1) Anytime an owner removes any asset for personal use it is recorded as:
A) a withdrawal.
B) payment of a liability.
C) an investment.
D) an expense.
2) The increase or decrease in the owner’s equity is reported on the:
A) statement of owner’s equity.
B) income statement.
C) balance sheet.
D) all of these
3) The purpose of the accounting process is to provide fi nancial information
on:
A) large corporations.
B) small businesses.
C) individuals.
D) All of these answers are correct.
4) Which of the following is not a business organization form?
A) Corporation
B) Sole proprietorship
C) Operation
D) Partnership
5) Owner’s withdrawals:
A) increase expenses.
B) increase liabilities.
C) increase assets.
D) decrease owner’s equity.
6) Cater Right, with total assets of $50,000, borrows $15,000 from the bank.
Which of the following is a True statement upon borrowing the money?
A) Total assets are now $35,000.
B) Owner’s equity is $15,000 more.
C) Total assets are now $50,000.
D) Total assets are now $65,000.
7) Mark paid $500 rent for the month. Identify the accounts affected.
A) Cash and Rent Expenses increase.
B) Cash and Capital increase.
C) Cash decreases, and Rent Expense decreases.
D) Cash decreases, and Rent Expense increases.
8) If Suite Dream Toys’ revenues are less than its expenses during the
accounting
period:
A) the business will incur a loss.
B) owner’s withdrawals decrease owner’s equity.
C) owner withdrawals decrease net income. D) net income causes liabilities to decrease.
9) The fi nancial statement that shows revenue and expenses for a period of
time
is the:
A) statement of owner’s equity.
B) balance sheet.
C) statement of liabilities and capital.
D) income statement.
10) The purchase of a truck with a down payment was recorded as a pure
cash
purchase. This error would cause:
A) liabilities were understated.
B) assets were overstated.
C) owner’s equity was overstated.
D) None of the above are correct.
11) The business provided services to a credit customer.
A) Assets and owner’s equity increase.
B) Assets and revenue increase.
C) Liabilities and owner’s equity increase.
D) None of the above are correct.
12) Which of the following transactions would cause an asset to increase and
the
owner’s equity to increase?
A) The business bought supplies on account.
B) The owner invested cash in the business.
C) The business incurred an expense on credit.
D) The owner withdrew cash from the business.
13) Which of the following would result if the business provided services to a
customer collecting cash?
A) Cash would increase and Revenue would decrease.
B) Since the cash was collected there is no need to record this.
C) Cash would increase and Capital would increase.
D) Cash would increase and Revenue would increase.
14) A formal account that has columns for date, explanation, post reference,
debit, and credit is called the:
A) T account.
B) ledger.
C) chart of accounts.
D) standard account form.
15) A credit may signify a(n):
A) decrease in revenues.
B) decrease in assets.
C) decrease in capital. D) decrease in liabilities.
16) A listing of all the accounts from the ledger with their ending balances is
called a:
A) normal balance.
B) trial balance.
C) footing.
D) chart of accounts.
17) Accounts Payable had a normal starting balance of $600. There were
debit
postings of $350 and credit postings of $200 during the month. The ending
balance is:
A) $950 credit.
B) $450 debit.
C) $450 credit.
D) $750 debit.
18) The beginning balance in Cash was $400. Additional cash of $800 was
received. Checks were written for $900. The cash balance is:
A) $400.
B) $300.
C) $700.
D) $900.
19) Given the following list of accounts with normal balances, what are the
trial
balance totals of the debits and credits?
Cash $500
Accounts Receivable 100
Capital 300
Withdrawals 100
Service Fees 700
Rent Expense 300
A) $800 debit, $800 credit
B) $1,200 debit, $1,200 credit
C) $900 debit, $900 credit
D) $1,000 debit, $1,000 credit
20) A credit to an asset account was posted to an owner’s equity account.
This
error would cause:
A) assets were overstated.
B) owner’s equity was overstated.
C) liabilities were overstated.
D) Both a and c are correct.
21) A debit to an asset account was posted to an expense account. This error
would cause:
A) assets were overstated B) expenses were overstated.
C) liabilities were overstated.
D) None of the above are correct.
22) The owner withdrew cash from the business. To record this:
A) Capital is debited and an asset is credited.
B) an expense is debited and an asset is credited.
C) Withdrawals is debited and an asset is credited.
D) None of these are correct.
23) One asset would be debited and another credited if:
A) the business paid a creditor.
B) the business provided services to a cash customer
C) the business bought supplies paying cash.
D) the business provided services to a credit customer
24) Paid the rent for the next six months.
A) An asset would be debited and an expense credited.
B) An asset would be debited and a revenue credited.
C) Capital would be debited and a revenue credited.
D) An asset would be debited and an asset credited.
25) The journal described as the simplest form is a (an):
A) accounting journal.
B) general journal.
C) special journal.
D) interim journal.
26) The process of initially recording business transactions in a journal is:
A) posting.
B) sliding.
C) journalizing.
D) transposing.
27) In the month of June, Davis Computers paid three months’ rent in
advance.
The journal entry to record this transaction is:
A) Rent Expense Cash
B) Cash Prepaid Rent
C) Cash Rent Expense
D) Prepaid Rent Cash
28) Antonio’s catered a reception. The total price was $1,200. The customer
paid
$200 cash and charged the remainder. The journal entry to record this
transaction
is:
A) Cash 200
Accounts Receivable 200 B) Cash 200
Accounts Receivable 1,000
Catering Service Fees 1,200
C) Cash 1,000
Accounts Receivable 200
Catering Service Fees 1,200
D) Accounts Receivable 1,200
Cash 200
Catering Service Fees 1,000
29) M. Sands, CPA, collected fees of $650 not previously billed or recorded.
The
journal entry to record the collection would be:
A) Accounting Fees 650
Cash 650
B) Accounts Receivable 650
Cash 650
C) Cash 650
Accounting Fees 650
D) Cash 650
M. Sands, Capital 650
30) When a number is recorded as 856 instead of 865 it is called a:
A) slide.
B) rearrangement.
C) composition
D) transposition.
31) A $600 check written for supplies was journalized as $60. The entry to
correct this error is:
A) debit Supplies, $540; credit Cash, $540.
B) debit Supplies, $60; credit Cash, $60.
C) debit Cash, $540; credit Supplies, $540.
D) debit Cash, $60; credit Cash, $60.
32) Proof that the dollar amount of the debits equals the dollar amount of the
credits in the ledger means:
A) all accounts have their correct balances in the ledger.
B) all of the information from the journal was correctly transferred to the
ledger.
C) only that the debit dollar amounts equal the credit dollar amounts.
D) only the ledger is accurate; the journal may be incorrect.
33) A debit to a revenue account was posted to an asset account. This would
cause:
A) revenue to be understated.
B) liabilities to be understated.
C) expense to be understated.
D) assets to be overstated. 34) The general journal entry to record an exchange of assets would most
commonly
include:
A) A debit to Cash and a credit to Fees Earned.
B) A debit to Fees Earned and a credit to Accounts Receivable.
C) A debit to Supplies and a credit to Accounts Payable.
D) A debit to Cash and a credit to Accounts Receivable.
35) If Cash has been debited, it is most likely that:
A) the business borrowed cash from the bank.
B) a charge customer made a payment.
C) the owner made an investment.
D) All of these are possible.
36) If you had purchased $500 of supplies during the month and at the end of
the month you had $300 on hand, the adjustment for Supplies would be:
A) $100.
B) $300.
C) $200.
D) $500.
37) If the adjustment for Supplies used during the period was not made:
A) expenses would be too high.
B) revenue would be too high.
C) expenses would be too low.
D) asset Offi ce Supplies would be too low.
38) Andrew Antiques showed store supplies available during the year of $400.
A
count of the supplies on hand as of May 31 is $150. The adjusting entry for
Store Supplies would include:
A) a debit to Store Supplies for $150.
B) a credit to Store Supplies Expense for $250.
C) a debit to Store Supplies Expense for $250.
D) a credit to Store Supplies Expense for $150.
39) Roy purchased a one-year insurance policy for $2,400. The adjusting
entry
for one month would include a:
A) debit to Prepaid Insurance, $200.
B) credit to Cash, $200.
C) debit to Insurance Expense, $200.
D) None of these answers are correct.
40) The capital balance amount shown in the balance sheet column of the
worksheet
represents:
A) beginning capital plus net income.
B) beginning capital plus investments to capital.
C) beginning capital less withdrawals. D) beginning capital plus net income less withdrawal.
41) When counting the supplies a fi le cabinet was forgotten and the
adjustment
was made based on the incorrect count. This would:
A) overstate the period’s net income.
B) overstate the end of period assets.
C) understate the end of period assets.
D) None of these are correct.
42) The adjustment for accrued wages included the entire pay period, some
of
which occurs next month. This would:
A) understate the end of period liabilities.
B) overstate the period’s net income.
C) overstate the end of period liabilities.
D) None of these are correct.
43) The purchase of equipment will require an adjustment of:
A) increasing the total assets and increasing the total expenses at the end of
the
month.
B) decreasing the total assets and decreasing the total expenses at the end
of
the month.
C) decreasing the total assets and increasing the total expenses at the end of
the month.
D) none of the above.
Final Examination
44) Which of the following would cause an asset to be debited and a liability
credited?
A) Recorded the adjustment for the expiration of the insurance policy
B) Recorded the adjustment for the expiration of rent
C) Purchased supplies on account
D) None of these would have that effect.
45) Which of the following would cause a liability to be credited and an
expense
debited?
A) Recorded the adjustment for the accrual of wages
B) It is the end of the month and no utility bill has been received
C) Recorded an accrued expense
D) All of the above would have that effect.
46) The adjusting entries are journalized:
A) whenever time permits.
B) before preparing fi nancial reports.
C) after preparing fi nancial reports.
D) at the beginning of the accounting period. 47) Which of the following accounts would be considered a permanent
account?
A) Service Fees
B) Salaries Expense
C) Salaries Payable
D) Depreciation Expense
48) An important purpose of closing entries is to:
A) set nominal account balances to zero to begin the next period.
B) adjust the accounts in the ledger.
C) help in preparing fi nancial statement.
D) set real account balances to zero to begin the next period.
49) Which of the following accounts will not be closed to Income Summary at
the
end of the fi scal year?
A) Word Processing Fees
B) Smith, Withdrawals
C) Salaries Expense
D) Supplies Expense
50) Which of the following accounts will be directly closed to Capital at the
end
of the fi scal year?
A) Depreciation Expense
B) Fees Revenue
C) Salaries Expense
D) Withdrawals
51) Which of the following accounts ordinarily appears in the post-closing trial
balance?
A) Accumulated Depreciation
B) Supplies Expense
C) Fees Revenue
D) Salaries Expense
52) The Income Summary account shows debits of $20,000 and credits of
$18,000. This is a result of a:
A) net loss of $38,000.
B) net income of $2,000.
C) net income of $38,000.
D) net loss of $2,000.
53) After closing the revenue, expense, and withdrawal accounts, the capital
increased by $2,000. Which of the following situations could have occured?
A) The owner made withdrawals.
B) The company had a net income of $5,000.
C) The owner invested an additional amount.
D) All of these answers are correct. 54) When the expenses are closed:
A) Owner’s Capital will be debited.
B) Income Summary will be credited.
C) Income Summary will be debited.
D) None of these are correct.
55) Closed the Fees Earned account.
A) Owner’s capital would decrease.
B) Owner’s capital would remain the same.
C) Owner’s capital would increase.
D) None of these are correct.
56) A restrictive endorsement on a check:
A) can be further endorsed by someone else.
B) permits the bank to use its best judgment.
C) is the safest endorsement for businesses.
D) None of these answers are correct.
57) Key points in working with a checkbook should include:
A) the stub will be used in recording transactions and future reference.
B) the number of the check is preprinted on the check.
C) the amount written in words should start on the far left.
D) all of the above.
58) A check for $78 is incorrectly recorded on the checkbook stub as $87. The
$9 error should be shown on the bank reconciliation as:
A) deducted from the balance per bank statement.
B) added to the balance per bank statement.
C) added to the balance per books.
D) deducted from the balance per books.
59) Which of the following bank reconciliation items would not be refl ected in
a
journal entry?
A) Outstanding checks
B) NSF customer check
C) Collection of a note by the bank
D) Bank service charges
60) The debit recorded in the journal to establish the petty cash fund is to:
A) Petty Cash.
B) Accounts Receivable.
C) Cash.
D) Accounts Payable.
61) A $100 petty cash fund has cash of $14 and valid receipts for $82. The
entry to replenish the fund would include a:
A) credit to Cash for $82.
B) debit to Cash Short/Over for $4.
C) debit to Cash for $82. D) debit to Petty Cash for $86.
62) Robbins Supply journal entry to establish a $100 petty cash fund for the
offi
ce would include a:
A) credit to Petty Cash for $100.
B) credit to Cash for $100.
C) debit to Offi ce Expense for $100.
D) debit to Cash for $100.
63) The entry to replenish the petty cash fund debited Supplies instead of
Postage
Expense. This would cause:
A) expenses to be overstated.
B) revenues to be understated.
C) expenses to be understated.
D) revenues to be overstated.
64) An error recording a $72 check as $27 would be included on the bank
reconciliation
as a(n):
A) subtraction from the balance per bank.
B) subtraction from the balance per books.
C) addition to the balance per books.
D) addition to the balance per bank..
65) The amount of federal income tax withheld is computed using the:
A) FICA tax tables.
B) net earnings and Form W-4.
C) employee’s income, number of allowances, and marital status.
D) W-2 charts.
66) A form completed by employees showing the number of allowances is:
A) Form W-4.
B) Form W-2.
C) Form 941.
D) Form 8109.
67) The amount of FICA-OASDI and FICA-Medicare taxes an employer must
pay
is:
A) equal to the amount withheld from the employee.
B) not dependent on the amount withheld from the employee.
C) greater than the amount withheld from the employee.
D) less than the amount withheld from the employee.
68) The payroll register includes sections for recording:
A) assets, liabilities, equity, revenues, and expenses.
B) gross pay, deductions, and net pay.
C) accrued expenses, unearned revenues, and net pay. D) trade accounts receivable and short-term note receivables.
69) Net pay is the same as:
A) before taxes pay.
B) gross pay.
C) pay before deductions.
D) take-home pay.
70) Both employees and employers pay which of the following taxes?
A) FICA taxes (Social Security and Medicare)
B) Excise tax
C) Federal income tax
D) FUTA tax
71) When calculating the payroll the clerk forgot about the tax ceilings.
A) SUTA could be overstated.
B) FICA-OASDI could be overstated.
C) FUTA could be overstated.
D) All of these could be correct.
72) The accounting department forgot to estimate the worker’s
compensation,
this will cause:
A) the net income to be understated.
B) the liabilities to be overstated.
C) the assets to be overstated.
D) the net income to be overstated.
73) Posting the payroll entry comes from the:
A) employee’s earnings record.
B) journal.
C) payroll register.
D) None of these answers are correct.
74) The entry to record the employer’s payroll taxes would include:
A) a credit to State and Federal Unemployment Tax Payable.
B) a credit to FICA-Social Security Taxes Payable and FICA-Medicare Taxes
Payable.
C) a debit to Payroll Taxes Expense.
D) All of these answers are correct.
75) The entry to record the payroll tax expense would include:
A) a credit to Cash.
B) a credit to FICA (Social Security and Medicare) Taxes Payable.
C) a credit to Federal Income Taxes Payable.
D) a credit to Wages Payable.
76) The percentage of FICA-Medicare multiplied by taxable earnings on the
941 is:
A) 12.4%.
B) 6.2%.
C) 2.9%.
D) 1.45%.
77) The employer’s annual Federal Unemployment Tax Return is:
A) Form 940EZ.
B) Form 8109.
C) Form 941.
D) Form W-4.
78) Workers’ Compensation Insurance is:
A) paid by the employer to protect the employee against job-related injury or
death.
B) paid by the employee to protect himself/herself against no-njob-related
accidents
and death.
C) paid by the employee to protect himself/herself against job-related
accidents
or death.
D) paid by the employer to protect the employee against non-job-related
injury
or death.
79) Gross sales equals:
A) the total of cash sales and credit sales.
B) net income plus gross profi t.
C) net sales minus sales discount.
D) sales discount less net income.
80) The normal balance of the Sales Returns and Allowances account is:
A) a debit.
B) zero.
C) a credit.
D) It does not have a normal balance.
81) Jane’s Bakery sold 50 pies at $8.00 each to a charge customer, terms
2/10,
n/30. Which entry is required to record this transaction?
A) Debit Accounts Receivable for $400; credit Bakery Sales for $400
B) Debit Accounts Receivable for $392; credit Bakery Sales for $392
C) Debit Cash for $392; credit Bakery Sales for $392
D) Debit Accounts Receivable for $392; debit Sales Discount for $8, and credit
Bakery Sales for $400
82) Compass Outfi tters sold goods for $300 to a charge customer. The
customer
returned for credit $120 worth of goods. Which entry is required to record the
return transaction? A) Debit Sales Returns and Allowances $120; credit Accounts Receivable for
$180
B) Debit Accounts Receivable $180; credit Sales Returns and Allowances for
$120
C) Debit Sales $180; credit Sales Returns and Allowances $120
D) Debit Sales Returns and Allowances for $120; credit Sales for $180
83) Accounts of a single type are kept in this ledger:
A) subsidiary ledger.
B) supplemental ledger.
C) additional ledger.
D) None of these answers are correct.
84) Payment for merchandise sold on credit for $100 subject to 2/10 n/30 was
received within the discount period – $98 was received. This was recorded
with a debit to Sales Discounts for $2, a debit to Cash for $98, and a credit
to Accounts Receivable100, but no mention was made of the subsidiary
ledger
account. This error will cause:
A) the net income for the period to be overstated.
B) the net income for the period to be understated.
C) the assets to be overstated.
D) the control account to not agree with the subsidiary ledger.
85) When the term F.O.B. shipping point is used, title passes:
A) when the buyer unpacks the goods.
B) when goods are shipped.
C) when goods reach the halfway point.
D) when goods reach the destination.
86) A form used to request the purchase department to buy goods is a:
A) sales invoice.
B) purchase requisition.
C) purchase invoice.
D) receiving report.
87) A form completed at the time the shipment arrives is the:
A) receiving report.
B) purchase order.
C) sales invoice.
D) purchase invoice.
88) A list of creditors with ending balances is called:
A) a trade list.
B) a schedule of accounts payable.
C) a list of suppliers.
D) a schedule of accounts receivable.
89) Magic Shoe offers a trade discount of 25%. If the list price is $1,200, the
trade discount amount would be: A) $300.
B) $400.
C) $900.
D) $200.
90) Purchased offi ce supplies on account. This will be recorded with:
A) a debit to a liability and a credit to an asset.
B) a credit to a liability and a debit to an asset.
C) a credit to an asset and a debit to an expense.
D) a debit to an asset and a credit to an expense.
91) The journal entry to record the return of a purchase of inventory under
the
perpetual system includes a:
A) credit to Merchandise Inventory.
B) credit to Purchases.
C) debit to Purchases Returns and Allowances.
D) debit to Merchandise Inventory.
92) The inventory method that matches old costs with current selling prices
is:
A) specifi c invoice.
B) LIFO.
C) FIFO.
D) weighted-average.
93) Deluth Corporation has a normal gross profi t of 40%. The current year’s
beginning inventory was $2,000, purchases were $5,000, and retail sales
were $6,000. The estimated ending inventory under the gross margin method
is:
A) $3,600.
B) $3,400.
C) $3,450.
D) $4,500.
94) Supplies bought on account were returned for credit and recorded with a
debit to Accounts Payable and a credit to Merchandise Inventory. This error
would cause:
A) the period’s net income to be understated.
B) the period end cost of goods sold to be understated.
C) the period end cost of goods sold to be overstated.
D) None of these are correct.
95) The ending inventory for this year is understated. This error would cause:
A) the period’s net income will be understated.
B) the period end assets will be overstated.
C) the period’s net income will be overstated.
D) None of these are correct. 96) What would the depreciation be in year 2 for a computer system using
the
straight-line method when cost is $5,000, residual value is $1,000, and the
expected life is 4 years?
A) $1,250
B) $800
C) $2,000
D) $1,000
97) What would be the depreciation using double-declining-balance to
compute
the expense for year 1 of a machine costing $15,000, when residual value is
$5,000, and useful life is 5 years?
A) $4,000
B) $6,000
C) $3,600
D) $2,400
98) When equipment that is fully depreciated is discarded:
A) debit Accumulated Depreciation and credit Equipment.
B) credit the balance of accumulated depreciation.
C) debit the original cost of the asset.
D) None of these answers are correct.
99) When an asset is exchanged for a similar asset and a gain results, under
accounting rules the gain is:
A) subtracted from the cost of the new asset.
B) credited to Gain on Exchange of an Asset.
C) absorbed into the cost of the new asset.
D) recorded in the other income section of the income statement.
100) Salvage value was ignored using units-of-production depreciation. This
error
would cause:
A) the period’s net income will be understated.
B) the period’s net income will be overstated.
C) the period end assets will be overstated.
D) None of these are correct.
