1. (Multiple Choice)

Which of the following expressions is true?

A.  
Assets + Liabilities = Stockholders’ Equity.
B.   Assets 
= Stockholders’ Equity.
C.  
Liabilities – Assets = Stockholders’ Equity.
D.  
Cash = Stockholders’ Equity.
E.   None of these.
2. (Multiple Choice)

Of the following items, which may be found on both an income statement and the statement of retained earnings?

A.  
Net loss.
B.  
Dividends.
C.  
Capital Stock.
D.  
Accounts Receivable.
E.   None of these.
3. (Multiple Choice)

The expression “For the Year Ended December 31, 20X7” would be the proper dating on the heading of a company’s:

A.  
Income Statement.
B.  
Statement of Retained Earnings.
C.  
Balance Sheet.
D.  
Both “A” and “B”.
E.   None of these.
4. (Multiple Choice)

Which of the following statements about journals is false?

A.  
The ledger is posted from transactions recorded in the general journal.
B.  
Journals are posted from transactions recorded in the general ledger.
C.  
Transactions reflected in the journal tend to follow chronological sequence.
D.  
All accounts affected by a transaction are reflected together in the journal.
E.   None of these.
5. (Multiple Choice)

Failure to record the purchase of office furniture on account will result in:

A.  
an overstatement of assets.
B.  
an understatement of liabilities.
C.  
an overstatement of stockholders’ equity.
D.  
All of these.
E.   None of these.
6. (Multiple Choice)

Richards Corporation incurred and paid $25,000 of rent during August. 
The appropriate journal entry to completely account for this activity is:

A.  
Debit Cash/Credit Rent Payable.
B.  
Debit Cash/Rent Expense.
C.  
Debit Rent Expense/Credit Cash.
D.  
Debit Rent Expense/Credit Rent Payable.
E.   None of these.
7. (Multiple Choice)

If payday occurs on each Wednesday for the weekly pay period ending the previous Friday, and an entry is made each Friday to accrue the payroll for that week, the journal entry to record on each Friday would involve a debit to:

A.  
Wage Expense.
B.  
Wages Payable.
C.  
Cash.
D.  
Cash Expense.
E.   None of these.
8. (Multiple Choice)

During June, Zorba Magazine sold for cash six advertising spaces for $400 each to be run in the July through December issues.  On that date, Zorba properly recognized Unearned Revenue. 
The adjusting entry to record on July 31 includes:

A.  
a debit to Unearned Revenue for $400.
B.  
a credit to Unearned Revenue for $400.
C.  
a credit to Revenue for $2,000.
D.  
a debit to Cash for $2,000.
E.   None of these.
9. (Multiple Choice)

On January 26, a customer paid Collin Printing $250 in advance for printing.  On January 28, Collin printed 500 posters for Grubb at a price of 30¢ each. 
The proper entry on January 28 would include a:

A.  
debit to Unearned Revenue of $250.
B.  
credit to Unearned Revenue for $100.
C.  
credit to Unearned Revenue for $250.
D.  
debit to Unearned Revenue for $100.
E.   None of these.
10. (Multiple Choice)

The proper journal entry to close an $11,000 debit balance in the Dividends account would include:

A.  
a credit to Dividends for $11,000.
B.  
a credit to Income Summary for $11,000.
C.  
a credit to Retained Earnings for $11,000.
D.  
a credit to Expenses for $11,000.
E.   None of these.
11. (Multiple Choice)

Which of the following statements about reversing entries is true?

A.  
Identical balances eventual result with or without reversing entries.
B.  
Reversing entries may not be used with accrued revenues.
C.  
Reversals are usually for adjusting items that do not involve future cash flow.
D.  
All of the above.
E.   None of these.
12. (Multiple Choice)

Working capital is equal to:

A.  
current liabilities divided by current assets.
B.  
current assets divided by current liabilities.
C.  
current assets x current liabilities.
D.  
current assets – current liabilities.
E.   None of these.
13. (Multiple Choice)

Which of the following statements is false?

A.  
List price minus invoice price is equal to the amount of the trade discount.
B.  
Trade discounts are a convenient means of reducing list prices to invoice prices.
C.  
Trade discounts are not entered in the accounting records.
D.  
Trade discounts are the same thing as cash discounts.
E.   None of these.
14. (Multiple Choice)

Merchandise is sold on account on January 16, terms 2/10, n/30, and recorded by debiting Accounts Receivable and crediting Sales for $2,000. 
If payment occurs on January 31, the journal entry would include a credit to:

A.  
Accounts Receivable for $1,960.
B.  
Accounts Receivable for $2,000.
C.  
Sales Discounts for $40.
D.  
Cash for $1,960.
E.   None of these.
15. (Multiple Choice)

On April 1, a $5,000 merchandise purchase was recorded under the gross method.  The purchase was made on account and subject to credit terms of 2/10, n/30. 
The journal entry to record payment on April 15 would include:

A.  
a debit to Accounts Payable for $4,900.
B.  
a credit to Cash for $5,000.
C.  
a debit to Purchase Discounts Lost for $100.
D.  
All of the above.
E.   None of these.
16. (Multiple Choice)

Ace Hardware Store acts as agent for Plumbing Company of America.  Accordingly, Ace holds merchandise on consignment from Plumbing Company of America in its retail store. 
Plumbing Company of America:

A.  
is known as the consignor.
B.  
should not include the consigned inventory on its balance sheet.
C.  
should record a profit when the inventory is consigned to Ace.
D.  
All of the above.
E.   None of these.
17. (Multiple Choice)

An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is:
 
A.  
FIFO.
B.  
LIFO.
C.  
Retail.
D.  
Weighted-average.
E.   None of these.
18. (Multiple Choice)

Which of the following inventory methods will always produce the same results under both a periodic and perpetual system?
 
A.  
FIFO.
B.  
LIFO.
C.  
Weighted-average.
D.  
All of these.
E.   None of these.
19. (Multiple Choice)

Amounts that must be left on deposit and cannot be withdrawn are known as:

A.  
compensating balances.
B.  
dead monies.
C.  
sinking funds.
D.  
demand deposits.
E.   None of these.
20. (Multiple Choice)

After preparing a bank reconciliation, certain adjustments may be necessary to the Cash account in the company records. 
The source for this journal entry could be the reconciliation of:

A.  
the ending balance per bank statement to the adjusted cash balance.
B.  
the ending balance per company records to the adjusted cash balance.
C.  
Both A and B.
D.  
Neither A or B.
E.   None of these.
21. (Multiple Choice)

Hastings Company replenished a $500 petty cash fund.  The petty cash box contained vouchers of $87 for postage, $173 for supplies, $58 for gasoline, and cash on hand of $182. 
The journal entry to reflect replenishment would include:

A.  
a credit to Petty Cash for $318.
B.  
debits to expense of $318.
C.  
a debit to Cash for $318.
D.  
a credit to Cash or $182.
E.   None of these.
22. (Multiple Choice)

An aging revealed a year-end target allowance of $100,000.  The beginning of year allowance contained $75,000.  $40,000 was written off during the year. 
How much should be charged to Uncollectible Accounts expense?

A.  
$40,000.
B.  
$65,000.
C.  
$70,000.
D.  
$135,000.
E.   None of these.
23. (Multiple Choice)

If McCarthy should collect an account in 20X6 which was written off in 20X5, McCarthy would debit Cash for the amount received and credit:

A.  
an income account entitled Adjustment of Prior Period Earnings.
B.  
the Accounts Receivable account.
C.  
the Bad Debts Expense account.
D.  
the Accounts Receivable account after the original write-off is reestablished.
E.   None of these.
24. (Multiple Choice)

Which of the following statements is false?

A.  
Notes receivable are initially entered in the accounting records via a debit.
B.  
The interest on a note is deemed to be revenue to the maker of the note.
C.  
Interest revenue is recorded as it is received and as a year-end adjustment.
D.  
Principal is the amount on which interest is figured.
E.   None of these.
25. (Multiple Choice)

Which of the following costs is normally not a capital expenditure?

A.  
Normal installation fees on a long-lived asset.
B.  
Freight charges incurred on the purchased of new equipment.
C.  
Interest charges during the active construction period of a new building.
D.  
General training costs for employees to operate a new machine.
E.   None of these.
26. (Multiple Choice)

Which of the following is false?

A.  
Cost less accumulated depreciation equals depreciable base.
B.   
“Depreciation expense” and “accumulated depreciation” are synonymous.
C.  
Depreciation expense normally increases over the service life of an asset..
D.  
All of the above.
E.   None of these.
27. (Multiple Choice)

A new truck is purchased on January 1, 20X6.  The truck cost $10,000, has a 5-year life, and a $2,000 residual value. 
Given a December 31 year-end, and use of the straight-line method, how much is the net book value at December 31, 20X7?

A.  
$10,000.
B.  
$7,200.
C.  
$6,000.
D.  
$3,200.
E.   None of these.
28. (Multiple Choice)

Farmco recently incurred costs associated with replacing the oil in one of its tractors. 
How should this cost be accounted for?

A.  
As a repair and maintenance expense.
B.  
As an increase in the cost basis of the tractor.
C.  
As a reduction of accumulated depreciation associated with the tractor.
D.  
As an intangible.
E.   None of these.
29. (Multiple Choice)

A gain would always be recorded:

A.  
on an exchange lacking commercial substance.
B.  
when an asset is sold for less than its net book value.
C.  
when an asset is sold for more than its residual value.
D.  
when an asset is sold for cash.
E.   None of these.
30. (Multiple Choice)

Overestimating the number of barrels that can be pumped from an oil well over its lifetime will result in:

A.  
understating net income each year.
B.  
understating depletion cost per unit each year.
C.  
overstating depletion expense each year.
D.  
understating total assets each year.
E.   None of these.
31. (Multiple Choice)

Typical current liabilities include:

A.  
contingent liabilities.
B.  
prepayment by customers.
C.  
accrued liabilities.
D.  
All of the above.
E.   None of these.
32. (Multiple Choice)

The account Discount on Notes Payable:

A.  
usually has a credit balance and is added to the Notes Payable account.
B.  
is recorded only when the note has a stated interest rate.
C.  
is amortized over the life of the note by a transfer to interest revenue.
D.  
represents future interest expense which will be incurred over the life of the note.
E.   None of these.
33. (Multiple Choice)

Sylvan Company had sales of $1,500,000.  Estimated warranty costs are 1% of sales.  Work performed under warranties during the period actually cost $8,750. 
The entry to record the warranty liability includes:

A.  
a debit to Warranty Expense for $23,750.
B.  
a debit to Warranty Expense for $15,000.
C.  
a debit to Warranty Expense for $8,750.
D.  
a debit to Warranty Expense for $6,250.
E.   None of these.
34. (Multiple Choice)

Which of the following statements is true?

A.  
Preemptive rights make it easy for a corporation to issue additional shares.
B.  
One purpose of a corporation is to avoid “double taxation.”
C.  
A corporate entity is typically of unlimited duration.
D.  
A corporation can issue common or preferred stock, but not both.
E.   None of these.
35. (Multiple Choice)

As a normal rule of thumb, which of the following statements is true?

A.  
Par value exceeds the issue price of common stock.
B.  
Par value is correlated to dividends on common stock.
C.  
Par value is correlated to dividends on preferred stock.
D.  
Par value is equivalent to total paid in capital.
E.   None of these.
36. (Multiple Choice)

Gaines originally issued 15,000 shares of $10 par value common stock at $15 per share.  During the current year, 1,000 of these shares were reacquired for $20 each. 
The proper entry to record the reacquisition includes:

A.  
a debit to Treasury Stock for $10,000.
B.  
a debit to Treasury Stock for $15,000.
C.  
a debit to Treasury Stock for $20,000.
D.  
a debit to Retained Earnings for $5,000.
E.   None of these.

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