Download Comprehensive Basic Financial Accounting Multiple-Choice Questions (MCQs) and more Exams Financial Accounting in PDF only on Docsity!
Comprehensive Basic Financial
Accounting Multiple-Choice
Questions (MCQs)
Q: On January 1, 2016, Microspace, Inc., purchased $100,000 face value of the 11% bonds of Service Express, Inc., at 103. The bonds mature on January 1, 2021. For the year ended December 21, 2019, Microspace received cash interest of a. $11, b. $11, c. $11, d. $10,400 - ANS:$11,0 00 Q:Net sales revenue $628, Beginning inventory $64, Ending inventory $43, Net purchases $450, Based on these facts, the gross profit for Dodge Company is a. $178, b. $147, c. $180, d. $157,000 - ANS:$180, Q:Which of the following in NOT a capital expenditure? a. A complete overhaul of an air-conditioning system b. The addition of a building wing c. Replacement of an old motor with a new one in a piece of equipment d. A tune-up of a company vehicle
e. The cost of installing a piece of equipment - ANS:A tune-up of a company vehicle Q:Bennet, Inc., purchased a tract of land, a small office building, and some equipment for $1,900,000. The appraised value of the land was $1,380,000, the building $575,000, and the equipment $345,000. What is the cost of the land a. $1,140, b. $1,380, c. $633, d. None of the above - ANS:$1,140, Q:Hank Neylon Productions held investments in trading securities with a fair value of $70,000 at December 31, 2016. These investments cost Hank Neylon Productions $63,000 on January 1, 2016. What is the appropriate amount for Hank Neylon Productions to report for these investments on the December 31, 2016, balance sheet? a. $70, b. $63, c. $7,000 gain d. Cannot be determined from the data given - ANS:$70, Q:Which of the following assets is NOT subject to a decreasing book value through depreciation, depletion, or amortization? a. Land improvements b. Intangibles c. Natural resources d. Goodwill - ANS:Goodwill Q:On August 1, 2016, Azore, Inc., sold equipment and accepted a six-month, 8%, $30,000 note receivable. Azore's year-end is December 31. Which of the following accounts will Azore, Inc., credit in the journal entry at maturity on February 1, 2017, assuming collection in full? a. Interest Payable
c. Gross margin - ANS:a. $160, b. $120, c. $40, Q:From the following list of accounts calculate the quick ratio: Cash $10, Accounts receivable $7, Inventory $13, Prepaid insurance $4, Accounts payable $8, Salary payable $7, Notes payable (due in two years) $10, Short-term investments $3, a. 1. b. 2. c. 1. d. 2.3 - ANS:1. Q:Which statement is true? a. the inventory method that best matches current expense with current revenue is FIFO b. When prices are rising, the inventory method that results in the lowest ending inventory value is FIFO c. An error overstating ending inventory in 2016 will understate 2016 net income d. Application of the lower-of-cost-or-market rule often results in a lower inventory value - ANS:Application of the lower-of-cost-or-market rule often results in a lower inventory value Q:Identify each of the following items as either a capital expenditure (C), expense on the income statement (E), or neither (N):
a. Paid property taxes of $75,000 for the first year the new building is occupied b. Paid interest on construction note for new plant building, $550, c. Repaired plumbing in main plant, paying $270,000 cash d. Purchased equipment for new manufacturing plant, $6,000,000; financed with long-term note. e. Paid dividends of $40, f. Purchased a computer and peripheral equipment for $29,000 cash g. Paved a parking lot on leased property for $300, h. Paid $90,000 in cash for installation of equipment in (d) i. Paid $148,000 to tear down old building on new plant site j. Paid $31,000 maintenance on equipment in (d) during its first year of use - ANS:a. E b. C c. E d. C e. N f. C g. C h. C i. C j. E Q:David Company had the following information in 2016: Accounts receivable 12/31/16 $16, Allowance for uncollectible account 12/31/16 (before adjustment) $ Credit service revenue during 2016 $39, Cash service revenue during 2016 $15, Collections from customers on account during 2016 $44,
E) Assets, $30,000 decrease; liabilities, no effect; equity $30,000 decrease. - ANS:B) Assets, $30,000 decrease; liabilities, $30,000 decrease; equity, no effect. Q:Determine the net income of a company for which the following information is available. Employee salaries expense... $180, Interest expense................... 10, Rent expense ....................... 20, Consulting revenue .............. 400, A) $190,000. B) $210,000. C) $230,000. D) $400,000. E) $610,000. - ANS:A) $190,000. Q:According to generally accepted accounting principles, a company's balance sheet should show the company's assets at the cash equivalent value of what was given up. This is known as the: A) Objectivity Principle B) Monetary Unit Principle C) Business Entity Principle D) Revenue Recognition Principle E) Cost Principle - ANS:E) Cost Principle Q:A company collected $42,000 cash on its accounts receivable. The effects of this transaction as reflected in the accounting equation are: A) Total assets decrease and equity increases. B) Both total assets and total liabilities decrease. C) Total assets, total liabilities, and equity are unchanged.
D) Both total assets and equity are unchanged and liabilities increase. E) Total assets increase and equity decreases. - ANS:C) Total assets, total liabilities, and equity are unchanged. Q:How would the accounting equation of a company be affected by the billing of a client for $10,000 of consulting work completed? A) +$10,000 accounts receivable, - $10,000 accounts payable. B) +$10,000 accounts receivable, +$10,000 accounts payable. C) +$10,000 accounts receivable, +$10,000 cash. D) +$10,000 accounts receivable, +$10,000 revenue. E) +$10,000 accounts receivable, - $10,000 revenue. - ANS:D) +$10,000 accounts receivable, +$10,000 revenue. Q:On September 30, the Cash account of Value Company had a normal balance of $5,000. During September, the account was debited for a total of $12,200 and credited for a total of $11,500. What must have been the balance in the Cash account on September 1? A) A $0 balance. B) A $4,300 debit balance. C) A $4,300 credit balance. D) A $5,700 debit balance. E) A $5,700 credit balance. - ANS:B) A $4,300 debit balance. Q:Wisconsin Rentals purchased office supplies on credit. The general journal entry made by Wisconsin Rentals will include a: A) Debit to Accounts Payable. B) Debit to Accounts Receivable. C) Credit to Cash.
E) An $800 prepayment from a customer for services to be rendered in the future was posted as an $800 debit to Unearned Revenue and an $800 credit to Cash.. - ANS:B) A $100 cash receipt from a customer in payment of his account posted as a $100 debit to Cash and a $ credit to Accounts Receivable. Q:A company purchased a new car for $10,000 by trading in an old car which had a recorded net cost and value of $2,000. They also paid cash of $3,000, and signed a note for the remaining balance. The journal entry to record this transaction will NOT include: A) Debit Equipment $10, B) Credit Equipment $2, C) Credit Cash $3, D) Credit Accounts Payable $5, E) Debit Accounts Payable $5,000 - ANS:E) Debit Accounts Payable $5, Q:An asset created by prepayment of an expense is: A) Recorded as a debit to a prepaid expense account. B) Recorded as a debit to an unearned revenue account. C) Recorded as a credit to an unearned revenue account. D) Recorded as a credit to a prepaid expense account. E) Not recorded in the accounting records until the earnings process is complete. - ANS:A) Recorded as a debit to a prepaid expense account Q:ABC Co. leased a portion of its store to another company for eight months beginning on October 1, 2004. This other company paid the entire rent of $6,400 cash on October 1, which ABC Co. recorded as unearned revenue. The journal entry made by ABC Co. at year- end on December 31, 2004 would include: A) A debit to Rent Earned for $2,400.
B) A credit to Unearned Rent for $2,400. C) A debit to Cash for $6,400. D) A credit to Rent Earned for $2,400. E) A debit to Unearned Rent for $4,000. - ANS:D) A credit to Rent Earned for $2,400. Q:Prior to recording adjusting entries, the Office Supplies account had a $ normal balance. A physical count of the supplies showed $105 of unused supplies. The required adjusting entry is: A) Debit Office Supplies $105 and credit Office Supplies Expense $105. B) Debit Office Supplies Expense $105 and credit Office Supplies $105. C) Debit Office Supplies Expense $254 and credit Office Supplies $254. D) Debit Office Supplies $254 and credit Office Supplies Expense $254. E) Debit Office Supplies Expense $105 and credit Office Supplies $254. - ANS:C) Debit Office Supplies Expense $254 and credit Office Supplies $254. Q:A company purchased a new truck at a cost of $42,000 on July 1, 2004. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. Which of the following will be included in the journal entry recorded on December 31, 2004? A) Debit Depreciation Expense $3,500. B) Credit Accumulated Depreciation $3,250. C) Debit Depreciation Expense $4,000. D) Credit Accumulated Depreciation $6,500. E) Debit Depreciation Expense $7,000. - ANS:B) Credit Accumulated Depreciation $3,250. Q:On April 30, 2004, a three-year insurance policy was purchased for $18,000 cash with coverage to begin immediately. What is the amount of Prepaid Insurance that would appear on the company's financial statements for
Q:Andy Store sold merchandise in the amount of $5,800 to a customer on October 1, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Andy uses the perpetual inventory system. The journal entries that Andy will make on October 1 will include: A) Debit to Accounts Receivable for $4, B) Credit to Merchandise Inventory for $5, C) Debit to Cost of Goods Sold for $5, D) Credit to Merchandise Inventory for $4, E) Credit to Net Income for $1,800 - ANS:D) Credit to Merchandise Inventory for $4, Q:Jennifer Store sold merchandise in the amount of $5,800 to a customer on October 1, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Jennifer uses the perpetual inventory system. On October 4, the customer returns some of the merchandise, which were put back into the inventory. The selling price and the cost of the returned merchandise are $500 and $350, respectively. The entries that Jennifer must make on October 4 will NOT include: A) Debit to Sales Returns and Allowances for $ B) Credit to Accounts Receivable for $ C) Debit to Merchandise Inventory for $ D) Debit to Merchandise Inventory for $ E) Credit to Cost of goods Sold for $350 - ANS:C) Debit to Merchandise Inventory for $ Q:Lindsay Store sold merchandise in the amount of $5,800 to a customer on October 1, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Jennifer uses the perpetual inventory system. On October 4, the customer returns some of the merchandise, which were not defective. The selling price and the cost of the returned merchandise is
$500 and $350, respectively. The journal entry that Lindsay makes on October 8, when the customer pays the invoice will include: A) Debit Cash for $5, B) Credit Accounts Receivable $5, C) Debit Sales discounts $ D) Credit Sales Discounts $ E) Debit Sales Discounts $106 - ANS:E) Debit Sales Discounts $ Q:Tyler Company purchased merchandise in the amount of $4,800 from Sam's Store, with credit terms of 1/10, n/45 on October 1. Tyler uses the perpetual inventory system. On October 4, Tyler returns some of the merchandise, which were not defective, and receieved a credit memorandum for $1,500. The journal entry that Tyler makes on October 8, while paying the invoice will include: A) Debit to Accounts Payable for $4, B) Credit to Merchandise Inventory $ C) Credit Merchandise Inventory $1, D) Credit to Sales Returns and Allowances for $1, E) Credit to Cash $4,752 - ANS:B) Credit to Merchandise Inventory $ Q:Maya Company reports the following amounts for the year ending on December 31, 2004: Merchandise Inventory, January 1, 2004 : $70, Cost of Transportation : $2, Invoice Cost of Merchandise Purchases : $195, Purchase Returns and Allowances: $4, Purchase Discounts Received: $3, Cost of Goods Sold: $158, Cost of merchandise returned by customers and restored to inventory: $17,
B) $81.
C) $77.
D) $84.
E) $82. - ANS:C) $77.
Q:During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is: A) Specific identification method. B) Average cost method. C) Weighted-average method. D) FIFO method. E) LIFO method. - ANS:E) LIFO method. Q:Bonnie Company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6 they purchased 6 units at $25 each. On November 8, 8 units were sold for $ each. Using the LIFO perpetual inventory method, what was the value of the inventory on November 8 after the sale? A) $ B) $ C) $ D) $ E) $280 - ANS:D) $ Q:Chris Company uses the perpetual inventory system and had the following activity during the current monthly period. November 1: Beginning Inventory of 100 units @$ November 5: Purchased 100 units @ $ November 8: Purchased 50 units @$ November 16: Sold 200 units @ $
November 19: Purchased 50 units @ $ Using the weighted-average inventory method, the company's ending inventory would be reported at: A) $2,200. B) $2,320. C) $2,250. D) $2,400. E) $2,270. - ANS:B) $2,320.
- The revenues and expenses of a company are displayed in which statement? A. Balance Sheet B. Cash Flow Statement C. Income Statement D. None of the above - ANS:Answer: C) Income Statement ['Explanation:', 'The income statement displays all the revenues and expenses of a company.'] Q:2. The main Purpose of Financial Accounting is? A. To Provide financial information to shareholders B. To maintain balance sheet C. To minimize taxes. D. To keep track of liabilities - ANS:Answer: A) To Provide financial information to shareholders ['Explanation:', 'The purpose of financial accounting is to provide financial information to shareholders.']
A. Debit Account B. Credit Account C. Revenue D. Treasury Stock - ANS:Answer: C) Revenue ['Explanation:', 'Revenue, Owner Investments and retained earnings increase the equity of a company.'] Q:7. What are the long-term assets which do not have any physical existence? A. Intangible Assets B. Tangible Assets C. Current Liabilities D. Current Assets - ANS:Answer: A) Intangible Assets ['Explanation:', 'Intangible Assets have no physical existence. For Example, Goodwill, Brand Recognition, Patents etc. are known as Intangible Assets.'] Q:8. What is the supporting evidence in a business transaction called? A. Journal B. Ledger C. Voucher D. Contra Voucher - ANS:Answer: C) Voucher ['Explanation:', 'Vouchers are proof that a business transaction has taken place.'] Q:9. The Expenses, Profit & Loss of an organisation are recorded in which account?
A. Current Account B. Personal Account C. Nominal Account D. None of the above - ANS:Answer: C) Nominal Account ['Explanation:', 'The nominal account records all the transactions of a business for one fiscal year. '] Q:10. Which person owes an amount to a business organisation for buying goods and services on a credit basis? A. Creditors B. Debtors C. Owner D. None of the above - ANS:Answer: B) Debtors ['Explanation:', 'Debtors are the persons who owe an amount to a business organisation for buying goods and services on a credit basis.'] Q:11. When are balance sheets prepared? A. Quarterly B. Yearly C. Monthly D. None of the above - ANS:Answer: B) Yearly ['Explanation:', 'Balance Sheets are prepared yearly as it displays the liabilities and assets of a company.'] Q:12. What is Activity Ratio?
