. A contra account.
C. The matching principle.
D. Depreciation expense.
D
17. Prior to recording adjusting entries, the Office Supplies account had a $359 debit
balance. A physical count of the supplies showed $105 of unused supplies available.
The required adjusting entry is:
A. Debit Office Supplies $105 and credit Office Supplies Expense $105.
B. Debit Office Supplies Expense $105 and credit Office Supplies $105.
C. Debit Office Supplies Expense $254 and credit Office Supplies $254.
D. Debit Office Supplies $254 and credit Office Supplies Expense $254.
C
18. If throughout an accounting period the fees for legal services paid in advance by
clients are recorded in an account called Unearned Legal Fees, the end-of-period
adjusting entry to record the portion of those fees that has been earned is:
A. Debit Cash and credit Legal Fees Earned.
B. Debit Cash and credit Unearned Legal Fees.
C. Debit Unearned Legal Fees and credit Legal Fees Earned.
D. Debit Legal Fees Earned and credit Unearned Legal Fees.
C
19. A company had no office supplies available at the beginning of the year. During the
year, the company purchased $250 worth of office supplies. On December 31, $75
worth of office supplies remained. How much should the company report as office
supplies expense for the year?
A. $75. B. $125. C. $175. D. $250.
C
20. On January 1 a company purchased a five-year insurance policy for $1,800 with
coverage starting immediately. If the purchase was recorded in the Prepaid Insurance
account, and the company records adjustments only at year-end, the adjusting entry at
the end of the first year is:
A. Debit Prepaid Insurance, $1,800; credit Cash, $1,800.
B. Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.
C. Debit Prepaid Insurance, $360; credit Insurance Expense, $360.
D. Debit Insurance Expense, $360; credit Prepaid Insurance, $360.
D
21.
Unearned revenue is reported in the financial statements as:
A. A revenue on the statement of financial position.
B. A liability on the statement of financial position.
C. An unearned revenue on the income statement.
D. An asset on the statement of financial position.
B
22. Which of the following does not require an adjusting entry at year-end?
A. Accrued interest on notes payable.
B. Supplies used during the period.
C. Cash invested by owner.
D. Accrued wages.
C
23. On April 30, a three-year insurance policy was purchased for $18,000 with
coverage to begin immediately. What is the amount of insurance expense that would
appear on the company's income statement for the year ended December 31?
A. $500.
B. $4,000.
C. $6,000.
D. $14,000.
B
24. PPW Co. leased a portion of its store to another company for eight months
beginning on October 1, at a monthly rate of $800. This other company paid the entire
$6,400 cash on October 1, which PPW Co. recorded as unearned revenue. The journal entry
made by PPW Co. at year-end on December 31 would include:
A. A debit to Rent Earned for $2,400.
B. A credit to Unearned Rent for $2,400.
C. A debit to Cash for $6,400.
D. A credit to Rent Earned for $2,400.
D
25. Incurred but unpaid expenses that are recorded during the adjusting process with a
debit to an expense and a credit to a liability are:
A. Intangible expenses.
B. Prepaid expenses.
C. Unearned expenses.
D. Accrued expenses.
D
26. A company pays each of its two office employees each Friday at the rate of $100
per day for a five-day week that begins on Monday. If the monthly accounting period
ends on Tuesday and the employees worked on both Monday and Tuesday, the
month-end adjusting entry to record the salaries earned but unpaid is:
A. Debit Unpaid Salaries $600 and credit Salaries Payable $600.
B. Debit Salaries Expense $400 and credit Salaries Payable $400.
C. Debit Salaries Expense $600 and credit Salaries Payable $600.
D. Debit Salaries Payable $400 and credit Salaries Expense $400.
B
27.
A company purchased a new truck at a cost of $42,000 on July 1. The truck is
estimated to have a useful life of 6 years and a residual value of $3,000. The company
uses the straight-line method of depreciation. How much depreciation expense will be
recorded for the truck during the first year ended December 31?
A. $3,250.
B. $3,500.
C. $4,000.
D. $6,500.
A
28.
A company's Office Supplies account shows a beginning balance of $600 and an
ending balance of $400. If office supplies expense for the year is $3,100, what amount
of office supplies was purchased during the period?
A. $2,700.
B. $2,900.
C. $3,300.
D. $3,500.
B
29.
If a company records prepayment of expenses in an asset account, the
adjusting entry would:
A. Result in a debit to an expense and a credit to an asset account.
B. Cause an adjustment to prior expense to be overstated and assets to be understated.
C. Cause an accrued liability account to exist.
D. Result in a debit to a liability and a credit to an asset account.
A
30.
If accrued salaries were recorded on December 31 with a credit to Salaries Payable,
the entry to record payment of these wages on the following January 5 would include:
A. A debit to Cash and a credit to Salaries Payable.
B. A debit to Cash and a credit to Prepaid Salaries.
C. A debit to Salaries Payable and a credit to Cash.
D. A debit to Salaries Payable and a credit to Salaries Expense.
C
31.
The balance in the prepaid insurance account before adjustment at the end of the
year is $4,800, which represents the insurance premiums for four months. The
premiums were paid on November 1. The adjusting entry required on December 31 is:
A. Debit Insurance Expense, $2,400; credit Prepaid Insurance, $2,400.
B. Debit Prepaid Insurance, $2,400; credit Insurance Expense, $2,400.
C. Debit Insurance Expense, $1,200; credit Prepaid Insurance, $1,200.
D. Debit Prepaid Insurance, $1,200; credit Insurance Expense, $1,200.
A
32. On March 31, Phoenix, Inc. paid Melanie Publishing Company $15,480 for a
3-year subscription for five different magazines. The subscriptions started
immediately. What is the adjusting entry that should be recorded by Melanie
Publishing Company on December 31 of the first year if the credit to record the
collection was made to Unearned Fees?
A. Debit Unearned Fees, $15,480; credit Fees Earned, $15,480.
B. Debit Unearned Fees, $5,160; credit Fees Earned, $5,160.
C. Debit Unearned Fees, $11,610; credit Fees Earned, $11,610.
D. Debit Unearned Fees, $3,870; credit Fees Earned, $3,870.
D
33. A company made no adjusting entry for accrued and unpaid employee salaries of
$9,000 on December 31. Which of the following statements is true?
A. It will have no effect on income.
B. It will overstate assets and liabilities by $9,000.
C. It will understate net profit by $9,000.
D. It will understate expenses and overstate net profit by $9,000.
D
34.
A company made no adjusting entry for accrued and unpaid employee salaries of
$9,000 on December 31. The entry to record the adjusting entry should have been:
A. debit Salary Expense, $9,000; credit Cash, $9,000
B. debit Salary Expense, $9,000; credit Fees Earned, $9,000
C. debit Salary Expense, $9,000; credit Prepaid Salary, $9,000
D. debit Salary Expense, $9,000; credit Salaries Payable, $9,000
D
35. A company purchased new computers at a cost of $14,000 on September 30. The
computers are estimated to have a useful life of 4 years and a residual value of $2,000.
The company uses the straight-line method of depreciation. How much depreciation
expense will be recorded for the computers for the first year ended December 31?
A. $250 B. $750 C. $875 D. $1,000
B
36.
The balance in Tee Tax Services' office supplies account on February 1 and
February 28 was $1,200 and $375, respectively. If the office supplies expense for the
month is $1,900, what amount of office supplies was purchased during February?
A. $1,075 B. $1,500 C. $1,525 D. $2,325
A
37. Which of the following statements is incorrect?
A. An income statement reports revenues earned less expenses incurred.
B. An unadjusted trial balance shows the account balances after they have been
revised to reflect the effects of end-of-period adjustments.
C. Interim financial reports can be based on one-month or three-month accounting
periods.
D. The financial year is any 12 consecutive months (or 52 weeks) used by a business
as its annual accounting period.
B
38. A trial balance prepared after adjustments have been recorded is called a(n)
A. Statement of financial position.
B. Adjusted trial balance.
C. Unadjusted trial balance.
D. Classified statement of financial position.
B
39. A trial balance prepared before any adjustments have been recorded is:
A. An adjusted trial balance.
B. Used to prepare financial statements.
C. An unadjusted trial balance.
D. Correct with respect to proper statement of financial position and income statement
amounts.
C
40.
A statement of financial position that places the assets above the liabilities
and equity is called a(n):
A. Report form statement of financial position.
B. Account form statement of financial position.
C. Classified statement of financial position.
D. Unadjusted statement of financial position.
A
CH4
1. Revenues and expenses accounts, which are closed at the end of each accounting
period are:
A. Real accounts.
B. Temporary accounts.
C. Closing accounts.
D. Permanent accounts
B
2. Which of the following statements is incorrect?
A. Permanent accounts is another name for nominal accounts.
B. Temporary accounts carry a zero balance at the beginning of each accounting
period.
C. The Income Summary account is a temporary account.
D. Real accounts remain open as long as the asset, liability, or equity items recorded
in the accounts continue in existence.
A
3. Assets, liabilities, and equity accounts are not closed; these accounts are called:
A. Nominal accounts.
B. Temporary accounts.
C. Permanent accounts.
D. Contra accounts.
C
4. Closing the temporary accounts at the end of each accounting period does all of the
following except:
A. Serves to transfer the effects of these accounts to the owner's capital account on the
statement of financial position.
B. Prepares the withdrawals account for use in the next period.
C. Gives the revenue and expense accounts zero balances.
D. Has no effect on the owner's capital account.
D
5. Journal entries recorded at the end of each accounting period to prepare the revenue,
expense, and withdrawals accounts for the upcoming period and to update the owner's
capital account for the events of the period just finished are referred to as:
A. Adjusting entries.
B. Closing entries.
C. Final entries.
D. Work sheet entries.
B
6. The recurring steps performed each reporting period, starting with analyzing and
recording transactions in the journal and continuing through the post-closing trial
balance, is referred to as the:
A. Accounting period.
B. Operating cycle.
C. Accounting cycle.
D. Closing cycle.
C
7. A classified statement of financial position:
A. Measures a company's ability to pay its bills on time.
B. Organizes assets and liabilities into important subgroups.
C. Presents revenues, expenses, and net profit.
D. Reports operating, investing, and financing activities.
B
8. The assets section of a classified statement of financial position usually includes:
A. Current assets, long-term investments, property, plant and equipment, and
intangible assets.
B. Current assets, long-term assets, revenues, and intangible assets.
C. Current assets, long-term investments, property, plant and equipment, and equity.
D. Current assets, liabilities, property, plant and equipment, and intangible assets.
A
9. A classified statement of financial position differs from an unclassified statement of
financial position in that
A. an unclassified statement of financial position is never used by large companies.
B. a classified statement of financial position normally includes only three subgroups.
C. a classified statement of financial position presents information in a manner that
makes it easier to calculate a company's current ratio.
D. a classified statement of financial position will include more accounts than an
C
10. The current ratio:
A. Is used to measure a company's profitability.
B. Is used to measure the relation between assets and long-term debt.
C. Measures the effect of operating income on profit.
D. Is used to help evaluate a company's ability to pay its debts in the near future.
D
11. The Unadjusted Trial Balance columns of a company's work sheet show the
balance in the Office Supplies account as $750. The Adjustments columns show that
$425 of these supplies were used during the period. The amount shown as Office
Supplies in the Statement of Financial Position columns of the work sheet is:
A. $325 debit.
B. $325 credit.
C. $425 debit.
D. $750 debit.
A
12. A columnar working paper used to prepare a company's unadjusted trial balance,
adjusting entries, adjusted trial balance, and financial statements, and which is an
optional tool in the accounting process is a(n) :
A. Adjusted trial balance.
B. Work sheet.
C. Post-closing trial balance.
D. Unadjusted trial balance.
B
13. Which of the following statements is incorrect?
A. Working papers are useful aids in the accounting process.
B. On the work sheet, the effects of the accounting adjustments are shown on the
account balances.
C. After the work sheet is completed, it can be used to help prepare the financial
statements.
D. On the work sheet, the adjusted amounts are sorted into columns according to
whether the accounts are used in preparing the unadjusted trial balance or the adjusted
trial balance.
D
14. Statements that show the effects of proposed transactions as if the transactions had
already occurred are called:
A. Pro forma statements.
B. Professional statements.
C. Simplified statements.
D. Temporary statements.
A
15. If in preparing a work sheet an adjusted trial balance amount is mistakenly sorted
to the wrong work sheet column. The Statement of Financial Position columns will
balance on completing the work sheet but with the wrong net profit, if the amount
sorted in error is:
A. An expense amount placed in the Statement of Financial Position Credit column.
B. A revenue amount placed in the Statement of Financial Position Debit column.
C. A liability amount placed in the Income Statement Credit column.
D. An asset amount placed in the Statement of Financial Position Credit column.
C
16.
Which of the following errors would cause the Statement of Financial Position
and Statement of Changes in Equity columns of a work sheet to be out of balance?
A. Entering an asset amount in the Income Statement Debit column.
B. Entering a liability amount in the Income Statement Credit column.
C. Entering an expense amount in the Statement of Financial Position and Statement
of Changes in Equity Debit column.
D. Entering a revenue amount in the Statement of Financial Position and Statement of
Changes in Equity Debit column.
D
17.
The Unadjusted Trial Balance columns of a work sheet total $84,000. The
Adjustments columns contain entries for the following:
1. Office supplies used during the period, $1,200.
2. Expiration of prepaid rent, $700.
3. Accrued salaries expense, $500.
4. Depreciation expense, $800.
5. Accrued service fees receivable, $400.
The Adjusted Trial Balance columns total
is:
A. $80,400. B. $84,000. C. $85,700. D. $85,900.
C
18.
The balances in the unadjusted columns of a work sheet will agree with:
A. the balances reflected in the company's financial statements.
B. the balances reflected in the company's unadjusted trial balance.
C. whatever balances management has decided to report.
D. the balances in the company's post-closing trial balance.
B
19.
A company had revenues of $75,000 and expenses of $62,000 for the
accounting period. The owner withdrew $8,000 in cash during the same period.
Which of the following entries could not be a closing entry?
A. Debit Income Summary $13,000; credit Owner's, Capital $13,000.
B. Debit Income Summary $75,000; credit Revenues $75,000.
C. Debit Revenues $75,000; credit Income Summary $75,000.
D. Debit Income Summary $62,000, credit Expenses $62,000.
B
20.
The J. Godfrey, Capital account has a credit balance of $17,000 before
closing entries are made. If total revenues for the period are $55,200, total
expenses are
$39,800, and withdrawals are $9,000, what is the ending balance in the J. Godfrey,
Capital account after all closing entries are made?
A. $8,000. B. $15,400. C. $23,400. D. $17,000.
C
21.
The Income Summary account is used:
A. To adjust and update asset and liability accounts.
B. To close the revenue and expense accounts.
C. To determine the appropriate withdrawal amount.
D. To replace the income statement under certain circumstances.
B
22.
Dina Kader withdrew a total of $35,000 from her business during the
current year. The entry needed to close the withdrawals account is:
A. Debit Income Summary and credit Cash for $35,000.
B. Debit Dina Kader, Withdrawals and credit Cash for $35,000.
C. Debit Income Summary and credit Dina Kader, Withdrawals for $35,000.
D. Debit Dina Kader, Capital and credit Dina Kader, Withdrawals for $35,000.
D
23.
At the beginning of the year, a company's statement of financial position
reported the following balances: Total Assets = $125,000; Total Liabilities =
$75,000; and Owner's Capital = $50,000. During the year, the company
reported revenues of
$46,000 and expenses of $30,000. In addition, owner's withdrawals for the year
totaled $20,000. Assuming no other changes to owner's capital, the balance in
the owner's capital account at the end of the year would be:
A. $66,000. B. $86,000. C. $(4,000). D. $46,000.
D
24.
After preparing and posting the closing entries to close revenues (and
gains) and expenses (and losses), the income summary account has a debit
balance of $33,000. The entry to close the income summary account will
include:
A. a debit of $33,000 to owner withdrawals.
B. a credit of $33,000 to owner withdrawals.
C. a debit of $33,000 to income summary.
D. a debit of $33,000 to owner capital.
D
25.
A trial balance prepared after the closing entries have been journalized
and posted is the:
A. Unadjusted trial balance.
B. Post-closing trial balance.
C. General ledger.
D. Adjusted trial balance.
B
26.
Which of the following statements is true?
A. Owner's capital must be closed each accounting period.
B. A post-closing trial balance should include only permanent accounts.
C. Information on the work sheet can be used in place of preparing financial
statements.
D. By using a work sheet to prepare adjusting entries you need not post these entries
to the ledger accounts.
B
27.
Reversing entries:
A. are necessary when journal entries have been incorrectly recorded.
B. are a required step in the accounting cycle.
C. will often result in abnormal account balances in some accounts.
D. are required only if the company uses accounting software to record journal entries.
C
28.
The purpose of reversing entries is to:
A. simplify the recording of certain journal entries in the future.
B. correct an error made in a previous journal entry.
C. ensure that closing entries have been properly posted to the ledger accounts.
D. make certain that only permanent accounts are carried forward into the next
accounting period.
A
29.
Temporary accounts include all of the following except:
A. Consulting revenue.
B. Withdrawals.
C. Rent expense.
D. Prepaid rent.
D
30.
Permanent accounts include all of the following except:
A. Accumulated Depreciation - Equipment.
B. Prepaid Rent.
C. Unearned Consulting Revenue.
D. Depreciation Expense - Equipment.
D
31.
Which of the following statements regarding presentation of financial
statements under IFRS is not true?
A. Assets can be listed from least liquid to most liquid, where liquid refers to the ease
of converting an asset to cash.
B. Assets can be listed from most liquid to least liquid, where liquid refers to the ease
of converting an asset to cash.
C. Assets must be listed from most liquid to least liquid, where liquid refers to the
ease of converting an asset to cash.
D. Liabilities can be listed from furthest from maturity to nearest to maturity, where
maturity refers to the nearness of paying off the liability.
C
CH5
1. A merchandising company:
A. Earns net profit by buying and selling merchandise.
B. Receives fees only in exchange for services.
C. Earns profit from commissions only.
D. Earns profit from fares only.
A
2. Cost of goods sold:
A. Is another term for merchandise sales.
B. Is the term used for the cost of buying and preparing merchandise for sale.
C. Is another term for revenue.
D. Is also called gross margin.
B
3. A company had sales of $695,000 and cost of goods sold of $278,000. Its gross
margin equals:
A. $(417,000).
B. $695,000.
C. $278,000.
D. $417,000.
D
$695,000 - $278,000 = $417,000
4. A company had sales of $375,000 and its gross profit was $157,500. Its cost of
goods sold equals:
A. $(217,000).
B. $375,000.
C. $157,500.
D. $217,500.
D
$375,000 - $157,500 = $217,500
5. The following statements regarding gross profit are true except:
A. Gross profit is also called gross margin.
B. Gross profit is used to calculate net profit.
C. Gross profit is not calculated on the income statement.
D. Gross profit must cover all other expenses to yield a return for the owner of the
business.
C
6. The following statements regarding merchandise inventory are true except:
A. Merchandise inventory is reported on the statement of financial position as a
current asset.
B. Merchandise inventory refers to products a company owns and intends to sell.
C. Merchandise inventory can include the cost of shipping the goods to the store and
making them ready for sale.
D. Merchandise inventory purchases are not considered part of the operating cycle for
a business.
D
7. The following statements are true regarding the operating cycle of a merchandising
company except:
A. The operating cycle begins with the purchase of merchandise.
B. The operating cycle is shortened by credit sales.
C. The operating cycle ends with the collection of cash from the sale of merchandise.
D. The operating cycle can vary in length among different merchandising companies.
E. The operating cycle sometimes involves accounts receivable.
B
8. Merchandise inventory:
A. Is a long-term asset.
B. Is a current asset.
C. Includes supplies.
D. Is classified with investments on the statement of financial position.
E. Must be sold within one month.
B
9. The operating cycle for a merchandiser that sells only for cash moves from:
A. Purchases of merchandise to inventory to cash sales.
B. Purchases of merchandise to inventory to accounts receivable to cash sales.
C. Inventory to purchases of merchandise to cash sales.
D. Accounts receivable to purchases of merchandise to inventory to cash sales.
A
10. The current period's ending inventory is:
A. The next period's beginning inventory.
B. The current period's cost of goods sold.
C. The prior period's beginning inventory.
D. The current period's beginning inventory.
A
11. Beginning inventory plus net purchases is:
A. Cost of goods sold.
B. Merchandise available for sale.
C. Ending inventory.
D. Sales.
E. Shown on the statement of financial position.
B
12. The quick assets are defined as:
A. Cash, short-term investments, and inventory.
B. Cash, short-term investments, and current receivables.
C. Cash, inventory, and current receivables.
D. Cash, noncurrent receivables, and prepaid expenses.
A
13. ABC Corporation's total quick assets were $5,888,000, its current assets were
$11,700,000 and its current liabilities were $8,000,000. Its acid-test ratio equals:
A. 0.50.
B. 0.68.
C. 0.74.
D. 1.50.
$5,888,000/$8,000,000 = 0.74
C
14. A company's current assets were $17,980, its quick assets were $11,420 and its
current liabilities were $12,190. Its quick ratio equals:
A. 0.94.
B. 1.07.
C. 1.48.
D. 1.57.
$11,420/$12,190 = 0.94
A
15. Using the following year-end information for Breanna Boutique, calculate the
current ratio and acid-test ratio for the boutique:
Cash…………………………………
$ 52,000
Short–term investment……….……
12,000
Accounts Receivable………………...
54,000
Inventory……………………………
325,000
Prepaid expenses……………………..
17,500
Account payable…………………….
106,500
Other current payables………………
25,000
A. 1.8 and 1
B. 1.97 and 1.52
C. 2.73 and 1.52
D. 3.50 and 0.90
Current ratio = $460,500/$131,500 = 3.50
Acid-test ratio = $118,000/$131,500 =
0.90
D
16. The gross margin ratio:
A. Is also called the net profit ratio.
B. Measures a merchandising firm's ability to earn a profit from the sale of inventory.
C. Is also called the profit margin.
D. Is a measure of liquidity.
B
17. A company's gross profit was $83,750 and its net sales were $347,800. Its gross
margin ratio equals:
A. 4.2%.
B. 24.1%.
C. 75.9%.
D. $83,750.
$83,750/$347,800 = 24.1%
B
18. A company's net sales were $676,600, its cost of goods sold was $236,810 and its
net profit was $33,750. Its gross margin ratio equals:
A. 5%.
B. 9.6%.
C. 35%.
D. 65%.
($676,600 - $236,810)/$676,600 = 65%
D
19. A company had net sales and cost of goods sold of $752,000 and $543,000,
respectively. Its net profit was $17,530. The company's gross margin ratio equals:
A. 18.9%
B. 24.5%
C. 27.8%
D. 34.7%
($752,000 - $543,000)/$752,000 = 27.8%
C
20. Peg had net sales of $28,496 million, its cost of goods sold was $19,092 million,
and its net profit was $997 million. Its gross margin ratio equals:
A. 3.5%.
B. 5.2%.
C. 33%.
D. 67%.
($28,496 - $19,092)/$28,496 = 33%
C
21. The credit terms 2/10, n/30 are interpreted as:
A. 2% cash discount if the amount is paid within 10 days, or the balance due in 30
days.
B. 10% cash discount if the amount is paid within 2 days, or the balance due in 30
days.
C. 30% discount if paid within 2 days.
D. 30% discount if paid within 10 days.
A
22. A trade discount is:
A. A term used by a purchaser to describe a cash discount given to customers for
prompt payment.
B. A reduction in price below the list price.
C. A term used by a seller to describe a cash discount granted to customers for prompt
payment.
D. A reduction in price for prompt payment.
B
23. The amount recorded for merchandise inventory includes all of the following
except:
A. Purchase discounts.
B. Returns and allowances.
C. Freight costs paid by the buyer.
D. Freight costs paid by the seller.
D
24. A company uses the perpetual inventory system and recorded the following entry
Accounts Payable................................
2,500
Merchandise Inventory..............
50
Cash...........................................
2.450
This entry reflects a:
A. Purchase of merchandise on credit.
B. Return of merchandise.
C. Sale of merchandise on credit.
D. Payment of the account payable and recognition of a 2% cash discount taken.
D
25. A debit memorandum is:
A. Required whenever a journal entry is recorded.
B. The source document for the purchase of merchandise inventory.
C. Required when a purchase discount is granted.
D. The document a buyer issues to inform the seller of a debit made to the seller's
account in the buyer's records.
E. Not necessary in a perpetual inventory system.
26. A company purchased $1,800 of merchandise on December 5. On December 7, it
returned $200 worth of merchandise. On December 8, it paid the balance in full,
taking a 2% discount. The amount of the cash paid on December 8 equals:
A. $200.
B. $1,564.
C. $1,568.
D. $1,600.
($1,800 - $200) x .98 = $1,568
C
27. A company purchased $4,000 worth of merchandise. Transportation costs were an
additional $350. The company later returned $275 worth of merchandise and paid the
invoice within the 2% cash discount period. The total amount paid for this merchandise
is:
A. $3,725.00.
B. $3,925.00.
C. $3,995.00.
D. $4,000.50.
[($4,000 - $275) x .98] + $350 = $4,000.50
D
28. A buyer failed to take advantage of the vendor's credit terms of 2/15, n/45, but
instead paid the invoice in full at the end of 60 days. By not taking advantage of the
cash discount, the buyer lost the equivalent of
amount of the purchase.
annual interest on the
A. 12.2%
B. 16.2%
C. 18.9%
D. 24.3%
(365/[45-15]) x .02 = 24.3%
D
29. Sales returns:
A. Refer to merchandise that customers return to the seller after the sale.
B. Refer to reductions in the selling price of merchandise sold to customers.
C. Represent cash discounts.
D. Represent trade discounts.
A
30. All of the following statements regarding sales returns and allowances are true
except:
A. Sales returns and allowances can include a reduction is the selling price because of
damaged merchandise.
B. Sales returns and allowances do not reflect the possibility of lost future sales.
C. Sales returns and allowances are recorded in a separate contra-revenue account.
D. Sales returns and allowances are rarely disclosed in published financial statements.
B
31. A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
A. Reflects an increase in amount due from a customer.
B. Recognizes that a customer returned merchandise and/or received an allowance.
C. Requires a debit memorandum to recognize the customer's return.
D. Reflects a decrease in amount due a supplier.
B
32. Sales less sales discounts less sales returns and allowances equals:
A. Net purchases.
B. Cost of goods sold.
C. Net sales.
D. Gross profit.
C
33. Herald Company had sales of $135,000, sales discounts of $2,000, and sales
returns of $3,200. Herald Company's net sales equals:
A. $5,200. B.
$129,800. C.
$133,000.
D.
$135,000.
$135,000 - $2,000 - $3,200 = $129,800
B
34. On October 1, Robinson Company sold merchandise in the amount of $5,800 to
Rosser, with credit terms of 2/10, n/30. The cost of the items sold is $4,000.
Robinson uses the perpetual inventory system. The journal entry or entries that
Robinson will make on October 1 is:
A.
Sales………………………………………….….
5,800
Accounts receivable.........................................
B._
Sales…………………………………………….
5,800
5,800
Accounts receivable........................................
Cost of goods sold...............................................
5,800
4,000
Merchandise Inventory..................................
C.
Accounts receivable.............................................
4,000
5,800
Sales................................................................
D.
Accounts receivable.............................................
Sales..............................................................
5,800
5,800
5,800
Cost of goods sold...............................................
4,000
Merchandise inventory................................
E.
Accounts receivable.............................................
4,000
4,000
Sales..............................................................
4,000
A. Choice A
B. Choice B
C. Choice C
D. Choice D
D
35. On October 1, Whaley Company sold merchandise in the amount of $5,800 to
Lee Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000.
Whaley uses the perpetual inventory system. Lee pays the invoice on October 8, and
takes the appropriate discount. The journal entry that Whaley makes on October 8 is:
A.
Cash......................................................................
5,800
5,800
Accounts receivable....................................
B.
Cash......................................................................
4,000
Accounts receivable......................................
C.
4,000
Cash......................................................................
3,920
Sales discounts.....................................................
80
Accounts receivable....................................
D.
4,000
Cash......................................................................
5,684
Sales discounts.....................................................
116
Accounts receivable....................................
5,800
A. Choice A
B. Choice B
C. Choice C
D. Choice D
$5,800 x .02 = $116
$5,800 - $116 = $5,684
D
36. On October 1, Mutch Company sold merchandise in the amount of $5,800 to
Carr Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000.
Mutch uses the perpetual inventory system. On October 4, Carr returns some of the
merchandise. The selling price of the merchandise is $500 and the cost of the
merchandise returned is $350. The entry or entries that Mutch must make on October
4 is:
A.
Sales returns and allowances.......................
500
Accounts receivable........................
Merchandise inventory................................
500
350
Cost of goods sold...........................
B.
Sales returns and allowances.......................
350
500
Accounts receivable..........................
C.
Accounts receivable....................................
500
500
500
Sales returns and allowances................
D.
Accounts receivable.....................................
500
Sales returns and allowances................
500
Cost of goods sold.......................................
350
Merchandise inventory.....................
350
A. Choice A
B. Choice B
C. Choice C
D. Choice D
A
37. A company records the following journal entry: debit Cash $1,470, debit Sales
Discounts $30, and credit Accounts Receivable $1,500. This means that a customer
has taken a
A. 1%
cash discount for early payment.
B. 2%
C. 5%
D. 15%
$30/$1,500 = 2% discount
B
38. All of the following statements regarding inventory shrinkage are true except:
A. Inventory shrinkage refers to the loss of inventory.
B. Inventory shrinkage is determined by comparing a physical count of inventory with
recorded inventory amounts.
C. Inventory shrinkage is recognized by debiting an interest expense.
D. Inventory shrinkage is recognized by debiting Cost of Goods Sold.
C
39. Which of the following accounts would be closed with a debit?
A. Sales Discounts.
B. Sales Returns and Allowances.
C. Cost of Goods Sold.
D. Sales.
D
40. Expenses that support the overall operations of a business and include the
expenses relating to accounting, human resource management, and financial
management are called:
A. Cost of goods sold.
B. Selling expenses.
C. Purchasing expenses.
D. Administrative expenses.
E. Losses.
D
41. Benson Company had cash sales of $94,275, credit sales of $83,450, sales returns
and allowances of $1,700, and sales discounts of $3,475. Benson's net sales for this
period equal:
A. $94,275.
B. $172,550.
C. $174,250.
D. $176,025.
$94,275 + $83,450 - $1,700 - $3,475 = $172,550
B
42. Expenses of promoting sales by displaying and advertising merchandise, making
sales, and delivering goods to customers are:
A. General and administrative expenses.
B. Cost of goods sold.
C. Selling expenses.
D. Purchasing expenses.
C
43. A company has net sales and cost of goods sold of $752,000 and $543,000,
respectively. Its net profit is $17,530. The company's gross margin and total other
expenses are
and
, respectively.
A. $209,000; $191,470
B. $191,470; $209,000
C. $525,470; $227,000
D. $227,000; $525,470
$752,000 - $543,000 = $209,000; $209,000 - $17,530 = $191,470
A
44. An account used in the periodic inventory system that is not used in the
perpetual inventory system is
A. Merchandise Inventory
B. Sales
C. Accounts Payable
D. Purchases
D
45. When preparing an unadjusted trial balance using a periodic inventory system,
the amount shown for Merchandise Inventory is:
A. The ending inventory amount.
B. The beginning inventory amount.
C. Equal to the cost of goods sold.
D. Equal to the cost of goods purchased.
E. Equal to the gross profit.
B
CH6
1. Damaged and obsolete goods that can be sold:
A. Are never counted as inventory.
B. Are included in inventory at their full cost.
C. Are included in inventory at their net realizable value.
D. Should be disposed of immediately.
C
2. Merchandise inventory includes:
A. All goods owned by a company and held for sale.
B. All goods in transit.
C. All goods on consignment.
D. Only damaged goods.
A
3. Goods in transit are included in a purchaser's inventory:
A. At any time during transit.
B. When the purchaser is responsible for paying freight charges.
C. When the supplier is responsible for freight charges.
D. If the goods are shipped FOB destination.
E. After the half-way point between the buyer and seller.
B
4. Goods on consignment:
A.
Are goods shipped by the owner to the consignee who sells the goods
for the owner.
B. Are reported in the consignee's books as inventory.
C. Are goods shipped to the consignor who sells the goods for the owner.
D.
Are not reported in the consignor's inventory since they do not have
possession of the inventory.
A
5. Regardless of the inventory costing system used, cost of goods available for sale
must be allocated between
A. beginning inventory and net purchases during the period.
B. ending inventory and beginning inventory.
C. net purchases during the period and ending inventory.
D. ending inventory and cost of goods sold.
D
6. On December 31 of the current year, Hewett Company reported an ending inventory
balance of $215,000. The following additional information is also available: Hewett
sold goods costing $38,000 to Trump Enterprises on December 28 and shipped the
goods on that date with shipping terms of FOB shipping point. The goods were not
included in the ending inventory amount of $215,000 because they were not in Hewett's
warehouse.
Hewett purchased goods costing $44,000 on December 29. The goods were shipped
FOB destination and were received by Hewett on January 2 of the following year. The
shipment was a rush order that was supposed to arrive by December 31. These goods
were included in the ending inventory balance of $215,000.
Hewett's ending inventory balance of $215,000 included $15,000 of goods being held
on consignment from Rumsfeld Company. (Hewett Company is the consignee.)
Hewett's ending inventory balance of $215,000 did not include goods costing $95,000
that were shipped to Hewett on December 27 with shipping terms of FOB destination
and were still in transit at year-end.
Based on the above information, the correct balance for ending inventory on
December 31 is:
A. $194,000
B. $209,000
C. $200,000
D. $156,000
D
Start with beginning inventory of $215,000. The information in the first bullet point
was handled correctly, although the explanation for why is incorrect. No adjustment.
For the second bullet point, the $44,000 of goods should not have been included in
ending inventory since the goods were shipped FOB destination. Subtract $44,000.
For the third bullet point, ending inventory should not include goods held on
consignment from another company. Subtract $15,000. The information in the fourth
bullet point was handled correctly.
No adjustment. $215,000 - $44,000 - $15,000 = $156,000.
7. Internal controls that should be applied when a business takes a physical count of
inventory should include all of the following except:
A. Prenumbered inventory tickets.
B. A manager does not confirm that all inventories are ticketed once, and only once.
C. Counters must confirm the validity of inventory existence, amounts, and quality.
D. Second counts by a different counter.
B
8. Physical counts of inventory:
A. Are not necessary under the perpetual system.
B. Are necessary to adjust the Inventory account to the actual inventory available.
C. Must be taken at least once a month.
D. Requires the use of hand-held portable computers.
B
9. During a period of steadily rising costs, the inventory valuation method that yields
the lowest reported net profit is:
A. Average cost method.
B. Weighted-average method.
C. FIFO method.
D. LIFO method.
D
10. The inventory valuation method that tends to smooth out erratic changes in costs
is:
A. FIFO.
B. Weighted average cost.
C. LIFO.
D. Specific identification.
B
11. The inventory valuation method that has the advantages of assigning an amount to
inventory on the statement of financial position that approximates its current cost, and
also mimics the actual flow of goods for most businesses is:
A. FIFO.
B. Weighted average cost.
C. LIFO.
D. Specific identification.
A
12. The inventory valuation method that results in the lowest taxable profit in a period
of inflation is:
A. LIFO method.
B. FIFO method.
C. Weighted-average cost method.
D. Specific identification method.
A
13. The full disclosure principle:
A.
Prescribes that when a change in inventory valuation method is made, the
notes to the statements report the type of change, its justification and its effect on net
profit.
B.
Requires that companies use the same accounting method for inventory
valuation period after period.
C. Is not subject to the materiality principle.
D. Is only applied to retailers.
A
14. Which of the following inventory costing methods will always result in the same
values for ending inventory and cost of goods sold regardless of whether a perpetual
or periodic inventory system is used?
A. FIFO and LIFO
B. LIFO and weighted-average cost
C. Specific identification and FIFO
D. FIFO and weighted-average cost
C
15. If a period-end inventory amount is reported in error, it can cause a misstatement
in all of the following except:
A. Cost of goods sold.
B. Gross profit.
C. Net sales.
D. Current assets.
C
16. An error in the period-end inventory causes an offsetting error in the next period
and therefore:
A. Managers can ignore the error.
B. It is sometimes said to be self-correcting.
C. It affects only income statement accounts.
D. If affects only statement of financial position accounts.
.
B
17. The understatement of the ending inventory balance causes:
A. Cost of goods sold to be overstated and net profit to be understated.
B. Cost of goods sold to be overstated and net profit to be overstated.
C. Cost of goods sold to be understated and net profit to be understated.
D. Cost of goods sold to be understated and net profit to be overstated.
A
18. The understatement of the beginning inventory balance causes:
A. Cost of goods sold to be understated and net profit to be understated.
B. Cost of goods sold to be understated and net profit to be overstated.
C. Cost of goods sold to be overstated and net profit to be overstated.
D. Cost of goods sold to be overstated and net profit to be understated.
B
19. Thelma Company reported cost of goods sold for Year 1 and Year 2 as follows:
Year 1
Year 2
$ 120,000
$ 130,000
Cost of goods purchased
250,000
275,000
Cost of goods available for sale
370,000
405,000
Ending inventory
130,000
135,000
$ 240,000
$ 270,000
Beginning inventory
Cost of goods sold
Thelma Company made two errors: 1) ending inventory at the end of Year 1 was
understated by $15,000 and 2) ending inventory at the end of Year 2 was overstated
by $6,000. Given this information, the correct cost of goods sold figure for Year 2
would be:
A.
$291,000
B.
$276,000
C.
$264,000
D.
$285,000
A
If ending inventory for Year 1 was reported at $130,000 but was understated by
$15,000, the correct ending inventory figure for Year 1 was $145,000. That amount
becomes the beginning inventory for Year 2. Add to that amount the $275,000 of cost
of goods purchased in Year 2 and you get cost of goods available for sale of $420,000.
Finally, the reported ending inventory figure for Year 2 of $135,000 was overstated
by $6,000. Thus, the correct ending inventory figure for Year 2 was $129,000.
Subtracting ending inventory of $129,000 from cost of goods available for sale of
$420,000 yields cost of goods sold of $291,000.
20. Louise Company reported the following income statement information for Year
1 and Year 2:
Sales
Year 1
Year 2
$410,000
$550,000
Cost of goods sold:
Beginning inventory
$132,000
$144,000
Cost of purchases
273,000
302,000
Cost of goods available for sale
405,000
446,000
Ending inventory
144,000
152,000
Cost of goods sold
261,000
294,000
$149,000
$256,000
Gross profit
The beginning inventory balance for Year 1 is correct. The ending inventory balance
for Year 2 is also correct. However, the ending inventory figure for Year 1 was
overstated by $20,000. Given this information, the correct gross profit figures for
Year 1 and Year 2 would be:
A. $129,000 for Year 1 and $256,000 for Year 2.
B. $281,000 for Year 1 and $274,000 for Year 2.
C. $129,000 for Year 1 and $276,000 for Year 2.
D. $169,000 for Year 1 and $236,000 for Year 2.
C
If ending inventory of $144,000 for Year 1 were overstated by $20,000, the correct
amount of ending inventory was $124,000. As a result, cost of goods sold for Year 1
was not $261,000 as reported, but rather $281,000. Thus, gross profit for Year 1 was
$129,000 (Sales of $410,000 - Cost of Goods Sold of $281,000). The adjusted ending
inventory balance for Year 1 ($124,000) becomes the beginning inventory balance for
Year 2. Adding to that figure the $302,000 of purchases during the year and you get
cost of goods available for sale of $426,000. If we then subtract the $152,000 of
ending inventory for Year 2, we get cost of goods sold in Year 2 of $274,000.
Accordingly, gross profit for Year 2 is $276,000 (Sales of $550,000 - Cost of Goods
Sold of $274,000).
21. An overstatement of ending inventory will cause
A. An overstatement of assets and equity on the statement of financial position.
B. An understatement of assets and equity on the statement of financial position.
C. An overstatement of assets and an understatement of equity on the statement of
financial position.
D. An understatement of assets and an overstatement of equity on the statement of
financial position.
A
22. The inventory turnover ratio:
A. Is used to analyze profitability.
B. Is used to measure solvency.
C. Reveals how many times a company turns over (sells) its merchandise inventory.
D. Validates the acid-test ratio.
C
23. Days' sales in inventory:
A. Is also called days' stock on hand.
B. Focuses on average inventory rather than ending inventory.
C. Is used to measure solvency.
D. Is calculated by dividing cost of goods sold by ending inventory.
A
24. The inventory turnover ratio is calculated as:
A. Cost of goods sold divided by average merchandise inventory.
B. Sales divided by cost of goods sold.
C. Ending inventory divided by cost of goods sold.
D. Cost of goods sold divided by ending inventory.
A
25. Days' sales in inventory is calculated as:
A. Ending inventory divided by cost of goods sold.
B. Cost of goods sold divided by ending inventory.
C. Ending inventory divided by cost of goods sold times 365.
D. Cost of goods sold divided by ending inventory times 365.
C
26. Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million,
and average inventory of $1,965 million. Its inventory turnover equals:
A. 0.21.
B. 4.51.
C. 4.79.
D. 76.1 days.
C
9,421/1,965 = 4.79 times
27. Tops had cost of goods sold of $9,421 million, ending inventory of $2,089 million,
and average inventory turnover of $1,965 million. Its days' sales in inventory equals: A.
0.21.
B. 4.51.
C. 4.79.
D. 80.9 days.
D
2,089/9,421 * 365 = 80.9 days
28. Acceptable methods of assigning specific costs to inventory and cost of
goods sold include all of the following except:
A. LIFO method.
B. FIFO method.
C. Specific identification method.
D. Retail method.
D
29. Management decisions in accounting for inventory cost include all of
the following except:
A. Costing method.
B. Inventory system (perpetual or periodic).
C. Customer demand for inventory.
D. Use of net realizable values or other estimates.
C
30. The inventory valuation method that identifies each item in ending inventory
with a specific purchase and invoice is the:
A. Weighted average cost inventory method.
B. First-in, first-out method.
C. Last-in, first-out method.
D. Specific identification method.
D
31. A company had the following purchases during the current year:
January:
10 units at $120
February:
20 units at $130
May:
15 units at $140
September:
12 units at $150
November:
10 units at $160
On December 31, there were 26 units remaining in ending inventory. These 26 units
consisted of 2 from January, 4 from February, 6 from May, 4 from September, and 10
from November. Using the specific identification method, what is the cost of the
ending inventory?
A. $3,500.
B. $3,800.
C. $3,960.
D. $3,280.
D
32. A company had inventory on November 1 of 5 units at a cost of $20 each. On
November 2, they purchased 10 units at $22 each. On November 6 they purchased 6
units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO
perpetual inventory method, what was the value of the inventory on November 8 after
the sale?
A.
$304
B.
$296
C.
$288
D.
$276
D
Units available = 5 + 10 + 6 = 21 units
Units in inventory = 21 - 8 units = 13 units
Cost of inventory = (5 x $20) + (8 x $22) = $276
33. Axme Corporation uses a weighted-average perpetual inventory system.
August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $14 per unit.
August 29, 12 units were sold.
What was the amount of the cost of goods sold for this sale?
A. $148.00.
B. $150.50.
C. $158.40.
D. $210.00.
C
Average cost = [(10 x $12) + (15 x $14)]/25 units = $13.20/unit
Cost of sale = 12 units x $13.20/unit = $158.40
34. A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it
purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual
inventory method, what is the cost of the 12 units that were sold?
A. $120.
B. $124.
C. $128.
D. $130.
B
(10 units x $10) + (2 x $12) = $124
35. A company has inventory of 15 units at a cost of $12 each on August 1. On August
5, it purchased 10 units at $13 per unit. On August 12 it purchased 20 units at
$14 per unit. On August 15, it sold 30 units. Using the FIFO perpetual inventory
method, what is the value of the inventory at August 12 after the sale?
A. $140.
B. $160.
C. $210.
D. $590.
C
Units available for sale = 15 + 10 + 20 = 45 units
Units in inventory = 45 - 30 = 15 units
Cost of inventory = 15 x $14 each = $210
36. A company had inventory of 5 units at a cost of $20 each on November 1. On
November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at
$25 each. On November 8, it sold 18 units for $54 each. Using the LIFO perpetual
inventory method, what was the cost of the 18 units sold?
A. $395.
B.$410.
C.$450.
D.$510
B
(6 x $25) + (10 x $22) + (2 x $20) = $410
37. A company sells a climbing kit and uses the perpetual inventory system to
account for its merchandise. The beginning balance of the inventory and its
transactions during January were as follows:
January 1:
Beginning balance of 18 units at $13 each
January 12:
Purchased 30 units at $14 each
January 19:
Sold 24 units at $30 selling price each
January 20:
Purchased 24 units at $17 each
January 27:
Sold 27 units at $30 selling price each
If the ending inventory is reported at $276, what inventory method was used?
A. LIFO method.
B. FIFO method.
C. Weighted average cost method.
D. Specific identification method.
A
Purchases
Date
Units
Sales
Unit
Total
Units
cost
Unit
Balance
Total
30
$14
Jan. 27
24
24
$17
$14
Total
cost
$420
Jan. 19
Jan. 20
Unit
cost
Jan. 1
Jan. 12
Units
$336
$408
18
$13
$234
18
$13
$234
30
S14
$420
18
$13
$234
6
$14
$84
18
$13
$234
6
S14
$84
24
$17
$408
24
$17
$408
18
$13
$234
3
$14
$ 42
3
S14
$ 42
21
$276
38. Axme uses a weighted average cost perpetual inventory
system. August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $15 per
unit. August 29, 20 units were sold.
August 31, 14 units were purchased at $16 per unit.
What is the per-unit value of ending inventory on August
31?
A. $12.00.
B. $13.80.
C. $15.42.
D. $16.00.
C
Purchases
Date
Units
Unit cost
Cost of goods sold
Total
Units
Unit
Total
Balance
Units
Unit cost
Total
cost
Aug. 2
10
$12
$120
10
$12.00
$120
Aug. 18
15
$15
$225
25
$13.80 *
$345
5
$13.80
$69
19
$15.42**
$293
Aug. 20
Aug. 31
20
14
S16
$13.80
$276
$224
* $345/25 units = $13.80/unit
**$293/19 units = $15.42/unit
39. Given the following information, determine the cost of the inventory at
June 30 using the LIFO perpetual inventory method.
June 1
Beginning inventory, 15 units at $20 each
June 15
Sale of 6 units for $50 each
June 29
Purchase of 8 units at $25 each
The cost of the ending inventory
is
A. $200.
B.$220.
C.$380.
D.$275
C
Purchases
Date
Units
Unit
Cost of goods sold
Total
Units
cost
June 1
15
$20
Unit
Total
Balance
Units
Unit
cost
cost
$300
June
6
$20
Total
$120
15
$20
$300
9
$20
$180
9
$20
$180
8
$25
$200
15
June
8
$25
$200
29
17
$380
40. In applying the lower of cost and net realizable value (NRV) to inventory
valuation, NRV is defined as:
A. Historical cost.
B. Estimated selling price in the ordinary course of business less the estimated costs
of completion and the estimated costs necessary to make the sale.
C. Current sales price.
D. FIFO.
B
41. Generally accepted accounting principles require that the inventory of a company
be reported at:
A. Selling Price.
B. Historical cost.Lower of cost and net realizable value.
C. Net realizable value.
D. Retail value.
B
42. The application of lower of cost and NRV:
A.
Can be applied item by item or grouping of similar or related items.
B. Is not necessary for high cost items.
C. Is only necessary when FIFO is used.
D. Applies to immaterial items.
A
43. A company normally sells its product for $20 per unit. However, the selling price
has fallen to $15 per unit. This company's current inventory consists of 200 units
purchased at $16 per unit. Net realizable value has now fallen to $13 per unit.
Calculate the value of this company's inventory at the lower of cost and net realizable
value.
A. $2,550.
B. $2,600.
C. $2,700.
D. $3,000.
B
200 units @ $13 per unit = $2,600
44. A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it
purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic
inventory method, what is the cost of the 12 units that were sold?
A.$120.
B.$124.
C.$128.
D.$130
B
(10 units x $10) + (2 x $12) = $124
45. Gotham Company reported a December 31 ending inventory balance of $412,000.
The following additional information is also available:
The ending inventory balance of $412,000 included $72,000 of consigned inventory
for which Gotham was the consignor.
The ending inventory balance of $412,000 included $22,000 of office supplies that
were stored in the warehouse and were to be used by the company's supervisors and
managers during the coming year.
The ending inventory balance of $412,000 did not include goods costing $48,000 that
were purchased by Gotham on December 28 and shipped FOB destination on that date.
Gotham did not receive the goods until January 2 of the following year.
The ending inventory balance of $412,000 included damaged goods at their original
cost of $38,000. The net realizable value of the damaged goods was $10,000.
The ending inventory balance of $412,000 included $43,000 of consigned inventory
for which Gotham was the consignee.
Based on this information, the correct balance for ending inventory on December 31
is:
A. $247,000
B. $341,000
C. $362,000
D. $319,000
D
Start with beginning inventory of $412,000. The information in the first bullet point
was handled correctly since inventory should include consigned goods for which the
subject company is the consignor. No adjustment. With respect to the second bullet
point, inventory should not include office supplies held for use. Subtract $22,000. The
information in the third bullet point was handled correctly since inventory should not
include goods shipped FOB destination that have not yet been received by the buyer.
With respect to the fourth bullet point, damaged goods should not be included in
inventory at their original cost if the net realizable value is materially below cost.
Subtract $28,000 ($38,000 - $10,000). With respect to the fifth bullet point, inventory
should not include the value of consigned inventory for which the subject company is
the consignee. Subtract $43,000. Thus, ending inventory should be $412,000 $22,000 - $28,000 - $43,000 = $319,000.
46. Costs included in the Merchandise Inventory account can include all of the
following except:
A. Invoice price minus any discount.
B. Transportation-in.
C. Storage.
D. Damaged inventory that cannot be sold.
D
CH7
1. All of the following statements regarding accounting information systems are true
except:
A. Accounting information systems collect and process data from transactions and
events.
B. Accounting information systems organize data in useful forms.
C. Accounting information systems do not establish internal control procedures.
D. Accounting information systems are crucial to effective decision making.
C
2. The control principle for accounting information systems requires that the:
A. Benefits from an activity outweigh the costs of the activity.
B. System report useful, understandable, timely, and pertinent information for
effective decision making.
C. System must have internal controls.
D. System adapts to changes in the company, business environment, and needs of
decision makers.
C
3. The flexibility principle of accounting information systems prescribes that the:
A. Benefits from an activity outweigh the costs of the activity.
B. System report useful, understandable, timely, and pertinent information for
effective decision making.
C. System aid managers in controlling and monitoring business activities.
D. System be able to adapt to changes in the company, business environment, and
needs of decision makers.
D
4. The accounting principle that prescribes an accounting information system to report
useful, understandable, timely, and pertinent information for effective
decision-making is the:
A. Control principle.
B. Compatibility principle.
C. Relevance principle.
D. Flexibility principle.
C
5. The basic components of an accounting information system include all of the
following except:
A. Source documents.
B. Warehouses.
C. Information processors.
D. Information storage.
C
6. Source documents:
A. Are input devices.
B. Provide the basic information processed by an accounting system.
C. Cannot be electronic files.
D. Store processed information for future use.
B
7. Input devices include:
A. Bar-code readers.
B. Printers.
C. Software.
D. Ledgers.
E. Information processors.
A
8. Information storage:
A. Eliminates the need for professional judgment.
B. Keeps data in a form accessible to information processors.
C. Provides the basic information processed by an accounting system.
D. Captures information from source documents.
B
9. Output devices include all of the following except:
A. Printers.
B. Monitors.
C. LCD projectors.
D. Bar code readers.
D
10. Information processors:
A. Include information storage.
B. Interpret, transform, and summarize information for use in analysis and reporting.
C. Are components of an accounting system that keep data in accessible form.
D. Are the means to take information out of an accounting system and make it
available to users.
B
11. The special journals of many accounting systems include the:
A. Sales journal.
B. Purchases journal.
C. Cash receipts journal.
D. General Ledger.
D
12. The sales journal is used for recording:
A. Credit purchases.
B. Credit sales.
C. Cash sales.
D. Cash purchases.
B
13. The purchases journal is used for recording:
A. Credit purchases.
B. Credit sales.
C. Cash sales.
D. Cash purchases.
A
14. A log that is used to record and post transactions of a similar type is a:
A. Schedule.
B. Columnar ledger.
C. Special journal.
D. General journal.
C
15. When a company uses special journals, the general journal is used for selected
transactions and events including:
A. Recording adjusting transactions.
B. Posting transactions to special journals.
C. Accumulating debits and credits.
D. Collecting detailed listings of amounts.
A
16. A record that contains all accounts (with amounts) of a company is the:
A. General ledger.
B. General journal.
C. Special journal.
D. Column balance ledger.
A
17. A subsidiary ledger:
A. Includes transactions not covered by special journals.
B. Is a listing of all of the accounts of a business.
C. Is a listing of individual accounts and amounts with a common characteristic.
D. Is also called a general ledger.
C
18. A subsidiary ledger that contains a separate account for each supplier (creditor) to
the company is a(n):
A. Controlling account.
B. Accounts receivable ledger.
C. Accounts payable ledger.
D. General ledger.
C
19. An accounts payable ledger is:
A. A subsidiary ledger that contains an account for each supplier (creditor).
B. A list of the balances of all the accounts in the accounts receivable ledger that is
added to show the total amount of accounts receivable outstanding.
C. A book of original entry that is designed and used for recording only a specific
type of transaction.
D. The ledger that contains the financial statement accounts of a business.
A
20. Assume that a company uses a sales journal, a purchases journal, a cash receipts
journal, a cash disbursements journal, and a general journal. A sales return for credit
on account would be recorded in the:
A. Sales journal.
B. General journal.
C. Cash receipts journal.
D. Accounts receivable ledger.
B
21. An accounts receivable ledger is:
A. A subsidiary ledger that contains an account for each credit customer.
B. A list of the balances of selected accounts in the accounts receivable ledger that is
added to show the total amount of the significant accounts receivable outstanding.
C. A book of original entry that is designed and used for recording only a specified
type of transaction.
D. The ledger that contains the financial statement accounts of a business.
A
22. Subsidiary ledgers do all of the following except:
A. Remove excessive detail from the general ledger.
B. Provide up-to-date information on customer or other specific account balances.
C. Aid in error identification for individual accounts.
D. Eliminate the need for individual postings to the customer or supplier accounts.
D
23. The accounts receivable ledger:
A. Is for storing transaction data for customers.
B. Is for storing transaction data for individual customers.
C. Is for storing transaction data for individual creditors.
D. Is for storing transaction date for creditors.
B
24. Enterprise-resource planning software:
A. Refers to programs that help manage a company's vital operations.
B. Is another name for spreadsheet programs.
C. Uses batch processing of business information.
D. Is substantially declining in use.
A
25. An approach that enters and processes data as soon as source documents are
available is called:
A. Date storage.
B. Batch processing.
C. Online processing.
D. Computer programming
C
26. Which of the following does not apply to enterprise resource planning (ERP)
software:
A. ERP refers to programs that help manage a company's vital operations.
B. ERP can include programs that extend from order taking to manufacturing to
accounting.
C. ERP can speed up business decision making and help reduce costs.
D. ERP cannot be used to share data with customers and suppliers.
D
27. A business segment:
A. Requires only internal reporting.
B. Is a part of a company that is separately identified by its products, services, or
geographic market.
C. Requires special journals.
D. Requires subsidiary ledgers.
B
28. Kala's Latin American segment had revenues of $2,089 million, operating profit
of $1,033 million, and average assets of $1,443 millions. The Latin American
segment return on assets is:
A. 49.4%
B. 69.0%
C. 71.6%
D. 139.7%
C
$1,033/$1,443 = 71.6%
29. The segment return on assets:
A. Can only be determined for international companies.
B. Reflects the profitability of a segment.
C. Is difficult to calculate because companies with traded shares are not required to
report segment information.
D. Is calculated as segment average assets divided by segment operating profit.
B
30. When the sales journal's column for accounts receivable and sales is totaled at the
end of the month, its total is:
A. Debited to Sales and credited to Accounts Receivable.
B. Debited to Accounts Receivable and credited to Cash.
C. Debited to Cash and credited to Accounts Receivable.
D. Debited to Accounts Receivable and credited to Sales.
D
31. A list of all the accounts in the accounts receivable ledger with their balances and
the total is a(n):
A. Schedule of accounts.
B. Controlling account.
C. Schedule of accounts receivable.
D. Subsidiary ledger.
C
32. The Accounts Payable account in the general ledger is:
A. A controlling account for the subsidiary accounts payable ledger.
B. The account that controls the purchases journal.
C. The subsidiary account to the purchases journal.
D. Part of a special journal.
A
33. After posting is completed, there may be an error if:
A. The sum of the customer account balances does not equal the total in the sales
journal.
B. The sum of the accounts receivable ledger does not equal the balance in the Sales
account.
C. The sum of the customer account balances does not equal the general ledger
Accounts Receivable controlling account balance.
D. The balance in the sales journal does not equal the Accounts Receivable account
balance.
C
34. Assume that a company using a purchases journal made an error in totaling the
journal's accounts payable column. The error should be discovered:
A. When the purchases journal is posted to the general ledger.
B. When the sum of the vendor accounts does not equal the balance in the Purchases
journal.
C. When the total of the schedule of accounts payable is compared with the balance of
the Accounts Payable account.
D. When the creditors receive their payments.
C
35. The main difference in the sales journal under the perpetual and periodic
inventory system is:
A. The column to record cost of goods sold and inventory amounts sold that is used
under the perpetual system but not the periodic.
B. The sales tax receivable column that is used under the perpetual system but not the
periodic.
C. The sales tax payable column that is used under the perpetual system but not the
periodic.
D. The accounts receivable column that is used under the perpetual system but not the
periodic.
A
36. The accounting principle that prescribes an accounting information system
conform with a company's activities, personnel, and structure is the:
A. Control principle.
B. Compatibility principle.
C. Relevance principle.
D. Flexibility principle.
B
37. All of the following statements regarding source documents are true except:
A. Source documents provide the basic information processed by an accounting
system.
B. Source documents include bank statements, cash register files, and employee
earnings records.
C. Source documents are insignificant and play a minor role in the reliability of the
information system.
D. Source documents can be paper or electronic files.
C
38. All of the following statements regarding input devices are true except:
A. Input devices capture information from source documents and enable its transfer to
the system's information processing component.
B. Input devices convert data on source documents from written form to a form usable
for the system.
C. Input devices include journal entries.
D. Input devices are always reliable and no controls are needed to verify accuracy of
input.
D
39. For a retailer required to collect sales taxes from customers, all of the following
adaptations would be made to the sales journal except:
A. Column totals would continue to be posted as usual.
B. A Sales Taxes Payable credit column would be added.
C. There would be a separate Accounts Receivable debit column.
D. A Sales Taxes Payable debit column would be added.
D
40. To be sure that total debits and credits in a columnar journal are equal, before
posting we should:
A. Crossfoot.
B. Foot.
C. Journalize.
D. Post.
A
41. A company borrowed $50,000 from a bank by signing a long-term note payable.
Identify the journal the transaction would be recorded in.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
C
42. A company had cash sales of $24,000 (cost is $13,000). Identify the journal the
transaction would be recorded in.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchase journal.
C
43. A company sold merchandise on credit for $5,000 (cost is $2,400). Identify the
journal the transaction would be recorded in.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
B
44. A company purchased $11,200 of merchandise on credit. Identify the journal the
transaction would be recorded in.
A. Cash disbursements journal.
B. Sales journal.
C. Cash receipts journal.
D. Purchases journal.
D
45. A company had average total assets of $982,450 and net profit of $190,700, and
reports various segment information. Segment A had average total assets of $437,800
and segment operating profit of $98,230. Segment B had average assets of $151,200
and segment operating profit of $16,190. Calculate the segment return on assets for
Segment A.
A. 19.4%.
B. 22.4%.
C. 26.1%.
D. 20.2%.
$98,230/$437,800=22.4%
B
46. A company had average total assets of $982,450 and net profit of $190,700, and
reports various segment information. Segment A had average total assets of $437,800
and segment operating profit of $98,230. Segment B had average assets of $151,200
and segment operating profit of $16,190. Calculate the segment return on assets for
Segment B.
A. 19.4%.
B. 22.4%.
C. 26.1%.
D. 10.7%.
$16,190/$151,200=10.7%
D
CH8
1. The principles of internal control include:
A. Establish responsibilities.
B. Maintain minimal records.
C. Use only computerized systems.
D. Bond all employees.
A
2. A properly designed internal control system:
A. Lowers the company's risk of loss.
B. Insures profitable operations.
C. Eliminates the need for an audit.
D. Requires the use of non-computerized systems.
A
3. A company's internal control system:
A. Eliminates the company's risk of loss.
B. Monitors company and employee performance.
C. Eliminates human error.
D. Eliminates the need for audits.
B
4. Cash equivalents:
A. Include savings accounts.
B. Include checking accounts.
C. Are short-term investments sufficiently close to their maturity date that their value
is not sensitive to interest rate changes.
D. Include time deposits.
.
C
5. The following information is available for Holland Company at December 31:
Money market fund balance
Certificate of deposit maturing June 30 of next year
Postdated checks from customers
Cash in bank account
NSF checks from customers returned by bank
$ 2,790
$ 15,000
$ 1,475
$ 22,431
$ 650
Cash in petty cash fund
$ 200
Inventory of postage stamps
U.S. Treasury bill purchased on December 15 and maturing on February 28 of
$ 18
$ 10,000
following year
Based on this information, Holland Company should report Cash and Cash
Equivalents on December 31 of:
A.
$35,421
B.
$50,421
C.
$37,546
D.
$36,246
A
Add $2,790 in money market fund + $22,431 of cash in bank + $200 of cash in petty
cash fund + $10,000 of U.S. Treasury bill with maturity of less than three months on
date of purchase = $35,421.
6. The following information is available for Johnson Manufacturing Company at
June 30:
Cash in bank account
$ 6,455
Inventory of postage stamps
$ 74
Money market fund balance
$ 12,400
Petty cash balance
$ 350
NSF checks from customers returned by bank
$ 867
Postdated checks received from customers
$ 391
Money orders
$ 257
A nine-month certificate of deposit maturing on December
31 of
$ 8,000
Based on this information, Johnson Manufacturing Company should report Cash and
Cash Equivalents on June 30 of:
A.
$15,062
B.
$20,072
C.
$19,205
D.
$19,462
D
Add $6,455 of cash in bank + $12,400 of money market fund, $350 of petty cash
balance + $257 of money orders = $19,462.
7. A check involves three parties:
A. The writer, the cashier, and the bank.
B. The maker, the payee, and the bank.
C. The maker, the manager, and the payee.
D. The bookkeeper, the payee, and the bank.
B
8. A bank statement includes:
A. A list of outstanding checks.
B. A list of petty cash amounts.
C. The beginning and the ending balance of the depositor's account.
D. A listing of deposits in transit.
C
9. Preparing a bank reconciliation on a monthly basis is an example of:
A. Establishing responsibility.
B. Separation of duties.
C. Protecting assets by proving accuracy of cash records.
D. A technological control.
C
10. The number of days' sales uncollected is calculated by:
A. Dividing accounts receivable by net sales.
B. Dividing accounts receivable by net sales and multiplying by 365.
C. Dividing net sales by accounts receivable.
D. Dividing net sales by accounts receivable and multiplying by 365.
B
11. A company had net sales of $31,500 and ending accounts receivable of $2,700 for
the current period. Its days' sales uncollected equals:
A. 11.7 days.
B. 23.3 days.
C. 31.3 days.
D. 42.5 days.
C.
($2,700/$31,500) x 365 = 31.3 days
12. Maxtel had net sales of $4,235 million and ending accounts receivable of $775
million. Its days' sales uncollected equals:
A. 298 days.
B. 66.8 days.
C. 19.4 days.
D. 81.8 days.
B
($775/$4,235) x 365 = 66.8 days
13. The following information is taken from Hogan Company's December 31
statement of financial position:
Cash and cash equivalents
$ 8,419
Accounts receivable
70,422
Merchandise inventories
60,362
Prepaid expenses
4,100
Accounts payable
$ 14,950
Notes payable
Other current liabilities
86,638
9,500
If net credit sales and cost of goods sold for the current year were $612,000 and
$367,200, respectively, the firm's days' sales uncollected for the year is:
A. 60 days
B. 85 days
C. 42 days
D. 154 days
C
($70,422/$612,000) x 365 = 42 days
14. An income statement account that is used to record cash overages and cash
shortages arising from petty cash transactions or from errors in making change is
titled:
A. Cash Lost.
B. Bank Reconciliation.
C. Petty Cash.
D. Cash Over and Short.
D
15. A set of procedures and approvals designed to control cash disbursements and the
acceptance of obligations is referred to as a(n):
A. Internal cash system.
B. Petty cash system.
C. Cash disbursement system.
D. Voucher system.
D
16. The Cash Over and Short account:
A. Is used to record a credit balance in the cash account.
B. Is an income statement account used for recording the income effects of cash
overages and cash shortages from errors in making change and/or from errors in
processing petty cash transactions.
C. Is not necessary in a computerized accounting system.
D. Can never have a debit balance.
B
.
17. At the end of the day, the cash register's record shows $1,250, but the count of
cash in the cash register is $1,245. The correct entry to record the cash sales is
A. Debit Cash $1,245; Credit Sales $1,245.
B. Debit Cash $1,245; debit Cash Over and Short $5; credit Sales $1,250.
C. Debit Cash $1,250; credit Sales $1,250.
D. Debit Cash $1,250; credit Sales $1,245, credit Cash Over and Short $5.
B
18. At the end of the day, the cash register tape shows $1,000 in cash sales but the
count of cash in the register is $1,035. The proper entry to account for this excess
includes a:
A. Credit to Cash for $35.
B. Debit to Cash for $35.
C. Credit to Cash Over and Short for $35.
D. Debit to Cash Over and Short for $35.
E. Debit to Petty Cash for $35.
C
19. The entry necessary to establish a petty cash fund should include:
A. A debit to Cash and a credit to Petty Cash.
B. A debit to Cash and a credit to Cash Over and Short.
C. A debit to Petty Cash and a credit to Cash.
D. A debit to Petty Cash and a credit to Accounts Receivable.
C
20. The entry to record reimbursement of the petty cash fund for postage expense
should include:
A. A debit to Postage Expense.
B. A debit to Petty Cash.
C. A debit to Cash.
D. A debit to Cash Short and Over.
A
21. When a petty cash fund is in use:
A. Expenses paid with petty cash are recorded when the fund is replenished.
B. Petty Cash is debited when funds are replenished.
C. Petty Cash is credited when funds are replenished.
D. Expenses are not recorded.
E. Cash is debited when funds are replenished.
A
22. In reimbursing the petty cash fund:
A. Cash is debited.
B. Petty Cash is credited.
C. Petty Cash is debited.
D. Appropriate expense accounts are debited.
D
23. Assume that the custodian of a $450 petty cash fund has $62.50 in coins and
currency plus $382.50 in receipts at the end of the month. The entry to replenish the
petty cash fund will include:
A. A debit to Cash for $377.50.
B. A credit to Cash Over and Short for $5.00.
C. A debit to Petty Cash for $382.50.
D. A credit to Cash for $387.50.
D
$450 - 62.50 - 382.50 = $5.00 cash shortage
$382.50 + 5.00 = $387.50 reimbursement and credit to cash
24.
A company plans to decrease a $200 petty cash fund to $75. The current
balance in the account includes $45 petty cash payment in receipts and $165 in
currency. Theentry to reduce the fund will include a:
A. Debit to Cash Short and Over for $10.
B. Debit to Cash for $90.
C. Debit to Miscellaneous Expenses for $35.
D. Credit to Petty Cash for $165.
B
$200.00 - 165.00 - 45.00 = $-10.00 cash overage
$125.00 - 45.00 + 10.00 = $90.00 debit to cash
25. A company had $43 missing from petty cash that was not accounted for by petty
cash receipts. The correct procedure is to:
A. Debit Cash Over and Short for $43.
B. Credit Cash Over and Short for $43.
C. Debit Petty Cash for $43.
D. Credit Petty Cash for $43.
A
26. Martha Company has an established petty cash fund in the amount of $500. The
fund was last reimbursed on November 30. At the end of December, the fund
contained the following petty cash receipts:
December 4
Freight charge for merchandise purchased
$42
December 7
Freight charge for delivery to customer
$66
December 12
Purchase of office supplies
$31
December 18
Donation to charitable organization
$ 50
If, in addition to these receipts, the petty cash fund contains $301 of cash, the journal
entry to reimburse the fund on December 31 will include:
A. A debit to Transportation-In of $73.
B. A debit to Transportation-Out of $73.
C. A credit to Cash Over and Short of $10.
D. A debit to Cash Over and Short of $10.
D
Opening cash balance of $500. Subtract the $189 of disbursements from the petty
cash fund during December (as evidenced by the petty cash receipts). This yields an
expected cash balance of $311. Since there is only $301 of cash in the fund, the
journal entry to reimburse the fund will include a $10 debit to Cash Over and Short.
27. An analysis that explains any differences between the checking account balance
according to the depositor's records and the balance reported on the bank statement is
a(n):
A. Internal audit.
B. Bank reconciliation.
C. Bank audit.
D. Trial reconciliation.
B
28. On a bank reconciliation, an unrecorded debit memorandum for printing checks is:
A. Noted as a memorandum only.
B. Added to the book balance of cash.
C. Deducted from the book balance of cash.
D. Added to the bank balance of cash.
.
C
29. On a bank reconciliation, the amount of an unrecorded bank service charge should
be:
A. Added to the book balance of cash.
B. Deducted from the book balance of cash.
C. Added to the bank balance of cash.
D. Deducted from the bank balance of cash.
B
30. If a check correctly written and paid by the bank for $794 is incorrectly
recorded in the company's books for $749, how should this error be treated
on the bank reconciliation?
A. Subtract $45 from the bank's balance.
B. Add $45 to the bank's balance.
C. Subtract $45 from the book balance.
D. Add $45 to the book balance.
C
$794 - 749 = $45
31. During the month of September, Norris Industries issued a check in the amount of
$845 to a supplier on account. The check cleared the bank during
September. The disbursement was recorded incorrectly as $854. The
journal entry to correct this mistake when discovered will include:
A. A debit to Accounts Payable for $854.
B. A credit to Cash for $854.
C. A credit to Cash for $9.
D. A credit to Accounts Payable for $9.
D
$854 - 845 = $9
32. In the process of reconciling Marks Enterprises' bank statement for
September, Mr. Marks compiles the following information:
Cash balance per Company books on September 30
$ 6,275
Deposits in transit at month-end
$ 1,300
Outstanding checks at month-end
Bank charge for printing new checks
$ 620
$ 45
Note receivable and interest collected by bank on Marks’ behalf
$ 770
A check given to Marks during the month by a customer is returned by the bank as NSF
$ 480
33. Which of the following events would cause a bank to debit a depositor's account?
A. The depositor authorizes the bank to charge the depositor's account $50
for new checks.
B. The bank collects a note receivable and related interest on the depositor's behalf.
C. The depositor determines there are outstanding checks drawn on the
account at month-end.
D. The depositor determines there are deposits in transit on the account at month-end.
A
34. The internal document prepared by a department manager that informs the
purchasing department of its needs that lists the merchandise needed and requests that
it be purchased is the
A. Purchase requisition.
B. Purchase order.
C. Invoice.
D. Receiving report.
A
35. The document that the purchasing department prepares and sends to the vendor to
place an order is the
A. Purchase requisition.
B. Purchase order.
C. Invoice.
D. Receiving report.
B
36. The document that is an itemized statement of goods prepared by a vendor listing
the customer's name, items sold, sales prices, and terms of the sale is the
A. Purchase requisition.
B. Purchase order.
C. Invoice.
D. Receiving report.
C
37. The internal document that is prepared to notify the appropriate persons that
ordered goods have been received and describes the quantities and condition of the
goods is the
A. Purchase requisition.
B. Purchase order.
C. Invoice.
D. Receiving report.
D
38. The gross method of recording purchases refers to the method of recording:
A. Purchases at the invoice price less any cash discounts.
B. Specified amounts and timing of payments that a buyer agrees to make in return for
being granted credit.
C. Purchases at the full invoice price, without deducting any cash discounts.
D. Inventory at its selling price.
C
39. An expense resulting from failing to take advantage of cash discounts on
purchases is called:
A. Sales discounts.
B. Trade discounts.
C. Purchases discounts.
D. Discounts lost.
.
D
40. A company using the net method of recording purchases failed to take advantage of
a discount available. When they pay the full (gross) amount of an invoice at the end of
the credit period the journal entry will include a debit to:
A. Merchandise Inventory.
B. Sales Discounts.
C. Discounts Lost.
D. Cash.
C
41. A company that uses the net method of recording invoices made a purchase of
$400 with terms of 2/10, n/30. The entry to record the purchase would include:
A. A debit to Merchandise Inventory for $392.
B. A credit to Discounts Lost for $8.
C. A credit to Cash for $392.
D. A debit to Discounts Lost for $8.
A
$400 x .98 = $392
42. Merchandise with an invoice price of $2,000 was purchased on October 3, terms
1/15, n/60. The company uses the net method to record purchases. The entry to record
the cash payment of this purchase obligation on October 17 is:
A. Debit Accounts Payable $1,980; credit Cash $1,980.
B. Debit Accounts Payable $2,000; credit Cash $2,000.
C. Debit Accounts Payable $1,980; credit Discounts Lost $20; credit Cash $2,000.
D. Debit Accounts Payable $2,000; credit Merchandise Inventory $20; credit Cash
$1,980.
A
$2,000 x .99 = $1,980
43. A company records purchases using the net method. On February 1, they purchased
merchandise inventory on account for $8,300 with terms of 1/10, n/30. The February 1
journal entry to record this transaction would include a:
A. Debit to Merchandise Inventory of $8,300.
B. Debit to Merchandise Inventory of $8,217.
C. Debit to Merchandise Inventory of $83.
D. Credit to Merchandise Inventory of $83.
A
$8,300 x .99 = $8,217
.
CH9
1. A credit sale of $3,275 to a customer would result in:
A. A debit to the Accounts Receivable account in the general ledger and a debit to the
customer's account in the accounts receivable subsidiary ledger.
B. A credit to the Accounts Receivable account in the general ledger and a credit to
the customer's account in the accounts receivable subsidiary ledger.
C. A debit to the Accounts Receivable account in the general ledger and a credit to the
customer's account in the accounts receivable subsidiary ledger.
D. A credit to the Accounts Receivable account in the general ledger and a debit to
the customer's account in the accounts receivable subsidiary ledger.
A
2. The person who signs a note receivable and promises to pay the principal and
interest is the:
A. Maker.
B. Payee.
C. Holder.
D. Receiver.
A
3. The accounting principle that requires financial statements (including notes) to
report all relevant information about the operations and financial condition of a
company is called:
A. Relevance.
B. Full disclosure.
C. Evaluation.
D. Materiality.
B.
4. A promissory note:
A. Is a short-term investment for the maker.
B. Is a written promise to pay a specified amount of money at a certain date.
C. Is a liability to the payee.
D. Is another name for an installment receivable.
B
5. The maturity date of a note receivable:
A. Is the day of the credit sale.
B. Is the day the note was signed.
C. Is the day the note is due to be repaid.
D. Is the date of the first payment.
C
.
6. The interest accrued on $6,500 at 6% for 60 days is:
A. $36.
B. $42.
C. $65.
D. $180.
C
$6,500  0.06  60/360 = $65
7. A 90-day note issued on April 10 matures on:
A. July 9.
B. July 10.
C. July 11.
D. July 12.
A
8. A company receives a 10%, 90-day note for $1,500. The total interest due on the
maturity date is:
A. $50.00
B. $150.00.
C. $75.00.
D. $37.50.
D
$1,500  0.10  90/360 = $37.50
9. A company borrowed $10,000 by signing a 180-day promissory note at 11%. The
total interest due on the maturity date is.
A. $50
B. $275 C.
$550 D.
$825
C
$10,000  0.11  1/2 = $550
10. A company borrowed $10,000 by signing a 180-day promissory note at 11%. The
maturity value of the note is:
A. $12,050
B. $12,275
C. $10,550
D. $12,825
C
$10,000 + ($10,000  0.11  180/360) = $10,550
11. A company factored $45,000 of its accounts receivable and was charged a 3%
factoring fee. The journal entry to record this transaction would include a:
A. Debit to Cash of $45,000, a debit to Factoring Fee Expense of $1,350, and credit to
Accounts Receivable of $43,650.
B. Debit to Cash of $45,000 and a credit to Accounts Receivable of $45,000.
C. Debit to Cash of $43,650, a debit to Factoring Fee Expense of $1,350, and a credit to
Accounts Receivable of $45,000.
D. Debit to Cash of $46,350 and a credit to Accounts Receivable of $46,350.
C
$45,000  .03 = $1,350 $45,000 - $1,350 = $43,650
12. The account receivable turnover measures:
A. How long it takes to sell accounts receivable to a factor.
B. How often, on average, receivables are received and collected during the period.
C. The relation of cash sales to credit sales.
D. How long it takes to sell merchandise inventory.
B
13. The accounts receivable turnover is calculated by:
A. Dividing net sales by average accounts receivable.
B. Dividing net sales by average accounts receivable and multiplying by 365.
C. Dividing average accounts receivable by net sales.
D. Dividing average accounts receivable by net sales and multiplying by 365.
A
14. A company has net sales of $900,000 and average accounts receivable of
$300,000. What is its accounts receivable turnover for the period? A.
0.20.
B. 5.00
C. 73.0
D.3.0
D
$900,000/$300,000 = 3.0
15. Dart reported net sales of $8,739 million and average accounts receivable of $864
million. Its accounts receivable turnover is:
A. 0.90.
B. 36.1.
C. 50.0.
D.3,686.
D
$8,739/$864 = 10.1
16. Tepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year.
Craig's turnover was 9.3 for this year and 9.3 for last year. These results imply that:
A. Craig has the better turnover for both years.
B. Tepsi has the better turnover for both years.
C. Craig's turnover is improving.
D. Craig's credit policies are too loose.
B
17. A company had net sales of $600,000, total sales of $750,000, and an average
accounts receivable of $75,000. Its accounts receivable turnover equals:
A. 0.13
B. 0.80
C. 7.75
D. 8.00
D
$600,000/$75,000 = 8.00
18. Newton Company uses the allowance method of accounting for uncollectible
accounts. On May 3, the Newton Company wrote off the $3,000 uncollectible account
of its customer, P. Best. On July 10, Newton received a check for the full amount of
$3,000 from Best. On July 10, the entry or entries Newton makes to record the
recovery of the bad debt is:
A
Accounts Receivable−P. Best
3,000
Allowance for Doubtful Accounts
3,000
Cash
3,000
Accounts Receivable P−Best
B.
Cash
3,000
3,000
Bed Debts expense
C.
3,000
Accounts Receivable – P. Best
3,000
Bad debts expense
Cash
3,000
Accounts Receivable – P. Best
D.
3,000
Allowance for Doubtful Accounts
3,000
3,000
Accounts Receivable – P. Best
Accounts Receivable – P. Best
Cash
A. Option A
B. Option B
C. Option C
D. Option D
A
3,000
3,000
3,000
19. A method of estimating bad debts expense that involves a detailed examination of
outstanding accounts and their length of time past due is the:
A. Direct write-off method.
B. Aging of accounts receivable method.
C. Timing method.
D. Aging of investments method.
B
20. An accounting procedure that (1) estimates and reports bad debts expense from
credit sales during the period the sales are recorded, and (2) reports accounts
receivable at the estimated amount of cash to be collected is the:
A. Allowance method of accounting for bad debts.
B. Aging of notes receivable.
C. Adjustment method for uncollectible debts.
D. Direct write-off method of accounting for bad debts.
A
21. On December 31 of the current year, a company's unadjusted trial balance
included the following: Accounts Receivable, debit balance of $97,250;
Allowance for Doubtful Accounts, credit balance of $951. What amount should be
debited to Bad Debts Expense, assuming 6% of outstanding accounts receivable at
the end of the current year will be uncollectible?
A.
$951.
B.
$3,99
2.
C. $4,884.
D. $5,835.
C
Desired balance in allowance account:
$97,250 × 0.06 =
$5,835 credit
Current balance in allowance account:
Required: amount of Bad Debts Expense:
- 951 credit
$4,884 credit
22. A company ages its accounts receivables to determine its end of period
adjustment for bad debts. At the end of the current year, management estimated
that $15,750 of the accounts receivable balance would be uncollectible. Prior to
any year-end adjustments, the Allowance for Doubtful Accounts had a debit
balance of $175. What adjusting entry should the company make at the end of the
current year to record its estimated bad debts expense?
A.
Bed Debts expense
15,750
Allowance for Doubtful Accounts
B.
Bed Debts expense
15,750
15,575
Allowance for Doubtful Accounts
C.
Bad Debts Expense
15,575
15,925
Allowance for Doubtful Accounts
D
.
Accounts Receivable
Bad Debts Expense
Sales
15,925
15,750
175
15,925
A. Option A
B. Option B
C. Option C
D. Option D
C
Desired balance in allowance account:
Current balance:
Required: adjustment to allowance
15,750 credit
175 debit
$15,925 credit
23. A company has $90,000 in outstanding accounts receivable and it uses the
allowance method to account for uncollectible accounts. Experience suggests that 6%
of outstanding receivables are uncollectible. The current debit balance (before
adjustments) in the allowance for doubtful accounts is $800. The journal entry to
record the adjustment to the allowance account includes a debit to Bad Debts Expense
for:
A. $4,600
B. $5,400
C. $6,200
D. $6,800
C
Desired balance in allowance:
$90,000 × .06 =
Current balance in allowance:
Adjustment to allowance:
$5,400 credit
800 credit
$6,200 credit
24. Electron borrowed $75,000 cash from TechCom by signing a promissory note.
TechCom's entry to record the transaction should include a:
A. Debit to Notes Receivable for $75,000.
B. Debit to Accounts Receivable for $75,000.
C. Credit to Notes Receivable for $75,000.
D. Debit Notes Payable for $75,000.
A
25. The amount due on the maturity date of a $6,000, 60-day 8%, note receivable is:
A. $6,000.
B. $6,480.
C. $5,520.
D. $6,080.
E. $5,920.
D
Interest: $6,000  .08  60/360 = $80
Maturity value: $6,000 + $80 = $6,080
26. Paoli Pizza bought $5,000 worth of merchandise from TechCom and signed a
90-day, 10% promissory note for the $5,000. TechCom's journal entry to record the
sales portion of the transaction is:
A. Debit Accounts Receivable $5,000; credit Sales $5,000.
B. Debit Notes Receivable $5,000; credit Sales $5,000.
C. Debit Accounts Receivable $5,125; credit Sales $5,125.
D. Debit Notes Receivable $5,125; credit Sales $5,125.
D
27. MixRecording Studios purchased $7,800 in electronic components from TechCom.
MixRecording Studios signed a 60-day, 10% promissory note for $7,800. TechCom's
journal entry to record the sales portion of the transaction is:
A. Debit Accounts Receivable $7,800; credit Sales $7,800.
B. Debit Accounts Receivable $7,930; credit Sales $7,930.
C. Debit Notes Receivable $7,800; credit Sales $7,800.
D. Debit Notes Receivable $7,930; credit Sales $7,930.
C
28. Teller purchased merchandise from TechCom on October 17 of the current year
and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should
TechCom make on January 15 of the next year when the note is paid?
A. Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
B. Debit Cash $4,920; credit Notes Receivable $4,920.
C. Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20;
credit Notes Receivable $4,800.
D. Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100;
credit Notes Receivable $4,800.
D
Interest accrued at December 31: $4,800  .10  75/360 = $100
Interest earned during January: $4,800  .10  15/360 = $20
29. Teller purchased merchandise from TechCom on October 17 of the current year
and TechCom accepted Teller's $4,800, 90-day, 10% note. What entry should
TechCom make on December 31, to record the accrued interest on the note?
A. Debit Cash $20; credit Notes Receivable $20.
B. Debit Cash $100; credit Notes Receivable $100.
C. Debit Interest Receivable $20; credit Interest Revenue $20.
D. Debit Interest Receivable $100; credit Interest Revenue $100.
D
Interest accrued at December 31: $4,800 x .10 x 75/360 = $100
30. Teller purchased merchandise from TechCom on October 17 of the current year
and TechCom accepted Teller's $4,800, 90-day, 10% note. If the note is dishonored,
what entry should TechCom make on January 15 of the next year?
A. Debit Notes Receivable $4,800; debit Interest Receivable $120; credit Sales $4,920.
B. Debit Cash $4,920; credit Notes Receivable $4,920.
C. Debit Cash $4,920; credit Interest Revenue $100; credit Interest Receivable $20,
credit Notes Receivable $4,800.
D. Debit Cash $4,920; credit Interest Revenue $20; credit Interest Receivable $100,
credit Notes Receivable $4,800.
D
Receivable $100, credit Notes Receivable $4,800.
Interest accrued at December 31: $4,800 x .10 x 75/360 = $100
Interest earned during January: $4,800 x .10 x 15/360 =$20
31. MixRecording Studios purchased $7,800 in electronic components from TechCom.
MixRecording Studios signed a 60-day, 10% promissory note for $7,800. If the note is
dishonored, what is the amount due on the note?
A. $130 B.
$7,800 C.
$7,930 D.
$8,050
C
$7,800  .10  60/360 = $130 + $7,800 = $7,930
32. The Allowance for Doubtful Accounts:
A. Is a contra asset account.
B. Is used instead of reducing accounts receivable directly.
C. Is debited when uncollectible accounts are written off.
D. All of these.
A
33. Hankco accepts all major bank credit cards, including Omni Bank's, which
assesses a 4% charge on sales for using its card. On June 28, Hankco had
$3,500 in Omni Card credit sales. What entry should Hankco make on June 28
to record the deposit?
A. Debit Cash $3,500; credit Sales $3,500.
B. Debit Accounts Receivable $3,500; credit Sales $3,500.
C. Debit Cash $3,640; credit Credit Card Expense $140; credit Sales $3,500.
D. Debit Cash $3,360; debit Credit Card Expense $140; credit Sales $3,500.
D
Credit card fee expense: $3,500  .04 = $140
Cash received: $3,500 - $140 = $3,360
34. Calco accepts all major bank credit cards, including First Bank's, which assesses a
3.5% charge on sales for using its card. On May 25, Calco had $4,800 in First Bank
Card credit sales. What entry should Calco make on May 25 to record the deposit?
A. Debit Accounts Receivable $4,800; credit Sales $4,800.
B. Debit Cash $4,632; debit Credit Card Expense $168; credit Sales $4,800.
C. Debit Cash $4,800; credit Sales $4,800.
D. Debit Cash $4,968; credit Credit Card Expense $168; credit Sales $4,800.
B
Credit card fee expense: $4,800  .035 = $168
Cash received: $4,800 - $168 = $4,632
35. Darby uses the allowance method to account for uncollectible accounts. Its
year-end unadjusted trial balance shows Accounts Receivable of $104,500, allowance
for doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts
are estimated to be 4% of accounts receivable, what is the amount of the bad debts
expense adjusting entry?
A. $4,845
B. $4,180
C. $3,515
D. $3,700
C
$104,500  .04 = $4,180 - $665 = $3,515
36. On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer
Eric Simms as payment on his account. Compute the maturity date for the note.
A. October 8
B. October 7
C. November 8
D. November 7
B
37. On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer
Eric Simms as payment on his account. Compute the amount due at maturity for the
note.
A. $8,628
B. $8,192
C. $8,500
D.$8,670
D
$8,500  .08  90/360 = $170 + $8,500 = $8,670
38. On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer
Eric Simms as payment on his account. What entry should be made on August 9 to
record receipt of the note?
A. Debit Accounts Receivable $8,500; credit Sales $8,500.
B. Debit Notes Receivable $8,670; credit Sales $8,670.
C. Debit Notes Receivable $8,500; credit Accounts Receivable $8,500.
D. Debit Notes Receivable $8,500; credit Sales $8,500.
C
39. On August 9, Pierce Company receives a $8,500, 90-day, 8% note from customer
Eric Simms as payment on his account. What entry should be made on the maturity
date assuming the maker pays in full?
A. Debit Notes Receivable $8,500; debit Interest Receivable $170; credit Sales $8,670.
B. Debit Cash $8,670; credit Interest Revenue $170; credit Notes Receivable $8,500.
C. Debit Cash $8,628; credit Interest Revenue $128; credit Notes Receivable $8,500.
D. Debit Cash $8,613; credit Interest Revenue $113; credit Notes Receivable $8,500.
B
$8,500 x .08 x 90/360 = $170 + $8,500 = $8,670
40. On November 19, Hayes Company receives a $15,000, 60-day, 10% note from a
customer as payment on his account. What adjusting entry should be made on the
December 31 year-end?
A. Debit Interest Receivable $175; credit Interest Revenue $175.
B. Debit Interest Receivable $250; credit Interest Revenue $250.
C. Debit Interest Receivable $75; credit Interest Revenue $75.
D. Debit Interest Revenue $175; credit Interest Receivable $175.
A
$15,000  .10  42/360 = $175
41. A company uses the percent of receivables method to determine its bad debts
expense. At the end of the current year, the company's unadjusted trial balance
reported the following selected amounts:
Accounts receivable
Allowance for Doubtful Accounts
Net Sales
$435,000
Debit
1,250
Debit
2,100,000
Credit
All sales are made on credit. Based on past experience, the company estimates 3.5%
of credit sales to be uncollectible. What adjusting entry should the company make at
the end of the current year to record its estimated bad debts expense?
A. Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts
$13,975.
B. Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts
$15,225.
C. Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts
$16,475.
D. Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
C
$435,000  .035 = $15,225 + $1,250 = $16,475
42. On September 1, a customer's account balance of $2,300 was deemed to be
uncollectible. What entry should be recorded on September 1 to record the write-off
assuming the company uses the allowance method?
A. Debit Bad Debts Expense $2,300; credit Accounts Receivable $2,300.
B. Debit Allowance for Doubtful Accounts $2,300; credit Bad Debts Expense $2,300.
C. Debit Allowance for Doubtful Accounts $2,300; credit Accounts Receivable
$2,300.
D. Debit Bad Debts Expense $2,300; credit Allowance for Doubtful Accounts $2,300.
C
CH10
1. Property, plant and equipment are:
A. Current assets.
B. Used in operations.
C. Natural resources.
D. Long-term investments.
B
2. Depreciation:
A. Measures the decline in market value of an asset.
B. Measures physical deterioration of an asset.
C. Is the process of allocating to expense the cost of an item of property, plant and
equipment.
D. Is an outflow of cash from the use of an item of property, plant and equipment.
C
3. A machine originally had an estimated useful life of 5 years, but after 3 complete
years, it was decided that the original estimate of useful life should have been 10
years. At that point the remaining cost to be depreciated should be allocated over the
remaining:
A. 2 years.
B. 5 years.
C. 7 years.
D. 8 years.
C
10 year revised life - 3 years depreciated = 7 remaining
4. When originally purchased, a vehicle had an estimated useful life of 8 years. The
vehicle cost $23,000 and its estimated residual value is $1,500. After 4 years of
straight-line depreciation, the asset's total estimated useful life was revised from 8
years to 6 years and there was no change in the estimated residual value. The
depreciation expense in year 5 equals:
A. $5,375.00.
B. $2,687.50.
C. $5,543.75.
D. $10,750.00.
A
Accumulated depreciation, end of year 4: [($23,000 - $1,500)/8 years]  4 years =
$10,750
Depreciation, year 5: ($23,000 - $10,750 - $1,500)/2 years = $5,375
5. A company used straight-line depreciation for an item of equipment that cost
$12,000, had a residual value of $2,000, and had a five-year useful life. After
depreciating the asset for three complete years, the residual value was reduced to
$1,200 and its total useful life was increased from 5 years to 6 years. Determine the
amount of depreciation to be charged against the machine during each of the
remaining years of its useful life:
A. $1,000.
B. $1,800.
C. $1,467.
D. $1,600.
D
Accumulated depreciation, end of year 3: [($12,000 - $2,000)/5 years]  3 years
=$6,000
Depreciation, years 4 through 6: ($12,000 - $6,000 - $1,200)/3 years = $1,600
6. Many companies use an accelerated depreciation method because:
A. It is required by the tax code.
B. It is required by financial reporting rules.
C. It yields larger depreciation expense in the early years of an asset's life.
D. It yields a higher income in the early years of the asset's useful life.
C
7. Total asset turnover is used to evaluate:
A. The efficiency of management's use of assets to generate sales.
B. The necessity for asset replacement.
C. The number of times operating assets were sold during the year.
D. The cash flows used to acquire assets.
A
8. A total asset turnover ratio of 3.5 indicates that:
A. For every $1 in sales, the firm acquired $3.50 in assets during the period.
B. For every $1 in assets, the firm produced $3.50 in net sales during the period.
C. For every $1 in assets, the firm earned gross profit of $3.50 during the period.
D. For every $1 in assets, the firm earned $3.50 in net profit.
B
9. Total asset turnover is calculated by dividing:
A. Gross profit by average total assets.
B. Average total assets by gross profit.
C. Net sales by average total assets.
D. Average total assets by net sales.
C
10. A company had average total assets of $897,000. Its gross sales were $1,090,000
and its net sales were $1,000,000. The company's total asset turnover equals:
A. 0.82.
B. 0.90.
C. 1.09.
D. 1.11.
D
$1,000,000/$897,000 = 1.11
11. Dart had net sales of $35,404 million. Its average total assets for the period were
$14,502 million. Dart's total asset turnover equals:
A. 0.40.
B. 0.35.
C. 1.45.
D. 2.44
D.
$35,404/$14,502 = 2.44
12. Land improvements are:
A. Assets that increase the usefulness of land, and like land, are not depreciated.
B. Assets that increase the usefulness of land, but that have a limited useful life and
are subject to depreciation.
C. Included in the cost of the land account.
D. Expensed in the period incurred.
B
13. Property, plant and equipment include:
A. Land improvements.
B. Buildings.
C. Machinery and equipment.
D. All of these.
D
14. A company purchased property for a building site. The costs associated with the
property were:
Purchase price ............................................
$175,000
Real estate commissions ............................
15,000
Legal fees ...................................................
800
Expenses of Clearing the land ...................
2,000
Expenses to remove old building ...............
1,000
What portion of these costs should be allocated to the cost of the land and what
portion should be allocated to the cost of the new building?
A. $175,800 to Land; $18,800 to Building.
B. $190,000 to Land; $3,800 to Building.
C. $190,800 to Land; $1,000 to Building.
D. $193,800 to Land; $0 to Building.
D
Total cost = $175,000 + $15,000 + $800 + $2,000 + $1,000 = $193,800
The entire amount of the cost should be allocated to the land, since the new building
is not yet constructed.
15. A company purchased property for $100,000. The property included a building, a
parking lot, and land. The building was appraised at $62,000; the land at $45,000, and
the parking lot at $18,000. Land should be recorded in the accounting records with an
allocated cost of:
A. $0.
B. $36,000.
C. $42,000.
D. $45,000.
B
$100,000  $45,000/($62,000 + $45,000 + $18,000) = $36,000
16. A method that charges the same amount of expense to each period of the asset's
useful life is called:
A. Accelerated depreciation.
B. Declining-balance depreciation.
C. Straight-line depreciation.
D. Units-of-production depreciation.
C
17. A company purchased a delivery van for $23,000 with a residual value of $3,000
on September 1, Year 1. It has an estimated useful life of 5 years. Using the
straight-line method, how much depreciation expense should the company recognize
on December 31, Year 1?
A. $1,000.
B. $1,333.
C. $1,533.
D. $4,000.
B
($23,000 - $3,000)/5 x 4/12 = $1,333
18. A company purchased a cash register on January 1 for $5,400. This register has a
useful life of 10 years and a residual value of $400. What would be the depreciation
expense for the second year of its useful life using the double-declining-balance
method?
A. $500. B.
$800. C.
$864. D.
$1,000.
C
Year 1: $5,400 x 2 x 10% = $1,080
Year 2: ($5,400 - $1,080) x 2 x 10% = $864
19. A company purchased a rope braiding machine for $190,000. The machine has a
useful life of 8 years and a residual value of $10,000. It is estimated that the machine
could produce 750,000 units of climbing rope over its useful life. In the first year,
105,000 units were produced. In the second year, production increased to 109,000 units.
Using the units-of-production method, what is the amount of depreciation that should
be recorded for the second year?
A. $25,200.
B. $26,160.
C. $26,660.
D. $27,613.
B
109,000 units x [($190,000 - $10,000)/750,000 units] = $26,160
20. An asset's carrying amount is $18,000 on June 30, Year 6. The asset is being
depreciated at an annual rate of $3,000 on the straight-line method. Assuming the
asset is sold on December 31, Year 7 for $15,000, the company should record:
A. A loss on sale of $1,500.
B. A gain on sale of $1,500.
C. Neither a gain nor a loss is recognized on this type of transaction.
D. A gain on sale of $3,000.
B
If the asset's carrying amount is $18,000 on June 30, Year 6 and is being depreciated at
a rate of $3,000 per year, an additional $4,500 of depreciation expense would be
recognized by December 31, Year 7. Thus, the asset's carrying amount on that date
would be $13,500. If the asset is sold for $15,000, a gain on sale of $1,500 should be
recognized.
21. An asset's carrying amount is $36,000 on January 1, Year 6. The asset is being
depreciated $500 per month using the straight-line method. Assuming the asset is sold
on July 1, Year 7 for $25,000, the company should record:
A. A gain on sale of $2,000.
B. A loss on sale of $1,000.
C. A gain on sale of $1,000.
D. A loss on sale of $2,000.
D
If the asset's carrying amount is $36,000 on January 1, Year 6 and is being depreciated
$500 per month, $9,000 (18 x $500) of additional depreciation expense would be
recognized by July 1, Year 7. Thus, the asset's carrying amount on that date would be
$27,000. If the asset is sold for $25,000, a loss on sale of $2,000 should be recognized.
22. Wilson Engineering purchased a depreciable asset costing $45,000 on January 1,
Year 1. The asset is estimated to have a residual value of $5,000 and an estimated
useful life of 8 years. Straight-line depreciation is used. If the asset is sold on July 1,
Year 5 for $20,000, the journal entry to record the sale will include:
A. A credit to cash for $20,000.
B. A debit to accumulated depreciation for $22,500.
C. A debit to loss on sale for $10,000.
D. A credit to loss on sale for $10,000.
B
Annual depreciation is $5,000 [(45,000 - 5,000) / 8 years]. On July 1, Year 5, the asset
will have been depreciated for 4.5 years for a total of $22,500. The resulting carrying
amount on that date will be $22,500. The journal entry to record the sale of the asset
would be as follows:
Cash
20,000
Accumulated Depreciation
22,500
Loss on Disposal
2,500
Asset
45,000
23. A depreciable asset costing $75,000 is purchased on September 1, Year 1. The
asset is estimated to have a residual value of $10,000 and an estimated useful life of 4
years. Double-declining-balance depreciation is used. If the asset is sold on December
31, Year 3 for $13,000, the journal entry to record the sale will include:
A. A credit to gain on sale for $8,000.
B. A debit to loss on sale for $2,625.
C. A credit to accumulated depreciation for $59,375.
D. A debit to loss on sale for $3,042.
.
B
Beginning of
Period
Year Carrying
End of Year
DDB Rate
Depreciation Expense
Amount
Carrying
Amount
Year 1
$75,000
50%
37,500 × 4/12 = $12,500
$62,500
Year 2
62,500
50%
31,250
31,250
Year 3
31,250
50%
15,625
15,625
Accumulated depreciation
$59,375
Therefore, the journal entry to record the sale of the asset would be as follows:
Cash
13,000
Accumulated Depreciation
59,375
Loss on Sale
2,625
Asset
75,000
DB Rate = Declining-balance rate of depreciation (100%/4) x 2
24. A company sold a machine that originally cost $100,000 for $60,000 cash. The
accumulated depreciation on the machine was $40,000. The company should
recognize a:
A. $0 gain or loss.
B. $20,000 gain.
C. $20,000 loss
D. $40,000 loss.
A
Cost of machine
$100,000
Accu Dep
(40,000)
Carrying amount
$60,000
Cash received
(60,000)
Gain or Loss on sale $
0
25. A company discarded a display case originally purchased for $8,000. The
accumulated depreciation was $7,200. The company should recognize a(an):
A. $0 gain or loss.
B. $800 loss.
C. $800 gain.
D. $8,000 loss.
B
Cost of display case
$8,000
Accu Dep
Carrying amount
Cash received
Loss on disposal
(7,200)
$800
0
$800
Cost of display case
$8,000
Accumulated depreciation
(7,200)
Book value
$
800
Cash received
0
Loss on disposal
$ 800
26. A company had a bulldozer destroyed by fire. The bulldozer originally cost
$125,000 with accumulated depreciation of $60,000. The proceeds from the insurance
company were $90,000. The company should recognize:
A. A loss of $25,000.
B. A gain of $25,000.
C. A loss of $65,000.
D. A gain of $65,000.
B
Cost of bulldozer
$125,000
Accumulated Depreciation (60,000)
27.
Carrying amount
$65,000
Cash received
(90,000)
Gain
$25,000
A company purchased a tract of land for its natural resources at a cost of
$1,500,000. It expects to mine 2,000,000 tons of ore from this land. The residual
value of the land is expected to be $250,000. The depletion expense per ton of ore is:
A. $0.75.
B. $0.625.
C. $0.875.
D. $6.00.
B
($1,500,000 - $250,000)/2,000,000 tons = $0.625 per ton
28.
A company purchased a mineral deposit for $800,000. It expects this property to
produce 1,200,000 tons of ore and to have a residual value of $50,000. In the current
year, the company mined and sold 90,000 tons of ore. Its depletion expense for the
current period equals:
A. $15,000.
B. $60,000.
C. $150,000.
D. $56,250.
$90,000 tons  ($800,000 - $50,000/1,200,000) = $56,250
D
29.
A company's old machine that cost $40,000 and had accumulated depreciation of
$30,000 was traded in on a new machine having an estimated 20-year life with an
invoice price of $50,000. The company also paid $43,000 cash, along with its old
machine to acquire the new machine. If this transaction has commercial substance, the
new machine should be recorded at:
A. $40,000.
B. $47,000.
C. $50,000.
D. $53,000.
C
$50,000
Market value of new
machine
Cost of old machine
$40,000
Accumulated Dep
(30,000)
Carrying amount of
old machine
$10,000
Plus cash paid in
exchange
Loss on exchange
43,000
53,000
($3,000)
Therefore the loss on the exchange is recognized and the new machine should
be recorded at its price of $50,000.
30.
Marble Company purchased a machine costing $120,000, terms 1/10, n/30.
The machine was shipped FOB shipping point and freight charges were $2,000.
The
machine requires special mounting and wiring connections costing $10,000. When
installing the machine, $1,300 in damages occurred. Materials costing $1,500 are
used in testing and adjusting the machine to produce a satisfactory product. Compute
the cost recorded for this machine assuming Marble paid within the discount period.
A.$131,100.
B.$134,800.
C.$132,300.
D.$133,600
C
$120,000  .99 = 118,800 + $2,000 + $10,000 + $1,500 = $132,300
31.
Salta Company installs a manufacturing machine in its factory at the beginning
of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years,
or 400,000 units of product, with a $7,000 residual value. During its second year,
the machine produces 84,500 units of product. Determine the machines' second year
depreciation under the straight-line method.
A.$16,900.
B.$16,000.
C.$17,400.
D.$18,379
B
($87,000 - $7,000)/5 = $16,000
32.
Salta Company installs a manufacturing machine in its factory at the beginning
of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years,
or 400,000 units of product, with a $7,000 residual value. During its second year,
the machine produces 84,500 units of product. Determine the machines' second year
depreciation under the double-declining-balance method.
A.
$16,900.
B.
$16,000..
C.
$18,379.
D.
$20,880.
D
Year 1 $87,000  20%  2 = $34,800
Year 2 ($87,000 - $34,800)  20%  2 = $20,880
33.
Salta Company installs a manufacturing machine in its factory at the
beginning of the year at a cost of $87,000. The machine's useful life is estimated
to be 5 years, or 400,000 units of product, with a $7,000 residual value. During its
second year, the machine produces 84,500 units of product. Determine the machines'
second year depreciation under the units-of-production method.
A.
$16,900.
B.
$16,000.
C.
$17,400.
D.
$18,379.
A
($87,000 - $7,000)/400,000 = $.20  84,500 = $16,900
34.
Salta Company installs a manufacturing machine in its factory at the beginning
of the year at a cost of $87,000. The machine's useful life is estimated to be 5 years,
or 400,000 units of product, with a $7,000 residual value. During its second year,
the machine produces 84,500 units of product. What journal entry would be needed
to record the machines' second year depreciation under the units-of-production
method?
A. Debit Depletion Expense $16,900; credit Accumulated Depletion $16,900.
B. Debit Depletion Expense $16,000; credit Accumulated Depletion $16,000.
C. Debit Depreciation Expense $16,900; credit Accumulated Depreciation $16,900.
D. Debit Depreciation Expense $16,000; credit Accumulated Depreciation $16,000.
C
($87,000 - $7,000)/400,000 = $.20  84,500 = $16,900
35.
Carmel Company acquires a mineral deposit at a cost of $5,900,000. It
incurs additional costs of $600,000 to access the deposit, which is estimated to
contain 2,000,000 tons and is expected to take 5 years to extract. Compute the
depletion expense for the first year assuming 418,000 tons were mined.
A. $1,233,100.
B. $1,358,500.
C. $1,300,000.
D. $1,180,000.
B
($5,900,000 + $600,000)/2,000,000 = $3.25  418,000 = $1,358,500
36.
Carmel Company acquires a mineral deposit at a cost of $5,900,000. It incurs
additional costs of $600,000 to access the deposit, which is estimated to contain
2,000,000 tons and is expected to take 5 years to extract. What journal entry would
be needed to record the expense for the first year assuming 418,000 tons were
mined?
A. Debit Depletion Expense $1,233,100; credit Accumulated Depletion $1,233,100.
B. Debit Amortization Expense $1,358,500; credit Accumulated Amortization
$1,358,500.
C.Debit Depreciation Expense $1,358,500; credit Accumulated Depreciation
$1,358,500.
D.Debit Depletion Expense $1,358,500; credit Accumulated Depletion $1,358,500.
D
($5,900,000 + $600,000)/2,000,000 = $3.25  418,000 = $1,358,500
37.
Monte Ray leases office space for $7,000 per month. On January 3, Monte Ray
incurs $75,000 to improve his leased office space. These improvements are
expected to yield benefits for 8 years. Ray has 6 years remaining on his lease.
Compute the amount of expense that should be recorded the first year related to the
improvements.
A. $19,500.
B.$7,000.
C.$12,500.
D.$9,375
.
C
$75,000/6 = $12,500
38.
Monte Ray leases office space for $7,000 per month. On January 3, Monte Ray
incurs $75,000 to improve his leased office space. These improvements are
expected to yield benefits for 8 years. Ray has 6 years remaining on his lease. What
journal entry would be needed to record the expense for the first year related to the
improvements?
A. Debit Amortization Expense $12,500; credit Accumulated Amortization $12,500.
B. Debit Depletion Expense $12,500; credit Accumulated Depletion $12,500.
C. Debit Depreciation Expense $12,500; credit Accumulated Depreciation
$12,500.
D. Debit Depletion Expense $9,375; credit Accumulated Depletion $9,375.
A
$75,000/6 = $12,500
39.
Cambria owns equipment that cost $93,500 with accumulated depreciation of
$64,000. Cambria asks $35,000 for the equipment but sells the equipment for
$33,000. Compute the amount of gain or loss on the sale.
A.$3,500loss
B.$5,500loss.
C.$3,000gain.
D.$3,500gain
D
$33,000 - ($93,500 - $64,000) = $3,500 gain
40.
Cambria owns equipment that cost $93,500 with accumulated depreciation of
$64,000. Cambria asks $35,000 for the equipment but sells the equipment for
$33,000. Compute the amount of gain or loss on the sale. The journal entry to record
the disposal of the asset would involve all of the following except:
A, Debit Accumulated Depreciation $64,000.
B. Credit Equipment $93,500.
C. Debit Loss on Disposal of Equipment $3,500.
D. Credit Gain on Disposal of Equipment $3,500.
C
$33,000 - ($93,500 - $64,000) = $3,500 gain
41.
Cambria Company reports net sales of $4,315 million; cost of goods sold of
$2,808 million; net profit of $283 million; and average total assets of
$2,136. Compute its total asset turnover.
A. 1.31.
B. 2.02.
C. 13.
D. 76.
B
$4,315/$2,136 = 2.02
42.
Big River Rafting pays $310,000 plus $15,000 in closing costs to buy out a
competitor. The real estate consists of land appraised at $105,000, a building
appraised at $210,000, and equipment appraised at $35,000. Compute the cost
that should be allocated to the building.
A.$93,000.
B.$186,000.
C. $32,500.
D.$195,000.
D
$210,000/$350,000 = .60 x $325,000 = $195,000
43.
Big River Rafting pays $310,000 plus $15,000 in closing costs to buy out a
competitor. The real estate consists of land appraised at $105,000, a building
appraised at $210,000, and equipment appraised at $35,000. Compute the cost
that should be allocated to the land.
A. $93,000.
B. $186,000.
C. $195,000.
D.$97,500
.
D
$105,000/$350,000 = .30  $325,000 = $97,500