Question 1: If a firm had sales of $50,000 during a period and sales returns and allowances of $4,000, its net sales were
A) $54,000.
B) $50,000.
C) $46,000.
D) $4,000.
Question 2: On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An age analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
A) $800.
B) $1,000.
C) $1,200.
D) $200.
Question 3: A firm reported sales of $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectible accounts to be one-half of 1 percent of sales. The entry to record the estimated losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for
A) $1,200.
B) $1,500.
C) $1,800.
D) $3,000.
Question 4: The adjusting entry to record accrued interest on a note payable requires
A) a debit to Interest Income and a credit to Notes Payable.
B) a debit to Interest Payable and a credit to Interest Expense.
C) a debit to Interest Expense and a credit to Cash.
D) a debit to Interest Expense and a credit to Interest Payable.
Question 5: When a company issues a promissory note, the accountant records an entry that includes a credit to Note Payable for
A) the face value of the note.
B) the face value of the note plus the interest that will accrue.
C) the face value less the interest that will accrue.
D) the maturity value of the note.
Question 7: The balance sheet shows
A) the results of business operations.
B) all revenues and expenses.
C) the amount of net income or loss.
D) the financial position of a business at a given time.
Question 8: Amounts that a business must pay in the future are known
A) accounts receivable.
B) accounts payable.
C) stock.
D) expenses.
Question 9 Examples of assets are
A) cash and accounts receivable.
B) cash and revenue.
C) cash and rent expense
D) investments by the owner and revenue
Question 10: A net loss results
A) when expenses are greater than revenue.
B) when assets are greater than liabilities.
C) when revenue is greater than expenses
D) when expenses are greater than assets.
Question 11: The income statement shows
A) the financial position of a business on a specific date.
B) revenue and stockholders' equity.
C) the results of operations for a period of time.
D) the total value of the business.
Question 12: If liabilities are $4,000 and stockholders' equity is $15,000, assets are
A) $9,000.
B) $15,000.
C) $19,000
D) $4,000
Question 13: Credits are used to record
A) decreases in assets and stockholders' equity and increases in liabilities.
B) decreases in assets, liabilities, and stockholders' equity.
C) decreases in liabilities and increases in assets and stockholders' equity.
D) increases in liabilities and stockholders' equity.
Question 14: Debits are used to record increases in
A) assets and revenue.
B) revenue and stockholders' equity.
C) assets and expenses.
D) assets and liabilities.
Question 15: The journal entry to record the sale of services on credit should include
A) debit to Accounts Receivable and a credit to Stock.
B) a debit to Cash and a credit to Accounts Receivable.
C) a debit to Fees Income and a credit to Accounts Receivable.
D) a debit to Accounts Receivable and a credit to Fees Income.
Question 16: The journal entry to record the payment of the current month utility bill would include
A) a debit to Utilities Expense and a credit to Stock.
B) a debit to stockholders' equity and a credit to Cash.
C) a debit to Utilities Expense and a credit to Cash.
D) a debit to Utilities Expense and a credit to Accounts Payable.
Question 17: The journal entry to record the payment of dividends for the month is:
A) a debit to Common Stock and a credit to Cash.
B) a debit to Cash and a credit to Dividends.
C) a debit to Dividends and a credit to Cash.
D) a debit to Dividends and a credit to Common Stock.
Question 18: If the prepaid expenses are not adjusted, assets on the balance sheet
A) will be overstated.
B) will be understated.
C) will not be affected.
D) may be either overstated or understated.
Question 19: On May 1, 20XX, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense associated with this policy for 20XX is
A) $600.
B) $1,200.
C) $1,800.
D) $1,050.
Question 20: The entry to record a purchase of merchandise on credit using a perpetual inventory system includes
A) a debit to Merchandise Inventory and a credit to Accounts Payable.
B) a credit to Merchandise Inventory and a debit to Accounts Payable.
C) a debit to Accounts Payable and a credit to Purchases.
D) a debit to Purchases (COGS) and a credit to Accounts Payable.
Question 21: Which of the following is allowed under generally accepted accounting principles?
A) A company was offered $60,000 for land that it had purchased for $15,000. The company did not sell the land but increased the Land account to $60,000.
B) An owner lists the full cost of his or her personal automobile, which is occasionally used for business purposes, on the company's balance sheet.
C) A large company recorded the $20 cost of a tool as an expense, although the item is expected to be used for 3 years.
D) The Equipment ledger account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000.
Question 22: An accountant who records revenue when a credit sale is made rather than waiting for the receipt of cash from the customer is
A) following the accrual principle.
B) following the conservatism convention.
C) violating generally accepted accounting principles.
D) following the consistency principle.
Question 23: Depreciating equipment over its useful life is an example of
A) following the objectivity assumption.
B) applying the matching principle.
C) applying the realization principle.
D) applying the conservatism convention.
Question 24: The method of depreciation that results in the same amount of depreciation expense each year is the
A) units-of-output method.
B) straight-line method.
C) sum-of-the-years'-digits method.
D) declining-balance method.
Question 25: The book value of an asset is
A) the market value of the asset.
B) the portion of the asset's cost that has not yet been charged to expense.
C) the acquisition cost shown in the asset account less the estimated salvage value.
D) the replacement cost of the asset.
Question 26: An asset that cost $14,000 was sold for $9,000 cash. Accumulated depreciation on the asset was $7,000. The entry to record this transaction includes the recognition of
A) a gain of $2,000.
B) a loss of $5,000.
C) neither a gain nor a loss.
D) a loss of $2,000.
Question 27: A company receives a note payable for $3,500 at 9% for 45 days. How much interest (to the nearest cent) will the customer owe using a 360-day year?
A) $354.38
B) $315.00
C) $ 39.38
D) $ 38.84
Question 28: Utilize the _____________ principle to estimate warranty liabilities.
A) matching
B) entity
C) conservatism
D) objectivity
Question 29: Which of the following would NOT be considered a contingent liability?
A) Pending legal action
B) Potential fines from the EPA
C) Mortgage payable
D) Cosigning a loan
Question 30: If a $6,000, 10 percent, 10-year bond was issued at 104 on October 1, 2011, how much interest will accrue on December 31 if interest payments are made annually?
A) None
B) $104
C) $144
D) $500
Question 31: If the market rate of interest is greater than the bond's stated rate of interest, the bond will be issued at
A) a discount.
B) par.
C) a premium.
D) maturity value.
Question 32: The number of shares of stock that a corporation is given the right to sell is called
A) issued stock.
B) authorized stock.
C) outstanding stock.
D) capital stock.
Question 33: Which of the following is NOT an advantage of a corporation?
A) Unlimited liability
B) Ease of raising capital
C) Ease of transfer ownership
D) Continuous life
Question 34: Earnings that a stockholder receives from a corporation is an example of which stockholder right?
A) Vote
B) Dividends
C) Liquidation
D) Preemption
Question 35: Cherry Corporation's outstanding stock is 100 shares of $100 par, 11% cumulative preferred stock and 2,000 shares of $12 par common stock. Cherry paid $1,600 in cash dividends during the year. No dividends are in arrears. Common stockholders received
A) $ 0.
B) $ 500.
C) $2,500
D) $1,100.
Question 36: A stock dividend affects the debiting and crediting of the following accounts
A) debit Retained Earnings, debit Common Stock; credit Paid-in Capital in excess of par.
B) credit Retained Earnings; debit Common Stock; credit Paid-in Capital in excess par.
C) debit Retained Earnings; credit Common Stock, credit Paid-in Capital in excess of par.
D) credit Retained Earnings, credit Common Stock and credit Paid-in Capital in excess of par
Question 37: The statement of cash flows reports the sources and uses of cash from all of the following EXCEPT
A) managerial activities.
B) financing activities.
C) operating activities.
D) investing activities.
Question 38: The accuracy of the statement of cash flows can be verified by computing the change in the balance of the
A) cash and cash equivalent accounts.
B) equity account.
C) revenue accounts.
D) asset and liability accounts.
Question 39: The purpose of the statement of cash flows is to show
A) the revenue earned.
B) the profits that were earned.
C) the expenses that were paid.
D) how cash was received and used during the period.
Question 40: Which of the following is NOT a part of operating activities?
A) Paying dividends
B) Paying payables
C) Earnings revenue
D) Paying utilities
Question 41: Which of the following is NOT a part of investing activities?
A) Buying a building
B) Collecting on a loan receivable
C) Borrowing money
D) Selling off equipment
Question 42: Which of the following activities is computed differently using the two methods of formatting a statement of cash flows?
A) Operating activities
B) Financing activities
C) Investing activities
D) Both operating activities and investing activities
Question 43: The debt ratio is the relationship between
A) current assets and current liabilities.
B) current assets and total liabilities.
C) total assets and total liabilities.
D) total assets and current liabilities.
Question 44: What is the purpose of the Statement of Cost of Goods Manufactured?
A) To determine the ending materials inventory
B) To determine the ending work in process inventory
C) To determine the amounts transferred to finished goods
D) All of these are true
Question 45: The cost of a manufactured product generally consists of which of the following costs?
A) Direct materials cost and factory overhead cost
B) Direct labor cost and factory overhead cost
C) Direct labor cost, direct materials cost, and factory overhead cost
D) Direct materials cost and direct labor cost
Question 46: The entry to record a purchase of merchandise on credit using a perpetual inventory system includes
A) a debit to Merchandise Inventory and a credit to Accounts Payable.
B) a credit to Merchandise Inventory and a debit to Accounts Payable.
C) a debit to Accounts Payable and a credit to Purchases.
D) a debit to Purchases (COGS) and a credit to Accounts Payable.
Question 47: The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes
A) a debit to Sales and a credit to Accounts Receivable.
B) a debit to Sales and a credit to Sales Returns and Allowances.
C) a debit to Sales Returns and Allowances and a credit to Accounts Receivable.
D) a debit to Accounts Receivable and a credit to Sales Returns and Allowances.
Question 48: The entry to record a purchase of merchandise on credit using a periodic inventory system includes
A) a debit to Merchandise Inventory and a credit to Accounts Payable
B) a credit to Merchandise Inventory and a debit to Accounts Payable
C) a debit to Accounts Payable and a credit to Purchases
D) a debit to Purchases (COGS) and a credit to Accounts Payable
Question 49: The total of the balances in the individual creditor's accounts should agree with the balance
A) the Purchases account in the general ledger
B) the Accounts Receivable account in the general ledger
C) the Accounts Payable account in the general ledger
D) the Sales account in the general ledger
Question 50: As part of the initial investment, a partner contributes equipment that had a cost of $50,000 and accumulated depreciation of $35,000. If the partners agree on a valuation of $30,000 for the equipment, what amount should be debited to the office equipment account?
A) $15,000
B) $20,000
C) $30,000
D) $50,000
Question 51: A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the double-declining-balance method, the depreciation expense for the first year of the asset's useful life is
A) $9,000.
B) $18,000.
C) $10,000.
D) $20,000.