Devry ACCT504 week 8 final exam set 7

Devry ACCT504 week 8 final exam set 6 26 mcq

July 12, 2018

Devry ACCT505 Midterm Week 4 Midterm set 1

July 12, 2018

Name:
__________________________ Date: _____________

1.
From
an accounting standpoint, the acquisition of long-lived assets is essentially
a(n)

A)
accrual
of expense.
B)
accrual
of revenue.
C)
accrual
of unearned revenue.
D)
prepaid
expense.

2. Failure
to prepare an adjusting entry at the end of a period to record an accrued
revenue would cause
A)
net
income to be overstated.
B)
an
understatement of assets and an understatement of revenues.
C)
an
understatement of revenues and an understatement of liabilities.
D)
an
understatement of revenues and an overstatement of liabilities.

3.
Adjusting
entries are

A)
the
same as correcting entries.
B)
needed
to ensure that the matching principle is followed.
C)
optional.

D)
rarely
needed.

4.
Maple Tree Inc. purchased a 12-month
insurance policy on March 1, 2007 for $900. At March 31, 2007, the adjusting
journal entry to record expiration of this asset will include

A)
a
debit to Prepaid Insurance and a credit to Cash for $900.
B)
a
debit to Prepaid Insurance and a credit to Insurance Expense for $100.
C)
a
debit to Insurance Expense and a credit to Prepaid Insurance for $75
D)
a
debit to Insurance Expense and a credit to Cash for $75.

5.
Using
accrual accounting, expenses are recorded and reported only

A)
when
they are incurred whether or not cash is paid.
B)
when
they are incurred and paid at the same time.
C)
if
they are paid before they are incurred.
D)
if
they are paid after they are incurred.

6.
The
time period assumption states that

A)
a
transaction can only affect one period of time.
B)
estimates
should not be made if a transaction affects more than one time period.

C)
adjustments
to the enterprise’s accounts can only be made in the time period when the
business terminates its operations.
D)
the
economic life of a business can be divided into artificial time periods.

Page 1

7. Blue
Corporation issued a one-year 12% $200,000 note on April 30, 2007. Interest
expense for the year ended December 31, 2007 was?
A)
$24,000

B)
$18,000

C)
$16,000

D)
$14,000

Use the
following to answer question 8:

Sheepskin
Company had the following transactions during 2006.

â¢
Sales
of $4,500 on account

â¢
Collected
$2,000 for services to be performed in 2007
â¢
Paid
$625 cash in salaries
â¢
Purchased
airline tickets for $250 in December for a trip to take place in 2007

8.
What
is Sheepskin’s 2006 net income using accrual accounting?

A)
$3,875

B)
$5,875

C)
$5,625

D)
$3,625

Use the
following to answer question 9:

Given the
following adjusted trial balance:
.jpg”>

Page 2

9.
Net
income for the year is:

A)
$24

B)
$110

C)
$137

D)
$223

10.
The
first required step in the accounting cycle is

A)
adjusting
entries.
B)
journalizing
transactions.
C)
analyzing
transactions.
D)
posting
transactions.

11.
An
adjusted trial balance

A)
is
prepared after the financial statements are completed.
B)
proves
the equality of the total debit balances and total credit balances of ledger
accounts after all adjustments have been made.
C)
is
a required financial statement under generally accepted accounting principles.
D)
cannot
be used to prepare financial statements.

12. A
Christmas shop signs a three-month note payable to help finance increases in
inventory for the Christmas shopping season. The note is signed on October 1 in
the

amount of
$10,000 with annual interest of 9%. What is the adjusting entry to be made on
December 31 for the interest expense accrued to that date, if no entries have
been made previously for the interest?

Interest
Expense

Interest Payable

Interest Expense

150

Interest Payable

150

Interest Expense

225

Interest Payable

225

Interest Expense

900

Note Payable

900

13. Why
do generally accepted accounting principles require the application of the
revenue recognition principle?
A)
Failure
to apply the revenue recognition principle could lead to an overstatement of
revenue.
B)
It
is easy to apply the revenue recognition principle because revenue issues are
always easy to identify and resolve.
C)
Recording
revenue when cash is received is an objective application of the revenue
recognition principle.
D)
Accounting
software has made the revenue recognition easy to apply.

Page 3

14.
An
assetâexpense relationship exists with

A)
liability
accounts.
B)
revenue
accounts.
C)
prepaid
expense adjusting entries.
D)
accrued
expense adjusting entries.

15. Javier’s
Tune-Up Shop follows the revenue recognition principle. Javier services a car
on August 31. The customer picks up the vehicle on September 1 and mails the
payment to Javier on September 5. Javier receives the check in the mail on
September 6. When should Javier show that the revenue was earned?

A)
August
31
B)
August
1
C)
September
5
D)
September
6

16.
Which principle dictates that efforts
(expenses) be recorded with accomplishments (revenues)?
A)
Cost
principle.
B)
Periodicity
principle.
C)
Revenue
recognition principle.
D)
Matching
principle.

Use the
following to answer question 17:

Use the
following information from the Income Statement of the Dirt Poor Laundry
Service
.jpg”>

17.
The
entry to close the expense accounts includes a

A)
credit
to Income Summary for $2,050.
B)
debit
to Income Summary for $2,050.
C)
debit
to Wages Expense for $950.
D)
credit
to Retained Earnings for $2,050.

Page 4

18. At
March 1, 2007, CookieTime Inc. had supplies on hand of $1,500. During the
month, Candy purchased supplies of $1,900 and used supplies of $1,800. The
March 31 balance sheet should report what balance in the supplies account?

A)
$1,500

B)
$1,600

C)
$1,800

D)
$1,900

19.
All
of the following are required steps in the accounting cycle except:

A)
journalizing
and posting closing entries.
B)
preparing
an adjusted trial balance.
C)
preparing
a post-closing trial balance.
D)
preparing
a work sheet.

20. An
architecture firm earned $2,000 for architecture services provided with the fee
to be paid in the future. No entry was made at the time the service was
provided. If the fee has not been paid by the end of the accounting period and
no adjusting entry is made, this would cause

A)
revenues
to be overstated.
B)
net
income to be overstated.
C)
liabilities
to be understated.
D)
revenues
to be understated.

21. Younger
Corporation purchased a one-year insurance policy in January 2006 for $48,000.
The insurance policy is in effect from March 2006 through February 2007. If the
company neglects to make the proper year-end adjustment for the expired
insurance

A)
Net
income and assets will be understated by $40,000
B)
Net
income and assets will be overstated by $40,000
C)
Net
income and assets will be understated by $8,000
D)
Net
income and assets will be overstated by $8,000

22.
If
a company fails to adjust for accrued revenues

A)
liabilities
will be understated and revenues will be understated.
B)
liabilities
will be overstated and revenues will be understated.
C)
assets
will be overstated and revenues will be understated.
D)
assets
will be understated and revenues will be understated.

Page 5

Use
the following to answer question 23:

Use the
following information from the Income Statement of the Dirt Poor Laundry
Service
.jpg”>

23.
The
entry to close the Laundry Service Revenue account includes a

A)
debit
to Laundry Service Revenue for $4,500.
B)
credit
to Laundry Service Revenue for $4,500.
C)
debit
to Income Summary for $4,500.
D)
debit
to Retained Earnings for $4,500.

Use the
following to answer question 24:

Given the
following adjusted trial balance:
.jpg”>

Page 6

24.
After
closing entries have been posted, the balance in retained earnings will be:

A)
$3,195

B)
$3,281

C)
$3,415

D)
$3,329

25.
Adjusting
entries are required

A)
because
some costs expire with the passage of time and have not yet been journalized.
B)
when
the company’s profits are below the budget.
C)
when
expenses are recorded in the period in which they are earned.
D)
when
revenues are recorded in the period in which they are earned.

Use the
following to answer question 26:
.jpg”>

26.
The
profit margin ratio would be

A)
.454.

B)
.119.

C)
.238.

D)
.135.

27. Holt
Company sells merchandise on account for $2,000 to Jones Company with credit
terms of 2/10, n/30. Jones Company returns $400 of merchandise that was
damaged, along with a check to settle the account within the discount period.
What is the amount of the check?

A)
$1,960

B)
$1,968

C)
$1,600

D)
$1,568

Page 7

Use
the following to answer question 28:
.jpg”>

28.
Gross
Profit would be

A)
$77,000.

B)
$64,000.

C)
$70,000.

D)
$83,000.

29.
In
a perpetual inventory system, cost of goods sold is recorded

A)
on
a daily basis.
B)
on
a monthly basis.
C)
on
an annual basis.
D)
each
time a sale occurs.

30.
Under
a perpetual inventory system

A)
accounting
records continuously disclose the amount of inventory.
B)
increases
in inventory resulting from purchases are debited to purchases.
C)
there
is no need for a year-end physical count.
D)
the
account purchase returns and allowances is credited when goods are returned to
vendors.

31.
When
a seller records a return of goods, the account that is credited is

A)
Sales.

B)
Sales
Returns and Allowances.
C)
Merchandise
Inventory.
D)
Accounts
Receivable.

32. Ingrid’s
Fashions sold merchandise for $38,000 cash during the month of July. Returns
that month totaled $800. If the company’s gross profit rate is 40%, Ingrid’s
will report monthly net sales revenue and cost of goods sold of:

A)
$38,000
and $22,800.
B)
$37,200
and $14,880.
C)
$37,200
and $22,320.
D)
$38,000
and $22,320.

Page 8

33.
The
collection of a $600 account beyond the 2 percent discount period will result
in a

A)
debit
to cash for $588.
B)
credit
to Accounts Receivable for $600.
C)
credit
to Cash for $600.
D)
debit
to Sales Discounts for $12.

34.
The form of income statement that
derives its name from the fact that the total of all expenses is deducted from
the total of all revenues is called a
A)
multiple-step
statement.
B)
revenue
statement.
C)
report-form
statement.
D)
single-step
statement.

35. A
credit sale of $800 is made on April 25, terms 2/10, net/30, on which a return
of $50 is granted on April 28. What amount is received as payment in full on
May 4?
A)
$735

B)
$784

C)
$800

D)
$750

36.
Under a perpetual inventory system,
acquisition of merchandise for resale is debited to
A)
the
Merchandise Inventory account.
B)
the
Purchases account.
C)
the
Supplies account.
D)
the
Cost of Goods Sold account.

37.
Which
of the following would not be classified as a contra account?

A)
Sales

B)
Sales
Returns and Allowances
C)
Accumulated
Depreciation
D)
Sales
Discounts

38.
The
operating cycle of a merchandising company is

A)
always
one year in length.
B)
ordinarily
longer than that of a service company.
C)
about
the same as that of a service company.
D)
ordinarily
shorter than that of a service company.

39.
Which
of the following accounts has a normal credit balance?

A)
Sales
Returns and Allowances
B)
Sales
Discounts
C)
Sales

D)
Cost
of Goods Sold

Page 9

40.
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.

41.
The respective normal account balances
of Sales, Sales Returns and Allowances, and Sales Discounts are
A)
credit,
credit, credit.
B)
debit,
credit, debit.
C)
credit,
debit, debit.
D)
credit,
debit, credit.

42.
A
company shows the following balances:

What
is the gross profit rate?

A)
60%

B)
36%

C)
26%

D)
20%

43.
Which
statement is incorrect?

A)
Periodic
inventory systems provide better control over inventories than perpetual
inventory systems.
B)
Computers
and electronic scanners allow more companies to use a perpetual inventory
system.
C)
Freight
in is debited to merchandise inventory when a perpetual inventory system is
used.
D)
Regardless
of the inventory system that is used, companies should take a physical
inventory count.

44.
For
a jewelry retailer, which is an example of Other Revenues and Gains?

A)
repair
revenue
B)
unearned
revenue
C)
gain
on sale of display cases
D)
discount
received for paying for merchandise inventory within the discount period
.jpg”>

Page 10

45. The
Sales Returns and Allowances account does not provide information to
management about
A)
possible
inferior merchandise.
B)
the
percentage of credit sales versus cash sales.
C)
inefficiencies
in filling orders.
D)
errors
in filling customers.

46.
Income
from operations is gross profit less

1.
operating
expenses and other expenses and losses.
2.
operating
expenses plus other revenues and gains.
3.
operating
expenses.
A)
1

B)
2

C)
3

D)
both
1 and 2

Use the
following to answer question 47:
.jpg”>

47.
The
profit margin ratio would be

A)
.520.

B)
.203.

C)
.255.

D)
.184.

Use the
following to answer question 48:
.jpg”>

Page 11

48.
The
gross profit rate would be

A)
.454.

B)
.546.

C)
.500.

D)
.538.

49. The
operating expenses section of an income statement for a merchandising company
would not include
A)
Freight-out.

B)
Utilities
expense.
C)
Cost
of goods sold.
D)
Insurance
expense.

50.
The
Sales Returns and Allowances account is classified as a(n)

A)
asset
account.
B)
contra
asset account.
C)
expense
account.
D)
contra
revenue account.

Use the
following to answer question 51:

Tier II Company uses a periodic inventory system.
Details for the inventory account for the month of January 2007 are as follows:

Units

Per unit price

Total

Balance,
1/1/2007

200

$5.00

$1,000

Purchase,
1/15/2007

100

5.30

530

Purchase,
1/28/2007

100

5.50

550

An end of the
month (1/31/2007) inventory showed that 120 units were on hand.

51.
How
many units did the company sell during January 2007?

A)
80

B)
120

C)
200

D)
280

Page 12

Use
the following to answer question 52:

Assume a
periodic inventory system is used.

Nov.

Inventory

15 units @

$8.00

Purchase

60 units @

$8.60

Purchase

30 units @

$8.40

Purchase

45 units @

$8.80

A physical count of merchandise inventory on
November 30 reveals that there are 50 units on hand.

52.
Ending
inventory under LIFO is

A)
$438

B)
$421

C)
$846

D)
$863

Use the
following to answer question 53:

A company just
starting business made the following four inventory purchases in June:

June

150 units

780

June

200 units

1,170

June

200 units

1,260

June

150 units

990

$4,200

A
physical count of merchandise inventory on June 30 reveals that there are 200
units on hand.

53.
Using
the LIFO inventory method, the value of the ending inventory on June 30 is

A)
$1,040.00

B)
$1,072.50

C)
$1,305.00

D)
$1,320.00

Use the
following to answer question 54:

Use the
following inventory information for the month of July.

July

Beginning inventory

10
units at $90

Purchases

60
units @ $84

Sale

40
units

Purchases

30
units at $87

Sale

28
units

Page 13

54. Assuming
that a perpetual inventory system is used, what is the cost of goods sold on a
LIFO basis.
A)
$5,802

B)
$5,772

C)
$5,796.

D)
$5,916

55.
Many companies use just-in-time
inventory methods. Which of the following is not an advantage of this method?
A)
It
limits the risk of having obsolete items in inventory.
B)
Companies
may not have quantities to meet customer demand.
C)
It
lowers inventory levels and costs.
D)
Companies
can respond to individual customer requests.

Use the
following to answer question 56:

The
following information was available for Hawley Company at December 31, 2007:
beginning inventory $80,000; ending inventory $120,000; cost of goods sold
$700,000; and sales $1,000,000.

56.
Hawley’s
days in inventory in 2007 was

A)
36.5
days.
B)
42.4
days.
C)
52.1
days.
D)
62.9
days.

Use the
following to answer question 57:

Use the
following inventory information for the month of July.

July

Beginning inventory

10
units at $120

Purchases

60
units at $112

Sale

40
units

Purchases

30
units at $115

Sale

28
units

57.
Assuming that a periodic inventory
system is used, what is the cost of goods sold on a LIFO basis.
A)
$3,664

B)
$3,674

C)
$7,696.

D)
$7,706

Page 14

Use
the following to answer question 58:

Cole Industries
had the following inventory transactions occur during 2007:

Units

Cost/unit

2/1/07

Purchase

$45

3/14/07

Purchase

$47

5/1/07

Purchase

$49

The company sold
153 units at $63 each and has a tax rate of 30%.

58.
Assuming that a periodic inventory
system is used, what is the company’s after-tax income using LIFO? (rounded to
whole dollars)
A)
$2,316

B)
$2,544

C)
$1,782

D)
$1,621

59.
A
problem with the specific identification method is that

A)
inventories
can be reported at actual costs.
B)
management
can manipulate income.
C)
matching
is not achieved.
D)
the
lower of cost or market basis cannot be applied.

60.
The
consistent application of an inventory costing method enhances

A)
conservatism.

B)
accuracy.

C)
comparability.

D)
efficiency.

Use the
following to answer question 61:

Ace Industries
had the following inventory transactions occur during 2007:

Units

Cost/unit

2/1/07

Purchase

$45

3/14/07

Purchase

$47

5/1/07

Purchase

$49

The company sold
51 units at $63 each and has a tax rate of 30%.

Page 15

61. Assuming
that a periodic inventory system is used, what is the company’s after-tax
income using LIFO? (rounded to whole dollars)
A)
$772

B)
$848

C)
$594

D)
$540

62.
In periods of inflation, phantom or
paper profits may be reported as a result of using the
A)
perpetual
inventory method.
B)
FIFO
costing assumption.
C)
LIFO
costing assumption.
D)
periodic
inventory method.

Use the
following to answer question 63:

Ace Industries
had the following inventory transactions occur during 2007:

Units

Cost/unit

2/1/07

Purchase

$45

3/14/07

Purchase

$47

5/1/07

Purchase

$49

The company sold
51 units at $63 each and has a tax rate of 30%.

63. Assuming
that a periodic inventory system is used, what is the company’s gross profit
using FIFO? (rounded to whole dollars)
A)
$2,441

B)
$2,365

C)
$848

D)
$772

64. Given
equal circumstances, which inventory method would probably be the most time
consuming?
A)
FIFO

B)
LIFO

C)
Average
cost
D)
Specific
identification.

Page 16

65.
Farley Company had beginning inventory
of $15,000 at March 1, 2007. During the month, the company made purchases of
$40,000. The inventory at the end of the month is $17,300. What is cost of
goods sold for the month of March?

A)
$37,700

B)
$40,000

C)
$55,000

D)
$57,300

66.
The
term “FOB” denotes

A)
free
on board.
B)
freight
on board.
C)
free
only (to) buyer.
D)
freight
charge on buyer.

67.
An
overstatement of the beginning inventory results in

A)
no
effect on the period’s net income.
B)
an
overstatement of net income.
C)
an
understatement of net income.
D)
a
need to adjust purchases.

Use the
following to answer question 68:

A company just
starting business made the following four inventory purchases in June:

June

150 units

825

June

200 units

1,120

June

200 units

1,140

June

150 units

885

3,970

A
physical count of merchandise inventory on June 30 reveals that there are 250
units on hand.

68.
Using the FIFO inventory method, the
amount allocated to ending inventory for June is
A)
$1,385.

B)
$1,425.

C)
$1,455.

D)
$1,475.

Page 17

69. A company
purchased inventory as follows:

200 units at $10
300 units at $11
The average unit cost for inventory is
A)
$10.00.

B)
$10.50.

C)
$10.60.

D)
$11.00.

Use the
following to answer question 70:

Lansing Company
had the following records:

2007

2006

2005

Ending
inventory

$34,580

$27,650

$30,490

Cost of goods
sold

182,000

163,500

174,200

70.
What
is Lansing’s average days in inventory for 2007? (rounded)

A)
62.39
days
B)
64.95
days
C)
61.76
days
D)
2,147
days

Use the
following to answer question 71:

Tier
II Company uses a periodic inventory system. Details for the inventory account
for the month of January 2007 are as follows:

Units

Per unit price

Total

Balance,
1/1/2007

200

$5.00

$1,000

Purchase,
1/15/2007

100

5.30

530

Purchase,
1/28/2007

100

5.50

550

An end of the
month (1/31/2007) inventory showed that 120 units were on hand.

71.
If the company uses FIFO and sells the
units for $10 each, what is the gross profit for the month?
A)
$1,376

B)
$1,424

C)
$2,800

D)
$3,000

Page 18

72. Of
the following companies, which one would not likely employ the specific
identification method for inventory costing?
A)
Music
store specializing in organ sales
B)
Farm
implement dealership
C)
Antique
shop
D)
Hardware
store

73. An
error in the physical count of goods on hand at the end of a period resulted in
a $10,000 overstatement of the ending inventory. The effect of this error in
the current period is

Cost of Goods
Sold

Net Income

Understated

Overstated

Understated

Overstated

Understated

74.
The
specific identification method of costing inventories is used when the

A)
physical
flow of units cannot be determined.
B)
company
sells large quantities of relatively low cost homogeneous items.
C)
company
sells large quantities of relatively low cost heterogeneous items.
D)
company
sells a limited quantity of high-unit cost items.

Use the
following to answer question 75:

Use the
following inventory information for the month of July.

July

Beginning inventory

20 units at $20

400

Purchases

70 units at $21

1,470

Purchases

10 units at
$22

220

2,090

A physical count
of merchandise inventory on July 30 reveals that there are 35 units on hand.

75.
Using
the average cost method, the value of ending inventory is

A)
$700.00

B)
$731.50.

C)
$735.00

D)
$770.00

Page 19

Page
21