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Collection of a $500 Accounts Receivable

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ACC557 Exam

1. Collection of a $500 Accounts Receivable
a. increases an asset $500; decreases an asset $500.
b. increases an asset $500; decreases a liability $500.
c. decreases a liability $500; increases stockholders' equity $500.
d. decreases an asset $500; decreases a liability $500

2. Revenues are
a. the cost of assets consumed during the period.
b. gross increases in stockholders' equity resulting from business activities.
c. the cost of services used during the period.
d. actual or expected cash outflows.

3. If the retained earnings account increases from the beginning of the year to the end of the year, then
a. net income is less than dividends.
b. a net loss is less than dividends.
c. the company must have sold stock.
d. net income is greater than dividends.

4. An awareness of the normal balances of accounts would help you spot which of the following as an error in recording?
a. A debit balance in the dividends account
b. A credit balance in an expense account
c. A credit balance in a liabilities account
d. A credit balance in a revenue account

5. Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the time period?
a. Due from Employees
b. Due to Employer
c. Wages Payable
d. Wages Expense

6. Adjusting entries are required
a. yearly.
b. quarterly.
c. monthly.
d. every time financial statements are prepared.

7. The following is selected information from J Corporation for the fiscal year ending October 31, 2008.
Cash received from customers $300,000
Revenue earned 350,000
Cash paid for expenses 170,000
Cash paid for computers on November 1, 2007 that will be used
for 3 years (annual depreciation is $16,000) 48,000
Expenses incurred, not including any depreciation 200,000
Proceeds from a bank loan, part of which was used to pay for the computers 100,000

Based on the accrual basis of accounting, what is J Corporation’s net income for the year ending October 31, 2008?
a. $114,000
b. $134,000
c. $82,000
d. $150,000

8. Clark Real Estate signed a four-month note payable in the amount of $8,000 on September 1. The note requires interest at an annual rate of 9%. The amount of interest to be accrued at the end of September is
a. $240.
b. $60.
c. $720.
d. $80.

9. The accounts of a business before an adjusting entry is made to record an accrued revenue reflect an
a. understated liability and an overstated retained earnings.
b. overstated asset and an understated revenue.
c. understated expense and an overstated revenue.
d. understated asset and an understated revenue.

10. Cost of goods sold is determined only at the end of the accounting period in
a. a perpetual inventory system.
b. a periodic inventory system.
c. both a perpetual and a periodic inventory system.
d. neither a perpetual nor a periodic inventory system.

11. Which of the following expressions is incorrect?
a. Gross profit – operating expenses = operating income
b. Sales – cost of goods sold – operating expenses = operating income
c. Operating income + operating expenses = gross profit
d. Operating expenses – cost of goods sold = gross profit

12. A buyer would record a payment within the discount period under a perpetual inventory system by crediting
a. Accounts Payable.
b. Merchandise Inventory.
c. Purchase Discounts.
d. Sales Discounts.

13. Bryan Company purchased merchandise from Cates Company with freight terms of FOB shipping point. The freight costs will be paid by the
a. buyer.
b. seller.
c. transportation company.
d. buyer and the seller.

14. The entry to record the receipt of payment within the discount period on a sale of $750 with terms of 2/10, n/30 will include a credit to
a. Sales Discounts for $15.
b. Cash for $735.
c. Accounts Receivable for $750.
d. Sales for $750.

15. The factor which determines whether or not goods should be included in a physical count of inventory is
a. physical possession.
b. legal title.
c. management's judgment.
d. whether or not the purchase price has been paid.

16. Westcoe Company's goods in transit at December 31 include:
sales made purchases made
(1) FOB destination (3) FOB destination
(2) FOB shipping point (4) FOB shipping point

Which items should be included in Westcoe's inventory at December 31?
a. (2) and (3)
b. (1) and (4)
c. (1) and (3)
d. (2) and (4)

17. The conceptual framework includes all of the following except
a. Objectives of financial reporting
b. Elements of financial statements
c. Statement presentation and analysis
d. Qualitative characteristics

18. Which one of the following is not an objective of financial reporting according to the conceptual framework?
a. To provide information that will increase the value of the company
b. To provide information in assessing future cash flows
c. To provide information that is useful for making investment and credit decisions
d. To provide information that identifies economic resources, the claims to those resources, and the changes in those resources and claims

19. Accounting information is relevant if it
a. has either predictive or feedback value.
b. is consistently presented from year to year.
c. is verifiable.
d. is neutral.

20. The custodian of a company asset should
a. have access to the accounting records for that asset.
b. be someone outside the company.
c. not have access to the accounting records for that asset.
d. be an accountant.

21. In large companies, the independent internal verification procedure is often assigned to
a. computer operators.
b. management.
c. internal auditors.
d. outside CPAs.

22. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
a. when a credit sale is past due.
b. at the end of each accounting period.
c. whenever a pre-determined amount of credit sales have been made.
d. when an account is determined to be uncollectible.

23. Two methods of accounting for uncollectible accounts are the
a. allowance method and the accrual method.
b. allowance method and the net realizable method.
c. direct write-off method and the accrual method.
d. direct write-off method and the allowance method.

24. The cost of land does not include
a. real estate brokers' commission.
b. annual property taxes.
c. accrued property taxes assumed by the purchaser.
d. title fees.

25. Shawnee Hospital installs a new parking lot. The paving cost $30,000 and the lights to illuminate the new parking area cost $15,000. Which of the following statements is true with respect to these additions?
a. $30,000 should be debited to the Land account.
b. $15,000 should be debited to Land Improvements.
c. $45,000 should be debited to the Land account.
d. $45,000 should be debited to Land Improvements.

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