1) A company has the following adjusted trial balance:
What closing entries are needed?
A) Debit Service Revenue for $33,000 and credit Retained Earnings for $33,000
B) Debit Rent Expense for $2,300 and credit Retained Earnings for $2,300
C) Credit Retained Earnings for $2,100 and debit Cash for $2,100
D) Debit Dividends for $1,000 and credit Retained Earnings for $1,000
2) A three month, 10% note for $8,000, dated April 15, is received from a customer. The
maturity value of the note is:
A) $200
B) $8,000
C) $8,200
D) $8,800
3) Which of the following is a TRUE statement about the characteristics of
partnerships?
A) Limited partners have mutual agency and unlimited liability for the partnership’s
debts
B) General partners have mutual agency and limited liability for the partnership’s debts
C) Net income and loss of the partnership “flows through” to the partners
D) The partnership agreement must be in writing
4) The journal entry to record a semiannual interest payment on a bond payable issued
at par:
A) debits Interest Expense and credits Bonds Payable
B) debits Interest Expense and credits Cash
C) debits Cash and credits Interest Payable
D) debits Cash and credits Interest Expense
5) Which of the following increases retained earnings?
A) Net loss
B) Net income
C) Expenses
D) Dividends
6) On the Statement of Cash Flows, the ending balance of cash is also found on the:
A) Statement of Retained Earnings
B) Balance Sheet
C) Income Statement
D) Statement of Stockholders’ Equity
7) A company completed the following transactions during the month of October:
I Purchased office supplies on account, $4,000
II Provided services for cash, $20,000
III Provided services on account, $32,000
IV Collected cash from a customer on account $27,000
V Paid the monthly rent of $3,000
What was the company’s total revenue for the month?
A) $20,000
B) $32,000
C) $52,000
D) $79,000
8) On January 1, 2014, Rod Corporation purchased 35% of the outstanding stock of
Alamo Corporation for $500,000. Net income reported by Alamo for 2014 was
$200,000. Dividends paid by Alamo during 2014 were $40,000. The amount of
investment revenue that Rod should recognize for 2014 is:
A) $14,000
B) $56,000
C) $70,000
D) $84,000
9) Two employees worked a week and the business paid salaries of $1,200 The journal
entry would:
A) debit Cash for $1,200 and credit Salaries Payable for $1,200
B) debit Accounts Payable for $1,200 and credit Cash for $1,200
C) debit Accounts Payable for $1,200 and credit Salary Payable for $1,200
D) debit Salary Expense for $1,200 and credit Cash for $1,200
10) Boston Company sells twenty items for $1,000 per unit, and has a cost of goods
sold percentage of 70%. The gross profit to be reported for selling 20 items is:
A) $300
B) $6,000
C) $14,000
D) $20,000
11) When listing the accounts on the trial balance, we list the________ accounts first
and then the ________ accounts
A) income statement; cash flow statement
B) asset; liability
C) income statement; balance sheet
D) revenues; stockholders’ equity
12) Expenses of a business include:
A) sales and cash equivalents
B) common stock and rent expense
C) cost of goods sold and salaries expense
D) retained earnings and utilities expense
13) A business paid $40,000 cash to purchase equipment The business would:
A) debit Equipment for $40,000 and credit Accounts Payable for $40,000
B) debit Equipment for $40,000 and credit Cash for $40,000
C) debit Cash for $40,000 and credit Note Payable for $40,000
D) debit Accounts Payable for $40,000 and credit Cash for $40,000
14) Unearned Service Revenue relating to services to be provided in one month is
reported on the balance sheet as:
A) a revenue account
B) a current liability
C) a component of stockholders’ equity
D) a long-term liability
15) Cash and cash equivalents do NOT include:
A) time deposits
B) petty cash
C) bank checking account
D) high-grade U.S. government securities maturing in 5 years
16) In 2015, Gary Kraen Company purchases $100,000 of equipment with cash. This
purchase would be reported on Gary Kraen Company’s 2015 statement of cash flows as:
A) a financing activity
B) an operating activity
C) an investing activity
D) none of the above
17) The impairment loss on long-term plant assets equals:
A) book value minus fair value
B) book value minus estimated future cash flows
C) estimated future cash flows minus fair value
D) estimated future cash flows minus book value
18) On January 1, 2014, Jude Corporation purchases stock in Gelco Company. Jude
Corporation owns 1% of the outstanding stock of Gelco Company. Jude Corporation
intends to hold the stock for longer than one year. How should Jude Corporation
classify this stock?
A) trading security
B) held-to-maturity investment in bonds
C) equity-method investment
D) investment in available-for-sale securities
19) Owners of an LLC are called:
A) partners
B) proprietors
C) members
D) stockholders
20) The three factors that influence business and accounting decisions are:
A) judgment, cost/benefit analysis, and religious training
B) minimizing costs, maximizing profits and cost/benefit tradeoff
C) economic, legal, and ethical
D) legal implications, religious training, profit maximization
21) Which of the following statements is TRUE for a limited liability partnership?
A) The partnership pays no federal income taxes
B) Only the limited partners pay federal income taxes on their shares of the
partnership’s profits
C) Only the general partner pays federal income taxes on his or her share of the
partnership’s profits
D) Only the members pay federal income taxes on their shares of the partnership’s
profits
22) The journal entry on the date of record for cash dividends is:
A) non-existent. No journal entry is required on the date of record
B) to debit Retained Earnings and credit Dividends Payable
C) to credit Dividends and credit Cash
D) to debit Dividends Payable and credit Cash
23) In present value calculations, the process of determining the present value of a
single sum of money is called:
A) allocating
B) pricing
C) negotiating
D) discounting
24) Why is depreciation expense added to net income when reconciling net income to
net cash provided by operating activities?
A) Because depreciation expense represents a cash inflow
B) Because depreciation expense is a tax deduction that reduces the payment of taxes
C) Because depreciation expense conserves cash outflows for taxes
D) Because depreciation expense reduces net income but it has no effect on cash, so we
add depreciation expense to net income to cancel the deduction
25) Accounts that relate to a limited period of time are called:
A) asset and liability accounts
B) permanent accounts
C) real accounts
D) temporary accounts
26) When comparing the FIFO and LIFO inventory methods:
A) LIFO reports inventory at net realizable value
B) LIFO reports the most up-to-date inventory cost on the balance sheet
C) FIFO results in the most realistic net income figure
D) FIFO matches old inventory costs against revenue
27) Stelloh’s Berry Farm accepted a bank-issued credit card in payment of a $1,200
sales transaction. Stelloh’s bank charges 1% to process the transaction. The journal
entry to record the sales transaction will include:
A) a debit to Accounts Receivable for $1,188 and a credit to Sales Revenue for $1,188
B) a debit to Cash for $1,200 and a credit to Sales Revenue for $1,200
C) a debit to Cash for $1,188, a debit to Credit Card Discount Expense for $12 and a
credit to Sales Revenue for $1,200
D) a debit to Accounts Receivable for $1,200, a debit to Credit Card Revenue for $12
and a credit to Sales Revenue for $1,212
28) A company has net credit sales of $2,000,000, a beginning balance of net
receivables of $202,000, and an ending balance of net receivables of $245,000. What is
the company’s days’ sales in receivables (rounded)?
A) 9 days
B) 37 days
C) 41 days
D) 48 days
29) Under the indirect method of preparing the operating section of the statement of
cash flows, net cash provided by operating activities is $207,000. If the direct method
of preparing the operating section of the statement of cash flows was used:
A) net cash provided by operating activities would be the same, $207,000
B) net cash provided by operating activities would be more than $207,000
C) net cash provided by operating activities would be less than $207,000
D) net cash provided by financing and investing activities would equal $207,000
30) When converting net income to net cash provided by operating activities on the
statement of cash flows, indirect method, which of the following is NOT added to net
income?
A) Gain on sale of land
B) Decrease in inventory
C) Decrease in accounts receivable
D) Depreciation expense
31) Examples of fraud involving improper revenue recognition include:
A) recording revenue before performing the services required
B) channel stuffing
C) sales to nonexistent customers
D) all of the above
32) The journal entry to record the sale of a long-term available-for-sale investment
includes a Gain on Sale of Investment in Available-for-Sale Securities for $500. The
income statement will report:
A) other comprehensive income of $500
B) other income and gains of $500
C) an extraordinary gain of $500
D) accumulated other comprehensive income of $500
33) Under the direct method of preparing the statement of cash flows, all of the
following would be reported under operating activities EXCEPT:
A) collections from customers
B) interest received on notes receivable
C) dividends received on investments in stock
D) cash proceeds on sale of long-term investments
34) On December 31, Copper Corporation has the following data available:
What is the leverage ratio?
A) 0.6
B) 1.5
C) 1.6
D) 1.65
35) The method of preparing the statement of cash flows that starts with net income and
adjusts it for items that affect net income, but do not affect cash is called the:
A) lower-of-cost or market method
B) direct method
C) indirect method
D) gross profit method