a.To meet the legal requirements of the IRS
b.To reduce the Expense line on the profit & loss statement
c.To accurately apply costs to WIP so that the cost of the finished product reflects all the costs incurred to produce it
d.To hide costs from the auditors
Q.3: Trade accounts receivable:
a.arise from the sale of a company’s products or services.
b.are reported in the non-current asset section of the balance sheet.
c.include deposits with utilities
d.generally comprise the minority of the total receivables balance.
Q.4: Trade accounts receivable:
a. arise from the sale of a company’s products or services.
b. are reported in the non-current asset section of the balance sheet.
c. include deposits with utilities
d. generally comprise the minority of the total receivables balance.
Q.5: Sorting the accounts Payable into current, 1-30 days past due, 31-60 days past due, and so on, is known as
a. Aging Report
b. Pending Report
c. Payable Report
d. Other Report.
Q.6: How does a company ensure that their physical inventory matches what is there in the account books?
a. It assumes it to be correct if it has been received properly in the system
b. It holds the warehouse manager accountable
c. It counts every item daily
d. It uses some form of physical inventory count – either annual or cyclical
Q.7: Why is cyclical counting a better method of inventory taking than the annual count?
a. It results in accurate ongoing inventory
b. It lets the company incur adjustment costs on a monthly rather than annual basis
c. It allows the company to look for and correct ongoing discrepancies
d. All of the above
Q.8: Refer to the given image:
On March 1, Zekew & Co. purchased $1,000 worth of merchandise, terms 1%10 net 30 days. They use the net method of recording purchases. Payment of the accounts payable was made on March 4. Which of the following journal entries would be appropriate for the March 4 transaction?
a. 1
b. 2
c. 3
d. 4
Q.9: Which of the following is a liability?
a. Creditors for Goods
b. Machinery
c. Cash at Bank
d. Motor Vehicles
Q.10: Home Depot. Inc. had net purchases of $50,000, closing inventory of $25,000, net sales of $100,000, and gross profit of $32,000. How much was their opening inventory?
a. $7,000
b. $43,000
c. $93,000
d. $143,000
Q.11: In which section of the balance sheet should inventory accounts be classified?
a. Current assets
b. Investments
c. Property, plant, and equipment
d. Intangible assets
Q.12: Under normal circumstances, the Work in Process account used in a job costing system:
a. will include charges for direct labor, direct materials, and applied overhead.
b. will include only charges for direct materials and applied overhead. The labor is charged to expense as incurred.
c. will include charges for direct labor, direct materials, and actual overhead.
d. will include only charges for direct labor and direct materials.
Q.13: The amount of cash reported in the financial statements is the closing balance of cash reported in the ______________?
a. check register before Bank Reconcilation
b. Bank Reconcilation
c. bank statement before Bank Reconcilation
d. None of the above
Q.14: Accounts payable refer to the current?
a. Liability of a business or an organization
b. Asset of a business or an organization
c. Expense of a business or organization
d. Income of a business or organization
Q.15: Which of the following errors will be disclosed in the preparation of a trial balance?
a. Recording transactions in the wrong account.
b. Duplication of a transaction in the accounting records.
c. Posting only the debit portion of a particular journal entry.
d. Recording wrong amount for a transaction to both the account debited and the account credited.
Q.16: Which of the following inventory methods will always produce the same results under both a periodic and a perpetual system?
a. FIFO
b. LIFO
c. Average
d. All of these
Q.17: What are the adjustments most common to bank reconciliation?
a. Interest earned and bank fees
b. Bank errors
c. Unidentified transactions
d. Checks cleared but not in the accounting system
Q.18: An increase in a firm’s receivable turnover ratio means that:
a. it is collecting credit sales more quickly than before
b. cash sales have decreased
c. it has initiated more liberal credit terms
d. it’s inventories have increased
Q.19: Purchasers of merchandise may be dissatisfied with the quality of goods purchased on account, and return the goods to the seller with an indication that payment will not be forthcoming. In such a case, the document prepared by the purchaser is called:
a. a debit memorandum.
b. a credit memorandum.
c. a receiving report.
d. an invoice.
Q.20: Which of the following is a typical prepaid expense?
a. Rent
b. Insurance
c. Wages
d. Office Supplies
Q.21: The entry to record the declaration of dividends is:
a. debit Cash, credit Dividend Expense
b. debit Dividend Expense, credit Cash
c. debit Dividends, credit Dividend Payable
d. debit Retained Earnings, credit Dividend Payable
Q.22: Gerber Departmental Store uses the retail inventory method. Their opening inventory had cost $140,000 and its retail price was fixed at $280,000. Purchases for the period amounted to $390,000 and were priced to sell at twice that amount. Sales for the period, all at the normal retail price, were $600,000. How much is the estimated cost of their closing inventory?
a. $115,000
b. $150,000
c. $230,000
d. $300,000
Q.23: The Factory Overhead account in a job costing system is credited for the:
a. excess of applied overhead over actual overhead.
b. actual overhead.
c. applied overhead.
d. indirect materials and indirect labor.
Q.24: Gerald’s had opening total stockholders’ equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Their net income was $180,000. No additional investments were made. However, some amount was paid as dividend during the year. What was the amount of the dividend paid?
a. $20,000.
b. $60,000.
c. $140,000.
d. $220,000.
Q.25: If the supplies account (assets), before adjustment on May 31, indicated a balance of $2,250, and the supplies on hand on May 31 totaled $950, the adjusting entry would be:
a. Debit supplies, $1,300; credit supplies expense, $1,300
b. Debit supplies, $950; credit supplies expense, $950
c. Debit supplies expense, $950; credit supplies, $950
d. Debit supplies expense, $1,300; credit supplies, $1,300
Q.26: The correct journal entry to reconcile an NSF check returned by the bank is:
a. Debit Accounts Receivable, Credit NSF
b. Debit Cash, Credit Accounts Receivable
c. Debit NSF Expense, Credit Cash
d. Debit Accounts Receivable, Credit Cash
Q.27: The following comments relate to the recording of journal entries. Which statement is true?
a. For any given journal entry, debits must exceed credits.
b. It is customary to record credits on the left and debits on the right.
c. The chart of accounts reveals the amount to debit and credit to the affected accounts.
d. Journalization is the process of converting transactions and events into the debit/credit format.
Q.28: The theoretically correct method of allocating under or over applied overhead is to:
a. allocate the amount to cost of goods sold.
b. allocate the amount to finished goods.
c. allocate the amount to work in process and finished goods.
d. allocate the amount among work in process, finished goods, and cost of goods sold.
Q.29: The following statements are true regarding the Cash short and Over account except
a. “Cash Short and Over also acts as an internal control device.”
b. “There is rarely a difference between actual cash receipts and that day’s record of cash receipts.”
c. “A large balance signals the accountant to investigate.”
d. “Honest errors can result in an entry to this account.”
Q.30: Why is the Accounts Receivable function important?
a. All companies have it; so it must be important
b. It is good to have someone people can call with invoice questions
c. It turns the receivables into cash
d. Sales would go down without an AR department
Q.31: Of the following manufacturing operations, which is best suited to the utilization of a job order system?
a. Helicopter manufacturing.
b. Soft drink bottling operation.
c. Crude oil refining.
d. Plastic molding operation.
Q.32: Which of the following is a personal account?
a. Building
b. Wages
c. Debtors
d. Rent
Q.33: A payment of cash for the purchases of services should be recorded in the:
a. cash payments journal
b. purchases journal
c. revenue journal
d. cash receipts journals
Q.34: How often can a company change its inventory valuation methodology and still be compliant with GAAP?
a. Once per month
b. Any number of times; there are no rules
c. Once per year, but not every year
d. Never; you decide once and only once.
Q.35: Refer to the given image:
Bernstein Corporation Ltd.recently experienced a fire which destroyed its entire inventory. The following data have been reconstructed from the partial accounting information available, and pertain to the year up to the date of the fire.
Using the gross profit method, estimate the dollar amount of the inventory which was destroyed in the fire.
a. $17,000
b. $33,000
c. $48,000
d. $65,000
Q.36: The appropriate journal entry to record the application of overhead in a job costing system involves a debit to Work in Process and a credit to:
a. Cost of Goods Sold
b. Factory Overhead
c. Cash
d. Income Summary
Q.37: Mike is the payee of a $20,000, 180-day, 8% note. On maturity, the note maker fails to pay. How much interest income should Mike receive on the dishonored note?
a. $0
b. $800
c. $1,600
d. $10,800
Q.38: Refer to the given image:
Hefty & Co. wants to know the effect of different inventory methods on financial statements. Given below is the information about the opening inventory and purchases for the current year.
Sales during the year were 2,700 units at $5.00. If they used the weighted-average method, the gross profit would be:
a. $3,255
b. $3,415
c. $10,245
d. $13,500
Q.39: Refer to the given image:
Bergstrom Inc. Ltd. accepted the return of merchandise by a customer. The merchandise had been sold on account, and payment had not been received on the date of return. The returned goods were retailed for $400, but had cost them only $300. The appropriate journal entry for them would be:
a. 1
b. 2
c. 3
d. 4
Q.40: Which of the following best describes the meaning of ‘Purchases’?
a. Goods paid for
b. Goods bought for resale
c. Items bought
d. Goods bought on credit
