Download TRUE/FALSE. Write `T` if the statement is true and `F` if the statement

Exam
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TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
1) Accrual accounting records transactions ONLY when cash is received or paid.
1)
2) There are two ways to do accounting: accrual accounting and cash-basis accounting.
2)
3) The revenue principle is the basis for recording revenues, both when to record revenue and the
amount of revenue to record.
3)
4) The matching principle guides accounting for expenses: identifying all expenses incurred during
the period, measuring the expenses, and matching them against the revenues earned during that
time period.
4)
5) In a prepaid adjustment, the cash payment occurs before an expense is recorded.
5)
6) The account "Prepaid Insurance" is an asset account.
6)
7) The adjusting entry required for an accrued expense consists of a debit to a liability and a credit to
revenue.
7)
8) The adjusting entry required for unearned revenue consists of a debit to a liability and a credit to
revenue.
8)
9) The adjusting entry required for accrued revenue consists of a debit to an expense and a credit to a
liability.
9)
10) The adjusted trial balance columns on a worksheet contain the adjusted account balances after
adjusting entries are made.
10)
11) Net income from the income statement is reported on the balance sheet.
11)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
12) Under which of the following methods of accounting is an expense recorded when it is incurred,
regardless of when cash is paid?
A) Receivable
B) Cash
C) Accrual
D) Deferral
12)
13) Under the accrual method of accounting, service revenue is recorded at which of the following
times?
A) When the services are completed
B) When payment for the services is received
C) At the end of the accounting period
D) Both A and B
13)
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14) Which of the following is the revenue principle?
A) The principle that determines when to record revenue.
B) The principle that determines when to record expenses.
C) The principle that ensures that information is reported at regular intervals.
D) None of the above.
14)
15) Robert Rogers, CPA, completed accounting services in December. A bill was mailed on December
30. A check arrived in the mail and was deposited on January 5. The revenue principle would
require that which of the following accounts appear on the income statement for the year ended
December 31?
A) Accounts Receivable
B) Accounting Expense
C) Service Revenue
D) Accounts Payable
15)
16) What debit is required as part of an adjusting entry when a prepaid expense is initially recorded as
an expense?
A) A debit to a deferred revenue account
B) A debit to a contra account
C) A debit to an unearned expense account
D) A debit to an asset account
16)
17) A prepaid expense is which of the following?
A) An expense that will be incurred and paid in the future
B) An expense that the business has incurred but not yet paid
C) An expense that has been paid and incurred
D) An expense that the business has paid but not yet incurred
17)
18) The Supplies account for Vulcan Detail Company had a balance of $3,200 at the beginning of the
year. Additional supplies of $13,400 were purchased during the year. A physical count of the
ending inventory of supplies revealed that $5,900 of supplies were still on hand. What was total
supplies expense for the year?
A) $4,300
B) $9,100
C) $16,400
D) $10,700
18)
19) The adjusting entry to record supplies expense accomplishes which of the following?
A) Decreases a liability and increases an expense
B) Decreases an asset and increases an expense
C) Decreases a liability and increases a revenue
D) Increases an asset and increases an expense
19)
20) Plant assets are long-lived tangible assets used in the operation of a business. The allocation of a
plant asset's cost to expense is which of the following?
A) Depreciation
B) Revenue allocation
C) Historical cost
D) The revenue principle
20)
21) What type of account is Prepaid Rent and what is its normal balance?
A) Revenue, credit
B) Liability, credit
C) Expense, debit
D) Asset, debit
21)
22) Which of the following reports a company's results of operations?
A) Income statement
B) Balance sheet
C) Statement of owner's equity
D) Adjusted trial balance
22)
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TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
23) Accountants often use a work sheet a document with several columns to summarize data for the
financial statements.
23)
24) Assets and liabilities are classified as either current or long-term to show their relative liquidity.
24)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
25) Which of the following statements is a TRUE statement concerning the work sheet?
A) The work sheet is a ledger.
B) The work sheet is a financial statement.
C) The work sheet is a document used to summarize data to prepare the financial statements.
D) The work sheet is a journal.
25)
26) What is TRUE if the Income Statement debit column exceeds the income statement credit column
on a work sheet?
A) The company has net income.
B) The owner's capital account increased during the period.
C) The company has a net loss.
D) Both A and C are true.
26)
27) Which of the following columns are generally found on a work sheet?
A) Adjusted balance sheet.
B) Pre-adjusted trial balance.
C) Adjustments.
D) Post-closing trial balance.
27)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
28) Prepaid rent is usually a long-term asset.
28)
29) The first step in creating a work sheet is to enter the adjusting entries in the Adjustments columns.
29)
30) The debit total and the credit total in the Adjusted Trial Balance columns of the work sheet should
equal each other.
30)
31) The debit total and the credit total in the Income Statement columns of the work sheet should
equal each other.
31)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
32) Which of the following reports a company's financial position?
A) Adjusted trial balance
B) Statement of owner's equity
C) Income statement
D) Balance sheet
32)
33) What type of account is an accrued expense and what is its normal balance?
A) Asset, debit
B) Revenue, credit
C) Expense, debit
D) Liability, credit
33)
34) What type of account is Accumulated Depreciation and what is its normal balance?
A) Expense, debit
B) Contra asset, credit
C) Revenue, debit
D) Liability, credit
34)
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35) Accrued revenue is which of the following?
A) Revenue that will be collected and earned in the future
B) Revenue that the business has collected but not yet earned
C) Revenue that the business has earned but not collected
D) Revenue that has been collected and earned
35)
36) Unearned revenue is which of the following?
A) Revenue that has been collected and earned
B) Revenue that the business has earned but not collected
C) Revenue that will be collected and earned in the future
D) Revenue that the business has collected but not yet earned
36)
37) What debit is required as part of an adjusting entry when unearned income is initially recorded as
revenue?
A) A debit to a deferred revenue account
B) A debit to a contra account
C) A debit to an unearned expense account
D) A debit to an asset account
37)
38) What debit is required as part of the entry that will eventually require an adjusting entry to
depreciation expense?
A) A debit to an asset account
B) A debit to a contra account
C) A debit to a deferred revenue account
D) A debit to an unearned expense account
38)
39) Which of the following is the matching principle?
A) The principle that determines when to record revenue.
B) The principle that determines when to record expenses.
C) The principle that ensures that information is reported at regular intervals.
D) None of the above.
39)
40) Under the accrual method of accounting, an expense is recorded at which of the following times?
A) When payment for the expense is made
B) When the expense is incurred
C) At the end of the accounting period
D) Both A and C
40)
41) Under which of the following methods of accounting is an expense recorded ONLY when cash is
paid?
A) Deferral
B) Accrual
C) Cash
D) Receivable
41)
42) Generally accepted accounting principles require the use of which of the following methods of
accounting?
A) Deferral
B) Accrual
C) Receivable
D) Cash
42)
43) Totals of various columns from the worksheet are shown below. What is net income or loss?
Income Statement
43)
Income Statement
Debit
Credit
$8,500
$6,750
Balance Sheet
Debit
Credit
$4,300
$6,050
A) Net income of $1,750
C) Net loss of $1,750
B) Net loss of $4,300
D) Net income of $4,300
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44) In which of the columns of the worksheet would the depreciation expense account be found?
A) In the Trial Balance credit column, the Adjusted Trial Balance debit column and the Income
Statement debit column
B) In the Adjusted Trial Balance debit column and the Income Statement debit column
C) In the Trial Balance credit column, the Adjusted Trial Balance credit column and the Income
Statement credit column
D) In the Adjusted Trial Balance credit column and the Income Statement credit column
44)
45) Which of the following accounts would appear in the Balance Sheet debit column?
A) Prepaid insurance
B) Service revenue earned
C) Unearned service revenue
D) Depreciation expense
45)
46) Which of the following accounts will be closed by debiting the Income Summary?
A) Depreciation Expense
B) Service Revenue
C) Accounts Payable
D) Accumulated Depreciation
46)
47) Revenues total $10,200. Expenses total $7,300. Owner's withdrawals total $2,600. What is the
balance in the Income Summary account prior to closing net income or loss to the owner's capital
account?
A) Credit balance of $2,900
B) Debit balance of $2,900
C) Balance of $0
D) Credit balance of $300
47)
48) Which of the following assets is the most liquid?
A) Cash
C) Prepaid expenses
48)
B) Accounts Receivable
D) Inventory
49) Under which of the following categories would Inventory appear?
A) Current assets
B) Current liabilities
C) Long-term liabilities
D) Long-term assets
49)
50) Under which of the following categories would Accounts Payable appear?
A) Long-term liabilities
B) Current assets
C) Long-term assets
D) Current liabilities
50)
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
51) Revenue accounts and expense accounts are closed to the __________ account.
51)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
52) Which of the following does NOT appear on the work sheet?
A) Adjusting entries
B) Closing entries
C) The adjusted trial balance
D) The trial balance
52)
53) Which of the following accounts will be closed by debiting the Income Summary?
A) Accounts Receivable
B) Owner's Capital
C) Accounts Payable
D) Owner's Withdrawal
53)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
54) Merchandising consists of buying and selling products.
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54)
55) The periodic inventory system keeps a running record of inventory and cost of goods sold.
55)
56) The accounting cycle for a service company begins with the purchase of inventory.
56)
57) Credit terms of "2/10 n/30" mean that the purchaser may deduct 2 percent if the invoice is paid
within 10 days, with the full amount due in 30 days if the early payment option is NOT exercised.
57)
58) The recording of cost of goods sold along with sales revenue is an example of the matching
principle.
58)
59) The cost of goods sold account keeps a current balance throughout the period if a company uses
the perpetual inventory method.
59)
60) Freight out is an addition to the inventory account if the company uses the perpetual inventory
method.
60)
61) Purchase returns and allowances decrease the net amount of revenue earned on sales.
61)
62) When a company uses the perpetual inventory method, it should NOT be necessary to conduct a
physical count of inventory.
62)
63) The entry to close Sales Discounts and Sales Returns and Allowances results in a debit to Income
Summary.
63)
64) If a physical count of inventory indicates that the Inventory account is overstated, an additional
closing entry is required.
64)
65) Cost of goods sold is an operating expense on a merchandising company's income statement.
65)
66) Cost of goods sold appears on both a multi-step income statement and a single-step income
statement.
66)
67) Purchase Discounts appear on the income statement of a company that uses the perpetual
inventory method.
67)
68) Inventory is the most important asset for a merchandiser.
68)
69) A small decrease in the gross profit percentage generally signals a rise in income.
69)
70) Owners and managers generally strive to sell inventory quickly.
70)
71) With a periodic inventory method, purchases, purchase discounts, purchase returns and
allowances are recorded in separate accounts.
71)
72) With a periodic inventory method, cost of goods sold is computed by adding ending inventory to
cost of goods available for sale.
72)
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73) With a periodic inventory method, it is necessary to conduct a physical count of inventory to
determine cost of goods sold.
73)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
74) A company uses the perpetual inventory method. Which of the following entries would be made
to record a purchase of inventory on account?
A) The accounting entry would be a debit to Accounts Payable and a credit to Purchases.
B) The accounting entry would be a debit to Accounts Payable and a credit to Inventory.
C) The accounting entry would be a debit to Purchases and a credit to Accounts Payable.
D) The accounting entry would be a debit to Inventory and a credit to Accounts Payable.
74)
75) Which of the following statements concerning the Inventory account is true?
A) The Inventory account is used only for goods purchased for resale.
B) Inventory is an asset until it is sold.
C) The Inventory account is used for goods purchased for resale and for supplies to be used by
the business.
D) Both A and B are true.
75)
76) Which of the following assets does a merchandising company but NOT a service company
need?
A) Accounts Receivable
B) Equipment
C) Merchandise Inventory
D) Prepaid Insurance
76)
77) Which of the following is the correct order of the steps in the accounting cycle for a merchandising
company?
I. The company sells inventory to customers, creating Accounts Receivable.
II. The company collects cash.
III. The company buys inventory.
A) III, I, II
B) III, II, I
C) II, I, III
D) I, II, III
77)
78) A company uses the perpetual inventory method. Which of the following entries would be made
to record a $1,200 purchase of inventory on account?
A) The accounting entry would be a $1,200 debit to Inventory and a $1,200 credit to Accounts
Payable.
B) The accounting entry would be a $1,200 debit to Purchases and a $1,200 credit to Accounts
Payable.
C) The accounting entry would be a $1,200 debit to Accounts Payable and a $1,200 credit to
Purchases.
D) The accounting entry would be a $1,200 debit to Accounts Payable and a $1,200 credit to
Inventory.
78)
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79) A company that uses the perpetual inventory method purchases inventory of $1,000 on account
with terms of 2/10 net/30. Which of the following entries would be made to record the payment for
the inventory if the payment is made within 10 days?
A) The accounting entry would be a $1,000 debit to Accounts Payable, a $20 credit to Inventory
and a $980 credit to Cash.
B) The accounting entry would be a $1,000 debit to Accounts Payable and a $1,000 credit to
Cash.
C) The accounting entry would be a $20 debit to Inventory, a $1,000 debit to Accounts Payable
and a $1,020 credit to Cash.
D) The accounting entry would be a $980 debit to Accounts Payable, a $20 debit to Inventory
and a $1,000 credit to Cash.
79)
80) A company that uses the perpetual inventory method purchases inventory of $1,000 on account
with terms of 2/10 net/30. Which of the following entries would be made to record the payment for
the inventory if the payment is made 20 days later?
A) The accounting entry would be a $20 debit to Inventory, a $1,000 debit to Accounts Payable
and a $1,020 credit to Cash.
B) The accounting entry would be a $1,000 debit to Accounts Payable, a $20 credit to Inventory
and a $980 credit to Cash.
C) The accounting entry would be a $980 debit to Accounts Payable, a $20 debit to Inventory
and a $1,000 credit to Cash.
D) The accounting entry would be a $1,000 debit to Accounts Payable and a $1,000 credit to
Cash.
80)
81) A company uses the perpetual inventory method. Which of the following entries would be made
to record a return of $200 of inventory purchased on account?
A) The accounting entry would be a $200 debit to Inventory and a $200 credit to Accounts
Payable.
B) The accounting entry would be a $200 debit to Accounts Payable and a $200 credit to
Inventory.
C) The accounting entry would be a $200 debit to Purchases and a $200 credit to Accounts
Payable.
D) The accounting entry would be a $200 debit to Accounts Payable and a $200 credit to
Purchases.
81)
82) A company that uses the perpetual inventory method purchases inventory of $1,000 on account
with terms of 2/10 net/30. Defective inventory of $200 is returned 2 days later. Which of the
following entries would be made to record the payment for the inventory if the payment is made
within 10 days?
A) The accounting entry would be a $16 debit to Inventory, a $800 debit to Accounts Payable
and a $816 credit to Cash.
B) The accounting entry would be a $784 debit to Accounts Payable, a $16 debit to Inventory
and a $800 credit to Cash.
C) The accounting entry would be an $800 debit to Accounts Payable, a $16 credit to Inventory
and a $784 credit to Cash.
D) The accounting entry would be an $800 debit to Accounts Payable and an $800 credit to Cash.
82)
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83) A company that uses the perpetual inventory method purchases inventory of $1,000 on account
with terms of 2/10 net/30. Defective inventory of $200 is returned 2 days later. Which of the
following entries would be made to record the payment for the inventory if the payment is made
20 days later?
A) The accounting entry would be a $16 debit to Inventory, a $800 debit to Accounts Payable
and a $816 credit to Cash.
B) The accounting entry would be an $800 debit to Accounts Payable and an $800 credit to Cash.
C) The accounting entry would be a $784 debit to Accounts Payable, a $16 debit to Inventory
and a $800 credit to Cash.
D) The accounting entry would be an $800 debit to Accounts Payable, a $16 credit to Inventory
and a $784 credit to Cash.
83)
84) Which of the following does "FOB Shipping Point" mean?
A) The seller pays the transportation costs.
B) The buyer pays the transportation costs.
C) Both A and B are true
D) Neither A nor B are true.
84)
85) Which of the following does "FOB Destination" mean?
A) The seller pays the transportation costs.
B) The buyer pays the transportation costs.
C) Both A and B are true
D) Neither A nor B are true.
85)
86) A company that uses the perpetual inventory method purchases inventory of $2,000 on account
FOB shipping point with terms of 2/10 net/30. The seller prepays $100 of transportation costs for
the company. Which of the following entries would be made to record full payment to the seller
the payment is made within 10 days?
A) The accounting entry would be a $2,060 debit to Accounts Payable, a $40 debit to Inventory
and a $2,100 credit to Cash.
B) The accounting entry would be a $2,100 debit to Accounts Payable, a $42 credit to Inventory
and a $2,058 credit to Cash.
C) The accounting entry would be a $2,100 debit to Accounts Payable, a $40 credit to Inventory
and a $2,060 credit to Cash.
D) The accounting entry would be a $2,100 debit to Accounts Payable and a $2,100 credit to
Cash.
86)
87) A company that uses the perpetual inventory method purchases inventory of $2,000 on account
FOB shipping point with terms of 2/10 net/30. The seller prepays $100 of transportation costs for
the company. Which of the following entries would be made to record full payment to the seller
the payment is made 20 days later?
A) The accounting entry would be a $2,100 debit to Accounts Payable and a $2,100 credit to
Cash.
B) The accounting entry would be a $2,060 debit to Accounts Payable, a $40 debit to Inventory
and a $2,100 credit to Cash.
C) The accounting entry would be a $2,100 debit to Accounts Payable, a $40 credit to Inventory
and a $2,060 credit to Cash.
D) The accounting entry would be a $2,100 debit to Accounts Payable, a $42 credit to Inventory
and a $2,058 credit to Cash.
87)
88) Which of the following is generally a merchandiser's major cost?
A) Cost of goods sold
B) Advertising
C) Buildings
D) Salary expense
88)
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89) Which of the following describes Freight Out?
A) Freight Out is part of Merchandise Inventory.
B) Freight Out is an operating expense.
C) Both A and B are correct.
D) None of the above.
89)
90) Which one of the following is the basis for Cost of Goods Sold?
A) Cost of Goods Sold is based on the net realizable value of the merchandise.
B) Cost of Goods Sold is based on the value of the merchandise when it is sold.
C) Cost of Goods Sold is based on the selling price of the merchandise.
D) Cost of Goods Sold is based on the entity's cost.
90)
91) A company uses the perpetual inventory method. Which of the following entries would be made
to record a sale of merchandise on account?
A) The accounting entry would be a debit to Accounts Receivable and a credit to Sales Revenue.
B) The accounting entry would be a debit to Sales Revenue and a credit to Accounts Receivable.
C) The accounting entry would be a debit to Cost of Goods Sold and a credit to Inventory.
D) Both A and C would be necessary to record the sale.
91)
SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
92) __________ accounts are closed at the end of the accounting period.
92)
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
93) Which of the following is NOT a long-term asset?
A) Equipment
C) Buildings
B) Land
D) Accounts receivable
94) Which of the following is NOT a current asset?
A) Cash
C) Equipment
B) Prepaid insurance
D) Accounts receivable
93)
94)
95) Under which of the following categories would Land appear?
A) Current liabilities
B) Current assets
C) Long-term liabilities
D) Long-term assets
95)
96) Which of the following is an asset that is expected to be converted to cash, sold, or consumed
during the next year (or normal operating cycle if longer)?
A) Liquid asset
B) Long-term asset
C) Quick asset
D) Current asset
96)
97) Revenues total $10,200. Expenses total $7,300. Owner's withdrawals total $2,600. What is the
balance in the Income Summary account after closing net income or loss to the owner's capital
account?
A) Credit balance of $2,900
B) Debit balance of $2,900
C) Credit balance of $300
D) Balance of $0
97)
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98) Which of the following accounts are temporary accounts that must be closed at the end of the year?
A) Assets, liabilities and owner's withdrawals
B) Assets, liabilities and owner's equity
C) Revenues, expenses and owner's capital
D) Revenues, expenses and owner's withdrawals
98)
99) Which of the following accounts will be closed by crediting the Income Summary?
A) Accounts Payable
B) Service Revenue
C) Accumulated Depreciation
D) Depreciation Expense
99)
100) Which of the following accounts would appear in the Income Statement debit column?
A) Service revenue earned
B) Unearned service revenue
C) Depreciation expense
D) Prepaid insurance
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100)