ACC230 Final Exam Guide (Part 1) _correct w/ Solutions !! 1 answer below »

Question 1 of 38

Where would the total of all of a company's customer accounts in the accounts receivable ledger at year-end be found?

The cost of goods sold account in the general ledger

The accounts payable account in the general ledger

The sales account in the general ledger

The accounts receivable account in the general ledger

Question 2 of 38

Which of the following is NOT true of an effective accounting system?

The system must accommodate changes in the business over time.

The system must provide minimal benefits at whatever cost is necessary.

The system must work smoothly with your personnel and organizational structure.

The system has internal controls to help the owner(s) control the business

.

Question 3 of 38

Which of the following are characteristics of an effective manual accounting system, but NOT characteristics of an effective computerized accounting system?

Flexibility

Control

Compatibility

All of these features are needed by both accounting systems.

Question 4 of 38

Which of the following is generally used by small businesses?

QuickBooks or Peachtree

SAP, Oracle, or PeopleSoft

Both of the above

Neither of the above

Question 5 of 38

Which of the following is a spreadsheet?

PowerPoint

Word

Access

Excel

Question 6 of 38

A check was written by a business for $329, but recorded in the cash payments journal as $239. How would this error be included on the bank reconciliation?

A deduction on the book side

An addition on the book side

An addition on the bank side

A deduction on the bank side

Question 7 of 38

Which of the following items does NOT cause a difference in the bank balance and the book balance on a bank reconciliation?

Deposits in transit

Outstanding checks

Canceled checks

Nonsufficient funds checks

Question 8 of 38

Which of the following describes the internal control component "control procedures?"

A company must identify its risks.

Control procedures are designed to ensure that the business's goals are achieved.

Control procedures are the "tone at the top" of the business.

Internal auditors monitor company controls to safeguard assets and external auditors monitor the controls to ensure that the accounting records are accurate.

Question 9 of 38

At the West Texas Clothing Store, the same employee who sold merchandise rings up returned merchandise and refunds the cash. Which internal control procedure is being violated by West Texas Clothing Store?

A company must identify its risks.

The "tone at the top" requires that the owner and managers set a good example.

External auditors will monitor internal controls.

All transactions must be properly authorized.

Question 10 of 38

Which of the following is a common tactic to overcome internal controls?

Firewalls

Separation of duties

Collusion

Encryption

Question 11 of 38

Table 9.1

The following information is from the 2008 records of Armadillo Camera Shop:

Accounts Receivable, December 31, 2008$20,000(debit)

Allowance for uncollectible accounts, December 31, 2008, prior to adjustment600(debit)

Net credit sales for 200895,000

Accounts written off as uncollectible during 20087,000

Cash sales during 200827,000

Refer to Table 9.1. Uncollectible accounts expense is estimated by the aging-of-accounts-receivable method. Management estimates that $2,850 of accounts receivable will be uncollectible. Which of the following will be the amount of Allowance for Uncollectible Accounts after adjustment?

$3,450

$2,850

$7,000

$2,250

Question 12 of 38

What is the maturity value of a note?

The principal amount plus interest due

The principal amount minus total interest due

The principal amount times the interest rate

The face amount of the note

Question 13 of 38

The allowance for uncollectible accounts currently has a credit balance of $200. The company's management estimates that 2.5% of net credit sales will be uncollectible. Net credit sales are $115,000. What will be the amount of allowance for uncollectible accounts reported on the balance sheet?

$3,075

$2,675

$2,875

$3,275

Question 14 of 38

Goodwill of $20,000 was recorded upon the purchase of Smith Repair Parts. The company has been very successful and has increased in value during its first year of operation under its new management. How much amortization should be recorded for the first year?

$-0-

$2,000

$4,000

$1,000

Question 15 of 38

Which of the following would be expensed rather than capitalized?

Oil change and lubrication

Major engine overhaul

Addition to storage capacity

Modification for new use

Question 16 of 38

In which of the following periods should the expense for warranty costs be recorded?

The period when the product is repaired or replaced

The period when cash is collected for the sale of the product

The period when cash is paid to repair or replace the product

The period when the product is sold

Question 17 of 38

A company issues two thousand $1,000 bonds at 98. Which of the following is the entry to record this transaction?

A

B

C

D

Question 18 of 38

How much cash will be received if a corporation issues $6,000,000 of 10% bonds at 102?

$6,012,000

$6,000,000

$6,120,000

$5,880,000

Question 19 of 38

Which of the following statements about the information included on a statement of cash flows is TRUE?

The statement of cash flows contains information about the business's percentage change in each item of revenue and expense.

The statement of cash flows contains information about the differences between net income and additions to retained earnings.

The statement of cash flows contains information about stock splits and stock dividends distributed by the company.

The statement of cash flows contains information about the business's ability to generate positive cash flows in future periods.

Question 20 of 38

Case 16.1

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007, financial statements.

December 31, 2006December 31, 2007

Accounts receivable$100,000$110,000

Cost of goods sold560,000

Sales revenue830,000

Accounts payable*67,00075,000

Inventory105,00086,000

Salary payable10,00013,000

Salary expense45,00049,000

*Relates solely to the acquisition of inventory

Refer to Case 16.1. What will appear in the operating activities section related to inventory?

The decrease of $19,000 will be subtracted from net income.

The decrease of $19,000 will be added to net income.

The decrease of $19,000 will be added to cost of goods sold.

The decrease of $19,000 will be subtracted from cost of goods sold.

Question 21 of 38

Which of the following is generally the base amount when performing vertical analysis of a balance sheet?

A net asset is generally the base amount when performing vertical analysis of a balance sheet.

Stockholders' equity is generally the base amount when performing vertical analysis of a balance sheet.

Total liabilities is generally the base amount when performing vertical analysis of a balance sheet.

Total assets is generally the base amount when performing vertical analysis of a balance sheet.

Question 22 of 38

Case 17.3

The following is a summary of information presented on the income statement of HR Flowers for December 31, 2007.

Account20072006

Net sales revenue$487,000100.00%$500,000

Cost of goods sold400,00082.14%395,000

Gross profit157,00032.24%105,000

Selling and general expenses70,00014.37%50,000

Net income before income tax expense87,00017.86%55,000

Income tax expense24,0004.93%16,500

Net income$ 63,00012.94%$ 38,500

Refer to Case 17.3. What would vertical analysis report with respect to 2007 net sales revenue?

Vertical analysis would report a 2.60% decrease in net sales revenue.

Vertical analysis would report cost of goods sold as 79.19% of net sales revenue.

Vertical analysis would report a dividend yield of $8.20.

Vertical analysis would report net sales revenue as the 100% base amount.

Question 23 of 38

A company received a bank statement showing a balance of $62,300. Reconciling items were outstanding checks of $1,450 and a deposit in transit of $8,500. What is the company's adjusted bank balance?

$70,850

$72,250

$60,850

$69,350

Question 24 of 38

Which of the following are the two methods of accounting for uncollectible receivables?

The direct write-off method and the liability method

The asset method and the sales method

The allowance method and the liability method

The allowance method and the direct write-off method

Question 25 of 38

Table 10.1

On January 1, 2011, Zane Manufacturing Company purchased a machine for $40,000. The company expects to use the machine a total of 24,000 hours over the next 6 years. The estimated sales price of the machine at the end of 6 years is $4,000. The company used the machine 8,000 hours in 2011 and 12,000 in 2012.

Refer to Table 10.1. What is depreciation expense for 2012 if the company uses units-of-production depreciation?

$18,000

$6,000

$10,000

$9,000

Question 26 of 38

Lowery Food Market owns refrigeration equipment that cost $10,000 and has accumulated depreciation of $7,400. The company exchanges the equipment for new equipment worth $12,000. In addition to the old equipment, the company pays $10,000 for the new equipment. Which of the following is the correct entry to record the transaction?

Refrigeration equipment 12,000 Accumulated depreciation 7,400 Loss on exchange of equipment 600 Cash 10,000 Refrigeration equipment 10,000

Refrigeration equipment 10,000 Accumulated depreciation 10,000 Gain on exchange of equipment 600 Cash 12,000 Refrigeration equipment 7,400

Refrigeration equipment 12,000 Accumulated depreciation 7,400 Cash 10,000 Refrigeration equipment 9,400

None of the above

Question 27 of 38

Which of the following is the type of account that represents taxes withheld from employees' gross pay?

Asset

Expense

Contra asset

Liability

Question 28 of 38

In which journal would a return of merchandise purchased on account be recorded?

The sales journal

The cash payments journal

The cash receipts journal

The purchases journal

The general journal

Question 29 of 38

Which of the following is a method of establishing control over collections of accounts receivable?

Designate an authorized check signer.

Allow no one but the bookkeeper to handle cash.

Set up a petty cash fund.

Establish a bank lock-box system.

Question 30 of 38

Case 16.1

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007, financial statements.

December 31, 2006December 31, 2007

Accounts receivable$100,000$110,000

Cost of goods sold560,000

Sales revenue830,000

Accounts payable*67,00075,000

Inventory105,00086,000

Salary payable10,00013,000

Salary expense45,00049,000

*Relates solely to the acquisition of inventory

Refer to Case 16.1. What will appear in the operating activities section related to accounts payable?

The increase of $8,000 will be added to net income.

The increase of $8,000 will be subtracted from cost of goods sold.

The increase of $8,000 will be added to cost of goods sold.

The increase of $8,000 will be subtracted from net income.

Question 31 of 38

Current liabilities are obligations due within:

one month or within the company's normal operating cycle, if it is shorter than one month.

one month or within the company's normal operating cycle, if it is longer than one month.

one year or within the company's normal operating cycle, if it is shorter than one year.

one year or within the company's normal operating cycle, if it is longer than one year.

Question 32 of 38

Current liabilities fall into two categories, which are referred to as:

contingent liabilities and contra-liabilities.

unearned liabilities and accrued liabilities.

liabilities of a known amount and estimated liabilities.

contingent liabilities and noncontingent liabilities.

Question 33 of 38

Kosovo Company has $45 million in long-term debt, payable in annual installments of $15 million. How much of the debt should be reported as current and as long-term liabilities?

Current Liabilities

$15 million Long-Term Liabilities 30000

Current Liabilities

$7.5 millionLong-Term Liabilities $40 million

Current Liabilities

$0 millionLong-Term Liabilities $45 million

Current Liabilities

$45 million Long-Term Liabilities $0 million

Question 34 of 38

Potential liabilities that depend on future events arising out of past events are called:

estimated liabilities.

contingent liabilities.

actual liabilities.

long-term liabilities.

Question 35 of 38

Which of the following statements about capital leases is incorrect?

A capital lease is non-cancellable.

A capital lease is a long-term financial obligation.

Under a capital lease, the lessee's books do not report the leased asset.

Under a capital lease, the lessee records a lease liability at the beginning of the lease term.

Question 36 of 38

Bonds with a face value of $150,000 are issued at 98. The statement of cash flows would report a:

cash inflow of $3,000 in the investing activities section.

cash inflow of $3,000 in the financing activities section.

cash inflow of $147,000 in the financing activities section.

cash inflow of $147,000 in the investing activities section.

Question 37 of 38

Which of the following is not an advantage of forming a corporation, as opposed to organizing as a partnership or proprietorship?

A corporation is a separate legal entity distinct from its owners.

Ease of transferring ownership

Limited liability of stockholders

Limited taxation

Question 38 of 38

Limited liability of a corporation means that:

shareholders are not responsible for the decisions of management.

the corporation is not required to pay dividends.

a shareholders' potential loss is limited to their investment in the corporation.

the corporation is not required to earn net income.

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