29 Jun Question 3. Which of the following a
Question
3. Which of the following accounts is not closed to Income Summary? A) Cost of Goods Sold B) Merchandise Inventory C) Sales D) Sales Discounts
4. Claims for which formal instruments of credit are issued as proof of the debt are A) accounts receivable. B) interest receivable. C) notes receivable. D) other receivables.
5. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is debited when A) a sale is made. B) an account becomes bad and is written off. C) management estimates the amount of uncollectibles. D) a customer’s account becomes past-due.
6. A factor which distinguishes the corporate form of organization from a sole proprietorship or partnership is that a A) corporation is organized for the purpose of making a profit. B) corporation is subject to numerous federal and state government regulations. C) corporation is an accounting economic entity. D) corporation’s temporary accounts are closed at the end of the accounting period.
7. Flynn Company reported a net loss of $11,000 for the year ended December 31, 2008. During the year, accounts receivable decreased $9,000, merchandise inventory increased $13,000, accounts payable increased by $27,000 and depreciation expense of $17,000 was recorded. During 2008, operating activities A) used net cash of $29,000. B) used net cash of $51,000. C) provided net cash of $29,000. D) provided net cash of $51,000.
8. In recording the sale of accounts receivable, the commission charged by a factor is recorded as A) Bad Debts Expense. B) Commission Expense. C) Loss on Sale of Receivables. D) Service Charge Expense.
9. Inventoriable costs include all of the following except the A) freight costs incurred when buying inventory. B) costs of the purchasing and warehousing departments. C) cost of the beginning inventory. D) cost of goods purchased. Use the following to answer question
10: On October 1, Jerry’s Carpet Service borrows $250,000 from First National Bank on a 3-month, $250,000, 8% note. 10. What entry must Jerry’s Carpet Service make on December 31 before financial statements are prepared? A) a B) b C) c D) d
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11. W.B. Reindeer Company’s inventory records show the following data: Units Unit Cost Inventory, January 1 5,000 9 Purchases: June 18 4,500 6 November 8 3,000 4 A physical inventory on December 31 shows 2,000 units on hand. W.B. Reindeer sells the units for $17 each. The company has an effective tax rate of 30%. Reindeer uses the periodic inventory method. The weighted-average cost per unit is A) $5.00. B) $6.33. C) $6.72. D) $6.58.
12. A stock split A) may occur in the absence of retained earnings. B) will increase total paid-in capital. C) will increase the total par value of the stock. D) will have no effect on the par value per share of stock.
13. Each payment on a mortgage note payable consists of A) interest on the original balance of the loan. B) reduction of loan principal only. C) interest on the original balance of the loan and reduction of loan principal. D) interest on the unpaid balance of the loan and reduction of loan principal.
14. An accounting time period that is one year in length, but does not begin on January 1, is referred to as A) a fiscal year. B) an interim period. C) the time period assumption. D) a reporting period.
15. Paid-In Capital in Excess of Stated Value A) is credited when no-par stock does not have a stated value. B) is reported as part of paid-in capital on the balance sheet. C) represents the amount of legal capital. D) normally has a debit balance.
16. If a company is given credit terms of 2/10, n/30, it should A) hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time. B) pay within the discount period and recognize a savings. C) pay within the credit period but don’t take the trouble to invest the cash while waiting to pay the bill. D) recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.
17. All of the following are reported as current liabilities except A) accounts payable. B) bonds payable. C) notes payable. D) unearned revenues.
18. In a manufacturing business, inventory that is ready for sale is called A) raw materials inventory. B) work in process inventory. C) finished goods inventory. D) store supplies inventory.
19. Which of the following methods of computing depreciation is production based? A) Straight-line B) Declining-balance C) Units-of-activity D) None of these
20. The method of accounting for uncollectible accounts that results in a better matching of expenses with revenues is the A) aging accounts receivable method. B) direct write-off method. C) percentage of receivables method. D) percentage of sales method.
21. Intangible assets are the rights and privileges that result from ownership of long-lived assets that A) must be generated internally. B) are depletable natural resources. C) have been exchanged at a gain. D) do not have physical substance.
Use the following to answer question
22: On October 1, 2008, Dole Company places a new asset into service. The cost of the asset is $60,000 with an estimated 5-year life and $15,000 salvage value at the end of its useful life. 22. What is the depreciation expense for 2008 if Dole Company uses the straight-line method of depreciation? A) $2,250 B) $12,000 C) $3,000 D) $6,000
23. If a stockholder receives a dividend consisting of a promissory note, the stockholder has received a A) stock dividend. B) cash dividend. C) contingent dividend. D) scrip dividend.
24. Generally, the most important category on the statement of cash flows is cash flows from A) operating activities. B) investing activities. C) financing activities. D) significant noncash activities.
25. Which of the statements below is not true? A) An adjusted trial balance should show ledger account balances. B) An adjusted trial balance can be used to prepare financial statements. C) An adjusted trial balance proves the mathematical equality of debits and credits in the ledger. D) An adjusted trial balance is prepared before all transactions have been journalized.
26. A retail store credited the Sales account for the sales price and the amount of sales tax on sales. If the sales tax rate is 4% and the balance in the Sales account amounted to $166,400, what is the amount of the sales taxes owed to the taxing agency? A) $160,000 B) $166,400 C) $6,656 D) $6,400
27. Stine Company purchased merchandise with an invoice price of $2,000 and credit terms of 2/10, n/30. Assuming a 360 day year, what is the implied annual interest rate inherent in the credit terms? A) 20% B) 24% C) 36% D) 72%
28. The net income reported on the income statement for the current year was $206,000. Depreciation was $44,000. Account receivable and inventories decreased by $20,000 and $41,000, respectively. Prepaid expenses and accounts payable increased, respectively, by $1,000 and $7,200. How much cash was provided by operating activities? A) $276,200 B) $317,200 C) $302,800 D) $310,000
29. Rudolf Diesel Company’s inventory records show the following data: Units Unit Cost Inventory, January 1 5,000 $9 Purchases: June 18 4,500 7 November 8 3,000 6 A physical inventory on December 31 shows 3,000 units on hand. Under the FIFO method, the December 31 inventory is A) $18,000. B) $22,680. C) $22,000. D) $27,000.
30. Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally A) expensed when incurred. B) capitalized as a part of the cost of the asset. C) debited to the Accumulated Depre
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