1st Exam, Practice Test Ch 1,2,3 PDF

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SALEM STATE COLLEGE ACC106 – FINANCIAL ACCOUNTING 1ST EXAM – CHAPTERS 1, 2, 3 Practice Test PROFESSOR PAUL F. MCGEE, CPA Name____________________________________ Please indicate the best correct answer by circling the appropriate letter. 1. A small neighborhood barber shop that is operating by its owner would likely be organized as a. joint venture b. partnership c. corporation d. sole proprietorship 2. Which account would be defined as a current asset? a. b. c. d.

Supplies Equipment Retained earnings Long-term investments

3. Which of the following statements is true? a. b. c. d.

Amounts received from issuing stock are revenues Amounts paid out as dividends are not expenses Amounts paid out as dividends are reported on the income statement Amounts received from issued stock are reported on the income statement

4. Which of the following is not a liability? a. b. c. d.

Unearned revenue Accounts payable Accounts receivable Salaries payable

5. If total liabilities decreased by $25,000 and stockholders’ equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during the same period? a. b. c. d.

$20,000 decrease $20,000 increase $25,000 increase $30,000 increase

6. Which of the following would not be considered an external user of accounting data for the Jullian Company? a. b. c. d.

Internal Revenue Service Agent Management Creditors Customers

7. A current asset is a. b. c. d.

the last asset purchased by a business an asset which is currently being used to produce a product or service usually found as a separate classification in the income statement expected to be converted to cash or used in the business within one year

8. Working capital is calculated by taking a. b. c. d.

current assets plus current liabilities current assets minus current liabilities current assets divided by current liabilities current assets times current liabilities

9. Using the following balance sheet and income statement data, what is the current ratio? Current assets $ 7,000 Net income $12,000 Current liabilities 4,000 Stockholders’ equity 27,000 Average assets 40,000 Total liabilities 9,000 Total assets 30,000 Average common shares outstanding was 10,000 a. b. c. d.

1.75: 1 1.6: 1 0.57:1 2:1

10. Given the following information, compute earnings per share: Sales revenue Cost of Goods Sold Net income Preferred dividends Average shares outstanding a. $1.00 per share b. $2.00 per share c. $3.00 per share

$2,000,000 900,000 $ 500,000 -0500,000 shares

d. $4.00 per share 11. Given the following information how much is the current assets? Cash Accounts Receivable Accounts Payable Prepaid insurance Equipment a. b. c. d.

$10,000 25,000 30,000 40,000 100,000

$35,000 $65,000 $75,000 $175,000

12. Liabilities are generally classified on a balance sheet as a.small liabilities and large liabilities. b.present liabilities and future liabilities c.tangible liabilities and intangible liabilities. d.current liabilities and long-term liabilities.

13. Credits a. b. c. d.

Increase assets and decrease liabilities Decrease assets and increase liabilities Increase revenues and increases expenses Increase liabilities and increases expenses

14. A list of accounts and their balances at a given time is called a(n) a. b. c. d.

journal posting trial balance balance sheet

15. A $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a a. b. c. d.

debit to note payable credit to cash credit to notes receivable credit to machinery

16. Economic events that require recording in the financial statements are called a. computer systems

b. transaction analysis c. accounting transactions d. accounting information system 17. A CPA receives a $2,000 check from a client and the CPA has not done any work yet. The entry to record this transaction would be a. No entry b. Cash

2,000 Revenue

2,000 2,000 Unearned revenue 2,000 d. Accounts receivable 2,000 Unearned revenue 2,000 c. Cash

18. Stockholder’s Equity is increase by a. b. c. d.

dividends net income expenses liabilities

19. An account will have a credit balance if the a. b. c. d.

credits exceed the debits first transaction entered was a credit debits exceed the credits last transaction entered was a credit

20. Morgan Realty Corporation had the following balance sheet accounts and balances: Accounts payable $15,000 Accounts receivable ? Building 7,000 Cash 10,000

Common stock Equipment Land Retained earnings

? $15,000 8,000 8,000

If the balance of the Common Stock account were $20,000, what would be the balance in the accounts receivable account? a. b. c. d.

$3,000 $6,000 $10,000 $12,000

Please use the blue book provided to answer the following problems. 1. Indicate whether the following accounts are an asset (A), liability (L), stockholder’s equity (SE), revenue (R), or expenses (E) a. Cash b. Service revenue c. Retained earnings d. Salary expense e. Unearned revenue f. Long-term debt g. Accounts receivable h. Accounts payable i. Prepaid expense j. Common stock k. Professional fees expense l. Salaries payable m. Supplies 2. Prepare the following journal entries (without explanations) Mar 1 Mar 2 Mar 2 Mar 3

Stockholders invested $100,000 in exchange of common stock of a corporation Hired a secretary at a salary of $400 per week. Paid office rent for the month, $1,000 Advertised the opening of business, paying advertising expenses of $1,500 in cash Mar 4 Purchase supplies on account, $2,000 Mar 7 Paid cash $3,000 for a one-year insurance policy Mar 9 Received $10,000 for services rendered Mar 10 Declared and paid a $600 cash dividend Mar 25 Paid the receptionist, $1,000 Mar 27 Paid for supplies purchased on March 4 Mar 28 Billed $2,500 for services rendered Mar 30 Purchased $3,000 of furniture, paying $1,000 in cash and the balance on account Mar 31 Paid $150 for utilities

3. The following items are taken from the financial statements of Cheung Company for yearend December 31, 2017: Cash Accounts receivable Prepaid insurance Equipment Accumulated depreciation, equipment Accounts payable Salaries payable Common stock Retained Earnings, (beginning of year) Dividends Service revenue Repair expense Depreciation expense Insurance expense Salaries expense Utilities expense

13,600 14,200 3,500 66,000 17,600 13,300 3,000 13,000 26,000 12,000 82,000 1,800 2,600 2,200 37,000 2,000

Required: Prepare an income statement, for Cheung Corporation for the year ended December 31, 2017....