Corresponds to CLO 1(a) Which of the following interrelationships

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Corresponds to CLO 1(a) Which of the following
interrelationships is not important to understand when preparing
financial statements: (Points : 8)

Total payments on the balance sheet
should equal the cash payments for operating activities on the statement of
cash flows.
Net income from the income statement is
used in the retained earnings statement.
The ending retained earnings from the
retained earnings statement is used in the stockholders’ equity section of
the balance sheet.
The cash on the balance sheet should be
equal to the cash at the end of the period on the statement of cash flows.

2.Corresponds to
CLO 1(b) Which of the following does not describe the balance sheet?
(Points : 8)

The balance sheet presents a picture at a
point in time of what a business owns and owes.
The balance sheet reports the assets,
liabilities, and stockholders’ equity at a specific date.
The balance sheet reports the changes in
assets, liabilities, and stockholders’ equity over a period of time.
The balance sheet reports assets and
claims to those assets at a specific point in time.

3.Corresponds to
CLO 1(c) Tulsa Corporation began the year by issuing $50,000 of common
stock for cash. The company recorded revenues of $200,000, expenses of
$125,000, and paid dividends of $20,000. What was Tulsa’s net income for
the year? (Points : 8)

$75,000
$105,000
$55,000
$200,000

4.Corresponds to
CLO 1(d) Which of the following is not true about the statement of cash
flows? (Points : 8)

The statement of cash flows provides
information about a company’s cash receipts and cash payments.
Ending cash on the statement of cash
flows should equal cash shown on the balance sheet.
The statement of cash flows is prepared
in order to determine the cash balance to be used on the balance sheet.
The statement of cash flows shows the
amount of cash provided or used by operating activities, investing
activities, and financing activities.

5.Corresponds to
CLO 2(a) Based on the following account balances, what is the total of
the debit and credit columns of this company’s adjusted trial balance?
Service Revenue…$5,000; Cash…$1,600; Unearned revenue…$3,600; Salary
expense…$1,300; Common stock…$1,000; Equipment…$7,000; Prepaid
insurance…$1,400; Depreciation expense…$700; Accumulated
depreciation…$1,400; Retained earnings…$1,000. (Points : 8)

$8,600
$11,300
$12,000
$17,000

6.Corresponds to
CLO 2(b) Given the following adjusted trial balance amounts, what is the
net income for the year?
Debit balances
Cash…$8,000; Accounts receivable…$4,000; Short-term investments…$10,000;
Prepaid rent…$500; Property, plant, & equipment…$20,000; Salary
expense…$6,000; Depreciation expense…$2,000; Rent expense…$2,500
Credit balances
Accumulated depreciation…$6,000; Accounts payable…$2,600; Unearned
revenue…$3,000; Common stock…$8,000; Retained earnings…$12,000; Service
revenue…$21,000; Interest revenue…$400. (Points : 8)

$7,900
$11,400
$10,400
$10,900

7.Corresponds to
CLO 2(c) Given the following adjusted trial balance amounts, what is the
retained earnings ending balance to be reported on the statement of
retained earnings?
Debit balances
Cash…$8,000; Accounts receivable…$12,000; Inventory…$13,000; Property,
plant, & equipment…$30,000; Cost of goods sold…$21,000; Salary
expense…$4,000; Depreciation expense…$3,000
Credit balances
Accumulated depreciation…$9,000; Accounts payable…$5,000; Common
stock…$35,000; Retained earnings…$12,000; Revenue…$30,000. (Points : 8)

$12,000
$14,000
$10,000
$17,000

8.Corresponds to
CLO 2(d) Given the following adjusted trial balance amounts, total assets
reported on the balance sheet is?
Debit balances
Cash…$15,000; Accounts receivable…$12,000; Equipment…$60,000;
Supplies…$4,000; Expenses…$95,000.
Credit balances
Accumulated depreciation…$6,000; Accounts payable…$5,000; Common
stock…$40,000; Retained earnings…$15,000; Revenue…$120,000. (Points : 8)

$85,000
$91,000
$125,000
$81,000

9.Corresponds to
CLO 3(a) Intuition Company provided consulting services and billed the
client $4,000. As a result of this transaction, (Points : 8)

assets increased by $4,000
equity increased by $4,000
assets and equity remained unchanged.
both a and b.

10.Corresponds to
CLO 3(b) Delbert Industries purchased and received inventory of
$15,000 on account. The entry to record this purchase will include:
(Points : 8)

a debit to Inventory and a credit to
Accounts Payable.
a debit to Inventory expense and a credit
to Accounts Receivable.
a debit to Accounts Payable and a credit
to Inventory.
a debit to Inventory and a credit to
Cash.

11.Corresponds to
CLO 3(c) During June 2013, its first month of operations, the owner of
Jinx Enterprises invested cash of $25,000 in Jinx Enterprises. Jinx had
cash sales of $8,000, bought supplies of $600 on account, and paid
expenses of $12,500. Assuming no other transactions impacted the cash
account, what is the balance in Cash at June 30. (Points : 8)

$20,500 debit
$20,500 credit
$19,900 debit
$19,900 credit

12.Corresponds to
CLO 3(d) Hemmingway Corporation paid salaries of $5,000 and paid
advertising expense of $2,000. Which of the following journal entries
correctly records these expenses? (Points : 8)

Debit: Cash $7,000
Credit: Salaries/Wages Expense$5,000
Credit: Advertising Expense $2,000
Debit: Salaries/Wages Expense$5,000
Debit: Advertising Expense $2,000
Credit: Cash$7,000
Debit: Salaries/Wages Expense$5,000
Debit: Advertising Expense $2,000
Credit: Salaries/Wages Payable$5,000
Credit: Accounts Payable$2,000
Debit: Salaries/Wages Expense$5,000
Debit: Advertising Expense $2,000
Credit: Cash$8,000

13.Corresponds to
CLO 4(a) Which of the following statements is correct regarding prepaid
expenses and accrued expenses, before adjusting entries have been made?
(Points : 8)

Prepaid expenses have been recorded and
accrued expenses have not been recorded.
Prepaid expenses have been incurred and
accrued expenses have not been incurred.
Prepaid expenses have not been paid and
accrued expenses have been paid.
Prepaid expenses have not been recorded
and accrued expenses have not been recorded.

14.Corresponds to
CLO 4(b) Hudson Law Corporation received $5,500 cash for legal services
to be rendered in the future. The full amount was credited to the
liability account Unearned Service Revenue. At the end of the period,
Hudson determines that $2,500 of the legal services have been rendered.
The appropriate adjusting journal entry to be made at the end of the
period is: (Points : 8)

debit Unearned Service Revenue, $3,000;
credit Cash, $3,000.
debit Unearned Service Revenue, $3,000;
credit Service Revenue, $3,000.
debit Unearned Service Revenue, $2,500;
credit Service Revenue, $2,500.
debit Service Revenue, $2,500; credit
Unearned Service Revenue, $2,500.

15.Corresponds to
CLO 4(c) Ace Corporation purchased office supplies costing $15,000 and
debited Office Supplies inventory for the full amount. At the end of
the accounting period, a physical count of office supplies revealed
$2,400 still on hand. The appropriate adjusting journal entry to be made
at the end of the period is: (Points : 8)

debit Office Supplies Expense, $2,400;
credit Office Supplies, $2,400.
debit Office Supplies, $2,400; credit
Office Supplies Expense, $2,400.
debit Office Supplies Expense, $12,600;
credit Office Supplies, $12,600.
debit Office Supplies, $12,600; credit
Office Supplies Expense, $12,600.

16.Corresponds to
CLO 4(d) On September 1, Northgate paid $18,000 to Evans Management
Company for 12 months of rent beginning on September 1. The appropriate
journal entry was made to record this transaction. If financial
statements are prepared for the 9 months ended September 30, the
adjusting entry to be made by Northgate is: (Points : 8)

debit Rent Expense, $13,500; credit
Prepaid Rent, $13,500.
debit Prepaid Rent, $1,500; credit Rent
Revenue, $1,500.
debit Prepaid Rent, $1,500; credit Rent
Expense, $1,500.
debit Rent Expense, $1,500; credit
Prepaid Rent, $1,500.

17.Corresponds to
CLO 5(a) Lennox Corporation purchased a new delivery truck for 60,000. The
sales taxes are $4,800. The logo is painted on the side of the truck for
$1,000. The truck’s annual license is $250. Annual insurance on the truck
is $1,200. What should Lennox record as the cost of the new truck?
(Points : 8)

$60,000
$64,800
$65,800
$67,250

18.Corresponds to
CLO 5(b) On October 1, 2013, Ballard Corporation purchased equipment for
$65,000. It is estimated that the equipment will have a $5,000 salvage value
at the end of its 5 year useful life. If Ballard uses the straight-line
method of depreciation, what is the accumulated depreciation at December
31, 2013? (Points : 8)

$3,000
$3,250
$12,000
$13,000

19.Corresponds to
CLO 5(c) Tyree Company purchased equipment with a cost of $90,000 and an
estimated salvage value of $18,000. The equipment is expected to produce
120,000 units over its estimated useful life of 10 years. If Tyree uses
the units-of-activity method, what is the depreciation cost per unit to
be used in calculating depreciation? (Points : 8)

$1.67
$0.75
$0.60
$1.33

20.Corresponds to
CLO 5(d) Kerns Company purchased equipment with a cost of $200,000 and an
estimated salvage value of $10,000. The equipment has an estimated useful
life of 5 years. If Kerns uses the double-declining balance method, what
is the annual depreciation rate to be used in calculating depreciation?
(Points : 8)

5%
10%
20%
40%

21.Corresponds to
CLO 6(a) Marshall Machinery made a sale for $80,000 on January 6. The
customer is sent a statement on January 25 and payment is received on
February 20. Marshall prepares January’s monthly internal financial
statements on February 15. Marshall follows GAAP and applies the revenue
recognition principle. When is the $80,000 considered to be earned?
(Points : 8)

February 20
February 15
January 25
January 6

22.Corresponds to
CLO 6(b) Mann Corporation’s employees worked overtime to complete an
order that is sold on July 27. The office sends a statement to the
customer on August 15, and payment is received on September 5. Mann
follows GAAP. In what month should the overtime wages be expensed?
(Points : 8)

either July or August, depending on when
the pay period ends
September
August
July

23.Corresponds to
CLO 6(c) Sight Company had the following transactions during 2013: sales
of $5,000 on account; collected $1,600 for services to be performed in
2014; paid $4,100 cash for 2013 salaries; purchased airline tickets for
$800 in December for a trip to take place in 2014. What is Sight’s 2013
net income using accrual accounting? (Points : 8)

$1,700
$900
$2,500
$5,800

24.Corresponds to
CLO 6(d) Lyme Corporation had the following transactions during 2013:
sales of $10,000 on account; collected $5,500 for services to be
performed in 2014; paid $3,000 cash for 2013 salaries; paid $800 for
airline tickets for a trip to take place in 2014. What is Lyme’s 2013 net
income using cash basis accounting? (Points : 8)

$11,700
$1,700
$6,200
$2,500

25.Corresponds to
CLO 7(a) Ping Sports Company purchases $1,000 of merchandise on credit.
Using the periodic inventory approach, the journal entry to record this
transaction would be: (Points : 8)

debit: Accounts Payable $1,000; credit:
Inventory $1,000
debit: Inventory $1,000; credit: Accounts
Payable $1,000
debit: Accounts Payable $1,000; credit:
Purchases $1,000
debit: Purchases $1,000; credit: Accounts
Payable $1,000

26.Corresponds to
CLO 7(b) Gardner Corporation sold a riding lawnmower for $2,400 on
account on January 9, 2013. Gardner uses the perpetual inventory method.
The journal entry to record this transaction would include: (Points : 8)

a debit to Sales Revenue and a credit to
Accounts Receivable.
a debit to Accounts Receivable, a credit
to Sales Revenue, a debit to Cost of Goods Sold, and a credit to Inventory.
a debit to Cash and a credit to Sales
Revenue.
a debit to Accounts Receivable, a credit
to Sales Revenue, a debit to Cost of Goods Sold, and a credit to Purchases.

27.Corresponds to
CLO 7(c) Rupert Hobby’s accounting records show the following for the
year ending December 31, 2014: Purchase Discounts…$15,600;
Freight-in…$14,000; Purchases…$540,500; Beginning Inventory…$54,200;
Ending Inventory…$58,600; Purchase Returns (not sales returns)…$20,000.
Using the periodic inventory system, what is the cost of goods sold?
(Points : 8)

$573,100
$500,500
$536,100
$514,500

28.Corresponds to
CLO 7(d) Bay Company sold $100,000 of merchandise in the month of April,
2013. Returns that month totaled $5,000. Bay Company uses the periodic
method to determine ending inventory each December 31. For interim
financial statements, cost of goods sold is estimated based on the
previous year’s gross profit rate. If Bay Company’s gross profit rate for
2012 was 40%, what is the cost of goods sold for the month of April?
(Points : 8)

$60,000
$57,000
$40,000
$38,000

29.Corresponds to
CLO 8(a) We Love Pets, Inc. has the following inventory data: January 1,
beginning inventory of 50 units at $25; January 10, purchases of 70 units
at $27; January 25, purchases of 40 units at $28. A physical count of
inventory on January 31 reveals that there are 45 units on hand. Using
the FIFO inventory method, cost of goods sold for January is (Points : 8)

$3,135
$3,005
$2,875
$1,255

30.Corresponds to
CLO 8(b) Party Retailers has the following inventory data: May 1,
beginning inventory of 200 units at $10; May 14, purchases of 300 units
at $12; May 23, purchases of 250 units at $15. A physical count of
inventory on May 31 reveals that there are 225 units on hand. Using the
LIFO inventory method, ending inventory for May is (Points : 8)

$2,300
$2,250
$7,050
$3,375

31.Corresponds to
CLO 8(c) Halting Corporation has the following inventory data: September
1, beginning inventory of 430 units at $11; September 8, purchases of 350
units at $12; September 21, purchases of 460 units at $14. A physical
count of inventory on September 30 reveals that there are 400 units on
hand. Using the weighted average inventory method, rounding the unit cost
to the nearest penny, what is cost of goods sold for September? (Points :
8)

$10,357
$4,960
$10,416
$4,932

32.Corresponds to
CLO 8(d) Unleash Corporation is a retailer operating in an industry
currently experiencing high inflation. Unleash wants to show the highest
cost of goods sold possible in order to reduce the company’s income tax
liability. Which inventory costing method should Unleash use? (Points :
8)

FIFO because cost of goods sold
represents the earliest costs.
Average because cost of goods sold will
represent an average amount.
Specific identification because it
involves the actual costs.
LIFO because cost of goods sold
represents the latest costs.

33.Corresponds to
CLO 9(a) The following balance sheet and income statement data is available
for Gold River Corporation: Current assets…$205,000; Total
assets…$520,000; Net income…$345,000; Current liabilities…$125,000; Total
liabilities…$250,000; Stockholders’ equity…$270,000; Average common
shares outstanding… 10,000. What is Gold River’s current ratio? (Points :
8)

2.08
1.64
1.56
0.82

34.Corresponds to
CLO 9(b) The following balance sheet data is available for Pinpoint
Products: Current assets…$25,000; Property, plant, and
equipment,…$100,000…Other assets…$15,000; Current liabilities…$15,000;
Long-term liabilities…$48,000; Stockholders’ equity…$77,000; Average
common shares outstanding… 10,000. What is Pinpoint’s debt to total
assets, shown as a percentage? (Points : 8)

45%
60%
40%
81%

35.Corresponds to
CLO 9(c) The following balance sheet and income statement data is
available for Frame Manufacturing: Total assets…$520,000; Total
liabilities…$250,000; Stockholders’ equity…$270,000; Gross
profit…$55,000; Net income…$40,000; Average common shares outstanding… 25,000.
What is Frame Manufacturing’s earnings per share? (Points : 8)

$10.80
$3.50
$1.60
$2.20

36.Corresponds to
CLO 9(d) The following financial information is available for Maroon
Corporation: Sales revenue…$200,000; Cost of goods sold…$120,000;
Operating expenses…$40,000. What is Maroon’s gross profit rate, shown as
a percentage? (Points : 8)

20%
80%
60%
40%

37.Corresponds to
CLO 10(a) Which of the following is not true about a company’s system of
internal controls? (Points : 8)

Internal control procedures are designed
to safeguard assets from employee theft.
Internal control measures can eliminate
all irregularities in the accounting process.
Internal controls can be rendered
ineffective by employee collusion.
Large companies often assign internal
auditors to continuously evaluate the effectiveness of the company’s
internal control systems.

38.Corresponds to
CLO 10(b) At Huntington Health Corporation, only the treasurer is
authorized to sign checks. This is an example of which of the following
internal control procedures? (Points : 8)

Establishment of responsibility
Physical controls
Human resource controls
Segregation of duties

39.Corresponds to
CLO 10(c) At Delicious Desserts Corporation, the bookkeeper records cash
receipts which are held by the treasurer. This is an example of which of
the following internal control procedures? (Points : 8)

Human resource controls
Physical controls
Segregation of duties
Establishment of responsibility

40.Corresponds to
CLO 10(d) At Pocket Protector Products, the treasurer of the company has
not taken vacation for the past 4 years. Which of the following internal
control principles does this violate? (Points : 8)

Human resource controls
Physical controls
Segregation of duties
Establishment of responsibility

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