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2004 Accounting II Indicate whether the sentence or statement is True or False. Mark “A” if the answer is True or “B” if the answer is False. 1. When a payment is made to a vendor, the amount will be a. True b. False posted as a credit in the Accounts Payable ledger. 2. A report of deposits, checks written, ATM transactions, a. True b. False service charges, and the bank balance sent to an account holder by the bank is called a bank statement. 3. A purchase of merchandise on account is posted as a a. True b. False debit to the customer’s account in the subsidiary ledger. 4. Separate cost accounts are set up for each department in a. True b. False a departmental accounting system. 5. The cash account should be adjusted on the work sheet a. True b. False to bring it up to date. 6. In a partnership, each partner is personally liable for the a. True b. False debts of the partnership. 7. A corporation must pay federal income taxes on its a. True b. False profits. 8. Sales Returns and Allowances are listed on the Balance a. True b. False Sheet. 9. The Retained Earnings account shows the dividends a. True b. False issued to stockholders. 10. The Statement of Stockholders’ Equity shows changes in a. True b. False partners’ capital accounts for a fiscal period. 11. Unemployment taxes are withheld from employees’ a. True b. False paychecks. 12. Salaries Payable is an example of an accrued expense. a. True b. False 13. A plant asset record is used to keep track of the a. True b. False accumulated depreciation and book value for each plant asset owned by the company. 14. An example of an accelerated method of depreciation is a. True b. False the straight-line method. 15. Organization costs are an intangible asset that is a. True b. False amortized over a period of years. 16. A debit amount posted to a customer’s account indicates a. True b. False an amount paid on account. 17. Allowance for Uncollectible Accounts reduces the a. True b. False amount of accounts receivable a company will realize. 18. The net income of a corporation is subject to double a. True b. False taxation as corporate income and stockholders’ personal income in the form of dividends. 19. In a departmental account system, gross profit is a. True b. False calculated for each department. Page 1 2004 Accounting II 20. Both Accounts Payable and the vendor’s individual a. True account should be debited when a purchase is made on account. 21. Source documents should be discarded at the end of the a. True fiscal year to make room for next year's documents. 22. Subsidiary ledgers are used to maintain accounts a. True receivable and accounts payable balances. 23. Partners are required by law to split profits equally in a a. True partnership. 24. The balance sheet reports net income or net loss of the a. True business for the fiscal period. 25. The number of times the average amount of merchandise a. True inventory is sold during a specific time period is called the merchandise inventory turnover ratio. Mark the correct answer on your Scantron sheet for each of the following questions. 26. The following are all examples of payroll deductions a. state sales tax. except 27. The method that uses scanners to keep inventory a. perpetual. constant and up to date is 28. A plant asset record includes all of the following except a. date of purchase. 29. Which of the following is not a factor in preparing a bank reconciliation? 30. If a company has a total revenue of $150,000, cost of goods sold of $59,600, and total expenses of $72,985, its gross profit is 31. The method of depreciation that records the same amount each year is called 32. Which of the following transactions would result in a debit and a credit to the same general ledger account? 33. Which of the following is not a factor in proving cash? 34. Which of the following is used to record a company’s entire payroll for one pay period? 35. Which of the following would be recorded in the Sales Journal? 36. Which of the following is the correct entry for a payroll? a. Outstanding checks a. $ 77,315. a. units of production. a. Discarding a plant asset a. Balance of the Accounts Receivable account a. Employee earnings record a. Sale of old office equipment for cash a. Debit Cash/credit Salary Expense and payroll deductions Page 2 b. False b. False b. False b. False b. False b. False b. federal income tax. b. consignment. c. FICA taxes. c. periodic. d. employee health insurance. d. quality control. b. name of purchaser. b. Outstanding deposits b. $ 17,415. c. depreciation rate. d. original cost. c. Amount of petty cash c. $132,585. d. Service charges b. double declining balance. b. Trading in a plant asset b. Balance of Cash at the beginning of the month b. Payroll register c. straight line. d. sum-of-the-years’ digits. d. Purchasing a new plant asset with cash d. Cash paid during the month b. Sale of old office equipment on account b. Debit Salary Expense and Cash/credit payroll deductions c. Selling a plant asset c. Cash received during the month c. Commissions record c. Cash sale of merchandise c. Debit payroll deductions/credit Cash and Salary Expense d. $ 90,400. d. Gross profit statement d. Sale of merchandise on account d. Debit Salary Expense/credit payroll deductions and Cash 2004 Accounting II 37. The Accounts Payable subsidiary ledger contains Page 3 a. customers’ account balances. a. stock subscribed. b. vendors’ account balances. b. cash. a. book value of accounts receivable. b. bad debts expense. a. Debit Accounts Receivable and customer/credit Purchases a. common stock. c. employee payroll records. c. subscriptions receivable. c. loss on plant assets. d. petty cash records. b. Debit Purchases/credit Accounts Receivable and customer b. preferred stock. c. Debit Accounts Payable and vendor/credit Purchases c. treasury stock. d. Debit Purchases/credit Accounts Payable and vendor d. equity stock. a. Debit Cash and Sales Discounts/credit Accounts Receivable and customer a. Balance Sheet b. Debit Accounts Receivable and customer/credit Cash and Sales Discounts a. book value of plant assets. a. direct write off. d. Debit Accounts Receivable and customer/credit Cash and Purchases Discount d. Plant Asset Record d. net sales. a. FIFO. b. uncollectible accounts. b. percentage of accounts receivable. b. LIFO. c. Debit Cash and Purchases Discounts/credit Accounts Receivable and customer c. Owner’s Equity Statement c. net purchases. a. Asset b. Current liabilities c. aging accounts receivable. c. Comparative Average. c. Revenue a. Asset b. Current liabilities c. Revenue 48. Loss on Plant Assets a. Asset b. Current liabilities c. Revenue 49. Sales Discounts a. Asset b. Current liabilities c. Revenue 50. Unearned Rent a. Asset b. Current liabilities c. Revenue 51. Prepaid Interest a. Asset b. Current liabilities c. Revenue 52. Interest Payable a. Asset b. Current liabilities c. Revenue 53. An independent review by the IRS to determine the reliability of accounting records is called a. auditing. b. financial planning. c. managerial accounting. d. percentage of net sales. d. Weighted Average Cost. d. Cost of merchandise d. Cost of merchandise d. Cost of merchandise d. Cost of merchandise d. Cost of mercha=dise d. Cost of merchandise d. Cost of merchandise d. systems analysis. 38. The account debited to journalize a final payment on a stock subscription is 39. The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts, is called 40. A purchase of merchandise on account would result in which of the following? 41. Stock issued by a corporation, then reacquired and held is called 42. A cash receipt that includes a cash discount for a payment from a customer on account would result in which of the following? 43. On which of the following financial statements would Purchases Returns and Allowances appear? 44. Sales, minus Sales Discounts, Sales Returns, and Allowances is known as 45. The most accurate method of figuring the allowance for uncollectible accounts is 46. The assumption that the most recently purchased merchandise is sold first is called Use the following choices to identify the classification for the accounts in questions 47-52. 47. Purchases Returns and Allowances b. Income Statement d. common stock. d. accumulated depreciation. e. Expenses e. Expenses e. Expenses e. Expenses e. Expenses e. Expenses e. Expenses 2004 Accounting II 54. A written promise to pay a certain amount of money on a specific date is called 55. The proceeds of an 8%, 3-month discounted note with a face value of $1,200 would be 56. Which of the following is the correct adjustment to record annual depreciation of a plant asset? Page 4 d. earned interest. b. $1,224.00. c. stockholders’ dividend. c. $1,104.00. a. Debit Depreciation Expense/credit Cash b. Debit Depreciation Expense/credit Accumulated Depreciation c. Debit Accumulated Depreciation/credit Depreciation Expense 57. Which of the following accounts would not be needed for the purchase of merchandise on account? 58. Which of the following forms is filled out by a newlyhired employee for withholding taxes? 59. The Accumulated Depreciation for Office Equipment would be extended to which column on a worksheet? 60. Which of the following is not a method of figuring the allowance for uncollectible accounts adjusting entry? a. Purchases b. Accounts Payable c. Sales Tax Payable d. Debit Uncollectible Accounts Expense/credit Accumulated Depreciation d. Vendor’s account a. W2 b. W4 a. Income Statement debit a. Percentage of net sales d. Withholding tax tables d. Balance Sheet credit d. Direct write off Choose one of the following journals for the transactions in questions 61-67. 61. Purchase of merchandise for cash a. Purchases Journal b. Income Statement credit b. Percentage of accounts receivable account balance b. Sales Journal c. Quarterly tax report c. Balance Sheet debit c. Aging accounts receivable a. Purchases Journal b. Sales Journal 62. Purchase of new equipment on account a. Purchases Journal b. Sales Journal 63. Recording employer’s payroll taxes for the current payroll 64. Receipt of cash for the sale of old equipment a. Purchases Journal b. Sales Journal a. Purchases Journal b. Sales Journal 65. Cash sales of merchandise a. Purchases Journal b. Sales Journal 66. Purchase of merchandise on account a. Purchases Journal b. Sales Journal 67. Purchase of supplies on account a. Purchases Journal b. Sales Journal 68. Entries used to bring an account up to date on the worksheet at the end of a fiscal period are called 69. The $1,500 rent paid per month is a 70. Which of the following items on a bank statement would be subtracted from your checkbook balance? 71. Which of the following payroll deductions is matched by the employer? a. correcting entries. b. closing entries. c. Cash Payments Journal c. Cash Payments Journal c. Cash Payments Journal c. Cash Payments Journal c. Cash Payments Journal c. Cash Payments Journal c. Cash Payments Journal c. Cash Payments Journal c. adjusting entries. d. Cash Receipts Journal d. Cash Receipts Journal d. Cash Receipts Journal d. Cash Receipts Journal d. Cash Receipts Journal d. Cash Receipts Journal d. Cash Receipts Journal d. Cash Receipts Journal d. allowance entries. a. fixed cost. a. Outstanding deposits a. Federal income taxes b. variable cost. b. Outstanding checks b. State income taxes c. total cost. c. Service charges d. breakeven cost. d. Beginning statement balance d. FICA taxes a. savings bond. b. promissory note. a. $ 24.00. c. Unemployment taxes d. $1,176.00. e. General Journal e. General Journal e. General Journal e. General Journal e. General Journal e. General Journal e. General Journal e. General Journal 2004 Accounting II 72. The journal entry to record the payment of sales tax would be 73. Unemployment taxes are usually paid how often by an employer? 74. Which of the following actions is performed in reconciling a bank statement? Page 5 a. debit Sales Tax Expense/credit Cash. a. Weekly b. debit Sales Tax Payable/credit Cash. b. Monthly c. debit Cash/credit Sales Tax Payable. c. Quarterly d. debit Cash/credit Sales. d. Annually a. Subtract credit card fees from your check register a. Sales b. Subtract canceled checks from the statement balance b. Retained Earnings c. Add outstanding checks to the statement balance c. Purchases d. Add service charges to your check register d. Sales Discount a. original cost. b. useful life. c. depreciation. d. salvage value. a. Purchases b. Sales c. Accounts Payable a. par value. b. common value. c. preferred value. d. Accounts Receivable d. charter value. a. sales invoice. b. cash register tape. 80. The journal entry to record a corporation’s payment of dividends would be 81. The return of merchandise from a customer would result in which of the following journal entries? a. debit Dividends Expense/credit Cash. a. Debit Accounts Receivable and customer/credit Sales and Sales Tax Payable b. debit Dividends Payable/credit Cash. b. Debit Accounts Receivable and customer/credit Sales Returns and Allowances and Sales Tax Payable c. debit memorandum. c. debit Cash/credit Dividends Income. c. Debit Sales and Sales Tax Payable/credit Accounts Receivable and customer 82. A net loss would appear in which column of the worksheet? 83. Which of the following would not appear on the Income Statement? 84. The journal entry to record a payment on account with a discount for merchandise bought from a vendor is a. Income Statement debit a. Net Worth b. Income Statement credit b. Net Income c. Adjustment debit a. debit Purchases/credit Cash. b. debit Accounts Payable and vendor/credit Cash. 85. An actual physical count of merchandise is called a a. periodic inventory. 86. The cost of inventory includes all except which of the following? a. Transporting the merchandise to the company b. perpetual inventory. b. The price of the merchandise c. debit Accounts Payable and vendor/credit Cash and Purchases Discount. c. LIFO inventory. 75. In departmentalized accounting, which of the following account does not need to be separated by department? 76. The estimated value of a plant asset at the time of its disposal is called 77. Which account would be credited when a company buys merchandise on account? 78. A specific value assigned to a share of stock and printed on the stock certificate is called 79. The source document used to record cash sales is a c. Net Loss c. Advertising the merchandise to the public d. purchase invoice. d. debit Cash/credit Dividends Payable. d. Debit Sales Returns and Allowances and Sales Tax Payable/credit Accounts Receivable and customer d. Balance Sheet credit d. Operating Expenses d. debit Purchases Discount, Accounts Payable, and vendor/credit Cash. d. FIFO inventory. d. Getting the merchandise ready for sale 2004 Accounting II 87. The last step in posting from a journal to the ledger account is 88. The Accounts Receivable account is a Page 6 a. recording the account number in the journal. a. contra account in the subsidiary ledger. b. recording the page number of the journal in the account. b. controlling account in the subsidiary ledger. b. Office Equipment 89. A business would not record depreciation for which of a. Store Equipment the following plant assets? 90. The number of times per year that a company collects a. price earnings b. accounts the average balance of accounts receivable is called ratio. receivable turnover. 91. The value of an asset determined by tax authorities for a. assessed value. b. real value. the purpose of calculating taxes is called the 92. The decrease in the value of a plant asset due to removal a. depreciation. b. devaluation. of a natural resource is called Use the following partial Income Statement to choose the correct amounts in questions 93-97. XYZ COMPANY Income Statement Sales c. transferring the amount in the debit or credit column. d. finding the new balance in the account. c. contra account in the general ledger. d. controlling account in the general ledger. d. Land c. Buildings c. current ratio. c. property value. d. merchandise inventory turnover. d. current value. c. depletion. d. disposition. $218,750 Sales Discounts Sales Returns & Allowances Beginning Inventory Purchases Purchases Discounts Purchases Returns & Allowances Ending Inventory $2,375 890 595,900 127,450 1,265 960 650,425 Total Expenses 104,600 93. Net Sales a. $222,015 b. $215,485 c. $216,375 d. $ 3,265 94. Net Purchases a. $125,225 b. $123,960 c. $129,675 d. $ 2,225 95. Merchandise Available for Sale a. $1,246,325 b. $ 257,125 c. $ 346,200 d. $ 721,125 96. Cost of Merchandise Sold a. $127,450 b. $125,225 c. $114,150 d. $ 70,700 97. Gross Profit on Sales a. $241,600 b. $148,050 c. $144,785 d. $114,150 Calculate how net income of $50,000 would be distributed to partners Smith and Jones in each of the following cases for questions 98-100. Smith’s equity is $40,000 and Jones’ equity is $60,000. 98. Smith receives 65% of net income; Jones receives 35%. a. Smith $17,500; b. Smith $32,500; c. Smith $21,125; d. Smith $28,875; Jones $32,500 Jones $17,500 Jones $28,875 Jones $21,125 99. Each partner receives 10% interest on equity, sharing the a. Smith $44,000; b. Smith $22,000; c. Smith $26,000; d. Smith $24,000; remaining net income equally. Jones $6,000 Jones $28,000 Jones $24,000 Jones $26,000 2004 Accounting II 100. Smith receives a salary of $25,000; Jones receives $18,000. They share remaining net income at 55% for Smith and 45% for Jones. Page 7 a. Smith $28,850; Jones $21,150 b. Smith $21,150; Jones $28,850 c. Smith $3,850; Jones $3,150 d. Smith $3,150; Jones $3,850 2004 Accounting II Page 8 2003 FBLA ACCOUNTING II ANSWER KEY 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. B A B A B A A B B B B A A B A B A A A B B A B B A 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. A A B C D C B A B D D B B A D C A B D C B D E C B 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. A B A B D B C B D D C E E D D A E C A C D B C A B 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. D C A B B D B A C A C A D D B A C B A D D C B D A