Section : Multiple-Choice Questions
Question 1:-
After the bank reconciliation is prepared, the entry to record bank service charges would have a credit to _______________.
Question 1 options:
•Bank Service Charge Expense
•Cash
•Petty Cash
•Cash Short and Over
•None of the above
Question 2:-
Malloy Company estimates uncollectible accounts using the percentage-of-receivables method and expects that 5 percent of outstanding receivables will be uncollectible for 2015. The balance in Accounts Receivable is $200,000, and the allowance account has a $3,000 credit balance before adjustment at year end. The uncollectible accounts expense for 2015 will be _______________.
•$7,000
•$10,000
•$13,000
• $9,850
•None of the above
Question 3:
Malloy Company issued its own $10,000, 90-day, non-interest-bearing note to a bank. The only payment Malloy will ever make to the bank will be for $10,000 at the maturity date of the loan as the bank discounts the note at 10 percent. The proceeds to Malloy are _______________.
•$10,000
•$9,000
•$9,750
•$10,250
•None of the above
Question 4:
Malloy company uses a calendar year. On 2015 July 1, Malloy Company purchased equipment for $400,000, and installation and testing costs totaled $40,000. The equipment has an estimated useful life of 10 years and an estimated salvage value of $40,000. If Malloy uses the double-declining-depreciation method, the depreciation expense for 2015 is _______________.
•$88,000
•$72,000
•$36,000
•$44,000
•$40,000
Question 5:
The result of recording a capital expenditure as a revenue expenditure is an _______________.
•overstatement of current year's expense
•understatement of current year's expense
•understatement of subsequent year's net income
•overstatement of current year's net income
•None of the above
Question 6:
Cole Inc., a new company, purchases a two-year insurance policy for $12,000. Six months later, the correct balance in the prepaid insurance account would be _______________.
•$12,000
•$6,000
•$9,000
•None of the above
Question 7:
Which of the following is not an advantage of the corporate form of organization?
•continuous existence of the entity
•limited liability of stockholders
•government regulation
•easy transfer of ownership
Question 8:
Treasury stock should be shown on the balance sheet as a(n) _______________.
•reduction of the corporation's stockholders' equity
•current asset
•current liability
•investment asset
Question 9:
When the stockholders invest cash in the business, what is the effect on the accounting equation?
•Liabilities increase and stockholders' equity increases.
•Both assets and liabilities increase.
•Both assets and stockholders' equity increase.
•None of the above
Question 10:
The ending balance in retained earnings is shown in the _______________.
•income statement
•statement of retained earnings
•balance sheet
•both (b) and (c)
•both (a) and (c)
•(a), (b), and (c)
Question 11:
A cash dividend of $500 was declared and paid to stockholders simultaneously. The correct journal entry to record the declaration and payment simultaneously is _______________.
•debit Capital Stock 500 and credit Cash 500
•debit Cash 500 and credit Dividends 500
•debit Dividends 500 and credit Cash 500
•debit Cash 500 and credit Capital Stock 500
Question 12 :
If $3,000 has been earned but not yet paid to a company's workers since the last payday within an accounting period, the necessary adjusting entry at the end of that accounting period would be _______________.
•debit an expense and credit a liability
•debit an expense and credit an asset
•debit a liability and credit an asset
•debit a liability and credit an expense
Question 13:
The accrual basis of accounting _______________.
•recognizes revenues only when cash is received
•is used by almost all companies
•recognizes expenses only when cash is paid out
•recognizes revenues when sales are made or services are performed, and recognizes expenses only when cash is paid out
Question 14:
The need for adjusting entries is based on _______________.
•the matching principle
•source documents
•the cash basis of accounting
•activity that has already been recorded in the proper accounts
Question 15:
Which of the following statements is false regarding the closing process?
•The Dividends account is closed to Income Summary.
•The closing of expense accounts results in a debit to Income Summary.
•The closing of revenues results in a credit to Income Summary.
•The Income Summary account is closed to the Retained Earnings account.
Question 16:
Which of the following statements is true regarding the classified balance sheet?
•Current assets include cash, accounts receivable, and equipment.
•Plant, property, and equipment is one category of long-term assets.
•Current liabilities include accounts payable, salaries payable, and notes receivable.
• equity is subdivided into current and long-term categories.
Question 17:
The underlying assumptions of accounting include all the following except _______________.
•business entity
•concern
•matching
•measurement and periodicity
Question 18:
Malloy Company began the accounting period with $60,000 of merchandise, and the net cost of purchases was $240,000. A physical inventory showed $72,000 of merchandise unsold at the end of the period. The cost of goods sold of Malloy Company for the period is _______________.
•$300,000
•$228,000
•$252,000
•$168,000
•None of the above
Question 19:
A classified income statement consists of all of the following major sections except _______________.
•Operating revenues
•Cost of goods sold
•Operating expenses
•Non-operating revenues and expenses
•Current assets
Question 20:
A business purchased merchandise for $12,000 on account; terms are 2/10, n/30. If $2,000 of the merchandise was returned and the remaining amount due was paid within the discount period, the purchase discount would be _______________.
•$240
•$200
•$1,200
•$1,000
•$3,600
Question 21 :
Malloy Company began the accounting period with inventory of 3,000 units at $30 each. During the period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the use of periodic inventory procedure. The cost of ending inventory using weighted-average is _______________.
•$114,750
•$157,600
•$122,400
•$109,650
•None of the above
Question 22:
Malloy Company began the accounting period with inventory of 3,000 units at $30 each. During the period, the company purchased an additional 5,000 units at $36 each and sold 4,600 units. Assume the use of periodic inventory procedure. The cost of goods sold using weighted-average is _______________.
•$147,200
•$160,350
•$155,250
•$114,000
•None of the above
Question 23:
During a period of rising prices, which inventory method might be expected to give the highest net income?
•Weighted-average
•FIFO
•LIFO
•Specific identification
•Cannot determine
Question 24:
The following information is related to the bank reconciliation of the Acme Company:
•Balance per bank statement $1,951.20
•Balance per ledger 1,869.60
•Deposits in transit 271.20
•Outstanding checks 427.80
•NSF check 61.20
•Service charges 13.80
The adjusted/correct cash balance is _______________.
•$1,794.60
•$1,719.60
•$1,638.00
•$1,713.00
•$1,876.20
Question 25:
In a bank reconciliation, deposits in transit should be _______________.
•deducted from the balance per books
•deducted from the balance per bank statement
•added to the balance per ledger
•added to the balance per bank statement
•disregarded in the bank reconciliation
Question 26:
Medina Company received its February bank statement on March 6. The statement showed a balance of $316,500. Included on the statement were memoranda showing collections from Medina customers (A/R), totaling $16,000.
The statement also showed a returned check for a customer who paid the balance on his account, for $2,825. The bank charged a returned check fee of $75 for this NSF check. This $75 charge will be added to the customer's balance. There were other service charges for the monthly service charge and ATM fees, totaling $200. These are bank service charge expenses. Medina's accountant looked at her accounting records. At the end of February, the cash balance was $312,300. The statement did not reflect a deposit made late on February 28th, for $14,900. There were also some outstanding checks, totaling $6,200.
Required:
a. Determine the adjusted balance in the cash account after completing a bank reconciliation.
b. Prepare three journal entries needed due to the reconciliation.