Download ACTG Practice Exam: Accounting Principles and Concepts and more Exams Accounting in PDF only on Docsity!
ACTG Practice Exam | 100% Correct Answers |
Verified | Latest 2024 Version
A company uses the Allowance method of accounting for Bad Debts. This means that in the period when an Account Receivable actually becomes uncollectible, the company will reduce Accounts Receivable and: - ✔✔Decrease the Allowance for Doubtful Accounts account (This is a "write-off". The journal entry is a debit to Allowance for Doubtful Accounts and credit to Accounts Receivable.) The concept of "accrual" accounting - ✔✔Recognizes revenues when they are earned, and expenses when they are incurred. The beginning balance in Accounts Receivable was $5,000. Sales on account amounted to $20,000 and sales for cash amounted to $18,000. During the period, $7,000 of Accounts Receivable was written off. If the ending balance in accounts receivable was $1,200, the amount of cash collected from customers is: - ✔✔16,800 (When sales revenue occurs and cash is immediately collected, you increase (debit) Cash and increase (credit) Revenue. Therefore, the $18,000 is not included as an increase (debit) in A/R. The $7,000 write-off decreases A/R.) Our customer pays us in advance $500 for services which our company is to provide in a future period. This event: - ✔✔Increases Assets and increases Liabilities Which of the following accounts are NOT found in the "Closing Entry - ✔✔contributed capital As a piece of equipment or property loses its value due to usage or the mere passage of time, the company records an entry which: - ✔✔Credits Accumulated Depreciation If we provide cash to our vendor in a period before the expense is actually incurred & recorded, the expense is known as: - ✔✔deferral or deferred expense ABC Company purchases 150 units of inventory at $400 each, under terms of FOB Shipping Point, 2- 10 - Net 30. They pay $6 per unit transportation costs on inbound freight with cash. They pay the vendor's invoice early, taking the early-payment cash discount. This means that one unit of inventory now has a total acquisition cost of: - ✔✔398 (Set up an inventory T-account to help you solve this problem. Update the T-account after each event takes place, starting with buying the inventory on account for $60,000 (= 150 units * $400). The journal entry is a debit to Inventory and credit to Accounts Payable.
Next, record the cash payment of the freight expense of $900 (= 150 units * $6) as a debit to Inventory and credit to Cash. The Inventory account increases because it was sold FOB Shipping Point. Because we paid within the discount period, we reduce our inventory account by $1,200 (= $60,000 * .02). This leaves us with an ending Inventory balance of $59,700 (= 60,000 + 900 - 1,200). In order to get the acquisition cost of the inventory on a per unit basis, we must divide $59,700 by the total number of units we bought (150) to get $398 per unit.) P&G, Inc., started operations on June 1, 2017 with a $100,000 cash contribution from its owner. During 2017, the company earned $80,000 in revenue, and incurred $180,000 in Expenses. No other activity happened during 2017. During 2018, the company earned $210,000 in revenue, and incurred $180,000 in Expenses. A distribution of $5,000 was made to owners during December 2018. What was P&G's Total Equity as reported on their balance sheet as of December 31, 2018? - ✔✔140,000 (Beginning Balances for 2018: Contributed Capital $100, Retained Earnings $15, No change in Contributed Capital, so that stays at $100,000. Retained Earnings increases by $25,000 (= 210,000 - 180,000 - 5,000). Therefore, Total Equity as of December 31, 2018 is $140,000 (= 100,000 + 15,000 + 25,000).) All of the following appear as line items on the Balance Sheet except: - ✔✔revenues (On the Statements of Changes in Owner's Equity: Net Income (Rev - Exp) is added to the beginning balance of Retained Earnings and Dividends are subtracted from the beginning balance of Retained Earnings to obtain the ending balance of Retained Earnings, which is displayed as a line item on the Balance Sheet) One of the primary functions of the independent financial auditor is to check for and discover any fraud in the business. - ✔✔False (Independent financial auditors are not obligated to try and go out of their way to find fraud in a business.) Which of the three forms of business ownership almost always displays a separation of "ownership" from "operations"? - ✔✔corporation Dukes Corporation's Balance Sheet as of December 31, 2019, showed Total Assets of $600,000, Liabilities of $230,000, Contributed Capital of $80,000. What was Dukes's Retained Earnings balance? - ✔✔290,
The $340 exchanged in the business event that occurred on Jan. 1st is considered a deferred revenue for Mowers, Inc. and a ________________________ for Sally - ✔✔deferred/prepaid expense Recognition of revenue may be accompanied by which of the following? - ✔✔an increase in a liability, a decrease in an asset Greene Company began 2019 with $200 in its Supplies account. During the year, the company purchased $1,400 of Supplies on account. The company paid $1,000 on Accounts Payable by year end. On December 31, 2019, Greene counted $600 of Supplies on hand. Greene's financial statements for 2019 would show: - ✔✔$600 of supplies; $1,000 of supplies expense The following events took place in 2019: Jan 1 Acquired $50,000 cash from the issue of common stock. Mar 1 Paid rent for office space for 2 years beginning on March 1st, $16,800 cash Apr 14 Purchased $800 of supplies on account June 30 Received $24,000 cash in advance for one year of services to be provided beginning July 1st July 5 Paid $6,000 of the balance due in accounts payable Aug 1 Provided $9,600 of services on account Aug 8 Completed a job and received $3,200 cash Sept 1 Paid employee salaries of $36,000 cash Sept 9 Received $8,500 cash from accounts receivable Oct 5 Billed customers $34,000 for services provided on account Nov 2 Paid a $1,000 cash dividend to the stockholders Dec 31 Accrued salaries of $2, Dec 31 $100 worth of supplies was on hand Complete the adjusting journal entries Orange Company must make at the end of 2019 in relation to the date in bold. Include only the name of the account, no n - ✔✔1. rent/expense
- prepaid rent/expense
- supplies expense
- supplies
- unearned revenue
- service/revenue
- n/a
- n/a
- n/a
- n/a
- salaries expense
- salaries payable
- supplies expense
- supplies On Jan. 1st, L&I Apartment Complex collected $13,500 from a tenant for 12 months of rent starting May 1st. The adjusting entry to recognize revenue earned on the prepaid contract above would include - ✔✔Credit Rent Revenue $9, Debit Rent Expense $9, A company makes an entry which increases an Expense account. Which of the following events most likely occurred to generate this entry? - ✔✔The company paid an employee for service rendered Short-term assets are always listed on the Balance Sheet in order of decreasing: - ✔✔liquidity Which of the following account balances will NOT be reported on a company's Income Statement? Select all that apply. - ✔✔Dividends, Unearned Revenue, Prepaid expenses On a typical Balance Sheet presented in good form: - ✔✔Unearned Revenue would be listed in the Liability section On Jan. 1st, 2019, Brian borrows a $50,000 loan for 48 months from the bank. Brian will pay back $12,500 of the loan every year on Dec. 31st (starting Dec. 31st, 2019) until it is fully paid off. Ignoring any interest on the loan, the Liabilities section of Brian's Balance Sheet on Jan. 1st, 2020 will show: - ✔✔Short-term Liabilities $12,500; Long-term Liabilities $25, ABC Company purchases 310 units of inventory from a vendor at a unit price of $6.00 each. The 310 units are shipped via common carrier, under terms of FOB Destination. The freight company charges are
XYZ Company uses the LIFO cost flow method. What will they report as Gross Margin? - ✔✔2, XYZ Company uses the Weighted Average cost flow method. What will they report as Cost of Goods Sold? - ✔✔3, To calculate Gross Margin, start with ___ and subtract ___ To calculate Net Sales, start with ___ and subtract ___ - ✔✔1. net sales revenue
- CoGS
- Gross Sales Revenue 4.Sales Allowances, Returns, and Discounts Which of the following is an inventory (product) cost? - ✔✔Freight-in on purchases A CPA conducts an audit on a company's financial statements and finds that the statements are materially correct and are in compliance with GAAP without reservation or exception. What form of opinion will the CPA firm issue on these statements? - ✔✔unqualified opinion Which of the following would NOT be considered an internal control related to cash receipts? - ✔✔Cashiers count out their drawers at the end of each shift A good audit will always require the auditor to check every single transaction the company engaged in during the period being audited. - ✔✔false Auditors must maintain complete confidentiality and not disclose any information obtained during the audit without the client company's permission. This is true except for (a) sworn testimony in a court of law, and (b) Mandatory reporting of fraud to...: - ✔✔management and the board of directors The Independent Auditor's Primary Responsibility is to: - ✔✔the public What is the name of the federal law, passed in 2002, which makes management, rather than the accountants, completely responsible for the Internal Control System? (I'm just looking for two words) - ✔✔sarbanes oxley
Which one of the following is NOT one of the five Management Assertions, which management is assumed to make each and every time financial statements are released to outsiders? Select ALL that apply. - ✔✔1. All policies of the company are in compliance with all laws, regulations, and other legal requirements
- Management has implemented sufficient controls over the accounting processes to ensure complete compliance with GAAP
- The financial statements are free from all fraud see other quizlet - ✔✔ The Sales Manager's job is to: __________________________________________ The Collection Manager's job is to ________________________________________ - ✔✔1. determine what products to sell, and at what prices to sell those products
- make calls to customers to follow up on very overdue accounts When an account is determined uncollectible and the write-off has been approved by upper management, the __ should notify the ___ to write off the account. - ✔✔1. collections manager
- controller Harris Company began 2019 with $50,000 in accounts receivable and $4,000 in its allowance for doubtful accounts. During the year, Harris recorded sales on account of $250,000 and collected $260,000 from customers. Harris also wrote off $1,500 in uncollectible accounts. On December 31, 2019, Harris estimates that 2% of credit sales will be uncollectible. What will Harris report as bad debt expense for 2019? - ✔✔5, Harris Company began 2019 with $50,000 in accounts receivable and $4,000 in its allowance for doubtful accounts. During the year, Harris recorded sales on account of $250,000 and collected $260,000 from customers. Harris also wrote off $1,500 in uncollectible accounts. On December 31, 2019, Harris estimates that 2% of credit sales will be uncollectible. What will Harris report as the net realizable value of its accounts receivable on December 31, 2019? - ✔✔38, When a company uses the percentage of sales on account method, Bad Debt Expense is found by multiplying the given % by the sales on account. This differs from the percentage of receivables method where Bad Debt Expense is found by first calculating the ending balance of Allowance for Doubtful Accounts and then solving for the Bad Debt Expense - ✔✔True
