Having management periodically determine whether the amount of physical assets of the company match the accounting records is an example of which detective control?

A) Separation of duties.

B) Reconciliations.

C) Performance reviews.

D) Employee management.

Answer: Reconciliations.

Which employees have an impact on the operation and effectiveness of internal controls?

A) Upper management.

B) Mid-level managers.

C) Lower-level employees.

D) All employees.

Answer: All employees.

Allowing only certain individuals to have passwords to conduct online purchases is an example of which preventive control?

A) Separation of duties.

B) Physical controls.

C) E-commerce controls.

D) Employee management.

Answer: E-commerce controls.

Providing employees with appropriate guidance to ensure they have the knowledge necessary to carry out their job duties is an example of which preventive control?

A) Separation of duties.

B) Physical controls.

C) Proper authorization.

D) Employee management.

Answer: Employee management.

Giving only management the right to make purchases over a certain amount is an example of which preventive control?

A) Separation of duties.

B) Physical controls.

C) Proper authorization.

D) Employee management.

Answer: Proper authorization.

Keeping supplies in a locked room with access allowed only to authorized personnel is an example of which preventive control?

A) Separation of duties.

B) Physical controls.

C) Proper authorization.

D) Employee management.

Answer: Physical controls.

What is the concept behind separation of duties in establishing internal controls?

A) The company's financial accountant should not share information with the company's tax accountant.

B) Duties of middle-level managers should be clearly separated from those of top executives.

C) Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

D) The external auditors of the company should have no contact with managers while the audit is taking place.

Answer: Employee fraud is less likely to occur when access to assets and access to accounting records are separated.

Which of the following is not an example of preventive controls?

A) Separation of duties.

B) Physical controls.

C) Proper authorization.

D) Reconciliations.

Answer: Reconciliations.

Which of the following is an example of detective controls?

A) Separation of duties.

B) Physical controls.

C) Proper authorization.

D) Reconciliations.

Answer: Reconciliations.

The component of internal control that includes the formal procedures for reporting control deficiencies is:

A) Monitoring.

B) Information and communication.

C) Risk assessment.

D) Control activities.

Answer: Monitoring.

The components of internal control do not directly include:

A) Risk assessment.

B) Inflation adjustment.

C) Monitoring.

D) Control activities.

Answer: Inflation adjustment.

Separation of duties refers to:

A) Making each manager personally responsible for his/her department.

B) Keeping functions across different departments separate.

C) Preventing top management and lower-level employees from interacting.

D) Individuals who have physical responsibility for assets should not also have access to accounting records.

Answer: Individuals who have physical responsibility for assets should not also have access to accounting records.

The component of internal control that identifies internal and external factors that could prevent a company's objectives from being achieved is:

A) Monitoring.

B) Information and communication.

C) Risk assessment.

D) Control activities.

Answer: Risk assessment.

A framework for designing an internal control system is provided by the:

A) Committee of Sponsoring Organizations.

B) Financial Accounting Standards Board.

C) Securities and Exchange Commission.

D) International Accounting Standards Board.

Answer: Committee of Sponsoring Organizations.

The component of internal control that includes the policies and procedures that help ensure that management's directives are being carried out is:

A) Monitoring.

B) Information and communication.

C) Risk assessment.

D) Control activities.

Answer: Control activities.

The Sarbanes-Oxley Act (SOX) mandates which of the following?

A) Increased regulations related to auditor-client relations.

B) Increased regulations related to internal control.

C) Increased regulations related to corporate executive accountability.

D) All of the other answers represent mandates of the Sarbanes-Oxley Act.

Answer: All of the other answers represent mandates of the Sarbanes-Oxley Act.

Which of the following is NOT a design feature of effective internal controls?

A) Allow greater reliance by investors on reported financial statements.

B) Prevent fraudulent or errant financial reporting.

C) Ensure the company's price advantage over competitors.

D) Prevent misuse of company funds by employees.

Answer: Ensure the company's price advantage over competitors.

Which of the following best describes the goal of internal controls?

A) Ensuring the business is profitable.

B) Enhancing the health of employees.

C) Improving the accuracy and the reliability of financial information.

D) Ensuring the compliance with tax regulations.

Answer: Improving the accuracy and the reliability of financial information.

Under the provisions of the Sarbanes-Oxley Act, auditors must do which of the following?

A) Provide nonaudit services for their clients.

B) Audit public companies whose chief executives worked for the audit firm in the preceding year.

C) Be hired by company management.

D) Maintain working papers for at least seven years following an audit.

Answer: Maintain working papers for at least seven years following an audit.

Which of the following does not represent a major provision of the Sarbanes-Oxley Act?

A) Nonaudit services.

B) Quarterly financial statements.

C) Auditor rotation.

D) Corporate executive accountability.

Answer: Quarterly financial statements.

Under the provisions of the Sarbanes-Oxley Act, corporate executives:

A) Have limited responsibility for financial statements.

B) Must personally prepare the company's financial statements.

C) Must personally certify the company's financial statements.

D) Are not allowed to view the company's financial statements.

Answer: Must personally certify the company's financial statements.

What key piece of legislation was passed in response to corporate accounting scandals by Enron, WorldCom, and others?

A) Sarbanes-Oxley Act.

B) 1933 Securities Act.

C) 1934 Securities Exchange Act.

D) Regulation Fair Disclosure.

Answer: Sarbanes-Oxley Act.

Under the Sarbanes-Oxley Act, management is responsible for:

A) Analysts' having positive comments about the company's operations.

B) The reliability of financial statements.

C) Increasing the company's stock price.

D) All of the other answers represent management responsibilities under the Sarbanes-Oxley Act.

Answer: The reliability of financial statements.

The Sarbanes-Oxley Act requires that companies must:

A) Conduct customer surveys each year to ensure satisfaction with products and services.

B) Document internal controls and assess their effectiveness each year.

C) Pay taxes owed to the Internal Revenue Service by the tax filing date.

D) Devise a budget each year to ensure cash outflows are not greater than cash inflows.

Answer: Document internal controls and assess their effectiveness each year.

A company's plans to minimize theft and enhance the accuracy of accounting information are referred to as:

A) Corporate controls.

B) Security controls.

C) Internal controls.

D) General controls.

Answer: Internal controls.

Which element of the fraud triangle do companies have the greatest ability to eliminate?

A) Motivation.

B) Rationalization.

C) Opportunity.

D) Intelligence.

Answer: Opportunity.

Fraudulent reporting by management could include:

A) Fictitious revenues from a fake customer.

B) Improper asset valuation.

C) Mismatching revenues and expenses.

D) All of the other answers could involve fraudulent reporting.

Answer: All of the other answers could involve fraudulent reporting.

The three elements present in every fraud are commonly referred to as the ________.

A) Triple threat

B) Three-way manipulation

C) Fraud triangle

D) Three-alarm fire

Answer: Fraud triangle

The three elements of the fraud triangle are:

A) Motivation.

B) Rationalization.

C) Opportunity.

D) All of the other answers are elements of the fraud triangle.

Answer: All of the other answers are elements of the fraud triangle.

The phrase "cooking the books" is commonly used to refer to:

A) The company's accounting records being thoroughly audited at the end of the year.

B) The company's financial statements being presented in a deceptive form.

C) The company's ability to provide timely financial information under operating pressure.

D) The inclusion of a variety of information in the financial statements.

Answer: The company's financial statements being presented in a deceptive form.

Which of the following accounts is(are) listed in a post-closing trial balance?

A) Prepaid Rent.

B) Accounts Payable.

C) Salaries Expense.

D) Two of these three accounts would be included in a post-closing trial balance.

Answer: D

Which of the following statements is true regarding the post-closing trial balance?

A) The post-closing trial balance will be distributed to investors and other stakeholders along with the financial statements.

B) The post-closing trial balance is a report prepared before the adjustments and the financial statements to prove that debits equal credits.

C) The post-closing trial balance is an internal report prepared as the last step in the accounting cycle.

D) The post-closing trial balance proves that all entries have been made correctly and accurately during the accounting period.

Answer: C

Occupational fraud:

A) Is the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources.

B) Occurs in only a few organizations and generally involves minor amounts.

C) Will be prevented when companies employ an auditor.

D) Is committed only by lower-level employees.

Answer: Is the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of the employer's resources.

A list of all accounts and their balances after posting closing entries is referred to as:

A) A trial balance.

B) An adjusted trial balance.

C) A post-closing trial balance.

D) An accounting trial balance.

Answer: C

A post-closing trial balance:

A) Is a list of all accounts and their balances after adjusting entries.

B) Is a list of all accounts and their balances before adjusting entries.

C) Is a list of all accounts and their balances after closing entries.

D) Is a trial balance adjusted for cash-basis accounting.

Answer: C

Which one of the following accounts would NOT have a balance after closing entries?

A) Deferred Revenue.

B) Supplies.

C) Prepaid Rent.

D) Dividends.

Answer: D

Frosty Inc. has the following balances on December 31 prior to closing entries:

Frosty Inc. has the following balances on December 31 prior to closing entries:

Revenues $ 35,000

Retained Earnings, Jan. 1 10,000

Cash 7,000

Expenses 23,000

Accounts Payable 4,000

Dividends 1,000

Supplies 18,000

Based upon the balances above, what net adjustment would be made to Retained Earnings due to closing entries?

A) Increase of $11,000.

B) Increase of $13,000.

C) Increase of $12,000.

D) Increase of $14,000.

Answer: A

Which of the following is a possible closing entry?

A) Debit Cash, credit Service Revenue.

B) Debit Cash, credit Retained Earnings.

C) Debit Service Revenue, credit Retained Earnings.

D) Debit Dividends, credit Retained Earnings.

Answer: C

The closing entry for expenses includes:

A) A debit to Dividends and a credit to all expense accounts.

B) A debit to Retained Earnings and a credit to all expense accounts.

C) A debit to Revenues and a credit to Retained Earnings.

D) A debit to Revenues and a credit to all expense accounts.

Answer: B

For the first three years of operations, the company reports net income of $1,000, $2,000, and $3,000, and pays dividends of $500, $1,000, and $1,000

For the first three years of operations, the company reports net income of $1,000, $2,000, and $3,000, and pays dividends of $500, $1,000, and $1,000. What is the balance of retained earnings at the end of the third year?

A) $2,000.

B) $2,500.

C) $3,500.

D) $6,000.

Answer: C

In the first three years of operations, Lindsey Corporation reported net income(loss) of $(150,000), $100,000, and $250,000. At the end of the third year, Lindsey Corporation has a balance of $120,000 in its Retained Earnings account. What is the total amount of dividends Lindsey Corporation paid over the three years?

A) $130,000.

B) $120,000.

C) $80,000.

D) $380,000.

Answer: C

The Retained Earnings account had a beginning credit balance of $26,000. During the period, the business had a net loss $12,000, and the company paid dividends of $8,000. The ending balance in the Retained Earnings account is:

A) $6,000.

B) $30,000.

C) $22,000.

D) $14,000.

Answer: A

The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year.

The ending Retained Earnings balance of Juan's Mexican Restaurant chain increased by $3.2 million from the beginning of the year. The company declared a dividend of $1.3 million during the year. What was the amount of net income during the year?

A) $1.9 million.

B) $3.2 million.

C) $4.5 million.

D) $1.3 million.

Answer: C

The ending balance of Retained Earnings can best be described as:

A) The amount of cash received from stockholders over the life of the company.

B) The amount of net income over the life of the company not paid to owners in the form of dividends.

C) The amount of dividends paid over the life of the company.

D) The amount of net income over the life of the company.

Answer: B

When a company prepares closing entries, which one of the following is NOT a correct closing entry?

A) Debit Retained Earnings; credit Salaries Expense.

B) Debit Dividends; credit Retained Earnings.

C) Debit Service Revenue; credit Retained Earnings.

D) All of the other answers are incorrect.

Answer: B

Of the following six accounts, which ones have temporary balances:

(1) Service Revenue

(2) Dividends

(3) Salaries Expense

(4) Common Stock

(5) Retained Earnings

(6) Cash

A) (1), (2), and (3).

B) (4), (5), and (6).

C) (2), (4), and (5).

D) (1), (3), and (5).

Answer: A

Temporary accounts would not include:

A) Salaries Payable.

B) Advertising Expense.

C) Supplies Expense.

D) Dividends.

Answer: A

Which of the following accounts will NOT be involved in closing entries?

A) Prepaid Insurance.

B) Service Revenue.

C) Utilities Expense.

D) Retained Earnings.

Answer: A

The following table contains financial information for Fisher Inc. before closing entries:

The following table contains financial information for Fisher Inc. before closing entries:

Cash $ 23,000

Common Stock 34,000

Supplies 4,000

Advertising Expense 2,000

Accounts Payable 20,000

Service Revenue 30,000

Salaries Expense 3,000

Prepaid Rent 4,000

Dividends 3,000

Equipment 45,000

How many of the above accounts are permanent?

A) Three.

B) Four.

C) Five.

D) Six.

Answer: D

Permanent accounts would not include:

A) Accounts Payable.

B) Office Supplies.

C) Utilities Expense.

D) Common Stock.

Answer: C

Permanent accounts would not include:

A) Interest Expense.

B) Salaries Payable.

C) Prepaid Rent.

D) Deferred Revenues.

Answer: A

Which of the following is true concerning temporary and permanent accounts?

A) Cash is a temporary account.

B) Permanent accounts represent activity over the entire life of the company.

C) Permanent accounts must be closed at the end of every reporting period.

D) Temporary accounts represent activity over the previous three years.

Answer: B

Which of the following is a permanent account?

A) Dividends.

B) Service Revenue.

C) Advertising Expense.

D) Retained Earnings.

Answer: D

The purpose of closing entries is to transfer:

A) Accounts Receivable to Retained Earnings when an account is fully paid.

B) Balances in temporary accounts to a permanent account.

C) Inventory to Cost of Goods Sold when merchandise is sold.

D) Assets and liabilities when operations are discontinued.

Answer: B

Which of the following describes the purpose(s) of closing entries?

A) Adjust the balances of asset and liability accounts for unrecorded activity during the period.

B) Transfer the balances of temporary accounts to common stock.

C) Reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

D) Transfer the balances of temporary accounts to common stock; reduce the balances of the temporary accounts to zero to prepare them for measuring activity in the next period.

Answer: C

The primary purpose of closing entries is to:

A) Prove the equality of the debit and credit entries in the general journal.

B) Ensure that all assets and liabilities are recognized in the appropriate period.

C) Update the balance of Retained Earnings and prepare revenue, expense, and dividend accounts for next period's transactions.

D) Assure that adjusting entries balance.

Answer: C

The closing process includes which of the following?

A) Closing the balance of the retained earnings account to zero.

B) Closing the balance of only the dividends account to zero.

C) Closing the balances of only revenue and expense accounts to zero.

D) Closing the balances of revenue, expense and dividend accounts to zero.

Answer: D

When a company owes employee salaries at the end of the period but fails to make an adjusting entry for that amount owed, which of the following is true?

A) Net income in the income statement is overstated.

B) Retained earnings in the statement of stockholders' equity is overstated.

C) Total stockholders' equity in the balance sheet is overstated.

D) All of the other answers are correct.

Answer: D

Current assets in a classified balance sheet are typically listed in order of:

A) Operational functionality.

B) Lowest to highest amount.

C) Importance to the company's profitability.

D) Liquidity.

Answer: D

The liquidity of an asset in a classified balance sheet refers to:

A) The dollar magnitude of the asset.

B) How quickly the asset will be converted to cash.

C) The length of time for which the company has owned the asset.

D) The likelihood that the asset will help to increase the company's profitability.

Answer: B

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect total assets for the current period?

A) Total assets will be too low.

B) Total assets will be correct.

C) Total assets will be too high.

D) Not possible to determine.

Answer: B

If a company incorrectly records Service Revenue too high, which of the following is true?

A) Net income in the income statement is overstated.

B) Retained earnings in the statement of stockholders' equity is overstated.

C) Total stockholders' equity in the balance sheet is overstated.

D) All of the other answers are correct.

Answer: D

Providing services to customers on account would affect the balances reported in which financial statement(s)?

A) Income statement.

B) Statement of stockholders' equity.

C) Balance sheet.

D) All of the financial statements in the other answers would be affected.

Answer: D

The following table contains financial information for Trumpeter Inc. before closing entries:

The following table contains financial information for Trumpeter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is the amount of Trumpeter's total stockholders' equity?

A) $5,000.

B) $78,500.

C) $68,500.

D) $83,500.

Answer: B

The following table contains financial information for Trumpeter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is the amount of Trumpeter's total liabilities?

A) $5,000.

B) $78,500.

C) $68,500.

D) $83,500.

Answer: A

The following table contains financial information for Trumpter Inc. before closing entries:

The following table contains financial information for Trumpter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is the amount of Trumpter's total assets?

A) $81,500.

B) $82,500.

C) $68,500.

D) $83,500.

Answer: D

Which of the following are reported as stockholders' equity in a classified balance sheet?

A) Debits and Credits.

B) Revenues and Expenses.

C) Common Stock and Retained Earnings.

D) Assets and Liabilities.

Answer: C

The following financial information is from Bronco Company. All debt is due within one year unless

The following financial information is from Bronco Company. All debt is due within one year unless stated otherwise.

Retained Earnings $ 52,000

Supplies 37,000

Equipment 72,000

Accounts Receivable 8,600

Deferred Revenue 6,000

Accounts Payable 15,000

Common Stock 25,000

Notes Payable (due in 18 months) 35,000

Interest Payable 7,000

Cash 22,400

What is the amount of current liabilities?

A) $63,000.

B) $28,000.

C) $45,600.

D) $22,000.

Answer: B

The Deferred Revenue account is shown in which statement?

A) Income statement.

B) Statement of cash flows.

C) Balance sheet.

D) Statement of stockholders' equity.

Answer: C

Which of the following current liabilities does not involve the future payment of cash?

A) Interest Payable.

B) Deferred Revenue.

C) Accounts Payable.

D) Salaries Payable.

Answer: B

An advantage of a classified balance sheet is that it is easy to see:

A) If the company is likely to be profitable in future periods.

B) If the company is profitable in the current period.

C) If current assets are large enough to pay current liabilities.

D) If dividends have been paid to stockholders.

Answer: C

A current liability is defined as:

A) An amount borrowed less than one year ago.

B) An amount due to an employee.

C) An amount due within one year.

D) A small amount due.

Answer: C

Patents, copyrights, franchises, and trademarks are examples of:

A) Current assets.

B) Investments.

C) Intangible assets.

D) Property, plant, and equipment.

Answer: C

How many of the items listed above are generally long-term assets?Land Accounts Receivable Notes Payable

Consider the following items:

Land

Accounts Receivable

Notes Payable (due in three years)

Accounts Payable

Retained Earnings

Prepaid Rent

Deferred Revenue

Buildings

Notes Payable (due in six months)

Equipment

How many of the items listed above are generally long-term assets?

A) Two.

B) Three.

C) Four.

D) Five.

Answer: B

Resources owned by the company that will provide a benefit for more than one year are called:

A) Current assets.

B) Current liabilities.

C) Long-term assets.

D) Revenues.

Answer: C

Long-term productive assets used in the normal course of business are typically classified as:

A) Current assets.

B) Investments.

C) Intangible assets.

D) Property, plant, and equipment.

Answer: D

The following financial information is from Shovels Construction Company: Accounts Payable $ 15,000 Buildings 80,000

The following financial information is from Shovels Construction Company:

Accounts Payable $ 15,000

Buildings 80,000

Cash 10,500

Accounts Receivable 9,500

Sales Tax Payable 4,500

Retained Earnings 47,500

Supplies 40,000

Notes Payable (due in 18 months) 35,000

Interest Payable 3,000

Common Stock 35,000

What is the amount of current assets, assuming the accounts above reflect normal activity?

A) $20,000.

B) $60,000.

C) $140,000.

D) $175,000.

Answer: B

With respect to current assets, liquidity refers to:

A) How quickly the asset can be converted to cash.

B) The magnitude of the asset's account balance.

C) Whether cash was paid for the asset at the time of acquisition.

D) The accuracy of the balance being reported.

Answer: A

Current assets include:

A) Assets that must be paid for within 12 months.

B) Assets that will be used up or converted to cash within 12 months.

C) Assets that will be used for many years.

D) Any assets that were purchased for cash.

Answer: B

In the statement of stockholders' equity, the balance of Retained Earnings increased by $32,000. The company declared a dividend of $10,000 during the year. What was the net income for the year?

A) $10,000.

B) $32,000.

C) $42,000.

D) $22,000.

Answer: C

A classified balance sheet ________.

A) Shows only current assets and current liabilities

B) Shows changes in assets, liabilities, revenues and expenses

C) Contains confidential information

D) Shows subtotals for current assets and current liabilities

Answer: D

Which financial statement provides information for a point in time only?

A) Statement of cash flows.

B) Income statement.

C) Statement of stockholders' equity.

D) Balance sheet.

Answer: D

In the statement of stockholders' equity, Retained Earnings had a beginning balance of $60,000. During the period, the company reports a net loss of $10,000 and net cash outflows of $15,000. The ending balance in the Retained Earnings account is:

A) $60,000.

B) $35,000.

C) $50,000.

D) $45,000.

Answer: C

In the statement of stockholders' equity, Retained Earnings had a beginning balance of $25,000. During the period, the company reports a net income of $10,000 and a dividend of $4,000. The ending balance in the Retained Earnings account is:

A) $10,000.

B) $35,000.

C) $39,000.

D) $31,000.

Answer: D

The statement of stockholders' equity includes:

A) Net income from the income statement.

B) The amount of stock issued in the current period.

C) Dividends declared to stockholders in the current period.

D) All of the other answers are correct.

Answer: D

If a company records cash received for services to be provided in the future with a debit to Cash and a credit to Service Revenue, how will this error affect net income for the current period?

A) Net income will be too low.

B) Net income will be correct.

C) Net income will be too high.

D) Not possible to determine.

Answer: C

If a company incorrectly records a payment as an expense instead of an asset, how will this error affect net income in the current period?

A) Net income will be too low.

B) Net income will be correct.

C) Net income will be too high.

D) Not possible to determine.

Answer: A

The statement of stockholders' equity includes which of the following for the period?

A) Details of a company's profitability that represents stockholders' claims.

B) Changes in stockholders' equity accounts.

C) Inflows and outflows of cash that benefit stockholders.

D) Current assets available to pay current liabilities to reduce risk to stockholders.

Answer: B

The following table contains financial information for Trumpeter Inc. before closing entries: Cash $ 12,000

The following table contains financial information for Trumpeter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is Trumpeter's net income?

A) $3,500.

B) $2,500.

C) $5,000.

D) $5,500.

Answer: D

Which of the following best describes the information reported in the income statement?

A) The portion of profits paid in cash to stockholders.

B) The current resources available to pay current obligations.

C) The amount recognized from providing goods and services to customers compared to the cost of doing so.

D) The extent to which cash inflows exceed cash outflows.

Answer: C

Which of the following is true about an income statement?

A) It reports activity for a period of time.

B) It does not include dividends paid.

C) It reports revenues and expenses.

D) All of the other answers are true.

Answer: D

A company's accountant is trying to prepare an adjusted trial balance from the list of accounts below. Cash $ 12,000

A company's accountant is trying to prepare an adjusted trial balance from the list of accounts below.

Cash $ 12,000

Retained Earnings 31,000

Prepaid Rent 2,000

Salaries Expense 15,000

Equipment 68,000

Service Revenue 40,000

Miscellaneous Expense 10,000

Supplies 4,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 38,000

What is the total amount of credits?

A) $111,000.

B) $81,000.

C) $114,000.

D) $86,000.

Answer: C

A company's accountant is trying to prepare an adjusted trial balance from the list of accounts below.

Cash $ 12,000

Retained Earnings 31,000

Prepaid Rent 2,000

Salaries Expense 15,000

Equipment 68,000

Service Revenue 40,000

Miscellaneous Expense 10,000

Supplies 4,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 38,000

What is the total amount of debits?

A) $114,000.

B) $86,000.

C) $81,000.

D) $11,000.

Answer: A

Which of the following trial balances shows account balances that incorporate current year deferrals and accruals?

A) Adjusted trial balance.

B) Final trial balance.

C) Unadjusted trial balance.

D) Cash-basis trial balance.

Answer: A

Consider the adjustment process at the end of the accounting period.

1. Record the adjusting entries in the journal.

2. Prepare an adjusted trial balance to check the equality of the debits and credits.

3. Determine the accounts requiring adjustment, using the unadjusted trial balance.

4. Post the adjusting entries to the general ledger.

Place the actions above in the proper order.

A) 1, 4, 3, 2.

B) 1, 2, 4, 3.

C) 3, 4, 2, 1.

D) 3, 1, 4, 2.

Answer: D

An adjusted trial balance:

A) Is a list of all accounts and their balances after adjusting entries.

B) Is a list of all accounts and their balances before adjusting entries.

C) Is a list of all accounts and their balances after closing entries.

D) Is a trial balance adjusted for cash-basis accounting.

Answer: A

The adjusted trial balance should be prepared ________ the financial statements are prepared in order to prove the ________ of the debits and credits.

A) after; equality

B) before; accuracy

C) before; equality

D) after; accuracy

Answer: C

PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are required to pay for the subscription at the beginning of the subscription period

PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are required to pay for the subscription at the beginning of the subscription period. On April 1, 2021, total sales of one-year subscriptions are $12,000. What is the adjusted balance of Deferred Revenue on December 31, 2021?

A) $9,000.

B) $3,000.

C) $0.

D) $12,000.

Answer: B

Eve's Apples opened for business on January 1, 2021, and paid for two insurance policies effective that date. The liability policy was $36,000 for 18 months, and the crop damage policy was $12,000 for a two-year term. What was the balance in Eve's Prepaid Insurance account as of December 31, 2021?

A) $9,000.

B) $18,000.

C) $30,000.

D) $48,000.

Answer: B

A list of all accounts and their balances after updating account balances for adjusting entries is referred to as:

A) A trial balance.

B) An adjusted trial balance.

C) A post-closing trial balance.

D) An accounting trial balance.

Answer: B

On November 1, $4,800 of rent on equipment for the next six months was paid and charged to Prepaid Rent. At the end of the year, the financial statements would report:

A) Rent Expense, $4,800; Prepaid Rent $0.

B) Rent Expense, $1,600; Prepaid Rent $3,200.

C) Rent Expense, $1,600; Prepaid Rent $4,800.

D) Rent Expense, $3,200; Prepaid Rent $1,600.

Answer: B

Prior to adjusting entries, Salaries Expense had a balance of $22,300. The following year-end adjusting entry was made by the company:

Salaries Expense 4,400

Salaries Payable 4,400

What balance would be shown for Salaries Expense in the adjusted trial balance?

A) $4,400.

B) $17,900.

C) $22,300.

D) $26,700.

Answer: D

Prior to adjusting entries, Prepaid Rent had a balance of $8,300. The following year-end adjusting entry was made by the company:

Rent Expense 6,800

Prepaid Rent 6,800

What balance would be shown for Prepaid Rent in the adjusted trial balance?

A) $1,500.

B) $6,800.

C) $8,300.

D) $15,100.

Answer: A

A company provides maintenance services to customers. The company's policy is to provide services and then bill customers

A company provides maintenance services to customers. The company's policy is to provide services and then bill customers on the 10th of the following month. In December 2021, the company provided services of $14,000 and plans to bill customers on January 10, 2022. What adjusting entry, if any, will the company record on December 31, 2021?

A) Debit Accounts Receivable and credit Deferred Revenue for $14,000.

B) Debit Accounts Receivable and credit Service Revenue for $14,000.

C) Debit Service Revenue and credit Accounts Receivable for $14,000.

D) No adjusting entry is necessary at the end of the year.

Answer: B

On November 1, 2021, a company signs a one-year contract to provide services. The agreement specifies payments of $4,500 to be received every three months for a total of $18,000 over the entire year ($1,500 per month). No entry is made on November 1, 2021, at the time the contract is signed. What adjusting entry does the company need to record at the end of the year?

A) Debit Accounts Receivable and credit Service Revenue for $15,000.

B) Debit Service Revenue and credit Accounts Receivable for $12,000.

C) Debit Accounts Receivable and credit Service Revenue for $3,000.

D) Debit Accounts Receivable and credit Service Revenue for $18,000.

Answer: C

On October 1, 2021, a company purchases equipment for $72,000. The equipment is expected to be used for the next four years (48 months). What adjusting entry should the company record on December 31, 2022?

A) Debit Depreciation Expense and credit Accumulated Depreciation for $13,500.

B) Debit Depreciation Expense and credit Accumulated Depreciation for $18,000.

C) Debit Depreciation Expense and credit Accumulated Depreciation for $22,500.

D) Debit Depreciation Expense and credit Accumulated Depreciation for $4,500.

Answer: B

At the beginning of December, Global Corporation had $2,000 in supplies on hand. During the month, supplies purchased amounted to $3,000, but by the end of the month the supplies balance was only $800. What is the appropriate month-end adjusting entry?

A) Debit Cash $4,200, credit Supplies $4,200.

B) Debit Supplies $4,200, credit Supplies Expense $4,200.

C) Debit Supplies Expense $4,200, credit Supplies $4,200.

D) Debit Cash $800, credit Supplies $800.

Answer: C

On October 1, 2021, a company purchases equipment for $72,000. The equipment is expected to be used for the next four years (48 months). What adjusting entry should the company record on December 31, 2021?

A) Debit Depreciation Expense and credit Cash for $72,000.

B) Debit Depreciation Expense and credit Accumulated Depreciation for $72,000.

C) Debit Equipment and credit Depreciation Expense for $4,500.

D) Debit Depreciation Expense and credit Accumulated Depreciation for $4,500.

Answer: D

During the year, Cheng Company paid salaries of $24,000. In addition, $8,000 in salaries has accrued by the end of the year but has not been paid. The year-end adjusting entry would include which one of the following?

A) Debit to Salaries Expense for $32,000.

B) Credit to Salaries Expense of $8,000.

C) Debit to Salaries Payable for $24,000.

D) Credit to Salaries Payable for $8,000.

Answer: D

On September 1, 2021, Gold Gaming sold 400 one-year subscriptions to its online gaming website for $90 each. The total amount received was credited to Deferred Revenue. What would be the required adjusting entry at December 31, 2021?

A) Debit Deferred Revenue and credit Service Revenue for $36,000.

B) Debit Service Revenue and credit Deferred Revenue for $24,000.

C) Debit Deferred Revenue and credit Service Revenue for $24,000.

D) Debit Deferred Revenue and credit Service Revenue for $12,000.

Answer: D

A company has a policy of paying salaries for contract labor on the 15th of the month following the labor services received. In December 2021, the company recorded $15,000 paid in salaries for labor services received in November 2021. In addition, labor services received in December 2021 were $12,000 and will be paid by the company on January 15, 2022. What adjusting entry will the company record on December 31, 2021?

A) Debit Salaries Expense and credit Salaries Payable for $27,000.

B) Debit Salaries Expense and credit Cash for $15,000.

C) Debit Salaries Expense and credit Salaries Payable for $12,000.

D) Debit Salaries Expense and credit Salaries Payable for $3,000.

Answer: C

PrimeFlix sells one-year online subscriptions for viewing classic movies. Customers are required to pay for the subscription at the beginning of the subscription period. On April 1, 2021, total sales of one-year subscriptions are $12,000. What adjusting entry does PrimeFlix need to record on December 31, 2021?

A) Debit Deferred Revenue and credit Service Revenue for $9,000.

B) Debit Deferred Revenue and credit Service Revenue for $12,000.

C) Debit Service Revenue and credit Deferred Revenue for $9,000.

D) Debit Service Revenue and credit Deferred Revenue for $12,000.

Answer: A

The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $32,000

The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling $32,000 (or $3,200 per weekday). The current pay period ends on Friday, January 3. Neat Clothes is now preparing financial statements for the year ended December 31. What is the adjusting entry to record accrued salaries at the end of the year?

A) Debit Salaries Payable and credit Salaries Expense for $22,400.

B) Debit Salaries Expense and credit Salaries Payable for $6,400.

C) Debit Salaries Expense and credit Salaries Payable for $9,600.

D) Debit Salaries Expense and credit Salaries Payable for $22,400.

Answer: D

A company receives a utility bill each month for services received. The company's policy is to pay the utility bill within 30 days of receipt. On December 31, 2021, the company receives a utility bill of $4,200 for the month of December and plans to pay the bill by January 30, 2022. What adjusting entry, if any, will the company record on December 31, 2021?

A) Debit Utilities Expense and credit Cash for $4,200.

B) Debit Utilities Expense and credit Utilities Payable for $4,200.

C) Debit Utilities Payable and credit Utilities Expense for $4,200.

D) No adjusting entry is necessary at the end of the year.

Answer: B

A company owes employee salaries of $16,000 at the end of the year. These salaries will be paid in the following year. What adjusting entry, if any, does the company need to record at the end of the year?

A) Debit Salaries Expense and credit Cash for $16,000.

B) Debit Salaries Expense and credit Salaries Payable for $16,000.

C) Debit Salaries Payable and credit Salaries Expense for $16,000.

D) No adjusting entry is necessary at the end of the year.

Answer: B

Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the $4,200 premium to prepaid insurance

Yummy Foods purchased a one-year hazard insurance policy on August 1 and recorded the $4,200 premium to prepaid insurance. At its December 31 year-end, Yummy Foods would record which of the following adjusting entries?

A) Debit Insurance Expense and credit Prepaid Insurance for $1,750.

B) Debit Prepaid Insurance and credit Insurance Expense for $1,750.

C) Debit Insurance Expense and credit Accounts Payable for $4,200.

D) Debit Insurance Expense and credit Prepaid Insurance for $2,450.

Answer: A

At the beginning of the year, a company had a balance in its prepaid insurance account of $48,400. During the year, $86,000 was paid for insurance. At the end of the year, after adjusting entries were recorded, the balance in the prepaid insurance account was $42,000. Insurance expense for the year would be:

A) $92,400.

B) $86,000.

C) $134,400.

D) $6,400.

Answer: A

A company purchased $270,000 in supplies during the year. The supplies account increased by $10,000 during the year to an ending balance of $66,000. For what amount was the adjusting entry to supplies expense?

A) $300,000.

B) $280,000.

C) $260,000.

D) $240,000.

Answer: C

When a company makes an end-of-period adjusting entry, which includes a debit to Supplies Expense, the usual credit entry is made to:

A) Accounts Payable.

B) Supplies.

C) Cash.

D) Retained Earnings.

Answer: B

When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent, the debit is usually made to:

A) Cash.

B) Rent Expense.

C) Rent Payable.

D) Rent Receivable.

Answer: B

Which of the following would not typically be used as an adjusting entry?

A) Debit Rent Expense and credit Prepaid Rent.

B) Debit Cash and credit Deferred Revenue.

C) Debit Interest Expense and credit Interest Payable.

D) Debit Deferred Revenue and credit Service Revenue.

Answer: B

On May 1, 2021, Townsley borrowed $250,000 from Prime Bank by signing a three-year, 6% note payable

On May 1, 2021, Townsley borrowed $250,000 from Prime Bank by signing a three-year, 6% note payable. Interest is due each May 1. What adjusting entry, if any, should Prime Bank record on December 31, 2021?

A) Debit Interest Receivable and credit Interest Revenue for $5,000.

B) Debit Interest Receivable and credit Interest Revenue for $10,000.

C) Debit Interest Receivable and credit Interest Revenue for $15,000.

D) No adjusting entry is necessary.

Answer: B

Allen Inc. took out a one-year, 8%, $100,000 loan on March 31, 2021. Interest is due upon maturity of the loan. What adjusting entry, if any, should Allen Inc. record on December 31, 2021?

A) Debit Interest Expense and credit Interest Payable for $6,000.

B) Debit Interest Expense and credit Interest Payable for $2,000.

C) No adjusting entry is necessary.

D) Debit Interest Expense and credit Interest Payable for $8,000.

Answer: A

Which of the following is a possible adjusting entry?

A) Debit Cash, credit Accounts Payable.

B) Debit Service Revenue, credit Cash.

C) Debit Salaries Expense, credit Salaries Payable.

D) Debit Utilities Expense, credit Retained Earnings.

Answer: C

On July 1, 2021, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2021

On July 1, 2021, Charlie Co. paid $18,000 to Rent-An-Office for rent covering 18 months from July 2021 through December 2022. What adjusting entry should Charlie Co. record on December 31, 2021?

A) Debit Rent Expense and credit Cash for $18,000.

B) Debit Rent Expense and credit Prepaid Rent for $18,000.

C) Debit Prepaid Rent and credit Rent Expense for $6,000.

D) Debit Rent Expense and credit Prepaid Rent for $6,000.

Answer: D

Adjusting entries:

A) Often include the Cash account.

B) Usually are recorded at the beginning of the accounting period.

C) Always involve at least one income statement account and one balance sheet account.

D) Adjust the balance of revenue and expense accounts to zero.

Answer: C

The adjusting entry required to record accrued expenses includes:

A) A credit to Cash.

B) A debit to an asset.

C) A credit to an asset.

D) A credit to liability.

Answer: D

The adjusting entry required when goods and services are provided to customer for amounts previously recorded

The adjusting entry required when goods and services are provided to customer for amounts previously recorded as deferred revenues includes:

A) A debit to a liability.

B) A debit to an asset.

C) A credit to a liability.

D) A credit to an asset.

Answer: A

An example of an adjusting entry would not include:

A) Recording interest earned on bank account balances.

B) Recording the expiration of prepaid rent.

C) Recording unpaid salaries.

D) Recording the purchase of office supplies.

Answer: D

Providing goods or services to customers on account is an example of a(n):

A) Accrued expense.

B) Accrued revenue.

C) Prepaid expense.

D) Deferred revenue.

Answer: B

A gym offers one-year memberships for $99 and requires customers to pay the full amount of cash at the beginning of the membership period

A gym offers one-year memberships for $99 and requires customers to pay the full amount of cash at the beginning of the membership period. For the gym, this is an example of a(n):

A) Accrued expense.

B) Accrued revenue.

C) Prepaid expense.

D) Deferred revenue.

Answer: D

Making rent payments in advance is an example of a(n):

A) Accrued revenue.

B) Accrued expense.

C) Deferred revenue.

D) Prepaid expense.

Answer: D

Receiving a utility bill for costs in the current period but delaying payment until the following period is an example of a(n):

A) Accrued expense.

B) Accrued revenue.

C) Prepaid expense.

D) Deferred revenue.

Answer: A

An accrued expense occurs when:

A) Cash payment (or an obligation to pay cash) occurs before the expense recognition.

B) An expense is recorded at the same time as the cash payment.

C) The expense is recognized before the payment of cash.

D) Cash is paid but an expense is never recorded.

Answer: C

An accrued revenue represents:

A) Customers paying cash in advance of the good or service to be provided.

B) Revenue being recorded prior to cash collection from the customer.

C) Revenue being recorded at the same time the cash is collected from the customer.

D) Cash being collected from the customer prior to the revenue being recorded.

Answer: B

Deferred revenues refer to:

A) Customers paying cash in advance of the good or service to be provided.

B) Revenue being recorded prior to cash collection from the customer.

C) Revenue being recorded at the same time the cash is collected from the customer.

D) Cash being collected from the customer after the revenue is recorded.

Answer: A

Making insurance payments in advance is an example of:

A) A prepaid expense transaction.

B) A deferred revenue transaction.

C) An accrued expense transaction.

D) An accrued revenue transaction.

Answer: A

Prepayments occur when:

A) Cash payment (or an obligation to pay cash) occurs before the expense recognition.

B) Sales are delayed pending credit approval.

C) Customers are unable to pay the full amount due when goods are delivered.

D) Cash payment occurs after the expense is incurred and liability is recorded.

Answer: A

Which of the following is true about adjusting entries?

A) Entries are necessary due to the conservatism principle.

B) Entries can be done at the beginning or end of the accounting period.

C) They zero the balance of all income statement accounts.

D) They are a necessary part of accrual-basis accounting.

Answer: D

Examples of adjusting entries could include all of the following except:

A) Recording interest earned on bank account balances.

B) Recording the expiration of prepaid insurance.

C) Recording unpaid taxes.

D) Recording the purchase of office supplies.

Answer: D

Which of the following regarding adjusting entries is correct?

A) Adjusting entries are recorded for all external transactions.

B) Adjusting entries are recorded to make sure all cash inflows and outflows are recorded in the current period.

C) Adjusting entries are needed because we use accrual-basis accounting.

D) After adjusting entries, all temporary accounts should have a balance of zero.

Answer: C

Adjusting entries are primarily needed for:

A) Cash-basis accounting.

B) Accrual-basis accounting.

C) Current value accounting.

D) Manual accounting systems.

Answer: B

Consider the following events for Sophia Incorporated:April 5 Sophia purchases volleyballs for $200 on account.

Consider the following events for Sophia Incorporated:

April 5 Sophia purchases volleyballs for $200 on account.

April 6 Sophia advertises a sand volleyball camp for $20 a person.

April 12 Thirty people sign up for the camp paying a total of $600.

April 21 Sophia hosts the sand volleyball camp.

April 23 Sophia pays for the volleyballs purchased on April 5.

Under cash-basis accounting, what is the appropriate day to record the revenues related to the sand volleyball camp?

A) April 5.

B) April 12.

C) April 21.

D) April 23.

Answer: B

Which one of the following best describes the characteristics of adjusting entries?

A) Adjusting entries reduce the balance of revenue, expense, and dividend accounts to zero.

B) Adjusting entries update balances for the recognition of cash flows.

C) Adjusting entries update balances for the recognition of investments from and distributions to stockholders.

D) Adjusting entries update balances for the recognition of revenue and expenses.

Answer: D

Consider the following events for Sophia Incorporated:

April 5 Sophia purchases volleyballs for $200 on account.

April 6 Sophia advertises a sand volleyball camp for $20 a person.

April 12 Thirty people sign up for the camp paying a total of $600.

April 21 Sophia hosts the sand volleyball camp.

April 23 Sophia pays for the volleyballs purchased on April 5.

Under cash-basis accounting, what is the appropriate day to record the expenses related to the sand volleyball camp?

A) April 5.

B) April 12.

C) April 21.

D) April 23.

Answer: D

Consider the following events for Betterment Incorporated:January 1 Betterment purchases gasoline for $200 on account.

Consider the following events for Betterment Incorporated:

January 1 Betterment purchases gasoline for $200 on account.

January 7 Betterment advertises lawn mowing services for $100 per lawn.

January 9 Betterment signs up 8 customers who pay a total of $800 cash.

January 12 Betterment mows the lawns of the 8 customers and all gasoline purchased on January 1 is used.

January 13 Betterment pays for the gasoline purchased on January 1.

Under cash-basis accounting, what is the appropriate day to record the expenses related to the gasoline?

A) January 1.

B) January 9.

C) January 12.

D) January 13.

Answer: D

Consider the following events for Sophia Incorporated:

April 5 Sophia purchases volleyballs for $200 on account.

April 6 Sophia advertises a sand volleyball camp for $20 a person.

April 12 Thirty people sign up for the camp paying a total of $600.

April 21 Sophia hosts the sand volleyball camp.

April 23 Sophia pays for the volleyballs purchased on April 5.

Under accrual-basis accounting, what is the appropriate day to record the revenues from the sand volleyball camp?

A) April 5.

B) April 6.

C) April 12.

D) April 21.

Answer: D

Consider the following events for Sophia Incorporated:

April 5 Sophia purchases volleyballs for $200 on account.

April 6 Sophia advertises a sand volleyball camp for $20 a person.

April 12 Thirty people sign up for the camp paying a total of $600.

April 21 Sophia hosts the sand volleyball camp.

April 23 Sophia pays for the volleyballs purchased on April 5.

Under accrual-basis accounting, what is the appropriate day to record the expenses related to the sand volleyball camp?

A) April 5.

B) April 12.

C) April 21.

D) April 23.

Answer: C

The following information pertains to Sooner Company:May 1 Customer ordered an installation service to be done by Sooner Company on May 15.

The following information pertains to Sooner Company:

May 1 Customer ordered an installation service to be done by Sooner Company on May 15.

May 2 Customer paid cash for the installation job to be done on May 15.

May 8 The Sooner Company purchased installation supplies on account for the job.

May 15 The installation job was started and completed.

May 20 Amount owed for supplies purchased on May 8 is paid.

Assuming that Sooner Company uses accrual-basis accounting, when would the company record the expense related to the supplies?

A) May 2.

B) May 8.

C) May 15.

D) May 20.

Answer: C

For the month of September, the company sold 35 units. What is cost of goods sold under the weighted-average cost method? (Round weighted-average unit cost to 4 decimals)

A) $121.

B) $116.

C) $124.

D) $131.

Answer: $121.

FIFO is considered a balance-sheet approach for reporting inventory because it:

A) Better approximates the value of ending inventory.

B) Always results in a lower amount of inventory being reported.

C) Better approximates inventory cost necessary to generate revenue.

D) Always results in a higher amount of inventory being reported

Answer: Better approximates the value of ending inventory.

Which inventory method is better described as having a balance-sheet focus and why is it considered as such?

A) FIFO; better approximates the value of ending inventory.

B) LIFO; better approximates the value of ending inventory.

C) LIFO; better approximates inventory cost necessary to generate revenue.

D) FIFO; better approximates inventory cost necessary to generate revenue.

Answer: FIFO; better approximates the value of ending inventory.

What is the ending inventory balance for Julia & Company assuming that it uses FIFO?

A) $125.

B) $100.

C) $110.

D) $85.

Answer: $85.

LIFO is considered an income-statement approach for reporting inventory because it:

A) Always results in a higher amount of net income being reported.

B) Better approximates the value of ending inventory.

C) Better approximates inventory cost necessary to generate revenue.

D) Always results in a lower amount of net income being reported.

Answer: Better approximates inventory cost necessary to generate revenue.

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be:

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $16,733.

B) $17,408.

C) $16,713.

D) $16,089.

Answer: $16,713.

The company reports cost of goods sold of $16,000. Which inventory cost method is the company using?

A) FIFO.

B) LIFO.

C) Weighted-average.

D) The answer cannot be determined with the information given.

Answer: FIFO.

What is the cost of goods sold for Julia & Company assuming it uses LIFO?

A) $125.

B) $100.

C) $110.

D) $85.

Answer: $110.

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming weighted-average cost would be:

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $5,087.

B) $5,107.

C) $5,077.

D) $5,005.

Answer: $5,087.

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming FIFO would be:

A) $5,140.

B) $5,080.

C) $5,060.

D) $5,050.

Answer: $5,140.

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming FIFO would be:

A) $16,800.

B) $16,760.

C) $16,540.

D) $16,660.

Answer: $16,660.

Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be

Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $1,711.

B) $1,700.

C) $1,720.

D) $1,708.

Answer: $1,711.

Dunbar sold 700 units of inventory during the month. Ending inventory assuming weighted-average cost would be: (Round weighted-average unit cost to 4 decimals)

A) $502.

B) $490.

C) $489.

D) $480.

Answer: $489.

Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming LIFO would be:

A) $1,730.

B) $1,700.

C) $1,720.

D) $1,710.

Answer: $1,720.

Dunbar sold 700 units of inventory during the month. Ending inventory assuming FIFO would be:

A) $500.

B) $490.

C) $470.

D) $480.

Answer: $500.

Marvin sold 2,300 units of inventory during the month. Ending inventory assuming LIFO would be:

A) $5,040.

B) $5,055.

C) $5,075.

D) $5,135.

Answer: $5,040.

Marvin sold 2,300 units of inventory during the month. Cost of goods sold assuming LIFO would be:

A) $16,800.

B) $16,760.

C) $16,540.

D) $16,660.

Answer: $16,760.

The inventory cost flow assumption that is least likely to match the physical flow of inventory for most companies is:

A) FIFO.

B) LIFO.

C) Weighted-average.

D) Specific identification.

Answer: LIFO.

Dunbar sold 700 units of inventory during the month. Cost of goods sold assuming FIFO would be:

A) $1,730.

B) $1,700.

C) $1,720.

D) $1,710.

Answer: $1,700.

Dunbar sold 700 units of inventory during the month. Ending inventory assuming LIFO would be:

A) $500.

B) $490.

C) $470.

D) $480.

Answer: $480.

At what amount would Shoeless report cost of goods sold using the weighted-average cost flow assumption?

A) $110.

B) $73.

C) $70.

D) $105.

Answer: $105.

At what amount would Shoeless report gross profit using LIFO cost flow assumptions?

A) $105.

B) $80.

C) $175.

D) $120.

Answer: $80

At what amount would Shoeless report ending inventory using FIFO cost flow assumptions?

A) $55.

B) $170.

C) $110.

D) $70.

Answer: $110.

The inventory cost flow assumption that results in a random mixture of goods

The inventory cost flow assumption that results in a random mixture of goods being included in the balance of inventory and cost of goods sold is:

A) FIFO.

B) LIFO.

C) Weighted-average.

D) Lower of cost and net realizable value.

Answer: Weighted-average.

The inventory costing method that matches each unit of inventory with its actual cost is referred to as the ________ method.

A) Weighted-average.

B) Specific identification.

C) Actual cost.

D) Matching unit.

Answer: Specific identification

The inventory cost flow assumption that generally best matches the physical flow of inventory is:

A) FIFO.

B) LIFO.

C) Weighted-average.

D) Lower of cost and net realizable value.

Answer: FIFO.

Which measure reflects profitability from normal operations and a key performance measure for predicting the future profit-generating

Which measure reflects profitability from normal operations and a key performance measure for predicting the future profit-generating ability of a company?

A) Gross profit.

B) Operating income.

C) Income before income taxes.

D) Net income.

Answer: Operating income.

A company is most likely to utilize the specific identification method if its inventory consists of:

A) Unique products.

B) Very expensive products.

C) A relatively small number of products.

D) All of the other answers are reasons to utilize the specific identification method

Answer: All of the other answers are reasons to utilize the specific identification method

Operating income is calculated as net sales minus:

A) Utilities expense.

B) Salaries expense.

C) Cost of goods sold.

D) All of the other answers are subtracted from net sales to calculate operating income.

Answer: All of the other answers are subtracted from net sales to calculate operating income

A company has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000

A company has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit?

A) $76,000.

B) $80,000.

C) $74,000.

D) $72,000.

Answer: $80,000.

What amount will the company report for operating income?

A) $200,000.

B) $210,000.

C) $380,000.

D) $120,000.

Answer: $210,000.

Gross profit is calculated as net sales minus:

A) Nonoperating expenses and income tax expense.

B) Operating expenses.

C) Cost of goods sold.

D) All of the other answers are subtracted from net sales to calculate gross profit.

Answer: Cost of goods sold.

Given the information in the table below, what is the company's gross profit?

Sales revenue $ 350,000

Accounts receivable $ 280,000

Ending inventory $ 230,000

Cost of goods sold $ 180,000

Sales returns $ 50,000

Sales discounts $ 20,000

A) $280,000.

B) $170,000.

C) $50,000.

D) $100,000.

Answer: $100,000.

Which of the following items may be classified as nonoperating revenues and expenses?

A) Interest expense.

B) Loss on the sale of equipment.

C) Interest revenue.

D) All of the other answers are classified as nonoperating revenues and expenses.

Answer: All of the other answers are classified as nonoperating revenues and expenses.

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ________ income statement.

A) Single-step.

B) Subtotaled.

C) Multiple-step.

D) Classified.

Answer: Multiple-step.

Tyler Toys has beginning inventory for the year of $18,000. During the year, Tyler purchases inventory for $230,000

Tyler Toys has beginning inventory for the year of $18,000. During the year, Tyler purchases inventory for $230,000 and has cost of goods sold equal to $233,000. Tyler's ending inventory equals:

A) $15,000.

B) $18,000.

C) $21,000.

D) $19,000.

Answer: $15,000.

The primary distinction between operating activities and nonoperating activities in a multiple-step income statement is whether the activity is:

A) A large or small dollar amount.

B) Part of primary business operations.

C) Related to current versus long-term assets.

D) Reported as a revenue or an expense.

Answer: Part of primary business operations.

The distinction between operating and nonoperating income relates to:

A) Current versus noncurrent.

B) Primary versus peripheral activities of the reporting entity.

C) Revenues versus expenses.

D) Reliability of measurements.

Answer: Primary versus peripheral activities of the reporting entity.

A company has beginning inventory for the year of $12,000. During the year, the company purchases inventory for $150,000

A company has beginning inventory for the year of $12,000. During the year, the company purchases inventory for $150,000 and ends the year with $20,000 of inventory. The company will report cost of goods sold equal to:

A) $150,000.

B) $158,000.

C) $142,000.

D) $170,000.

Answer: $142,000.

Beginning inventory is $30,000. Purchases of inventory during the year are $50,000. Cost of goods sold is $60,000. What is ending inventory?

A) $20,000.

B) $30,000.

C) $10,000.

D) $50,000.

Answer: $20,000.

The type of income statement that classifies items as operating and nonoperating is the ________ income statement.

A) Consolidated.

B) Multiple-step.

C) Classified.

D) Single-step.

Answer: Multiple-step.

The cost of the goods that a company sold during a period is shown in its financial statements as ________ and the cost of the goods that a company still has on hand at the end of the year is shown in the financial statements as ________.

A) Cost of goods sold; inventory

B) Goods on hand; inventory expense

C) Inventory; cost of goods sold

D) Sales revenue; cost of goods sold

Answer: Cost of goods sold; inventory

The largest expense on a retailer's income statement is typically:

A) Salaries.

B) Cost of goods sold.

C) Income tax expense.

D) Depreciation expense.

Answer: Cost of goods sold.

The balance of the Cost of Goods Sold account at the end of the year represents:

A) The cost of inventory not sold in the current year.

B) The total sales revenue to customers.

C) The cost of inventory sold in the current year.

D) Total purchases of inventory for the year.

Answer: The cost of inventory sold in the current year.

For a manufacturing company, the combination of the cost of raw materials, direct labor, and overhead for inventory

For a manufacturing company, the combination of the cost of raw materials, direct labor, and overhead for inventory that has not yet completed production is known as:

A) Work-in-process.

B) Finished goods.

C) Merchandise.

D) Retail goods.

Answer: Work-in-process.

A manufacturer's inventory consists of what type of inventory?

A) Raw materials.

B) Finished goods.

C) Work-in-process.

D) All of the other answers are included in a manufacturer's inventory.

Answer: All of the other answers are included in a manufacturer's inventory.

Cost of Goods Sold is:

A) An asset account.

B) A revenue account.

C) An expense account.

D) A permanent equity account.

Answer: An expense account.

The cost of unsold inventory at the end of the year is classified as a(n) ________ in the ________.

A) Asset; Balance sheet

B) Expense; Income statement

C) Liability; Balance sheet

D) Revenue; Income statement

Answer: Asset; Balance sheet

Inventory does not include:

A) Materials used in the production of goods to be sold.

B) Assets intended to be sold in the normal course of business.

C) Equipment used in the manufacturing of assets for sale.

D) Assets currently in production for normal sales.

Answer: Equipment used in the manufacturing of assets for sale.

What type of company purchases raw materials and makes goods to sell?

A) Wholesaler.

B) Retailer.

C) Merchandiser.

D) Manufacturer.

Answer: Manufacturer.

One of the major differences between service companies and retail or manufacturing companies is that retailers and manufacturers

One of the major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for:

A) Current assets.

B) Inventory.

C) Selling expenses.

D) Deferred revenue.

Answer: Inventory.

Companies that purchase inventories that are primarily in finished form for resale to customers are known as:

A) Delivering companies.

B) Service companies.

C) Merchandising companies.

D) Manufacturing companies.

Answer: Merchandising companies.

Firms that want to grow quickly in the global marketplace often employ the cost leadership strategy because

A) this produces favorable customs rates and import duties.

B) manufacturers around the world adopt lean manufacturing methods to bring their costs down.

C) this allows them to employ and benefit from enterprise management systems.

D) there are relatively few product variations across different countries.


Answer: B) manufacturers around the world adopt lean manufacturing methods to bring their costs down.