1) Stanfield Equipment sells new tractors and pays each salesperson a commission of
$1,000 for each tractor sold. During the month of August, a salesperson, Jason, sold 3
new tractors. Stanfield pays Jason on the 10th day of the month following the sale.
Jason operates on the cash basis; the tractor dealer operates on the accrual basis. Which
of the following statements is true?
A.Jason will recognize commission revenue earned in the amount of $3,000 in August
B.Stanfield will recognize commission expense in the amount of $3,000 in August
C.Jason will recognize commission expense in the amount of $3,000 in September
D.Jason will recognize revenue in the same month that the tractor dealer recognizes
expense
2) Presented below are selected data from the accounting records for Miccos Gift Store
for 2014.
A) Calculate the net income or loss for 2014.
B) Explain how the amount from part A will affect the financial position of Miccos Gift
Store.
C) Is the company profitable? Explain your answer.
3) Which one of the following is an accurate description of Allowance for Doubtful
Accounts?
A.Contra account
B.Liability account
C.Revenue account
D.Expense account
4) On January 1, 2013, Petersen Corp. sold a piece of equipment for $3,000 which it
had used for several years. The equipment had cost $13,000, and its accumulated
depreciation amounted to $9,000 at the time of the sale. What are the net effects on the
accounting equation of selling the equipment?
A.Assets and Stockholders Equity increase $1,000
B.Assets decrease and Stockholders Equity increases $3,000
C.Assets and Stockholders Equity decrease $1,000
D.Assets and Stockholders Equity decrease $3,000
5) Carl and Stefanie each invest $15,000 in a business and are given shares of stock in
Thibeau Industries as evidence of their ownership interests. For this transaction,
identify the effect on the accounting equation.
A.Assets increase and liabilities increase
B.Assets increase and stockholders equity increases
C.Liabilities increase and stockholders equity decreases
D.Liabilities decrease and assets decrease
6) Assume the current ratio is 3 to 4. Purchases of inventory on account would cause the
current ratio to
A.increase
B.decrease
C.be unchanged since the effects offset each other
D.be unchanged since it has no effects on any current accounts
7) Duggard Transport Company
On January 1, 2013, Duggard Transport Company purchased a ship for $2,000,000. It
has a ten-year useful life and a residual value of $50,000. The company uses the
double-declining-balance method.
What was the depreciation expense for Duggard Transport for the year ended December
31, 2014?
A.$ -0-
B.$160,000
C.$320,000
D.$400,000
8) The party to a promissory note that agrees to repay money on the maturity date of the
note is called the
A.Lender
B.Maker of the note
C.Payee of the note
D.Recipient of the note
9) Goodwill can be recorded as an asset when a(n)
A.business has above normal profitability compared to other businesses in its industry
B.business can determine that it has created customer goodwill and name recognition
C.offer is received to purchase the business at a price in excess of the value of the assets
D.business is purchased and payment is made in excess of the value of the net assets
10) What is the form sent by the seller to the buyer as evidence of a sale?
A.an invoice approval form
B.a purchase order
C.a receiving report
D.an invoice
11) In a vertical analysis of the balance sheet, the 100% amount is
A.Current assets
B.Working capital
C.Total assets
D.Total stockholders equity
12) Each of the following documents is used in the control of cash disbursements
except:
A.Purchase requisitions
B.Purchase orders
C.Receiving reports
D.Cash register tapes
13) Which internal control procedure is followed when management authorizes the
purchasing department to order goods and services for the company?
A.Segregation of duties
B.Safeguarding of assets and records
C.Independent verifications
D.Proper authorizations
14) If a company uses the allowance method to account for bad debts, when will the
company’s owners’ equity decrease?
A.At the date a customer’s account is written off
B.At the end of the accounting period when an adjusting entry for bad debts is recorded
C.At the date a customer’s account is determined to be uncollectible
D.When the accounts receivable amount becomes past due
15) Which of the following statements is true?
A.If a debit entry is made to an account in the general journal, the same account will
receive a credit entry when the amount is posted to the general ledger
B.If all transactions are correctly posted to the general ledger, the sum of the accounts
with debit balances should be equal to the sum of the accounts with credit balances
C.Posting occurs when numbers in the general ledger accounts are transferred to the
general journal
D.If the sum of the debit balances equals the sum of the credit balances then there were
no mistakes made in the posting process
16) Which of the following statements best describes the term revenues?
A.Revenues represent an outflow of assets resulting from the sale of goods or services
B.Revenues represent assets received from the sale of products or services
C.Revenues represent assets used or consumed in the sale of products or services
D.Revenues represent the dollar amount of bonds sold to the public
17) Crystal, Inc. issued $41,000,000 of bonds. Assuming the most common
denomination of bonds, the number of bonds sold was
A.41,000
B.410,000
C.4,100,000
D.41,000,000