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Assignment: Quiz 1 1. Increases in equity from a company’s earnings activities are: Assets. Revenues. Liabilities. Owner’s Equity. Expenses. 2. Cash investments by owners are listed on which of the following statements? Balance sheet. Income statement. Statement of owner’s equity only. Statement of cash flows only. Statement of owner’s equity and statement of cash flows. 3. Decreases in equity that represent costs of assets or services used to earn revenues are called: Liabilities. Equity. Withdrawals. ? Expenses. Owner’s Investment. 4. A payment to an owner is called a(n): Liability. Withdrawal. Expense. Contribution. Investment. 5. The group that attempts to create more harmony among the accounting practices of different countries is the: AICPA. IASB. CAP. SEC. FASB. 6. A partnership: Is also called a sole proprietorship. Has unlimited liability for its partners. Has to have a written agreement in order to be legal. Is a legal organization separate from its owners. Has owners called shareholders. 7. A financial statement providing information that helps users understand a company’s financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n): Balance sheet. Income statement. Statement of cash flows. Statement of owner’s equity. Financial Status Statement. 8. A corporation: Is a business legally separate from its owners. Is controlled by the FASB. Has shareholders who have unlimited liability for the acts of the corporation. Is the same as a limited liability partnership. Is not subject to double taxation. 9. Rent expense that is paid with cash appears on which of the following statements? Balance sheet. Income statement. Statement of owner’s equity. Income statement and statement of cash flows. Statement of cash flows only. 10. Revenues are: The same as net income. The excess of expenses over assets. Resources owned or controlled by a company. The increase in equity from a company’s earning activities. The costs of assets or services used. 11. In which of the following situations would the trial balance not balance? A $1,000 collection of an account receivable was erroneously posted as a debit to Accounts Receivable and a credit to Cash. The purchase of office supplies on account for $3,250 was erroneously recorded in the journal as $2,350 debit to Office Supplies and credit to Accounts Payable. A $50 cash receipt for the performance of a service was not recorded at all. The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a credit to Cash for $1,200. The cash payment of a $750 account payable was posted as a debit to Accounts Payable and a debit to Cash for $750. 12. Of the following errors, which one by itself will cause the trial balance to be out of balance? A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries Expense. A $100 cash receipt from a customer in payment of his account posted as a $100 debit to Cash and a $10 credit to Accounts Receivable. A $75 cash receipt from a customer in payment of his account posted as a $75 debit to Cash and a $75 credit to Cash. A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment and a $50 credit to Cash. An $800 prepayment from a customer for services to be rendered in the future was posted as an $800 debit to Unearned Revenue and an $800 credit to Cash. 13. A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is: Recorded as a debit to an unearned revenue account. Recorded as a debit to a prepaid expense account. Recorded as a credit to an unearned revenue account. Recorded as a credit to a prepaid expense account. Not recorded in the accounting records until the earnings process is complete. 14. The credit purchase of a delivery truck for $4,700 was posted to Delivery Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance? The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700. The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700. The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400. The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400. The total of the Debit column of the trial balance will equal the total of the Credit column. 15. A trial balance taken at year-end showed total credits exceed total debits by $4,950. This discrepancy could have been caused by: An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash. A net income of $4,950. The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950. The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550. An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable. 16. A credit is used to record: An increase in an expense account. A decrease in an asset account. A decrease in an unearned revenue account. A decrease in a revenue account. A decrease in a capital account. 17. A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is a(n): Journal. Posting. Trial balance. Account. Chart of accounts. 18. A list of all accounts and the identification number assigned to each account used by a company is called a: Source document. Journal. Trial balance. Chart of accounts. General Journal. 19. The process of transferring general journal information to the ledger is: Double-entry accounting. Posting. Balancing an account. Journalizing. Not required unless debits do not equal credits. 20. A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n): Account. Trial balance. Journal. T-account. Balance column account. 21. A trial balance prepared before any adjustments have been recorded is: An adjusted trial balance. Used to prepare financial statements. An unadjusted trial balance. Correct with respect to proper balance sheet and income statement amounts. Only prepared once a year. 22. The time period assumption assumes that an organization’s activities can be divided into specific time periods including all of the following except: Months. Quarters. Fiscal years. Calendar years. Days. 23. Which of the following statements in incorrect: An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded. An adjusted trial balance is a list of accounts and balances prepared after adjusting entries have been recorded and posted to the ledger. Each trial balance amount is used in preparing the financial statements. Financial statements should be prepared directly from information in the unadjusted trial balance. Financial statements can be prepared directly from information in the adjusted trial balance. 24. A balance sheet that places the assets above the liabilities and equity is called a(n): Report form balance sheet. Account form balance sheet. Classified balance sheet. Unadjusted balance sheet. Unclassified balance sheet. 25. A balance sheet that places the liabilities and equity to the right of the assets is a(n): Account form balance sheet. Report form balance sheet. Interim balance sheet. Classified balance sheet. Unclassified balance sheet. 26. Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of: Items that require contra accounts. Items that require adjusting entries. Asset and equity. Asset accounts. Income statement accounts. 27. Assuming prepaid expenses are originally recorded in balance sheet accounts, the adjusting entry to record use of a prepaid expense is: Increase an expense; increase a liability. Increase an asset; increase revenue. Decrease a liability; increase revenue. Increase an expense; decrease an asset. Increase an expense; decrease a liability. 28. Accrued revenues: At the end of one accounting period often result in cash receipts from customers in the next period. At the end of one accounting period often result in cash payments in the next period. Are also called unearned revenues. Are listed on the balance sheet as liabilities. Are recorded at the end of an accounting period because cash has already been received for revenues earned. 29. The difference between the cost of an asset and the accumulated depreciation for that asset is called Depreciation Expense. Unearned Depreciation. Prepaid Depreciation. Depreciation Value. Book Value. 30. The adjusting entry to record an accrued expense is: Increase an expense; increase a liability. Increase an asset; increase revenue. Decrease a liability; increase revenue. Increase an expense; decrease an asset. Increase an expense; decrease a liability. (ACCT 301 – Fall B, 2014 1) Assignment: Quiz 2 1. If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except: Cost of goods sold. Gross profit. Net sales. Current assets. Net income. 2. Days’ sales in inventory: Is also called days’ stock on hand. Focuses on average inventory rather than ending inventory. Is used to measure solvency. Is calculated by dividing cost of goods sold by ending inventory. Is a substitute for the acid-test ratio. 3. When purchase costs of inventory regularly decline, which method of inventory costing will yield the lowest cost of goods sold? FIFO. LIFO. Weighted average. Specific identification. Gross margin. 4. Goods in transit are included in a purchaser’s inventory: At any time during transit. When the purchaser is responsible for paying freight charges. When the supplier is responsible for freight charges. If the goods are shipped FOB destination. After the half-way point between the buyer and seller. 5. Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as expenses when incurred. The argument that supports this is called: The matching principle. The materiality constraint. The cost principle. The conservation constraint principle. The lower of cost or market principle. 6. Merchandise inventory includes: All goods owned by a company and held for sale. All goods in transit. All goods on consignment. Only damaged goods. Only non-damaged goods. 7. Management decisions in accounting for inventory cost include all of the following except: Costing method. Inventory system (perpetual or periodic). Customer demand for inventory. Use of market values or other estimates. Items included in inventory and their costs. 8. The full disclosure principle: Prescribes that when a change in inventory valuation method is made, the notes to the statements report the type of change, its justification and its effect on net income. Requires that companies use the same accounting method for inventory valuation period after period. Is not subject to the materiality principle. Is only applied to retailers. Is also called the consistency principle. 9. Internal controls that should be applied when a business takes a physical count of inventory should include all of the following except: Prenumbered inventory tickets. A manager does not confirm that all inventories are ticketed once, and only once. Counters must confirm the validity of inventory existence, amounts, and quality. Second counts by a different counter. Counters of inventory should not be those who are responsible for the inventory. 10. The inventory valuation method that results in the lowest taxable income in a period of inflation is: LIFO method. FIFO method. Weighted-average cost method. Specific identification method. Gross profit method. 11. Which of the following accounts would be closed with a debit? Sales Discounts. Sales Returns and Allowances. Cost of Goods Sold. Operating Expenses. Sales. 12. When preparing an unadjusted trial balance using a periodic inventory system, the amount shown for Merchandise Inventory is: The ending inventory amount. The beginning inventory amount. Equal to the cost of goods sold. Equal to the cost of goods purchased. Equal to the gross profit. 13. The current period’s ending inventory is: The next period’s beginning inventory. The current period’s cost of goods sold. The prior period’s beginning inventory. The current period’s net purchases. The current period’s beginning inventory. 14. The acid-test ratio differs from the current ratio in that: Liabilities are divided by current assets. Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio. The acid-test ratio measures profitability and the current ratio does not. The acid-test ratio excludes short-term investments from the calculation. The acid-test ratio is a measure of liquidity but the current ratio is not. 15. A trade discount is: A term used by a purchaser to describe a cash discount given to customers for prompt payment. A reduction in price below the list price. A term used by a seller to describe a cash discount granted to customers for prompt payment. A reduction in price for prompt payment. Also called a rebate. 16. A debit to Sales Returns and Allowances and a credit to Accounts Receivable: Reflects an increase in amount due from a customer. Recognizes that a customer returned merchandise and/or received an allowance. Requires a debit memorandum to recognize the customer’s return. Is recorded when a customer takes a discount. Reflects a decrease in amount due a supplier. 17. Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called: Cost of goods sold. Selling expenses. Purchasing expenses. General and administrative expenses. Non-operating activities. 18. The following statements regarding merchandise inventory are true except: Merchandise inventory is reported on the balance sheet as a current asset. Merchandise inventory refers to products a company owns and intends to sell. Merchandise inventory can include the cost of shipping the goods to the store and making them ready for sale. Merchandise inventory does not appear on the balance sheet of a service company. Merchandise inventory purchases are not considered part of the operating cycle for a business. 19. Beginning inventory plus net purchases is: Cost of goods sold. Merchandise available for sale. Ending inventory. Sales. Shown on the balance sheet. 20. A merchandising company: Earns net income by buying and selling merchandise. Receives fees only in exchange for services. Earns profit from commissions only. Earns profit from fares only. Buys products from consumers. 21. All of the following statements regarding the Income Statement columns on the worksheet are true except: The balances in the Income Statement credit column are revenues. The balances in the Income Statement credit column are unearned revenues. The balances in the Income Statement debit column are expenses. The difference between the totals of the Income Statement columns is net income or net loss. The net income or net loss from the Income Statement columns is entered in the Balance Sheet & Statement of Owner’s Equity columns. 22. Which of the following statements regarding reporting under GAAP and IFRS is not true: Both GAAP and IFRS define the initial asset value as historical cost for nearly all assets. The definition of an asset under GAAP and IFRS involves three basic criteria. Both GAAP and IFRS define the initial asset value as replacement value. The definition of a liability under GAAP and IFRS involves three basic criteria. After acquisition, one of two asset measurement systems is applied. 23. A post-closing trial balance reports: All ledger accounts with balances, none of which can be temporary accounts. All ledger accounts with balances, none of which can be permanent accounts. All ledger accounts with balances, which include some temporary and some permanent accounts. Only revenue and expense accounts. Only asset accounts. 24. In the process of completing a work sheet, you determine that the Income Statement debit column totals $83,000, while the Income Statement credit column totals $65,000. To enter net income (or net loss) for the period into the work sheet would require an entry to the Adjustments debit column and the Adjustments credit column. the Unadjusted Trial Balance debit column and the Adjustments credit column. it is not practical to enter Net Income (or Net Loss) on the work sheet. the Balance Sheet & Statement of Owner’s Equity debit column and the Income Statement credit column. the Income Statement debit column and the Balance Sheet & Statement of Owner’s Equity credit column. 25. Which of the following errors would cause the Balance Sheet and Statement of Owner’s Equity columns of a work sheet to be out of balance? Entering an asset amount in the Income Statement Debit column. Entering a liability amount in the Income Statement Credit column. Entering an expense amount in the Balance Sheet and Statement of Owner’s Equity Debit column. Entering a revenue amount in the Balance Sheet and Statement of Owner’s Equity Debit column. Entering a liability amount in the Balance Sheet and Statement of Owner’s Equity Credit column. 26. Closing the temporary accounts at the end of each accounting period does all of the following except: Serves to transfer the effects of these accounts to the owner’s capital account on the balance sheet. Prepares the withdrawals account for use in the next period. Gives the revenue and expense accounts zero balances. Has no effect on the owner’s capital account. Causes owner’s capital to reflect increases from revenues and decreases from expenses and withdrawals. 27. Permanent accounts include all of the following except: Accumulated Depreciation – Equipment. Prepaid Rent. Unearned Consulting Revenue. Accounts Payable. Depreciation Expense – Equipment. 28. Which of the following statements is incorrect? Working papers are useful aids in the accounting process. On the work sheet, the effects of the accounting adjustments are shown on the account balances. After the work sheet is completed, it can be used to help prepare the financial statements. On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance. A worksheet is not a substitute for financial statements. 29. Another name for temporary accounts is: Real accounts. Contra accounts. Accrued accounts. Balance column accounts. Nominal accounts. 30. The closing process is necessary in order to: calculate net income or net loss for an accounting period. ensure that all permanent accounts are closed to zero at the end of each accounting period. ensure that the company complies with state laws. ensure that net income or net loss and owner withdrawals for the period are closed into the owner’s capital account. ensure that management is aware of how well the company is operating. (ACCT 301 – Fall B, 2014 1) Assignment: Quiz 3 1. Input devices include: Bar-code readers. Printers. Software. Ledgers. Information processors. 2. A company purchased equipment costing $32,000 on credit. Identify the journal the transaction would be recorded in. Cash disbursements journal. Sales journal. Cash receipts journal. Purchases journal. General journal. 3. To be sure that total debits and credits in a columnar journal are equal, before posting we should: Crossfoot. Foot. Journalize. Post. Reconcile. 4. A company purchased $11,200 of merchandise on credit. Identify the journal the transaction would be recorded in. Cash disbursements journal. Sales journal. Cash receipts journal. Purchases journal. General journal. 5. A company borrowed $50,000 from a bank by signing a long-term note payable. Identify the journal the transaction would be recorded in. Cash disbursements journal. Sales journal. Cash receipts journal. Purchases journal. General journal. 6. The segment return on assets: Can only be determined for international companies. Reflects the profitability of a segment. Is difficult to calculate because companies with traded stock are not required to report segment information. Is calculated as segment average assets divided by segment operating income. Is calculated as segment sales divided by segment average assets. 7. All of the following statements regarding internal control procedures are true except: Internal control procedures are designed to ensure reliable financial reports. Internal control procedures are designed to safeguards company assets. Internal control procedures direct operations toward common goals. Internal control procedures include methods to achieve compliance with laws and regulation. Internal control procedures are not affected by the cost-benefit principle. 8. A subsidiary ledger that contains a separate account for each supplier (creditor) to the company is a(n): Controlling account. Accounts receivable ledger. Accounts payable ledger. General ledger. Special journal. 9. When a company uses special journals, the general journal is used for selected transactions and events including: Recording adjusting transactions. Posting transactions to special journals. Accumulating debits and credits. Collecting detailed listings of amounts. Recording cash receipts. 10. A company sold merchandise on credit for $5,000 (cost is $2,400). Identify the journal the transaction would be recorded in. Cash disbursements journal. Sales journal. Cash receipts journal. Purchases journal. General journal. 11. Which of the following events would cause a bank to debit a depositor’s account? The depositor authorizes the bank to charge the depositor’s account $50 for new checks. The bank collects a note receivable and related interest on the depositor’s behalf. The depositor determines there are outstanding checks drawn on the account at month-end. The depositor determines there are deposits in transit on the account at month-end. The bank determines it incorrectly charged the depositor’s account twice for the monthly service charge in a previous month. 12. Internal control policies and procedures have limitations including: Human error. Human fraud. Cost-benefit principle. Collusion. All of the options are limitations. 13. The number of days’ sales uncollected: Measures how much time is likely to pass before the current amount of accounts receivable is received in cash. Can be used for comparisons to other companies in the same industry. Can be used for comparisons between current and prior periods. Reflects the liquidity of receivables. All of the options are correct. 14. The document, also known as the check authorization, that is a checklist of steps necessary for approving an invoice for recording and payment is the Purchase requisition. Purchase order. Invoice. Receiving report. Invoice approval. 15. A seller (or provider) of goods or services to a business organization, usually a manufacturer or wholesaler, is known as a: Vendor. Payee. Vendee. Creditor. Debtor. 16. An expense resulting from failing to take advantage of cash discounts on purchases is called: Sales discounts. Trade discounts. Purchases discounts. Discounts lost. Discounts earned. 17. The Cash Over and Short account: Is used to record a credit balance in the cash account. Is an income statement account used for recording the income effects of cash overages and cash shortages from errors in making change and/or from errors in processing petty cash transactions. Is not necessary in a computerized accounting system. Can never have a debit balance. Can never have a credit balance. 18. An internal control system consists of all of the following policies and procedures except ones designed to: Protect assets. Ensure reliable accounting. Guarantee a return to investors. Urge adherence to company policies. Promote efficient operations. 19. A company’s internal control system: Eliminates the company’s risk of loss. Monitors company and employee performance. Eliminates human error. Eliminates the need for audits. Eliminates the need for managers’ certification of controls. 20. The number of days’ sales uncollected: Is used to evaluate the liquidity of receivables. Is calculated by dividing accounts receivable by sales. Measures a company’s ability to pay its bills on time. Measures a company’s debt to income. Is calculated by dividing sales by accounts receivable 21. The accounting principle that requires financial statements (including notes) to report all relevant information about the operations and financial condition of a company is called: Relevance. Full disclosure. Evaluation. Materiality. Matching. 22. The accounts receivable turnover is calculated by: Dividing net sales by average accounts receivable. Dividing net sales by average accounts receivable and multiplying by 365. Dividing average accounts receivable by net sales. Dividing average accounts receivable by net sales and multiplying by 365. Dividing net income by average accounts receivable. 23. The matching principle prescribes: That expenses be ignored if their effect on the financial statements is unimportant to users’ business decisions. The use of the direct write-off method for bad debts. The use of the allowance method of accounting for bad debts. That bad debts be disclosed in the financial statements. That bad debts not be written off. 24. Pledging receivables: Allows firms to raise cash. Allows a firm to retain ownership of its receivables. Does not transfer risk of bad debts to the lender. Should be disclosed in the financial statements. All of the options are correct. 25. A promissory note received from a customer in exchange for an account receivable: Is a cash equivalent for the recipient. Is an account receivable for the recipient. Is a note receivable for the recipient. Is a short-term investment for the recipient. Is a note payable for the recipient. 26. A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the: Direct write-off method. Aging of accounts receivable method. Percentage of sales method. Aging of investments method. Percent of accounts receivable method.

Assignment:

Quiz 1

 

1.

 

Increases in equity from a company’s earnings activities are:

Assets.

 

Revenues.

Liabilities.

 

Owner’s Equity.

Expenses.

 

2.

Cash investments by owners are listed on which of the following statements?

Balance sheet.

Income statement.

 

Statement of owner’s equity only.

Statement of cash flows only.

 

Statement of owner’s equity and statement of cash flows.

 

3.

Decreases in equity that represent costs of assets or services used to earn revenues are called:

 

Liabilities.

Equity.

Withdrawals.

?

Expenses.

Owner’s Investment.

 

4.

A payment to an owner is called a(n):

Liability.

 

Withdrawal.

Expense.

Contribution.

Investment.

 

5.

The group that attempts to create more harmony among the accounting practices of different countries is the:

AICPA.

 

IASB.

CAP.

SEC.

FASB.

 

6.

A partnership:

Is also called a sole proprietorship.

 

Has unlimited liability for its partners.

Has to have a written agreement in order to be legal.

Is a legal organization separate from its owners.

Has owners called shareholders.

 

7.

A financial statement providing information that helps users understand a company’s financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n):

 

Balance sheet.

Income statement.

Statement of cash flows.

Statement of owner’s equity.

Financial Status Statement.

 

8.

A corporation:

 

Is a business legally separate from its owners.

Is controlled by the FASB.

Has shareholders who have unlimited liability for the acts of the corporation.

Is the same as a limited liability partnership.

Is not subject to double taxation.

 

9.

Rent expense that is paid with cash appears on which of the following statements?

Balance sheet.

Income statement.

Statement of owner’s equity.

 

Income statement and statement of cash flows.

 

Statement of cash flows only.

 

10.

 

Revenues are:

The same as net income.

The excess of expenses over assets.

Resources owned or controlled by a company.

 

The increase in equity from a company’s earning activities.

The costs of assets or services used.

 

11.

In which of the following situations would the trial balance not balance?

A $1,000 collection of an account receivable was erroneously posted as a debit to Accounts Receivable and a credit to Cash.

The purchase of office supplies on account for $3,250 was erroneously recorded in the journal as $2,350 debit to Office Supplies and credit to Accounts Payable.

A $50 cash receipt for the performance of a service was not recorded at all.

The purchase of office equipment for $1,200 was posted as a debit to Office Supplies and a credit to Cash for $1,200.

 

The cash payment of a $750 account payable was posted as a debit to Accounts Payable and a debit to Cash for $750.

 

12.

Of the following errors, which one by itself will cause the trial balance to be out of balance?

A $200 cash salary payment posted as a $200 debit to Cash and a $200 credit to Salaries Expense.

 

A $100 cash receipt from a customer in payment of his account posted as a $100 debit to Cash and a $10 credit to Accounts Receivable.

A $75 cash receipt from a customer in payment of his account posted as a $75 debit to Cash and a $75 credit to Cash.

A $50 cash purchase of office supplies posted as a $50 debit to Office Equipment and a $50 credit to Cash.

An $800 prepayment from a customer for services to be rendered in the future was posted as an $800 debit to Unearned Revenue and an $800 credit to Cash.

 

13.

A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is:

Recorded as a debit to an unearned revenue account.

Recorded as a debit to a prepaid expense account.

 

Recorded as a credit to an unearned revenue account.

Recorded as a credit to a prepaid expense account.

Not recorded in the accounting records until the earnings process is complete.

 

14.

The credit purchase of a delivery truck for $4,700 was posted to Delivery Trucks as a $4,700 debit and to Accounts Payable as a $4,700 debit. What effect would this error have on the trial balance?

The total of the Debit column of the trial balance will exceed the total of the Credit column by $4,700.

The total of the Credit column of the trial balance will exceed the total of the Debit column by $4,700.

 

The total of the Debit column of the trial balance will exceed the total of the Credit column by $9,400.

The total of the Credit column of the trial balance will exceed the total of the Debit column by $9,400.

The total of the Debit column of the trial balance will equal the total of the Credit column.

 

15.

A trial balance taken at year-end showed total credits exceed total debits by $4,950. This discrepancy could have been caused by:

An error in the general journal where a $4,950 increase in Accounts Receivable was recorded as an increase in Cash.

A net income of $4,950.

 

The balance of $49,500 in Accounts Payable being entered in the trial balance as $4,950.

The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550.

An error in the general journal where a $4,950 increase in Accounts Payable was recorded as a decrease in Accounts Payable.

 

16.

A credit is used to record:

An increase in an expense account.

 

A decrease in an asset account.

A decrease in an unearned revenue account.

A decrease in a revenue account.

A decrease in a capital account.

 

17.

A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is a(n):

Journal.

Posting.

Trial balance.

 

Account.

Chart of accounts.

 

18.

A list of all accounts and the identification number assigned to each account used by a company is called a:

Source document.

Journal.

Trial balance.

 

Chart of accounts.

General Journal.

 

19.

The process of transferring general journal information to the ledger is:

Double-entry accounting.

 

Posting.

Balancing an account.

 

Journalizing.

Not required unless debits do not equal credits.

 

20.

A record in which the effects of transactions are first recorded and from which transaction amounts are posted to the ledger is a(n):

Account.

Trial balance.

 

Journal.

T-account.

Balance column account.

 

21.

A trial balance prepared before any adjustments have been recorded is:

An adjusted trial balance.

Used to prepare financial statements.

 

An unadjusted trial balance.

Correct with respect to proper balance sheet and income statement amounts.

Only prepared once a year.

 

22.

The time period assumption assumes that an organization’s activities can be divided into specific time periods including all of the following except:

Months.

Quarters.

Fiscal years.

Calendar years.

 

Days.

 

23.

Which of the following statements in incorrect:

An unadjusted trial balance is a list of accounts and balances prepared before adjustments are recorded.

An adjusted trial balance is a list of accounts and balances prepared after adjusting entries have been recorded and posted to the ledger.

Each trial balance amount is used in preparing the financial statements.

 

Financial statements should be prepared directly from information in the unadjusted trial balance.

 

Financial statements can be prepared directly from information in the adjusted trial balance.

 

24.

A balance sheet that places the assets above the liabilities and equity is called a(n):

Report form balance sheet.

 

Account form balance sheet.

Classified balance sheet.

Unadjusted balance sheet.

Unclassified balance sheet.

 

25.

A balance sheet that places the liabilities and equity to the right of the assets is a(n):

 

Account form balance sheet.

Report form balance sheet.

Interim balance sheet.

Classified balance sheet.

Unclassified balance sheet.

 

26.

Prepaid expenses, depreciation, accrued expenses, unearned revenues, and accrued revenues are all examples of:

Items that require contra accounts.

 

Items that require adjusting entries.

Asset and equity.

Asset accounts.

Income statement accounts.

 

27.

Assuming prepaid expenses are originally recorded in balance sheet accounts, the adjusting entry to record use of a prepaid expense is:

 

Increase an expense; increase a liability.

Increase an asset; increase revenue.

Decrease a liability; increase revenue.

 

Increase an expense; decrease an asset.

Increase an expense; decrease a liability.

 

28.

Accrued revenues:

 

At the end of one accounting period often result in cash receipts from customers in the next period.

At the end of one accounting period often result in cash payments in the next period.

Are also called unearned revenues.

Are listed on the balance sheet as liabilities.

Are recorded at the end of an accounting period because cash has already been received for revenues earned.

 

29.

The difference between the cost of an asset and the accumulated depreciation for that asset is called

Depreciation Expense.

Unearned Depreciation.

Prepaid Depreciation.

Depreciation Value.

 

Book Value.

 

30.

The adjusting entry to record an accrued expense is:

 

Increase an expense; increase a liability.

Increase an asset; increase revenue.

Decrease a liability; increase revenue.

Increase an expense; decrease an asset.

Increase an expense; decrease a liability.

 

 

 

 

 

 

 

 

 

(ACCT 301 – Fall B, 2014 1)

Assignment:

Quiz 2

 

1.

If a period-end inventory amount is reported in error, it can cause a misstatement in all of the following except:

 

Cost of goods sold.

Gross profit.

 

Net sales.

Current assets.

Net income.

 

2.

Days’ sales in inventory:

 

Is also called days’ stock on hand.

Focuses on average inventory rather than ending inventory.

Is used to measure solvency.

Is calculated by dividing cost of goods sold by ending inventory.

Is a substitute for the acid-test ratio.

 

3.

When purchase costs of inventory regularly decline, which method of inventory costing will yield the lowest cost of goods sold?

 

FIFO.

LIFO.

Weighted average.

Specific identification.

Gross margin.

 

4.

Goods in transit are included in a purchaser’s inventory:

At any time during transit.

 

When the purchaser is responsible for paying freight charges.

When the supplier is responsible for freight charges.

If the goods are shipped FOB destination.

After the half-way point between the buyer and seller.

 

5.

Some companies choose to avoid assigning incidental costs of acquiring merchandise to inventory by recording them as expenses when incurred. The argument that supports this is called:

 

The matching principle.

The materiality constraint.

 

The cost principle.

The conservation constraint principle.

The lower of cost or market principle.

 

6.

Merchandise inventory includes:

 

All goods owned by a company and held for sale.

All goods in transit.

All goods on consignment.

Only damaged goods.

Only non-damaged goods.

 

7.

Management decisions in accounting for inventory cost include all of the following except:

Costing method.

Inventory system (perpetual or periodic).

Customer demand for inventory.

 

Use of market values or other estimates.

Items included in inventory and their costs.

 

8.

The full disclosure principle:

 

Prescribes that when a change in inventory valuation method is made, the notes to the statements report the type of change, its justification and its effect on net income.

 

Requires that companies use the same accounting method for inventory valuation period after period.

Is not subject to the materiality principle.

Is only applied to retailers.

Is also called the consistency principle.

 

9.

Internal controls that should be applied when a business takes a physical count of inventory should include all of the following except:

Prenumbered inventory tickets.

 

A manager does not confirm that all inventories are ticketed once, and only once.

Counters must confirm the validity of inventory existence, amounts, and quality.

Second counts by a different counter.

Counters of inventory should not be those who are responsible for the inventory.

 

10.

The inventory valuation method that results in the lowest taxable income in a period of inflation is:

 

LIFO method.

FIFO method.

Weighted-average cost method.

Specific identification method.

Gross profit method.

 

11.

Which of the following accounts would be closed with a debit?

Sales Discounts.

 

Sales Returns and Allowances.

Cost of Goods Sold.

Operating Expenses.

 

Sales.

 

12.

When preparing an unadjusted trial balance using a periodic inventory system, the amount shown for Merchandise Inventory is:

The ending inventory amount.

 

The beginning inventory amount.

Equal to the cost of goods sold.

Equal to the cost of goods purchased.

Equal to the gross profit.

 

13.

The current period’s ending inventory is:

 

The next period’s beginning inventory.

The current period’s cost of goods sold.

The prior period’s beginning inventory.

The current period’s net purchases.

The current period’s beginning inventory.

 

14.

The acid-test ratio differs from the current ratio in that:

 

Liabilities are divided by current assets.

 

Prepaid expenses and inventory are excluded from the calculation of the acid-test ratio.

The acid-test ratio measures profitability and the current ratio does not.

The acid-test ratio excludes short-term investments from the calculation.

The acid-test ratio is a measure of liquidity but the current ratio is not.

 

15.

A trade discount is:

A term used by a purchaser to describe a cash discount given to customers for prompt payment.

 

A reduction in price below the list price.

A term used by a seller to describe a cash discount granted to customers for prompt payment.

A reduction in price for prompt payment.

Also called a rebate.

 

16.

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

Reflects an increase in amount due from a customer.

 

Recognizes that a customer returned merchandise and/or received an allowance.

Requires a debit memorandum to recognize the customer’s return.

Is recorded when a customer takes a discount.

Reflects a decrease in amount due a supplier.

 

17.

Expenses that support the overall operations of a business and include the expenses relating to accounting, human resource management, and financial management are called:

Cost of goods sold.

Selling expenses.

Purchasing expenses.

 

General and administrative expenses.

Non-operating activities.

 

18.

The following statements regarding merchandise inventory are true except:

Merchandise inventory is reported on the balance sheet as a current asset.

Merchandise inventory refers to products a company owns and intends to sell.

Merchandise inventory can include the cost of shipping the goods to the store and making them ready for sale.

Merchandise inventory does not appear on the balance sheet of a service company.

 

Merchandise inventory purchases are not considered part of the operating cycle for a business.

 

19.

Beginning inventory plus net purchases is:

 

Cost of goods sold.

 

Merchandise available for sale.

Ending inventory.

Sales.

Shown on the balance sheet.

 

20.

A merchandising company:

 

Earns net income by buying and selling merchandise.

Receives fees only in exchange for services.

Earns profit from commissions only.

Earns profit from fares only.

Buys products from consumers.

 

21.

All of the following statements regarding the Income Statement columns on the worksheet are true except:

The balances in the Income Statement credit column are revenues.

 

The balances in the Income Statement credit column are unearned revenues.

The balances in the Income Statement debit column are expenses.

The difference between the totals of the Income Statement columns is net income or net loss.

The net income or net loss from the Income Statement columns is entered in the Balance Sheet & Statement of Owner’s Equity columns.

 

22.

Which of the following statements regarding reporting under GAAP and IFRS is not true:

Both GAAP and IFRS define the initial asset value as historical cost for nearly all assets.

The definition of an asset under GAAP and IFRS involves three basic criteria.

 

Both GAAP and IFRS define the initial asset value as replacement value.

The definition of a liability under GAAP and IFRS involves three basic criteria.

 

After acquisition, one of two asset measurement systems is applied.

 

23.

A post-closing trial balance reports:

 

All ledger accounts with balances, none of which can be temporary accounts.

All ledger accounts with balances, none of which can be permanent accounts.

 

All ledger accounts with balances, which include some temporary and some permanent accounts.

Only revenue and expense accounts.

Only asset accounts.

 

24.

In the process of completing a work sheet, you determine that the Income Statement debit column totals $83,000, while the Income Statement credit column totals $65,000. To enter net income (or net loss) for the period into the work sheet would require an entry to

the Adjustments debit column and the Adjustments credit column.

the Unadjusted Trial Balance debit column and the Adjustments credit column.

it is not practical to enter Net Income (or Net Loss) on the work sheet.

 

the Balance Sheet & Statement of Owner’s Equity debit column and the Income Statement credit column.

 

the Income Statement debit column and the Balance Sheet & Statement of Owner’s Equity credit column.

 

25.

Which of the following errors would cause the Balance Sheet and Statement of Owner’s Equity columns of a work sheet to be out of balance?

Entering an asset amount in the Income Statement Debit column.

Entering a liability amount in the Income Statement Credit column.

 

Entering an expense amount in the Balance Sheet and Statement of Owner’s Equity Debit column.

Entering a revenue amount in the Balance Sheet and Statement of Owner’s Equity Debit column.

Entering a liability amount in the Balance Sheet and Statement of Owner’s Equity Credit column.

 

26.

Closing the temporary accounts at the end of each accounting period does all of the following except:

Serves to transfer the effects of these accounts to the owner’s capital account on the balance sheet.

Prepares the withdrawals account for use in the next period.

Gives the revenue and expense accounts zero balances.

 

Has no effect on the owner’s capital account.

Causes owner’s capital to reflect increases from revenues and decreases from expenses and withdrawals.

 

27.

Permanent accounts include all of the following except:

Accumulated Depreciation – Equipment.

Prepaid Rent.

 

Unearned Consulting Revenue.

Accounts Payable.

 

Depreciation Expense – Equipment.

 

28.

Which of the following statements is incorrect?

 

Working papers are useful aids in the accounting process.

On the work sheet, the effects of the accounting adjustments are shown on the account balances.

After the work sheet is completed, it can be used to help prepare the financial statements.

 

On the work sheet, the adjusted amounts are sorted into columns according to whether the accounts are used in preparing the unadjusted trial balance or the adjusted trial balance.

A worksheet is not a substitute for financial statements.

 

29.

Another name for temporary accounts is:

Real accounts.

Contra accounts.

Accrued accounts.

Balance column accounts.

 

Nominal accounts.

 

30.

The closing process is necessary in order to:

calculate net income or net loss for an accounting period.

ensure that all permanent accounts are closed to zero at the end of each accounting period.

ensure that the company complies with state laws.

 

ensure that net income or net loss and owner withdrawals for the period are closed into the owner’s capital account.

ensure that management is aware of how well the company is operating.

 

 

 

 

 

 

(ACCT 301 – Fall B, 2014 1)

Assignment:

Quiz 3

 

1.

Input devices include:

 

Bar-code readers.

Printers.

Software.

Ledgers.

 

Information processors.

 

2.

A company purchased equipment costing $32,000 on credit. Identify the journal the transaction would be recorded in.

Cash disbursements journal.

Sales journal.

Cash receipts journal.

 

Purchases journal.

General journal.

 

3.

To be sure that total debits and credits in a columnar journal are equal, before posting we should:

Crossfoot.

Foot.

 

Journalize.

Post.

Reconcile.

 

4.

A company purchased $11,200 of merchandise on credit. Identify the journal the transaction would be recorded in.

Cash disbursements journal.

Sales journal.

Cash receipts journal.

 

Purchases journal.

General journal.

 

5.

A company borrowed $50,000 from a bank by signing a long-term note payable. Identify the journal the transaction would be recorded in.

Cash disbursements journal.

Sales journal.

 

Cash receipts journal.

Purchases journal.

General journal.

 

6.

The segment return on assets:

Can only be determined for international companies.

 

Reflects the profitability of a segment.

Is difficult to calculate because companies with traded stock are not required to report segment information.

Is calculated as segment average assets divided by segment operating income.

Is calculated as segment sales divided by segment average assets.

 

7.

All of the following statements regarding internal control procedures are true except:

Internal control procedures are designed to ensure reliable financial reports.

Internal control procedures are designed to safeguards company assets.

Internal control procedures direct operations toward common goals.

Internal control procedures include methods to achieve compliance with laws and regulation.

 

Internal control procedures are not affected by the cost-benefit principle.

 

8.

A subsidiary ledger that contains a separate account for each supplier (creditor) to the company is a(n):

Controlling account.

 

Accounts receivable ledger.

 

Accounts payable ledger.

General ledger.

Special journal.

 

9.

When a company uses special journals, the general journal is used for selected transactions and events including:

 

Recording adjusting transactions.

Posting transactions to special journals.

Accumulating debits and credits.

Collecting detailed listings of amounts.

Recording cash receipts.

 

10.

A company sold merchandise on credit for $5,000 (cost is $2,400). Identify the journal the transaction would be recorded in.

Cash disbursements journal.

 

Sales journal.

Cash receipts journal.

Purchases journal.

General journal.

 

11.

Which of the following events would cause a bank to debit a depositor’s account?

 

The depositor authorizes the bank to charge the depositor’s account $50 for new checks.

The bank collects a note receivable and related interest on the depositor’s behalf.

The depositor determines there are outstanding checks drawn on the account at month-end.

The depositor determines there are deposits in transit on the account at month-end.

The bank determines it incorrectly charged the depositor’s account twice for the monthly service charge in a previous month.

 

12.

Internal control policies and procedures have limitations including:

Human error.

Human fraud.

Cost-benefit principle.

Collusion.

 

All of the options are limitations.

 

13.

The number of days’ sales uncollected:

 

Measures how much time is likely to pass before the current amount of accounts receivable is received in cash.

Can be used for comparisons to other companies in the same industry.

Can be used for comparisons between current and prior periods.

Reflects the liquidity of receivables.

 

All of the options are correct.

 

14.

The document, also known as the check authorization, that is a checklist of steps necessary for approving an invoice for recording and payment is the

Purchase requisition.

Purchase order.

Invoice.

Receiving report.

 

Invoice approval.

 

15.

A seller (or provider) of goods or services to a business organization, usually a manufacturer or wholesaler, is known as a:

 

Vendor.

Payee.

Vendee.

Creditor.

Debtor.

 

16.

An expense resulting from failing to take advantage of cash discounts on purchases is called:

Sales discounts.

Trade discounts.

Purchases discounts.

 

Discounts lost.

Discounts earned.

 

17.

The Cash Over and Short account:

Is used to record a credit balance in the cash account.

 

Is an income statement account used for recording the income effects of cash overages and cash shortages from errors in making change and/or from errors in processing petty cash transactions.

Is not necessary in a computerized accounting system.

Can never have a debit balance.

Can never have a credit balance.

 

18.

An internal control system consists of all of the following policies and procedures except ones designed to:

Protect assets.

Ensure reliable accounting.

 

Guarantee a return to investors.

Urge adherence to company policies.

Promote efficient operations.

 

19.

A company’s internal control system:

 

Eliminates the company’s risk of loss.

 

Monitors company and employee performance.

Eliminates human error.

Eliminates the need for audits.

Eliminates the need for managers’ certification of controls.

 

20.

The number of days’ sales uncollected:

 

Is used to evaluate the liquidity of receivables.

 

Is calculated by dividing accounts receivable by sales.

Measures a company’s ability to pay its bills on time.

Measures a company’s debt to income.

Is calculated by dividing sales by accounts receivable

 

21.

The accounting principle that requires financial statements (including notes) to report all relevant information about the operations and financial condition of a company is called:

Relevance.

 

Full disclosure.

Evaluation.

Materiality.

Matching.

 

22.

The accounts receivable turnover is calculated by:

 

Dividing net sales by average accounts receivable.

 

Dividing net sales by average accounts receivable and multiplying by 365.

Dividing average accounts receivable by net sales.

Dividing average accounts receivable by net sales and multiplying by 365.

Dividing net income by average accounts receivable.

 

23.

The matching principle prescribes:

That expenses be ignored if their effect on the financial statements is unimportant to users’ business decisions.

The use of the direct write-off method for bad debts.

 

The use of the allowance method of accounting for bad debts.

That bad debts be disclosed in the financial statements.

That bad debts not be written off.

 

24.

Pledging receivables:

Allows firms to raise cash.

Allows a firm to retain ownership of its receivables.

Does not transfer risk of bad debts to the lender.

Should be disclosed in the financial statements.

 

All of the options are correct.

 

25.

A promissory note received from a customer in exchange for an account receivable:

Is a cash equivalent for the recipient.

Is an account receivable for the recipient.

 

Is a note receivable for the recipient.

Is a short-term investment for the recipient.

Is a note payable for the recipient.

 

26.

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the:

 

Direct write-off method.

 

Aging of accounts receivable method.

Percentage of sales method.

Aging of investments method.

Percent of accounts receivable method.

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