Accounting Principles AC 101

Transcription

1 Accounting Principles AC 101 Final Study Guide Multiple Choice Key Chapters 1, 2, 3, 4, 5, 6, 8, 17 Page 1 of 11

2 Chapter 1 - Introduction to Accounting Pp Which of the following events would be recorded as an accounting event? a. A guest enters the dining room and is seated by a host. b. A guest complains to front office representatives about a dirty guestroom. c. A valet parks a guest s vehicle. d. A guest purchases a meal in a food outlet. 2. The branch of accounting that involves reviewing and evaluating documents, records, and control systems is called: a. financial accounting. b. cost accounting. c. managerial accounting. d. auditing. 3. The major disadvantage of the corporate form of business organization is: a. double taxation. b. limited liability. c. difficulty in raising capital. d. all of the above. 4. Regardless of the size of an operation s accounting department, the diversity of its responsibilities, or the number and types of reports produced, the accounting staff is responsible for providing: a. accurate accounting services. b. clean rooms that are ready for sale. c. inventory counts. d. guest comment cards. 5. The generally accepted accounting principle of matching requires that: a. accounting adjustments be made at least quarterly. b. balance sheet accounts and income statement accounts match. c. expenses be matched with the revenues they generate. d. hospitality businesses use the cash basis of accounting. 6. The Tech Hotel purchased a computer for $3,000. The retail value of the computer is $3,500; however, it is estimated that the computer will have a market value of only $2,500 one year from now. The cost principle dictates that the computer purchase be recorded at the date of purchase for: a. $2,500. b. $3,000. c. $3,500. d. cannot be determined 7. Which of the following statements best describes the accounting principle of objective evidence? a. It requires supporting documents for accounting transactions whenever possible. b. It involves recording, classifying, and summarizing transactions in order to prepare reports. c. It requires that all events that would make a difference to the user of a financial report be accounted for. d. It assumes that the business will survive for the foreseeable future. 8. What happens to the fundamental accounting equation when the sole proprietor of a business invests more cash in it? a. Assets increase, liabilities increase, and owner s equity decreases. b. Assets increase, liabilities remain the same, and owner s equity increases. c. Assets remain the same, liabilities increase, and owner s equity increases. d. Assets increase, liabilities increase, and owner s equity remains the same. Page 2 of 11

3 Chapter 2 - Accounting for Business Transactions Pp T-accounts are so named because of: a. their shape. b. the kinds of information they provide. c. their relevance to trade analysis. d. their inventor, whose name was Mr. T. 2. Jerry accepts a formal, written promise from an employee of his hotel to pay a certain sum. The employee plans to repay the hotel within the current fiscal year, and states this intention in the note. Notes Receivable are classified as: a. liabilities. b. owners equity. c. expenses. d. assets. 3. The basic element used in an accounting system to classify and summarize business transactions is the: a. T-account. b. account. c. liability. d. marketable security. 4. Sara totals the credits and debits for a certain account and finds that the account carries a debit balance. All of the following types of accounts typically carry a debit balance except: a. asset accounts. b. liability accounts. c. drawing accounts. d. expense accounts. 5. Revenue from cash sales ultimately affects which two balance sheet accounts? a. assets and liabilities b. assets and owner s equity c. liabilities and owner s equity d. assets and expenses 6. All of the following are balance sheet accounts except: a. revenue accounts. b. asset accounts. c. liability accounts. d. owners equity accounts. 7. Which of the following kinds of accounts would appear in a general ledger? a. asset accounts b. drawing accounts c. owners equity accounts d. all of the above Chapter 3 - Accounting Adjustments Pp Which of the following statements about accrual basis accounting is true? a. Accrual basis accounting is reflected on the statement of cash flows. b. Accrual basis accounting is used only by small hospitality businesses. c. Accrual basis accounting allows a business to show greater profits than cash basis accounting. d. Accrual basis accounting generally requires that several adjusting entries be recorded at the end of the accounting period. Page 3 of 11

4 2. A meeting planner made a deposit with a hotel to reserve exhibit space and the hotel has hosted the meeting. Now that the meeting has taken place, accountants should make an adjustment: a. in which previously recorded assets become expenses. b. in which previously recorded liabilities become revenue. c. to record assets and revenues not previously provided. d. to record liabilities and expenses not previously recorded. 3. Which of the following is an example of an accounting adjustment in which previously recorded assets become expenses? a. Prepaid Rent decreases and Rent Expense increases. b. Utilities Payable increases and Utilities Expense increases. c. Prepaid Insurance decreases and Insurance Expense decreases. d. Depreciation Expense increases and Accumulated Depreciation, Building increases. 4. Which of the following adjustments is an example of an accrual adjustment? a. a liability/revenue adjustment involving unearned revenues b. an asset/expense adjustment involving insurance c. an asset/expense adjustment involving depreciation d. a liability/expense adjustment involving utility expenses 5. Accounts that record accumulated depreciation are shown on the: a. balance sheet as deductions from assets. b. income statement as deductions from liabilities. c. income statement as increases to expenses. d. statement of cash flows as revenue. 6. James Bell plans to stay at the Michaels Motel for one month, and he prepays his room charges. Bell arrives and begins his stay on January 21. To account for Bell s prepayment, at the end of January (the end of the accounting period) the motel accountant should: a. credit Room Revenue and debit Cash. b. debit Unearned Room Revenue and credit Cash. c. debit Unearned Room Revenue and credit Room Revenue. d. credit Accounts Receivable and debit Cash. 7. Accounting adjustments to account for unpaid wages would: a. credit Wage Expense and debit Accrued Wages Payable. b. debit Wage Expense and credit Accrued Wages Payable. c. credit both Wage Expense and Cash. d. debit both Wage Expense and Accrued Wages Payable. 8. Telephone service costs the Eggleston Motor Hotel $250 per week. The business pays its phone service bill on the fifteenth day of each month, but it prepares its financial statements at the end of each month. Which of the following types of adjustments is required to ensure the accuracy of the Eggleston Motor Hotel s financial statements? a. a liability/expense adjustment b. an asset/expense adjustment c. a liability/revenue adjustment d. an asset/revenue adjustment 9. Jaime failed to make adjusting entries to account for the use of prepaid insurance for his hotel. This mistake affects which of the following financial statements? a. the balance sheet b. the income statement c. the statement of cash flows d. a and b Page 4 of 11

5 Chapter 4 - Completing the Accounting Cycle Pp Which of the following steps in the accounting cycle is performed immediately before preparing adjusting entries? a. analyzing transactions b. recording and posting closing entries c. preparing a trial balance d. preparing the financial statements 2. The accounting cycle step that involves summarizing the ledger accounts to prove the equality of debits and credits is called: a. posting adjusting entries. b. preparing a trial balance. c. preparing the financial statements. d. analyzing transactions. 3. Which of the following serves as the link between the income statement and the balance sheet? a. the statement of cash flows b. the statement of owners equity c. the adjusted trial balance d. the post-closing trial balance 4. Trish is preparing a financial statement for which she needs the balances of the owners capital and drawing accounts. Which statement is Trish most likely preparing? a. an income statement b. an adjusted trial balance c. a statement of owners equity d. a statement of cash flows 5. Ivan is making several entries into the general journal at the restaurant where he serves as an accountant. The main difference between entries for routine business transactions and adjusting entries is that: a. entries for business transactions are made more often than adjusting entries. b. adjusting entries are usually higher than entries for routine business transactions. c. adjusting entries are usually lower than entries for routine business transactions. d. entries for business transactions usually affect fewer kinds of accounts than adjusting entries. 6. Why do accountants close accounts? a. to ensure that the general ledger is the only remaining ledger account b. to test the balance of debits and credits c. to consolidate revenues and expenses into one net figure d. to obtain more detailed information on revenues and expenses 7. Closing the Interest Income account usually involves: a. debiting a liabilities account. b. crediting an asset account. c. crediting an expense account. d. crediting the Owners Equity account. 8. All of the following are examples of accounts that would be listed on a worksheet except: a. Income Summary. b. Rooms Revenue. c. Interest Expense. d. Depreciation Expense. 9. Which of the following items do accountants neither publish nor give to managers? a. the statement of owner s equity b. the worksheet c. the balance of the owner s capital account d. the income statement Page 5 of 11

6 Chapter 5 - Income Statement Pp The Expenses section of an income statement includes which of the following? a. outflows related to the accounting period and expenses that were incurred in the process of producing revenue b. the amounts of prepaid utility fees and allowances c. inflows related to the accounting period and expenses that were incurred in the process of producing revenue d. depreciation and interest income 2. A certain reservationist receives a call and makes a reservation for one room night for a future hotel guest. The traveler uses a credit card to guarantee the reservation, but no amount is charged to the traveler s account. From an accounting standpoint, a sale and the event. a. has been made; should be recorded b. has not been made; should be recorded c. has been made; should not be recorded d. has not been made; should not be recorded 3. Hospitality managers are held responsible primarily for: a. the profitability of the operation they manage. b. increasing gains on assets sold. c. decreasing losses on assets sold. d. b and c. 4. Stormin Norman s Resort sold two golf carts for a total of $1,000 in order to raise cash. The resort s managers had originally bought the carts for a total of $6,000. The accumulated depreciation on both carts was $4,000. The resort s managers will have to record a of on the sale of these carts. a. gain; $3,000 b. loss; $500 c. loss; $1,000 d. loss; $4, Which of the following groups would be considered internal users of a company s income statement? a. investors b. creditors c. operation managers d. suppliers 6. Earnings per share is calculated only for: a. sole proprietorships. b. partnerships. c. restaurant corporations. d. corporations. 7. Cami s floating casino achieved an earnings per share of $12 last accounting period. If her firm has 1,500 shareholders and 6,000 shares of common stock outstanding, how much net income did the firm earn last period? a. 4 shares b. $5,500 c. $60,000 d. $72,000 Page 6 of 11

7 8. The Uniform System of Accounts for the Lodging Industry, in its ninth revised edition, could be described as any of the following except: a. a set of tables that indicate how much net income a property can expect to earn each year b. a turnkey system for new entrants into the hospitality industry. c. a standardized accounting system. d. an instrument that allows for a more reasonable comparison of the operational results of similar hospitality firms. 9. Rent, property taxes, and insurance are all independent of hotel occupancy rates; they vary only with the passage of time. For this reason, these expenses are called: a. management fees. b. departmental income. c. costs of sales. d. fixed charges. 10. On which of the following financial statements would you expect to find a line item for correcting errors that were made in a previous financial statement? a. departmental operations report b. the income statement c. the balance sheet d. the statement of retained earnings Chapter 6 - Balance Sheet P Which of the following financial reports most completely reflects the financial position of a business at a given point in time? a. balance sheet b. statement of cash flows c. income statement d. statement of retained earnings 2. Which of the following financial statements would show how quickly a hospitality operation could convert assets into cash? a. income statement b. balance sheet c. statement of cash flows d. aging of accounts payable report 3. Cecil, the general manager of a hotel, picks up a balance sheet from the end of the previous fiscal year, which ended December 31. He is gathering information to prove to creditors that the hotel is able to pay its debts. If the current date is July 14: a. the balance sheet is too outdated to be helpful. b. the balance sheet s assets may need to be updated. c. Cecil may use the balance sheet for one-and-a-half more months, after which the statement will be useless. d. a few corrections to the footnotes may be all that is necessary to update the statement. 4. All of the following items are shown on the balance sheet of a hospitality company except: a. accounts payable. b. accounts receivable. c. purchased good will. d. customer loyalty value. Page 7 of 11

8 5. Among current assets, the category Cash includes all of the following except: a. checking and savings accounts. b. bank accounts with restricted use. c. certificates of deposit. d. house banks. 6. All of the following are considered current liabilities except: a. deferred income taxes. b. advance deposits on rooms. c. payables resulting from the purchase of services. d. obligations relating to fixed asset purchases to be paid in the current period. 7. Which of the following would be included in the Investments category on the balance sheet? a. all marketable securities b. property not currently used in operations c. notes receivable due within twelve months d. leasehold improvements 8. The class of assets on the balance sheet that includes land, buildings, and furnishings that are in use is: a. fixed assets. b. property and equipment. c. investments. d. liabilities. 9. Which of the following statements best summarizes the role of footnotes on a balance sheet? a. Footnotes should explain balance sheet figures and help users interpret the balance sheet. b. Footnotes should contradict balance sheet information. c. Footnotes are meant to provide the details that the balance sheet presents only in summary form. d. Footnotes soften the disclosure of financial statements. 10. Which of the following statements about consolidated financial statements is true? a. Consolidated financial statements make footnotes unnecessary. b. Consolidated financial statements are required of all companies in the United States. c. The subsidiaries of corporations cease to be separate legal entities when their parent corporations use consolidated financial statements. d. Generally, most of the voting stock of a subsidiary should be owned by the holding company or by the same interests if the associated companies financial statements are to be combined. Chapter 8 - Cash Pp At the Seldom Inn, cash is deposited daily, employees use a voucher system, and cash-handling duties are segregated. These practices and policies are most likely in place to achieve: a. high profitability. b. internal control over assets. c. greater control over expenses. d. greater accuracy in recordkeeping. Page 8 of 11

9 2. All of the following would be considered Cash or Cash Equivalents for accounting purposes except: a. furniture and fixtures. b. credit card slips. c. money orders. d. certificates of deposit. 3. When a bill is due to be paid, an accounting employee pulls a voucher from the file and prepares a for the treasurer to sign. a. cash receipts; check b. tickler; voucher c. registration; report d. tickler; check 4. Petty cash is usually shown on the balance sheet as: a. Cash. b. Petty Cash. c. a noncurrent asset. d. a liability. 5. Once a firm establishes a petty cash fund, it has than it did before. a. more owners equity b. higher expenses c. less money in demand deposits d. less liquidity 6. Cyril, a restaurant accountant, notices that there is a difference between the bank statement s balance and the balance in the restaurant records for the restaurant s account. All of the following are common causes for this difference except: a. credits for interest earned or receivables collected. b. NSF checks. c. allowances made for doubtful accounts. d. outstanding checks. 7. To prepare a bank reconciliation, an accounting employee may have to perform any of the following except: a. add deposits in transit to the balance per bank. b. deduct amounts of NSF checks from the balance per books. c. check the equality of the adjusted bank balance and the adjusted book balance. d. deduct interest earned from the balance per books. 8. When a supplier s invoice indicates terms of 2/15, n/30, and it has just been delivered, the hospitality firm will have to pay full price if payment is not made: a. after 2 days. b. after 15 days. c. after 30 days. d. within the number of days that it took to ship the goods or supply the services purchased. Page 9 of 11

10 9. A restaurant submits credit card slips that total $1,000 to American Express for payment. Suppose that American Express charges a 4 percent processing fee. The amount the hotel will receive is: a. $1,060. b. $960. c. $940. d. $ Cash forecasting is an aspect of which of the following? a. conducting audits b. preparing a bank reconciliation c. collecting franchise fees d. an integrated cash management system Chapter 17 - Statement of Cash Flows Pp Which of the following would best be described as short-term, highly liquid investments? a. cash inflows b. cash outflows c. cash equivalents d. financing activities 2. All of the following are sections of the statement of cash flows except the: a. Operating Activities section. b. Earning Activities section. c. Financing Activities section. d. Investing Activities section. 3. Proceeds from the issuance of capital stock would appear under the section of the statement of cash flows. a. Noncash b. Operating Activities c. Financing Activities d. Earning Activities 4. The statement of cash flows is prepared according to the basis of accounting. a. cash b. accrual c. double-entry d. direct 5. Accrued Payroll was $10,000 and $15,000 at the beginning and end of 20X4, respectively. The payroll expense for 20X4 totaled $520,000. Cash outflow for payroll during 20X4 totaled: a. $525,000. b. $520,000. c. $515,000. d. $510, Sales of the Randolf Inn were $2,000,000 for 20X3. Accounts Receivable Trade totaled $140,000 and $160,000 at the beginning and end of 20X3, respectively. What were the estimated cash receipts from sales for 20X3? a. $2,020,000 b. $2,000,000 c. $1,980,000 d. $20,000 Page 10 of 11

11 7. The process of preparing the Investing Activities section of a statement of cash flows involves a focus on: a. net income from the income statement. b. owners equity from the statement of retained earnings. c. noncurrent assets from the balance sheet. d. current assets from the balance sheet. 8. The Wilson Inn sold 10,000 shares of $5 par value common stock for $30 per share. How much would be reported as sale of common stock on the statement of cash flows? a. $15,000 b. $50,000 c. $25,000 d. $300, The River Hotel s Dividends Payable account at the beginning and end of 20X3 totaled $40,000 and $35,000, respectively. Assume that dividends declared during 20X3 totaled $65,000. The dividends paid by the River Hotel during 20X3 totaled: a. $70,000. b. $65,000. c. $45,000. d. $15, The Norumbega Villa Resort sold investments that originally cost it $300,000 for $200,000. How would this transaction affect the Investing Activities section of its statement of cash flows? a. as a $200,000 cash inflow b. as a $200,000 cash outflow c. as a $200,000 noncash transaction d. no effect on the Investing Activities section Page 11 of 11