Accounting Test 2 - note PDF

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Accounting Test Questions 81. An NSF check returned by the bank should be entered in the depositor's accounting records by a debit to: 7777 A. Accounts Receivable. B. An expense account. C. Cash. D. Cash Over and Short 78. A bank reconciliation explains the differences between: A. Cash receipts and cash disbursements for the period. B. The balance of cash in the bank and the budgeted expenditures for the upcoming accounting period. C. The balance per bank statement and the cash balance per the accounting records of the depositor. D. The balance per bank statement and cash expected to be on hand according to the cash forecast. 777 131. A bank statement shows a balance of $8,445 at June 30. A bank reconciliation is prepared and includes outstanding checks of $2,790, deposits in transit of $1,350, and a bank service charge of $30. Among the paid checks returned by the bank was check no. 900 in the amount of $600, which the company had erroneously recorded in the accounting records as $60. The "adjusted cash balance" at June 30 is: 7777 A. $6,975. B. $6,465. C. $7,005. D. $7,575. The bank statement, however, showed a balance of $3,900 at the same date. The only reconciling items consisted of a $700 deposit in transit, a bank service charge of $7, and a large number of outstanding checks. 7777 132. Refer to the above data. What is the "adjusted cash balance" at June 30? A. $3,900. B. $3,093 C. $7,600 D. Some other amount.

82. In preparing a bank reconciliation, a service charge shown on the bank statement should be: 77777 A. Added to the balance per the bank statement. B. Deducted from the balance per the bank statement. C. Added to the balance per the depositor's records. D. Deducted from the balance per the depositor's records. 83. Enclosed with the bank statement received by Sydney Company at October 31 was an NSF check for $300. No entry has yet been made by the company to reflect the bank's action in charging back the NSF check. During preparation of the bank reconciliation, the NSF check should be: 77777 A. Deducted from the balance per the depositor's records. B. Deducted from the balance per the bank statement. C. Added to the balance per the bank statement. D. Added to the balance per the depositor's records.

133. Refer to the above data. What is the total amount of the outstanding checks at June 30? A. $1,513. B. $1,486. C. $1,507. D. Some other amount. 134. Refer to the above data. Upon completion of the bank reconciliation, a journal entry will be required to update the depositor's accounting records. This entry will include: A. a credit to Cash for $700. B. a debit to Cash for $700 C. a debit to Cash for $7 D. a debit to Bank Service Charge Expense for $7

135. Refer to the above data. What is the adjusted cash balance in the September 30 bank reconciliation? A. $16,237. B. $12,580. C. $9,513. D. $5,856.

136. Refer to the above data. What is the amount of the deposit in transit? A. $5,856. B. $9,513. C. $3,067. D. $3,083.

137. Cardinal Company's bank statement showed a balance at May 31 of $180,974. The only reconciling items consisted of a large number of outstanding checks totaling $51,847. At May 31, what balance should Cardinal's Cash account show? A. $232,821 B. $129,127 C. $77,280 D. Some other amount Michael uses its periodic inventory system and the following information is available:

87. What is the cost of goods sold? A. $9,800. B. $33,600. C. $32,200. D. $43,400. 88. What is the gross profit? A. $9,800 B. $33,600 C. $32,200 D. $43,400 72. The Sales Returns and Allowances account is debited when: A. Merchandise is returned to a supplier. B. Merchandise is returned by a customer. C. Payment is made to a supplier within the discount period. D. An account receivable is collected within the discount period. 73. If sales discounts are shown as a separate item in financial statements, they should be shown as a(n): A. Deduction from accounts receivable. B. Deduction from gross sales revenue. C. Operating expense. D. Current liability. 74. All of the following accounts normally have debit balances except: A. Transportation-in. B. Cost of Goods Sold. C. Sales Returns & Allowances. D. All of the above accounts normally have debit balances.

75. The gross profit margin: A. Is the dollar amount of gross profit expressed as a percentage of net sales. B. May indicate popular products and successful marketing strategies. C. Can be computed for the business as a whole or for specific sales departments. D. All of the above.

76. The basic purpose of offering customers cash discounts such as 2/10, n/30 is to: A. Increase sales. B. Reduce net sales. C. Speed up the collection of accounts receivable. D. Focus management's attention upon customers that fail to take advantage of all available cash discounts. 64. Inventory shrinkage is caused by: A. Shoplifting. B. Breakage. C. Spoilage. D. All three of the above. 65. Which of the following statements about a periodic inventory system is not correct? A. These systems are used primarily by small businesses with manual accounting systems. B. The system does not include an up-to-date inventory ledger. C. The balance in the Inventory account remains unchanged until the end of the period. D. The Cost of Goods Sold account is updated as sales transactions occur. 66. The cost of the transportation of inventory purchased: A. Are expensed in the current period. B. Increases income. C. Becomes part of the cost of inventory. D. Reduces the sales price.

67. A company's gross profit rate is computed by dividing: A. Net sales by gross profit. B. Cost of goods sold by gross profit. C. Gross profit by the cost of goods sold. D. None of the above. 68. Regal Artworks Co. records purchases net of all available purchase discounts. If the company makes payment after the discount has expired, the entry to record the payment should include a: A. Debit to Purchase Discounts Lost. B. Credit to Purchase Discounts Lost. C. Debit to Sales Discounts. D. Credit to Sales Discounts.

39. Which of the following businesses is likely to have the shortest operating cycle? A. A food store. B. A department store. C. An art store. D. A car store. 35. Merchandising companies that are small and do not use a perpetual inventory system may elect to use: A. A physical inventory system B. A periodic inventory system C. An inventory shrinkage method D. An inventory subsidiary ledger system.

36. Which of the following would not tend to make a manufacturer choose a perpetual inventory system? A. Management wants information about quantities of specific products B. A low volume of sales transactions and a computerized accounting system C. A high volume of sales transactions and a manual accounting system D. Items in inventory with high per unit costs 37. Which of the following should not be classified as inventory in the balance sheet of a large automobile dealership? A. Pickup trucks offered for sale. B. Used cars taken in trade and offered for sale on the company's used-car lot. C. Spark plugs, oil filters, and other parts which are intended for use by the service department in repairing and servicing customers' cars. D. "Company cars" provided to specific company executives for their personal use.

32. Sales discounts and allowances: A. When properly recorded will reduce net profit. B. When properly recorded will increase net profit. C. Will not affect net profit. D. Are always immaterial and need not be recorded.

36. If the ending inventory is overstated in the current year: A. Net income will also be overstated in the current year. B. Next year's beginning inventory will also be overstated. C. Next year's net income will be understated. D. All three of the above statements are correct.

37. In a periodic inventory system, recording a sale on account involves debiting which of the following accounts? A. Only Accounts Receivable. B. Accounts Receivable and Inventory. C. Accounts Receivable and Cost of Goods Sold. D. Accounts Receivable, Cost of Goods Sold, and Inventory. 38. In a periodic inventory system, recording a sale on account involves crediting which of the following accounts? A. Only Sales. B. Sales and Inventory. C. Sales and Cost of Goods Sold. D. Sales, Inventory, and Cost of Goods Sold. 33. In which of these three inventory cost flow assumptions is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold? A. LIFO. B. FIFO. C. Specific identification. D. All three assumptions. 34. In a perpetual inventory system, two entries are normally made to record each sales transaction. The purpose of these entries is best described as follows: A. One entry recognizes the sales revenue and the other recognizes the cost of goods sold. B. One entry records the purchase of merchandise and the other records the sale. C. One entry records the cost of goods sold and the other reduces the balance in the Inventory account. D. One entry updates the subsidiary ledger and the other updates the general ledger. 35. Which of the four inventory cost flow assumptions is best suited to inventories of highpriced, low-volume items? A. LIFO. B. FIFO. C. Average. D. Specific identification.

27. Inventory A. Consists of all goods owned and held for sale to customers. B. Is a non-financial asset C. Both A and B D. Neither A nor B 28. The lower of cost or market rule may be applied by comparing the market value of the inventory to the cost of the inventory based on: A. Individual inventory items B. Major inventory categories C. The entire inventory D. All of the above 29. Which of the following is not considered an acceptable inventory cost method according to GAAP? A. First-in, first-out B. First-in, last-out C. Last-in, first-out D. Average cost 30. When prices are increasing which inventory method will produce the highest cost of goods sold? A. FIFO B. LIFO C. Average D. Cost of goods sold will not change 31. Kent Company has used the same inventory method for many years. This is an example of which principle? A. Matching B. Realization C. Cost D. Consistency 32. Gross profit rate is equal to. A. Net sales divided by gross profit. B. Gross sales divided by gross profit. C. Gross profit divided by net sales. D. Gross profit divided by gross sales.

95. Refer to the above data. Assuming that Anderson uses the LIFO flow assumption, it should record this inventory shrinkage by: A. Debiting Cost of Goods Sold $7,000. B. Crediting Cost of Goods Sold $7,500. C. Debiting Cost of Goods Sold $7,500. D. Crediting Cost of Goods Sold $7,000. 96. Refer to the above data. Assuming that Anderson uses the FIFO flow assumption, it should record this inventory shrinkage by: A. Crediting Cost of Goods Sold $7,500. B. Debiting Cost of Goods Sold $7,000. C. Crediting Cost of Goods Sold $7,000. D. Debiting Cost of Goods Sold $7,500....