TRUE/FALSE - Henry County Schools



1. In accounting, the two types of equity are liabilities and owner's equity. |A. True |B. False | | | |

|2. When journalizing, you are advised |A. True |B. False | | |

|to go from left to right. | | | | |

|3. Transportation charges need to be |A. True |B. False | | |

|included in order to determine net | | | | |

|purchases. | | | | |

|4. When using a special journal, the |A. True |B. False | | |

|journalizing and posting processes are | | | | |

|much more complicated than when using the | | | | |

|general journal. | | | | |

|5. Both the double-declining balance |A. True |B. False | | |

|method and the sum-of-the-y ears'-digits | | | | |

|method of depreciation are examples of | | | | |

|accelerated methods of depreciation. | | | | |

|6. When buying merchandise on account,|A. True |B. False | | |

|the bookkeeper will debit purchases and | | | | |

|credit cash. | | | | |

|7. To determine depreciation using the|A. True |B. False | | |

|double-declining balance method, the | | | | |

|salvage value of the asset is used in the | | | | |

|calculation. | | | | |

|8. Merchandise Inventory will appear |A. True |B. False | | |

|on the Balance Sheet but not the Income | | | | |

|Statement. | | | | |

|9. A delivery truck bought on June 16 |A. True |B. False | | |

|is counted for the full month when | | | | |

|calculating depreciation. | | | | |

|10. To determine the cost of |A. True |B. False | | |

|merchandise sold, include the ending | | | | |

|inventory but not the beginning inventory | | | | |

|in the calculation. | | | | |

|11. Reporting income on the basis of |A. True |B. False | | |

|when it is earned is called the accrual | | | | |

|basis of accounting. | | | | |

|12. If a business has a note payable, |A. True |B. False | | |

|the amount is classified as a liability to| | | | |

|the business. | | | | |

|13. Advertising costs for a |A. True |B. False | | |

|manufacturing business are usually | | | | |

|classified as manufacturing overhead. | | | | |

|14. The book value of an asset is not |A. True |B. False | | |

|the same as the asset's | | | | |

|trade-in-allowance. | | | | |

|15. The amount of depreciation for an |A. True |B. False | | |

|asset depreciated using the straight-line | | | | |

|method will be lower in the first year | | | | |

|than when using other depreciation | | | | |

|methods. | | | | |

|16. Self-generated income is an example|A. True |B. False | | |

|of income for a not-for-profit | | | | |

|organization. | | | | |

|17. Shipping costs incurred by a seller|A. True |B. False | | |

|for merchandise sold should be considered | | | | |

|an expense rather than an inventory cost. | | | | |

|18. Purchase discounts increase the |A. True |B. False | | |

|cost of merchandise bought for resale to | | | | |

|customers. | | | | |

|19. The cost of merchandise sold is |A. True |B. False | | |

|deducted from sales, and the amount | | | | |

|reported for merchandise inventory affects| | | | |

|net income. | | | | |

|20. Retained Earnings is one |A. True |B. False | | |

|stockholders' equity account; the other is| | | | |

|Capital Stock. | | | | |

|21. When an uncollectible account is |A. True |B. False | | |

|written off, the method the accountant | | | | |

|uses is called the direct-write-off | | | | |

|method. | | | | |

|22. A straight-line method of |A. True |B. False | | |

|calculating depreciation for an asset | | | | |

|assumes that higher amounts of | | | | |

|depreciation are recorded in the early | | | | |

|years rather than in the later years. | | | | |

|23. Purchase Returns and Allowances |A. True |B. False | | |

|would normally have a credit balance. | | | | |

|24. Transportation In would normally |A. True |B. False | | |

|have a debit balance. | | | | |

|25. In a partnership, only one partner |A. True |B. False | | |

|needs to maintain a separate capital | | | | |

|account and a separate withdrawal account | | | | |

|in accordance with the standards of | | | | |

|accounting principles. | | | | |

|26. The social security tax was |A. True |B. False | | |

|established by the Fair Labor Standards | | | | |

|Act. | | | | |

|27. Form W-2 summarizes the employer's |A. True |B. False | | |

|earnings and taxes for a given year. | | | | |

|28. The gross earnings of an employee |A. True |B. False | | |

|are debited to the Salary Expense account | | | | |

|each pay period. | | | | |

|29. Supplies, accounts receivable, and |A. True |B. False | | |

|equipment are examples of plant asset | | | | |

|accounts. | | | | |

|30. On a note receivable, the interest |A. True |B. False | | |

|plus the principal is called the face | | | | |

|value. | | | | |

|31. Not counting extensions, the filing |A. January 15 |B. March 15 |C. April 15 |D. August 15 |

|deadline for federal income tax returns | | | | |

|for individuals is | | | | |

|32. When current assets exceed current |A. increase capital. |B. decrease current ratio. |C. increase current ratio. |D. have no effect. |

|liabilities, payments to creditors on the | | | | |

|last day of the month will | | | | |

|33. Jones and Smith are partners with |A. $17,000 |B. $13,600 |C. $12,000 |D. $15,600 |

|capital balances of $40,000 and $20,000. | | | | |

|They share profit and loss in the ratio of| | | | |

|2:1, respectively. On December 31, 1998, | | | | |

|Hunter invests $18,000 cash for a 20 | | | | |

|interest in the capital and profit of the | | | | |

|business. How much will be credited to | | | | |

|Hunter's capital account on December 31, | | | | |

|1998? | | | | |

|34. An asset with a useful life of four |A. First Year, Higher; Second Year, Higher|B. First Year, Lower; Second Year, Higher |C. First Year, Higher; Second Year, Lower |D. First Year, Lower; Second Year, Lower |

|years and an estimated 10 salvage value | | | | |

|was purchased on January 1, 1999. Would | | | | |

|depreciation expense using the | | | | |

|sum-of-the-years'-digits method of | | | | |

|depreciation be higher or lower than | | | | |

|depreciation expense using the | | | | |

|double-declining balance method of | | | | |

|depreciation in the first and second | | | | |

|years? | | | | |

|35. Acme Company pays all employees on a|A. $22,500. |B. $49,200. |C. $45,000. |D. $26,700. |

|biweekly basis. Overtime pay, however, is | | | | |

|paid on the next biweekly period. The | | | | |

|company accrues salaries expense only at | | | | |

|year end. Data relating to salaries earned| | | | |

|in December 1998 are as follows: | | | | |

|• Last payroll was paid on 12/24/98, for | | | | |

|the 2-week period ended 12/25/98. | | | | |

|• Overtime pay earned in the same 2-week | | | | |

|period was $4,200. | | | | |

|• Work days remaining in the year were | | | | |

|December 28-31. | | | | |

|• The recurring biweekly salaries total | | | | |

|$75,000. | | | | |

|Assuming a five-day workweek, the company | | | | |

|should record a liability on December 31 | | | | |

|for accrued salaries of | | | | |

|The same company had a checkbook balance of $ 15,000 on December 31. In addition, the company held the following items during December: |

|• Check payable for $2,000 dated January 4, 1999, for payment of a sale made in December. |

|• Check for $500 deposited December 24 and included in the December 31 checkbook balance, but returned on December 30 stamped "NSF." The check was redeposited on January 4, and cleared on January 8. |

|• Check for $300 payable to a creditor, dated and recorded on December 31 and mailed on January 4. |

|36. What amount should be shown as Cash |A. $14,800 |B. $14,700 |C $14.500 |D. $16,800 |

|on the balance sheet on December 31, 1998?| | | | |

|37. On June 1, 1999, Acme Company |A. 24 months. |B. 6 months. |C. 12 months. |D. 7 months. |

|borrowed cash and signed a two-year | | | | |

|interest-bearing note on which both the | | | | |

|principal and interest are payable on June| | | | |

|1, 2001. On December 31,1999, the | | | | |

|liability for accrued interest should be | | | | |

|for | | | | |

|ITEMS 38 AND 39 ARE BASED ON THE FOLLOWING DATA: |

|In preparing its bank reconciliation for month ending May 31, 1999, Smith Corporation has available the following data: |

|Balance on bank statement, 5/28 $30,000 |

|Deposit in transit, 5/29 $5,200 |

|Outstanding checks $6,750 |

|Bank service charges for month $25 |

|38. Smith Corporation's adjusted |A. $23,225. |B. $28,475. |C. $28,450. |D. $28,425. |

|checkbook balance after reconciliation | | | | |

|should be | | | | |

|39. Given the information above, a debit|A. $0 |B. $25 |C. $5,200 |D. $6,750 |

|to Miscellaneous Expense and a credit to | | | | |

|Cash in Bank should be made for what | | | | |

|amount? | | | | |

|40. Individual taxpayers whose itemized |A. 1040EZ |B. 1040A |C. 1040 |D. Both b and c |

|deductions exceed their standard deduction| | | | |

|must file which IRS Form in order to take | | | | |

|advantage of itemizing? | | | | |

|41. The effect of declaring a dividend |A. a debit to Dividends Declared and a |B. a debit to Dividends Declared and a |C. a debit to Dividends Payable and a |D. no transaction until the dividend is |

|for any given year is |credit to Dividends Payable. |credit to Retained Earnings. |credit to Dividends Declared. |paid to stockholders. |

|42. If the maturity date of a 90 day |A. June 4 |B. May 4 |C. May 3 |D. May 5 |

|note payable is August 3, what was the | | | | |

|issue date? | | | | |

|43. Jamie has not cashed his payroll |A. The amount will show as a current |B. The amount will show as a current |C. It's the Income Statement that is |D. The balance will not show on either the|

|check; therefore, the payroll bank account|asset. |liability. |affected, not the Balance Sheet. |Balance Sheet or the Income Statement. |

|still shows a balance. What affect does | | | | |

|this have on the Balance Sheet? | | | | |

|44. Under the inventory costing method,|A. FIFO. |B. LIFO. |C. Perpetual Inventory. |D. Periodic Inventory. |

|items purchased at the end of the month | | | | |

|are the first items sold at the beginning | | | | |

|of the month. This is called | | | | |

|45. Find the interest and maturity |A. $ 120.00 interest; $ 1,620.00 maturity |B. $32.88 interest; $1,532.88 maturity |C. $3.29 interest; $1,503.29 maturity |D. $19.74 interest; $1,519.74 maturity |

|value for a 60 day note with principal of |value |value |value |value |

|$1,500 and interest at 8 percent. | | | | |

|TravelWorks provided you with the following information for 1998: |

|Net Sales $100,000 |

|Beginning Inventory $36,000 |

|Purchases $42,000 |

|Ending Inventory $16,000 |

|46. What is TravelWorks's cost of good |A. $62,000 and $38,000 |B. $38,000 and $62,000 |C. $22,000 and $78,000 |D. None of the above. |

|sold and its gross profit on sales? | | | | |

|47. A fiscal period may be |A. three months. |B. six months. |C. twelve months. |D. any of the above. |

|48. Which of the following is not a |A. Raw materials |B. Indirect labor |C. Utilities |D. Supervisor's salary |

|cost considered as factory overhead? | | | | |

|49. An example of a business's variable|A. advertising. |B. rent expense. |C. direct labor. |D. All of the above |

|cost would be | | | | |

|50. If a business installs a new and |A. revenue expense. |B. capital expense. |C. pre-paid expense. |D. liability. |

|improved electrical system, the cost is | | | | |

|considered a | | | | |

|51. In a manufacturing business, |A. finished goods. |B. raw materials. |C. work in progress. |D. interim inventory. |

|products that have not yet been fully | | | | |

|completed are called | | | | |

|52. A franchise is a |A. patent. |B. copyright. |C. charter. |D. right to conduct business under a |

| | | | |contracted name. |

|53. When a business exchanges a plant |A. not recognized. |B. recognized. |C. recognized, but at book value. |D. recognized, but at market value. |

|asset for a similar plant asset, losses | | | | |

|are | | | | |

|54. When a corporation sells a bond |A. mortgagor. |B. mortgagee. |C. stockholder. |D. underwriter. |

|issue to an investment firm, the firm is | | | | |

|known as the | | | | |

|55. Which inventory cost method yields |A. FIFO |B. LIFO |C. Weighted average |D. Specific identification |

|the smallest gross profit (and smallest | | | | |

|tax obligation)? | | | | |

|56. When both a partnership and the |A. mutual understanding. |B. dissolution. |C. termination. |D. liquidation. |

|partnership business end, this is called a| | | | |

|Space Company shows the following data for May, 1999: |

|• Beginning Inventory at cost: $210,000; at retail: $428,510 |

|• Net Purchases at cost: $74,000; at retail: $129,667 |

|• Sales totaled $194,000 |

|57. If the gross profit percentage has |A. $144,320 |B. $139,680 |C. $229,680 |D. $199,987 |

|been 28 on average, what is the estimated | | | | |

|cost of the ending inventory using the | | | | |

|gross profit method? | | | | |

|58. The costing method used to |A. affect all of the adjusting entries. |B. affect the gross profit on sales for |C. affect the market value of the |D. affect the original cost of the |

|determine the value of the ending | |the period. |inventory on hand. |merchandise purchased. |

|inventory will | | | | |

|59. MACRS is a method to calculate |A. true, and may be an advantage to a |B. true, but MACRS has no impact on a |C. false, as MACRS is not a method to |D. None of the above are correct. |

|depreciation. This statement is |business for tax purposes. |business's tax situation. |calculate depreciation. | |

|60. Generally, the accountant will |A. Balance Sheet, Income Statement, |B. Statement of Owner's Equity, Income |C. Income Statement, Statement of Owner's |D. Income Statement, Balance Sheet, |

|prepare financial statements in a specific|Statement of Owner's Equity |Statement, Balance Sheet |Equity, Balance Sheet |Statement of Owner's Equity |

|order. Which of the following is the best | | | | |

|order to follow? | | | | |

|61. The ____________is used to |A. Income Statement |B. Work Sheet |C. Statement of Owner's Equity |D. Balance Sheet |

|determine the liquidity ratio of a | | | | |

|business. | | | | |

|62. All of the information needed to |A. Balance Sheet section of the work |B. Income Statement section of the work |C. General Journal. |D. Trial Balance section of the work |

|journalize the closing entries is found in|sheet. |sheet. | |sheet. |

|the | | | | |

|63. The Jones Corporation issued 6,000 |A. $60,000 |B. $87,000 |C. $27,000 |D. $6,000 |

|shares of $10 par common stock at $14.50 | | | | |

|per share. What amount will be credited to| | | | |

|the Paid-in Capital (excess of par) | | | | |

|account? | | | | |

|64. To evaluate a business's earning |A. the quick ratio. |B. the current ratio. |C. the profitability ratio. |D. the portfolio ratio. |

|power, the accountant will determine | | | | |

|65. When a corporation accepts assets |A. debit the assets at fair market value, |B. debit the stock, credit the assets at |C. debit the assets at book value, credit|D. Stock should never be issued for |

|other than cash in exchange for its stock,|credit stock. |fair market value. |the stock. |non-cash assets. |

|the journal entry is | | | | |

|66. When a dividend is paid in cash, |A. Dividends Received and Dividends |B. Cash and Dividends Payable. |C. Dividends Payable and Cash. |D. Common Stock and Cash. |

|the accounts debited and credited are |Payable. | | | |

|67. A method of estimating the |A. aging of accounts receivable. |B. bad debts allowance. |C. matching principle. |D. direct write-off. |

|uncollectible amount from customers' | | | | |

|accounts is called | | | | |

|68. Would stockholders' equity be |A. Yes and Yes |B. Yes and No |C. No and Yes |D. No and No |

|affected by a stock dividend? A stock | | | | |

|split? | | | | |

|69. When a corporation issues preferred|A. a decrease of preferred stock |B. an increase of preferred stock |C. an increase of preferred stock |D. both an increase and decrease of |

|stock to its stockholders, the result will|outstanding. |outstanding. |authorized. |preferred stock outstanding. |

|be | | | | |

|70. An example of direct labor is |A. wages paid to a person who works on a |B. wages paid to a person who supervises |C. wage paid to a security person who |D. wage paid to the payroll clerk. |

| |product. |the production process. |oversees the security of the production | |

| | | |process. | |

|71. The total of beginning inventory |A. gross profit on sales. |B. merchandise available for sale. |C. cost of goods sold. |D. book value of the accounts receivable. |

|plus purchases represents the | | | | |

|QUESTIONS 72 THROUGH 80 ARE BASED ON ANALYZING WHETHER THE ACCOUNT WOULD NORMALLY HAVE A DEBIT OR CREDIT TRANSACTION. USE "A" FOR DEBIT AND "B" FOR CREDIT. |

|72. Certificates of Deposit |A. Debit |B. Credit | | |

|73. Grants Receivable |A. Debit |B. Credit | | |

|74. Wages Payable |A. Debit |B. Credit | | |

|75. Prepaid Rent |A. Debit |B. Credit | | |

|76. Purchase Returns and Allowances |A. Debit |B. Credit | | |

|77. Sales Returns and Allowances |A. Debit |B. Credit | | |

|78. Federal Income Tax Expense |A. Debit |B. Credit | | |

|79. Paid-in-capital from sale of |A. Debit |B. Credit | | |

|treasury stock (at above cost) | | | | |

|80. Accumulated Depreciation |A. Debit |B. Credit | | |

|81. To write off a bond premium over the|A. depreciate the bond premium. |B. underwrite the bond premium. |C. amortize the bond premium. |D. liquidate the bond premium. |

|life of the bond, the accountant will | | | | |

|82. The price-earnings ratio of a |A. dividing net income after taxes by the |B. dividing the market price per share by |C. determining the current ratio. |D. dividing the profitability ratio by |

|company's stock is calculated by. |market price of the stock. |the earnings per share. | |the quick ratio. |

|83. If fixed costs increase profits |A. increase |B. decrease | | |

|will________ | | | | |

|84. If the number of units produced |A. increase |B. decrease | | |

|increases, unit fixed costs will | | | | |

|85. If the contribution margin |A. increase |B. decrease | | |

|increases, profits will______ | | | | |

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