Accounting Comprehensive Exam

Question 1

Journal in which the transaction should be recorded:

Purchased store supplies on credit for $485

Answer 1

Purchases Journal

Question 2

Journal in which the transaction should be recorded:

Sold $230 of merchandise to a customer on account

Answer 2

Sales Journal

Question 3

Journal in which the transaction should be recorded:

A customer returned a $260 item purchased on account

Answer 3

General Journal

Question 4

Journal in which the transaction should be recorded:

Paid supplier on due date for merchandise originally purchased on account

Answer 4

Cash Disbursements Journal

Question 5

Journal in which the transaction should be recorded:

Recorded depreciation for the year

Answer 5

General Journal

Question 6

Journal in which the transaction should be recorded:

Returned defective merchandise originally purchased on account

Answer 6

General Journal

Question 7

Journal in which the transaction should be recorded:

Paid the $540 monthly utilities

Answer 7

Cash Disbursements Journal

Question 8

Journal in which the transaction should be recorded:

The owner invested $10,000 in the business

Answer 8

Cash Receipts Journal

Question 9

Balance sheet category:

Current assets

Answer 9

Accounts Receivable

Question 10

Balance sheet category:

Current liabilities

Answer 10

Interest Payable

Question 11

Balance sheet category:

Long-tern liabilities

Answer 11

Bonds payable in more than one year

Question 12

Balance sheet category:

Owner’s equity

Answer 12

Owners name, Capital

Question 13

Balance sheet category:

Plant and equipment

Answer 13

Buildings

Question 14

Balance sheet category:

Investments

Answer 14

Shares of stock in another company

Question 15

Balance sheet category:

Intangible assets

Answer 15

Goodwill

Question 16

Balance sheet category:

Long-term liabilities

Answer 16

Bonds payable in more than one year

Question 17

Balance sheet category:

Owner’s equity

Answer 17

Owners name, Capital

Question 18

Balance sheet category:

Current liabilities

Answer 18

Unearned Revenues

Question 19

Balance sheet category:

Investments

Answer 19

Stocks

Question 20

Balance sheet category:

Intangible assets

Answer 20

Patents

Question 21

Balance sheet category:

Plant and equipment

Answer 21

Accumulated Depreciation

Question 22

Balance sheet category:

Current assets

Answer 22

Building

Question 23

The statement containing three sections which describe the operating, investing, and financing activities of a business during a period

Answer 23

Statement of Cash Flows (CF)

Question 24

The statement that lists the types and amounts of the assets of a business on a given date

Answer 24

Balance Sheet (BS)

Question 25

The statement that explains the items affecting owner's equity from the beginning of a period to the end of the period

Answer 25

Statement of Changes in Owner's Equity (COE)

Question 26

The statement that shows all expenses incurred by a business during a specific period of time

Answer 26

Income Statement (IS)

Question 27

Product warranties are usually treated as contingent liabilities. (T/F)

Answer 27

True

Question 28

Federal income taxes are withheld from each paycheck during the year until the tax-exempt limit is reached. (T/F)

Answer 28

False

Question 29

Deferred income taxes result from temporary differences between taxable income on the tax return and income before taxes on the income statement. (T/F)

Answer 29

True

Question 30

The costs of patents are amortized over 40 years. (T/F)

Answer 30

True

Question 31

The process of systematically writing off the cost of an intangible asset to expense over its estimated useful life is:

Answer 31

Amortization

Question 32

If a business's inventory on hand was destroyed by fire, but the accounting records were saved, the method that would probably be used to estimate the amount of inventory lost would be the:

Answer 32

Gross profit method

Question 33

What is the final step in the accounting cycle?

Answer 33

Preparing a post-closing trial balance

Question 34

A condition in which, because of new inventions and improvements, a plant asset can no longer be used to produce goods or services with a competitive advantage is called:

Answer 34

Obsolescence

Question 35

An error is indicated if the following account has a balance appearing on the post-closing trial balance:

Answer 35

Depreciation Expense, Law Library

Question 36

A debit is used to record:

Answer 36

A increase in the balance of the owner's withdrawals account

Question 37

The portion of a corporation's equity that represents its cumulative net incomes, less net losses and dividends, is called:

Answer 37

Retained earnings

Question 38

A company that uses a Sales Journal, a Purchase Journal, a Cash Receipts Journal, a Cash Disbursements Journal, and a General Journal purchased a truck and signed a promissory note for the purchase price. In which journal should the transaction be recorded?

Answer 38

General Journal

Question 39

When a company updates the Merchandise Inventory account in the process of making closing entries, one closing entry will include a credit to Merchandise Inventory equal to the:

Answer 39

Amount of beginning inventory

Question 40

Which of the following statements is incorrect? * Prepaid expenses, depreciation, and unearned revenues involve previously recorded assets and liabilities * Accrued expenses and accrued revenues involve assets and liabilities that have not yet been recorded * Prepaid expenses, depreciation, and unearned revenues require adjusting entries to record the effects of the passage of time * Adjusting entries are used to record both accrued expenses and accrued revenues

Answer 40

All of the following statements are correct

Question 41

Double-entry accounting is:

Answer 41

* An accounting system in which the sum of the debit account balances in the ledger must always equal the sum of the credit account balances * An accounting system which uses the accounting equation, A = L + OE * An accounting system in which every transaction affects and is recorded in at least two accounts * An accounting system in which errors cannot always be avoided

Question 42

When a market value decline occurs in a company's portfolio of long-term investments in debt and equity securities available for sale, the company would report this decline on the:

Answer 42

Balance sheet

Question 43

When a single-column Sales Journal's Amount column is totaled at the end of the month, the total is:

Answer 43

Debited to Accounts Receivable and credited to Sales

Question 44

Using special journals in addition to a General Journal:

Answer 44

Saves posting labor

Question 45

Cash investments by owners are listed on which statement?

Answer 45

???

Question 46

Instead of extending credit to customers, a business may allow customers to use credit cards issued by banks or credit card companies because:

Answer 46

* The business does not have to evaluate the credit standing of each customer * The business often receives cash from the credit card company sooner than if credit were extended to the customer * The business avoids the risk of extending credit to customers who cannot pay

Question 47

The Stanley Company's beginning inventory for 1991 was $32,000. During 1991 Stanly made purchases of $24,700 and returned $400 of merchandise. Purchases discounts totaled $3,600. If Stanley's ending inventory was $30,000 for 1991, what was the cost of goods sold?

Answer 47

$22,700

Question 48

The method of estimating bad debts expense that involves classifying accounts receivable by how long they have been outstanding, and which is usually the most reliable, is the:

Answer 48

Aging of accounts receivable method

Question 49

What would be reported as a liability in the financial statements or in the footnotes?

Answer 49

* Discounted notes receivable * Deferred income taxes * Potential legal claims * Product warranties

Question 50

An asset, such as cash, that is easily converted into other types of assets or used to buy services or pay liabilities is a:

Answer 50

Liquid asset

Question 51

Brandenburg Corp. depreciated a machine that cost $40,000 on a straight-line basis for three years under the assumption it would have a five-year life and a $6,000 trade-in value. At that point, the manager realized that the machine had three years of remaining useful life, after which it would have an estimated $4,600 trade-in value. Determine the amount of depreciation to be charged against the machine during each of the remaining years in its life.

Answer 51

$5,000

Question 52

Which of the following assets is not depreciated? * Boats * Land * Land improvements * Professional library

Answer 52

Land

Question 53

Accounts that are closed at the end of each accounting period (the revenue, expense, Income Summary, and withdrawals accounts) are known as:

Answer 53

???

Question 54

If the liabilities of a business increased $8,000 during a period of time and owner's equity in the business decreased $3,000 during the same period, the assets of the business must have:

Answer 54

Increased $5,000

Question 55

Gross profit (from sales) is:

Answer 55

The difference between net sales and the cost of goods sold