ACCT 211 Unit 1 Study Guide FA18 – Chapters 1-4 Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) On a trial balance, if the Debit and Credit column totals are equal, then:
A) Equal debits and credits have been recorded for transactions.
B) All ledger account balances are correct.
C) All transactions have been recorded correctly.
D) All entries from the journal have been posted to the ledger correctly.
E) The balance sheet would be correct.
2) A company’s December 31 work sheet for the current period appears below. Based on the information
provided, what is net income for the current period?
Unadjusted Trial Adjustments
Balance
Debit
Credit
Debit
Credit
Cash
1025
Accounts receivable
350
Prepaid insurance
4100
200
Supplies
230
120
Equipment
11,820
Accumulated depreciations—equipment
240
Accounts payable
1640
Salaries payable
365
Unearned fees
5000
425
Retained earnings
10,180
Dividends
2150
Fees earned
7500
425
350
Rent expense
2000
Salaries expense
2600
365
Utilities expense
395
Insurance expense
200
Supplies expense
120
Depreciation expense—equipment
240
Totals
24,320
24,320
1700
1700
A) $6120. B) $1700.
C) $2505. D) $2660.
E) $2355.
3) A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200
worth of merchandise. On July 28, it paid the full amount due. Assuming the company uses a perpetual
inventory system, and records purchases using the gross method, The correct journal entry to record the
purchase on July 5 is:
A) Debit Merchandise Inventory $1,600; credit Cash $1,600.
B) Debit Merchandise Inventory $1,800; credit Accounts Payable $1,800.
C) Debit Accounts Payable $1,800; credit Purchase Returns $200; credit Merchandise Inventory $1,600.
D) Debit Merchandise Inventory $1,800; credit Sales Returns $200; credit Cash $1,600.
E) Debit Accounts Payable $1,800; credit Merchandise Inventory $1,800.
4) Mega Skateboard Supplier had net sales of $2.8 million, its cost of goods sold was $1.6 million, and its net
income was $0.9 million. Its gross margin ratio equals:
A) 175%. B) 56%.
C) 57%. D) 32%.
E) 43%.
5) On September 12, Ryan Company sold merchandise in the amount of $5,800 to Johnson Company, with
credit terms of 2/10, n/30. The cost of the items sold is $4,000. Ryan uses the periodic inventory system and the
net method of accounting for sales. Johnson pays the invoice on September 18, and takes the appropriate
discount. The journal entry that Ryan makes on September 18 is:
A)
Cash
4,000
Accounts receivable
4,000
B)
Cash
3,920
Sales discounts
80
Accounts receivable
4,000
C)
Cash
5,684
Accounts receivable
5,684
D)
Cash
5,684
Sales discounts
116
Accounts receivable
5,800
E)
Cash
5,800
Accounts receivable
5,800
6) A company purchased $1,800 of merchandise on July 5 with terms 2/10, n/30. On July 7, it returned $200
worth of merchandise. On July 12, it paid the full amount due. Assuming the company uses a perpetual
inventory system, and records purchases using the gross method, the correct journal entry to record the payment
on July 12 is:
A) Debit Accounts Payable $1,800; credit Cash $1,800.
B) Debit Accounts Payable $1,600; credit Cash $1,600.
C) Debit Cash $1,600; credit Accounts Payable $1,600.
D) Debit Merchandise Inventory $1,600; credit Cash $1,600.
E) Debit Accounts Payable $1,600; credit Merchandise Inventory $32; credit Cash $1,568.
7) The following information is available for Zephyr Company before closing the accounts. After all of the
closing entries are made, what will be the balance in the Retained earnings account?
Net income
$
96,600
Retained earnings
94,000
Dividends
33,000
A) $190,600. B) $804,400.
C) $96,600. D) $157,600.
E) $221,200.
8) On September 12, Ryan Company sold merchandise in the amount of $5,800 to Johnson Company, with
credit terms of 2/10, n/30. The cost of the items sold is $4,000. Johnson uses the periodic inventory system and
the net method of accounting for purchases. Johnson pays the invoice on September 18, and takes the
appropriate discount. The journal entry that Johnson makes on September 18 is:
A)
Cash
5,684
Purchases discounts
116
Accounts payable
5,800
B)
Accounts payable
5,800
Purchases discounts
116
Cash
5,684
C)
Accounts payable
5,684
Cash
5,684
D)
Purchases
5,684
Cash
5,684
E)
Accounts payable
4,000
Merchandise inventory
80
Cash
3,920
9) At the beginning of the current year, Trenton Company’s total assets were $286,000 and its total liabilities
were $194,000. During the year, the company reported total revenues of $131,000, total expenses of $95,000
and dividends of $24,000. There were no other changes in equity during the year and total assets at the end of
the year were $298,000. Trenton Company’s debt ratio at the end of the current year is:
A) 67.8%. B) 34.9%.
C) 65.1%. D) 53.6%.
E) 1.54%.
10) Adjusting entries made at the end of an accounting period accomplish all of the following except:
A) Assigning revenues to the periods in which they are earned.
B) Assigning expenses to the periods in which they are incurred.
C) Assuring that external transaction amounts remain unchanged.
D) Assuring that financial statements reflect the revenues earned and the expenses incurred.
E) Updating liability and asset accounts to their proper balances.
11) On August 31 of the current year, the assets and liabilities of Gladstone, Inc. are as follows: Cash $30,000;
Supplies, $600; Equipment, $10,000; Accounts Payable, $8,500. What is the amount of equity as of August 31
of the current year?
A) $12,100. B) $30,900.
C) $10,900. D) $32,100.
E) $49,100.
12) Andrea Apple opened Apple Photography on January 1 of the current year. During January, the following
transactions occurred and were recorded in the company’s books:
Andrea invested $13,500 cash in the business in exchange for common stock.
Andrea contributed $20,000 of photography equipment to the business.
The company paid $2,100 cash for an insurance policy covering the next 24 months.
The company received $5,700 cash for services provided during January.
The company purchased $6,200 of office equipment on credit.
The company provided $2,750 of services to customers on account.
The company paid cash of $1,500 for monthly rent.
The company paid $3,100 on the office equipment purchased in transaction #5 above.
Paid $275 cash for January utilities.
Based on this information, the balance in the cash account at the end of January would be:
A) $18,700. B) $12,225.
C) $15,250. D) $41,450.
E) $13,500.
13) If a company receives $13,100 from its sole stockholder to establish a corporation, the effect on the
accounting equation would be:
A) Assets increase $13,100 and liabilities decrease $13,100.
B) Assets increase $13,100 and liabilities increase $13,100.
C) Assets increase $13,100 and equity increases $13,100.
D) Liabilities increase $13,100 and equity decreases $13,100.
E) Assets decrease $13,100 and equity decreases $13,100.
14) On December 1, Milton Company borrowed $300,000, at 8% annual interest, from the Tennessee National
Bank. Interest is paid when the loan matures one year from the issue date. What is the adjusting entry for
accruing interest that Milton would need to make on December 31, the calendar year-end?
A) debit Interest Expense, $2,000; credit Cash, $2,000.
B) debit Interest Expense, $2,000; credit Interest Payable, $2,000.
C) debit Interest Expense, $4,000; credit Interest Payable, $4,000.
D) debit Interest Expense, $24,000; credit Interest Payable, $24,000.
E) debit Interest Payable, $2,000; credit Interest Expense, $2,000.
15) A credit entry:
A) Is always an increase in an account.
B) Is always a decrease in an account.
C) Decreases asset and expense accounts, and increases liability, common stock, and revenue accounts.
D) Is recorded on the left side of a T-account.
E) Increases asset and expense accounts, and decreases liability, common stock, and revenue accounts.
16) A law firm collected $3600 on account for work performed in the previous month. Which of the following
general journal entries will the firm make to record this transaction?
A) Debit Cash, $3600; credit Accounts Receivable, $3600.
B) Debit Legal Fees Revenue, $3600; credit Accounts Receivable, $3600.
C) Debit Cash, $3600; credit Unearned Legal Fees Revenue, $3600.
D) Debit Accounts Receivable, $3600; credit Legal Fees Revenue, $3600.
E) Debit Accounts Receivable, $3600; credit Unearned Legal Fees Revenue, $3600.
17) External users of accounting information include all of the following except:
A) Customers. B) Shareholders.
C) Purchasing managers. D) Government regulators.
E) Creditors.
18) Able Graphics received a $460 utility bill for the current month’s electricity. It is not due until the end of the
next month which is when they intend to pay it. Which of the following general journal entries will Able
Graphics make to record this transaction?
A)
Utilities Expense
460
Cash
460
B)
Cash
460
Utilities Expense
460
C)
No journal entry is required
D)
Accounts Payable
460
Utilities Expense
460
Utilities Expense
460
Accounts Payable
460
