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1. a. b. c. d. 2. a. b. c. d.

Of the following account types, which would be increased by a debit? Liabilities and Expenses Assets and Stockholders Equity Assets and Expenses Stockholders Equity and Expenses

Which of the following equations properly represents a derivation of the fundamental accounting equation Assets + Liabilities = OwnersEquity Assets = Owners Equity Cash = Assets Assets Liabilities = Owners Equity 3. Retained earnings will change over time because of several factors. Which of the following factors would explain an increase in retained earnings? Net loss Net income Dividends paid Investments by stockholders 4. Which of these items would be accounted for as an expense? Repayment of a bank loan Dividends paid to stockholders The purchase of land Payment of the current periods rent

a. b. c. d. a. b. c. d.

5.

a. b. c. d.

Gerald had beginning total stockholders' equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Gerald's net income was $180,000. No additional investments were made; however, dividends did occur during the year. How much were the dividends? $20,000 $60,000 $140,000 $220,000 6.

The proper journal entry to record Ransom Company's billing of clients for $500 of services rendered is: a. Cash $500

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Accounts Receivable b. Accounts Receivable Common Stock c. Accounts Receivable Service Revenue d. Cash Service Revenue 7. a. b. c. d.

$500 $500 $500 $500 $500 $500 $500

Which of the following errors will be disclosed in the preparation of a trial balance? Recording transactions in the wrong account Duplication of a transaction in the accounting records Posting only the debit portion of a particular journal entry Recording the wrong amount for a transaction to both the account debited and the account credited 8. Blankenship Company pays its employees every Friday for work rendered that week. The payroll is typically $10,000 per week. What journal entry would be recorded (on Wednesday) if the end of the accounting period occurred on a Wednesday? 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000

a. Salary Expense Salary Payable b. Salary Expense Cash c. Salary Payable Cash d. Salary Payable Cash

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9.

a. b. c. d.

On February 1, Crown Company purchased $2,000 of merchandise, terms 2/10, n/30. Crown uses the gross method of recording purchases. Payment of the accounts payable was made on February 26. Which of the following journal entries is appropriate for the February 26 transaction? Purchases $2,000 Accounts Payable $2,000 Accounts Payable 1,960 Cash 1,960 Accounts Payable 1,960 Purchase discounts lost 40 Accounts Payable 2,000 Accounts Payable 2,000 Cash 2,000

Malory Company provides the following information about the month-end bank reconciliation: Ending cash per bank statement Ending cash per company records Monthly bank service charge Deposits in transit at month-end Outstanding checks at month-end Customer check returned NSF 10. The correct balance is: $4,914 $7,268 $7,313 $7,383 None of the above 11. $1,367 7,383 25 8,345 2,399 45

a. b. c. d. e.

a. b. c. d.

During its first year of operation, Lenton Company acquired three investments in trading securities. Investment A cost $50,000 and had a year-end market value of $60,000. Investment B cost $35,000 and had a year-end market value of $17,000. Investment C cost $26,000 and had a year-end market value of $24,000. The journal entry to record the decline in market value would include A debit to unrealized loss on trading securities. A credit to unrealized gain on trading securities. A debit to trading securities. At least two of the above.

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12.

a. b. c. d. e.

Lindy Company uses an allowance method to account for bad debts. Lindy estimates that 5% of the outstanding accounts receivable will be uncollectible. At the end of the year, Lindy has outstanding accounts receivable of $750,000, and a debit balance in the Allowance for Uncollectible Accounts of $9,000. Lindy should record uncollectible accounts expense of: $28,500 $37,500 $46,500 $55,500 None of the above. Wonder Corporation failed to record the purchase of merchandise on account. The merchandise and related accounts payable should have been recorded but were not. What is the effect of these errors on assets, liabilities, retained earnings, and net income, respectively. Understated, understated, no effect, no effect Understated, understated, understated, understated Understated, overstated, overstated, understated Overstated, overstated, understated, overstated. 13.

a. b. c. d.

Bernstein Corporation recently experienced a fire which destroyed all of its inventory. The following data have been reconstructed from partial accounting information, and pertain to the year up to the date of the fire. Beginning inventory Net purchases Sales Gross profit rate $20,000 $45,000 $80,000 40%

14. a. b. c. d.

Using the gross profit method, estimate the dollar amount of inventory which was destroyed in the fire. $17,000 $33,000 $48,000 $65,000 15. Reno Acquisitions Company recently bought a furnished hotel for a lump-sum purchase price of $15,000,000. Separately, the land was valued at $6,000,000, the building at $12,000,000, and the furniture and equipment at $2,000,000. How much cost should Reno assign to the land? $1,000,000 $4,500,000 $6,000,000 $8,000,000

a. b. c. d.

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16.

Omni Corporation purchased a new vehicle on January 1, 20X1. The vehicle cost $100,000, has a five-year life, and a $20,000 residual value. Omni has a December 31 year-end. If Omni depreciates the truck by the double-declining balance method, how much should be recorded as depreciation expense during 20X4?

a. b. c. d. e.

$0 $1,600 $8,640 $40,000 None of the above 17. A machine that cost $18,000, with a book value of $4,000, is sold for $3,400. Which of the following is true concerning the journal entry to record the sale? Accumulated Depreciation is debited for $4,000. Machinery is credited for $4,000. Loss on sale of machinery is credited for $600. Accumulated depreciation is debited for $14,000. None of the above. 18. Deep Gold Mining Company recognizes $4 of depletion for each ton of ore mined. This year, 300,000 tons of ore were mined but only 180,000 were sold. The amount of depletion which should be deducted from revenue this year is:

a. b. c. d. e.

a. b. c. d.

$0. $480,000. $720,000. $1,200,000.

19. Which of the following statements regarding goodwill is false? a. The difference between the price paid to purchase a particular company , and the fair value of the underlying identifiable assets received (less liabilities assumed) is goodwill. b. Goodwill should not be amortized but evaluated for impairment. c. Goodwill is an intangible asset. d. Goodwill may be recorded for a company whether purchased or generated internally. e. None of the above. a. b. c. d. 20. Typical current liabilities include: Prepayments by customers Travel advances to employees The principal portion of a mortgage note that is due beyond one year or the operating cycle, whichever is longer. Accumulated depreciation.

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21.

a. b. c. d. e.

Assume that Kamchatny Vladimir borrowed $100,000 on January 1 of Year 1, at 5% interest per annum. On December 31, of Year 1, an $8,000 payment is made. On December 31, of year 2, another $8,000 payment is made. Using normal assumptions about interest and principal reduction, how much is the unpaid balance of Vladimir's loan after the second payment? $100,000 $94,000 $93,850 $84,000 None of the above

Use the following to answer questions 22-25: Orange Kola, Inc. uses a perpetual inventory system. The company's beginning inventory of a particular product and its purchases during the month of January were as follows: Beginning inventory (Jan. 1) Purchase (Jan. 11) Purchase (Jan. 20) Total Quantity 19 13 21 53 Unit Cost $ 11 12 17 Total Cost $ 209 156 357 $ 722

On January 14, Orange Kola, Inc. sold 25 units of this product. The other 28 units remained in inventory at January 31. 22. a. b. c. d. Refer to the above data. Assuming that Orange Kola uses the LIFO flow assumption, the cost of goods sold to be recorded at January 14 is:

$405 $222 $288 None of the above. 23. Refer to the above data. Assuming that Orange Kola uses the average cost flow assumption, the cost of goods sold to be recorded at January 14 is (round cost per unit to nearest cent): $287.90 $329.68 $309.35 None of the above. 24. Refer to the above data. Assuming that Orange Kola uses the FIFO flow assumption, the 28 units of this product in inventory at January 31 have a total cost of:

a. b. c. d.

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a. b. c. d.

$281 $403 $441 None of the above.

25. The logic behind the lower-of cost or market rule is: a. Inventory gradually becomes obsolete b. Inventory that is unsalable should be written down to zero (or its scrap value). c. An asset is not worth more than it would cost the owner to replace it. d. Inventory that is unsalable should be written down to its replacement cost. 26. a. b. c. d. Recognizing revenue when it is earned and not when cash is received and expenses when the related goods or services are used rather than when paid or is called: Revenue recognition. Accrual accounting. Conservatism. Matching.. 27. Nouveau Corporation purchased a piece of real estate, paying $300,000 cash and financing $600,000 of the purchase price with a 10-year, 15% installment note. The note calls for equal monthly payments that will result in the debt being completely repaid by the end of the tenth year. In this situation: The aggregate amount of the monthly payments is $600,000. Each monthly payment is greater than the amount of interest accruing each month. The portion of each payment representing interest expense will increase over the 10-year period, since principal is being paid off, yet the payment amount does not decrease.. The portion of each montly payment representing repayment of principal remains the same throughout the 10-year period. 28. If a bond is selling at 102, it is selling at: Maturity value and yields a 2% interest rate. A discount. A premium. $102 per bond. None of the above. 29. During the closing process: All income statement accounts are credited to income summary. All income statement accounts are debited to income summary. All revenue accounts are credited and expense accounts are debited. All revenue accounts are debited and expense accounts are credited.

a. b. c. d.
:

a. b. c. d. e. a. b. c. d.

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a. b. c. d. e. a. b. c. d.

Which of the following is defined as resources owned or controlled by a company that have expected future benefits? Liability Asset Revenue Expense Equity 31. Adjusting entries: Affect only income statement accounts Affect only balance sheet accounts Affect both income statement and balance sheet accounts Affect only cash accounts. e. None of the above 32. Maxwell Corp. recently acquired a new security system. Which of the following costs associated with the security system should not be debited to the Equipment account? Insurance coverage purchased by Maxwell to cover the computer during shipment from the manufacturer. Wages paid to system programmers hired to prepare the system for use. Replacement of several cameras damaged during installation Installation of new electrical power supplies required for operation during power failures. All of the above should be included in the Equipment account. 33. If the inventory at the end of the current year is understated and the error is never caught, the effect is to:the question here. Understate income this year and overstate income next year. Overstate income this year and understate income next year. Overstate the cost of goods sold, but have no effect on net income Understate income this year with no effect on income next year

30.

a. b. c. d. e.

a. b. c. d.

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