Major Review Quiz (Chapters 5-7)

What is the primary difference between accrual accounting and cash accounting?

• Accrual accounting records revenues and expenses when services are provided to costumers/costs used. Cash accounting records them when cash is received/paid.

• Accrual accounting records only cash transactions, while cash accounting records all transactions.

• Accrual accounting is used only by large corporations, while cash accounting is used by small businesses.

• Accrual accounting is based on the cash flow statement, while cash accounting is based on the income statement.

Which of the following is an example of an adjusting journal entry?

• Recording the purchase of inventory.

• Recording depreciation expense at the end of the period.

• Recording a cash sale.

• Recording the payment of a utility bill.

According to the revenue recognition principle, when should revenue be recognized?

• When cash is received.

• When the service is performed or goods are delivered.

• At the end of the fiscal year.

• When the invoice is sent to the customer.

Which inventory valuation method results in the highest ending inventory value during a period of rising prices?

• First-In, First-Out (FIFO)

• Last-In, First-Out (LIFO)

• Weighted Average Cost

• Specific Identification

Calculate the depreciation expense for a machine that costs 10,000, has a salvage value of 2,000, and a useful life of 4 years using the straight-line method.

• $2,000

• $2,500

• $3,000

• $4,000

If a company estimates that 5% of its $100,000 accounts receivable will be uncollectible, what is the estimated amount of uncollectible accounts?

• $2,000

• $3,000

• $5,000

• $10,000

A company has a beginning inventory of 15,000, purchases of 50,000, and an ending inventory of $10,000. Calculate the Cost of Goods Sold (COGS).

• $45,000

• $50,000

• $55,000

• $60,000

TRUE OR FALSE: The Allowance for Uncollectable accounts is a Liability.

• True

• False

Which of the following is considered a long-term asset?

• Accounts Receivable

• Inventory

• Equipment

• Prepaid Expenses

A company uses the double-declining balance method for depreciation. If an asset costs $12,000, has a useful life of 5 years, and no salvage value, what is the depreciation expense for the first year?

• $2,400

• $4,800

• $3,600

• $6,000