Indicate the normal balance of each of the following accounts:
a) Purchases Returns and Allowances
b) Merchandise Inventory
c) Freight-In
d) Sales Returns and allowances
e) Unearned Revenue
When closing the expense account, which of the following accounts will also be
closed?
A) Purchases Returns and Allowances
B) Merchandise Inventory
C) Sales Returns and Allowances
D) Prepaid Rent Expense
Interest expense will be less than the interest payment when bonds are issued at:
A) a premium.
B) face value.
C) a discount.
D) the contract rate.
On October 1, Allan Company issued 8%, 10-year, $300,000 bonds at 100. Interest
dates are April 1 and October 1. The amount of cash paid out for interest during the
current calendar year is:
A) $0.
B) $24,000.
C) $12,000.
D) $6,000.
Which situation would NOT result in a separation of duties?
A) The person who approves purchases does not make the payments.
B) The person who makes journal entries is the same as the person who signs and mails
checks.
C) The person who makes purchases is different from the one who approves the
purchase.
D) The person who distributes paychecks does not make journal entries.
When a year-end adjustment is made for estimated bad debts:
A) net income is increased.
B) liabilities increase.
C) net assets increase.
D) net assets decrease.
A sales discount correctly taken by the charge customer was debited to Sales at the time
the entry was recorded. This error will cause:
A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the sales discount account to be understated.
D) the sales account to be overstated.
Every controlling account must have its own:
A) junior ledger.
B) general ledger.
C) subsidiary ledger.
D) general journal.
Of the following items, which is classified as an investing activity on the statement of
cash flows?
A) Sale of a plant asset for cash
B) Selling goods and services
C) Collecting loans
D) Both A and C
Reversing entries occur at the beginning of the accounting period and:
A) help to reduce potential errors.
B) simplify the bookkeeping associated with accruals from the prior period.
C) reverse the adjusting entries.
D) All of the above are correct.
Internal control over a company’s assets should include the following procedures:
A) Responsibilities and duties of employees will be divided.
B) All cash receipts will be deposited into the bank the same day they arrive.
C) All cash payments will be made by check (except petty cash).
D) All of these answers are correct.
Which of the following statements is true as it pertains to the statement of cash flows?
A) It has three main sections: net cash flow from operating, investing, and financing
activities.
B) It may only be computed directly.
C) It is a statement used to better understand the equity of a company.
D) All of the above are correct.
The retained earnings section after a two-for-one stock split will:
A) be one-half as much after the split.
B) be double as much after the split.
C) not change after the split.
D) Cannot be determined from the information given.
Factory Supplies Expense, Depreciation Expense-Factory, and Heat, Light, and
Power-Factory appear on which section of the worksheet?
A) Statement of cost of goods manufactured
B) Balance sheet
C) Income statement
D) Statement of cost of goods sold
Compute the contribution margin for the video department, when gross profit is
$970,000, direct expenses $280,000, and indirect expenses are $190,000.
A) $320,000
B) $690,000
C) $510,000
D) $700,000
F.O.B. shipping point means:
A) the buyer pays for the freight.
B) the seller pays for the freight.
C) the title passes at time of shipment.
D) Both A and C are correct.
Manufacturing overhead includes all manufacturing costs except which of the
following?
A) Raw materials
B) Overhead
C) Direct labor
D) Both A and C
Which of the following types of accounts has a normal debit balance?
A) Withdrawals
B) Assets
C) Expenses
D) All of these answers are correct.
Which of the following is not a characteristic of a corporation?
A) Ease of raising capital
B) No mutual agency
C) Unlimited life
D) Unlimited liability
If the cosmetic department in the store measures 20,000 square feet and the total
building cost is $60,000 for a 40,000 square foot building, the cost that would be
allocated to the cosmetic department would be:
A) $30,000.
B) $10,000.
C) $22,500.
D) $7,500.
If your customer does not pay the note at maturity, the journal entry on your books
would be:
A) debit Notes Payable and credit Accounts Payable.
B) debit Accounts Payable, credit Interest Income and credit Notes Payable.
C) debit Accounts Receivable, credit Interest Income and credit Notes Receivable.
D) debit Notes Receivable, credit Interest Income, and credit Accounts Receivable.
The records of Ashley Boutique showed Net Loss, $30,000; Depreciation Expense,
$25,000; and decrease in Supplies on Hand, $25,000. The amount of Net Cash Flow
from Operating Activities using the indirect method is:
A) $15,000.
B) $20,000.
C) ($10,000).
D) ($15,000).
When a purchase is made under the periodic system, the business will:
A) debit Vouchers Payable.
B) not enter a voucher in the voucher register.
C) debit Purchases.
D) All of the above
A calendar quarter consists of:
A) 13 weeks.
B) 12 weeks.
C) 14 weeks.
D) 4 months.
Sales discounts are NOT taken on which of the following?
A) Sales Tax
B) Freight
C) Merchandise returned
D) Sales Discounts are not taken on any of the above.
Simon Brothers pays $55,000 into a bond sinking fund each year to redeem the future
maturity of its bonds. During the first year, the fund earned $3,500. At the time of bond
redemption, the fund has a balance of $550,000. Of this, $525,000 was used to redeem
the bonds. Journalize the a) initial deposit; b) the first year’s interest; and c) the
redemption of the bonds.
Which of the following transactions would cause the trial balance to be out of balance?
A) A debit to Cash and a debit to Equipment for the same amount
B) A credit to Cash and a debit to Supplies for the same amount
C) A debit to Accounts Receivable and a credit to Accounting Fees for the same amount
D) All of these answers are correct.
The photography department in a department store experienced the following revenue
and expenses during October:
The photography departmental net income is:
A) $6,500.
B) $3,700.
C) $3,500.
D) $2,200.
Urban Camping sold goods for $200 to a charge customer. The customer returned for
credit $80 worth of goods. Which entry is required to record the return transaction?
A) Debit Sales Returns and Allowances $80; credit Accounts Receivable $80
B) Debit Sales Returns and Allowances $80; credit Sales $80
C) Debit Sales $80; credit Sales Returns and Allowances $80
D) Debit Accounts Receivable $80; credit Sales Returns and Allowances $80
The time period for which a statement of owner’s equity is prepared is a(n):
A) calendar year.
B) accounting period.
C) fiscal period.
D) accounting cycle.
Great Lakes Modeling Agency purchased $800 of office furniture at the beginning of
the month. Depreciation Expense at the end of the month is $200. What is the balance
of the Office Furniture account at the end of the month?
A) $700
B) $1,000
C) $200
D) $800