财务会计复习题.docx

《财务会计》复习题

Circle the letter of the best response.
1． Which of the following statements is false?
A． Accounting is the information system that measures business activities, processes that information into reports, and communicates the results to decision makers.
B． Financial statements report financial information about a business entity to decision makers.
C． Owners of a corporation are personally liable for the debts of the corporation.
D． The purpose of financial accounting is to provide information to people outside of the entity, such as investors and creditors.
2． Wilbur owns and operates a fishing tackle shop. Wilbur needs to borrow money to expand; therefore, he prepared financial statements to present to his banker. Wilbur obtained appraisals of all the assets of the business to ensure that the balance sheet would reflect the most current value of the assets. Wilbur has violated which of the following principles or concepts?
A． Reliability principle
B． Cost principle
C． Going-concern principle
D． Stable-monetary-unit concept
3． Which of the following is true?
A． Owners' Equity － Assets ＝ Liabilities
B． Assets － Owners' Equity ＝ Liabilities
C． Assets ＋ Liabilities ＝ Owners' Equity
D． Liabilities ＝ Owners' Equity ＋ Assets
4． G. Harrison Inc experienced a decrease in total assets of $2,000 during the current year. During the same year, total liabilities decreased $6,000. If dividends for the year were $10,000 and the owners made no additional investment, how much was net income?
A． $14,000
B． $ 6,000
C． $18,000
D． $ 2,000
5． Which of the following statements is true?
A． The income statement reports all changes in assets, liabilities, and stockholders' equity of the business during the period.
B． Revenues and expenses are reported only on the balance sheet.
C． The statement of cash flows reports cash flows from three types of business activities——cash receipts, cash payments, and investing.
D． On the statement of retained earnings, the net income for the period is added to the beginning balance of retained earnings.
6． Which of the following statements is not true?
A． Investing activities relate to the investment by owners into the business.
B． Paying dividends is an example of a financing activity.
C． Operating activities are the most important type of business activity.
D． Managers must make decisions about operating, investing, and financing activities.
7． On which financial statement can the ending balance in retained earnings be found?
A． Balance sheet
B． Income statement
C． Statement of retained earnings
D． Both A and C
8． Which of these is an example of an asset account?
A． Service Revenue
B． Dividends
C． Supplies
D． All of the above are assets
9． Dobson Company paid $1,200 on account. The effect of this transaction on Dobson's accounting equation is to：
A． decrease liabilities and increase stockholders’ equity.
B． decrease assets and decrease liabilities.
C． have no effect on total assets.
D． decrease assets and decrease stockholders' equity.
10． Which of these statements is false?
A． Decreases in liabilities and increases in revenues are recorded with a credit.
B． Decreases in assets and increases in stockholders' equity are recorded with a credit.
C． Increases in both assets and expenses are recorded with a debit.
D． Increases in assets and decreases in liabilities are recorded with a debit.
11． Note Payable has a normal beginning balance of $40,200. During the period, new borrowings total $100,000 and payments on loans total $20,600. Determine the correct ending balance in Note Payable.
A． $39,200, debit
B． $119,600, credit
C． $39,200, credit
D． $160,800, credit
12． Which of these statements is correct?
A． The account is a basic summary device used in accounting.
B． A business transaction is recorded first in the journal and then posted to the ledger.
C． In the journal entry, all accounts that are increased are listed first and then all accounts that are decreased are listed next.
D． Both A and B are correct.
13． Which of these accounts has a normal debit balance?
A． Salary Expense
B． Accounts Payable
C． Service Revenue
D． Both A and B
14． The May 31 trial balance reports a credit balance of $5,000 for Service Revenue. During the month, one entry for $10 had been posted in error as a debit to Service Revenue. What is the correct balance of Service Revenue at May 31 ?
A． $4,980
B． $4,990
C． $5,020
D． $5,010
15． The beginning Cash account balance is $38,700. During the period, cash disbursements totaled $144,600. If ending Cash is $51,200, then cash receipts must have been：
A． $105,900
B． $234,500
C． $132,100
D． $157,100
16． Use the following selected information for the Perriman Company to calculate the correct credit column total for a trial balance：
Accounts receivable $ 27,200
Accounts payable 15,900
Building 359,600
Cash 55,600
Common stock 155,000
Dividends 4,800
Insurance expense 1,800
Retained earnings 133,800
Salary expense 52,500
Salary payable 3,600
Service revenue 193,200
A． $365,600
B． $304,700
C． $501,500
D． $506,300
17． The journal entry to record the performance of services on account for $1,200 is：
A． Accounts Payable 1,200
Service Revenue 1,200
B． Accounts Receivable 1,200
Service Revenue 1,200
C． Cash 1,200
Service Revenue 1,200
D． Service Revenue 1,200
Accounts Payable 1,200
18． The Smallwood Corporation began operations on January 1, 20X8. During 20X1, Smallwood collected $92,000 for management services. $12,000 of the amount collected was from a contract to provide management services for one year beginning November 1,20X8. An additional $20,000 of management services had been earned but not collected by year end. The amount of revenue that should be reported for 20X8 under the cash-basis and accrual-basis is：
Cash-Basis Accrual-Basis
A． $92,000 $80,000
B． $80,000 $100,000
C． $100,000 $112,000
D． $92,000 $102,000
19． Which of the following statements is false?
A． The time-period concept requires companies to prepare financial statements at least quarterly.
B． According to the revenue principle, revenue should be recorded when a product or service has been delivered to the customer.
C． When possible, expenses that can be linked to a specific revenue should be deducted from revenue in the same period that the revenue is recorded.
D． The time-period concept, the revenue principle, and the matching principle all support the practice of preparing adjusting entries.
20． The Armstead Company usually purchases office supplies twice a year to take advantage of quantity discounts. Office Supplies would be considered
A． an unearned revenue.
B． a prepaid expense.
C． an accrued revenue.
D． an accrued expense.
21． On November 1 , 20X8 , the Jemigan Company paid $4,800 for a one-year insurance policy. On December 31 , 20X8, the adjusting entry would include
A． a debit to insurance Expense$4,800.
B． a credit to insurance Payable, $800.
C． a credit to Prepaid insurance, $800.
D． a debit to Insurance Expense, $4,000.
22． Which of these could not be a closing entry?
A． Salary Expense XX
Retained Earnings XX
B． Retained Earnings XX
Dividends XX
C． Service Revenue XX
Retained Earnings XX
D． Retained Earnings XX
Rent Expense XX
23． What type of account is Unearned Revenue (asset, liability, stockholders' equity, revenue, or expense) and what is its normal balance, respectively?
A． asset, debit
B． expense, debit
C． liability, credit
D． revenue, credit
24． Which of the following transactions is considered an accrued expense?
Ⅰ．Salaries that employees have earned but not received
II．Management fees received in advance
Ⅲ．Newspaper advertising that has been purchased but has not yet appeared in the newspaper
A． I only
B． II only
C． Ⅲ only
D． Both I and II
25． Which of the following accounts is not considered a current asset?
A． Accounts Receivable
B． Equipment
C． Inventory
D． Prepaid Rent
26． The balance sheet for Arnold's Cleaners appears below：
Arnold's Cleaners
Balance sheet
December 31, 20X8
Assets Liabilities
Cash $400 Accounts payable $300
Accounts receivable 460 Salary payable 20
Supplies 10 Unearned revenue 120
Prepaid insurance 60 Note payable (due in 5 years) 400
Equipment $400 Total liabilities 840
Less: Acc. depr. 40 360 Stockholders’ Equity
Land 400 Common stock 370
Retained earnings 480
Total stockholders' equity 850

Total assets $1,690 Total liabilities and stockholders' Equity $1,690
Arnold's current ratio for 20X8 is
A． 2.11
B． 2.09
C． 2
D． 1.52
27． An investment in debt securities may be classified as any of the following categories except：
A． trading securities
B． available-for-sale
C． held-to-maturity
D． All of the above are categories for Debt securities
28． The Boulder Co. purchased the following securities in 20X8.The year-end balances of their trading and available-for-sale portfolios are given below：
Trading portfolio: Cost Market Value
Security A $10,000 $12,000
Security B 3,000 3,500
Total $13,000 $15,500
Available-for-sale portfolio:
Security D $5,500 $3,000
Security E 16,000 17,000
Total $21,500 $20,000
At what value should the trading securities and the available-for-sale securities be reported on the balance sheet?
Trading Securities Available-for-Sale Securities
A． $13,000 $21,500
B． $13,000 $20,000
C． $15,500 $21,500
D． $15,500 $20,000
29． Net accounts receivable is calculated as：
A． Sales less sales discounts.
B． Accounts receivable plus the allowance for uncollectible accounts.
C． Accounts receivable less the allowance for uncollectible accounts.
D． Accounts receivable less the bad debts expense..
30． When the allowance method is used, the entry to write off a customer’s account
A． increases bad debts expense.
B． has no effect on net accounts receivable.
C． decreases net accounts receivable.
D． Increases the balance of the allowance for uncollectible accounts.
31． Which of the following statements about the statement of cash flows is true?
A． The purchase of a held-to-maturity security is considered an investing activity.
B． Collection of interest is an investing activity.
C． Sales on account is the largest cash flow from operating activities.
D． Loaning money to others is a financing activity.
Table 1
On December 31, 20X8, Troy Inc., had the following accounts and balances（before adjustment）on its books：
Accounts Receivable $80,000
Allowance for Uncollectible Accounts 2,000 （credit balance）
Net Sales 500,000
32． Refer to Table 1. Troy estimates that its Bad Debts Expense is 2% of Net Sales. The Bad Debts Expense for 20X8 should be:
A． $10,000
B． $12,000
C． $8,000
D． $1,600
33． Refer to Table 1. Troy uses an aging schedule to estimate its uncollectible accounts. The aging schedule and the percentage of each category that is estimated to be uncollectible is given below：
Current $40,000 2%
1-30 days past due 30,000 10%
Over 30 days past due 10,000 40%
The balance in the Allowance for Uncollectible Accounts after adjusting should be：
A．$2,000 B．$5,800
C．$7,800 D．$9,800
34． Martinez Co. paid Acme Co. for merchandise with a $2,000, 90-day, 8% note dated April 1. If Martinez pays off the note at maturity, what entry should Acme make on its books at that time?
A．Cash 2,160
Notes Receivable 2,160
B．Notes Payable 2,000
Interest Expense 160
Cash 2,160
C．Cash 2,040
Notes Receivable 2,000
Interest Revenue 40
D．Cash 2,160
Notes Receivable 2,000
Interest Revenue 160
35． Which accounts would be debited and credited in the entry to record accrued interest on a note receivable?
Debit Credit
A．Interest Revenue Interest Receivable
B．Interest Receivable Interest Revenue
C．Cash Interest Revenue
D．Interest Receivable Cash
36． Given the following information, compute the quick ratio.
Salary Payable $4,000 Trading investments $10,000
Inventory 100,000 Equipment 96,000
Accounts Receivable 42,000 Cash 14,000
Supplies 8,000 Accounts Payable 62,000
A．1 B．2.5
C．1.2 D．2.45
37． Teresa Company began the period with 10 units in inventory, costing $5 each. During the period the company purchased 100 units at a cost of $5 each. At the end of the period there were 13 units left on hand. What is the correct amount that should appear on the income statement for the period and on the balance sheet at the end of the period?
Income Statement Balance Sheet
A． Cost of goods sold, $500 Inventory, $550
B． Inventory, $485 Cost of goods sold, $550
C． Cost of goods sold, $65 Inventory, $485
D． Cost of goods sold, $485 Inventory, $65
38． Sheridan Corp. has $10,000 of goods on hand at August 31, 20X8. Cost of goods sold averages 40% of sale revenue. Sales for the month of September are budgeted to be $143,000. If ending inventory at the end of September is budgeted to be $10,500, what amount of inventory will Sheridan’s managers need to purchase during