ACC 290 Study Guide 1 – A+

ACC 290 Study Guide 1 – A+
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ACC/290  

Which financial statement is used to determine cash generated from operations?
a.   Income statement
b.   Statement of operations
c.   Statement of cash flows
d.   Retained earnings statement

In terms of sequence, in what order must the four basic financial statements be prepared?
a.   Balance sheet, income statement, statement of cash flows, and capital statement
b.   Income statement, capital statement, statement of cash flows, and balance sheet
c.   Balance sheet, capital statement, statement of cash flows, and income statement
d.   Income statement, capital statement, balance sheet, and statement of cash flows

In classifying transactions, which of the following is true in regard to assets?
a.   Normal balances and increases are debits.
b.   Normal balances and decreases are credits.
c.   Normal balances can either be debits or credits for assets.
d.   Normal balances are debits and increases can be debits or credits.

An increase in an expense account must be
a.   debited
b.   credited
c.   either debited or credited, depending on the circumstances
d.   capitalized

ABC Corporation issues 100 shares of $1 par common stock at $5 per share, which of the following is the correct journal entry?
a.   Cash  $100
Common Stock  $100
b.   Cash  $500
Common Stock  $500
c.   Cash  $500
Paid-in Capital, Excess of Par  $400
Common Stock  $100   
d.   Common Stock  $100
Paid-in Capital, Excess of Par  $400
Cash  $500

In the first month of operations, the total of the debit entries to the cash account amounted to $1,400 and the total of the credit entries to the cash account amounted to $600. The cash account has a
 
a.   $600 credit balance
b.   $1,400 debit balance
c.   $800 debit balance
d.   $800 credit balance

Which ledger contains control accounts?
a.   Accounts receivable subsidiary ledger
b.   General ledger
c.   Accounts payable subsidiary ledger
d.   General revenue and expense ledger

Smith is a customer of ABC Corporation. Smith typically purchases merchandise from ABC on account. Which ledger would ABC use to keep track of the details of Smith’s account?
a.   Accounts receivable subsidiary ledger
b.   Accounts receivable control ledger
c.   General ledger
d.   Accounts payable subsidiary ledger

   Under the cash basis of accounting,
a.   revenue is recognized when services are performed
b.   expenses are matched with the revenue that is produced
c.   cash must be received before revenue is recognized
d.   a promise to pay is sufficient to recognize revenue

  Under the accrual basis of accounting,
a.   cash must be received before revenue is recognized
b.   net income is calculated by matching cash outflows against cash inflows
c.   events that change a company’s financial statements are recognized in the period they occur rather than in the period in which the cash is paid or received
d.   the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles

   The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is
a.   debit Laundry Expense, $2,000; credit Laundry Expense $2,000
b.   debit Laundry Expense, $4,500; credit Laundry Supplies Expense, $4,500
c.   debit Laundry Supplies, $2,000; credit Laundry Supplies Expense, $2,000
d.   debit Laundry Supplies Expense, $4,500; credit Laundry Supplies, $4,500

   Greese Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,100 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be
a.   debit Office Supplies Expense, $1,100; credit Office Supplies, $1,100
b.   debit Office Supplies, $2,900; credit Office Supplies Expense, $2,900
c.   debit Office Supplies Expense, $2,900; credit Office Supplies, $2,900
d.   debit Office Supplies, $1,100; credit Office Supplies Expense, $1,100   

   Based on the account balances below, what is the total of the debit and credit columns of the adjusted trial balance?
Service revenue   $3,300     Equipment     $6,400
Cash        1,525     Prepaid insurance    1,225
Unearned revenue    5,320     Depreciation expense    640
Salary expense        1,050     Accum. depreciation    1,280
Common stock      390     Retained earnings    550

a.   $9,150
b.   $10,840
c.   $9,560
d.   $10,430

   An adjusted trial balance
a.   is prepared after the financial statements are completed
b.   proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made
c.   is a required financial statement under generally accepted accounting principles
d.   cannot be used to prepare financial statements   

   Given the following adjusted trial balance:
               Debit     Credit
Cash              $781
Accounts receivable         1,049
   Inventory           1,562
Prepaid rent            43
Property, plant & equipment        150
Accumulated depreciation            26
Accounts payable              41
Unearned revenue              61
Common stock                103
Retained earnings                3,305
Service revenue                134
Interest revenue              28
Salary expense            80
Travel expense              33     
Total            $3,698    $3,698

Net income for the year is
a.   $248
b.   $135
c.   $162
d.   $49

  Given the following adjusted trial balance, what will be the totals for the debit and credit columns of the post-closing trial balance?

               Debit     Credit
Cash             $1,562
Accounts receivable            2,098
Inventory              3,124
Prepaid rent              86
Property, plant, & equipment        300
Accumulated depreciation           $  52
Accounts payable                82
Unearned revenue                172
Common stock                  206
Retained earnings            6,610
Service revenue                218
Interest revenue                56
Salary expense             160
Travel expense                66       
Totals            $7,396     $7,396

a.   $7,396
b.   $7,118
c.   $7,334
d.   $7,170

   Given the following adjusted trial balance:
   Debit   Credit
Cash   $781
Accounts receivable   1,049
Inventory   1,562
Prepaid rent   43
Property, plant & equipment   150
Accumulated depreciation     26
Accounts payable     41
Unearned revenue     61
Common stock     103
Retained earnings      3,305
Service revenue     134
Interest revenue     28
Salary expense   80
Travel expense    33     
Total    $3,698   $3,698
     
     After closing entries have been posted, the balance in retained earnings will be
a.   $3,256
b.   $3,170
c.   $3,440
d.   $3,354

  Net income is recorded on the work sheet under the
a.   debit column of the adjusted trial balance and the credit column of retained earnings
b.   debit column of the income statement and the credit column of the balance sheet
c.   credit column of the adjusted trial balance and the debit column of retained earnings
d.   credit column of the income statement and the debit column of the balance sheet

   At the beginning of the year, Uptown Athletic had an inventory of $400,000. During the year, the company purchased goods costing $1,500,000. If Uptown Athletic reported ending inventory of $600,000 and sales of $2,000,000, their cost of goods sold and gross profit rate would be
a.   $900,000 and 65%
b.   $1,300,000 and 35%
c.   $900,000 and 35%
d.   $1,300,000 and 65%

During the year, Sarah’s Pet Shop’s merchandise inventory decreased by $30,000. If the company’s cost of goods sold for the year was $450,000, purchases would have been
a.   $480,000
b.   $420,000
c.   $390,000
d.   Insufficient data to determine

   At the beginning of the year, Wildcat Athletic had an inventory of $200,000. During the year, the company purchased goods costing $700,000. If Wildcat Athletic reported ending inventory of $300,000 and sales of $1,000,000, their cost of goods sold and gross profit rate would be
a.   $400,000 and 60%
b.   $600,000 and 40%
c.   $400,000 and 40%
d.   $600,000 and 60%

  The entry to record of sale of $900 with terms of 2/10, n/30 will include a
a.   debit to Sales Discount for $18
b.   debit to Sales Revenue for $882
c.   credit to Accounts Receivable for $900
d.   credit to Sales Revenue for $900

   Dobler Company uses a periodic inventory system. Details for the inventory account for the month of January 2012 are as follows:

Units   Per unit price   Total
Balance, 1/1/2012   200   $5.00   $1,000
Purchase, 1/15/2012   100   5.30   530
Purchase, 1/28/2012   100   5.50   550

An end of the month (1/31/2012), inventory showed that 140 units were on hand. If the company uses LIFO, what is the value of the ending inventory?
a.   $737
b.   $700
c.   $762
d.   $1,380

   The difference between ending inventory using LIFO and ending inventory using FIFO is referred to as
a.   FIFO reserve
b.   inventory reserve
c.   LIFO reserve
d.   periodic reserve

  A consistent application of an inventory costing method enhances
a.   conservatism
b.   accuracy
c.   comparability
d.   efficiency

The accountant at Patton Company has determined that income before income taxes amounted to $11,000 using the FIFO costing assumption. If the income tax rate is 30% and the amount of income taxes paid would be $300 greater if the LIFO assumption were used, what would be the amount of income before taxes under the LIFO assumption?
a.   $11,300
b.    $12,000
c.    $10,000
d.    $10,700

   A very small company would have the most difficulty in implementing which of the following internal control activities?
a.   Separation of duties
b.   Limited access to assets
c.   Periodic independent verification
d.   Sound personnel procedures

   A system of internal control
a.   is infallible
b.   can be rendered ineffective by employee collusion
c.   invariably will have costs exceeding benefits
d.   is premised on the concept of absolute assurance

   The custodian of a company asset should
a.   have access to the accounting record for that asset
b.   be someone outside the company
c.   not have access to the accounting record for that asset
d.   be an accountant

   The Sarbanes Oxley Act (2002) applies to
a.   U.S. companies but not international companies
b.   international companies but not U.S. companies
c.   U.S. and Canadian companies but not other international companies
d.   U.S. and international companies