Archive for April 2017

Accounts receivable refers:

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Accounts receivable refers:





a. Money which is owed to a company by a customer for products and services provided on credit
b. Money which is owed to a company by a suppliers for products and services provided on credit
c. Money which is owed to a company by a bank
d. Money which is owed to a company by the investors
e. Money which is owed to a company by a customer for products and services provided






Answer: A

John, the owner of Matt company, withdrew $8,000 from the business during the current year. The entry to close the withdrawals account at the end of the year, is:

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John, the owner of Matt company, withdrew $8,000 from the business during the current year. The entry to close the withdrawals account at the end of the year, is:




a. Debit capital $8,000 and credit withdrawal $ 8,000
b. Debit capital $8,000 and credit cash $ 8,000
c. Debit capital $8,000 and credit expense $ 8,000
d. Debit expense $8,000 and credit income $ 8,000
e. Credit capital $8,000 and debit withdrawal $ 8,000






Answer: A

J. Awn, the proprietor of Awn Services, withdrew $8,700 from the business during the current year. The entry to close the withdrawals account at the end of the year, is:

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J. Awn, the proprietor of Awn Services, withdrew $8,700 from the business during the current year. The entry to close the withdrawals account at the end of the year, is:




a. Debit withdrawal 8,700 and credit cash $ 8,700
b. Debit capital $8,700 and credit withdrawal $ 8,700
c. Debit capital $8,700 and credit expense $ 8,700
d. Debit expense $8,700 and credit income $ 8,700
e. Credit capital $8,700 and debit withdrawal $ 8,700






Answer: B

The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account is the:

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The special account used only in the closing process to temporarily hold the amounts of revenues and expenses before the net difference is added to (or subtracted from) the owner's capital account is the:




a. Income Summary account.
b. Closing account.
c. Balance column account.
d. Profit accounts.
e. Loss accounts.





Answer: A

A company purchased a plant asset for $45,000. The asset has an estimated salvage value of $6,000, and an estimated useful life of 10 years. The annual depreciation expense using the straight-line method is

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A company purchased a plant asset for $45,000. The asset has an estimated salvage value of $6,000, and an estimated useful life of 10 years. The annual depreciation expense using the straight-line method is



a. $3,000 per year.
b. $9,300 per year.
c. $3,600 per year.
d. $3,900 per year.
e. $4,500 per year.






Answer: D

Book value is equal to:

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Book value is equal to:



a. Total asset cost minus depreciation expense
b. Total asset cost plus depreciation expense
c. Total asset plus depreciation expense
d. Total asset minus depreciation expense
e. None of these




Answer: E

Which statement is true?

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Which statement is true?




a. Total asset cost plus accumulated depreciation equals book value.
b. Total asset cost minus accumulated depreciation equals book value.
c. Total asset plus depreciation expense equals book value.
d. Total asset minus depreciation expense equals book value.
e. None of these.




Answer: B

Which statement is true?

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Which statement is true?




a. Assets need to depreciate include vehicle, machine, supplies, buildings
b. Assets need to depreciate include van, machine, supplies, buildings
c. Assets need to depreciate include machine, supplies, buildings
d. Assets need to depreciate include vehicle, machine, buildings
e. Assets need to depreciate include vehicle, supplies, buildings




Answer: D

Which statement is true:

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Which statement is true:




a. Merchandise available for sale includes Beginning inventory and ending inventory.
b. Merchandise available for sale includes Beginning inventory and cost of goods sold.
c. Merchandise available for sale includes Beginning inventory and Net cost of purchases.
d. Merchandise available for sale includes ending inventory and Net cost of purchases.
e. None of these





Answer: C

The inventory system that updates the accounting records for merchandise transactions only at the end of a period. This statement is about:The inventory system that updates the accounting records for merchandise transactions only at the end of a period. This statement is about:

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The inventory system that updates the accounting records for merchandise transactions only at the end of a period. This statement is about:



a. FIFO inventory system
b. LIFO inventory system
c. Weighted inventory system
d. Perpetual inventory system
e. Periodic inventory system







Answer: E

Which statement is true:

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Which statement is true:



a. A wholesaler is an intermediary that buys products from manufacturers or wholesalers and sells them to consumers.
b. A retailer is an intermediary that buys products from manufacturers or wholesalers and sells them to consumers.
c. A retailer is an intermediary that buys products from manufacturers and sells them to wholesalers.
d. A retailer is an intermediary that buys products from manufacturers and sells them to consumers.
e. None of these





Answer: B

Which statement is about Mary's capital:

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Which statement is about Mary's capital:




a. The owner's equity account that contains the amount invested in the sole proprietorship by Mary Smith plus the net income since the company began minus the draws made by Mary Smith since the company began.
b. The owner's equity account that contains the amount invested in the sole proprietorship by Mary Smith minus the net income since the company began minus the draws made by Mary Smith since the company began.
c. The owner's equity account that contains the amount invested in the sole proprietorship by Mary Smith plus the net income since the company began plus the draws made by Mary Smith since the company began.
d. The owner's equity account that contains the amount invested in the sole proprietorship by Mary Smith plus the net income since the company began
e. None of these







Answer: A

Which statement is true?

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Which statement is true?




a. A contra-asset account such as Accumulated Depreciation will likely have debit balance
b. A contra-asset account such as Accumulated Depreciation will likely have credit balance
c. A contra-asset account such as Depreciation will likely have credit balance
d. A contra-asset account such as Depreciation will likely have debit balance
e. None of these






Answer: B

Which account is noncurrent or long-term asset

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Which account is noncurrent or long-term asset




a. Equipment, supplies, vehicle
b. Equipment, building, vehicle
c. Equipment, prepaid expense, vehicle
d. Equipment, account receivable, vehicle
e. None of these






Answer: B

Which statement is true:

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Which statement is true:




a. Generally when an expense or withdraw is involved in a transaction, it will be debit
b. Generally when an expense or withdraw is involved in a transaction, it will be credit
c. Generally when an make loan or withdraw is involved in a transaction, it will be debit
d. Generally when make loan or withdraw is involved in a transaction, it will be credit
e. None of these






Answer: A

Which statement is true:

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Which statement is true:




a. Depreciation Expense is shown on the income statement in order to achieve accounting's matching principle.
b. Depreciation Expense is shown on the balance sheet in order to achieve accounting's matching principle.
c. Depreciation Expense is shown on the income statement
d. Depreciation Expense is shown on the balance sheet
e. None of these




Answer: A

The Income Summary account is:

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The Income Summary account is:




a. Temporary account that need to be closed at the end of accounting period.
b. Permanent account that need to be closed at the end of accounting period.
c. Temporary account that need not to be closed at the end of accounting period.
d. Permanent account that need not to be closed at the end of accounting period.
e. It depends on business




Answer: A

The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:

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The adjusting entry to record the earned but unpaid salaries of employees at the end of an accounting period is:




a. Debit Unpaid Salaries and credit Salaries Payable.
b. Debit Salaries Payable and credit Salaries Expense.
c. Debit Salaries Expense and credit Cash.
d. Debit Salaries Expense and credit Salaries Payable.
e. Debit Cash and credit Salaries Expense.




Answer: D

On May 1, 2009 Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2010. The Cash receipt was recorded as unearned fees and at December 31, 2009, $1,000 of the fees had been earned. The adjusting entry on December 31 Year 1 should include:

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On May 1, 2009 Giltus Advertising Company received $1,500 from Julie Bee for advertising services to be completed April 30, 2010. The Cash receipt was recorded as unearned fees and at December 31, 2009, $1,000 of the fees had been earned. The adjusting entry on December 31 Year 1 should include:




a. A debit to Unearned Fees for $500.
b. A credit to Unearned Fees for $500.
c. A credit to Earned Fees for $1,000.
d. A debit to Earned Fees for $1,000.
e. A debit to Earned Fees for $500.




Answer: C

PPW Co. leased a portion of its store to another company for eight months beginning on October 1, 2009, at a monthly rate of $800. This other company paid the entire $6,400 cash on October 1, which PPW Co. recorded as unearned revenue. The journal entry made by PPW Co. at year- end on December 31, 2009 would include:

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PPW Co. leased a portion of its store to another company for eight months beginning on October 1, 2009, at a monthly rate of $800. This other company paid the entire $6,400 cash on October 1, which PPW Co. recorded as unearned revenue. The journal entry made by PPW Co. at year- end on December 31, 2009 would include:




a. A debit to Rent Earned for $2,400.
b. A credit to Unearned Rent for $2,400.
c. A debit to Cash for $6,400.
d. A credit to Rent Earned for $2,400.
e. A debit to Unearned Rent for $4,000.





Answer: D

On April 30, 2009, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the year ended December 31, 2009?

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On April 30, 2009, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the year ended December 31, 2009?



a. $500.
b. $4,000.
c. $6,000.
d. $14,000.
e. $18,000.





Answer: B

Unearned revenue is reported in the financial statements as:

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Unearned revenue is reported in the financial statements as:




a. Revenue on the balance sheet.
b. A liability on the balance sheet.
c. Unearned revenue on the income statement.
d. An asset on the balance sheet.
e. An operating activity on the statement of cash flows.





Answer: B

On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:

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On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account, and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:



a. Debit Prepaid Insurance, $1,800; credit Cash, $1,800.
b. Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440.
c. Debit Prepaid Insurance, $360; credit Insurance Expense, $360.
d. Debit Insurance Expense, $360; credit Prepaid Insurance, $360.
e. Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440.






Answer: D

A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year?

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A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year?



a. $75.
b. $125.
c. $175.
d. $250.
e. $325.







Answer: C

On April 1, 2009, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2009?

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On April 1, 2009, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2009?




a. $1,350.
b. $450.
c. $1,012.50.
d. $337.50.
e. $37.50.





Answer: D

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:

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If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is:





a. Debit Cash and credit Legal Fees Earned.
b. Debit Cash and credit Unearned Legal Fees.
c. Debit Unearned Legal Fees and credit Legal Fees Earned.
d. Debit Legal Fees Earned and credit Unearned Legal Fees.
e. Debit Unearned Legal Fees and credit Accounts Receivable.



Answer: C

Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:

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Prior to recording adjusting entries, the Office Supplies account had a $359 debit balance. A physical count of the supplies showed $105 of unused supplies available. The required adjusting entry is:





a. Debit Office Supplies $105 and credit Office Supplies Expense $105.
b. Debit Office Supplies Expense $105 and credit Office Supplies $105.
c. Debit Office Supplies Expense $254 and credit Office Supplies $254.
d. Debit Office Supplies $254 and credit Office Supplies Expense $254.
e. Debit Office Supplies $105 and credit Supplies Expense $254.




Answer: C

The expense created by allocating the cost of fixed assets to the periods in which they are used, representing the expense of using the assets, is called

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The expense created by allocating the cost of fixed assets to the periods in which they are used, representing the expense of using the assets, is called




a. Accumulated depreciation.
b. A contra account.
c. The matching principle.
d. Depreciation expense.
e. An accrued account.



Answer: D

Which of the following statements is incorrect?

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Which of the following statements is incorrect?




a. Adjustments to prepaid expenses, depreciation, and unearned revenues involve previously recorded assets and liabilities.
b. Accrued expenses and accrued revenues involve assets and liabilities that had not previously been recorded.
c. Adjusting entries can be used to record both accrued expenses and accrued revenues.
d. Prepaid expenses, depreciation, and unearned revenues often require adjusting entries to record the effects of the passage of time.
e. Adjusting entries affect the cash account.





Answer: E

Adjusting entries are journal entries made at the end of an accounting period for the purpose of:

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Adjusting entries are journal entries made at the end of an accounting period for the purpose of:




a. Updating liability and asset accounts to their proper balances.
b. Assigning revenues to the periods in which they are earned.
c. Assigning expenses to the periods in which they are incurred.
d. Assuring that financial statements reflect the revenues earned and the expenses incurred.
e. All of these.




Answer: E

The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:

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The system of preparing financial statements based on recognizing revenues when the cash is received and reporting expenses when the cash is paid is called:




a. Accrual basis accounting.
b. Operating cycle accounting.
c. Cash basis accounting.
d. Revenue recognition accounting.
e. Current basis accounting.





Answer: C

Adjusting entries:

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Adjusting entries:




a. Affect only income statement accounts.
b. Affect only balance sheet accounts.
c. Affect both income statement and balance sheet accounts.
d. Affect only cash flow statement accounts.
e. Affect only equity accounts.



Answer: C

At the beginning of January of the current year, Thomas Law Center's ledger reflected a normal balance of $52,000 for accounts receivable. During January, the company collected $14,800 from customers on account and provided additional services to customers on account totaling $12,500. Additionally, during January one customer paid Thomas $5,000 for services to be provided in the future. At the end of January, the balance in the accounts receivable account should be:

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At the beginning of January of the current year, Thomas Law Center's ledger reflected a normal balance of $52,000 for accounts receivable. During January, the company collected $14,800 from customers on account and provided additional services to customers on account totaling $12,500. Additionally, during January one customer paid Thomas $5,000 for services to be provided in the future. At the end of January, the balance in the accounts receivable account should be:




a. $54
b. $49
c. $2
d. $54
e. $49





Answer: B

Zed Bennett opened an art gallery and as a dealer completed these transactions:

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Zed Bennett opened an art gallery and as a dealer completed these transactions:



1. Started the gallery, Artery, by investing $40,000 cash and equipment valued at $18,000.
2. Purchased $70 of office supplies on credit.
3. Paid $1,200 cash for the receptionist's salary.
4. Sold a painting for an artist and collected a $4,500 cash commission on the sale.
5. Completed an art appraisal and billed the client $200.
What was the balance of the cash account after these transactions were posted?



a. $12,230.
b. $12,430.
c. $43,300.
d. $43,430.
e. $61,430.







Answer: C

If Tim Jones, the owner of Jones Hardware proprietorship, uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to:

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If Tim Jones, the owner of Jones Hardware proprietorship, uses cash of the business to purchase a family automobile, the business should record this use of cash with an entry to:



a. Debit Salary Expense and credit Cash.
b. Debit Tim Jones, Salary and credit Cash.
c. Debit Cash and credit Tim Jones, Withdrawals.
d. Debit Tim Jones, Withdrawals and credit Cash.
e. Debit Automobiles and credit Cash.






Answer: D

The following transactions occurred during July:

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The following transactions occurred during July:

1. Received $900 cash for services provided to a customer during July.
2. Received $2,200 cash investment from Barbara Hanson, the owner of the business.
3. Received $750 from a customer in partial payment of his account receivable which arose from sales in June.
4. Provided services to a customer on credit, $375.
5. Borrowed $6,000 from the bank by signing a promissory note.
6. Received $1,250 cash from a customer for services to be rendered next year.
What was the amount of revenue for July?



a. $ 900.
b. $ 1,275.
c. $ 2,525.
d. $ 3,275.
e. $11,100.






Answer: B

During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the January 31 beginning cash balance?

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During the month of February, Hoffer Company had cash receipts of $7,500 and cash disbursements of $8,600. The February 28 cash balance was $1,800. What was the January 31 beginning cash balance?



a. $700.
b. $1,100.
c. $2,900.
d. $0.
e. $4,300.






Answer: C

On April 30, Holden Company had an Accounts Receivable balance of $18,000. During the month of May, total credits to Accounts Receivable were $52,000 from customer payments. The May 31 Accounts Receivable balance was $13,000. What was the amount of credit sales during May?

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On April 30, Holden Company had an Accounts Receivable balance of $18,000. During the month of May, total credits to Accounts Receivable were $52,000 from customer payments. The May 31 Accounts Receivable balance was $13,000. What was the amount of credit sales during May?



a. $ 5,000.
b. $47,000.
c. $52,000.
d. $57,000.
e. $32,000.





Answer: B

On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of September?

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On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of September?



a. A $0 balance.
b. A $4,300 debit balance.
c. A $4,300 credit balance.
d. A $5,700 debit balance.
e. A $5,700 credit balance.





Answer: B

An asset created by prepayment of an expense is:

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An asset created by prepayment of an expense is:




a. Recorded as a debit to an unearned revenue account.
b. Recorded as a debit to a prepaid expense account.
c. Recorded as a credit to an unearned revenue account.
d. Recorded as a credit to a prepaid expense account.
e. Not recorded in the accounting records until the earnings process is complete.




Answer: B

A debit is used to record:

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A debit is used to record:




a. A decrease in an asset account.
b. A decrease in an expense account.
c. An increase in a revenue account.
d. An increase in the balance of an owner's capital account.
e. An increase in the balance of the owner's withdrawals account.



Answer: E

Which is true about An account balance:

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Which is true about An account balance:



a. Always a debit.
b. Is the difference between the total debits and total credits for an account
c. Is the difference between the total debits and total credits for an account including the beginning balance
d. None of these
e. Always a credit.





Answer: C

Which of the following statements is correct?

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Which of the following statements is correct?



a. The left side of a T-account is the credit side.
b. Debits decrease asset and expense accounts, and increase liability, equity, and revenue accounts.
c. The left side of a T-account is the debit side.
d. Credits increase asset and expense accounts, and decrease liability, equity, and revenue accounts.
e. In certain circumstances the total amount debited need not equal the total amount credited for a particular transaction





Answer: C

A credit is used to record:

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A credit is used to record:



a. A decrease in an expense account.
b. A decrease in an asset account.
c. An increase in an unearned revenue account.
d. An increase in a revenue account.
e. All of these.




Answer: E

Which of the following statements is incorrect?

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Which of the following statements is incorrect?




a. The normal balance of accounts receivable is a debit.
b. The normal balance of owner's withdrawals is a debit.
c. The normal balance of unearned revenues is a credit.
d. The normal balance of an expense account is a credit.
e. The normal balance of the owner's capital account is a credit.






Answer: D

A debit is:

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A debit is:




a. An increase in an account.
b. The right-hand side of a T-account.
c. A decrease in an account.
d. The left-hand side of a T-account.
e. An increase to a liability account.




Answer: D

Prepaid expenses are:

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Prepaid expenses are:



a. Payments made for products and services that do not ever expire.
b. Classified as liabilities on the balance sheet.
c. Decreases in equity.
d. Assets that represent prepayments of future expenses.
e. Promises of payments by customers.





Answer: D

Unearned revenues are:

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Unearned revenues are:



a. Revenues that have been earned and received in cash.
b. Revenues that have been earned but not yet collected in cash.
c. Liabilities created when a customer pays in advance for products or services before the revenue is earned.
d. Recorded as an asset in the accounting records.
e. Increases to owners' capital.




Answer: C

Flash had cash inflows from operations $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:

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Flash had cash inflows from operations $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:




a. $40,500 increase.
b. $40,500 decrease.
c. $134,500 decrease.
d. $134,000 increase.
e. $9,500 increase.




Answer: A

A balance sheet lists:

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A balance sheet lists:




a. The types and amounts of the revenues and expenses of a business.
b. Only the information about what happened to equity during a time period.
c. The types and amounts of assets, liabilities, and equity of a business as of a specific date.
d. The inflows and outflows of cash during the period.
e. The assets and liabilities of a company but not the owner's equity.






Answer: C

The financial statement that reports whether the business earned a profit and also lists the types and amounts of the revenues and expenses is called:

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The financial statement that reports whether the business earned a profit and also lists the types and amounts of the revenues and expenses is called:




a. A Balance sheet.
b. A Statement of owner's equity.
c. A Statement of cash flows.
d. An Income statement.
e. A Statement of financial position.





Answer: D

If a company paid $38,000 of its accounts payable in cash, what was the effect on the assets, liabilities, and equity?

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If a company paid $38,000 of its accounts payable in cash, what was the effect on the assets, liabilities, and equity?




a. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.
b. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000.
c. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not change.
d. There would be no effect on the accounts because the accounts are affected by the same amount.
e. None of these.





Answer: C

If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets?

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If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period, what was the effect on the assets?





a. Assets would have increased $55,000.
b. Assets would have decreased $55,000.
c. Assets would have increased $19,000.
d. Assets would have decreased $19,000.
e. None of these.





Answer: A

If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:

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If the assets of a business increased $89,000 during a period of time and its liabilities increased $67,000 during the same period, equity in the business must have:



a. Increased $22,000.
b. Decreased $22,000.
c. Increased $89,000.
d. Decreased $156,000.
e. Increased $156,000.





Answer: A

If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have:

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If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have:



a. Decreased $105,000.
b. Decreased $45,000.
c. Increased $30,000.
d. Increased $45,000.
e. Increased $105,000.




Answer: D

Viscount Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:

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Viscount Company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are:



a. Total assets decrease and equity increases.
b. Both total assets and total liabilities decrease.
c. Total assets, total liabilities, and equity are unchanged.
d. Both total assets and equity are unchanged and liabilities increase.
e. Total assets increase and equity decreases.





Answer: C

How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed?

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How would the accounting equation of Boston Company be affected by the billing of a client for $10,000 of consulting work completed?




a. +$10,000 accounts receivable, -$10,000 accounts payable.
b. +$10,000 accounts receivable, +$10,000 accounts payable.
c. +$10,000 accounts receivable, +$10,000 cash.
d. +$10,000 accounts receivable, +$10,000 revenue.
e. +$10,000 accounts receivable, -$10,000 revenue.




Answer: D

On June 30 of the current year, the assets and liabilities of Phoenix Phildel are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of July 1 of the current year?

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On June 30 of the current year, the assets and liabilities of Phoenix Phildel are as follows: Cash $20,500; Accounts Receivable, $7,250; Supplies, $650; Equipment, $12,000; Accounts Payable, $9,300. What is the amount of owner's equity as of July 1 of the current year?




a. $8,300
b. $13,050
c. $20,500
d. $31,100
e. $40,400




Answer: D

Which of the following statements is true about assets?

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Which of the following statements is true about assets?




a. They are economic resources owned or controlled by the business.
b. They are expected to provide future benefits to the business.
c. They appear on the balance sheet.
d. Claims on them can be shared between creditors and owners.
e. All of these.







Answer: E

The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:

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The description of the relation between a company's assets, liabilities, and equity, which is expressed as Assets = Liabilities + Equity, is known as the:



a. Income statement equation.
b. Accounting equation.
c. Business equation.
d. Net income.
e. Trial balance.
f. Balance sheet.




Answer: B

Net Income:

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Net Income:



a. Decreases equity.
b. Represents the amount of assets owners put into a business.
c. Equals assets minus liabilities.
d. Is the excess of revenues over expenses.
e. Represents owners' claims against assets.





Answer: D

An example of an investing activity is

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An example of an investing activity is




a. Paying wages of employees.
b. Withdrawals by the owner.
c. Purchase of land.
d. Selling inventory.
e. Contribution from owner.








Answer: C

Operating activities:

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Operating activities:



a. Are the means organizations use to pay for resources like land, buildings and equipment.
b. Involve using resources to research, develop, purchase, produce, distribute and market products and services.
c. Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.
d. Are also called asset management.
e. Are also called strategic management.






Answer: B

An example of an operating activity is:

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An example of an operating activity is:



a. Paying wages.
b. Purchasing office equipment.
c. Borrowing money from a bank.
d. Selling stock.
e. Paying off a loan.






Answer: A

An example of a financing activity is:

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An example of a financing activity is:



a. Buying office supplies.
b. Obtaining a long-term loan.
c. Buying office equipment.
d. Selling inventory.
e. Buying land.






Answer: B

The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the:

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The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the:



a. Going-concern principle.
b. Business entity principle.
c. Objectivity principle.
d. Cost Principle.
e. Monetary unit principle.







Answer: A

The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

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The accounting assumption that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:



a. Objectivity principle.
b. Business entity assumption.
c. Going-concern assumption.
d. Revenue recognition principle.
e. Cost principle.






Answer: B

Lomax Enterprises purchased a depreciable asset for $20,000 on January 1, 2008. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, what will be the amount of accumulated depreciation on this asset on June 30, 2011?

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Lomax Enterprises purchased a depreciable asset for $20,000 on January 1, 2008. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,000, what will be the amount of accumulated depreciation on this asset on June 30, 2011?




a. $18000
b. $4500
c. $13500
d. $20,000
e. $15750






Answer: E

Thomas Enterprises purchased a depreciable asset on January 1, 2008 at a cost of $100,000. The asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. Balance of accumulated depreciation of this asset at the end of 2009 is

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Thomas Enterprises purchased a depreciable asset on January 1, 2008 at a cost of $100,000. The asset is expected to have a salvage value of $15,000 at the end of its five-year useful life. Balance of accumulated depreciation of this asset at the end of 2009 is




a. $27540
b. $21600
c. $34000
d. $17000
e. $90000





Answer: C

Orange Company purchased equipment on July 1 for $28,500 and decided to depreciate the equipment on the straight-line method over its useful life of five years. Assuming the equipment's salvage value is $4,500, the amount of monthly depreciation expense Nelson should recognize is:

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Orange Company purchased equipment on July 1 for $28,500 and decided to depreciate the equipment on the straight-line method over its useful life of five years. Assuming the equipment's salvage value is $4,500, the amount of monthly depreciation expense Nelson should recognize is:




a. $2,400
b. $ 200
c. $4800
d. $400
e. $ 450






Answer: D

A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000, and had a five-year useful life. What is the depreciation expense for one year?

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A company used straight-line depreciation for an item of equipment that cost $12,000, had a salvage value of $2,000, and had a five-year useful life. What is the depreciation expense for one year?




a. $1000.
b. $1800.
c. $2400.
d. $2000.
e. $2160.






Answer: D

A vehicle had an estimated useful life of 8 years. The vehicle cost $23,000 and its estimated salvage value is $1,500. The depreciation expense (using straight line method) for a year is:

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A vehicle had an estimated useful life of 8 years. The vehicle cost $23,000 and its estimated salvage value is $1,500. The depreciation expense (using straight line method) for a year is:





a. $ 2687.50.
b. $ 3546.50.
c. $ 2875.00.
d. $10,750.00.
e. $ 2,856.25.





Answer: A

Electron borrowed $15,000 cash from TechCom by signing a promissory note. TechCom's entry to record the transaction should include a:

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Electron borrowed $15,000 cash from TechCom by signing a promissory note. TechCom's entry to record the transaction should include a:



a. Debit to Notes Receivable for $15,000.
b. Debit to Accounts Receivable for $15,000.
c. Credit to Notes Receivable for $15,000.
d. Debit Notes Payable for $15,000.
e. Credit to Cash for $15,000.






Answer: A

A company has $20,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current debit balance (before adjustments) in the allowance for doubtful accounts is $800. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

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A company has $20,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current debit balance (before adjustments) in the allowance for doubtful accounts is $800. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:




a. $1200
b. $500
c. $400
d. $1000
e. None of these






Answer: C

Newton Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Newton Company wrote off the $3,000 uncollectible account of its customer, P. Best. The journal entry on May 3 is:

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Newton Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Newton Company wrote off the $3,000 uncollectible account of its customer, P. Best. The journal entry on May 3 is:



a. Dr allowance for doubtful debts 3000
Cr account receivable 3000
b. Dr bad debt expense 3000
Cr account receivable 3000
c. Dr bad debt expense 3000
Cr Allowance for doubtful debt 3000
d. Dr account receivable 3000
Cr bad debt expense 3000
e. Dr Accounts receivable 3000
Cr Cash 3000






Answer: A

A company had inventory of 10 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual inventory method, what was the cost of the 22 units sold?

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A company had inventory of 10 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 6 units at $25 each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual inventory method, what was the cost of the 22 units sold?



a. $570
b. $470
c. $670
d. $370
e. $740





Answer: B

A company that uses a perpetual inventory system made the following cash purchases and sales:

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A company that uses a perpetual inventory system made the following cash purchases and sales:


Jan, 1: Purchased 100 units at $10 per unit.
Feb, 5: Purchased 60 units at $12 per unit.
March, 16: Sold 40 units for $ 16 per unit.
Prepare the general journal entry to record the March 16 sale assuming a cash sale and the weighted average method is used.


a. Dr Cash 640
Cr Sale revenue 640
Dr COGS 450
Cr Inventories 450

b. Dr Cash 640
Cr Sale revenue 640
Dr COGS 340
Cr Inventories 340

c. Dr Cash 640
Cr Sale revenue 640
Dr COGS 470
Cr Inventories 470

d. Dr Cash 640
Cr Sale revenue 640
Dr COGS 430
Cr Inventories 430

e. None of these





Answer: D

A company that uses a perpetual inventory system made the following cash purchases and sales:

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A company that uses a perpetual inventory system made the following cash purchases and sales:

Jan, 1: Purchased 100 units at $10 per unit.
Feb, 5: Purchased 60 units at $12 per unit.
March, 16: Sold 40 units for $ 16 per unit.
Prepare the general journal entry to record the March 16 sale assuming a cash sale and the LIFO method is used:



a. Dr Cash 640
Cr Sale revenue 640
Dr COGS 450
Cr Inventories 450


b. Dr Cash 640
Cr Sale revenue 640
Dr COGS 840
Cr Inventories 840


c. Dr Cash 640
Cr Sale revenue 640
Dr COGS 480
Cr Inventories 480


d. Dr Sale revenue 640
Cr cash 640
Dr COGS 480
Cr Inventories 480


e. None of these






Answer: C

March, 16: Sold 40 units for $ 16 per unit. Prepare general journal entries to record the March 16 sale assuming a cash sale and the FIFO method is used.

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March, 16: Sold 40 units for $ 16 per unit. Prepare general journal entries to record the March 16 sale assuming a cash sale and the FIFO method is used.


a. March 16
Dr Cash 400
Cr Sale revenue 400
Dr COGS 640
Cr Inventories 640


b. March 16
Dr Cash 640
Cr Sale revenue 640
Dr COGS 400
Cr Inventories 400


c. March 16
Dr Sale revenue 640
Cr Cash 640
Dr COGS 400
Cr Inventories 400


d. March 16
Dr Sale revenue 640
Cr Cash 640
Dr Inventories 400
Cr COGS 400


e. None of these






Answer: B

A company had inventory of 15 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 12 units at $25 each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual inventory method, what was the cost of the 22 units sold?

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A company had inventory of 15 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $22 each. On November 6 it purchased 12 units at $25 each. On November 8, it sold 22 units for $54 each. Using the FIFO perpetual inventory method, what was the cost of the 22 units sold?




a. $454.
b. $366.
c. $450.
d. $570.
e. $520.







Answer: A

A company has inventory of 20 units at a cost of $12 each on August 1. On August 5, it purchased 10 units at $13 per unit. On August 12 it purchased 15 units at $14 per unit. On August 15, it sold 30 units. Using the FIFO periodic inventory method, what is the value of Cost of goods sold on August 15?

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A company has inventory of 20 units at a cost of $12 each on August 1. On August 5, it purchased 10 units at $13 per unit. On August 12 it purchased 15 units at $14 per unit. On August 15, it sold 30 units. Using the FIFO periodic inventory method, what is the value of Cost of goods sold on August 15?



a. $140.
b. $160.
c. $370.
d. $210.
e. $590.






Answer: C

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of ending inventories?

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A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of ending inventories?



a. $120.
b. $216.
c. $128.
d. $130.
e. $140.






Answer: B

Given the following information, determine the cost of the inventory at June 30 using the LIFO perpetual inventory method.

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Given the following information, determine the cost of the inventory at June 30 using the LIFO perpetual inventory method.


June, 1: Beginning inventory 15 units at $20 each
June, 15: Sale of 6 units at $50
June, 29: Purchased of 8 units at $25

The cost of goods sold is :




a. $200.
b. $220.
c. $120.
d. $275.
e. $300.






Answer: C

Acme-Jones Company uses a weighted-average perpetual inventory system.

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Acme-Jones Company uses a weighted-average perpetual inventory system.


August 2, 8 units were purchased at $12 per unit.
August 18, 15 units were purchased at $14 per unit.
August 29, 20 units were sold.
August 31, 10 units were purchased at $16 per unit.

What is the per-unit value of ending inventory on August 31?



a. $12.00.
b. $13.30.
c. $15.38.
d. $16.00.
e. $17.74.







Answer: C

A company had inventory of 10 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $21 each. On November 6 it purchased 15 units at $25 each. On November 8, it sold 20 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 20 units sold?

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A company had inventory of 10 units at a cost of $20 each on November 1. On November 2, it purchased 10 units at $21 each. On November 6 it purchased 15 units at $25 each. On November 8, it sold 20 units for $54 each. Using the LIFO perpetual inventory method, what was the cost of the 20 units sold?




a. $395.
b. $480.
c. $375.
d. $510.
e. $520.






Answer: B

A company has inventory of 15 units at a cost of $2 each on August 1. On August 5, it purchased 10 units at $3 per unit. On August 12 it purchased 20 units at $4 per unit. On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?

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A company has inventory of 15 units at a cost of $2 each on August 1. On August 5, it purchased 10 units at $3 per unit. On August 12 it purchased 20 units at $4 per unit. On August 15, it sold 30 units. Using the FIFO perpetual inventory method, what is the value of the inventory at August 15 after the sale?





a. $140.
b. $80.
c. $60.
d. $30.
e. $70.







Answer: C

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold?

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A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, it purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold?



a. $120.
b. $124.
c. $128.
d. $130.
e. $140.






Answer: B

Acme-Jones Corporation uses a weighted-average perpetual inventory system.

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Acme-Jones Corporation uses a weighted-average perpetual inventory system.


August 2, 10 units were purchased at $12 per unit.
August 18, 15 units were purchased at $14 per unit.
August 29, 12 units were sold.

What was the amount of the cost of goods sold for this sale?




a. $148.00.
b. $150.50.
c. $158.40.
d. $210.00.
e. $330.00.




Answer: C

A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?

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A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale?




a. $304
b. $296
c. $288
d. $280
e. $276






Answer: E

A company had the following purchases during the current year:

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A company had the following purchases during the current year:



Jan: 10 units at $ 120
Feb: 20 units at $130
May: 15 units at $140
Sep: 12 units at $150
Nov: 10 units at $160


On December 31, there were 26 units remaining in ending inventory. These 26 units consisted of 2 from January, 4 from February, 6 from May, 4 from September, and 10 from November. Using the specific identification method, what is the cost of the ending inventory?



a. $3,500.
b. $3,800.
c. $3,960.
d. $3,280.
e. $3,640.





Answer: B

Acceptable inventory methods include:

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Acceptable inventory methods include:




a. LIFO method.
b. FIFO method.
c. Specific identification method.
d. Weighted average method.
e. All of these.






Answer: E

An overstatement of ending inventory will cause

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An overstatement of ending inventory will cause




a. An overstatement of assets and equity on the balance sheet.
b. An understatement of assets and equity on the balance sheet.
c. An overstatement of assets and an understatement of equity on the balance sheet.
d. An understatement of assets and an overstatement of equity on the balance sheet.
e. No effect on the balance sheet.






Answer: A

Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?

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Which of the following inventory costing methods will always result in the same values for ending inventory and cost of goods sold regardless of whether a perpetual or periodic inventory system is used?




a. FIFO and LIFO
b. LIFO and weighted-average cost
c. Specific identification and FIFO
d. FIFO and weighted-average cost
e. LIFO and specific identification





Answer: C

Merchandise inventory includes:

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Merchandise inventory includes:





a. All goods owned by a company and held for sale.
b. All goods in transit.
c. All goods on consignment.
d. Only damaged goods.
e. All goods in the stores of company.





Answer: A
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