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WorksheetsACCT 2001 QUESTIONS REVIEW
Total questions: 104
Worksheet time: 52mins
Which is an advantage of corporations relative to partnerships and sole proprietorships?
reduced legal liability for investors
most common form of organization
harder to transform ownership
increased difficulty of raising funds
To which of the following questions will internal users want answers
What selling price for our product will maximize the company's net income?
Which product line is most profitable?
Is cash sufficient to pay dividends stockholders?
All of the answer choices are correct.
Which of the following is an example of a financing activity?
Selling goods on acounnts
Buying inventory
Buying delivery equipment
Issuing shares of common stock
The payment of dividends is an example of a(n):
Delivery activiity
financing activity
investing activity
operating activity
How is the issuance of common stock reported on the statement of cash flows?
Marketing activity
investing activity
operating activity
financing activity
Which section of the annual report presents highlights of favorable trends and identifies significant events and uncertainties affecting a company's ability to pay near-term obligations, and a company's ability fund operations and expansion?
Management discussion and analysis
auditor's report
Notes to the financial statements
Financial statements
Which financial statement report assets, liabilities, and stockholders' equity?
balance sheet
income statement
statement of cash flows
retained earnings statement
The correct order of presentation in a classified balance sheet for the following current assets is
inventories, cash, accounts receivable, prepaid insurance
accounts receivable, cash, prepaid insurance, inventories
cash, inventories, accounts receivable, prepaid insurance
cash, accounts receivable, inventories, prepaid insurance
Current liabilities are $10,000, long-term liabilities are $20,000, common stock is $50,000, and retained earning s totals $70,000. How much is total stockholders' equity?
$150,000
$120,000
$140,000
$70,000
Which one of the following does not affect retained earning?
Issuance of common stock
Net loss
Net income
Dividends
How much is the debt to assets ratio?
40%
30%
20%
60%
How much is earnings per share?
$0.15
$0.56
$1.20
$1.80
Earnings per share is computed by dividing net income
by the average common shares outstanding
by the ending common shares outstanding
less preferred stock dividends by the ending common shares outstanding
less preferred stock dividends by the average common shares outstanding
What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U.S.?
generally accepted accounting standards
generally accepted auditing principles
general accounting principles
generally accepted accounting principles
What are generally accepted accounting principles?
usually established by the Internal Revenue Service
the guidelines used to resolve ethical dilemmas
a set of accounting rules and practices that have authoritative support
fundamental truths that can be derived from the laws of nature
Receipt of an unearned revenue
decreases a liability; increases stockholders' equity
decreases a revenue; increase stockholders' equity
increase an asset; increases a liability
increases an asset; increases a revenue
If an expense is paid with cash
expenses will decrease
retained earnings will increase
liabilities will increase
assets will decrease
Debits
decrease assets and increase liabilities
increase assets and decrease liabilities
decrease both assets and liabilities
increase both assets and liabilities
Which statement about an account is true?
there are separate accounts for specific assets and liabilities but only one account for stockholders' equity items
the right side of an account is the debit side
an account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders' equity item
in its simplest form, an account consists of two parts
At September 1, 2017, Five-O Inc. reported retained earnings of $136,000. During the month, Five-O generated revenues of $20,000, incurred expenses of $12,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the balance in retained earnings at September 30, 2017?
$136,000 debit
$142,000 credit
$8,000 credit
$137,000 credit
What is evidence that a transaction has occured?
Journal
Anyone of the answer choices can be considered evidence
source document
ledger
Which of the following is not a part of a complete journal entry?
the balance of each account affected by the transaction
a brief explanation of the transaction
the accounts and amounts to be debited and credited
the date of the transaction
Which of the following is the correct sequence of events?
analyze a transaction; post it to the ledger; record it in the journal
none of the answer choices provides the correct sequence
analyze a transaction; record it in the journal; post it to the ledger
record a transaction in the journal; analyze the transaction; post it to the ledger
What type of account is unearned revenue?
Expense
Revenue
Liability
Asset
In what section of the statement of cash flows would the purchase of office equipment for $10,000 cash appear?
operating activities
financing activities
in the notes to the statement of cash flows
investing activities
Which of the following is the correct sequence of events?
Journalize; post; prepare a trial balance
Prepare a trial balance; post; journalize
Prepare a trial balance; journalize; post
Post; journalize; prepare a trial balance
Ignatenko Company purchased office supplies costing $5,000 and debited Supplies for the full amount. Supplies on hand at the end of the accounting period were $1,300. The appropriate adjusting journal entry to be made would be
Supplies $1,300
Supplies Expense $4,000
Supplies Expense $3,700
Supplies $3,700
Supplies $3,700
Supplies Expense $3,700
Supplies Expense $1,300
Supplies $1,300
Cash received before services are preformed which is recorded as a debit to a cash account and a credit to a liability account is called
an accrued revenue
an unearned revenue
an unrecorded revenue
none of these answer choices are correct
What is the periodicity assumption?
companies should match expenses with revenues
the fiscal year should correspond with the calendar year
companies should recognize revenue in the accounting period in which the performance obligation is satisfied
the economic life of a business can be divided into artificial time periods
In 2017, Costello Company performs work for a customer and bills the customer $10,000; it also pays expenses of $3,000. The customer pays Costello in 2018. If Costello uses the accrual-basis of accounting, then Costello will report
net income of $7,000 in 2018
revenue of $10,000 in 2018
expenses of $3,000 in 2018
revenue of $10,000 in 2017
How much is the debt to assets ratio?
40%
30%
20%
60%
Which is the correct order of steps in the accounting cycle?
Post transactions, journalize transactions, prepare a trial balance, prepare financial statements.
Prepare financial statements, prepare adjusting entries, prepare closing entries, prepare a post-closing trial balance.
Journalize and post transactions, journalize and post closing entries, journalize and post adjusting entries.
Journalize and post transactions, journalize and post adjusting entries, journalize and post closing entries.
The final step in the accounting cycle is to prepare
financial statements.
a post-closing trial balance.
adjusting entries.
closing entries.
The closing entry process consists of closing
all asset and liability accounts.
out the Retained Earnings account.
all temporary accounts.
all permanent accounts.
During the adjusting process two transactions were missed. The first is for unearned rent revenue of which $450 was earned during the period, the second was for accrued interest payable of which $275 is owed for the period. As a result of these omissions
net income is understated by $175.
assets are overstated by $725.
liabilities are overstated by $725.
revenue is overstated by $725.
Saira works for a sports franchise, which pays wages and salaries earned on a monthly basis. A new accountant was hired by the sports franchise in late May. Due to inexperience, the new accountant failed to accrue Saira’s salary for May. What is the impact on the May 31 financial statements of the sports franchise?
Liabilities are understated; assets are overstated.
Revenues are overstated; net income is understated.
Expenses are understated; net income is overstated.
Liabilities are overstated; retained earnings is overstated.
Net income is $15,000, operating expenses are $20,000, net sales total $75,000, and sales revenues total $95,000. How much is the profit margin?
75%
20%
16%
79%
Which of the following items does not result in an entry to the Inventory account under a perpetual system?
Payment of freight costs for goods received from a supplier
A purchase of merchandise
A return of Inventory to the supplier
Payment of freight costs for goods shipped to a customer
When credit terms of 1/15, n/60 are offered, how long is the discount period?
1 day
45 days
60 days
15 days
In a perpetual inventory system, which accounts will the seller credit when merchandise is returned by a customer?
Sales Returns and Allowances and Accounts Receivable
Accounts Receivable and Cost of Goods Sold
Sales Returns and Allowances and Inventory
Inventory and Cost of Goods Sold
Which one of the following statements is correct?
A company which uses a perpetual inventory system needs only one journal entry when it sells merchandise.
A company which uses a perpetual inventory system needs two journal entries when it sells merchandise.
A company which uses a perpetual inventory system debits inventory and credits cost of goods sold when it sells merchandise.
None of the answer choices are correct.
Which one of the following will result in gross profit?
Sales revenue less cost of goods sold
Operating expenses less cost of goods sold
Operating expenses less net income
Sales revenue less operating expenses
Which of the following will be shown on the income statement for a merchandising company?
Gross profit
Cost of goods sold
A sales revenue section
All of the answer choices are correct
Net income is $15,000, operating expenses are $20,000, and net sales total $75,000. How much is cost of goods sold?
$15,000
$60,000
$40,000
$35,000
Under what system is cost of goods sold determined at the end of an accounting period?
periodic inventory system
double entry inventory system
perpetual inventory system
single entry inventory system
Which of the following would affect the gross profit rate if sales remain constant?
an increase in cost of goods sold
a decrease in depreciation expense
a decrease in insurance expense
an increase in advertising expense
Cecil gives goods on consignment to Jerry who agrees to try to sell them for a 25% commission. At the end of the accounting period, which of the following parties includes in its inventory the consigned goods?
Cecil
Jerry
Both Cecil and Jerry
Neither Cecil and Jerry
Which of the following should not be included in the physical inventory of a company?
Goods in transit from another company shipped FOB shipping point
Good shipped on consignment to another company
All of the answer choices are correct
Goods held on consignment from another company
Which one of the following is not a consideration that affects the selection of an inventory costing method?
perpetual versus periodic inventory system
tax effects
income statement effects
balance sheet effects
In a period of falling prices, which of the following methods will give the largest net income?
LIFO
average-cost
specific identification
FIFO
What is the LIFO reserve?
an amount used to adjust inventory to the lower-of-cost-or-market
the difference between cost of goods sold under LIFO compared to FIFO
an amount used to adjust the LIFO inventory to historical cost
the difference between the value of the inventory under LIFO and the value under FIFO
Which of the following will not require an adjusting entry?
bank service charges
NSF checks
deposits in transit
book errors
Under which of the following do computer programs that limit unauthorized access to certain files fall?
independent internal verification
physical controls
documentation procedures
human resource controls
Which of the following is not a principle of internal control?
collusion between employees
documentation procedures
bonding of employees
segregation of duties
For which of the following might a bank issue a debit memorandum to a depositor's account?
collection of a note receivable
interest earned
monthly service charges
deposits in transit
Why should a bank reconciliation be prepared?
To make sure the actual cash balance is the same as the cash received from customers.
To explain any difference between the depositor's balance per books and the balance per bank.
To explain any difference between the bank deposits and the checks written.
To make sure employees have not committed fraud.
For which of the following will an adjusting entry be required as the result of a bank reconciliation?
NSF checks
deposits in transit
outstanding checks
bank errors
On June 15, Kersee Company sold merchandise on account to Eng Co. for $1,000, terms 2/10, n/30. On June 20, Eng Co. returns merchandise worth $300 to Kersee Company. On June 24, payment is received from Eng Co. for the balance due. What is the amount of cash received on June 24?
$700
$680
$686
None of the answer choices are correct
Which one of the following is part of the transaction that is recorded when an account is written off under the allowance method?
Bad Debts Expense account is debited.
Allowance for Doubtful Accounts is debited.
Accounts Receivable account is debited.
Loss on Accounts Receivable account is debited.
Factoring is the process of
determining the average collection period.
determining the allowance for doubtful accounts value.
selling accounts receivable at a discount to another party.
determining the percentage of accounts receivable expected to be collected.
Good Stuff Retailers accepted $50,000 of Citibank Visa credit card charges for merchandise sold on July 1. Citibank charges 4% for its credit card use. Which of the following is/are the debit entry(ies) required to record this transaction by Good Stuff Retailers?
Accounts receivable $48,000 and service charge expense $2,000
Cash $50,000
Cash $48,000 and service charge expense $2,000
accounts receivable $50,000
Notes receivable are reported in the current assets section of the balance sheet at
the selling price at which the inventory was sold to the customers
total principal plus interest for the term of the loan
market value
cash (net) realizable value
On May 2, Wainwright Company receives a $3,000, 4-month, 10% note from Fulton Company as a settlement of its accounts receivable. What entry will Wainwright Company make when it receives the note on May 2?
Notes Receivable 3,000
Accounts Receivable 3,000
Notes Receivable 3,000
Interest Receivable 100
Accounts Receivable
3,000
Interest Revenue 100
Notes Receivable 3,100
Sales Revenue 3,100
Notes Receivable 3,100
Accounts Receivable
3,100
Which of the following is the debit effect of the journal entry to record the dishonor of a note receivable?
bad debts expense
loss on notes receivable
allowance for doubtful accounts
accounts receivable
Which one of these statements about promissory notes is incorrect?
A promissory note is not a negotiable instrument
The party to whom payment is to be made is called the payee.
A promissory note is more liquid than an account receivable.
The party making the promise to pay is called the maker.
Eddy Corporation had net credit sales during the year of $800,000 and cost of goods sold of $500,000. The balance in receivables at the beginning of the year was $100,000 and at the end of the year was $150,000. How much is the accounts receivables turnover?
5.3
6.4
4.0
8.0
Which one of the following costs will not be included in the cost of equipment?
installation
freight
testing
annual insurance
Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building. At what amount will the land be recorded in the accounting records?
$80,000
$83,000
$92,000
$95,000
Able Towing Company purchased a tow truck for $60,000 on January 1, 2015. It was originally depreciated on a straight-line basis over 10 years with an estimated salvage value of $12,000. On December 31, 2017, before adjusting entries had been made, the company decided to change the remaining estimated life to 4 more years as of January 1, 2017, and the salvage value was adjusted to $2,000. How much is depreciation expense for 2017?
$4,800
$6,000
$15,000
$12,100
An asset purchased on January 1 for $60,000 has an estimated salvage value of $3,000. The current useful life is 8 years. How much is total accumulated depreciation using the straight-line method at the end of the second year of life?
$7,500
$7,125
$15,000
$14,250
What is depreciation?
a cash accumulation approach
an adjustment to market value over time
a valuation approach
a cost allocation method
Which one of the following is not a depreciable asset?
Land
equipment
driveways
buildings
Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?
straight-line
salvage method
units-of-activity
declining-balance
When a plant asset is retired, the difference between original cost and the book value of the asset is
subtracted from the accumulated depreciation account
recognized on the income statement as a loss on disposal of plant asset
debited to the sale of plant assets account
an increase to cash
A company sold for $3,000 a plant asset that had a cost of $10,000 and accumulated depreciation of $7,500. What gain or loss did the company experience?
gain of $3,000
loss of $7,000
gain of $500
loss of $500
If a company reports goodwill as an intangible asset on its books, what is the one thing you know with certainty?
The company purchased another company.
The goodwill will generate a lot of positive business for the company for many years to come
The company is a valuable company worth investing in.
The company has a well-established brand name.
Which of the following statements is false?
If an intangible asset has a finite life, it should be amortized.
The amortization period of an intangible life can exceed 20 years.
Goodwill is recorded only when a business is purchased.
Research and development costs are expensed when incurred, except when the research and development expenditures result in a successful patent.
The Jacksonville Jaguars sell season tickets to NFL football games. There are 10 home games during the season, which runs from August through December. During February, 65,000 season tickets were sold for $12,000,000 cash. Which account will be credited by the Jacksonville Jaguars upon receipt of the $12,000,000?
tickets receivable
prepaid tickets
unearned ticket revenue
ticket revenue
Andre Company collected $4,515 from cash sales to customers, which includes both sales revenue and 5% sales taxes. How much should be recognized as sales revenue?
$4,000
$4,289.25
$4,515
$4,300
To be classified as a current liability, how or when must a debt be expected to be paid?
beyond one year
either out of existing current assets or by crediting other current liabilities
by creating other current liabilities
out of existing current assets
A corporation issued a $50,000, 9%, 4-month note on July 1. The corporation's year-end is September 30. Which one of the following is the adjusting entry for interest on September 30?
Interest Expense 1,125
Notes Payable 1,125
Interest Expense 1,125
Interest Payable
1,125
Interest Expense 1,500
Interest Payable
1,500
Interest Expense 1,500
Notes Payable
1,500
On September 1, Banner Co. borrowed $70,000 from the City Bank for five months at 9%. Which journal entry will Banner Co. make on December 31 before issuing its financial statements?
Interest Expense 1,575
Interest Payable 1,575
Interest Expense 2,100
Interest Payable 2,100
Interest Expense 6,300
Notes Payable
6,300
Interest Expense 2,625
Notes Payable 2,625
Which statement describes the market interest rate?
It is listed in the bond indenture.
It is the contractual interest rate used to determine the amount of cash interest paid by the borrower.
It is the rate investors demand for loaning funds.
It is the rate stated on the bond certificate that determines the value at which bonds will sell.
What term is used for bonds that have specific assets pledged as collateral?
discount bonds
convertible bonds
secured bonds
callable bonds
Nashville Rail Co. issued $100,000 in 10-year bonds in 2009 at 103. The final interest payment was made and recorded. What entry will Nashville record for the redemption of its bonds at maturity?
Bonds Payable 100,000
Cash 100,000
Bonds Payable 103,000
Cash 103,000
Bonds Payable 103,000
Premium on Bonds Payable 3,000
Cash 100,000
Bonds Payable 103,000
Gain on Bonds Redemption 3,000
Cash 100,000
What is the nature of a bond premium?
it increases the cost of borrowing
it doesn't change the cost of borrowing
none of these
it reduces the cost of borrowing
Tanner, Inc. issued a 10%, 5-year, $100,000 bond when the market rate of interest was 12%. At what value will the bond sell?
par
a premium
face value
a discount
A $500,000 bond is retired at 101¼ when the unamortized premium is $4,500. Which of the following is one effect of recording the retirement?
a $6,250 gain
a $10,806 loss
a $1,750 loss
a $6,250 loss
Which one of the following is a major disadvantage of a corporation?
limited liability of stockholders
additional taxes
transferable ownership rights
limited life
If a corporation issues 1,000 shares of $3 par common stock for $7 a share, how much is the legal capital?
$7,000
$3,000
$4,000
$0
Which of the following is a disadvantage of the corporate business form?
No income taxes
Government regulation
Continuous life
Easy acquisition of capital
DT Inc. issued 3,000 shares of $5 par value common stock for $6 per share. Which of the following is one part of the journal entry to record the issuance?
debit to paid-in-capital in excess of par value for $3,000
debit to cash for $15,000
credit to common stock for $15,000
credit to common stock for $18,000
For what reason might a company acquire treasury stock?
To reissue the shares to officers and employees under bonus and stock compensation plans
To signal to the stock market that management believes the stock is overpriced
To increase profit
To increase the number of shares of stock outstanding
Harrison, Inc. issued 600 shares of common stock at $10 per share. If the stock was no-par value stock, which of the following will be part of the journal entry to record the issuance?
Debit to Cash for $600
Credit to Paid-in Capital in Excess of Par for $600
Credit to Common Stock for $6,000
Debit to Paid-in Capital $6,000
Which statement about stock dividends is true?
Stock dividends reduce a company’s cash balance.
A stock dividend has no effect on total stockholders’ equity.
A stock dividend decreases total stockholders’ equity.
A stock dividend increases total stockholders’ equity for the par value of the stock being distributed.
M-Bot Corporation has 10,000 shares of 8%, $100 par value, cumulative preferred stock outstanding at December 31, 2017. No dividends were declared in 2015 or 2016. If M-Bot wants to pay $375,000 of dividends in 2017, how much will common stockholders receive?
$0
$295,000
$215,000
$135,000
How are dividends in arrears reported in the financial statements?
as a liability
as an expense
in a footnote
as an equity item
Weeds Inc. has a balance of $10,000,000 in retained earnings and declares a 5% stock dividend on its 1,000,000 shares of $5 par value common stock. The current market value of the stock is $25 per share. What is the entry to record this transaction at the declaration date?
Stock Dividends 1,250,000
Common Stock 1,250,000
Stock Dividends 1,250,000
Common Stock Dividends Distributable 250,000
Paid-in Capital in Excess of Par Value 1,000,000
Stock Dividends 250,000
Common Stock Dividends Distributable
250,000
Common Stock Dividends Distributable
250,000
Common Stock 250,000
When a stock dividend is declared, which of the following accounts is debited?
common stock dividends distributable
paid-in capital in excess of par value
stock dividends
common stock
In recording a factoring transaction:
IFRS focuses on loss of control.
GAAP focuses on loss of control and risks and rewards.
IFRS and GAAP allow partial derecognition.
IFRS allows partial derecognition.
21.25%
20.00%
19.5%
18.75%
What amount should be recorded as the cost of the equipment?
$25,400
$25,800
$25,200
$24,000
$9,500,000
$5,500,000
$11,500,000
$7,500,000
$56,000
$70,000
$84,000
$75,250
