1 MULTIPLE CHOICE 4-2 I certify that I am taking this examination alone and am not receiving any help with it except through the use of my textbook and notes. I have not been given any of the questions in advance, nor have I received any other unfair advantage that might bias the result of this outcome assessment of my learning. (Either of the answers will be marked as correct). a. True b. False 2 MULTIPLE CHOICE 4-39 Which of the accounts below would be closed by posting a debit to the account? a. Fees Earned b. Rent Expense c. Jeff Ritter, Drawing d. Unearned Revenue 3 MULTIPLE CHOICE 4-49 The journal entry to close the Fees Earned (balance = $100), and Rent Revenue (balance = $25) accounts on December 31st during the closing process would be: a. c. b. d. 4 MULTIPLE CHOICE 5-7 Which of the following is not an element of Internal Controls? a. ensure that laws and regulations are followed 5 MULTIPLE CHOICE 5-25 b. to protect assets from misuse c. to ensure that the company's policies are in place to maximize profits d. ensure the accuracy of business information A company returns defective supplies that were purchased for cash and receives a cash refund. This transaction should be recorded in the a. Cash Receipts journal b. Purchases journal c. Revenue journal d. General journal 6 MULTIPLE CHOICE 5-37 If the individual subsidiary ledger accounts of Accounts Receivable and Accounts Payable contained the following data: Andy Always Delivers - Vendor - $125 credit balance Betty Better Sales - Customer - $275 debit balance Charlie's Castle Construction - Customer - $375 - debit balance Debbie's Donuts and Supplies - Vendor - $75 - credit balance The Accounts Receivable (A/R) controlling account balance and the Accounts Payable (A/P) controlling account balances would be: a. A/R - $400, A/P - $450 7 MULTIPLE CHOICE 5-40 b. A/R - $650, A/P - $200 c. A/R - $450, A/P - $400 In an effort to maximize internal controls, the function of recording revenues and collecting cash is separated a. to make it difficult for improper disbusements to be made through fraudulent checks. b. to ensure that the employees are not overworked. c. to make it difficult for one person to embezzle cash collections. d. A/R - $200, A/P - $650 d. to ensure that all the sales on account are properly recorded. PAGE 1
8 MULTIPLE CHOICE 5-49 In which journal would adjusting entries be found? a. Cash Receipts Journal b. Cash Payments Journal c. General Journal d. General Ledger 9 MULTIPLE CHOICE 5-69 Which of the following is not an advantage of a computerized accounting systems? a. Automatic posting to the general ledger accounts. c. Reduced equipment and training costs. b. Financial statements are easy to generate. d. Improves speed and accuracy. 10 MULTIPLE CHOICE 6-45 Using a perpetual inventory system, the entry made by the merchant to record the return of merchandise to the vendor includes a a. credit to Sales 11 MULTIPLE CHOICE 6-52 b. credit to Accounts Payable c. debit to Cost of Goods Sold If the buyer is to pay the transportation costs of delivering merchandise, delivery terms are stated as a. FOB buyer b. FOB destination c. FOB shipping point d. FOB n/30 12 MULTIPLE CHOICE 6-84 d. credit to Merchandise Inventory The Paula Corp. sold merchandise for cash, $6,900. The cost of the merchandise sold was $4,250. What journal entry(s) wouuld be made to record this transaction? (COMS stands for "Cost of Merchandise Sold"). a. d. b. e. c. 13 MULTIPLE CHOICE 8-38 Accompanying the bank statement was a debit memorandum for bank service charges. On the bank reconciliation, the item is a. an addition to the balance per bank statement c. a deduction from the balance per bank statement b. a deduction from the balance per depositor's records d. an addition to the balance per depositor's records 14 MULTIPLE CHOICE 8-42 Receipts from cash sales of $9,500 were recorded incorrectly in the cash receipts journal as $5,900. This item would be included on the bank reconciliation as a(n) a. addition to the balance per bank statement c. addition to the balance per depositor's records b. deduction from the balance per depositor's records d. deduction from the balance per bank statement PAGE 2
15 MULTIPLE CHOICE 8-69 A $100 petty cash fund contains $92 in petty cash receipts, and $6.50 in currency and coins. The journal entry to record the replenishment of the fund would include a a. credit to Cash for $92 16 MULTIPLE CHOICE 1-6 b. credit to Petty Cash for $93.50 c. debit to Cash Short and Over for $1.50 d. credit to Cash Short and Over for $1.50 Which of the following best describes accounting? a. is an information system that provides reports to stakeholders b. is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements 17 MULTIPLE CHOICE 1-20 c. is of no use by individuals outside of the business d. records economic data but does not communicate the data to users according to any specific rules Which of the following is the best description of accounting's role in business? a. Accounting provides stockholders with information regarding the market value of the company's stocks. c. Accounting is not responsible for providing any form of information to stakeholders. That is the role of the Information Systems Department. b. Accounting provides information to managers to operate the business and to other stakeholders to make decisions regarding the economic condition of the company. 18 MULTIPLE CHOICE 1-27 d. Accounting provides creditors and banks with information regarding the credit risk rating of the company. The initials GAAP stand for a. Generally Accepted Plans 19 MULTIPLE CHOICE 1-36 b. General Accounting Procedures c. Generally Accepted Accounting Practices d. Generally Accepted Accounting Principles is the authoritative body having the primary responsibility for developing accounting principles. a. AICPA b. FASB c. SEC d. IRS 20 MULTIPLE CHOICE 1-48 Which of the following is not a business transaction? a. make a sales offer 21 MULTIPLE CHOICE 1-52 b. pay for supplies c. receive cash for services to be rendered later d. sell goods for cash Revenues are reported when a. a contract is signed 22 MULTIPLE CHOICE 1-78 b. cash is received from the customer c. work is completed on the job d. work is begun on the job There are four transactions that directly affect Owner's Equity. Which are the two transactions that decrease Owner's Equity? a. Owner's investments and revenues 23 MULTIPLE CHOICE 1-84 b. Owner's withdrawals and expenses c. Owner's investments and expenses d. Revenues and expenses The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n) a. balance sheet b. statement of owner's equity c. prior period statement d. income statement PAGE 3
24 MULTIPLE CHOICE 2-9 An account is said to have a debit balance if a. there are more entries on the debit side than on the credit side 25 MULTIPLE CHOICE 2-13 b. its normal balance is debit without regard to the amounts or number of entries on the debit side c. the amount of the debits exceeds the amount of the credits d. the first entry of the accounting period was posted on the debit side Which of the following groups of accounts have a normal debit balance? a. liabilities, expenses b. assets, expenses c. revenues, liabilities, capital d. capital, assets 26 MULTIPLE CHOICE 2-34 Office supplies were sold by J's Appliance Repair at cost to another repair shop, with cash received. Which of the following entries for J's Appliance Repair records this transaction? a. Office Supplies, debit; Cash, credit c. Cash, debit; Office Supplies, credit b. Accounts Payable, debit; Office Supplies, credit d. Office Supplies, debit; Accounts Payable, credit 27 MULTIPLE CHOICE 2-42 Which of the following entries records the billing of patients for services performed? a. Accounts Receivable, debit; Fees Earned, credit c. Accounts Payable, debit; Cash, credit b. Fees Earned, debit; Cash, credit d. Fees Earned, debit; Accounts Receivable, credit 28 MULTIPLE CHOICE 2-59 XYZ Hospital purchased X-ray equipment for $3,000, paid $750 down, with the remainder to be paid later. The correct entry would be a. d. b. e. c. 29 MULTIPLE CHOICE 3-4 Using accrual accounting, expenses are recorded and reported a. when they are incurred, whether or not cash has been paid 30 MULTIPLE CHOICE 3-31 b. only if a bill has been received. c. only if they are incurred and paid at the same time d. at the time they are paid whether they have been incurred or not What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance account balance before adjustment, $15,500, and unexpired amounts per analysis of policies, $4,500? a. debit Insurance Expense, $15,500; credit Prepaid Insurance, $15,500 b. debit Insurance Expense, $11,000; credit Prepaid Insurance, $11,000 c. debit Insurance Expense, $4,500; credit Prepaid Insurance, $4,500 d. debit Prepaid Insurance, $11,500; credit Insurance Expense, $11,500 PAGE 4
31 MULTIPLE CHOICE 3-33 A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry necessary at the end of the fiscal period ending on Thursday is a. debit Salary Expense, $16,000; credit Salaries Payable, $16,000 32 MULTIPLE CHOICE 3-54 b. debit Salaries Payable, $16,000; credit Cash, $16,000 c. debit Drawing, $16,000; credit Cash, $16,000 d. debit Salary Expense, $16,000; credit Drawing, $16,000 Unearned rent, representing rent for the next six months' occupancy, would be reported on the landlord's balance sheet as a(n) a. asset b. liability c. capital account d. revenue 33 MULTIPLE CHOICE 3-55 Accrued expenses are ordinarily reported on the balance sheet as a. assets b. prepaid expenses c. liabilities d. fixed assets 34 MULTIPLE CHOICE 4-32 After posting the second closing entry to the income summary account, the balance will be equal to a. revenues for the period b. zero. c. owner's equity. d. the net income or (loss) for the period. 35 MULTIPLE CHOICE 4-47 A summary of selected ledger accounts appear below for Ted's Auto Services for the 2007 calendar year end. Net income for the period is a. $17,000 b. $7,000 c. $15,000 d. $22,000 36 MULTIPLE CHOICE 4-49 The journal entry to close the Fees Earned, $100, and Rent Revenue, $25, accounts on December 31st during the closing process would be: a. c. b. d. 37 MULTIPLE CHOICE 5-7 Which of the following is not an element of Internal Controls? a. ensure that laws and regulations are followed b. to protect assets from misuse c. to ensure that the company's policies are in place to maximize profits d. ensure the accuracy of business information PAGE 5
38 MULTIPLE CHOICE 5-14 The controlling account in the general ledger that summarizes the debits and credits to the individual customers accounts in the subsidiary ledger is entitled a. Accounts Payable b. Fees Earned c. Purchases d. Accounts Receivable 39 MULTIPLE CHOICE 6-4 What is the term applied to the excess of net revenue from sales over the cost of merchandise sold? a. gross sales b. income from operations c. gross profit d. net income 40 MULTIPLE CHOICE 6-8 Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as a. other expenses b. selling expenses c. general expenses d. administrative expenses 41 MULTIPLE CHOICE 6-16 The primary difference between a periodic and perpetual inventory system is that a a. periodic system records the cost of the sale on the date the sale is made c. periodic system determines the inventory on hand only at the end of the accounting period b. periodic system keeps a record showing the inventory on hand at all times 42 MULTIPLE CHOICE 6-35 d. periodic system provides an easy means to determine inventory shrinkage Merchandise with a sales price of $500 is sold on account with term 2/10, n/30. The journal entry to record the sale would include a a. Debit to Accounts Receivable for $490 43 MULTIPLE CHOICE 6-52 b. debit to Cash for $500 c. Credit to Sales for $500 If the buyer is to pay the transportation costs of delivering merchandise, delivery terms are stated as a. FOB buyer b. FOB destination c. FOB shipping point d. FOB n/30 44 MULTIPLE CHOICE 6-68 Based on the following information, the entry for April 10, 2007 would include? d. Debit to Sales Discounts for $10 1. $5,000 of merchandise inventory was ordered on April 2, 2007 2. $2,000 of this merchandise was received on April 5, 2007 3. On April 6, 2007, an invoice dated April 4, 2007, with terms of 2/10, net 30 for $2,150 which included a $150 prepaid freight cost, was received. 4. On April 10, 2007, $500 of the merchandise was returned to the seller. a. Credit to Accounts Payable $500 b. Debit to Purchases Returns $500 c. Debit to Merchandise Inventory $500 d. Credit to Merchandise Inventory $500 PAGE 6
45 MULTIPLE CHOICE 6-84 The Paula Corp. sold merchandise for cash, $6,900. The cost of the merchandise sold was $4,250. The journal entry(s) to record this transaction would be a. d. b. e. c. 46 MULTIPLE CHOICE 8-64 A $100 petty cash fund has cash of $18 and receipts of $80. The journal entry to replenish the account would include a a. credit to Petty Cash for $84. 47 MULTIPLE CHOICE 1-32 b. debit to Cash for $80. c. debit to Cash Over and Short for $2. d. credit to Cash for $80 The objectivity principle requires that a. business transactions must be consistent with the objectives of the entity b. accounting principles must meet the objectives of the Security and Exchange Commission c. amounts recorded in the financial statements must be based on independently verifiable evidence d. the Financial Accounting Standards Board must be fair and unbiased in its deliberations over new accounting standards 48 MULTIPLE CHOICE 1-38 Aztec Company is selling a piece of land adjacent to their business. An appraisal reported the market value of the land to be $100,000. The Majestic Company initially offered to buy the land for $87,000. The companies settled on a purchase price of $95,000. On the same day, another piece of land on the same block sold for $102,000. Under the cost concept, what is the amount that will be used to record this transaction in the accounting records? a. $100,000 b. $95,000 c. $87,000 d. $102,000 49 MULTIPLE CHOICE 3-2 The matching concept a. determines that expenses related to revenue be reported at the same time the revenue is reported b. addresses the relationship between the journal and the balance sheet c. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance d. determines whether the normal balance of an account is a debit or credit PAGE 7
50 MULTIPLE CHOICE 3-16 Which of the following is not a characteristic of accrual basis of accounting? a. Revenues and expenses are reported in the period in which cash is received or paid b. Supports the matching concept d. All of these choices. 51 MULTIPLE CHOICE 3-78 c. Revenues are reported in the income statement in the period in which they are earned The adjusting entry to adjust supplies was omitted at the end of the year. This would effect the income statements by having a. expenses understated and therefore net income understated b. expenses overstated and therefore net income understated c. revenues understated and therefore net income understated d. expenses understated and therefore net income overstated PAGE 8
ANSWER KEY Copy of Master Exam Bank - Elements of Accounting 1. a,b 2. a 3. c 4. c 5. a 6. b 7. c 8. c 9. c 10. d 11. c 12. a 13. b 14. c 15. c 16. a 17. b 18. d 19. b 20. a 21. c 22. b 23. d 24. c 25. b 26. c 27. a 28. b 29. a 30. b 31. a 32. b 33. c 34. d 35. a 36. c 37. c 38. d 39. c 40. b 41. c 42. c 43. c 44. d 45. a 46. c 47. c 48. b 49. a 50. a 51. d ANSWER KEY - Page 1