Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1)
1)
Which of the following may use a time card to track the time worked on a jobsite?
A)
Jobsite employees
B)
Jobsite equipment
C)
Main office employees
D)
A and B
Answer:
D
A)
B)
C)
D)
2)
2)
Which of the following transactions result in a change in the company’s cash balance (i.e., 110
Cash from the Chart of Accounts in Figure 2–1 of the textbook)?
A)
Paying invoices
B)
Invoices charged to a job with holding retention
C)
Invoices charged to a job without holding retention
D)
A and B
Answer:
A
A)
B)
C)
D)
3)
3)
Which of the following occurs when the purchase of a piece of equipment with a loan is recorded
into the accounting system?
A)
Equipment expenses increase.
B)
Assets increase.
C)
Long–term liabilities increase.
D)
A and C
Answer:
D
A)
B)
C)
D)
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4)
4)
Which of the following accounting transaction are not recorded on the equipment ledger?
A)
Loan payment for a piece of equipment
B)
Equipment leased with an operating
C)
Equipment depreciation
D)
None of the above
Answer:
A
A)
B)
C)
D)
5)
5)
Payment of a capital lease is recorded on which of the following ledgers?
A)
Income statement
B)
Balance sheet
C)
Job cost ledger
D)
All of the above
Answer:
B
A)
B)
C)
D)
6)
6)
Which of the following transactions result in an expense that is recorded on the income statement?
A)
Paying payroll taxes
B)
Labor charged to general overhead
C)
Paying for benefits
D)
B and C
Answer:
B
A)
B)
C)
D)
7)
7)
Receiving payment for a client who has previously been billed affect which of the following?
A)
Job cost ledger
B)
Income statement
C)
Balance sheet
D)
All of the above
Answer:
C
A)
B)
C)
D)
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8)
8)
Which of the following are true about debits?
A)
Debits decrease the balance of asset accounts.
B)
Debits decrease the balance of liability accounts.
C)
Debits increase the balance of asset accounts.
D)
B and C
Answer:
D
A)
B)
C)
D)
9)
9)
When charging labor to a job, which of the following is not charged to the job?
A)
Workers’ compensation insurance
B)
Federal Unemployment Tax (FUTA)
C)
Federal withholding taxes
D)
Social Security taxes paid by the employer
Answer:
C
A)
B)
C)
D)
10)
10)
Which of the following must be reported as an income or loss?
A)
Sale of an asset for book value
B)
Sale of an asset for less than book value
C)
Sale of an asset for more than book value
D)
B and C
Answer:
D
A)
B)
C)
D)
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
11)
What affects does recording an invoice for equipment repairs have on the job cost ledger?
Answer:
Because the equipment has not been charged to a job, the invoice does not affect the job cost ledger.
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12)
Compare and contrast the accounting transactions for a telephone bill for a jobsite phone to a general office
phone.
Answer:
The jobsite phone would be handled as an invoice charge to a job without retention and would be
recorded as a jobsite expense on the Job Cost ledger, as a 650 Other cost on the Income Statement, and
as a 310 Accounts PayableTrade on the Balance Sheet. The office phone would be recorded as a
general overhead expense in 846 Telephone on the Income Statement and a 310 Accounts Payable
Trade on the Balance Sheet.
13)
What is the purpose of costs and profits in excess of billings (under–billings) and billings in excess of costs and
profits (overbillings)?
Answer:
Companies need to recognize the under–billings as revenues, and they should not recognize
overbillings as profit.
14)
What is another accounting transaction that most similar to the amortization of a capital lease?
Answer:
The amortization of a capital lease behaves much the same as depreciation of an asset.
15)
Compare and contrast renting space for the general office to purchasing the space without a loan.
Answer:
When a construction company rents office space for the general office, the bill for office rent is recorded
as a general overhead expense in 842 Office Rent and as a liability in 310 Accounts PayableTrade.
When the company owns the general office, the loss in value is recorded as a general overhead expense
in 819 Depreciation and on the balance sheet in the 250 Less Accumulated Depreciation account.
16)
Why would a company charge an employee for the use of a company vehicle?
Answer:
The IRS requires that employers report an employee’s personal use of company vehicles as
compensation to the employee, which includes using the vehicle to commute to and from work.
17)
A company, using the percentage–of–completion accounting method, bills a client $50,000 for the current
month’s work. The client withholds 5% retention. How much does the company record as profit when the bill
is entered into the accounting system?
Answer:
The company would record $50,000 in profit. When using the percentage of completion accounting
method, retentions is recorded as a profit even though the company does not have the right to receive
it. Keep in mind that the profit was reduced as the costs associated with this job were entered into the
accounting system.
18)
A company is buying a large number of nails that will be used on multiple jobs throughout the year. How
should the nails be handled in the accounting system?
Answer:
The nails should be treated as inventory. The nails would be placed in inventory until the company is
ready to use them. When the nails are sent to a job, they would be charged to the job.
19)
How do you determine if a lease is a capital lease?
Answer:
Capital leases are noncancelable leases that meet at least one of the following conditions: (1) The lease
extends for 75% or more of the equipment’s useful life, (2) ownership transfers at the end of the lease,
(3) ownership is likely to transfer at the end of the lease through a purchase option with a heavily
discounted price, or (4) the present value of the lease payment at market interest rate exceeds 90% of
the fair market value of the equipment.
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20)
How is vacation handled for jobsite employees?
Answer:
Funds to pay for the jobsite employee’s vacation must be accrued throughout the year and are recorded
in the 344 Accrued Vacation account. When a jobsite employee takes a vacation, the employer pays him
or her for not working from the funds set aside in the 344 Accrued Vacation account.
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Answer Key
Testname: C3
1)
D
2)
A
3)
D
4)
A
5)
B
6)
B
7)
C
8)
D
9)
C
10)
D
11)
Because the equipment has not been charged to a job, the invoice does not affect the job cost ledger.
12)
The jobsite phone would be handled as an invoice charge to a job without retention and would be recorded as a
jobsite expense on the Job Cost ledger, as a 650 Other cost on the Income Statement, and as a 310 Accounts Payable
Trade on the Balance Sheet. The office phone would be recorded as a general overhead expense in 846 Telephone on
the Income Statement and a 310 Accounts PayableTrade on the Balance Sheet.
13)
Companies need to recognize the under–billings as revenues, and they should not recognize overbillings as profit.
14)
The amortization of a capital lease behaves much the same as depreciation of an asset.
15)
When a construction company rents office space for the general office, the bill for office rent is recorded as a general
overhead expense in 842 Office Rent and as a liability in 310 Accounts PayableTrade. When the company owns the
general office, the loss in value is recorded as a general overhead expense in 819 Depreciation and on the balance
sheet in the 250 Less Accumulated Depreciation account.
16)
The IRS requires that employers report an employee’s personal use of company vehicles as compensation to the
employee, which includes using the vehicle to commute to and from work.
17)
The company would record $50,000 in profit. When using the percentage of completion accounting method,
retentions is recorded as a profit even though the company does not have the right to receive it. Keep in mind that the
profit was reduced as the costs associated with this job were entered into the accounting system.
18)
The nails should be treated as inventory. The nails would be placed in inventory until the company is ready to use
them. When the nails are sent to a job, they would be charged to the job.
19)
Capital leases are noncancelable leases that meet at least one of the following conditions: (1) The lease extends for 75%
or more of the equipment’s useful life, (2) ownership transfers at the end of the lease, (3) ownership is likely to
transfer at the end of the lease through a purchase option with a heavily discounted price, or (4) the present value of
the lease payment at market interest rate exceeds 90% of the fair market value of the equipment.
20)
Funds to pay for the jobsite employee’s vacation must be accrued throughout the year and are recorded in the 344
Accrued Vacation account. When a jobsite employee takes a vacation, the employer pays him or her for not working
from the funds set aside in the 344 Accrued Vacation account.
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