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1. An adjusting entry in which Unearned Services Revenue was debited for $4,000 and Services Revenue was credited for $4,000 was posted to the Unearned Services Revenue account as a debit and to the Office Supplies Expense account as a credit. As a consequence of this error, the

A. trial balance will have equal totals of debit and credit balances.

B. trial balance will have a credit balance $4,000 greater than the debit balance

C. net income will be overstated $4,000

D. trial balance will have a debit balance $4,000 greater than the credit balance.

2. Interest earned on cash equivalents is shown on the statement of cash flows as cash from

A. a noncash investing and financing activity

B. an investing activity

C. a financing activity

D. an operating activity.

3. In a perpetual inventory system, as inventory is purchased, it is initially recorded as (1) _____________. When inventory is sold to customers, it is converted to (2) ___________.

A. (1) an expense (2) revenue

B. (1) an asset (2) an expense

C. (1) an asset (2) revenue

D. (1) an expense (2) cost of goods sold

4. Which of the following is a CORRECT statement of the rules of debit and credit?

A. Debits increase assets and decrease liabilities.

B. Credits increase assets and increase owners' equity

C. Debits increase assets and increase owners' equity.

D. Credits decrease assets and decrease liabilities.

5. Preferred Stock, $100 par, totals $500,000. Common Stock totals $500,000 and Additional Paid-in Capital, Common Stock is $100,000. Retained Earnings totals $250,000. If there are no dividends in arrears, what is the book value per share of the preferred stock?

A. $105 per share

B. $110 per share

C. $100 per share

D. $102 per share

6.

In no particular order, the accounting cycle includes the following activities. A-Posting B-Adjusting entries C-Preparing financial statements D-Journalizing daily entries E-Preparing a trial balance F-Journalizing and posting closing entries G-Preparing after-closing trial balance H-Preparing an adjusted trial balance. What is the correct order of activities of the accounting cycle?

A. B, C, D, A, E, F, G, H

B. D, A, E, B, F, G, H, C

C. D, A, E, B, H, C, F, G

D. D, A, E, B, C, H, F, G

7.

On June 28, 2009, a business sold for $1,500 a plant asset that cost $5,000. The asset had a 5-year service life, no salvage value, and had been used by the business since January 1, 2006. Straight-line depreciation was used. The fiscal year ends on December 31. What will be the result of selling the plant asset?

A. No gain or loss on the disposal of the plant asset.

B. A $500 unrecognized gain on the sale of a plant asset.

C. A $1,000 gain on the disposal of a plant asset.

D. A $500 loss on the disposal of a plant asset.

8. The Sales Returns and Allowance account and the Sales Discount account are closed at the end of the period

A. to the Cost of Goods Sold account

B. with other expense accounts

C. with other revenue accounts

D. to the Sales account

9. Restructuring costs are reported as

A. a deduction in arriving at operating income.

B. a deduction in arriving at taxable income

C. an extraordinary item.

D. an unusual and extraordinary item.

10. The Sarbanes-Oxley Act in 2002 provided for the establishment of the __________________ which is responsible for overseeing all aspects of the public accounting profession related to audits of publicly held companies.

A. Public Accounting Compliance Board

B. Professional Accounting Oversight Board

C. Public Company Accounting Oversight Board

D. Public Company Auditing Oversight Board

11. The effect of events on the business is recognized as services are rendered or consumed rather than when cash is received or paid and is a result of using the

A. matching principle.

B. accrual basis of accounting.

C. realization principle

D. time period principle

12. Ten thousand shares of common stock with a par value of $5 are issued at a price of $7 per share. The journal entry to record this transaction will include a

A. debit to Discount on Capital Stock for $20,000.

B. credit to Additional Paid-in Capital for $20,000

C. credit to Capital Stock for $70,000

D. debit to Cash for $50,000.

13. On October 1, the company issued $500,000 of 6%, 10-year bonds at a price of 100. Interest is paid semiannually. What is the journal entry at the end the first year, December 31, to accrue the interest on the bonds?

A. A debit to Bond Interest Expense for $7,500 and a credit to Cash for $7,500

B. A debit to Bond Interest Expense for $7,500 and a credit to Bond Interest Payable for $7,500

C. A debit to Bond Interest Expense for $30,000 and a credit to Bond Interest Payable for $30,000.

D. A debit to Bond Interest Expense for $7,500 and a credit to Bonds for $7,500.

14. On January 1, a business exchanged a plant asset with a cost of $18,000 and accumulated depreciation of $16,500 for a similar asset that had a list price of $23,000. The business received a trade-in allowance of $2,100 on the old plant asset. The income-tax method was used to record this trade. What was the result of the exchange?

A. A cost basis of $23,600 for the new plant asset

B. A $1,000 unrecognized gain on the exchange of the plant asset

C. A cost basis of $22,400 for the new plant asset

D. A $600 recognized gain on the exchange of the plant asset.

15. Ending inventory is overstated in Period A. As a result of this error

A. Retained Earnings at the end of Period B is correct.

B. Income of Period B is overstated

C. Retained Earnings at the end of Period A is understated

D. Income of Period A is understated.

16. When a firm writes off a bad debt under the allowance method of accounting for bad debts, which of the following will occur?

A. Total net current assets will decrease

B. The net realizable value of accounts receivable decreases

C. The net realizable value of accounts receivable will not change

D. The cash account will decrease

17. Sales were $424,000. Beginning inventory was $45,000. Purchases were $245,000. Ending inventory is $38,000. Operating expenses were $124,000. Calculate the cost of goods sold.

A. $128,000

B. $172,000

C. $290,000

D. $252,000

18. A trial balance with equal total credits and total debits is proof of which of the following?

A. No errors occurred when posting.

B. No errors occurred when journalizing or posting

C. The equality of debit and credits.

D. No errors occurred when journalizing (recording) transactions.

19. In accounting, the word accrued refers to the payment of expenses

A. at the time of payment.

B. that has occurred

C. that will not be made

D. that has been deferred

20. Which accounting principle or concept permits the direct write-off method of accounting for uncollectible accounts?

A. matching principle

B. materiality principle

C. full-disclosure principle

D. business entity concept

21.

Consider the following:

Assets-----$300,000

Liabilities-----$90,000

Capital stock-----$120,000

What is the dollar amount of retained earnings?

A. $210,000

B. $90,000

C. $30,000

D. $180,000

22. Accounting principles are given the force of law when they are adopted by the

A. Financial Accounting Standards Board (FASB).

B. American Accounting Association (AAA).

C. Internal Revenue Service (IRS).

D. Securities Exchange Commission (SEC).

23. If the beginning inventory was $45,000, the cost of goods sold was $380,000, and the inventory turnover rate is 8, the ending inventory must be

A. $50,000

B. $52,500

C. $45,000

D. $40,000

24.

Which of the following is a significant measure of short-term debt paying ability, expressed in dollars?

A. Net Income Percentage

B. Current ratio

C. Return on Equity

D. Working capital

25.

Using the following information from a recent payroll, compute the wages payable.

Gross wages-----$100,000

State Income Taxes Payable-----$2,000

Federal Income Taxes Payable (employee)-----$23,500

Social Security and Medicare Taxes Payable (employee)-----$8,000

Federal and State Unemployment Taxes-----7,200

Prepaid Worker's Compensation Insurance-----$4,000

Employee Health and Life Insurance Expense-----$9,000 Pension Fund Expense-----$12,000

The Employee Medical Insurance Expense and the Pension Fund Expense are employee benefits paid by the employer.

A. $66,500

B. $73,500

C. $45,500

D. $57,500

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