In a multi-step income statement, which of the following items is excluded from the
calculation of operating income?
A) sales revenue
B) interest expense
C) selling expense
D) administrative expense
Which of the following is true of source documents in an accounting information
system?
A) All journal entries can be considered as source documents in an accounting
information system.
B) Source documents provide control and reliability in an accounting information
system.
C) A manual document cannot be considered as a source document in an accounting
information system.
D) In a manual accounting information system, source documents refer to financial
statements.
Assets are listed in the order of their ________ on the balance sheet.
A) magnitude
B) dates of purchase
C) liquidity
D) durability
A business purchases $500 of office supplies on account. Which of the following
accounts is debited?
A) Cash
B) Accounts Payable
C) Office Supplies
D) Utilities Expense
Notes Payable due within two years are classified as ________.
A) current liabilities
B) current assets
C) long-term liabilities
D) long-term assets
A business purchases equipment for $8,000 cash. Which of the following accounts is
debited?
A) Cash
B) Accounts Payable
C) Common Stock
D) Equipment
Which of the following statements, regarding the management’s discussion and analysis
(MD&A) part of the annual report is not correct?
A) Investors are not interested in the MD&A because it is written by the company and
could present a biased view of the company’s financial condition and result.
B) It often contains information that is not found in the financial data.
C) It provides forward-looking formation.
D) The MD&A is the company’s attempt to explain its financial statements and to
discuss its performance.
An automobile parts retailer purchases merchandise inventory for cash. When using a
manual accounting information system, this transaction is recorded in the ________.
A) purchases journal
B) general journal
C) cash payments journal
D) sales journal
The Merchandise Inventory account balance is $50,000. An physical count of inventory
reveals that actual inventory balance is $47,000. Which of the following would be
included in the adjusting entry? (Assume a perpetual inventory system.)
A) a $47,000 credit to Merchandise Inventory
B) a $50,000 debit to Cost of Goods Sold
C) a $3,000 credit to Cost of Goods Sold
D) a $3,000 credit to Merchandise Inventory
Which of the following costs related to a business car would be capitalized?
A) the cost to install an engine with higher horsepower
B) the cost to change the oil
C) the cost to replace a broken windshield
D) the cost of new tires
Which of the following is an intangible asset?
A) copyright
B) building
C) land
D) equipment
A company that uses the perpetual inventory system purchased 500 pallets of industrial
soap for $12,000 and paid $770 for the freight-in. The company sold the whole lot to a
supermarket chain for $13,000 on account. The company uses the specific-identification
method of inventory costing. Which of the following entries correctly records the cost
of goods sold?A)
B)
C)
D)
The Merchandise Inventory account of a company shows a balance of $70,000 but a
physical count of inventory shows $67,000 Which of the following entries is required to
record the shrinkage? (Assume a perpetual inventory system.)A)
B)
C)
D)
Following is a list of account balances of Morris Mowing Services as of December 31
of the first year of operations.
Calculate the net income.
A) $1,000
B) $31,300
C) $2,800
D) $34,100
The allocation of a plant asset’s cost to expense over its useful life is called ________.
A) residual value
B) book value
C) accrued revenue
D) depreciation
Investors and creditors cannot evaluate a company by examining only one year’s data.