Description
1. Rules and concepts that govern the reporting of financial
statements are called:
a. Principles of Accounting
b. Generally Accepted Accounting Principles
c. Securities Exchange Commission
d. Accounting Assumptions
2. The private group that
currently has the authority to establish generally accepted accounting
principles in the United States is the:
a. APB
b. IASB
c. SEC
d. FASB
3. The two primary external
users of the financial statements are: (Hint: consider appropriate synonyms.)
a. IRS and owners
b. IRS and creditors
c. management and creditors
d. creditors and owners
4. An asset is best defined
as:
a. residual interest of owners.
b. economic resource obtained as a result of past transactions.
Assets will be used to generate revenues.
c. something that has been used to generate revenues.
d. something owned.
5. Revenue is properly
recognized:
a. When cash from a sale is received
b. When the customer’s order is received.
c. Only if the transaction creates an account receivable.
d. Upon completion of the
sale or when services have been performed.
6. The Maxim Company
acquired a building for $500,000. Maxim had the building appraised, and found
that the building was easily worth $575,000. The seller had paid $300,000 for
the building 6 years ago. Which accounting principle would require Maxim to
record the building on its records at $500,000?
a. Monetary unit assumption.
b. Going-concern assumption.
c. Cost principle.
d. Business entity
assumption.
7. Which of the following
accounting concept prescribes when a company should record its expenses
incurred to generate the revenue reported?
a. Going-concern assumption.
b. Time period (periodicity) assumption
c. Matching (expense recognition) principle.
d. Business entity assumption.
8. If a company paid $38,000
of its accounts payable in cash, what was the effect on the assets,
liabilities, and equity?
a. Assets would decrease $38,000, liabilities would decrease
$38,000, and equity would decrease $38,000.
b. Assets would decrease $38,000, liabilities would decrease
$38,000, and equity would increase $38,000.
c. Assets would decrease $38,000, liabilities would decrease
$38,000, and equity would not change.
d. There would be no effect
on the accounts because the accounts are affected by the same amount.
9. A credit entry:
a. Increases asset and expense accounts, and decreases liability,
equity, and revenue accounts.
b. Decreases asset and expense accounts, and increases liability,
equity, and revenue accounts.
c. Is recorded on the left side of a T-account.
d. Is always an increase in
an account.
10. Of the following
accounts, the one that normally has a credit balance is:
a. Cash.
b. Dividends.
c. Wages Payable.
d. Sales Salaries Expense.
Questions 11-35 relate to the ongoing business activities of
Zoogle Company—a newly formed company that provides dog-walking and pet-sitting
services for families in the city. As of January 1, 2014, the company employs
one person, who was given the title of “general manager.†Note that some
questions pertain to a one month period and others a full year.
11. On January 1, 2014,
Zoogle Corporation paid $3,000 cash to rent office space for the
period from January 1 to
June 30, 2014. Assuming that the appropriate adjusting journal entry is made on
January 31 for the rent events, what amount would Zoogle Corporation report for
rent expense for month ending January 31, 2014?
a. $ 0
b. $ 250
c. $ 500
d. $ 3,000
12. Zoogle recognizes
revenue according to the revenue principle. Friends of Zoogle’s general manager
are allowed to purchase services on account, whereas other customers are
required to pay for services in advance. During January 2014 Zoogle:
1 – provided $600 of
services to friends on account and has collected one-half of those accounts (in
cash),
2 – received $200 cash in
advance from other customers and has provided $100 worth of services to these
other customers.
What amount of revenue
should Zoogle report for the month of January 2014?
a. $900
b. $800
c. $700
d. $500
13. Zoogle decided to start
selling pet supplies and purchased $10,000 of merchandise on April 15 with
terms of 3/10, n/45. On April 20, it returned $800 of that merchandise. On
April 24, it paid the balance owed for the merchandise taking any discount it
is entitled to. The cash paid on April 24 equals:
a. $10,000
b. $9,800
c. $9,700
d. $8,924
14. If Zoogle had cash sales
of $94,275, credit sales of $83,450, sales returns and allowances of $1,700,
and sales discounts of $3,475. Zoogle’s net sales for this period equal:
a. $172,550
b. $174,250
c. $176,025
d. $177,725
15. On April 1, Zoogle
Company sold merchandise in the amount of $5,800 to Rosser, with credit terms
of 2/10, n/30. The cost of the items sold is $4,000. Robinson uses the
perpetual inventory system. The journal entry or entries that Zoogle will make
on April 1 is:
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Questions #16 – 19 are based on the following information:
The following month Zoogle
starts selling and delivering bags of dry dog food to interested customers. On
May 1, 2014, Zoogle buys 40 bags at a cost of $20 per bag. Also, assume that
Zoogle purchases 30 bags on May 8 at a cost of $21 per bag, and 30 more bags on
May 18 at a cost of $22 per bag. 60 bags are sold during the last week of May.
16. Which of the following
represents the cost of goods sold under the FIFO cost method?
a. $1,220
b. $1,260
c. $1,290
d. $ 870
17. Which of the following represents the cost of goods sold under
the LIFO cost method?
a. $1,220
b. $1,260
c. $1,290
d. $ 800
18. In reference to #16 –
17above, because of the effect of income taxes, which method will
provide a better cash
position?
a. LIFO
b. FIFO
c. All will provide the same cash position
d. Unable to determine
19. In reference to #16 – 17 above, which method will provide a
higher net income?
a. LIFO
b. FIFO
c. All will provide the same cash position
d. Unable to determine
20. Generally accepted accounting principles require that the
inventory of Zoogle be reported at:
a. Market value
b. Historical cost
c. Replacement cost
d. Lower of cost or market
21. The bank reconciliation
of Zoogle Corporation prepared for the month of February shows $20 of deposits
in transit, $176 of outstanding checks, $30 of interest earned, $15 for a
customer check returned as NSF, and no other reconciling items. If $175 is the
February 28 reconciled balance that is reported on the balance sheet, what must
have been the balance reported on the bank statement and the unadjusted balance
reported in the company’s books at February 28?
Bank Statement Balance
Unadjusted Book Balance
a. $160 $331
b. $190 $19
c. $ 19 $190
d. $331 $160
22. Zoogle has $90,000 in
outstanding accounts receivable and it uses the allowance method to account for
uncollectible accounts. Experience suggests that 6% of outstanding receivables
are uncollectible. The current balance in the allowance for doubtful accounts
before adjustments is a debit (negative) amount of $800. What will be the
adjusted amount reported for the Allowance for Doubtful Accounts and Bad Debts
Expense?
Allowance for Doubtful
Accounts Bad Debts Expense
a. 5400 5400
b. 5400 6200
c. 6200 6200
d. 6800 6800
23. Zoogle reports its Accounts Receivable at Net Realizable
Value, which is:
a. Gross accounts receivable minus cost of goods sold.
b. Also known as net pretax income.
c. Also known as net after-tax income.
d. Gross accounts receivable
minus allowance for doubtful accounts.
24. On March 29, Zoogle Company concluded that a customer’s $4,400
account receivable was uncollectible and that the account should be written
off. What effect will this write-off have on this company’s net income and
total assets assuming the allowance method is used to account for bad debts?
a. Decrease in net income; no effect on total assets.
b. No effect on net income; no effect on total assets.
c. Decrease in net income; decrease in total assets.
d. No effect on net income;
decrease in total assets.
25. On January 1, 2014, Zoogle Corporation purchased a pick-up
truck at a cost of $32,000 cash. Zoogle also had a liner and cap installed on
the pick-up box, at an additional cost of $1,000, which was charged on account.
Zoogle paid $800 for an insurance policy for the first year and anticipates
spending $1,200 for gas during the first year. What is the cost of the truck?
a. $32,000
b. $33,000
c. $33,800
d. $35,000
26. On June 1, 2014, Zoogle Corporation purchased another vehicle
at a cost of $27,000. The truck is estimated to have a useful life to Zoogle of
ten years and a resale value of $4,000 at the end of its life. How much
depreciation expense should be reported for this vehicle in the income
statement for the month of June 2014 assuming the straight-line is adopted?
a. $ 200
b. $ 192
c. $2400
d. $2300
27. At December 31, the
records of Zoogle reflected the following information:
Revenue………………………….………………
$100,000
Expenses (excluding
depreciation)… . …………. 66,000
Depreciation expense
(straight-line) …………… 4,000
Depreciation expense (accelerated)……………….
7,000
Income tax
rate…………………………………… 40%
To “save cash,†Zoogle is
considering using an accelerated depreciation method for income tax reporting,
in which case depreciation expense would be $7,000. Calculate how much cash
Zoogle would save by using an accelerated method for tax purposes rather than
the straight-line method of depreciation.
Note: You do NOTneed to compute depreciation; that
has been provided for you.
a. $3,000
b. $1,800
c. $1,200
d. $ 0
28. Zoogle owned other equipment that cost $93,500 with
accumulated depreciation of $64,000. Zoogle asked $35,000 for the equipment but
was only able to sell the equipment for $33,000. Compute the amount of gain or
loss on the sale.
a. $3,500 loss
b. $3,500 gain
c. $5,500 loss
d. $5,500 gain
e. $58,500 gain
29. Zoogle is required to report its trucks at book value on its
balance sheet, which represents:
a. Acquisition cost less the accumulated depreciation
b. Acquisition cost plus accumulated depreciation
c. Amount that could be obtained for the asset if it were sold
d. What the trucks are worth
30. Zoogle’s obligations due to be paid within one year or the
company’s operating cycle, whichever is longer, are:
a. Current assets
b. Operating cycle liabilities
c. Bills
d. Current liabilities
31. Employee Phil Phoenix is paid monthly. For the month of
January, he earned a total of $8,288. The FICA tax rate for social security is
6.2% and the FICA tax rate for Medicare is 1.45%. The FUTA tax rate is 0.8%,
and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first
$7,000 of an employee’s pay. The amount of Federal Income Tax withheld from his
earnings was $1,375.17. What is the total amount of taxes withheld from the
Phoenix’s earnings?
a. $3,097.17
b. $2,443.21
c. $2,009.21
d. $1,722.00
e. $1,495.36
Questions #32 – 33 are based on the following information:
Zoogle sold merchandise to
TechCom on October 17 and received a $4,800, 90-day, 10% note in return.
32. What entry should Zoogle
make on December 31, to record the accrued interest on the note? (Assume 360
days in a year.)
a. Debit Interest Receivable $20; credit Interest Revenue $20.
b. Debit Interest Receivable $100; credit Interest Revenue $100.
c. Debit Cash $20; credit Notes Receivable $20.
d. Debit Cash $100; credit
Notes Receivable $100.
33. How much cash will
Zoogle receive on January 15 of the next year when the note matures? (Assume
360 days in a year.)
a. $4,800
b. $4,920
c. $5,000
d. $5,280
34. Zoogle issued bonds with
a face value of $400,000 and a quoted price of 98½. The bonds had a selling
price of
a. $394,000.
b. $393,000.
c. $392,200.
d. $392,020.
35. Zoogle Corporation is
founded on January 1, 2014. The state authorized 3,000 shares of
common stock with a $10 par
value. Ten investors contributed $3,000 each in exchange for 100 shares each.
What is the correct accounting entry?
a. Cash 30,000
Common Stock 30,000
b. Cash 30,000
Common Stock 3,000
Paid-in Capital in Excess of
Par Value 27,000
c. Cash 30,000
Common Stock 10,000
Paid-in Capital in Excess of
Par Value 20,000
d. Cash 300,000
Common Stock 90,000
Paid-in Capital in Excess of
Par Value 210,000
That’s it for Zoogle! But there are more questions to enjoy……………..
36. The following were some
of the accounts in the stockholders’ equity section of the balance sheet for
Cloud Nine Co.
Preferred stock 6%, $100
par, cumulative, 1,000 shares issued
and
outstanding………………………………………… $100,000
Common stock $10 par, 20,000
shares issued,
19,200 shares
outstanding……………………………… $200,000
Paid –in capital in excess
of par-common……………………… $100,000
Treasury
stock……………………………………………… … $(16,000)
Cloud Nine Co. typically
pays a dividend to its shareholders every year, however Cloud Nine failed to distribute
a dividend last year. The board of directors declared a dividend to provide the
preferred shareholders with all of their share of the cumulative and current
dividend amounts and also $.50 per share dividend for the common shareholders.
The total amount of the dividend will be:
a. $15,600
b. $16,000
c. $21,600
d. $22,000
37. IBM issues 200,000
shares of stock at a par value of $0.01 for $150 per share. Three years later,
it repurchases these shares for $80 per share. IBM records the repurchase in
which of the following ways?
a. Debit Stockholders’
Equity for $30 million, credit Additional Paid-in Capital for $16 million and
credit Cash for $16 million.
b. Debit common stock for
$2,000, debit Additional Paid-in Capital for $15,998,000 and credit cash for
$16 million.
c. Debit Common Stock for
$2,000, debit Additional Paid-in Capital for $29,998,000 and credit Cash for
$30 million.
d. Debit Treasury Stock for
$16 million and credit Cash for $16 million.
38. Which of the following
statements is nottrue about a
2-for-1 stock split?
a. Total paid-in capital
increases.
b. The market value of the
stock will probably decrease.
b. A stockholder with 5
shares before the split owns 10 shares after the split.
c. Par value per share is
reduced to half of what it was before the split.
39. Peninsula Company
reported net income of $260,000 for the year. During the year, accounts
receivable increased by $21,000, accounts payable decreased by $9,000 and
depreciation expense of $45,000 was recorded. Net cash provided by operating
activities for the year is
a. $275,000.
b. $245,000.
c. $227,000.
d. $260,000.
40. Statler Company sold for
cash a machine that originally cost $18,000. The accumulated
depreciation to date of
disposal was $15,000, and a gain on the disposal of $2,000 was
reported. Therefore, the
cash inflow from this transaction was:
a. $1,000
b. $3,000
c. $4,000
d. $5,000
Matching
Match each activity below
with the proper classification by inserting the proper capital
letter in the space to the
left.
Classification of Activity
I. Investing
F. Financing
O. Operating
Activity
_______ 41. Sales of land
used in the business.
_______ 42. Payment of
long-term debt with cash.
_______ 43. Cash paid to
suppliers of inventory.
_______ 44. Purchase of
equipment for cash.
_______ 45. Issuance of
common stock for cash.
_______ 46. Cash received
from customers.
Financial Statement Problem
From the following jumbled
trial balance at the end of the 2014 year, prepare a
*Multi-step Income Statement
*Statement of Changes in
Retained Earnings
*Classified Balance Sheet
—————————-
MUST COMPLETE —————————–
Bell Department Store is located in midtown Metropolis.
During the past several years, net income has been declining because suburban
shopping centers have been attracting business away from city areas. At the end
of the company’s fiscal year on November 30, 2014, these accounts appeared in
its adjusted trial balance.
|
Accounts Payable |
$ 26,800 |
|
Accounts Receivable |
17,200 |
|
Accumulated Depreciation—Equipment |
68,000 |
|
Cash |
8,000 |
|
Common Stock |
35,000 |
|
Cost of Goods Sold |
614,300 |
|
Freight-Out |
6,200 |
|
Equipment |
157,000 |
|
Depreciation Expense |
13,500 |
|
Dividends |
12,000 |
|
Gain on Disposal of Plant Assets |
2,000 |
|
Income Tax Expense |
10,000 |
|
Insurance Expense |
9,000 |
|
Interest Expense |
5,000 |
|
Inventory |
26,200 |
|
Notes Payable |
43,500 |
|
Prepaid Insurance |
6,000 |
|
Advertising Expense |
33,500 |
|
Rent Expense |
34,000 |
|
Retained Earnings |
14,200 |
|
Salaries and Wages Expense |
117,000 |
|
Sales Revenue |
904,000 |
|
Salaries and Wages Payable |
6,000 |
|
Sales Returns and Allowances |
20,000 |
|
Utilities Expense |
10,600 |
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