Download AT1- 1 Achievement Test 1 Achievement Test 1: Chapters 1 and 2

Achievement Test 1: Chapters 1 and 2
Financial Accounting, 5e
Part
Points
Name _________________________
Instructor ______________________
Section # _______ Date _________
I
II
III
IV
Total
54
26
10
10
100
Score
PART I — MULTIPLE CHOICE (54 points)
Instructions: Designate the best answer for each of the following questions.
____ 1. "GAAP" refers to
a. General Accounting and Auditing Principles.
b. Guidelines for American Accounting Procedures.
c. General Association of Accounting Practitioners.
d. None of the above.
____ 2. The requirement that only transaction data capable of being expressed in terms of
money be included in the accounting records relates to the
a. cost principle.
b. monetary unit assumption.
c. economic entity assumption.
d. both a and b above.
____ 3. The initials CPA stand for
a. Certified Practical Auditor.
b. Chartered Public Auditor.
c. Certified Public Accountant.
d. Can't Pass Accounting.
____ 4. Which of the following is not an external user of accounting data?
a. Company officers
b. Regulatory agency
c. Labor union
d. Taxing authority
____ 5. Which of the following is not generally understood to be a major service of a public
accounting firm?
a. Auditing
b. Taxation
c. Budgeting
d. Management consulting
AT1- 2
Test Bank for Financial Principles, Fifth Edition
____ 6. Which of the following presents key aspects of the process of accounting in the correct
chronological order?
a. Totaling, auditing, and budgeting
b. Budgeting, recording, and communicating
c. Recording, totaling, and auditing
d. Identifying, recording, and communicating
____ 7. The process of transferring transaction effects into the appropriate accounts is referred
to as
a. closing.
b. journalizing.
c. recording.
d. posting.
____ 8. The following describes the process of identifying the economic events of an
organization:
a. Keeping a chronological diary of particular events in an orderly and systematic
manner.
b. Selecting the economic activities relevant to a particular organization.
c. Preparing accounting reports, including financial statements.
d. Quantifying events in dollars and cents.
____ 9. The current source of "GAAP" in the private sector is the
a. Accounting Principles Board.
b. Internal Revenue Service.
c. Financial Accounting Standards Board.
d. Securities Exchange Commission.
____10. Transactions are initially recorded in the
a. general ledger.
b. trial balance.
c. general journal.
d. balance sheet.
____11. The Retained Earnings Column had a beginning total of $40,000 and an ending total of
$50,000. If $10,000 of dividends were paid during the period, net income must have
been
a. $20,000.
b. $40,000.
c. $10,000.
d. $30,000.
____12. Which of the following is false with regard to a general journal?
a. It tracks the increases and decreases in an individual account.
b. It provides a chronological record of transactions.
c. It discloses in one place the complete effect of a transaction.
d. It helps to prevent errors since the debit and credit amounts in an individual entry
can be readily compared.
Achievement Test 1 AT1- 3
____13. Financial statements combining the operations of Sears and J.C. Penney would violate
the
a. monetary unit assumption.
b. economic entity assumption.
c. cost principle.
d. both a and c above.
____14. At January 1, 2006, Orion Enterprises reported accounts receivable totaling $3,500.
During the month, the company had credit sales of $5,000 and collected cash on
accounts of $6,000. At the end of January, the balance in accounts receivable is
a. $3,500 credit
b. $9,500 debit
c. $5,500 credit
d. $2,500 debit
____
15. The accounting equation for Ally Elton, Inc. is:
Assets $120,000 = Liabilities $60,000 + Stockholders’ Equity $60,000.
If the company purchases supplies on account for $5,000, the new accounting
equation will be:
a. Assets $115,000 = Liabilities $55,000 + Stockholders’ Equity $60,000.
b. Assets $125,000 = Liabilities $65,000 + Stockholders’ Equity $60,000.
c. Assets $125,000 = Liabilities $60,000 + Stockholders’ Equity $65,000.
d. Assets $120,000 = Liabilities $65,000 + Stockholders’ Equity $55,000.
____16. Although a separate legal entity, the transactions of the following still must be kept
separate from the personal activities of the owners for accounting purposes:
a. Proprietorship.
b. Partnership.
c. Corporation.
d. Both a and b above.
____17. Limited liability is not enjoyed by the owner(s) of a
a. corporation.
b. partnership.
c. proprietorship.
d. both b and c above.
____18. At June 1, 2006, Larry Levine Company reported Accounts Payable of $5,000. During
the month, the company made purchases on account of $14,000 and payments on
account of $10,000. At June 30, 2006, the balance in Accounts Payable is
a. $5,000 debit
b. $9,000 credit
c. $19,000 credit
d. $10,000 debit.
AT1- 4
Test Bank for Financial Principles, Fifth Edition
PART II — JOURNAL ENTRIES (26 points)
The ledger accounts given below, with an identification number for each, are used by Yates
Company.
Instructions: Indicate the appropriate entries for the month of June by placing the appropriate
identification number(s) in the debit and credit columns provided. Item 0 is given as an example.
Write "none" if no entry is appropriate.
1. Cash
7. Salaries Payable
13. Service Revenue
2. Accounts Receivable
8. Accounts Payable
14. Equipment Expense
3. Supplies
9. Unearned Service Revenue
15. Advertising Expense
4. Prepaid Salaries
10. Notes Payable
16. Supplies Expense
5. Prepaid Advertising
11. Common Stock
17. Rent Expense
6. Equipment
12. Dividends
18. Salaries Expense
———————————————————————————————————————————
Entry
Account(s) Account(s)
No.
Entry Information
Debited
Credited
0. June 1 H. Yates invested $25,000 in the business.
1
11
———————————————————————————————————————————
1. June 4 Purchased supplies costing $2,000 on account.
———————————————————————————————————————————
2. June 5 Equipment was purchased at a cost of $5,000; a threemonth, 12% note payable was signed for this amount.
———————————————————————————————————————————
3. June 8 Received $7,000 from customers for services rendered
during the week.
———————————————————————————————————————————
4. June 10 Yates agreed to hire B. James as an assistant. She will
be paid at the rate of $4,000 monthly, receiving $2,000
on the 15th and 30th of each month. She will begin
work June 16.
———————————————————————————————————————————
5. June 14 Paid $400 cash to the Daily News for advertisements
run this past week.
———————————————————————————————————————————
6. June 16 B. James began work.
———————————————————————————————————————————
7. June 19 Paid $2,000 in cash to Santo Company for June rent.
———————————————————————————————————————————
8. June 25 Paid supplier for supplies purchased on June 4.
———————————————————————————————————————————
9. June 26 Paid the Daily News $400 for an advertisement that will
run the first week in July.
———————————————————————————————————————————
10. June 27 Received $9,000 from customers for services to be
rendered early in July.
———————————————————————————————————————————
11. June 28 Billed customers $6,000 for services rendered but not
collected during June.
———————————————————————————————————————————
12. June 30 Yates paid $900 of dividends.
———————————————————————————————————————————
13. June 30 B. James was paid $2,000 cash for her salary.
———————————————————————————————————————————
Achievement Test 1 AT1- 5
PART III — SHORT PROBLEMS (10 points)
Instructions: Present the solutions, with appropriate supporting calculations, for each of the
following independent problems.
A. Given the following information, compute 2005 net income for Orson Company.
B. Stockholders’ equity—January 1, 2005
$125,000
B. Stockholders’ equity—December 31, 2005
140,000
Stockholder investments during 2005
20,000
Dividends paid during 2005
38,000
B. Indicate the impact on the accounting equation of each of the following transactions.
1.
Owner investment of cash.
2.
Purchase of equipment for cash
3.
Borrowed money from bank by issuing a note payable.
4.
Purchase of office furniture for cash.
5.
Purchase of supplies on account.
6.
Collect cash from customers for services performed.
7.
Purchased 24-month insurance policy
8.
Paid monthly payroll.
AT1- 6
Test Bank for Financial Principles, Fifth Edition
PART IV — TYPES OF ACCOUNTS (10 points)
Instructions: Place a check in the appropriate columns to designate whether each of the
following accounts: (1) has a debit or credit normal balance; and (2) is an asset, liability, or
stockholders’ equity account.
———————————————————————————————————————————
(1)
(2)
Owner's
Account
Debit
Credit
Asset
Liability
Equity
———————————————————————————————————————————
1. Service Revenue
———————————————————————————————————————————
2. Salaries Expense
———————————————————————————————————————————
3. Supplies
———————————————————————————————————————————
4. Common Stock
———————————————————————————————————————————
5. Accounts Payable
———————————————————————————————————————————
6. Salaries Payable
———————————————————————————————————————————
7. Dividends
———————————————————————————————————————————
8. Accounts Receivable
———————————————————————————————————————————
9. Prepaid Insurance
———————————————————————————————————————————
10. Notes Payable
———————————————————————————————————————————
Achievement Test 1 AT1- 7
Solutions — Achievement Test 1: Chapters 1 and 2
PART I — MULTIPLE CHOICE (54 points)
1. d
2. b
3. c
4. a
5. c
6. d
7. d
8. b
9. c
10. c
11. a
12. a
13. b
14. d
15. b
16. c
17. d
18. b
PART II — JOURNAL ENTRIES (26 points)
0.
1.
2.
3.
4.
5.
6.
Account(s)
Debited
3
8
6
1
None
15
None
Account(s)
Credited
8
1
10
13
None
1
None
Account(s)
Debited
17
8
5
1
2
12
18
7.
8.
9.
10.
11.
12.
13.
Account(s)
Credited
1
1
1
9
13
1
1
PART III — SHORT PROBLEMS (10 points)
A. Ending stockholders’ equity, 12/31/05 ......................................
Beginning stockholders’ equity, 1/1/05 .....................................
Increase in stockholders’ equity ...............................................
Dividends paid during 2005 ......................................................
Investments during 2005 ..........................................................
Net income in 2005 ..................................................................
B. 1.
2.
3.
4.
5.
6.
7.
8.
$140,000
125,000
15,000
38,000
53,000
20,000
$ 33,000
Increase assets and increase stockholders’ equity.
No effect.
Increase assets and increase liabilities.
No effect.
Increase assets and increase liabilities.
Increase assets and increase stockholders’ equity.
No effect.
Decrease assets and decrease stockholders’ equity.
PART IV — TYPES OF ACCOUNTS (10 points)
Debit
1.
2.
3.
4.
5.
6.
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Credit
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Asset
Liability
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Stockholders’
Equity
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AT1- 8
7.
8.
9.
10.
Test Bank for Financial Principles, Fifth Edition
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