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ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS, Exams of Accounting

ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS

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2023/2024

Available from 12/13/2023

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Download ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS and more Exams Accounting in PDF only on Docsity! ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Maxwell Plumbing Services earned $500 by completing a job for Smith Company. The $500 earned by Maxwell Plumbing Services is its ________. A) revenue B) equity C) gain D) debt - correct answer *A) revenue The owners' claims to the assets of the business are called ________. A) return on assets B) expenses C) equity D) debt - correct answer *C) equity Precision Camera Services started the year with total assets of $90,000 and total liabilities of $65,000. The revenues and the expenses for the year amounted to $100,000 and $70,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $40,000. What is the amount of stockholders' equity at the end of the year? A) $70,000 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS B) $100,000 C) $15,000 D) $40,000 - correct answer *C) $15,000 Dynamic Production Services started the year with total assets of $120,000 and total liabilities of $55,000. The revenues and the expenses for the year amounted to $100,000 and $80,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $50,000. Calculate Dynamic's net income for the year. A) $20,000 B) $100,000 C) $80,000 D) $120,000 - correct answer *A) $20,000 Metropolitan Casting Services started the year with total assets of $130,000 and total liabilities of $45,000. The revenues and the expenses for the year amounted to $130,000 and $50,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $60,000. Calculate the amount of increase or decrease in stockholders' equity for the year. A) a $20,000 increase ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS A) Accounts Receivable increases and Service Revenue increases. B) Cash increases and Accounts Receivable decreases. C) Cash increases and Service Revenue increases. D) Cash increases and Accounts Payable decreases. - correct answer *B) Cash increases and Accounts Receivable decreases. Mitchell Company receives a bill from one of its suppliers for advertising services received and will pay the supplier next month. How does the receipt of the bill from the supplier affect the accounting equation of Mitchell? A) Assets and equity decrease. B) Liabilities increase and equity decreases. C) Assets and liabilities increase. D) Liabilities and equity increase. - correct answer *B) Liabilities increase and equity decreases. Newton Corporation settles a liability by making a payment in cash. How does paying this liability affect the accounting equation of the business? A) Assets and liabilities decrease. B) Liabilities decrease and equity increases. ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS C) Assets and liabilities increase. D) Assets increase and equity decreases. - correct answer *A) Assets and liabilities decrease. Lamar Corporation originally purchased land for $20,000. It later sold the land for $20,000 in cash. Which of the following is true of the effect of the sale of land on the accounting equation? A) Assets increase and liabilities decrease by $20,000. B) Assets and equity increase by $40,000. C) Assets increase by $20,000; equity increases by $20,000. D) The amount of total assets remains the same. - correct answer *D) The amount of total assets remains the same. Rosewood Corporation purchased land for $100,000 by making a cash payment of $38,000 and promising to pay the remaining amount in a later accounting period. What is the net effect of this transaction on Rosewood's accounting equation? A) Assets increase by $100,000 and liabilities decrease by $38,000. ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS B) Assets increase by $100,000 and liabilities decrease by $62,000. C) Assets and equity increase by $62,000. D) Assets and liabilities increase by $62,000. - correct answer *D) Assets and liabilities increase by $62,000. Mulberry Corporation collected $16,000 from one of its customers, the amount owed from the previous month. How does this affect the accounting equation for Mulberry? A) Assets increase by $16,000; liabilities decrease by $16,000. B) Assets increase by $16,000; assets decrease by $16,000. C) Assets increase by $16,000; liabilities increase by $16,000. D) Assets increase by $16,000; equity increases by $16,000. - correct answer *B) Assets increase by $16,000; assets decrease by $16,000. Country Homes Corporation just recorded a transaction in its books. If this transaction increased the total liabilities by $10,000, then ________. ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS C) The double-entry system is a system of accounting in which every transaction affects at least two accounts. D) If office supplies are purchased on account, the account Office Supplies increases and the account Accounts Payable increases. - correct answer *B) Because of technology, the use of the double-entry system of accounting is optional. For Office Supplies, the category of account and its normal balance is ________. A) liabilities and a debit balance B) assets and a debit balance C) liabilities and a credit balance D) assets and a credit balance - correct answer *B) assets and a debit balance The Salaries Payable account is a(n) ________. A) liability account with a normal debit balance B) asset account with a normal debit balance C) liability account with a normal credit balance D) asset account with a normal credit balance - correct answer *C) liability account with a normal credit balance ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Which of the following statements is true of revenues? A) Revenues decrease equity, so a revenue account's normal balance is a credit balance. B) Revenues decrease equity, so a revenue account's normal balance is a debit balance. C) Revenues increase equity, so a revenue account's normal balance is a debit balance. D) Revenues increase equity, so a revenue account's normal balance is a credit balance. - correct answer *D) Revenues increase equity, so a revenue account's normal balance is a credit balance. Which of the following represents the correct flow of accounting data? A) transactions occur; transactions are analyzed; transactions are journalized and posted; source documents are prepared B) transactions occur; source documents are prepared; transactions are journalized and posted; C) transactions occur; source documents are prepared; transactions are analyzed; transactions are journalized and posted D) source documents are prepared; transactions occur; transactions are analyzed; transactions are journalized and posted - correct answer *C) transactions occur; ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS source documents are prepared; transactions are analyzed; transactions are journalized and posted A business makes a cash payment of $12,000 to a supplier for supplies purchased two weeks earlier. Which of the following accounts is debited? A) Cash B) Accounts Payable C) Supplies D) Accounts Receivable - correct answer *B) Accounts Payable A business makes a cash payment to a supplier on account for office supplies that were purchased earlier. Which of the following accounts is credited? A) Cash B) Accounts Payable C) Office Supplies D) Office Supplies Expense - correct answer *A) Cash A business collects cash from a customer for services that were performed one month earlier. Which of the following accounts is debited? ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS C) matching principle D) time period concept - correct answer *D) time period concept To match expenses against revenues means to ________. A) add expenses incurred during one period to revenues earned during that same period B) subtract expenses incurred during one period from revenues earned during the previous period C) add expenses incurred during one period to revenues earned during the previous period D) subtract expenses incurred during one period from revenues earned during that same period - correct answer *D) subtract expenses incurred during one period from revenues earned during that same period The matching principle states that ________. A) financial statements can be prepared for specific periods B) a business's activities can be sliced into small time segments C) all expenses should be recorded when they are incurred during the period ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS D) companies should record revenue when it has been earned - correct answer *C) all expenses should be recorded when they are incurred during the period The accounting principle that ensures all expenses are recorded during the period when they are incurred and offsets those expenses against the revenues of the period is called the ________ principle. A) comparison B) accrual C) matching D) revenue recognition - correct answer *C) matching The matching principle ________. A) guides accounting for revenues and expenses B) results in the matching of expenses incurred during the period to the cash paid for expenses C) ensures that all expenses are recorded when they are incurred during the period D) results from a natural link between all expenses and revenues - correct answer *C) ensures that all expenses are recorded when they are incurred during the period ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Adjusting entries are needed to correctly measure the ________. A) ending balance in the Cash account B) net income (loss) on the balance sheet C) net income (loss) on the income statement D) beginning balance in the Cash account - correct answer *C) net income (loss) on the income statement The following Office Supplies account information is available for Nabors, Inc. Beginning balance $1,100 Office Supplies expensed 7,000 Ending balance 2,000 From the above information, calculate the amount of office supplies purchased. A) $7,900 B) $7,000 C) $1,100 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS D) depreciation - correct answer *D) depreciation The expected value of a depreciable asset at the end of its useful life is called ________. A) book value B) residual value C) depreciation expense D) accrued expense - correct answer *B) residual value On September 1, 2018, Real Estate Professionals, Inc. paid $7,000 in advance for an eight-month rental space covering the period of September 1, 2018 through April 30, 2019. The deferred expense was initially recorded as an asset. The company makes adjusting entries once a year at year-end. The adjusting entry on December 31, 2018 would include a ________. A) debit of $7,000 to Cash B) credit of $7,000 to Prepaid Rent C) debit of $3,500 to Rent Expense D) credit of $3,500 to Rent Expense - correct answer *C) debit of $3,500 to Rent Expense ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Maxwell Tax Planning Service bought communications equipment for $10,200 on January 1, 2019. The equipment has an estimated useful life of five years and zero residual value. Maxwell uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of each month. As of June 30, 2019, the balance in the Accumulated Depreciation account for this equipment is ________. A) $170 B) $2,040 C) $850 D) $1,020 - correct answer *D) $1,020 Hudson Landscaping Service bought equipment for $9,600 on January 1, 2019. It has an estimated useful life of five years and zero residual value. Hudson uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month. As of June 30, 2019, the book value of this equipment shown on its balance sheet will be ________. A) $8,640 B) $9,600 C) $10,560 D) $9,760 - correct answer *A) $8,640 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Wellness, a healthy living magazine, collected $504,000 in subscription revenue on May 31. Each subscriber will receive an issue of the magazine in each of the next 12 months, beginning with the June issue. The company uses the accrual method of accounting. What is the balance in the Unearned Revenue account as of December 31? A) $210,000 B) $294,000 C) $504,000 D) $378,000 - correct answer *A) $210,000 An expense that has been incurred but not yet paid is called a(n) ________. A) accrued revenue B) deferred expense C) deferred revenue D) accrued expense - correct answer *D) accrued expense The accountant for Barnes Auto Repair, Inc. failed to make an adjusting entry to record $5,000 of unpaid ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS D) Cash - correct answer *D) Cash Which of the following is a current asset that is expected to be converted to cash, sold, or consumed during the next year (or the normal operating cycle, if longer)? A) Land B) Equipment C) Building D) Accounts Receivable - correct answer *D) Accounts Receivable Under which of the following categories would bonds held as an investment for more than a year appear? A) current assets B) long-term liabilities C) long-term assets D) current liabilities - correct answer *C) long-term assets 57) The balances of select accounts of Donovan, Inc. as of December 31, 2018 are given below. ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Debit Credit Building $120,000 Cash 9,000 Office Supplies 1,000 Furniture 4,000 Prepaid Insurance 600 Accumulated Depreciation—Furniture $2,000 Land ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS 33,000 Accumulated Depreciation—Building 4,000 Accounts Receivable 2,000 What amount of total long-term assets would be shown on the balance sheet at December 31, 2018? A) $120,000 B) $151,000 C) $153,000 D) $157,000 - correct answer *B) $151,000 An account that is not closed at the end of the period is called a(n) ________. A) expense account B) temporary account C) permanent account D) revenue account - correct answer *C) permanent account ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Refer to the following adjusted trial balance after the first year of operations. Accounts Debit Credit Cash $1,900 Accounts Receivable 8,900 Office Supplies 200 Equipment 22,300 Accumulated Depreciation— Equipment $2,000 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Accounts Payable 1,000 Salaries Payable 850 Unearned Revenue 400 Common Stock 3,600 Dividends 3,000 Service Revenue 55,150 Salaries Expense 23,000 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Supplies Expense 2,000 Depreciation Expense— Equipment 1,700 Total $63,000 $63,000 What will the balance of the Retained Earnings account be after the closing entries are posted? A) $25,450 B) $28,450 C) $32,050 D) $31,450 - correct answer *A) $25,450 Which of the following accounts will be included in a post- closing trial balance? A) Accumulated Depreciation—Building B) Rent Expense ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS A) In a perpetual inventory system, the Cost of Goods Sold account keeps a current balance throughout the period. B) Cost of Goods sold is a contra revenue account. C) Cost of Goods Sold is based on the company's cost, not the retail price. D) Cost of Goods Sold represents the cost of inventory that has been sold to customers. - correct answer *B) Cost of Goods sold is a contra revenue account. The Merchandise Inventory account balance is $52,000. A physical count of inventory reveals that the actual inventory balance is $41,000. Which of the following would be included in the adjusting entry? (Assume a perpetual inventory system.) A) a $41,000 credit to Merchandise Inventory B) a $52,000 debit to Cost of Goods Sold C) a $11,000 credit to Cost of Goods Sold D) a $11,000 credit to Merchandise Inventory - correct answer *D) a $11,000 credit to Merchandise Inventory The Income Summary account has a credit balance of $27,000 after the revenue and expense accounts have ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS been closed. Which of the following is credited to close the Income Summary account? A) Dividends B) Sales Revenue C) Cost of Goods Sold D) Retained Earnings - correct answer *D) Retained Earnings An adjusted trial balance is given below. Debit Credit Cash $13,000 Accounts Receivable 2,000 Prepaid Rent 700 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Merchandise Inventory 25,000 Accounts Payable $4,100 Salaries Payable 2,000 Notes Payable 800 Common Stock 8,000 Retained Earnings 3,800 Dividends 1,000 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Under which of the following inventory costing methods is the ending inventory based on the costs of the most recent purchases? A) specific identification B) weighted-average C) last-in, first-out D) first-in, first-out - correct answer *D) first-in, first- out A company purchased 500 units for $30 each on January 31. It purchased 550 units for $33 each on February 28. It sold a total of 650 units for $45 each from March 1 through December 31. What is the cost of ending inventory on December 31 if the company uses the first- in, first-out (FIFO) inventory costing method? (Assume that the company uses a perpetual inventory system.) A) $13,200 B) $10,200 C) $12,000 D) $1,8000 - correct answer *A) $13,200 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS A company purchased 90 units for $20 each on January 31. It purchased 180 units for $25 each on February 28. It sold 180 units for $60 each from March 1 through December 31. If the company uses the first-in, first-out inventory costing method, what is the amount of Cost of Goods Sold on the income statement for the year ending December 31? (Assume that the company uses a perpetual inventory system.) A) $1,800 B) $4,500 C) $4,050 D) $6,300 - correct answer *C) $4,050 Baldwin, Inc. had the following balances and transactions during 2019: Beginning Merchandise Inventory as of January 1, 2019 125 units at $81 March 10 Sold 50 units June 10 Purchased 225 units at $86 October 30 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Sold 175 units What would be reported as Cost of Goods Sold on the income statement for the year ending December 31, 2019 if the perpetual inventory system and the first-in, first-out inventory costing method are used? A) $10,125 B) $14,675 C) $29,475 D) $18,725 - correct answer *D) $18,725 A company purchased 130 units for $20 each on January 31. It purchased 190 units for $25 each on February 28. It sold 190 units for $60 each from March 1 through December 31. If the company uses the weighted-average inventory costing method, calculate the amount of Cost of Goods Sold on the income statement for the year ending December 31. (Assume the company uses the perpetual inventory system. Round any intermediate calculations two decimal places, and your final answer to the nearest dollar.) A) $7,350 B) $4,364 C) $2,600 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS D) are supported by a promissory note - correct answer *D) are supported by a promissory note Which of the following should be classified as a long-term asset? A) Interest Receivable B) Accounts Receivable C) Notes Receivable, due in 5 years D) Cash Equivalents - correct answer *C) Notes Receivable, due in 5 years A business that accepts payments by credit and debit cards ________. A) is usually unable to attract more customers B) must check each customer's credit rating C) generally receives proceeds from credit and debit card transactions 30-45 days after the sale D) almost always pays a fee to the processor to cover the processing costs - correct answer *D) almost always pays a fee to the processor to cover the processing costs The allowance method of accounting for uncollectible receivables ________. ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS A) is used to measure bad debts B) violates the matching principle C) records bad debt expense in the period the accounts receivable is written off D) requires the use of a contra liability account. - correct answer *A) is used to measure bad debts Which of the following statements regarding the allowance method of accounting for uncollectible receivables is incorrect? A) Bad debt expense is not estimated. B) The Allowance for Bad Debts is used to hold the pool of "unknown" uncollectible accounts. C) The business does not wait to see which customers will not pay when estimating the allowance for bad debts. D) The allowance method is based on the matching principle. - correct answer *A) Bad debt expense is not estimated. The Allowance for Bad Debts account ________. A) is a liability account B) holds the pool of "unknown" uncollectible accounts C) increases with a debit ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS D) is added to accounts receivable - correct answer *B) holds the pool of "unknown" uncollectible accounts Accounts Receivable has a balance of $32,000, and the Allowance for Bad Debts has a credit balance of $3,000. The allowance method is used. What is the net realizable value of Accounts Receivable before and after a $2,100 account receivable is written off? A) $29,000; $29,000 B) $26,900; $26,900 C) $29,000; $26,900 D) $26,900; $31,100 - correct answer *A) $29,000; $29,000 Accounts Receivable has a balance of $8,000, and the Allowance for Bad Debts has a credit balance of $450. The allowance method is used. What is the net realizable value of Accounts Receivable after a $160 account receivable is written off? A) $7,390 B) $7,710 C) $7,550 D) $8,000 - correct answer *C) $7,550 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Acquisition of land $23,000 Surveys and legal fees 1500 Land clearing 400 Fencing 7000 Install lighting and signage 1860 What amount should be recorded as the cost of the land in the corporation's books? A) $31,900 B) $24,900 C) $26,760 D) $30,400 - correct answer *B) $24,900 Anderson Corporation has purchased a group of assets for $20,300. The assets and their relative market values are listed below. ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS Land $6800 Equipment 2300 Building 3600 Which of the following amounts would be debited to the Land account? (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) A) $4233 B) $10,962 C) $3654 D) $5684 - correct answer *B) $10,962 On January 1, 2018, Jordan, Inc. acquired a machine for $1,100,000. The estimated useful life of the asset is five years. Residual value at the end of five years is estimated to be $61,000. Calculate the depreciation expense per year using the straight-line method. A) $220,000 B) $207,800 ACCT 2050 QUESTIONS WITH COMPLETE SOLUTIONS C) $268,800 D) $275,000 - correct answer *B) $207,800 Which of the following is true when the estimate of an asset's useful life is changed? A) The new estimate is ignored until the last year of the asset's life. B) The depreciation expense in the prior years are restated. C) Prior years' financial statements must be restated. D) The asset's remaining depreciable book value will be spread over the asset's remaining life. - correct answer *D) The asset's remaining depreciable book value will be spread over the asset's remaining life. An asset was purchased for $37,000 on January 1, 2019. The asset's estimated useful life was five years, and its residual value was $9000. The straight-line method of depreciation was used. Calculate the gain or loss if the asset is sold for $19,000 on December 31, 2019, the last day of the accounting period. A) $6200 gain B) $12,400 loss C) $12,400 gain