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Accounting 250 Practice Exam Chapter 5-9 Chapter 5 1. Davis-(Answered)

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Accounting 250

Practice Exam Chapter 5-9

Chapter 5

1. Davis Company February 28th bank statement said it had a balance of $9,600. The bank statement showed one check from a customer returned as NSF check for $500 and a service charge of $40. The company noted it had deposits in transit of $4,500. The balance per the check book was $9,500. Based on the facts, what was the value of the outstanding checks at February 28th?

a. $8,960

b. $5,140

c. $440

d. $100

Balance per bank

Balance per books

2. All of the following bank reconciliation items would be found on the book side of a bank reconciliation except

a. interest earned

b. deposits in transit

c. fee for collection of note by the bank

d. NSF check of a customer

3. Jansen Company had the following bank information:

Cash Balance per books $2,200

Outstanding checks $1,500

Deposits in transit $ 300

NSF checks noted on bank statement (from customer) $ 140

Notes receivable and interest collected by bank $ 740

Bank Service charges for April $ 25

What is the adjusted balance per books for Jansen Company as of April 30, 2003?

a. $3,075

b. $2,940

c. $2,775

d. $3,055

4. Internal controls are important because they

a. prevent fraud and misleading financial statement

b. eliminate fraud

c. deter fraud and prevent theft and other abuses

d. guarantee accurate financial statements

5. The company wrote a check for $250 but recorded it as a deduction of $520. To reconcile the bank statement, the company would:

a. increase the balance per checkbook by $270

b. decrease the balance per checkbook by $270

c. increase the balance per bank by $270

d. decrease the balance per bank by $270

6. The purpose of the Sarbanes-Oxley Act of 2002 is to

a.

restore public confidence and trust in the financial statements of publicly held companies.

b.

require all companies to prepare financial statements.

c.

protect companies from demands of investors, stockholders, and creditors.

d.

do all of these.

Chapter 6

7. Jones Company lends Gray Company $20,000 on May 1, accepting a four-month, 9% interest note. Jones prepares financial statements on May 31. What adjustment for interest should be made before the financial statements can be prepared?

a. increase Note Receivable, $20,000 and decrease Cash, $20,000

b. increase Interest Receivable, $150; increase retained earnings (Interest Revenue), $150

c. increase Cash, 150; increase retained earnings (Interest Revenue, $150

d. increase Interest Receivable, $600; increase retained earnings (Interest Revenue, $600

8. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is recorded when

a. a sale is made.

b. an account becomes bad and is written off.

c. management estimates uncollectible accounts at the end of the accounting period.

d. a customer's account becomes past due.

9. Johnson Company?s accounts receivable has a balance is $75,000. Management estimates that $3,750 of accounts receivable are uncollectible. What is the cash (net) realizable value of the accounts receivable after the adjusting entry is made?

a. $75,000.

b. $71,250.

c. $78,750.

10. On the balance sheet the Allowance for Doubtful Accounts

a. is offset against total assets.

b. increases the cash realizable value of accounts receivable.

c. appears under the heading "Other Assets."

d. is deducted from accounts receivables.

Use the following information for next 2 questions

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

Unit Cost Total cost

June 1 150 units $5.20 $ 780

June 10 200 units $5.85 1,170

June 15 200 units $6.30 1,260

June 28 150 units $6.60 990

700 $4,200

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

11. Using the First-In, First-Out inventory method, the value of the Cost of Goods Sold

on June 30 is

a. $1,073.

b. $1,305.

c. $2,895.

d. $3,127.

12. Using the weighted average method, the amount allocated to Ending inventory on June 30 is

a. $1,200.

b. $3,000.

c. $1,198.

d. $1,320

13. In a period of rising prices, which of the following statements is true?

a. LIFO will have the higher ending inventory and highest cost of goods sold as compared to FIFO.

b. FIFO will have the higher ending inventory and highest cost of goods sold as compared to LIFO.

c. FIFO will have the higher ending inventory and lowest cost of goods sold as compared to LIFO.

d. LIFO will have the higher ending inventory and lowest cost of goods sold as compared to FIFO.

14. If net sales is $550,000, beginning inventory is $110,000, and ending inventory is $125,000, how much would be the accounts receivables turnover?

a. 4.4

b. 5.0

c. 4.7

d. 4.0

15. If sales is $1,000,000, cost of merchandise sold is $750,000, and average inventory is $220,000, how much would be inventory turnover?

a. 1.1

b. 3.4

c. 1.3

d. 4.5

Chapter 7

16. Which of the following are intangible assets?

a. equipment.

b. Copyright

c. Patent.

d. b and c are both intangible assets.

e. all three are intangible assets

17. Jones and Co. buys land to mine for gold on January 1, 2008 for $1,000,000. The company estimates the land will provide 100,000 units of gold during the time it is mined. If the company extract 25,000 units of gold in the first year, what is the amount of the depletion to be recorded

a. $10.00.

b. $100,000.

c. $250,000.

d. $25,000 .

18. On January 1, 2005, a company purchased factory equipment for $100,000. It is estimated that the equipment will have a $10,000 salvage value at the end of its estimated 5-year useful life. If the company uses the straight line method of depreciation, the amount of depreciation expense for the second year after the purchase is?

a. $40,000.

b. $18,000.

c. $20,000.

d. $36,000.

19. On July 1, 2000, Waters Kennels sells equipment for $18,000. The equipment originally cost $60,000. The Accumulated Depreciation account had a balance of $40,000 on July 1, 2000, using the straight-line method. At disposal, there is a

a. $3,000 gain.

b. $2,000 loss.

c. $3,000 loss.

d. $2,000 gain.

20. The balance in the Accumulated Depreciation account represents the

a. cash fund available to replace plant assets.

b. amount to be deducted from the cost of the plant asset to arrive at its fair market value.

c. total amount charged to depreciation expense in the current period.

d. total amount charged to depreciation expense since the plant asset was acquired.

21. A truck costing $35,000 was completely destroyed when its engine caught fire. At the date of the fire, the accumulated depreciation on the truck was $16,000. An insurance check for $15,000 was received based on the value of the truck at the time of loss. (NOTE treat like cash sale) The transaction to record the insurance proceeds and the disposition of the truck (truck taken to dump) includes a

a. increase retained earnings- Gain on Disposal of $15,000.

b. decrease the Truck account of $19,000.

c. decrease the cash account for $19,000.

d. decrease retained earnings ? Loss on Disposal of $4,000.

22. Equipment was purchased for $15,000. Freight charges amounted to $700 and there was a cost of $2,000 for building a platform and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

a. $3,540.

b. $2,940.

c. $2,460.

d. $2,400.

23. A company has equipment on its balance sheet with a cost of $25,000. The equipment has a four year useful life and zero estimated salvage value. At the beginning of the year, the related accumulated depreciation account had a balance of $9,000. If annual depreciation is $6,250, the book value of the equipment at the end of the year is

$25,000

b. $16,000

c. $9,750

d. $6,250

24. The fixed asset turnover is calculated as _________.

a. net income divided by average fixed assets

b. net sales divided by cost of the assets

c. average fixed assets divided by net sales

d. net sales divided by average fixed assets

Chapter 8

25. On January 1, 2005 the Torrez Corporation issues 10-year, 5% bonds at face value for $1,000,000. The transaction to record the payment of semi-annual interest will

a. decrease assets and decrease equity.

b. decrease assets and increase liabilities

c. increase liabilities and decrease equity.

d. decrease assets and decrease liabilities

26. If the market rate of interest is less than the contractual (stated) rate of interest, the bond will sell

a. at a premium

b. at face value

c. at a discount

d. can?t determine with this information

27. The board of directors of Weston Company declared a cash dividend of $2.00 per share on 30,000 shares of common stock on September 15, 2003. The dividend is to be paid on October 30th to the stockholders of record on October 7th. The transaction to record the payment of the dividend on October 30th is

a. Increases dividends payable and decreases retained earnings.

b. Decreases dividends payable and decreases cash

c. Decreases cash and decreases retained earnings

d. Decreases dividends payable and increase retained earnings

28. If a company can determine a reasonable estimate of an expected loss from a lawsuit and it is probable it will lose the suit, the company should

a. only disclose the basic facts regarding the suit in the notes to its financial statements.

b. record the loss and disclose the basic facts regarding the suit in the notes to its financial statements

c. neither disclose the loss or record the loss.

d. pay the amount estimated.

29. The impact of the accounting equation on the declaration date of a dividend will

a. increase assets and increase equity.

b. decrease assets and decrease liabilities

c. increase liabilities and decrease equity.

d. decrease assets and decrease equity

30. J. Jones Company issued 100,000 shares of $5 common stock for $8 per share. What is the impact on the accounting equation?

a. Assets

Liabilities

Equity

Cash

Retained Earnings

+$800,000

+$800,000

Assets

Liabilities

Equity

Cash

Common Stock

-$800,000

-$800,000

Assets

Liabilities

Equity

Cash

Common stock Add paid in Capital

+$800,000

+$500,000 +300,000

31. For the year that just ended, a company reports net income of $1,500,000. There are 500,000 shares authorized, 300,000 shares issued, and 250,000 shares of common stock outstanding. What is the earnings per share?

a. $5.00

b. $2.50

c. $6.00

d. $3.00

Chapter 9

32. Roman & Co. at December 31, 1999 had beginning accounts receivable of $40,000; ending accounts receivables of $60,000; cost of goods sold of $600,000; and net sales of $800,000. What is Roman?s Accounts Receivable turnover for 1999?

a. 20.0 times

b. 16.0 times

c. 13.3 times

d. 12.0 times

33. The percent of fixed assets to total assets is an example of

a.

vertical analysis.

b.

solvency analysis.

c.

profitability analysis.

d.

horizontal analysis.

34. The percentage of change in long-term liabilities between two balance sheet dates is an example of

a.

vertical analysis.

b.

solvency analysis.

c.

profitability analysis.

d.

horizontal analysis.

35. Roman & Co. at December 31, 2011 had current assets of $40,000; total assets of $160,000; current liabilities of $30,000 and total liabilities of $70,000. What is Roman?s current ratio for 2011?

a. 1.33 to 1

b. .25 times

c. .57 to 1

d. 2.29 to 1

Miscellaneous

36. Which set of accounts are all found on the balance sheet?

a. Equipment, dividends and accumulated depreciation

b. Gain on sale of equipment, interest income, and repair expense

c. Copyright, Goodwill and accounts receivable

d. Amortization expense, depreciation expense and notes receivable

37. Which set of accounts are all found on the income statement?

a. Equipment, dividends and accumulated deprecation

b. gain on sale of equipment, interest income, and repair expense

c. Copyright, Goodwill and accounts receivable

d. Amortization expense, depreciation expense and notes receivable


Use the following trial balance to answer the next questions:

Henderson Hardware

Account list as of December 31, 2009

Balance in account

Cash

58,000

Accounts Receivable

20,000

Allowance for Doubtful Accts.

5,000

Inventory

19,000

Supplies

6,000

Equipment

50,000

Accumulated Depreciation

10,000

Goodwill

4,000

Accounts Payable

27,000

Unearned Revenue

3,000

Long Term Note Payable

40,000

Common Stock

18,000

Additional Paid in Capital

54,000

Retained Earnings (1/1/09)

5,000

Treasury Stock

4,000

Dividends

2,000

Sales

250,000

Sales Returns

5,000

Cost of Goods Sold

138,000

Delivery Expense

7,000

Rent Expense

24,000

Salaries Expense

60,000

Depreciation Expense

7,000

Bad Debt Expense

6,000

Interest Expense

1,000

Income Tax Expense

1,000

What is net income?

What is the amount of total current assets?

What is the amount of Net fixed assets?

What is the amount of total assets?

What is the amount of current liabilities?

What is the amount of total liabilities?

What is the amount of retained earnings at 12/31?

What is the amount of stockholder?s equity at 12/31?


Answer Key:

1

B

2

B

3

C

4

C

5

A

6

A

7

B

8

C

9

B

10

D

11

C

12

A

13

C

14

C

15

B

16

D

17

C

18

B

19

B

20

D

21

D

22

B

23

C

24

D

25

A

26

A

27

B

28

B

29

C

30

D

31

C

32

B

33

A

34

D

35

A

36

C

37

B

  1. Net income = 1,000
  2. Total current assets = 98,000
  3. Net Fixed assets = 40,000
  4. Total assets = 142,000
  5. Total current liabilities = 30,000
  6. Total liabilities = 70,000
  7. Ending retained earnings = 4,000
  8. Total stockholder?s equity 72,000

Accounting 250

 

Practice Exam Chapter 5-9

 

Chapter 5

 

1. Davis Company February 28th bank statement said it had a balance of $9,600. The bank statement showed one check

 

from a customer returned as NSF check for $500 and a service charge of $40. The company noted it had deposits in

 

transit of $4,500. The balance per the check book was $9,500. Based on the facts, what was the value of the

 

outstanding checks at February 28th?

 

a. $8,960

 

b. $5,140

 

c. $440

 

d. $100

 

Balance per bank

 

Balance per books

 


 

2. All of the following bank reconciliation items would be found on the book side of a bank reconciliation except

 

a. interest earned

 

b. deposits in transit

 

c. fee for collection of note by the bank

 

d. NSF check of a customer

 

3. Jansen Company had the following bank information:

 

Cash Balance per books

 

$2,200

 

Outstanding checks

 

$1,500

 

Deposits in transit

 

$ 300

 

NSF checks noted on bank statement (from customer)

 

$ 140

 

Notes receivable and interest collected by bank

 

$ 740

 

Bank Service charges for April

 

$ 25

 

What is the adjusted balance per books for Jansen Company as of April 30, 2003?

 

a.

 

$3,075

 

b.

 

$2,940

 

c.

 

$2,775

 

d.

 

$3,055

 

4. Internal controls are important because they

 

a. prevent fraud and misleading financial statement

 

b. eliminate fraud

 

c. deter fraud and prevent theft and other abuses

 

d. guarantee accurate financial statements

 

5. The company wrote a check for $250 but recorded it as a deduction of $520. To reconcile the bank statement, the

 

company would:

 

a. increase the balance per checkbook by $270

 

b. decrease the balance per checkbook by $270

 

c. increase the balance per bank by $270

 

d. decrease the balance per bank by $270

 


 

6. The purpose of the Sarbanes-Oxley Act of 2002 is to

 

a. restore public confidence and trust in the financial statements of publicly held

 

companies.

 

b. require all companies to prepare financial statements.

 

c. protect companies from demands of investors, stockholders, and creditors.

 

d. do all of these.

 

Chapter 6

 

7. Jones Company lends Gray Company $20,000 on May 1, accepting a four-month, 9% interest note. Jones prepares

 

financial statements on May 31. What adjustment for interest should be made before the financial statements can

 

be prepared?

 

a. increase Note Receivable, $20,000 and decrease Cash, $20,000

 

b. increase Interest Receivable, $150; increase retained earnings (Interest Revenue), $150

 

c. increase Cash, 150; increase retained earnings (Interest Revenue, $150

 

d. increase Interest Receivable, $600; increase retained earnings (Interest Revenue, $600

 

8. When the allowance method is used to account for uncollectible accounts, Bad Debts Expense is recorded when

 

a. a sale is made.

 

b. an account becomes bad and is written off.

 

c. management estimates uncollectible accounts at the end of the accounting period.

 

d. a customer's account becomes past due.

 

9. Johnson Company?s accounts receivable has a balance is $75,000. Management estimates that $3,750 of accounts

 

receivable are uncollectible. What is the cash (net) realizable value of the accounts receivable after the adjusting

 

entry is made?

 

a. $75,000.

 

b. $71,250.

 

c. $78,750.

 

10. On the balance sheet the Allowance for Doubtful Accounts

 

a. is offset against total assets.

 

b. increases the cash realizable value of accounts receivable.

 

c. appears under the heading "Other Assets."

 

d. is deducted from accounts receivables.

 

Use the following information for next 2 questions

 

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

 

Unit Cost

 

Total cost

 

June 1

 

150 units

 

$5.20

 

$ 780

 

June 10

 

200 units

 

$5.85

 

1,170

 

June 15

 

200 units

 

$6.30

 

1,260

 

June 28

 

150 units

 

$6.60

 

990

 

700

 

$4,200

 

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

 

11. Using the First-In, First-Out inventory method, the value of the Cost of Goods Sold

 

on June 30 is

 

a. $1,073.

 

b. $1,305.

 

c. $2,895.

 

d. $3,127.

 


 

12. Using the weighted average method, the amount allocated to Ending inventory on June 30 is

 

a. $1,200.

 

b. $3,000.

 

c. $1,198.

 

d. $1,320

 

13. In a period of rising prices, which of the following statements is true?

 

a. LIFO will have the higher ending inventory and highest cost of goods sold as compared to FIFO.

 

b. FIFO will have the higher ending inventory and highest cost of goods sold as compared to LIFO.

 

c. FIFO will have the higher ending inventory and lowest cost of goods sold as compared to LIFO.

 

d. LIFO will have the higher ending inventory and lowest cost of goods sold as compared to FIFO.

 

14. If net sales is $550,000, beginning inventory is $110,000, and ending inventory is $125,000, how much would be the

 

accounts receivables turnover?

 

a. 4.4

 

b. 5.0

 

c. 4.7

 

d. 4.0

 

15. If sales is $1,000,000, cost of merchandise sold is $750,000, and average inventory is $220,000, how much would be

 

inventory turnover?

 

a. 1.1

 

b. 3.4

 

c. 1.3

 

d. 4.5

 

Chapter 7

 

16. Which of the following are intangible assets?

 

a. equipment.

 

b. Copyright

 

c. Patent.

 

d. b and c are both intangible assets.

 

e. all three are intangible assets

 

17. Jones and Co. buys land to mine for gold on January 1, 2008 for $1,000,000. The company estimates the land will

 

provide 100,000 units of gold during the time it is mined. If the company extract 25,000 units of gold in the first

 

year, what is the amount of the depletion to be recorded

 

a. $10.00.

 

b. $100,000.

 

c. $250,000.

 

d. $25,000 .

 

18. On January 1, 2005, a company purchased factory equipment for $100,000. It is estimated that the equipment will

 

have a $10,000 salvage value at the end of its estimated 5-year useful life. If the company uses the straight line

 

method of depreciation, the amount of depreciation expense for the second year after the purchase is?

 

a. $40,000.

 

b. $18,000.

 

c. $20,000.

 

d. $36,000.

 


 

19. On July 1, 2000, Waters Kennels sells equipment for $18,000. The equipment originally cost $60,000. The

 

Accumulated Depreciation account had a balance of $40,000 on July 1, 2000, using the straight-line method. At

 

disposal, there is a

 

a. $3,000 gain.

 

b. $2,000 loss.

 

c. $3,000 loss.

 

d. $2,000 gain.

 

20. The balance in the Accumulated Depreciation account represents the

 

a. cash fund available to replace plant assets.

 

b. amount to be deducted from the cost of the plant asset to arrive at its fair market value.

 

c. total amount charged to depreciation expense in the current period.

 

d. total amount charged to depreciation expense since the plant asset was acquired.

 

21. A truck costing $35,000 was completely destroyed when its engine caught fire. At the date of the fire, the

 

accumulated depreciation on the truck was $16,000. An insurance check for $15,000 was received based on the

 

value of the truck at the time of loss. (NOTE treat like cash sale) The transaction to record the insurance proceeds

 

and the disposition of the truck (truck taken to dump) includes a

 

a. increase retained earnings- Gain on Disposal of $15,000.

 

b. decrease the Truck account of $19,000.

 

c. decrease the cash account for $19,000.

 

d. decrease retained earnings ? Loss on Disposal of $4,000.

 

22. Equipment was purchased for $15,000. Freight charges amounted to $700 and there was a cost of $2,000 for

 

building a platform and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value

 

at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

 

a. $3,540.

 

b. $2,940.

 

c. $2,460.

 

d. $2,400.

 

23. A company has equipment on its balance sheet with a cost of $25,000. The equipment has a four year useful life and

 

zero estimated salvage value. At the beginning of the year, the related accumulated depreciation account had a

 

balance of $9,000. If annual depreciation is $6,250, the book value of the equipment at the end of the year is

 

a. $25,000

 

b. $16,000

 

c. $9,750

 

d. $6,250

 

24. The fixed asset turnover is calculated as _________.

 

a. net income divided by average fixed assets

 

b. net sales divided by cost of the assets

 

c. average fixed assets divided by net sales

 

d. net sales divided by average fixed assets

 

Chapter 8

 

25. On January 1, 2005 the Torrez Corporation issues 10-year, 5% bonds at face value for $1,000,000. The transaction to

 

record the payment of semi-annual interest will

 

a. decrease assets and decrease equity.

 

b. decrease assets and increase liabilities

 

c. increase liabilities and decrease equity.

 

d. decrease assets and decrease liabilities

 


 

26. If the market rate of interest is less than the contractual (stated) rate of interest, the bond will sell

 

a. at a premium

 

b. at face value

 

c. at a discount

 

d. can?t determine with this information

 

27. The board of directors of Weston Company declared a cash dividend of $2.00 per share on 30,000 shares of common

 

stock on September 15, 2003. The dividend is to be paid on October 30 th to the stockholders of record on October

 

7th. The transaction to record the payment of the dividend on October 30th is

 

a. Increases dividends payable and decreases retained earnings.

 

b. Decreases dividends payable and decreases cash

 

c. Decreases cash and decreases retained earnings

 

d. Decreases dividends payable and increase retained earnings

 

28. If a company can determine a reasonable estimate of an expected loss from a lawsuit and it is probable it will lose

 

the suit, the company should

 

a. only disclose the basic facts regarding the suit in the notes to its financial statements.

 

b. record the loss and disclose the basic facts regarding the suit in the notes to its financial statements

 

c. neither disclose the loss or record the loss.

 

d. pay the amount estimated.

 

29. The impact of the accounting equation on the declaration date of a dividend will

 

a. increase assets and increase equity.

 

b. decrease assets and decrease liabilities

 

c. increase liabilities and decrease equity.

 

d. decrease assets and decrease equity

 

30. J. Jones Company issued 100,000 shares of $5 common stock for $8 per share. What is the impact on the accounting

 

equation?

 

a. Assets

 

Liabilities

 

Equity

 

Cash

 

Retained Earnings

 

+$800,000

 

+$800,000

 

b.Assets

 

Cash

 

+$500,000

 


 

Liabilities

 


 

Equity

 

Common Stock

 

+$500,000

 


 

c. Assets

 

Cash

 

-$800,000

 


 

Liabilities

 


 

Equity

 

Common Stock

 

-$800,000

 


 

d. Assets

 

Cash

 

+$800,000

 


 

Liabilities

 


 

Equity

 

Common stock

 

+$500,000

 


 

Add paid in Capital

 

+300,000

 


 

31. For the year that just ended, a company reports net income of $1,500,000. There are 500,000 shares authorized,

 

300,000 shares issued, and 250,000 shares of common stock outstanding. What is the earnings per share?

 

a. $5.00

 

b. $2.50

 

c. $6.00

 

d. $3.00

 


 

Chapter 9

 

32. Roman & Co. at December 31, 1999 had beginning accounts receivable of $40,000; ending accounts receivables of

 

$60,000; cost of goods sold of $600,000; and net sales of $800,000. What is Roman?s Accounts Receivable turnover

 

for 1999?

 

a. 20.0 times

 

b. 16.0 times

 

c. 13.3 times

 

d. 12.0 times

 

33. The percent of fixed assets to total assets is an example of

 

a. vertical analysis.

 

b. solvency analysis.

 

c. profitability analysis.

 

d. horizontal analysis.

 

34. The percentage of change in long-term liabilities between two balance sheet dates is an example of

 

a. vertical analysis.

 

b. solvency analysis.

 

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