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BUSA 10 FINAL EXAM
Spring 2001 MULTIPLE CHOICE 1.
Whic Which h of the the fol follo lowi wing ng tran transac sacti tion ons s shoul should d not be be reco record rded ed as rev reven enue ue? ? a. Sold services on account. b. Collected on an account receivable. receivable. c. Received cash for services performed. d. All of these these should be recorded as revenue. e. None of these should be recorded recorded as revenue. revenue.
2.
Amou Amount nts s owe owed d by by a busi busine ness ss are are refe referr rred ed to as a. assets. b. equities. c. liabilities. d. capital. e. none of these.
3.
A business firm received $800 cash from charge customers to apply on account. The effect of the transaction is a. an increase in an asset and an increase increase in revenue. revenue. b. an increase in an asset and a decrease decrease in capital. capital. c. an increase in an asset and a decrease in a liability. d. an increase in an asset and a decrease decrease in an asset. e. none of these.
4.
Over a period of time, if total assets increase by $25,000 and total liabilities increase by $7,000, then owner's equity will be increased by a. $32,000. b. $25,000. c. $7,000. d. $18,000. e. none of these
5.
Whic Which h of of the the foll follow owin ing g iis s not not an asse assett acc accou ount nt? ? a. Prepaid Insurance b. Supplies c. Office Equipment d. Sales e. none of these
6.
A purc purcha hase se of su supp ppli lies es on acco accoun untt s sho houl uld d be be rec recor orde ded d as as a. a debit to Supplies and a credit to Cash. b. a debit to Accounts Payable Payable and a credit to Supplies. c. a debit to Supplies and a credit credit to Accounts Payable. Payable. d. a debit to Supplies and a credit to Accounts Receivable. Receivable. e. none of these.
7.
A debit ma may si signify a decrease in a. a liability account.
b. an asset account.
c. a revenue account. e. an asset and a revenue account.
d. a liability and a revenue account.
8.
A trial balance is a. a listing of all the assets, liabilities, and owner's equity accounts that have balances. b. a listing of all the accounts that have balances. c. a listing of all the revenue and expense accounts that have balances. d. all of these. e. none of these. 9.
The normal balance of an account is on the a. plus side. b. left side. c. debit side. d. right side. e. credit side.
10.
The proof that the debits and credits in the ledger are equal is called a. the trial balance. b. the journal. c. the statement of owner's equity. d. the income statement. e. none of these.
11.
The first step in the posting process is a. recording the journal page number in the ledger account. b. recording the ledger account number in the journal. c. recording the date in the ledger account. d. recording the explanation in the journal. e. none of these.
12. Which of the following errors, considered individually, would cause the trial balance totals to be unequal? a. Cash received from a customer on account was posted as a debit of $320 to Cash and a credit of $32 to Accounts Receivable. b. A payment of $51 for supplies was posted as a debit of $57 to Supplies and a credit of $26 to Cash. c. A payment of $672 to a creditor was posted as a debit of $672 to Accounts Payable and a debit of $672 to Cash. d. Each of these would cause the totals to be unequal. e. None of these would cause the totals to be unequal. 13.
A book of original entry is known as a. a ledger account. b. a general ledger. c. a trial balance. d. a journal. e. none of these.
14. The difference between the balance of the Equipment account and its related Accumulated Depreciation account is called a. trade-in value. b. a contra asset. c. book value. d. an accrued asset. e. none of these.
15.
The type of account and normal balance of Accumulated Depreciation is a. contra asset, debit. b. asset, credit. c. asset, debit. d. contra asset, credit. e. none of these.
16. If total credits exceed total debits in the Income Statement columns of a worksheet a. a mistake has been made. b. a net income has occurred. c. a net loss has occurred. d. no conclusion can be drawn until the closing entries have been made. e. none of these is true. 17.
Accrued wages are a. wages that have been paid. b. wages that have not been paid. c. wages that have been neither paid nor owed. d. wages that were owed and have been paid. e. none of these.
18. If an accountant fails to make an adjusting entry at the end of a fiscal period to record expired insurance, the omission will cause a. total assets to be short. b. total expenses to be short. c. total revenue to be short. d. all of these. e. none of these. 19. Financial statements prepared during the fiscal year for periods of less than twelve months are called a. temporary statements. b. internal statements. c. interim statements. d. all of these. e. none of these. 20. Which of the following accounts in the ledger will ordinarily appear in the postclosing trial balance? a. Drawing b. Accounts Receivable c. Income from Services d. Supplies Expense e. none of these
21. Which of the following is prepared by taking the accounts and their balances from the general ledger? a. Income statement b. Statement of owner's equity c. Balance sheet d. Post-closing trial balance e. all of these 22.
Two sources for closing entry information are a. ledger and journal. b. journal and work sheet. c. ledger and work sheet. d. work sheet and financial statements. e. none of these. 23. On a bank statement, a deposit of $403 was recorded as $304. The difference should be treated as a. a deduction from the ledger balance of cash. b. an addition to the bank statement balance. c. a deduction from the bank statement balance. d. an addition to the ledger balance of cash. e. none of these. 24. of
The book balance of cash may differ from the bank statement balance because a. NSF checks. c. service charges. e. none of these.
b. outstanding checks. d. all of these.
25. H. Hanula shows a balance in her Cash account of $380, but the bank statement just received shows a balance of $480. The difference of $100 may be caused by a. an NSF check for $100. b. an outstanding check for $100. c. a debit memo for $100. d. all of these. e. none of these. 26.
An endorsement including the words "For deposit only" is called a. a restrictive endorsement. b. a blank endorsement. c. a qualified endorsement. d. a special endorsement. e. none of these.
27.
Types of compensation that an employee might receive include a. a bonus. b. meals. c. profit sharing. d. a commission. e. all of these.
28.
The portion of FICA taxes designated as Medicare is paid by
a. b. c. d. e.
employees only. employer and federal government. both employee and employer equally. all of these. none of these.
29.
The structure of the payroll entry to record the payroll is a. debit Salaries Payable, credit each employee deduction. b. debit Salaries Payable, credit Cash. c. debit Salaries Expense, credit each employee deduction, credit Salaries Payable. d. debit Salaries Expense, credit each employee deduction. e. none of these. 30.
The employer records the amount of federal income tax withheld as a. an expense. b. an asset. c. payroll tax expense. d. a liability. e. none of these.
31. A single summarizing account in the general ledger, representing all the accounts in a particular subsidiary ledger, is referred to as a. a response account. b. a summary account. c. a special account. d. a controlling account. 32.
When merchandise previously sold is returned for credit, the journal entry is a. debit Sales and credit Accounts Receivable. b. debit Sales Returns and Allowances and credit Accounts Payable. c. debit Accounts Receivable and credit Sales Returns and Allowances. d. debit Sales Returns and Allowances and credit Accounts Receivable. e. none of these.
33.
The purpose of an accounts receivable ledger is a. to provide information for billing customers at the end of the month. b. to provide detailed information concerning accounts receivable accounts. c. to provide information to be used in preparing a schedule of accounts receivable. d. all of these. e. none of these. 34.
35.
The total of the schedule of accounts receivable must equal a. the total of the sales on account for the month. b. the balance of the Accounts Receivable controlling account. c. the total of all sales for the month. d. sales on account less cash sales for the month. e. none of these. Bond Company bought goods from James Company with shipping terms
FOB destination. Which of the following statements correctly identifies who is to pay the freight bill and when the title is transferred? a. James pays transportation, and title is exchanged when goods are unloaded at Bond Company. b. Bond pays transportation, and title is exchanged when goods are loaded at James Company. c. James pays transportation, and title is exchanged when goods are unloaded at James Company. d. The manufacturer pays the freight, thus the term FOB (free on board). e. none of these. 36.
Freight charges may be a. listed separately on the invoice. b. billed separately from the invoice. c. include in the price of the goods on the invoice. d. all of these. e. none of these.
37. Which of the following transactions would be recorded in the Purchases account? a. purchase of office supplies on account b. purchase of equipment on account c. purchase of store supplies for cash d. all of these e. none of these 38.
Freight-in on the purchase of merchandise, FOB destination is paid by the: a. the Buyer. b. the Seller. c. the carrier. d. all of these. e. none of these.
39.
Which of the following normally has a debit balance? a. Credit Card Expense b. Sales Discount c. Sales Returns and Allowances d. all of these e. none of these
40.
Trade discounts are a. granted for prompt payment. b. granted in addition to the discount for prompt payment. c. recorded on the buyer's books. d. all of these. e. none of these.
41.
Which of the following accounts normally has a credit balance? a. Sales Discount b. Sales Returns and Allowances c. Purchases d. Purchase Returns and Allowances
e. none of these 42.
The schedule of accounts receivable shows a. A list of sales returns for the month b. Total sales for the month c. a list of the balances of charge customer accounts d. a list of each individual sale e. none of these.
43. In the Adjustments columns of the work sheet, the credit to the Merchandise Inventory account represents a. beginning inventory. b. ending inventory. c. the difference between the beginning and the ending inventory. d. all of these. e. none of these. 44.
The Unearned Revenue account would be used when a company a. collects cash and earns the revenue in the same fiscal period. b. collects cash and earns the revenue over two fiscal periods. c. pays cash for services not yet earned. d. pays cash for services earned in two fiscal periods.
45.
On the work sheet, the adjusted balance of unearned revenue appears in a. the Income Statement Debit column. b. the Income Statement Credit column. c. the Balance Sheet Debit column. d. the Balance Sheet Credit column. e. none of these. 46. The appropriate journal for recording the adjusting entry for Merchandise Inventory is a. the cash payments journal. b. the purchases journal. c. the sales journal. d. the general journal. e. none of these. 47.
The current ratio would probably be of most interest to a. creditors. b. management. c. the owner. d. customers. e. none of these.
48. If Ending Merchandise Inventory is $20,000, Purchases are $87,000, Purchases Discount is $1,600, Freight In is $3,000, and Beginning Inventory is $18,000, Cost of Goods Sold is a. $87,400. b. $91,000. c. $81,000. d. $84,600. e. none of these.
49.
On classified financial statements, Prepaid Insurance is classified as a. a current asset. b. a general expense. c. plant and equipment. d. a current liability. e. none of these.
50. If Current Assets are $93,000; Plant and Equipment is $127,000; Current Liabilities are $51,000; And Long-Term Liabilities are $115,000, the working capital is a. $83,000. b. $43,000. c. $19,000. d. $54,000. e. none of these. 51.
Liabilities represent amounts owed to debtors.
52.
Business transactions are expressed in terms of money.
53. The first step in analyzing a transaction is to determine what accounts are involved. 54. The liability created when supplies are bought on account is called an account payable. 55. When a business receives cash, it is always recorded as an increase to Cash and an increase to Revenue. 56. If equipment is bought by paying $200 as a down payment and the remaining $640 in 30 days, total assets are increased by $840. 57. In any transaction, the total dollar amount of debits must equal the total dollar amount of credits. 58.
Recording 124 as 214 is an example of a transposition.
59.
The list of names of the accounts of a business is called a ledger.
60.
It is proper to split a journal entry at the bottom of a page.
61. Recording the entire transaction twice will cause the trial balance totals to be unequal. 62. The first step in the posting process is to write the amount of the transaction in the ledger account. 63. The process of transferring accounts from the book of original entry to the general ledger is called
journalizing. 64. Financial statements are prepared from the Adjusted Trial Balance columns of a work sheet. 65.
Drawing is recorded in the Income Statement Debit column of a work sheet.
66. Since adjusting entries are recorded on a work sheet, they do not need to be journalized or posted. 67.
An asset's book value represents the true market value of the asset.
68. Accounts that are partly income statement amounts and partly balance sheet amounts are called Mixed accounts. 69.
The balance of the Drawing account is closed to the Income Summary account.
70.
After the temporary accounts are closed, only the real accounts have balances.
71. If the totals of the post-closing trial balance are not equal, the first step in tracking down the error is To verify posting in the ledger. 72. The balance of Accumulated Depreciation will normally appear on the income statement. 73.
An entry is made to the Change Fund account each time a deposit is made.
74. After a bank reconciliation has been completed, the accountant must make journal entries to record The outstanding checks. 75. A check that is outstanding for two consecutive months should be included on the bank Reconciliation for the first month only. 76. A check recorded on a deposit slip should be listed by its ABA number and its amount. 77. If an employee earning $12 per hour works 48 hours, the gross pay would amount to $624, Assuming time-and-a-half for over 40 hours worked per week. 78. 79. tax.
An employee's total earnings for a payroll period are called the gross pay. There is no limit on each employee's total earnings that are subject to Medicare
80. Employees, as well as employers, are required to make payments toward federal unemployment insurance. 81.
The Sales Returns and Allowances account normally has a credit balance.
82. The Accounts Receivable account is debited to record a customer's return of merchandise. 83. For a sale of $200 on which 6 percent sales tax is charged, the amount debited to Accounts Receivable is $200. 84. Generally, the Accounts Receivable controlling account will be up to date only at the end of the month. 85.
Purchases of goods for cash are recorded in the Inventory account.
86. With FOB destination, the seller maintains ownership of the goods until the goods are delivered. 87. point.
If the seller pays the freight charges, the terms are called FOB shipping
88. Freight charges on store equipment purchased FOB shipping point should be debited to Freight In. 89. The first adjusting entry for merchandise inventory causes a zero balance in the inventory account. 90.
The purchases account is not classified as a selling expense.
91.
An increase in rent expense reduces gross profit.
92. If the terms of sale are 1/10, n/30, the buyer has ten days after the date of the invoice to take advantage of a 1 percent cash discount. 93. When goods are bought under a periodic system of inventory, Merchandise Inventory is debited. 94.
An actual count of a stock of goods on hand is called a physical inventory.
95.
Unearned Revenue is classified as a revenue account.
96.
Taking a physical count of the merchandise is optional under a periodic
inventory system. 97.
The current ratio is equal to current assets minus current liabilities.
98.
The adjusting entry for supplies used is always reversed.
99. Reversing entries are journalized and posted after adjusting and closing entries are journalized and posted. 100.
Income from Operations is Gross Profit minus Operating Expenses.
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