WorksheetsFinancial Accounting | MCQs Midterm
Total questions: 76
Worksheet time: 38mins
Name
Class
Date
1.
(LO 1) Which of the following is not a step in the accounting process?
a)
Identification.
b)
Economic entity.
c)
Recording.
d)
Communication.
2.
(LO 1) Which of the following statements about users of accounting information is incorrect?
a)
Management is an internal user.
b)
Taxing authorities are external users.
c)
Present creditors are external users.
d)
Regulatory authorities are internal users.
3.
(LO 2) The historical cost principle states that:
a)
assets should be initially recorded at cost and adjusted when the fair value changes.
b)
activities of an entity are to be kept separate and distinct from its owner.
c)
assets should be recorded at their cost.
d)
only transaction data capable of being expressed in terms of money be included in the accounting records.
4.
(LO 2) Which of the following statements about basic assumptions is correct?
a)
Basic assumptions are the same as accounting principles.
b)
The economic entity assumption states that there should be a particular unit of accountability.
c)
The monetary unit assumption enables accounting to measure employee morale.
d)
Partnerships are not economic entities.
5.
(LO 2) The three types of business entities are:
a)
proprietorships, small businesses, and partnerships.
b)
proprietorships, partnerships, and corporations.
c)
proprietorships, partnerships, and large businesses.
d)
financial, manufacturing, and service companies.
6.
(LO 3) Net income will result during a time period when:
a)
assets exceed liabilities.
b)
assets exceed revenues.
c)
expenses exceed revenues.
d)
revenues exceed expenses.
7.
(LO 3) As of December 31, 2020, Stoneland AG has assets of €3,500 and equity of €2,000. What are the liabilities for Stoneland AG as of December 31, 2020?
a)
1500.0
b)
1000.0
c)
2500.0
d)
2000.0
8.
(LO 4) Performing services on account will have the following effects on the components of the basic accounting equation:
a)
increase assets and decrease equity.
b)
increase assets and increase equity.
c)
increase assets and increase liabilities.
d)
increase liabilities and increase equity.
9.
(LO 4) Which of the following events is not recorded in the accounting records?
a)
Equipment is purchased on account.
b)
An employee is terminated.
c)
A cash investment is made into the business.
d)
The company pays a cash dividend.
10.
(LO 4) During 2020, Xia Lin Company’s assets decreased ¥500,000 and its liabilities decreased ¥900,000. Its equity therefore:
a)
increased ¥400,000.
b)
decreased ¥1,400,000.
c)
decreased ¥400,000.
d)
increased ¥1,400,000.
11.
(LO 4) Payment of an account payable affects the components of the accounting equation in the following way.
a)
decreases equity and decreases liabilities.
b)
increases assets and decreases liabilities.
c)
decreases assets and increases equity.
d)
decreases assets and decreases liabilities.
12.
(LO 5) Which of the following statements is false?
a)
A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.
b)
A statement of financial position reports the assets, liabilities, and equity at a specific date.
c)
An income statement presents the revenues, expenses, assets, and liabilities for a specific period of time.
d)
A retained earnings statement summarizes the changes in retained earnings for a specific period of time.
13.
(LO 5) On the last day of the period, Jim Otto Company buys a $900 machine on credit. This transaction will affect the:
a)
income statement only.
b)
statement of financial position only.
c)
income statement and retained earnings statement only.
d)
income statement, retained earnings statement, and statement of financial position.
14.
(LO 5) The financial statement that reports assets, liabilities, and equity is the:
a)
income statement.
b)
retained earnings statement.
c)
statement of financial position.
d)
statement of cash flows.
15.
*(LO 6) Services performed by a public accountant include:
a)
auditing, taxation, and management consulting.
b)
auditing, budgeting, and management consulting.
c)
auditing, budgeting, and cost accounting.
d)
internal auditing, budgeting, and management consulting.
16.
(LO 1) Which of the following statements about an account is true?
a)
The right side of an account is the debit, or increase, side.
b)
An account is an individual accounting record of increases and decreases in specific asset, liability, and equity items.
c)
There are separate accounts for specific assets and liabilities but only one account for equity items.
d)
The left side of an account is the credit, or decrease, side.
17.
(LO 1) Debits:
a)
increase both assets and liabilities.
b)
decrease both assets and liabilities.
c)
increase assets and decrease liabilities.
d)
decrease assets and increase liabilities.
18.
(LO 1) A revenue account:
a)
is increased by debits.
b)
is decreased by credits.
c)
has a normal balance of a debit.
d)
is increased by credits.
19.
(LO 1) Accounts that normally have debit balances are:
a)
assets, expenses, and revenues.
b)
assets, expenses, and share capital—ordinary.
c)
assets, liabilities, and dividends.
d)
assets, dividends, and expenses.
20.
(LO 1) The expanded accounting equation is:
a)
Assets + Liabilities = Share Capital + Retained Earnings + Dividends + Revenues + Expenses.
b)
Assets = Liabilities + Share Capital + Retained Earnings + Dividends + Revenues – Expenses.
c)
Assets = Liabilities – Share Capital – Retained Earnings – Dividends – Revenues – Expenses.
d)
Assets = Liabilities + Share Capital + Retained Earnings + Revenues – Expenses – Dividends.
21.
(LO 2) Which of the following is not part of the recording process?
a)
Analyzing transactions.
b)
Preparing an income statement.
c)
Entering transactions in a journal.
d)
Posting journal entries.
22.
(LO 2) Which of the following statements about a journal is false?
a)
It is not a book of original entry.
b)
It provides a chronological record of transactions.
c)
It helps to locate errors because the debit and credit amounts for each entry can be readily compared.
d)
It discloses in one place the complete effect of a transaction.
23.
(LO 2) The purchase of supplies on account should result in:
a)
a debit to Supplies Expense and a credit to Cash.
b)
a debit to Supplies Expense and a credit to Accounts Payable.
c)
a debit to Supplies and a credit to Accounts Payable.
d)
a debit to Supplies and a credit to Accounts Receivable.
24.
(LO 3) The order of the accounts in the ledger is:
a)
assets, revenues, expenses, liabilities, share capital—ordinary, dividends.
b)
assets, liabilities, share capital—ordinary, dividends, revenues, expenses.
c)
share capital—ordinary, assets, revenues, expenses, liabilities, dividends.
d)
revenues, assets, expenses, liabilities, share capital—ordinary, dividends.
25.
(LO 3) A ledger:
a)
contains only asset and liability accounts.
b)
should show accounts in alphabetical order.
c)
is a collection of the entire group of accounts maintained by a company.
d)
is a book of original entry.
26.
(LO 3) Posting:
a)
normally occurs before journalizing.
b)
transfers ledger transaction data to the journal.
c)
is an optional step in the recording process.
d)
transfers journal entries to ledger accounts.
27.
(LO 3) Before posting a payment of €5,000, the Accounts Payable of Green Grocers had a normal balance of €16,000. The balance after posting this transaction was:
a)
21000.0
b)
5000.0
c)
11000.0
d)
cannot be determined.
28.
(LO 4) A trial balance:
a)
is a list of accounts with their balances at a given time.
b)
proves the journalized transactions are correct.
c)
will not balance if a correct journal entry is posted twice.
d)
proves that all transactions have been recorded.
29.
(LO 4) A trial balance will not balance if:
a)
a correct journal entry is posted twice.
b)
the purchase of supplies on account is debited to Supplies and credited to Cash.
c)
a £100 dividend is debited to Dividends for £1,000 and credited to Cash for £100.
d)
a £450 payment on account is debited to Accounts Payable for £45 and credited to Cash for £45.
30.
(LO 4) The trial balance of Jeong Company had accounts with the following normal balances: Cash $5,000, Service Revenue $85,000, Salaries and Wages Payable $4,000, Salaries and Wages Expense $40,000, Rent Expense $10,000, Share Capital—Ordinary $42,000, Dividends $15,000, and Equipment $61,000. In preparing a trial balance, the total in the debit column is:
a)
131000.0
b)
216000.0
c)
91000.0
d)
116000.0
31.
(LO 1) The revenue recognition principle states that:
a)
revenue should be recognized in the accounting period in which a performance obligation is satisfied.
b)
expenses should be matched with revenues.
c)
the economic life of a business can be divided into artificial time periods.
d)
the fiscal year should correspond with the calendar year.
32.
(LO 1) The time period assumption states that:
a)
companies must wait until the calendar year is completed to prepare financial statements.
b)
companies use the fiscal year to report financial information.
c)
the economic life of a business can be divided into artificial time periods.
d)
companies record information in the time period in which the events occur.
33.
(LO 1) Which of the following statements about the accrual basis of accounting is false?
a)
Events that change a company’s financial statements are recorded in the periods in which the events occur.
b)
Revenue is recognized in the period in which services are performed.
c)
This basis is in accordance with International Financial Reporting Standards.
d)
Revenue is recorded only when cash is received, and expense is recorded only when cash is paid.
34.
(LO 1) The principle or assumption dictating that efforts (expenses) should be recognized in the period in which a company consumes assets or incurs liabilities to generate revenue is the:
a)
expense recognition principle.
b)
cost assumption.
c)
time period assumption.
d)
revenue recognition principle.
35.
(LO 1) Adjusting entries are made to ensure that:
a)
expenses are recognized in the period in which they are incurred.
b)
revenues are recorded in the period in which services are performed.
c)
statement of financial position and income statement accounts have correct balances at the end of an accounting period.
d)
All the responses above are correct.
36.
(LO 1) Each of the following is a major type (or category) of adjusting entries except:
a)
prepaid expenses.
b)
accrued revenues.
c)
accrued expenses.
d)
recognized revenues.
37.
(LO 2) The trial balance shows Supplies €1,350 and Supplies Expense €0. If €600 of supplies are on hand at the end of the period, the adjusting entry is:
a)
Supplies 600 / Supplies Expense 600
b)
Supplies 750 / Supplies Expense 750
c)
Supplies Expense 750 / Supplies 750
d)
Supplies Expense 600 / Supplies 600
38.
(LO 2) Adjustments for prepaid expenses:
a)
decrease assets and increase revenues.
b)
decrease expenses and increase assets.
c)
decrease assets and increase expenses.
d)
decrease revenues and increase assets.
39.
(LO 2) Accumulated Depreciation is:
a)
a contra asset account.
b)
an expense account.
c)
an equity account.
d)
a liability account.
40.
(LO 2) Rivera Shipping computes depreciation on delivery equipment at ¥1,000 (amounts in thousands) for the month of June. The adjusting entry to record this depreciation is as follows.
a)
Depreciation Expense 1,000 / Accumulated Depreciation—Rivera Shipping 1,000
b)
Depreciation Expense 1,000 / Equipment 1,000
c)
Depreciation Expense 1,000 / Accumulated Depreciation—Equipment 1,000
d)
Equipment Expense 1,000 / Accumulated Depreciation—Equipment 1,000
41.
(LO 2) Adjustments for unearned revenues:
a)
decrease liabilities and increase revenues.
b)
have an assets-and-revenues-account relationship.
c)
increase assets and increase revenues.
d)
decrease revenues and decrease assets.
42.
(LO 3) Adjustments for accrued revenues:
a)
have a liabilities-and-revenues-account relationship.
b)
have an assets-and-revenues-account relationship.
c)
decrease assets and revenues.
d)
decrease liabilities and increase revenues.
43.
(LO 3) Anika Winter earned a salary of €400 for the last week of September. She will be paid on October 1. The adjusting entry for Anika’s employer at September 30 is:
a)
No entry is required.
b)
Salaries and Wages Expense 400 / Salaries and Wages Payable 400
c)
Salaries and Wages Expense 400 / Cash 400
d)
Salaries and Wages Payable 400 / Cash 400
44.
(LO 4) Which of the following statements is incorrect concerning the adjusted trial balance?
a)
An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made.
b)
The adjusted trial balance provides the primary basis for the preparation of financial statements.
c)
The adjusted trial balance lists the account balances segregated by assets and liabilities.
d)
The adjusted trial balance is prepared after the adjusting entries have been journalized and posted.
45.
*(LO 5) The trial balance shows Supplies NT$0 and Supplies Expense NT$1,500. If NT$800 of supplies are on hand at the end of the period, the adjusting entry is:
a)
debit Supplies NT$800 and credit Supplies Expense NT$800.
b)
debit Supplies Expense NT$800 and credit Supplies NT$800.
c)
debit Supplies NT$700 and credit Supplies Expense NT$700.
d)
debit Supplies Expense NT$700 and credit Supplies NT$700.
46.
*(LO 6) Neutrality is an ingredient of: (Faithful Representation / Relevance)
a)
Yes / Yes
b)
No / No
c)
Yes / No
d)
No / Yes
47.
*(LO 6) Which item is a constraint in financial accounting?
a)
Comparability.
b)
Materiality.
c)
Cost.
d)
Consistency.
48.
(LO 1) Which of the following statements is incorrect concerning the worksheet?
a)
The worksheet is essentially a working tool of the accountant.
b)
The worksheet is distributed to management and other interested parties.
c)
The worksheet cannot be used as a basis for posting to ledger accounts.
d)
Financial statements can be prepared directly from the worksheet before journalizing and posting the adjusting entries.
49.
(LO 1) In a worksheet, net income is entered in the following columns:
a)
income statement (Dr) and statement of financial position (Dr).
b)
income statement (Cr) and statement of financial position (Dr).
c)
income statement (Dr) and statement of financial position (Cr).
d)
income statement (Cr) and statement of financial position (Cr).
50.
(LO 1) In the unadjusted trial balance of its worksheet for the year ended December 31, 2020, Kim Company reported Equipment of NT$120,000. The year-end adjusting entries require an adjustment of NT$15,000 for depreciation expense for the equipment. After the adjusted trial balance is completed, what amount should be shown in the financial statement columns?
a)
A debit of NT$105,000 for Equipment in the statement of financial position column.
b)
A credit of NT$15,000 for Depreciation Expense in the income statement column.
c)
A debit of NT$120,000 for Equipment in the statement of financial position column.
d)
A debit of NT$15,000 for Accumulated Depreciation—Equipment in the statement of financial position column.
51.
(LO 2) An account that will have a zero balance after closing entries have been journalized and posted is:
a)
Service Revenue.
b)
Supplies.
c)
Prepaid Insurance.
d)
Accumulated Depreciation—Equipment.
52.
(LO 2) When a net loss has occurred, Income Summary is:
a)
debited and Retained Earnings is credited.
b)
credited and Retained Earnings is debited.
c)
debited and Dividends is credited.
d)
credited and Dividends is debited.
53.
(LO 2) The closing process involves separate entries to close (1) expenses, (2) dividends, (3) revenues, and (4) income summary. The correct sequencing of the entries is:
a)
(4), (3), (2), (1).
b)
(1), (2), (3), (4).
c)
(3), (1), (4), (2).
d)
(3), (2), (1), (4).
54.
(LO 2) Which types of accounts will appear in the post-closing trial balance?
a)
Permanent (real) accounts.
b)
Temporary (nominal) accounts.
c)
Accounts shown in the income statement columns of a worksheet.
d)
None of these answer choices is correct.
55.
(LO 3) All of the following are required steps in the accounting cycle except:
a)
journalizing and posting closing entries.
b)
preparing financial statements.
c)
journalizing the transactions.
d)
preparing a worksheet.
56.
(LO 3) The proper order of the following steps in the accounting cycle is:
a)
prepare unadjusted trial balance, journalize transactions, post to ledger accounts, journalize and post adjusting entries.
b)
journalize transactions, prepare unadjusted trial balance, post to ledger accounts, journalize and post adjusting entries.
c)
journalize transactions, post to ledger accounts, prepare unadjusted trial balance, journalize and post adjusting entries.
d)
prepare unadjusted trial balance, journalize and post adjusting entries, journalize transactions, post to ledger accounts.
57.
(LO 3) When Lopez Company purchased supplies worth $600, it incorrectly recorded a credit to Supplies for $6,000 and a debit to Cash for $6,000. Before correcting this error:
a)
Cash is overstated and Supplies is overstated.
b)
Cash is understated and Supplies is understated.
c)
Cash is understated and Supplies is overstated.
d)
Cash is overstated and Supplies is understated.
58.
(LO 3) Cash of €100 received at the time the service was performed was journalized and posted as a debit to Cash €100 and a credit to Accounts Receivable €100. Assuming the incorrect entry is not reversed, the correcting entry is:
a)
debit Service Revenue €100 and credit Accounts Receivable €100.
b)
debit Accounts Receivable €100 and credit Service Revenue €100.
c)
debit Cash €100 and credit Service Revenue €100.
d)
debit Accounts Receivable €100 and credit Cash €100.
59.
(LO 4) The correct order of presentation in a classified statement of financial position for the following current assets is:
a)
accounts receivable, cash, prepaid insurance, inventory.
b)
prepaid insurance, inventory, accounts receivable, cash.
c)
cash, accounts receivable, inventory, prepaid insurance.
d)
inventory, cash, accounts receivable, prepaid insurance.
60.
(LO 4) A company has purchased a tract of land. It expects to build a production plant on the land in approximately 5 years. During the 5 years before construction, the land will be idle. The land should be reported as:
a)
property, plant, and equipment.
b)
land expense.
c)
a long-term investment.
d)
an intangible asset.
61.
(LO 4) In a classified statement of financial position, assets and liabilities are usually shown in the following order:
a)
current assets, current liabilities, non-current liabilities, and non-current assets.
b)
non-current liabilities, current liabilities, current assets, and non-current assets.
c)
non-current liabilities, non-current assets, current liabilities, and non-current assets.
d)
non-current assets, current assets, non-current liabilities, and current liabilities.
62.
(LO 4) Current assets are listed:
a)
in the reverse order of expected conversion to cash.
b)
by importance.
c)
by longevity.
d)
by size.
63.
*(LO 5) On December 31, Kohl Company correctly made an adjusting entry to recognize $2,000 of accrued salaries payable. On January 8 of the next year, total salaries of $3,800 were paid. Assuming the correct reversing entry was made on January 1, the entry on January 8 will result in a credit to Cash $3,800 and the following debit(s):
a)
Salaries and Wages Payable $1,800 and Salaries and Wages Expense $2,000.
b)
Salaries and Wages Payable $2,000 and Salaries and Wages Expense $1,800.
c)
Salaries and Wages Expense $3,800.
d)
Salaries and Wages Payable $3,800.
64.
Gross profit will result if
a)
operating expenses are less than net income.
b)
net sales are greater than operating expenses.
c)
net sales are greater than cost of goods sold.
d)
operating expenses are greater than cost of goods sold.
65.
Under a perpetual inventory system, when goods are purchased for resale by a company:
a)
purchases on account are debited to Inventory.
b)
purchases on account are debited to Purchases.
c)
purchase returns are debited to Purchase Returns and
Allowances.
d)
freight costs are debited to Freight-Out.
66.
The sales accounts that normally have a debit balance are:
a)
a. Sales Discounts.
b)
b. Sales Returns and Allowances.
c)
Both (a) and (b).
d)
Neither (a) nor (b).
67.
A credit sale of NT$7,500 is made on June 13, terms 2/10,
net/30. A return of NT$500 is granted on June 16. The amount received
as payment in full on June 23 is:
a)
NT$7,000.
b)
NT$6,860.
c)
NT$6,850.
d)
NT$6,500.
68.
Which of the following accounts will normally appear in
the ledger of a merchandising company that uses a perpetual inventory system?
a)
Purchases.
b)
Freight-In.
c)
Cost of Goods Sold.
d)
Purchase Discounts.
69.
To record the sale of goods for cash in a perpetual inventory system:
a)
only one journal entry is necessary to record cost of goods
sold and reduction of inventory.
b)
only one journal entry is necessary to record the receipt of
cash and the sales revenue.
c)
two journal entries are necessary: one to record the receipt of
cash and sales revenue, and one to record the cost of goods sold
and reduction of inventory.
d)
two journal entries are necessary: one to record the receipt of
cash and reduction of inventory, and one to record the cost of
goods sold and sales revenue.
70.
The steps in the accounting cycle for a merchandising
company are the same as those in a service company except:
a)
an additional adjusting journal entry for inventory may be
needed in a merchandising company.
b)
closing journal entries are not required for a merchandising
company.
c)
a post-closing trial balance is not required for a merchandising company.
d)
an income statement is required for a merchandising
company.
71.
The income statement for a merchandising company shows
each of the following features except:
a)
gross profit.
b)
cost of goods sold.
c)
a sales section.
d)
investing activities section.
72.
If net sales are €400,000, cost of goods sold is €310,000,
and operating expenses are €60,000, the gross profit is:
a)
€30,000.
b)
€90,000.
c)
€340,000.
d)
€400,000.
73.
In a worksheet using a perpetual inventory system,
Inventory is shown in the following columns:
a)
adjusted trial balance debit and statement of financial position debit.
b)
income statement debit and statement of financial position
debit.
c)
income statement credit and statement of financial position
debit.
d)
income statement credit and adjusted trial balance debit.
74.
In determining cost of goods sold in a periodic system:
a)
purchase discounts are deducted from net purchases.
b)
freight-out is added to net purchases.
c)
purchase returns and allowances are deducted from net
purchases.
d)
freight-in is added to net purchases.
75.
If beginning inventory is HK$600,000, cost of goods purchased is HK$3,800,000, and ending inventory is HK$500,000, cost
of goods sold is:
a)
HK$3,900,000.
b)
HK$3,700,000.
c)
HK$3,300,000.
d)
HK$4,200,000.
76.
When goods are purchased for resale by a company using
a periodic inventory system:
a)
purchases on account are debited to Inventory.
b)
purchases on account are debited to Purchases.
c)
purchase returns are debited to Purchase Returns and
Allowances.
d)
freight costs are debited to Purchases.
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