Accounting Exam

1. The accounting equating can be stated as: a. Assets – liabilities = owner’s equity b. Assets + liabilities = owner’s equity c. Liabilities + assets = owner’s equity d. Owner’s equity + assets = liabilities e. Liabilities – onwer’s equity = assets 2. if liabilities increase $8000 during a given period and stockholder’s equity decreases $4000 during the same period, assets must have: a. increased $12000 b.increased $4000 c.decreased $4000 d.decreased $12000 e. cannot be determined with the given information 3. which of the following forms of business organization protect the personal assets of the owners from creditors of the business? a.partnership b. corporation c. proprietorships d. partnership and corporations e.partnership and propriotership 4. Revenues are: a. increases in liabilities resulting from delivering goods or services to customers b. decreases in assets resulting from delivering goods or services to customers c. increases in retained earnings resulting from delivering goods or services to customers d. decreases in retained earnings resulting from delivering goods or services to customers e. another terms for assets 5. Performing a services and immediately collecting the cash would: a. increase net income b. increase assets c. increase liabilities d. decrease expenses e. decrease revenue 6. Which of the following accounts may be thought of as stored costs that are carried forward to future periods rather than immediately charged again revenue: a. prepaid rent b. rent expense c. advertising expense d. depreciation expense e. cost of goods sold 7. which of the following transaction would not affect owner’s equity? a. recording cost of goods sold b. recording a cash sale c. recording a cash sale expense d. recording rent expense

e. purchasing supplies for cash 8. little house company received and paid its utility bill of $600. As the accountant, you would tell the bookkeeper to: a. debit Utility expense and credit cash for $600 b. debit cash and credit utility payable for $600 c. debit cash and credit utility expense for $600 d. debit utility receiveable and credit cash for $600 e. debit utility receivable and credit cash for $600 9. which of the following accounts would not be found on the debit side of a trial balance? a. equipment b. accumulated depreciation c. prepaid rent d. rent expense e. merchandise inventory

10. which of the following is an example of an accrual? a. wages incurred but not yet paid b. payment of advertising six months in advance c. purchase of supplies d. revenue collected in advance e. all of the above

11. the adjustment for revenue received in advance which has been earned in the current period involces a: a. b. c. d. e.

Debit to unearned revenue Debit to accued revenue Credit to accrued revenue Debit to cash Credit to cash

12. the collection in cash of interest received previously accured has what effect on the basic accounting equation? a. increase assets, increase liabilies b. decrease assets, decrease liabilities c. increase assets, decrase liabilities d. increase liabilities, decrease stockholder’s equity e. it has no effect as one asset increased while another asset decreases/

13. the accrual of unrecorded expenses have a.assets increased by later cash payments b. equity decreased by later cash payments c. equity increased by later cash payments d. liabilities increased by later cash payments e. liabilities decreased by later cash payments

14. the statement of cash flows has classifications of: a. b. c. d. e.

Operating, investing, and debt activities Investing, operating, and expense activities Operating, investing and equity activities Operating, financing and equity activites Operating, investing, and financing activities

15. cash payments to suppliers would appear on a statement of cash flows using the direct method as a(n)? a. financing activity b. operating activity c. investing activity d. debth activity e. equity activity

16. which of the following items will not appear in the cash flow operations section when using the direct method? a. b. c. d. e.

Payments to employees Collection from customers Net income Payments to suppliers Income tax payments

17. the indirect method: a. Is seldom used by companies because of the extra efford required to gather cash flow information b. Calculates only the cash effect of each operating activity c. Is the method preferred by the FASB d. Begins with net income; adds back non cash expenses; and adjust for changes in the current assets and current liability accounts e. Can be used to determine cash flows from operating, investing, and financing activities 18. the difference between gross sales and net sales may include: a. Bad debth expense b. Sales returns c. Trade discount d. Cost of goods sold e. Purchase returns 19. Viking Inc. wishes to borrow $70000 at %12 interest from the local bank, however, the bank requires a compensating balance of 9%. The effective rate the Viking inc will pay on loan is: a. 10.1%

b. c. d. e.

11.0% 13.2% 16.4% 21.0%

20. the write-off of a specific account for bad debts has what effect on the balance sheet under the allowance method? a. b. c. d. e.

It has no effect on total assets or stockholder’s equity It decreases assets and decreases stockholder’s equty It increases assets and decreases stockholder’s equity It decreases assets and has no effect on stockholder’s equity It has no effect on assets and decreases owner’s equity.

21. the primary goal of the separation of duties is: a. To provide greater training to employees by allowing them to work on different task b. To make sure that one person, acting alone, cannot defraud the company c. To ensure that no one is management accumulates too much organizational power and control d. To provide clear promotion tracks within one’s dispiline e. To provide a work envirolment where no one person is overloaded with work or does so many things that they 22. given the following data, what is cost of goods sold? Sales revenue $845,000 Beginning inventory 110,000 Ending inventory 200,000 Purchase of inventory 705,000 a. $615,000 b. 815,000 c. 320000 d. 905,000 e. $735,000 23. the journal entry to purchase merchandise under a periodic inventory system includes a debit to: a. Cost of goods sold b. Inventory c. Purchase d. Accounts reveivable e. Account payable 24. using LIFO method, the earliest purchases of inventory are assumed to be contained: a. On the balance sheet as part of ending inventory b. On the income statement as part of cost of goods sold c. Equally split between the income statement and the balance sheet

d. Impossible to determine from the given data e. The earliest purchases of inventory under LIFO are not shown on any financial statement A 25. two separate errors affected Dryer Shirt in 20X4. The beginning inventory was overstated by $17,000 and the ending inventory was overstated by $23,000. Ignoring taxes, net income in 20X4 will be: a. b. c. d. e. D

Overstated by $40,000 Understated by 23,000 Overstated by 23,000 Overstated by 6,000 Understated by 40,000