The final step in the accounting cycle is:
A) preparing the post-closing trial balance.
B) preparing the financial statements.
C) posting the closing entries.
D) posting the adjusting entries.
When the balance of the Income Summary account is a credit, the entry to close this
account is:
A) debit Withdrawals; credit Income Summary.
B) debit Income Summary; credit Revenue.
C) debit Income Summary; credit Capital.
D) debit Revenue; credit Income Summary.
Trust Worthy Bank accepts a promissory note for $6,000 from a customer on November
1, to be repaid in eight months plus 6% interest. The maturity value of the note is:
A) $6,240.
B) $6,140.
C) $6,075.
D) $6,000.
The agreed-upon ratio for dividing earnings or losses of a partnership is called:
A) interest allowance.
B) salary allowance.
C) profit and loss ratio.
D) profit and loss allowance.
Which of the following business documents would originate with the selling company?
A) Purchase requisition
B) Check for payment
C) Sales invoice
D) Receiving report
On which financial statement would you find the ending balance in the Capital account?
A) Income Statement
B) Balance Sheet
C) Statement of Owner’s Equity
D) Both B and C are correct.
How does the purchase of supplies on account affect the accounting equation?
A) Assets increase; liabilities decrease
B) Assets increase; owner’s equity increases
C) Assets increase; liabilities increase
D) Liabilities increase; owner’s equity decreases
What type of account is an Allowance for Doubtful Accounts?
A) Asset
B) Contra-asset
C) Revenue
D) Contra-revenue
What was the percentage of decrease in the Accounts Receivable account if the
receivables were $80,000 in Year 1, and $60,000 in Year 2?
A) (25%)
B) 33.33%
C) (33.33%)
D) 25%
John sold goods for $100 to a charge customer. The customer returned for credit $25
worth of goods. Terms of the sale were 1/10, n/30. If the customer pays the amount
owed within the discount period, what is the amount the customer should pay?
A) $74.25
B) $75.00
C) $100.00
D) $90.00
The maturity date for a 90-day note dated February 10, 2016, a leap year is:
A) May 10.
B) April 10.
C) May 11.
D) May 9.
Soy.com Corporation has 100 shares of $100, 7% cumulative nonparticipating preferred
stock and 1,000 shares of $10 par value common stock outstanding. The company paid
$4,000 cash dividends including one-year dividends in arrears to preferred
stockholders. Preferred stockholders received:
A) $1,200.
B) $2,000.
C) $3,300.
D) $1,400.
Paying the principal on a note plus interest would have which effect on the categories?
A) Total liabilities would be increased.
B) Total assets would be decreased.
C) Owner’s equity would be decreased.
D) B and C could be correct.
The company receiving a purchase order prepares a:
A) purchase requisition.
B) voucher.
C) purchases invoice.
D) sales invoice.
Using the gross method, record the payment of the following transaction in time to take
the discount. Clip Company bought $7,000 of merchandise, terms 1/15, n/45. The
company uses the voucher system and the periodic inventory method.
A) debit Cash $7,000; credit Vouchers Payable $7,000.
B) debit Vouchers Payable $7,000; credit Cash $6,930; credit Purchases Discount $70.
C) debit Vouchers Payable $6,930; credit Cash $6,930.
D) debit Vouchers Payable $7,000; credit Cash $7,000.
The adjustment for bad debts using the percentage of receivables ignored the debit
balance in the Allowance account. This error would cause:
A) total assets to be overstated.
B) total liabilities to be understated.
C) net income to be understated.
D) None of these is correct.
Under the perpetual inventory system, which of the following accounts would NOT be
used?
A) Sales
B) Purchases
C) Cost of Goods Sold
D) Merchandise Inventory
When historical cost is used to record equipment, it would appear as the:
A) original cost in an asset on the balance sheet.
B) residual value in the Stockholders Equity account.
C) residual value in an asset on the balance sheet.
D) original cost on the income statement.
The difference between a department’s gross profit and its operating expenses is known
as the:
A) departmental operating margin.
B) departmental operating cost.
C) departmental operating income.
D) departmental gross profit.
The entry to record the semiannual payment and amortization of the discount using the
straight-line method on a 10%, $200,000, 5-year bond issued at 97 would be to:
A) debit Bond Interest Expense $5,000; credit Cash $5,000.
B) debit Bond Interest Expense $5,300; credit Cash $5,000; credit Discount on Bonds
Payable $300.
C) debit Bond Interest Expense $10,600; credit Cash $10,600.
D) debit Bond Interest Expense $10,600; credit Cash $10,000; credit Discount on
Bonds Payable $600.
The credit purchase of a truck was recorded as a cash purchase. Due to this error:
A) assets were understated.
B) liabilities were overstated.
C) answers A and B are both correct.
D) None of the above is correct.
The employer records deductions from the employee’s paycheck:
A) as debits to expense accounts.
B) as credits to liability accounts until paid.
C) as debits to asset accounts until paid.
D) as credits to capital accounts.
Which taxes are considered 941 taxes?
A) FICA, FUTA, and SUTA
B) FICA and SIT
C) FICA, FIT, and Workers’ Compensation
D) None of these answers is correct.
An advantage of a promissory note receivable over an account receivable is that it:
A) establishes formal proof against the borrower.
B) has a specified interest rate and maturity date.
C) collects interest revenue from the borrower.
D) All of these answers are correct.
Bonnie’s Baskets purchases $2,000 worth of office equipment on account. This causes:
A) Cash and Capital to decrease.
B) Office Equipment and Accounts Payable to increase.
C) Office Equipment to decrease and Accounts Payable to increase.
D) Accounts Payable to increase and Capital to decrease.
An accounting report that shows the changes in capital during the accounting period is:
A) a balance sheet.
B) an income statement.
C) a statement of owner’s equity.
D) All of these answers are correct.
Talarico’s Subs purchased a new van for $28,000, its estimated useful life at 100,000
miles, residual value of $4,000. The van was driven 12,000 miles in year 1. What is the
depreciation expense in year 1?
A) $2,880
B) $3,000
C) $3,360
D) $4,000
On January 1, Auctions Online issued $400,000, 9%, 10-year bonds to lenders at the
contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the
following entries:
a. Issued the bonds.
b. Paid first semiannual interest payment.
c. Retired the bonds at maturity.
Customer returned merchandise for credit. This will be recorded with:
A) a debit to an asset account.
B) a debit to a revenue account.
C) a credit to an asset account.
D) None of these is correct.
The Raw Materials Inventory, Work-in-Process Inventory, and Finished Goods
Inventory accounts appear on the manufacturing worksheet in the:
A) balance sheet columns.
B) income statement columns.
C) statement of cost of goods manufactured.
D) All of the above
The May bank statement for Consulting Services shows a balance of $7300, but the
balance per books shows a cash balance of $8,980. Other information includes:
1. A check for $200 to pay the electric bill was recorded on the books as $20.
2. Included on the bank statement was a note collected by the bank for $400 plus
interest of $30.
3. Checks outstanding totaled $260.
4. Bank service charges were $50.
5. Deposits in transit were $2,140.
Which item should be added to the company’s book balance during the bank
reconciliation?
A) Deposit in transit
B) Outstanding check
C) Bank service charge
D) Note collected by the bank
Yamara Company purchased a $80,000 machine on January 1. The machine is expected
to have a useful life of 10 years or 60,000 operating hours and a residual value of
$5,000. The machine was used for 6,000 hours in the first year and 4,400 hours in the
second year. Compute the amount of depreciation expense for the first and second years
under each of the methods below.
Year 1 Year 2 Method
a) $ ________ $ ________ Straight-line
b) $ ________ $ ________ Units-of-production
c) $ ________ $ ________ Double declining-balance
Which accounts are affected when the company pays salaries?
A) Assets and Capital
B) Liabilities and revenue
C) Assets and Expenses
D) None of the above is correct.
The Income Summary account debited and the expense accounts credited would be the
result of:
A) closing the Income Summary accountthere is a net income.
B) closing the revenue accounts.
C) closing the Income Summary accountsthere is a net loss.
D) closing the expense accounts.
The basic accounting equation is:
A) Assets = Revenues – Expenses.
B) Assets = Liabilities – Owner’s Equity.
C) Assets = Owner’s Equity – Liabilities.
D) Assets = Liabilities + Owner’s Equity.
Given the following accounts:
[1] Cash in bank
[2] Petty cash
[3] Supplies
[4] Equipment
[5] Notes payable
[6] Vouchers payable
[7] FICA payable
[8] Wages payable
[9] Purchases
[10] Purchase discounts
[11] Discounts lost
[12] Repairs expense
[13] Interest expense
[14] Delivery expense
Indicate the account(s) to be debited and credited to record the following transactions.
The company uses the periodic inventory method.
Prepared and recorded voucher #426 for the purchase of merchandise (net method) of
$2,000 with credit terms of 2/10, n/30.
Debit ________ Credit ________
Given the following accounts:
[1] Cash
[2] Accounts receivable
[3] Merchandise inventory
[4] Supplies
[5] Accounts payable
[6] Sales
[7] Sales returns and allowances
[8] Sales discounts
[9] Cost of goods sold
[10] Purchases
[11] Purchase returns and allowances
[12] Purchase discounts
[13] Freight-in
Indicate the account(s) to be debited and credited to record the following transactions.
Purchased merchandise with cash; terms of 2/10, n/30. – Periodic
Debit ________ Credit ________
Below is a list of expenses; you are to identify each as either [1] a direct expense or [2]
an indirect expense.
Rent paid for the freezers in the frozen foods department of a food store. ________