Question 1.1. According to the FASB, the primary objective of financial reporting is to provide information _______. (Points : 1)...

Question 1.1. According to the FASB, the primary objective of financial reporting is to provide information _______. (Points : 1)

       regarding the assets and liabilities of a business

       to the Securities and Exchange Commission

       useful for making investing and lending decisions

       regarding the revenues and expenses of a business

Question 2.2. Presenting accounting information that is biased and incomplete violates the ________. (Points : 1)

       bylaws of the organization

       cost principle

       faithful representation principle

       entity concept

Question 3.3. Earning a revenue on account would _______. (Points : 1)

       have no effect on owner’s equity

       increase owner's equity

       decrease owner's equity

       decrease total assets

Question 4.4. The financial statement that presents a summary of the assets, liabilities, and owner's equity as of a specific date is the _______. (Points : 1)

       statement of assets

       balance sheet

       statement of owner’s equity

       statement of cash flows

Question 5.5. A written promise for future collections of cash is a _______. (Points : 1)

       revenue

       account receivable

       note receivable

       owner withdrawal

Question 6.6. The payment of an account payable would _______. (Points : 1)

       have no effect on total assets

       decrease assets and increase owner's equity

       decrease assets and decrease liabilities

       decrease assets and increase liabilities

Question 7.7. The payment of utilities each month would _______. (Points : 1)

       increase total assets

       increase owner's equity

       decrease liabilities

       increase expenses

Question 8.8. The copying of amounts from the journal to the appropriate ledger accounts is referred to as_______. (Points : 1)

       posting

       journalizing

       analyzing

       balancing

Question 9.9. The entry to record the receipt of $650 on account for services previously rendered would be_______. (Points : 1)

Accounts Receivable

650

Service Revenue

650

Service Revenue

650

Accounts Receivable

650

Cash

650

Accounts Payable

650

Cash

650

Accounts Receivable

650

Question 10.10. All of the following are liabilities except_______. (Points : 1)

       note payable

       accounts receivable

       accounts payable

       salaries payable

Question 11.11. Table 1

Following is a random list showing the account balances of various assets, liabilities, revenues, and expenses for Michael's Landscaping at December 31, 20X5, the end of its first year of operations.

Accounts receivable

$25,000

Accounts payable

3,500

Salary expense

4,500

Repairs expense

800

Truck

8,500

Equipment

6,300

Notes payable

8,200

Cash

6,800

Supplies expense

1,600

Service revenue

22,800

Gasoline expense

800

Salary payable

2,200

The owner, Michael Mower, invested $22,600 at the beginning of the year and withdrew $5,000 during the year for personal use.

Refer to Table 1. The statement of owner's equity would show an ending capital balance of _______. (Points : 1)

       $36,600

       $3,900

       $32,600

       $32,700

Question 12.12. ________ is/are an example of a liability. (Points : 1)

       Rent expense

       Prepaid expense

       Mortgage note payable

       Owner distributions

Question 13.13. The ________ is the organization that sets standards for financial accounting in the United States. (Points : 1)

       PCAOB

       FASB

       GASB

       GAAP

Question 14.14. Paying for supplies purchased In the previous period on account causes _______. (Points : 1)

       assets to increase and owner’s equity to decrease

       both assets and liabilities to decrease

       assets to increase and owner’s equity to increase

       no change in total assets

Question 15.15. At the end of the fiscal period, Burton Company omitted the adjusting entry for depreciation on equipment. The effect of this error on the financial statements is to_______. (Points : 1)

       understate liabilities

       understate owner's equity

       overstate expenses

       overstate assets

Question 16.16. At year end, no adjusting entry was made to the supplies inventory account. The general ledger balance for supplies inventory was $5000. The actual balance in inventory was $3000. The omission of this adjusting entry caused ________. (Points : 1)

       assets to be overstated and liabilities to be overstated

       assets to be understated and liabilities to be understated

       assets to be overstated and net income to be overstated

       assets to be understated and net income to be understated

Question 17.17. On May 8th, a customer hires Custom Landscaping to do some yard maintenance. Custom Landscaping arrives on May 10th and completes the job on May 12th. The customer pays the invoice from Custom Landscaping on May 25th. Revenue for this job is recorded on ________. (Points : 1)

       May 8th

       May 10th

       May 12th

       May 25th

Question 18.18. If a required accrued expense adjustment had not been made, the financial statements would have been affected as follows_______. (Points : 1)

       net income understated, assets overstated, liabilities unaffected, and owner’s equity understated

       net income understated, assets overstated, liabilities understated, and owner’s equity unaffected

       net income overstated, assets unaffected, liabilities understated, and owner’s equity overstated

       net income overstated, assets overstated, liabilities understated, and owner’s equity overstated

Question 19.19. The journal entry to record the payment of a telephone bill immediately upon receipt of the bill would_______. (Points : 1)

       have no effect on owner’s equity

       increase assets

       decrease owner’s equity

       decrease liabilities

Question 20.20. $300 receipt of cash on account was recorded as a $500 debit to accounts payable and a $500 credit to cash. This error will cause_______. (Points : 1)

       cash to be understated by $800

       cash to be overstated $500

       cash to be understated $500

       cash to be overstated by $800

Question 21.21. If the adjusting entry to record revenue earned during the current period when the cash was received in the last accounting period is not recorded_______. (Points : 1)

       assets will be overstated

       liabilities will be overstated

       liabilities will be understated

       assets will be understated

Question 22.22. Receiving a check for $1,200 from a customer with an account balance of $2,000 would include a_______. (Points : 1)

       debit to cash and a credit to accounts receivable for $1,200

       debit to cash and a credit to accounts receivable for $800

       debit to accounts payable and a credit to cash for $1,200

       debit to accounts receivable and a credit to service revenue for $1,200

Question 23.23. When cash is received from a customer on account, ________ should be credited under the accrual basis of accounting. (Points : 1)

       accounts receivable

       service revenue

       cash

       deferred revenue

Question 24.24. If the credit amount of an entry to record the purchase of supplies on account was not posted_______. (Points : 1)

       assets would be overstated

       assets would be understated

       owner’s equity would be overstated

       liabilities would be understated

Question 25.25. Under the cash basis of accounting, the receipt of cash from a customer in advance of performing the service would be credited to a_______. (Points : 1)

       revenue account

       deferred asset account

       deferred revenue account

       prepaid asset account

Question 26.26. A $75 payment for rent expense was posted as a debit to salary expense and a credit to cash. This error will cause_______. (Points : 1)

       the sum of the credits to exceed the sum of the debits

       the trial balance to be in balance

       the sum of the debits to exceed the sum of the credits by $75

       the sum of the debits to exceed the sum of the credits by $150

Question 27.27. The withdrawal of cash by the owner for personal use would include a_______. (Points : 1)

       credit to the owner's capital account

       credit to the owner's withdrawals account

       debit to the cash account

       debit to the owner's withdrawals account

Question 28.28. Purchasing office equipment for cash would include a_______. (Points : 1)

       debit to office equipment and a credit to note payable

       debit to equipment expense and a credit to cash

       debit to office equipment and a debit to accounts payable

       debit to office equipment and a credit to cash

Question 29.29. A building is financed with a note payable to a bank. This transaction would result in ________. (Points : 1)

       a credit to cash and a debit to buildings

       a credit to buildings and a debit to cash

       a debit to buildings and a credit to notes payable

       a credit to buildings and a debit to notes payable

Question 30.30. The account debited when payment is made for equipment purchased previously on account is_______. (Points : 1)

       accounts receivable

       cash

       accounts payable

       equipment

Question 31.31. Which of the following accounts should be closed to income summary? (Points : 1)

       beginning inventory

       sales returns and allowances

       owner withdrawals

       ending inventory

Question 32.32. In a periodic inventory system, the quantity of ending inventory is determined by_______. (Points : 1)

       subtracting units sold from units purchased

       a physical inventory count

       looking at the balance in the inventory account

       subtracting cost of goods sold from the beginning inventory balance

Question 33.33. Table 2

Assume the following data for Smithsonian Company for 20X5:

Beginning inventory

10 units at $70 each

March 18 sale

8 units

June 10 purchase

20 units at $80 each

October 30 sale

15 units

Referring to Table 2, under the perpetual LIFO method, cost of goods sold on the income statement would be_______. (Points : 1)

       $1,760

       $540

       $1,700

       $1,186

Question 34.34. Garry Corp uses a perpetual inventory accounting system. Garry Corp has a beginning inventory of 12 units at $15 each on January 1, 20X1. The following inventory transactions occurred during the month of January:

January 2nd - purchased 20 units at $16.50 each

January 10th – sold 7 units

January 17th – purchased 15 units at $17.25 each

January 22nd – sold 25 units

January 30th – purchased 5 units at $17.50 each

Garry Corp will report ________ for cost of goods sold in January using the FIFO inventory costing method. (Points : 1)

       $539.25

       $317.00

       $510.00

       $346.25

Question 35.35. A retailer that uses a bar code system to track inventory most likely uses ________. (Points : 1)

       a merchandising inventory system

       a periodic inventory system

       a perpetual inventory system

       this cannot be determined from the information provided

Question 36.36. When an unearned revenue is initially recorded as a revenue, the adjusting entry would include a(n) _______. (Points : 1)

       credit to a liability

       debit to a liability

       debit to an asset

       credit to revenue

Question 37.37. The inventory account shows an ending balance of $20,800. An actual count of inventory reveals $21,200 of inventory on hand. The adjusting entry involves_______. (Points : 1)

       credit to inventory for $20,500

       credit to cost of goods sold for $20,100

       debit to cost of goods sold for $400

       debit to inventory for $400

Question 38.38. If the cost of an item of inventory is $80, the current selling price is $100, and the current replacement cost is $75, the amount shown in inventory on the balance sheet under the lower-of-cost-or- market rule is_______. (Points : 1)

       $75

       $80

       $100

       $75 or $80

Question 39.39. Computer programs that link data by means of formulas and functions are referred to as_______. (Points : 1)

       inputs

       menus

       spreadsheets

       networks

Question 40.40. Revenues total $10,200, expenses total $7,300, and the owner’s withdrawals account has a balance of $2,600. What is the balance in the income summary account after all closing entries are completed? (Points : 1)

       $2,600 credit

       $2,900 debit

       $2,900 credit

       $0

Question 41.41. _______ is a process by which companies produce their financial statements for a specific period. (Points : 1)

       Liquidity

       The operating cycle

       The accounting cycle

       Postclosing

Question 42.42. Table 3

Sales revenue

$ 750,000

Cost of goods sold

406,000

Beginning inventory

75,000

Purchase discounts

20,000

Sales returns and allowances

44,000

Operating expenses

99,000

Ending inventory

72,000

Purchases of inventory

415,000

Sales discounts

25,000

William Browning, withdrawals

61,000

Purchase returns and allowances

36,000

Refer to Table 3. Gross profit is_______. (Points : 1)

       $275,000

       $344,000

       $300,000

       $319,000

Question 43.43. Inventory held by a business is a(n) _______ and when sold becomes a(n) _______ (Points : 1)

       liability, withdrawal

       asset, expense

       liability, asset

       asset, contra asset

Question 44.44. When a prepaid expense is initially recorded as an expense, the adjusting entry has the following effect on net income_______. (Points : 1)

       increase

       decrease

       increase or decrease

       no effect

Question 45.45. The journal entry to transfer the cost of purchases to cost of goods sold includes a_______. (Points : 1)

       debit to cost of goods sold

       debit to inventory

       debit to purchases

       credit to cost of goods sold

Question 46.46. The trial balance columns in the accounting worksheet include the effects of ________. (Points : 1)

       adjusting entries

       journal entries made based on transactions that have occurred throughout the period

       closing of temporary accounts

       the balance of the income summary account being transferred to the capital accounts

Question 47.47. Inventory turnover is calculated as_______. (Points : 1)

       cost of goods sold minus average inventory

       cost of goods sold divided by average inventory

       cost of goods sold times average inventory

       cost of goods sold plus average inventory

Question 48.48. Which subtotals appear on a multi-step income statement but do not appear on a single-step income statement? (Points : 1)

       Gross profit and Income from operations

       Operating expenses and Net income

       Cost of goods sold and Net income

       Net sales and cost of goods sold

Question 49.49. If a company uses LIFO and prices are rising, large purchases of inventory near the end of the year will_______. (Points : 1)

       reduce cost of goods sold

       increase income taxes paid

       reduce the gross profit

       have no effect on the amount of cost of goods sold

Question 50.50. Table 4

The following data are for the RoadRunner Corporation, which uses a perpetual inventory system:

Sales revenue

$600,000

Freight-in

42,000

Beginning inventory

77,000

Purchase discounts

19,000

Sales returns and allowances

33,000

Operating expenses

77,000

Ending inventory

81,000

Purchases of inventory

415,000

Sales discounts

35,000

Joseph RoadRunner, withdrawals

71,000

Purchase returns and allowances

39,000

Refer to Table 4. Gross profit for RoadRunner Company is_______. (Points : 1)

       $205,000

       $172,000

       $60,000

       $137,000

Question 51.51. Prepaid rent shows a beginning balance of $500 and an ending balance of $2,800. The rent expense account was debited during the adjusting process for $1,800. How much cash was spent for rent? (Points : 1)

       $1,500

       $4,100

       $1,000

       $3,300

Question 52.52. Marshall Corp uses a perpetual inventory accounting system. Marshall Corp has a beginning inventory of 10 units at $20 each on May 1, 20X1. The following inventory transactions occurred during the month of May:

May 2nd - purchased 20 units at $22 each

May 9th – sold 18 units

May 15th – purchased 15 units at $24 each

Marshall Corp will report ________ (rounded) for ending inventory on May 31st using the average-cost inventory costing method. (Points : 1)

       $400.00

       $600.00

       $384.00

       $616.00

Question 53.53. Which of the following accounts are not closed to the owner's capital account? (Points : 1)

       revenue accounts

       the owner's withdrawals account

       the income summary account

       all of the above

Question 54.54. Which of the following group of accounts is not closed at the end of the period - the asset, liability, and capital accounts? (Points : 1)

       Permanent accounts

       Debit accounts

       Credit accounts

       Temporary accounts

Question 55.55. A business pays weekly salaries on Friday of $25,000 for a five-day week ending on Friday. Assuming the fiscal period ends on a Thursday, the adjusting entry for accrued salaries would involve a_______. (Points : 1)

       debit to salary payable for $5,000

       debit to salary expense for $20,000

       credit to salary payable for $5,000

       credit to salary expense for $25,000

Question 56.56. The inventory system that continually discloses the amount of inventory on hand is called_______. (Points : 1)

       perpetual

       periodic

       physical

       specific identification

Question 57.57. A company’s operating cycle is ________. (Points : 1)

       the time required to purchase and sell goods and services and collect cash from customers.

       the time required to purchase and sell goods and services

       the process by which companies produce their financial statements

       a fiscal year

Question 58.58. Under a perpetual inventory system, the adjusting entry to account for inventory shrinkage would include a_______. (Points : 1)

       credit to miscellaneous expense

       credit to cost of goods sold

       credit to inventory

       debit to miscellaneous expense

Question 59.59. Debts that are due to be paid within one year or within the entity’s operating cycle, whichever is longer, are called_______. (Points : 1)

       current liabilities

       liquid liabilities

       quick liabilities

       deferred liabilities

Question 60.60. A company makes a purchase of $2,000 of inventory, subject to credit terms of 3/10 n/45 and returns $500 of inventory prior to payment. What is the amount of the payment assuming payment is made within the discount period? (Points : 1)

       $1,500

       $1,455

       $1,440

       $1,560

Question 61.61. The adjusting entry recording depreciation is omitted at year end. This omission affects the balance sheet by ________. (Points : 1)

       understating net income

       overstating liabilities

       overstating assets

       understating equity

Question 62.62. A work sheet is a_______. (Points : 1)

       formal statement issued to investors

       formal document required by the Internal Revenue Service

       replacement for the general journal

       a multicolumn document used by accountants to aid in the preparation of the financial statements

Question 63.63. Keeping accurate records of accounts receivable is an example of which feature of a good accounting information system? (Points : 1)

       favorable cost/benefit relationship

       compatibility

       control

       flexibility

Question 64.64. A purchase of supplies for cash is recorded in the_______. (Points : 1)

       cash receipts journal

       purchases journal

       cash payments journal

       general journal

Question 65.65. A computerized accounting information system can facilitate segregation of duties by ________. (Points : 1)

       attaching electronic sensors to merchandise that set off alarms when the merchandise is taken out of the store

       using pre-numbered documents

       limiting which employees have read/write access to certain information within the system

       hiring competent employees

Question 66.66. Posting the entries in the sales journal to the accounts receivable subsidiary ledger should be done_______. (Points : 1)

       on a weekly basis

       only at the end of the accounting period

       at the end of each month

       on a daily basis

Question 67.67. Assuming the use of special journals, the borrowing of $80,000 from the bank by signing a note payable would be recorded in the_______. (Points : 1)

       cash receipts journal

       sales journal

       cash payments journal

       general journal

Question 68.68. The following data are available for Cline Paper Company for March:

Book balance, March 31

$3,620

Service charges

50

Interest revenue

35

Note collected by bank

1,500

Check returned marked NSF

700

What is Cline’s adjusted book balance on March 31 from the above data? (Points : 1)

       $4,405

       $3,620

       $2,905

       $4,505

Question 69.69. All of the following would be on the books side of a bank reconciliation except_______. (Points : 1)

       bank recorded a $2,000 deposit as $200

       collection of note receivable for $1,000

       nonsufficient funds check for $75

       service fee of $20

Question 70.70. Assuming the use of special journals, the sale of merchandise to Jerri Blackwell on account would be recorded in the_______. (Points : 1)

       sales journal

       accounts receivable journal

       general journal

       cash receipts journal

Question 71.71. In a bank reconciliation, a $400 NSF check is_______. (Points : 1)

       deducted from the book balance

       added to the book balance

       deducted from the bank balance

       added to the bank balance

Question 72.72. Designating a corporate controller is an example of which characteristic of internal control_______? (Points : 1)

       assignment of responsibilities

       competent, reliable, and ethical personnel

       proper authorization

       separation of duties

Question 73.73. The Sawtooth Company received a bank statement showing a balance of $62,300. Reconciling items included outstanding checks of $1,450 and a deposit in transit of $8,500. What is the company’s adjusted bank balance? (Points : 1)

       $69,350

       $58,850

       $68,800

       $67,350

Question 74.74. A critical element of internal control over collections of accounts receivable is_______. (Points : 1)

       setting up a petty cash account

       the separation of cash-handling and cash-accounting duties

       using a chck writing machine

       depositing the cash from the cash register on a daily basis

Question 75.75. A check for the cash purchase of supplies for $329 was recorded on the books as $239. On a bank reconciliation, this will appear as a(n)_______. (Points : 1)

       addition to the book balance

       deduction from the bank balance

       addition to the bank balance

       deduction from the book balance