Nationals Accounting Practice Flashcards
(460 cards)
1
Q
The posting Refernence column of a journal is used to…
A
record the number of the ledger account to which the information is posted.
2
Q
Which of the following types of accounts normally have debit balances? a- expenses and assets. b- assets and revenue. c- assets, liabilities, and owner’s equity. d- liabilities and owner’s equity
A
A
3
Q
The journal entry to record the purchase of equipment for a $100 cash down payment and a balance of $400 due in 30 days would include…
A
a debit to Equipment for $500, a credit to Cash for $100, and a credit to Accounts Payable for $400.
4
Q
On the worksheet, the Balance Sheet columns should balance
A
After the net income amount is added to the Balance Sheet Credit column
5
Q
On a worksheet, the adjusted balance of a contra asset account would be extended to
A
The Balance Sheet Credit column
6
Q
The journal entry to record the withdrawal of cash by Sue Snow, the owner, to pay a personal utility bill would include
A
A debit to Sue Snow, Drawing and a credit to Cash
7
Q
When revenue is earned from charge-account sales, the accountant
A
Debits Accounts Receivable and credits a revenue account.
8
Q
Credits are used to record
A
Increases in liabilities and owner’s equity.
9
Q
A firm purchased telephone equipment for cash. By mistake, the person who recorded the transaction debited Utilities Expense instead of Office Equipment. The error was discovered after the data posted. The correcting entry should contain
A
A debit to Office Equipment and a credit to Utilities Expense.
10
Q
On a balance sheet, Accumulated Depreciation—Equipment is reported
A
As a deduction from the cost of the equipment.
11
Q
The balance sheet shows
A
The financial position of a business at a given time.
12
Q
The financial statement that is prepared first is
A
The income statement.
13
Q
On a worksheet, a net loss is
A
Recorded in the Balance Sheet Debit column
14
Q
The entry to transfer a net loss to the owner’s capital account would include
A
A debit to the owner’s capital account and a credit to Income Summary.
15
Q
The income statement shows
A
The results of operations for a period of time
16
Q
The owner’s drawing account is closed by
A
Debiting the owner’s capital account and crediting the owner’s drawing account
17
Q
The corporations whose stock can be bought and sold on stock exchanges and in over-the-counter markets are referred to as
A
Publicly owned corporations
18
Q
When charge customers pay cash to apply against their accounts, the amount is recorded
A
On the left side of the Cash account and the right side of the Accounts Receivable account.
19
Q
The asset, liability, and owner’s capital accounts appear on all of the following except… a- the postclosing trail balance. b- The income statement. c- The worksheet. d- The balance sheet.
A
B
20
Q
After the closing entries are posted to the ledger, each expense account will have
A
A zero balance
21
Q
When the owner withdraws cash for personal use,
A
Assets decrease and owner’s equity decreases.
22
Q
If the income statement covered a six-month period ending on November 30, 20–, the third line of the income statement heading would read
A
Six-month Period Ended November 30, 20—
23
Q
If long-term assets are not adjusted, expenses on the income statement
A
Will be understated
24
Q
When an entry is made in the general journal,
A
Accounts to be debited should be listed first.
25
The entry to close the Income Summary account may include
A debit to Income Summary and a credit to the owner’s capital account
26
One purpose of closing entries is to give zero balances to
Revenue and expense accounts
27
The general ledger accounts are usually arranged in the following order:
First the balance sheet accounts, then the income statement accounts.
28
The revenue account Fees Income is closed by
Debiting Fees Income and crediting Income Summary.
29
An example of an economic entity is… a- a church. b- A town. c- A business. d- A nonprofit hospital.
C
30
Equipment cost $36,000 and is expected to be useful for 5 years and have no salvage value. Under the straight-line method, monthly depreciation will be…
$600
31
When the owner writes a check to pay the firm’s electric bill,
Assets decrease and expenses increase
32
All financial statements submitted to the SEC by publicly owned corporations must include an auditor’s report prepared by
An independent certified public accountant
33
After the data about transactions have been posted, the next step in the accounting cycle is to…
Prepare the worksheet.
34
The total of the figures on the left side of a Cash account is $25,800. The total of the figures on the right side is $14,100. The balance of this account is
$11,700 and would be recorded on the left side of the account.
35
All of the following accounts will appear on the postclosing trial balance except… a- Equipment. b- Depreciation Expense—Equipment. c- Accumulated Depreciation—Equipment. d- Accounts Payable
B
36
If assets are numbered from 100-199, which of the following accounts would not be given a number in the 100 series? a- supplies. b- Accounts Payable. c- Prepaid Rent. d- Accounts Receivable.
B
37
The adjustments made to the worksheet are
Recorded in the journal and then posted to the general ledger accounts.
38
Assets and liabilities are reported on
The balance sheet
39
If the prepaid expenses are not adjusted, assets on the balance sheet
Will be overstated
40
The Cash account has a $15,000 debit balance. A $5,000 credit entry and a $7,000 debit entry are posted to the account. The final balance of the Cash account is
A $17,000 debit balance
41
On November 25, 2004, the company paid $24,000 rent in advance for a six-month period (December 2004 through May 2005). On December 31, 2004, the adjustment for expired rent would include
A $4,000 credit to Prepaid Rent
42
When the owner invests cash in a business,
Assets and owner’s equity increase
43
A postclosing trial balance should include all of the following except…
A Fees Income account
44
If the trial balance totals are not equal, the error may have been caused by a transposition if the difference is divisible by…
9
45
When the trial balance totals are not equal, the error may have been caused by recording a debit as a credit if the difference is divisible by…
2
46
Owners are not personally responsible for the debts of the business if the form of business organization is…
The corporation
47
The book value of long-term assets is reported on…
The Balance Sheet
48
The government agency that has final authority over the financial reporting of publicly owned corporations is the…
SEC
49
The rent paid for future months is a(n) ____ account
Asset
50
The area of accounting that involves the preparation of internal reports for a firm’s executives and the analysis of the data in these reports to aid in decision-making is known as…
Managerial accounting
51
After the worksheet has been completed, the next step in the accounting cycle is to…
Prepare the financial statements
52
When equipment is purchased for cash,
One asset increases and another asset decreases.
53
The Accounts Payable account has a $3,000 credit balance. An entry for the payment of $1,000 on the amount owed is recorded and posted. The new balance of the Accounts Payable account is…
A $2,000 credit balance.
54
Which of the following accounts is not closed? a- Joan Wilson, Drawing. b- Rent Expense. c- Fees Income. d- Cash
D
55
The Financial Accounting Standards Board is responsible for…
Developing generally accepted accounting principles.
56
The journal entry to record the payment of salaries should include
A debit to Salaries Expense and a credit to Cash
57
Which of the following increase owner’s equity? A-expenses. B- Revenue. C- Withdrawals. D- Receiving cash from customers.
B
58
One purpose of closing entries is to…
Transfer the results of operations to owner’s equity.
59
A net loss results
When expenses are greater than revenue
60
Debits are used to record increases in
Assets and expenses
61
If liabilities are $4,000 and owner’s equity is $15,000, assets are
$19,000
62
The net income or net loss from the income statement is transferred to the
Statement of owner’s equity
63
Which of the following accounts will not normally have a zero balance after the closing entries have been posted?
The owner’s capital account
64
When an entry is made in the general journal,
The accounts to be credited should be indented
65
Which of the following need not be completed separately if a worksheet is prepared? A-an income statement. B- A balance sheet. C- A statement of owner’s equity. D- A trial balance
D
66
The account used to record increases in owner’s equity from the sale of goods or services is
The revenue account.
67
The journal entry to record the sale of services on credit should include
A debit to Accounts Receivable and a credit to Fees Income
68
Which of the following groups contain only accounts that normally have credit balances? A- Salaries Expense and Accounts Payable. B- Accounts Receivable and Fees Income. C- Accounts Payable and Equipment. D- Fees Income and John Smith, Capital
D
69
On a worksheet, the adjusted balance of the Prepaid Rent account is extended to
The Balance Sheet Debit column
70
On a worksheet, the adjusted balance of the revenue account Fees Income would be extended to
The Income Statement Credit column
71
The account numbers are recorded in the Posting Reference column of the general journal
After each amount is posted.
72
Which of the following accounts is a permanent account? A- Fees Income. B- Owner’s drawing. C- Supplies Expense. D- Supplies.
D
73
A firm paid cash to apply against a debt. To record this transaction, the accountant would
Debit Accounts Payable and credit Cash
74
On a worksheet, the adjusting entry to account for depreciation of equipment consists of
A debit to Depreciation Expense and a credit to Accumulated Depreciation
75
When equipment is purchased on credit,
Assets and liabilities increase
76
Amounts that a business must pay in the future are known as
Accounts payable
77
Debits are used to record
Increases in assets
78
The group of accounting educators who offer their opinions about proposed FASB statements, after research has been done to determine the possible effects on financial reporting and the economy, is
The AAA
79
Which of the following accounts is not a permanent account? A- Accounts Payable. B- Salaries Expense. C- Cash. D- Thomas Bernard, Capital
B
80
The financial affairs of a business and the financial affairs of the owners should be…
Kept totally separate
81
If a journal entry that contains an error has already been posted,
A correcting entry should be journalized and posted
82
The journal entry to record the payment of a monthly utility bill would include
A debit to Utilities Expense and a credit to Cash
83
When a trial balance is in balance,
The debit account balances equal the credit account balances
84
The form of a business organization that is not affected by the withdrawal or death of an owner and can continue forever is…
The corporation
85
If a transaction is properly analyzed and recorded,
The total amount debited will equal the total amount credited
86
Examples of assets are… A- Cash and accounts receivable. B- Cash and revenue. C- Investments by the owner and revenue. D- Cash and rent expense.
A
87
If at the end of the year the firm owes a balance for workers’ compensation insurance, the adjusting entry includes…
A debit to Workers’ Compensation Insurance Expense
88
The Purchases account is
A temporary account
89
Employees’ payments for federal income taxes withheld and social security and Medicare taxes are periodically
Deposited in a government-authorized financial institution.
90
Most states require that the employer file the state return for unemployment taxes
Quarterly
91
Form 941 is filed
Quarterly
92
To record the payment of a purchase invoice when a cash discount is taken, the accountant would
Debit Accounts Payable, credit Purchases Discounts, and credit Cash
93
When the sales department needs goods, it sends the purchasing department a form called
A purchase requisition
94
If a firm had sales of $50,000 during a period and sales returns and allowances of $4,000, its net sales were…
$46,000
95
The amount used by wholesalers to record sales in its sales journal is…
The net price
96
Assuming a Medicare tax rate of 1.45% and monthly gross wages of $2,500, the entry to record in Medicare Tax Payable for one quarter is
A credit for $108.75
97
To arrive at an accurate balance on a bank reconciliation statement, outstanding checks should be
Deducted from the bank statement balance
98
The entry to record a purchase of merchandise on credit includes
A debit to Purchases and a credit to Accounts Payable
99
To find the balance due from an individual customer, the accountant would refer to…
The accounts receivable subsidiary ledger
100
On a bank reconciliation statement, you would find all of the following except
A list of canceled checks
101
Allowance for Doubtful Accounts is reported in
The Assets section of the balance sheet
102
Which of the following would not be shown as an adjustment to the book balance on a bank reconciliation statement? A- Deposits in transit. B- Bank service charges. C- A charge for printing new checks. D- NSF checks.
A
103
In a firm that uses special journals, credit sales of merchandise are recorded in…
The Sales Journal
104
Accrued income is income that has been
Earned but not received
105
With the accrual basis of accounting, it is appropriate to recognize revenue from a credit sale when?
On the date of the sale
106
The amount of the purchases for a period is presented in
The Cost of Goods Sold section of the income statement
107
If a check written by a firm is not canceled by the bank and returned with the month’s bank statement, the firm should
Consider this check as outstanding when preparing the bank reconciliation
108
An adjusting entry is usually not required for an expense item when…
It is paid for, recorded, and used in one period
109
Employers usually record unemployment taxes
At the end of each payroll
110
On November 1, 20--, a firm accepted a 4-month, 10 percent note for $900 from a customer with an overdue balance. The accrued interest recorded for this note for the year ended December 31, 20--, is
$15
111
Publication 15, Circular E contains withholding information
For federal income taxes only
112
It is best not to pay wages and salaries by
Cash
113
The total of the balances in the creditor’s accounts should agree with the balance of
The Accounts Payable account in the general ledger
114
Which of the following taxes is not withheld from an employee’s pay?
FUTA tax
115
On Form 941, the Employer’s Quarterly Federal Tax Return, a firm calculates its liability for the quarter for…
Federal income taxes withheld and social security and Medicare taxes
116
Purchases of merchandise are
Debited to Purchases
117
A copy of the Form W-2 for each employee is submitted to the Social Security Administration along with…
Form W-3
118
All details related to an employee’s earnings, deductions, and net pay throughout the year would be found in…
The individual earnings record
119
Lisa Ramos has a regular hourly rate of $10.75. In a week when she worked 40 hours and had deductions of $55 for federal income tax, $26.75 for social security tax, and $6.25 for Medicare tax, her net pay was
$342
120
The column totals in a payroll register
Are used in the journal entry to record the payroll
121
Included with its bank statement a firm may receive a credit memorandum, which could indicate
An addition to the firm’s account balance because the bank collected the amount due on a promissory note from a customer of the firm.
122
In a firm that uses special journals, cash collected from all sources is
Recorded in the cash receipts journal
123
On January 2, 20--, a firm purchased equipment for $8,500. Depreciation expense for 20--, given the straight-line method, a 5-year useful life, and a salvage value of $1,500, is
$1,400
124
Which of the following groups of accounts will have zero balances after the closing process is completed? A- Depreciation Expense and Accumulated Depreciation—Equipment. B- Purchases and Purchases Returns and Allowances. C- Allowance for Doubtful Accounts and Uncollectible Accounts Expense. D- Merchandise Inventory and Sales
B
125
A cash sale of merchandise would be recorded in
The cash receipts journal
126
Which of the following is a factor in the determination of the amount of social security tax to withhold from an employee’s pay? A- Withholding allowances claimed on Form W-4. B- Hours worked during the pay period. C- Marital status. D- Gross wages
D
127
The current ratio is calculated by
Dividing current assets by current liabilities
128
If an account has a debit balance of $700 in the Trial Balance section of a worksheet and there is a credit entry of $200 in the Adjustments section, the account balance in the Adjusted Trial Balance section of the worksheet is…
A $500 debit
129
Credit purchases of supplies that are to be used in the business are entered in
The general journal
130
The amount debited to Wages Expense when a payroll is recorded is the
Total gross earnings
131
In a sales journal used to record taxable sales, the total of the Accounts Receivable column should equal
The sum of the totals of the Sales Tax Payable column and the Sales column
132
Allowance for Doubtful Accounts is
Subtracted from Accounts Receivable in the Assets section of the Balance sheet
133
The Sales Returns and Allowances account is classified as
A contra revenue account
134
A firm appropriately wrote a check for $78 but entered the amount as payment of $87. On a bank reconciliation statement this error would be shown as…
An addition of $9 to the book balance
135
A creditor’s account in the accounts payable ledger has a $1,600 beginning balance. After a transaction for $700 is posted from the purchases journal, the balance of the creditor’s account is
$2,300 credit
136
The entry to record a return by a credit customer of defective merchandise on which no sales tax was charged includes
A debit to Sales Returns and Allowances and a credit to Accounts Receivable
137
The entry to record the payment of SUTA tax would include
A debit to State Unemployment Tax Payable and a credit to Cash
138
The ending merchandise inventory is recorded on the worksheet in
The Income Statement Credit and the Balance Sheet Debit columns
139
Merchandise is sold on credit for $600 plus 5% sales tax. The entry in the sales journal will include a debit to Accounts Receivable for
$630
140
To record the deposit of FUTA tax, the accountant would
Debit Federal Unemployment Tax Payable and credit Cash
141
Postings to the accounts payable ledger should be made
Daily
142
The entry to record an additional cash investment by the owner is recorded in
The cash receipts journal
143
To record a deposit of federal income taxes withheld and social security and Medicare taxes, the accountant would
Debit one or more liability accounts and credit an asset account
144
Freight charges on merchandise purchases should be debited to
The Freight In account
145
The entry to reverse the adjustment for accrued interest income consists of
A debit to Interest Income and a credit to Interest Receivable
146
The Sales Returns and Allowances account is presented
On the income statement as a deduction from Sales
147
Salespeople who are paid a percentage of net sales are paid on
The commission basis
148
The entry to reverse the adjusting entry for accrued payroll taxes expense includes
A debit to Social Security Tax Payable and a debit to Medicare Tax Payable
149
The entry to replenish a petty cash fund includes
Debits to various expense accounts and a credit to Cash
150
On the financial statements prepared at the end of an accounting period, the ending merchandise inventory is shown
On both the income statement and the balance sheet
151
Gross profit on sales is calculated by
Subtracting cost of goods sold from net sales
152
A wholesale business sells goods with a list price of $900 and a trade discount of 40%. The net price is
$540
153
The entry in a firm’s accounting records for a credit customer’s check that was returned by the bank marked “NSF” would include
A debit to Accounts Receivable and a credit to Cash
154
An income statement that lists all revenues in one section and all expenses in another section is known as
A single-step income statement
155
A firm’s bank reconciliation statement shows a book balance of $15,820, an NSF check of $400, and a service charge of $20. Its adjusted book balance is
$15,400
156
If a firm does not have a sales returns and allowances journal, the entries for these transactions are made in
The general journal
157
The base earnings subject to unemployment taxes is
Smaller than the base for social security
158
The beginning capital balance shown on a statement of owner’s equity is $43,000. Net income for the period is $18,000. The owner withdrew $22,000 cash from the business and made no additional investments during the period. The owner’s capital balance at the end of the period is
$39,000
159
The balance of the owner’s drawing account is
Used in the calculation of ending capital on a statement of owner’s equity
160
In the general journal, reversing entries are dated as of
The first day of the new fiscal period
161
The adjusting entry for uncollectible accounts requires
A debit to Uncollectible Accounts Expense and a credit to Allowances for Doubtful Accounts
162
An employee whose regular hourly rate is $9 and whose overtime rate is 1.5 times the regular rate worked 44 hours one week. The employee’s gross pay was
$414
163
Prepaid expenses appear in
The Current Assets section of the balance sheet
164
A retailer recorded the following in June: cash sales $2,000; credit sales, $9,000; sales returns and allowances, $1,000. Assuming the sales tax rate is 7%, the entry to record the sales tax payment includes a debit to Sales Tax Payable for
$700
165
Each employee of a firm will receive several copies of Form W-2, the Wage and Tax Statement,
From the employer once a year
166
Check marks next to the individual amounts in the purchases journal mean that the amounts
Have been posted to the accounts payable subsidiary ledger
167
Which of the following accounts will appear on the postclosing trial balance?
Medicare Tax Payable
168
A reversing entry should not be made for
An adjusting entry to record depreciation
169
After a bank reconciliation statement is completed, a firm may have to make an entry in its accounting records for
NSF checks
170
After all postings have been made, the total of the schedule of accounts receivable should equal
The balance of the Accounts Receivable account in the general ledger
171
The net income for an accounting period appears on the worksheet in
The Income Statement Debit and the Balance Sheet Credit columns
172
Each type of deduction made from the employees’ earnings is recorded in a separate
Liability account
173
Purchases of merchandise on credit should be recorded in
The purchases journal
174
A firm that sells goods that it purchases for re-sale is a
Merchandising business
175
Which of the following accounts is not closed? A- Purchases. B- Rent Expense. C- Merchandise Inventory. D- Sales
C
176
To record a return of merchandise purchased on credit, the accountant would
Debit Accounts Payable and credit Purchases Returns and Allowances
177
A firm had purchases of $16,200, freight charges of $300, and purchases returns and allowances of $1,100 during one month. Its net delivered cost of purchases was
$15,400
178
An employee whose regular hourly rate is $10 and whose overtime rate is 1.5 times the regular rate worked 44 hours in one week. In the payroll register, the employer should record an overtime premium of
$20
179
The adjusting entry to record accrued interest on a note payable requires
A debit to Interest Expense and a credit to Interest Payable
180
Upon collection of the amount due on an interest-bearing promissory note from a customer, the accountant would debit Cash, credit Notes Receivable, and
Credit Interest Income
181
Which of the following is not a current asset? A-Equipment. B- Merchandise Inventory. C- Prepaid Insurance. D- Accounts Receivable
A
182
When checks are issued to employees after the entry to record the payroll has been made, the accountant would
Debit Salaries and Wages Payable and credit Cash
183
Federal law requires that the employer withhold from the employee’s pay
Federal income tax, social security tax, and Medicare tax
184
Inventory turnover is calculated by
Dividing the cost of goods sold by average inventory
185
The Sales account is classified as
A revenue account
186
The employer records the amount of federal income tax withheld from employees as
Employee Income Tax Payable
187
After a supplier of merchandise is selected, the purchasing department issues a form called
A purchase order
188
Both the employer and the employee are responsible for paying
Social security and Medicare taxes
189
The most appropriate form of endorsement of a check for business purposes is
The restrictive endorsement
190
The source document for recording a purchase of merchandise on credit is
The purchase invoice
191
On May 1, 20--, a firm purchased a 1-year insurance policy for $1,800 and paid the full premium in advance. The insurance expense associated with this policy for 20—is
$1,200
192
The frequency of deposits of federal income taxes withheld and social security and Medicare taxes is most dependent on
The amount owed
193
A firm purchased equipment for $6,000 on credit and issued a 120-day note bearing interest at 9% a year as evidence of the debt. To record this transaction, the accountant would
Debit Equipment for $6,000 and credit Notes Payable for $6,000
194
The amount that each partner withdraws from a partnership
Should be specified in the partnership agreement
195
An asset that cost $14,000 was sold for $9,000 cash. Accumulated depreciation on the asset was $7,000. The entry to record this transaction includes the recognition of
A gain of $2,000
196
The entry to record a partner’s salary allowance consists of
A debit to Income Summary and a credit to the partner’s capital account
197
When computing depreciation, the salvage value should be ignored if a company uses
The declining-balance method
198
The Cervantes Company uses the same method of depreciation for its equipment in each fiscal period. This practice is an example of
Consistency
199
A firm is using the allowance method to provide for losses from uncollectible accounts collected the cash due from a customer whose account was previously written off. The entry to reinstate the customer’s account included a credit to
Allowances for Doubtful Accounts
200
Partnership net income of $33,000 is to be divided between two partners, Elan Chan and Roy Anderson, according to the following arrangement: There will be salary allowances of $20,000 for Chan and $10,000 for Anderson, with the remainder divided equally. How much of the net income will be distributed to Chan and Anderson, respectively?
$21,500 and $11,500
201
The book value of an asset is
The portion of the asset’s cost that has not yet been charged to expenses
202
Recording land at its cost rather than its appraisal value illustrates
The cost basis principle
203
The weighted average cost of an inventory item is calculated by
Dividing the cost of goods available for sale by the number of units available during the period
204
A 30-day note dated October 15, 20--, would be due on
November 14, 20—
205
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a debit balance of $400. An aging of the accounts receivable produces an estimate of $2,600 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
$3,000
206
When a firm uses the allowance method to provide for losses, the collecting of an account previously written off as uncollectible requires an entry
To reinstate the account receivable
207
The balance of Allowance for Doubtful Accounts is reported as
A deduction from Accounts Receivable on the balance sheet
208
The Jiminez Company accepted an interest-bearing note to settle a past-due account originating form a sale of merchandise. When the note is collected, the interest earned should be credited to
Interest Income
209
The Interest Income account
Usually has a credit balance
210
The amount of a long-term asset’s impairment is
The amount by which the asset’s book value exceeds its market value
211
Danny Ortiz and Angela Hufford are partners, and each has a capital balance of $25,000. To gain admission to the partnership, Derek Peters pays $15,000 directly to Ortiz for one-half of his equity. After the admission of Peters, the total partners’ equity in the records of the partnership will be
$50,000
212
The gross profit method of determining ending inventory cost
Can be used without taking a physical count of merchandise
213
An example of real property is
Buildings
214
The Notes Receivable Discounted account
Is shown as a deduction from Notes Receivable on the balance sheet
215
Which of the following methods must be used to record bad debt losses for tax purposes?
The direct charge-off method
216
Which of the following inventory costing procedures requires a physical count of merchandise?
The average cost methods
217
An existing balance in Allowance for Doubtful Accounts is not considered if the estimate of loss is based on
A percent of net credit sales
218
On March 1, a firm purchased equipment for $5,000, signing a 30-day note bearing interest at 12 percent a year. The entry to record the payment of the amount due on March 31 will include
A debit to Notes Payable for $5,000, a debit to Interest Expense for $50, and a credit to Cash for $5,050
219
A firm reported net credit sales of $225,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustments, Allowance for Doubtful Accounts has a debit balance of $100. The firm estimates its losses from uncollectible accounts to be one-half of 1 percent of net credit sales. The entry to record the estimated losses form uncollectible accounts will include a credit to Allowance for Doubtful Accounts for
$1,125
220
When the allowance method of recognizing losses from uncollectible accounts is used, the entry to record the write-off of a specific account consists of
A debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable
221
The accountant for a company whose inventory was destroyed by fire determined from undamaged records that the cost of goods available for sale was $100,000 and the net sales were $80,000 up to the date of the fire. The accountant also determined that the company’s normal gross profit rate is 40% of the net sales. From this data, the accountant estimated the cost of the inventory destroyed by the fire to be
$52,000
222
Keeping the personal assets of the owner of a business separate from the assets of the firm is an example of
Following the separate entity assumption
223
The entry to record the equal distribution of net income between two partners consists of
A debit to Income Summary and a credit to each partner’s capital account
224
The merchandise available for sale cost a company $90,000 and was marked to sell at a retail price of $125,000. Sales during the period totaled $80,000. If the retail method is used, the estimated cost of the ending inventory is
$32,400
225
When the owner of a sole proprietorship accepts a partner, the assets of the proprietorship
May be adjusted to reflect current values before being transferred to the partnership
226
Which method of depreciation is seldom, if ever, acceptable for financial accounting purposes?
The modified accelerated cost recovery system (MARCS)
227
How much interest will accrue on a $20,000 face value, 60-day note that bears interest at 9% a year?
$300
228
Upon collection of the amount due on a $6,000 face value, 90-day note with interest at 10% a year, the Not Receivable account is
Credited for $6,000
229
When a new company was formed, one partner contributed some used equipment he owned. The equipment at $44,000 in the financial records of the partnership. This is an example of
The conservatism principle
230
The entry to record the investment of cash in a partnership by one partner would consist of
A debit to Cash and a credit to the partner’s capital account
231
The adjusting entry to record estimated losses from uncollectible accounts consists of
A debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts
232
A matching of the most recent costs to revenue results from the use of
The LIFO method
233
Each year there was an increase in the market value of some stock owned by the Murdock Company, but the accountant did not record the increase in asset value and equity until the stock was sold. In this situation, the accountant
Followed the realization principle
234
A firm reported sales of $300,000 during the year and has a balance of $20,000 in its Accounts Receivable account at year-end. Prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $300. The firm estimated its losses from uncollectible accounts will include a credit to Allowance for Doubtful Accounts for
$1,500
235
If an individual invests more cash for an interest in an existing partnership than the book value of his or her interests, an entry is made to
Debit Cash and credit the capital account of each existing partner
236
The method of depreciation that results in the same amount of depreciation expense each year is the
Straight-line method
237
Use of the declining-balance method results in
Higher depreciation chargers in the early years of an asset’s life
238
The modifying convention of conservatism requires that inventory be presented on the balance sheet at
Either cost or market value, whichever is lower
239
The Statements of Financial Accounting Standards that automatically become generally accepted accounting principles are issued by
The FASB
240
A company purchased equipment for $16,000 cash. In addition, the company paid $1,000 to have the equipment delivered and $500 to have it installed. The cost of this asset for financial accounting purposes is
$17,500
241
The total that must be paid when a not becomes due is known as
The maturity value
242
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000. Early in the year, 8,000 units were purchased at $6 each. Using LIFO, what is the value of the ending inventory of 2,000 units?
$8,000
243
The denominator of the fraction that is used in the sum-of-the-years’-digits method of depreciation for an asset with a useful life of seven years is
28
244
The general ledger of a partnership
Will contain a separate capital account for each partner
245
The FASB has concluded that financial reporting rules should
Concentrate on providing helpful information to present and potential investors and creditors
246
The Financial Accounting Standards Board is
An independent organization
247
Depreciating equipment over its useful life is an example of
Applying the matching principle
248
The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of
The realization principle
249
An accountant who records revenue when a credit sale is made rather than waiting for the receipt of cash from the customer is
following the accrual principle
250
If no other method of dividing net income or net losses is specified in the partnership agreement, it is divided
Equally
251
When a company issues a promissory note, the accountant records an entry that includes a credit to Notes Payable for
The face value of the note
252
On December 31, prior to adjustments, the balance of Accounts Receivable is $26,000 and Allowance for Doubtful Accounts has a debit balance of $300. The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
$1,600
253
Notes payable due within one year are usually shown
In the Current Liabilities section of the balance sheet
254
The partners’ salary and interest allowances are recorded in
Capital accounts
255
Equipment that cost $20,000 was sold for $12,000 cash. Accumulated depreciation on the asset was $14,000. The entry to record the sale includes a credit to the Equipment account for
$20,000
256
The salary and interest allowances in a partnership profit-sharing agreement can best be described as
A means of distributing net income in relation to the services provided and the capital invested by each partner
257
The use of the LIFO method of inventory valuation results in
The lowest reported net income in a time of rising prices
258
The method of accounting for losses from uncollectible accounts that produces a proper valuation of the accounts receivable on the balance sheet is
The allowance method based on aging the accounts receivable
259
The use of the FIFO method of inventory valuation results in
The most current costs in ending inventory
260
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $28,000. Early in the year, 10,000 units were purchased at $9 each. Using FIFO, what is the value of the ending inventory of 3,000 units?
$27,000
261
If the amount due on a note receivable is not collected at maturity,
The note is said to be dishonored
262
Federal income tax is levied
On the partners for their individual shares of the reported partnership income
263
An accountant charged the Repairs Expense account for a tool that cost $12. The tool had an estimated useful life of 5 years; however, the accountant did not choose to depreciate it. The modifying convention that the accountant followed was
Materiality
264
If other items remain the same, the larger the ending inventory valuation,
The higher the reported net income
265
Assume that a business trades in an old cash register for a new one. Under the income tax method,
The cost of the new asset is recorded as the book value of the old asset plus the cash amount paid or to be paid
266
The allocation of the costs of natural resources, such as minerals, to the units produced is referred to as
Depletion
267
The entry to record the sale of equipment used in a business may include a debit to
The Accumulated Depreciation—Equipment account
268
In periods of rising prices, the inventory valuation procedure that results in the highest net income is
The FIFO method
269
Allowance for Doubtful Accounts has a credit balance of $1,000 immediately before the write-off of a $300 account receivable. The credit balance of Allowance for Doubtful Accounts immediately after the write-off is
$700
270
Which of the following is not a characteristic of a partnership?
The partnership income is a federal income tax that is levied on the business but not on the partners
271
If the proceeds of a note discounted at a bank are greater than the face value of the note, the difference is recognized as
Interest income
272
The cost of an intangible asset
Should be immediately charged to expense if the cost was incurred to develop the intangible asset
273
The maturity value of a 90-day note for $4,000 that bears interest at 10% a year is
$4,100
274
A 60-day note dated April 1 was turned over to the bank for discounting on April 21. The number of days used in computing the dollar amount of the discount is
40
275
Ryan Fuller, a sole proprietor, entered into partnership with another individual. Fuller’s investment in the partnership included equipment that cost $32,000 when it was purchased. The equipment has a book value of $13,000 and a net agreed-on value of $16,000. In the financial records of the partnership, this equipment and its accumulated depreciation should be recorded at
$16,000 and $0, respectively
276
The cost of the earliest merchandise purchased is assigned to ending inventory when a company uses
The LIFO method
277
On December 31, prior to adjustment, Allowance for Doubtful Accounts has a credit balance of $200. An age analysis of the accounts receivable produces an estimate of $1,000 of probable losses from uncollectible accounts. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
$800
278
The financial statements in the annual report of a corporation contain footnotes explaining the methods used to depreciate the firm’s equipment. This practice is an example of
The full disclosure principle
279
The firm had a beginning inventory of 50 units with a unit cost of $10. Purchases during the year were as follows: March—50 unites with a unit cost of $12; July—60 units with a unit cost of $15. If the average cost method is used, the value of the ending inventory of 45 units is
$563
280
A firm purchases an asset for $50,000 and estimates that it will have a useful life of five years and a salvage value of $5,000. Under the double-declining-balance method, the depreciation expense for the first year of the asset’s useful life is
$20,000
281
All of the following are included on the statement of partners’ equities except
Salary allowances
282
When Tamar Snyder opened a shoe store, her accountant did not include the cash in her personal savings account as one of the assets of the business. This is an example of
The separate entity assumption
283
Common stockholders will receive a dividend
In every year that the board of directors declares a dividend
284
A corporation is owned by
Its stockholders
285
A corporation has 1,000 shares of 10 percent, $50 par-value preferred stock and 10,000 shares of $5 par-value common stock outstanding. If the board of the directors decides to distribute dividends totaling $40,000, the common stockholders will receive a dividend of
$3.50 a share
286
The stockholders of a corporation
Have no personal liability for the debts of the corporation
287
Organization costs should
Be debited to an intangible asset account when incurred and systematically charged to expense over a period of up to 40 years
288
The Preferred Stock account is shown
In the Stockholders’ Equity section of the balance sheet
289
When the issuing corporation retains the right to repurchase shares of preferred stock at a specified price, the preferred stock is said to be
Callable
290
The entry to record the issuance of 1,000 shares of $10 par-value common stock for $14 a share consists of a debit to Cash for $14,000 and
A credit to Common Stock for $10,000 and a credit to Paid-in Capital in Excess of Par Value—Common Stock for $4,000
291
The Paid-in Capital in Excess of Par Value—Preferred Stock account would be shown
In the Stockholders’ Equity section of the balance sheet
292
A corporation received a subscription for 100 shares of 10%, $100 par-value preferred stock at $103 a share. The entry to record this transaction consists of a debit to Subscriptions Receivable—Preferred for $10,300 and
A credit to Preferred Stock Subscribed for $10,000 and a credit to Paid-in Capital in Excess of Par Value—Preferred Stock for $300
293
Participating preferred stockholders
Receive preference dividend amounts as well as a share of other dividends paid
294
An investor agrees to pay a preferred stock subscription in two monthly installments. Each collection will include a debit to Cash and a credit to
Subscriptions Receivable—Preferred
295
If only one class of stock is issued by a corporation, it is referred to as
Common stock
296
One disadvantage of a corporation is
Double taxation
297
The transfer of stock between shareholders
Is recorded in the capital stock transfer journal
298
Subchapter S corporations
Are entities formed as corporations but are treated essentially as a partnership so the corporation pays no income tax
299
Which of the following represents the total of the owners’ claims to the assets of a corporation?
The total stockholders’ equity
300
Treasury stock is
Stock previously paid for in full by a stockholder, then repurchased by the issuing corporation
301
An appropriation of retained earnings represents
A portion of retained earnings that is currently unavailable for dividends
302
Which of the following will decrease total stockholders’ equity?
A cash dividend
303
The entry to record the declaration of a cash dividend consists of
A debit to Retained Earnings and a credit to Dividends Payable
304
A declaration and distribution of a 20% stock dividend on common stock
Will not change the total stockholders’ equity
305
A liability for the payment of cash dividends is recorded
On the date the board of directors publicly declares its intention to pay the dividends
306
A corporation reported a net income of $90,000 for its fiscal year and declared and paid cash dividends of $60,000. A stock dividend recorded at $30,000 was also distributed during the year. If the beginning balance of the Retained Earnings account was $140,000, the ending balance is
$140,000
307
A corporation reacquired 400 shares of its $100 par-value common stock for $105 a share. The entry to record this transaction includes
A debit to Treasury Stock—Common for $42,000
308
The Treasury Stock account is shown on the balance sheet as
A deduction from the sum of all other items in the Stockholders’ Equity section
309
When a corporation reacquires its own shares of stock, the Treasury Stock account is usually debited for
The price paid to reacquire the shares
310
The Amortization of Organization Costs account may be shown in
The Other Expenses section of the income statement
311
Which of the following would be found on a corporation’s income statement?
Income Tax Expense
312
If the corporation’s income tax computed at the end of the year is less than the total of quarterly deposits, the necessary adjustment will result in
A debit to Income Tax Refund Receivable
313
Which of the following would not change the amount of total retained earnings for the year?
The transfer of retained earnings appropriated for treasury stock
314
When bonds mature, a corporation will pay the bondholders
The face amount of the bonds
315
If bonds are issued for a price below their face value, the bond discount should be
Amortized over the life of the bond issue
316
A corporation paid $104,000 to retire bonds with a face value of $100,000 and an unamortized premium balance of $3,000. The entry to record the early retirement of the bonds will include the recognition of a loss of
$1,000
317
On December 31, 2004, a corporation issued $200,000 face value, 12% bonds that mature 10 years from the date of issue. The issue price was 97. If the firm uses the straight-line method of amortization, interest expense for 2005 will be reported at
$24,600
318
Bonds with a face value of $200,000 were issued at 103. The entry to record the issuance will include a credit to the Bonds Payable account for
$200,000
319
The Premium on Bonds Payable account is shown
In the Long-Term Liabilities section of the balance sheet
320
Which of the following is not a disadvantage of raising capital through the issue of bonds payable?
Interest is deductible for income tax purposes
321
The entry to record the adjustment for accrued bond interest includes
A debit to Bond Interest Expense and a credit to Bond Interest Payable
322
When bonds are issued at a premium, the bond premium
Reduces the amount of interest expense over the life of the bonds
323
Bonds with a face value of $400,000 were issued at 98. The entry to record the issuance will include a credit to the Bonds Payable account for
$400,000
324
The entry to record the issuance of bonds at face value includes
A credit to Bond Payable
325
A bond sinking fund investment is started on January 5, 20--, by transferring $10,000 in cash to the fund. This $10,000 is invested and earns $1,100 during 20--. The entry to record the earnings made on the sinking fund investment includes
A debit to Bond Sinking Fund Investment for $1,100 and a credit to Income from Sinking Fund Investment for $1,100
326
A bond sinking fund investment is started on January 5, 2004, by transferring $12,000 in cash to the fund. This $12,000 is invested and earns $1,500 during 2004. On January 5, 2005, the amount of cash transferred to the sinking fund investment will be
$10,500
327
The corporation must maintain a subsidiary ledger showing who owns the bonds and is entitled to receive interest payments if the bonds are
Registered bonds
328
When the issuing corporation has the right to require the owners to surrender the bonds for payment before the maturity date of the bonds, the bonds are referred to as
Callable bonds
329
If current assets are $90,000 and total assets are $270,000, what percentage of total assets are current assets?
33%
330
A firm has sales of $40,000 in 2004 and $45,000 in 2005. The increase in sales from 2004 to 2005 is
12.5%
331
A firm has liabilities of $60,000 and stockholders’ equity of $180,000. The percentage of total liabilities to total assets is
25%
332
Comparing the amount of balance sheet item in one year to the amount for the same item in a prior year is called
Horizontal analysis
333
In vertical analysis of data, the cost of goods sold most likely would be expressed as a percentage of
Net sales
334
A horizontal analysis of balance sheet data involves a comparison of a balance sheet amount on a given date with
The amount for the same balance sheet item on a previous date
335
Vertical analysis of income statement data most often involves a comparison of each income statement item with
Net sales
336
A firm had retained earnings of $100,000 in 2004 and $125,000 in 2005. The increase in retained earnings from 2004 to 2005 is
25%
337
If long-term liabilities are $75,000 and total assets are $525,000, what percentage of total assets are long-term liabilities?
14.3%
338
If the comparative balance sheet shows the amount and percentage of decrease in merchandise inventory from 2004 to 2005, the firm used
Horizontal analysis
339
In vertical analysis of the balance sheet, each item is expressed as a percentage of
Total assets or of total liabilities and stockholders’ equity
340
Which of the following is true of horizontal analysis? A- The percentages of change can be added or subtracted from top to bottom. B- The current year is always the base year. C- The amounts of increase or decrease can be added or subtracted in the column from top to bottom and will give correct subtotals at each point. D- The amounts and percentages of increase or decrease can be added and subtracted vertically in a column
C
341
Which of the following is not true of vertical analysis? A- Each item on the balance sheet is expressed as a percentage of total liabilities. B- The percentages can be added and subtracted from top to bottom. C- Each item in the income statement is expressed as a percentage of net sales. D- Each item on the balance sheet is expressed as a percentage of total assets.
A
342
If total merchandise available for sale is 72 percent of net sales and cost of goods sold is 64% of net sales, gross profit on sales is
36% of net sales
343
If the ratio of total stockholders’ equity to total assets was greater in 2005 than in 2004, then
The ratio of total liabilities to total assets was smaller in 2005 than in 2004
344
The net cash provided by operating activities is affected by
A change in the merchandise inventory
345
Investing activities include
Purchases of plant and equipment for cash
346
When the net cash provided by operating activities is determined, a gain on a sale of equipment should
Be subtracted from the net income
347
Cash and cash equivalents, as used on the statement of cash flows, consist of
Currency, bank accounts and short-term, highly liquid investments
348
An example of a financing activity is
The issue of stock for cash
349
A corporation received $50,000 in cash when it sold a building and paid $90,000 in cash when it purchased some new machinery. As a result, the statement of cash flows would report
$40,000 as the net cash used in investing activities
350
On a statement of cash flows, depreciation expense is
Added to net income in the computation of net cash provided by operating activities
351
An example of an investing activity is
The purchase of property, plant, or equipment for cash
352
An increase in accounts payable is
Added to the net income when determining the net cash provided by operating activities
353
The method used by most corporations to prepare the statement of cash flows is the
Indirect method
354
Generally, if a short-term investment is to be classified as a cash equivalent, it must fall due within
3 months from the date it was acquired
355
On the statement of cash flows, an increase in a prepaid expense
Is included in computing cash flows from operating activities
356
When the net cash provided by operating activities is determined, an increase in income taxes payable should
Be added to the net income
357
The payment of interest is considered to be
An outflow of cash that results from an operating activity
358
When the net cash provided by operating activities is determined, the amortization of bond premium
Should be subtracted from the net income
359
Expenses that are closely related to a particular department and can easily be assigned to it during an accounting period are called
Direct expense
360
Floor space would be reasonable basis for the allocation of
Rent expense for a building
361
An example of a direct expense in a department store is
Sales salaries expense
362
In a store with several sales departments, departmentalized accounts would be used for
Sales, purchases, and merchandise inventory
363
A department probably would be considered for elimination if it had
A negative contribution margin and a net loss from operations
364
The procedure for assigning indirect expenses to departments at the end of an accounting period is called
Allocation
365
If a segment of business is considered a profit center
Both revenue and cost data must be accumulated for the segment.
366
The contribution margin of a department is the difference between
Its gross profit on sales and its direct expenses
367
A transfer price is
The price at which goods are moved from one department of a company to another
368
Department A had total sales of $84,000 and Department B had total sales of $36,000. Other Office Expenses, totaling $2,500, are allocated on the basis of total sales. The amount allocated to Department B is
$750
369
One department in a company had a contribution margin of $15,000 and a net loss from operations of $2,000. The indirect expenses allocated to this department would have been incurred whether or not the department existed. If this department had been eliminated, the company’s reported net income would have been
$15,000 lower
370
The telephone expense is allocated on the basis of floor space. Department A occupies 1,875 square feet and Department B occupies 625 square feet. If the telephone expense is $600, the amount allocated to Department A is
$450
371
Department A had gross profit on sales of $20,000, contribution margin of $12,000, total direct expenses of $8,000, and total indirect expenses of $7,000. Department A has
A net income from operations of $5,000
372
Which of the following is usually not departmentalized? A- Depreciation expense. B- Interest expense. C- Payroll taxes expense. D- Rent expense.
B
373
The manufacturing costs incurred during the year are
Used in the computation of costs of goods manufactured
374
The cost of goods manufactured is computed by
Deducting the ending work in process inventory form the sum of the total manufacturing cost and the beginning work in process inventory
375
Gross profit for a manufacturing business is computed by
Deducting cost of goods sold from net sales
376
Three components of total manufacturing cost are
Raw materials used, direct labor, and manufacturing overhead.
377
The balance sheet of a manufacturing business shows
The raw materials inventory, the work in process inventory, and the finished goods inventory
378
A standard cost system may be used
With either a job order cost system or a process cost system
379
Actual overhead costs are
Debited to Manufacturing Overhead when incurred
380
Job order cost accounting is appropriate when
A company produces more than one product in batches rather than on a continuous basis
381
The salary of the factory supervisor is a good example of
A fixed cost
382
As the level of activity increases, the fixed cost per unit of activity
Decreases
383
As the level of activity increases, the variable cost per unit of activity
Doesn’t change
384
As the level of activity increases, the total variable costs for the period
Increase
385
As the level of activity increases, the total fixed costs for the period
Do not change
386
The cost of the earliest merchandise purchased is assigned to ending inventory when a company uses
the LIFO method
387
A voucher should be prepared when?
before any obligation is recorded or paid
388
In making a decision to replace a machine, which of the following is not relevant? a- the book value of the old machine. b- the training that workers will need in order to use the new machine. c- the variable costs of operating the old machine. d- the variable costs of operating the new machine.
A
389
When a perpetual inventory system is used, sales revenue is recorded as products are sold,
and the cost of the goods sold is transferred from the Finished Goods Inventory account to the Cost of Goods Sold account
390
Which inventory costing system is not acceptable for financial reporting purposes?
direct costing
391
Which of the following cost amounts can be found in a firm's accounting records? a- incremental costs. b- sunk costs. c- opportunity costs. d- differential costs.
B
392
Which of the following is allowed under generally accepted accounting principles? a- a company was offered $60,000 for land that it had purchased for $15,000. The company did not sell the land but increased the Land account to $60,000. b- an owner lists the full cost of his or her personal automobile, which is occasionally used for the business, on the company's balance sheet. c- the Equipment account shows a balance of $55,000. This amount represents the original cost of $75,000 less the accumulated depreciation of $20,000. d- a large company recorded the $20 cost of a tool as an expense, although the item is expected to be used for 3 years.
D
393
At the end of the fiscal year, any overapplied or underapplied overhead is
transferred to the Cost of Goods Sold account in an adjustment.
394
A raw material subsidiary ledger contains a raw materials card for each
item of direct materials and indirect materials
395
A firm that uses a voucher register would not have to use
a purchases journal
396
Each year there was an increase in the market value of some stock owned by the Murdock Company, but the accountant did not record the increase in asset value until the stock was sold. In this situation the accountant
followed the realization principle
397
A good internal control procedure is to
use prenumbered business forms
398
The firm had beginning inventory of 50 units with a unit cost of $10. Purchases during the year were as follows: March--50 units with a unit cost of $12; July--60 units with a unit cost of $15. If the average cost method is used, the value of the ending inventory of 45 is
$563
399
Goods with an invoice price of $800 and credit terms of 2/10, n/30 were recorded net of the discount. To record payment nine days after the invoice date, the accountant would
debit Accounts Payable and credit Cash
400
The voucher method of internal control is least appropriate for
small businesses
401
Fixed manufacturing costs are written off as current expenses of the period in which they occurred when using what method?
direct costing
402
Under the voucher system, a check register is used in place of
a cash payments journal
403
Recording land on its cost rather than its appraisal value illustrates
the cost basis principle
404
Unpaid vouchers are filed according to
due date
405
If other items remain the same, the larger the ending inventory valuation,
the higher the reported net income.
406
The financial statements in the annual report of a corporation contain footnotes explaining the methods used to depreciate the firm's equipment. This practice is an example of
the full disclosure principle
407
A firm that sells a single product had a beginning inventory of 4,000 units with a total cost of $16,000. Early in the year, 8,000 units were purchased at $6 each. Using LIFO, what is the value of the ending inventory of 2,000 units?
$8,000
408
Costs that are not directly traceable to a segment of a business are called
common costs
409
A firm purchased 25 units of materials with a unit price of $2.00 on May 5. On May 15, the firm purchased 25 units with a unit price of $2.10. If the firm uses the FIFO method of inventory pricing, the total cost of 30 units issued on May 20 would be
$60.50
410
Goods with an invoice price of $900 and credit terms of 2/10, n/30 were recorded at the gross amount. To record payment eight days after the invoice date, the accountant would
debit Accounts Payable, credit Cash, and credit Purchases Discounts.
411
When processing a purchase of merchandise in a voucher system, which of the following steps is out of sequence? a- Prepare and approve the voucher. b- Record the voucher. c- Pay the voucher. d- Verify prices and computations on the invoice.
D
412
Purchases of merchandise on credit should be recorded in
the Purchases journal
413
When materials that will become part of a finished product are removed from the storeroom and placed in production,
Work in Process Inventory is debited
414
The entry to record the application of overhead to jobs consists of
a debit to Work in Process Inventory and a credit to Manufacturing Overhead Applied.
415
If the Check Number column of a voucher register is blank,
the voucher entered on that line has been approved but not paid.
416
Job order cost sheets constitute a subsidiary ledger that supports
the Work in Process Inventory
417
Goods with an invoice price of $1,500 and credit terms of 2/10, n/30 were recorded net of the discount. To record payment 15 days after the invoice date, the accountant would
debit Accounts Payable, debit Discount Lost, and credit Cash
418
A matching of the most recent costs to revenue results from the use of
the LIFO method
419
Depreciating equipment over its useful life is an example of
applying the matching principle
420
Actual overhead costs are
debited to Manufacturing Overhead when incurred.
421
The Garrison Company offers terms of net 30 days for its credit sales. It records the revenue from these sales as soon as the sales are made rather than waiting until cash is received from the customers. This is an example of
the realization principle
422
When partial payment of a previously recorded voucher is to be made
the original voucher is canceled and two or more new vouchers are prepared.
423
Process cost accounting is appropriate
when there are continuous operations on standard types of products.
424
The transfer of stock between shareholders is recorded in
the capital stock transfer journal
425
On an income statement prepared with a direct costing approach, the excess of sales over the cost of goods sold, based on variable costs only, is referred to as
the manufacturing margin.
426
Which of the following is true of horizontal analysis? a-the current year is always the base year. b- the amounts of increase or decrease can be added or subtracted in the column from top to bottom and will give correct subtotals at each point. c- the amounts and percentages of increase or decrease can be added and subtrated vertically in a column. d- the percentages of change can be added or subtracted from top to bottom.
B
427
Which of the following is not true of the direct costing procedure? a- the cost of goods sold, based solely on variable costs, is subtracted from net sales to arrive at the manufacturing margin. b- Variable administrative are deducted from the manufacturing margin. c- Variable selling expenses are deducted from the manufacturing margin. D- Variable and fixed costs are considered as part of the cost of goods manufactured.
D
428
Contribution margin is calculated by
deducting variable costs from revenue
429
Circled amounts in a voucher register may indicate
purchases returns and allowances
430
An accountant charged the Repairs Expense account for a tool that cost $12. The tool had an estimated useful life of 5 years; however, the accountant did not choose to depreciate it. The modifying convention that the accountant followed was
materiality
431
In periods of rising prices, the inventory valuation procedure that results in the highest net income is
the FIFO method
432
When perpetual inventories are maintained in a job order cost system, the balance of the Work in Process Inventory account represents
the actual costs for the labor and materials used in uncompleted jobs and estimate of the overhead associated with these jobs.
433
A firm purchased 50 units of materials with a unit price of $1.30 on June 1. On June 15, the firm purchased 50 units with a unit price of $1.20. If the firm uses the LIFO method of inventory pricing, the total cost of 65 units issued on June 20 would be
$79.50
434
Goods with an invoice price of $7,000 and credit terms of 2/10, n/30 were recorded net of (minus) the discount. If the goods are paid for after the expiration of the discount period, the necessary entry will include a debit to the Accounts Payable for
$6,860
435
A standard cost system may be used
with either a job order cost system or a process cost system
436
The Statements of Financial Accounting Standards that automatically become generally accepted accounting principles are issued by
the FASB
437
The use of the FIFO method of inventory valuation
results in the most current costs in ending inventory
438
A job order cost sheet summarizes
the direct labor, direct materials used, and applied overhead association with a specific job.
439
Job order cost accounting is appropriate
when a company produces more than one product in batches rather than on a continuous basis.
440
Vouchers are entered in the voucher register
in numerical order
441
When indirect materials are requisitioned from the materials storeroom and placed in production, an entry is made crediting Raw Materials Inventory and debiting
Manufacturing Overhead
442
When direct costing is used, cost of goods sold reflects
variable manufacturing costs only
443
A firm that sells a single product had a beginning inventory of 4,000 units with a total of $28,000. Early in the year, 10,000 units were purchased at $9 each. Using FIFO, what is the value of the ending inventory of 3,000 units?
$27,000
444
The use of the LIFO method of inventory valuation
results in the lowest reported net income in the time of rising prices
445
On December 31, prior to adjustments, the balance of Accounts Receivable is $16,000 and Allowance for Doubtful Accounts has a credit balance of $95. The firm estimates its losses from uncollectible accounts to be 5% of accounts receivable at the end of the year. The adjusting entry needed to record the estimated losses from uncollectible accounts is made for
$705
446
At the end of the month, the entry to close the Manufacturing Overhead control account is recorded as
A debit to Work in Process Inventory accounts and a credit to Manufacturing Overhead
447
Department B had net sales of $70,000, gross profit on sales of $35,000, total direct expenses of $9,000, and total indirect expenses of $6,000. Department B’s contribution margin is
$26,000
448
Which of the following is usually not departmentalized? A- Payroll taxes expense. B- Depreciation expense. C- Rent expense. D- Interest expense.
D
449
An example of real property is
Buildings
450
The adjusting entry to record estimated losses from uncollectible accounts consists of
A debit to Uncollectible Accounts Expense and a credit to Allowance for Doubtful Accounts
451
Which of the following would not change the amount of total retained earnings for the year? A- The net income after taxes for the year. B- An appropriation for building expansion. C- The dividends on common stock. D- The transfer of retained earnings appropriated for treasury stock.
D
452
Equipment that cost $20,000 was sold for $12,000 cash. Accumulated depreciation of the asset was $14,000. The entry to record the sale includes a credit to the Equipment account for
$20,000
453
The entry to replenish a petty cash fund includes
Debits to various expense accounts and a credit to Cash
454
The allocation of the costs of natural resources, such as minerals, to the units produced is referred to as
Depletion
455
A firm using the allowance method to provide for losses from uncollectible accounts collected the cash due from a customer whose account was previously written off. The entry to reinstate the customer’s account included a credit to
Allowance for Doubtful Accounts
456
Upon collection of the amount due on an interest-bearing promissory note from a customer, the accountant would debit Cash, credit Notes Receivable, and
Credit Interest Income
457
Assume that a business trades in an old cash register for a new one. Under the income tax method,
The cost of the new asset is recorded as the book value of the old asset plus the cash amount paid or to be paid
458
A firm had a beginning work in process inventory totaling $4,000 and current period costs of $22,500. Equivalent production was 5,000 units, and 3,000 units were completed and transferred to the finished goods inventory. Inventory costs would be determined using a unit cost of
$5.30
459
A firm had 600 units in its work in process inventory at the beginning of a month. Of these units, 30% were complete with respect to labor, materials, and overhead. The firm transferred 5,000 units to the finished goods inventory during the month. It had 500 units of which 40% were complete still in process at the end of the month. Equivalent production for the month was
5,380 units
460
Process cost accounting is most appropriate
when there is continuous production on a single product.
