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WorksheetsAcct 2010 Final Exam Review
Total questions: 92
Worksheet time: 49mins
The primary objective of financial reporting is to provide information
on the cash flows of the company.
about the profitability of the enterprise.
to the federal government.
useful for making investment and credit decisions.
Frost Enterprises buys a warehouse for $570,000 to use for its East Coast distribution operations. On the date of the purchase, a professional appraisal shows a value of $620,000 for the warehouse. The seller had originally purchased the building for $525,000. Frost has a similar warehouse on the West Coast that has a book value of $586,000. Under the historical cost principle, Frost should record the building for
$525,000.
$620,000.
$570,000.
$586,000.
To be useful, information must have which of the following fundamental qualitative characteristics?
Faithful representation and diversity
Timeliness and affordability
Relevance and faithful representation
Expediency and relevance
Assume that a business is headed for certain bankruptcy and it is evident that its liabilities greatly exceed its assets. Which principle would be violated if its financial statements were prepared using standard U.S. GAAP?
Entity assumption
Continuity assumption
Stable-monetary-unit assumption
Historical cost principle
The accounting equation can be expressed as
Assets = Liabilities-Equity.
Assets-Liabilities = Equity.
Assets + Liabilities = Equity.
Equity-Assets = Liabilities.
During the year, Greenwash Corporation has $270,000 in revenues, $145,000 in expenses, and $3,000 in dividend declarations and payments. Net income for the year was:
$270,000
$148,000
$128,000
$125,000
How would the issuance of common stock for cash affect the accounting equation?
Decrease assets and decrease liabilities
Increase assets and increase liabilities
Increase liabilities and decrease stockholders' equity
Increase assets and increase stockholders' equity
The costs of doing business are classified as:
revenues.
assets.
expenses.
liabilities.
Revenues are
decreases in liabilities resulting from paying off loans.
increases in retained earnings resulting from selling products or performing services.
increases in paid-in capital resulting from the owners investing in the business.
all of the above.
Which financial statement would show how well a company performed over the past year?
Balance sheet
Income statement
Statement of Retained Earnings
Statement of Cash Flows
What item flows from the income statement to the statement of retained earnings?
White Instruments had retained earnings of $380,000 at December 31, 2017. Net income for 2018 totaled $210,000, and dividends declared for 2018 were $75,000. How much retained earnings should White report at December 31, 2018?
$515,000
$380,000
$455,000
$590,000
Terry Corporation began the year with cash of $147,000 and land that cost $47,000. During the year Terry earned service revenue of $240,000 and had the following expenses: salaries, $185,000; rent, $87,000; and utilities, $20,000. At year-end Terry’s cash balance was down to $43,000. How much net income (or net loss) did Terry experience for the year?
$(32,000)
$55,000
$(156,000)
$(52,000)
All of the following are current assets except
accounts receivable.
prepaid expenses.
inventory.
accounts payable.
Amounts owed to a company by its customers would be:
Accounts Receivable.
Accounts Payable.
Inventory.
Cash
Thorpe Corporation purchases a new delivery truck and signs a note payable at the truck dealership for the total cost. The impact of this transaction on Thorpe Corporation
decreases assets and increases liabilities.
increases assets and increases liabilities.
increases assets and decreases liabilities.
increases assets and increases stockholders' equity.
Purchasing a laptop computer on account will
increase total liabilities.
increase total assets.
have no effect on stockholders' equity.
All of the listed choices are correct.
Accounts Payable had a normal beginning balance of $1,800. During the period, there were debit postings of $200 and credit postings of $700. What was the ending balance?
$2,300 debit
$1,300 debit
$1,300 credit
$2,300 credit
A firm’s beginning cash balance was $10,000. At the end of the period, the balance was $8,000. If total cash paid out during the period was $23,000, the amount of cash receipts was
$31,000.
$33,000.
$21,000.
$25,000.
A doctor purchases medical supplies of $640 and pays $290 cash with the remainder on account. The journal entry for this transaction would be which of the following?
Debit Supplies
Credit Supplies
Debit Supplies
Credit Supplies
An attorney performs services of $1,100 for a client and receives $400 cash with the remainder on account. The journal entry for this transaction would
debit Cash, debit Accounts Receivable, credit Service Revenue.
debit Cash, debit Service Revenue, credit Accounts Receivable.
debit Cash, credit Accounts Receivable, credit Service Revenue.
debit Cash, credit Service Revenue
The journal entry to record the acquisition of land and a building by issuing common stock
debits Land and credits Common Stock.
debits Land, Building, and Common Stock.
debits Common Stock and credits Land and Building.
debits Land and Building and credits Common Stock.
In a double-entry accounting system,
half of all the accounts have a normal credit balance.
a debit entry is recorded on the left side of a T-account.
liabilities, stockholders' equity, and revenue accounts all have normal debit balances.
both a and b are correct.
The following accounts have normal debit balances:
Liabilities
Revenues
Assets
All of the listed accounts have a normal debit balance.
If the credit to record the purchase of supplies on account is not posted,
expenses will be overstated.
liabilities will be understated.
stockholders' equity will be understated.
assets will be understated.
Which of the following transactions would be recorded if using the accrual basis of accounting but not if using the cash basis of accounting?
Purchasing inventory on account
Paying off loans
Borrowing money
Collecting customer payments
A physician performs medical services for a patient on October 20; the total bill for the medical services was $200. The patient makes a co-pay of $20 on October 20, and the insurance company pays the remaining balance of $180 on November 19. On what date(s) will the physician record the revenue for those medical services provided on October 20? (Assume the accrual basis of accounting is used.)
$200 of revenue on November 19
$20 of revenue on October 20 and $180 of revenue on November 19
$200 of revenue on October 20
According to U.S. GAAP, when should revenue be recognized?
When the service is performed, or the goods have been delivered to the customer
When the goods or services have been priced and offered for sale
At the stated date in the contract
When cash is received from the customer
All of the following are types of adjusting entries except
transactions.
depreciation.
accruals.
deferrals.
Aster Corporation had a balance of $1,200 in Prepaid Supplies at the beginning of the year. The company purchased $850 of supplies during the year. At year end, Prepaid Supplies had a balance of $1,700. What is the amount of Supplies Expense that Aster Corporation will recognize for the year?
$1,350
$1,700
$850
$350
On January 1 of the current year, Jasmine Company paid $1,500 in rent to cover six months (January-June). Jasmine recorded this transaction as follows: Jan 1 Prepaid Rent 1,500 Cash 1,500 Jasmine adjusts the accounts at the end of each month. Based on these facts, the adjusting entry at the end of January should include
a debit to Prepaid Rent for $250.
a credit to Prepaid Rent for $250.
a debit to Prepaid Rent for $1250.
a credit to Prepaid Rent for $1250.
What data flows from the statement of retained earnings to the balance sheet?
Cash
Net income
Assets
Ending retained earnings
Which of the following accounts would need to be closed at the end of the period?
Supplies expense
Accounts receivable
Cash
Unearned revenue
How are the assets and liabilities ordered on the balance sheet?
Alphabetical order
Random order
Based on liquidity (most liquid to least liquid)
Based on liquidity (least liquid to most liquid)
For 2018, Broadview Company had revenues in excess of expenses. Which statement describes Broadview's closing entries at the end of 2018? (Assume there is only one closing entry for both revenue and expenses.)
Revenues will be credited, expenses will be debited, and retained earnings will be debited.
Revenues will be debited, expenses will be credited, and retained earnings will be debited.
Revenues will be credited, expenses will be debited, and retained earnings will be credited.
Revenues will be debited, expenses will be credited, and retained earnings will be credited.
Which of the following accounts would not be included in the closing entries?
Retained Earnings
Accumulated Depreciation
Depreciation Expense
Service Revenue
Which ratio measures the ability to pay current liabilities with current assets?
Asset ratio
Debt ratio
Current ratio
Liability ratio
Requiring that an employee with no access to cash do the accounting is an example of which characteristic of internal control?
separation of duties
assignment of responsibility
competent and reliable personnel
monitoring of controls
All of these make up the fraud triangle except
Motive
Rationalization
Planning
Opportunity
Which of the following is an example of misappropriation of assets?
A manager makes a journal entry to a secret company account that they have set up to spend on personal expenses
An employee takes a bribe from a contractor to ensure they get the company’s business
To seem like the company is in better standing to investors a manager edits the journal entries to understate the company’s liabilities
In order to reach the quota to get his bonus a manager makes a few extra journal entries for some extra sales that were never really made
Each of the following represents an internal control procedure except for:
separation of duties
compliance monitoring
clear lines of authority and communication
limited access to both assets and records
Having a corporate code of ethics that prohibits employees from accepting gifts from customers or vendors is an example of which component of internal control?
Risk assessment
Control environment
Information system
Control procedures
Which law or regulation requires that public companies must maintain strong internal control systems?
Securities and Exchange Act of 1933
Dodd-Frank Act
Sarbanes-Oxley Act
Treadway Commission
Companies make most payments by check or EFT wire due to which reason
Provides record of payment
Must be signed by authorized official
Payment supported by evidence
All of the above
A journal entry would need to be made for which of the following adjustments on a bank reconciliation?
Outstanding checks
Bank service charges
Deposits in transit
Bank error to be corrected by the bank
The Cash account of Reese Corporation had a balance of $3,540 at October 31, 2018. Included were outstanding checks totaling $1,800 and an October 31 deposit of $300 that did not appear on the bank statement. The bank statement, which came from Turnstone State Bank, listen an October 31 balance of $5,570. Included in the bank balance was an October 30 collection of $600 on account from a customer who pays the bank directly. The bank statement also showed a $30 service charge, $10 of interest revenue that Reese earned on its bank balance, and an NSF check for $50. Prepare a bank reconciliation to determine how much cash Reese actually had at Oct. 31.
7070
5000
3900
4070
If a bank reconciliation included a deposit in transit of $790, the entry to record this reconciling item would include a
debit to Cash for $790.
credit to Cash for $790.
credit to Prepaid insurance for $790.
No entry is required.
On March 15, Maxwell Plush sold and shipped merchandise on account for $6,000 to Kitson Amusement Park, terms FOB shipping point, n/30. Maxwell's cost of goods sold is 40% of sales. How is Maxwell impacted by this sale on March 15?
Its assets will remain the same, while its equity decreases.
Its assets will increase, while its equity remains the same.
Its assets will increase, as will its equity.
Its assets will remain the same, while its equity increases.
Which of the following statements regarding contracts is incorrect?
A contract must be written to be valid.
A contract is an agreement between two parties that creates enforceable rights or performance obligations.
Identifying the contract with the customer is the first step of the revenue recognition model.
For a business that provides services, the performance obligation is generally satisfied when the service provider has substantially completed the service for the customer.
Washington Products offers credit terms of 3/10, n/45. Which of the following statements is correct?
No discount is offered for early payment.
The total amount of the invoice must be paid within 10 days of the invoice date.
A discount of 3% can be taken if the invoice is paid within 10 days of the invoice date.
The customer can take a 3% discount if the bill is paid within 45 days of the invoice date.
Winter Park Legal Association performs legal services for Rowland Construction for $1,000 on account with credit terms of 1/10, n/30. If Rowland pays the invoice within the discount period, Winter Park will record a debit to Cash in the amount of:
$990
$1000
$10
$1,010
Birchwood Corporation began 2018 with a balance in Accounts Receivable of $600,000. Service revenue, all on account, for the year totaled $1,600,000. The company ended the year with a balance in Accounts Receivable of $775,000. How much cash did the company collect from customers in 2018?
$2,375,000
$1,600,000
$1,425,000
$1,775,000
Accounts Receivable has a debit balance of $2,000, and the Allowance for Uncollectible Accounts has a credit balance of $600. A $110 account receivable is written off. What is the amount of net receivables (net realizable value) after the write-off?
A. $1,510
B. $1,400
C. $1,890
D. $1,290
Linus Company uses the percent-of-sales method to estimate uncollectible. Net credit sales for the current year amount to $110,000, and management estimates 4% will be uncollectible. The Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $3,000. The amount of expense to report on the income statement will be
A. $6,600
B. $7,400
C. $4,400
D. $1,500
Uncollectible account expense for 2018 is $1,415. What is the adjusted balance in the Allowance account at year-end for 2018?
A. $1,415
B. $1,400
C. $750
D. $2,165
Carey Corporation received a four-month 9%, $2,800 note receivable on March 1. The adjusting entry on March 31 will include
A. A credit to Interest Revenue for $21.
B. A debit to Interest Receivable for $84.
C. A debit to Cash for $252.
D. A debit to Interest Receivable for $252.
What is the maturity value of a $20,000, 12%, six-month note?
A. $20,000
B. $21,200
C. $22,400
D. $18,800
If the adjusting entry to accrue interest on a note receivable is omitted, then
A. liabilities are understated, net income is overstated, and stockholders' equity is overstated.
B. assets, net income, and stockholders' equity are overstated.
C. assets, net income, and stockholders' equity are understated.
D. assets are overstated, net income is understated, and stockholders' equity is understated.
How is cost of goods sold classified in the financial statements?
As an expense
As a liability
As an asset
As a revenue
When does the cost of inventory become an expense?
When payment is made to the supplier
When cash is collected from the customer
When inventory is delivered to a customer
When inventory is purchased from the supplier
Seaspray's cost of goods sold using the LIFO method would be:
$ 6,450.
$ 6,465.
$ 6,410.
$ 5,590.
Using the information above; Seaspray's ending inventory using the LIFO method would be:
$ 1,450.
$ 1,375.
$ 1,410.
$ 2,590.
In a period of rising prices,
gross profit under FIFO will be higher than under LIFO.
cost of goods sold under LIFO will be less than under FIFO.
net income under LIFO will be higher than under FIFO.
LIFO inventory will be greater than FIFO inventory
Using the information above; If Leading Edge Frame Shop uses the FIFO method, cost of goods sold will be
$ 42,250.
$ 33,250.
$ 33,400.
$ 32,700.
The income statement for Happy Foods shows gross profit of $150,000, operating expenses of $128,000, and cost of goods sold of $212,000. What is the amount of net sales revenue?
$ 340,000
$ 278,000
$ 362,000
$ 490,000
Corporation had beginning inventory of $ 26,000 and ending inventory of $ 29,000. Its net sales were $149,000 and net purchases were $ 71,000. Cost of goods sold for the period was $ 68,000. What is Flag's gross profit percentage (rounded to the nearest whole percentage)?
52%
50%
54%
46%
Chique Company purchased a building and land for $520,000 in total. Individually, the land appraised for $220,000 and the building appraised for $330,000. How much of the purchase price should be allocated to the cost of the land?
$132,000
$520,000
$220,000
$208,000
When a company expenses the cost of maintenance for its heating and cooling system, that cost will appear on
Statement of stockholders' equity.
Income statement.
Balance sheet.
Statement of retained earnings.
Capitalizing a cost involves increasing what type of account?
Stockholders' equity
Asset
Expense
Liability
Which of the following items should be accounted for as a capital expenditure?
Taxes paid in conjunction with the purchase of office equipment
Costs incurred to repair leaks in a building's roof
The monthly rental cost of an office building
Maintenance fees paid with funds provided by the company's capital
Cropper Company purchased a delivery van for $35,000 on January 1. The van has an estimated 5-year life with a residual value of $8,000. What would the depreciation expense for this van be in the first year if Cropper uses the straight-line method?
$27,000
$5,400
$7,000
$35,000
Bell Corporation purchased a forklift for $60,000 on July 1. The forklift has an estimated useful life of 35,000 usage hours with a residual value of $4,000. Bell uses the units-of-production method for depreciation. If Bell uses the forklift for 6,000 hours during the first year, the depreciation expense on the forklift would be (Round intermediary calculations to two decimal places and your final answers to the nearest whole dollar.)
$60,000
$10,286
$9,600
$4,000
On the first day of its fiscal year, Counter Balance Company purchased a new computer system for a total cost of $40,000. The computer system is expected to have a life of 10 years with a residual value of $7,000. If the company uses the double-declining-balance method, its depreciation expense for this computer system in the first year will be
$6,600
$4,000
$3,300
$8,000
The depreciation method that does not initially use the residual value in depreciation calculations is the
direct method.
double-declining balance method.
straight-line method.
units-of-production method.
Which statement about depreciation is false?
Obsolescence as well as physical wear and tear should be considered when determining the period over which an asset should be depreciated.
Depreciation should not be recorded in years in which the market value of the asset has increased.
Fortin Excavating purchased a used dump truck for $100,000 on January 1, 2018. The company has depreciated the dump truck using the straight-line method over its estimated 10-year life with a $9,000 residual value. Fortin sold the dump truck on January 1, 2021, for $80,000. Total accumulated depreciation on the dump truck on the date of sale was $27,300. What gain or loss should be recorded on the sale?
A gain of $20,000
A gain of $7,300
A loss of $20,000
A loss of $7,300
Which of the following is an intangible asset?
Copyright
Equipment
Land
Leasehold improvements
Data World, Inc., reported sales revenue of $420,000, net income of $21,000, and average total assets of $300,000. Data World's return on assets is
7.0%
1.4%
7.0%
5.0%
Company issued $350,000, 7%, five-year bonds for 115, with interest paid annually. Assuming straight-line amortization, what is the carrying value of the bonds after one year?
$397,250
$392,000
$402,500
$413,000
Missen Furniture issued $500,000 in bonds payable at par. The journal entry to record a semiannual interest payment on these bonds would
debit Cash and credit Interest Expense.
debit Interest Expense and credit Cash.
debit Interest Expense and credit Bonds Payable.
debit Cash and credit Interest Payable.
Bonds with an 8% stated interest rate were issued when the market rate of interest was 5%. This bond was issued at
par value.
face value.
a discount.
a premium.
Duke Corporation issued $1,900,000, 10-year, 4% bonds for $1,786,000 on January 1, 2019. Interest is paid semiannually on January 1 and July 1. The corporation uses the straight-line method of amortization. Duke's fiscal year ends on December 31. The amount of discount amortization on July 1, 2019, would be
$114,000
$76,000
$11,400
$5,700
The discount on a bond payable becomes
additional interest expense in the year the bonds are sold.
additional interest expense over the life of the bonds.
a reduction of interest expense in the year the bonds mature.
a reduction in interest expense over the life of the bonds.
A bond with a face value of $17,000 and a quoted price of 97 has a selling price of, has a price of?
17,000
17,510
16,040.90
16,490
The carrying value on bonds equals Bonds Payable
plus Premium on Bonds Payable.
minus Premium on Bonds Payable.
both a and b.
plus Discount on Bonds Payable.
minus Discount on Bonds Payable.
What type of account is Discount on Bonds Payable and what is its normal balance?
Reversing account; Debit
Contra liability; Credit
Adjusting account; Credit
Contra liability; Debit
New England Company sells $250,000 of 8%, 20-year bonds for 95.2684 on April 1, 2018. The market rate of interest on that day is 8.5%. Interest is paid each year on April 1. The entry to record the sale of the bonds on April 1 would be as follows: (Intermediary and final answer calculations are rounded to the nearest whole number.)
Bonds Payable 250,000
Cash 250,000
Bonds Payable 250,000
Discount on Bonds Payable 11,829
Cash 238,171
Right Track Company sells $450,000 of 8%, 20-year bonds for 86.7816 on April 1, 2018. The market rate of interest on that day is 9.5%. Interest is paid each year on April 1. The issue price of the bond is $390,517. Right Track Company uses the straight-line amortization method. The amount of interest expense for each year will be (Round intermediary calculations to the nearest whole number.)
$38,974.
$22,361.
$45,724.
$36,000.
none of these.
The debt ratio is calculated by dividing:
total debt by total assets.
total assets by total debt.
total assets by long-term liabilities.
long-term liabilities by total assets.
The two main categories of stockholders' equity are
assets and liabilities.
retained earnings and paid-in capital.
common stock and preferred stock.
retained earnings and common stock.
Which of the following is not considered to be an advantage of a corporation?
Continuous life
Ability to raise more capital than a partnership or proprietorship
Limited liability of stockholders for the corporation's debts
Double taxation
Stockholders of a corporation directly elect the
president of the corporation.
chief financial officer.
chairperson of the board.
board of directors.
