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A comprehensive set of practice exam questions covering fundamental accounting principles and concepts. It includes multiple-choice questions with detailed explanations for each correct answer, covering topics such as the allowance method for bad debts, accrual accounting, inventory valuation, and financial statement analysis. Designed to help students prepare for exams and gain a deeper understanding of key accounting concepts.
Typology: Exams
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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
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
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