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Accounting Quiz Review Chapters 5 & 6
1.
A deposit in transit on a bank reconciliation should be
a. added to the depositor's book cash balance.
b. subtracted from the depositor's book cash balance.
c. added to the bank statement balance.
d. subtracted from the bank statement balance.
2.
In recording the year-end adjusting entry for bad debt expense, a company would
a. increase accounts receivable.
b. decrease bad debts expense.
c. decrease allowance for doubtful accounts.
d. increase allowance for doubtful accounts.
3.
Discontinued operations are
a. the amount reflected on the income statement for adjustments made to balance sheet accounts
when applying different accounting principles.
b. the result of the disposal of a major segment of the business.
c. a gain or loss that is both unusual in nature and infrequent in occurrence.
d. a prediction of earnings for future accounting periods.
4.
A company had the following partial list of account balances at year-end:
Sales Returns and Allowances
Accounts Receivable
Sales Discounts (a contra- account)
Sales Revenue
Allowance for Doubtful Accounts
$
1,000
38,000
2,100
95,000
1,200
The amount of Net Sales shown on the income statement would be
a. $91,900.
b. $90,700.
c. $89,900.
d. $88,600.
5.
The Walt Disney Company reported credit sales revenue of $30,752 million for 2004. Their gross
accounts receivable balance was $5,330 million in 2004 and $4,912 million in 2003. Assuming no
write-offs, cash collected from customers equals
a. $25,013 million
b. $28,926 million
c. $30,334 million
d. None of the above
6.
Return on equity (ROE) primarily measures (Hint: Return on equity = Net Income ÷ Average
Stockholders’ Equity)
a. the ability to generate revenue while holding assets steady.
b. the ability to generate sufficient profit on total assets.
c. the ability to earn income for the common stockholders.
d. None of the above.
7.
When goods are sold to a customer with credit terms of 2/10, n/30, the customer will
a. receive a 10% discount if they pay within 2 days.
b. receive a 2% discount if they pay 10% of the amount due within 30 days.
c. receive a 10% discount if they pay within 30 days.
d. receive a 2% discount if they pay within 10 days.
8.
Centex, Inc. sold and issued 50,000 shares of its $1 par value common stock for $20 per share. The
entry to record the stock issue would include
a. an increase to cash for $1,000,000.
b. an increase to common stock for $1,000,000.
c. an increase to common stock for $50,000.
d. both A and C would be included.
9.
The qualitative characteristic that says accounting information can influence users' decisions is
a. comparability.
b. materiality.
c. reliability.
d. relevance.
10.
Accrual accounting requires that the loss resulting from the failure of credit customers to pay their bills
should
a. not be recorded until cash is collected from the customer in settlement of the account because that
is the only sure event.
b. be estimated in the period in which sales are made but should not be recorded until the customer
defaults because of the matching principle.
c. be estimated and recorded in the period in which sales are made so that periodic expenses are
matched with periodic revenues.
d. be recognized in the period in which the account receivable proves to be uncollectible because that
is the only date when the loss will really be known.
11.
Which of the following would cause the receivable turnover ratio to increase?
a. Reducing the time it takes to collect our customer accounts
b. Increasing sales revenue at a faster rate than the rate of increase in accounts receivable
c. Strengthening our credit and collection policies resulting in reduced receivables while sales remain
constant
d. All of the above cause the ratio to increase
12.
A $25,000 overstatement of the 2007 ending inventory was discovered after the financial statements for
2007 were prepared. The effect of the inventory error on the 2007 financial statements was
a. current assets were overstated and net income was understated.
b. current assets were understated and net income was understated.
c. current assets were overstated and net income was overstated.
d. current assets were understated and net income was overstated.
13.)
Consider the following accounts and their balances:
Gross Sales $900,000
Sales Returns and Allowances $4,000
Credit Card Discounts $2,000
Sales Discounts $3,500
Cost of Goods Sold $720,000
What is the gross profit percentage?
A.
B.
C.
D.
14.)
15.63%
19.14%
19.73%
19.33%
Gross sales total $500,000, one-half of which were credit sales. Sales returns and allowances of
$30,000 apply to the credit sales, sales discounts of 2% were taken on all of the net credit sales, and
credit card sales of $200,000 were subject to a credit card discount of 3%. What is the dollar amount of
net sales?
A. $454,000
B. $459,600
C. $500,000
D. $480,000