Question 1 On a multiple-step income statement, Income from Operations is computed as follows:
net sales less cost of goods sold.
cost of goods sold less total assets.
operating expenses plus total assets.
gross profit less total operating expenses.
Question 2 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:
balance sheet.
statement of cash flows.
statement of shareholders equity.
single-step income statement.
Question 3 The following information was taken from Smith Corporation s accounting records:
Operating Expenses$45,000
Sales Returns and Allowances13,000
Sales Discount6,000
Sales150,000
Costs of Goods Sold77,000
What is Smith Corporation s gross profit?
$61,000.
$54,000.
$76,000.
$73,000.
Question 4 Merchandising companies that sell to retailers are known as:
brokers.
corporations.
wholesalers.
service firms.
Question 5 Assume a company uses the periodic inventory system and has a beginning merchandise inventory balance of $5,000, inventory purchases for the year of $75,000, and sales for the year of $125,000. What is the amount of the company s Cost of Goods Available for Sale for the year?
$80,000.
$125,000.
$5,000.
none of the above.
Question 6 Which of the following items does not affect the merchandise inventory account under a perpetual system?
A purchase of merchandise inventory.
A return of merchandise inventory to the supplier
Payment of freight costs for merchandise inventory shipped to a customer
Payment of freight costs for merchandise inventory received from a supplier
Question 7 Which of the following inventory costing methods depends upon an inventory count to determine cost of goods sold?
Lower of Cost or Market
Obsolescence
Perpetual
Periodic
Question 8 The accountant at Kramer Company is figuring out the difference in income taxes the company will pay depending on the choice of either FIFO or LIFO as an inventory costing method. The tax rate is 30% and the FIFO method will result in income before taxes of $4,370. The LIFO method will result in income before taxes of $3,950. What is the difference in tax that would be paid between the two methods?
$420
$294
$126
Cannot be determined from the information provided.
Question 9 The lower of cost or market basis of valuing inventories is an example of:
voodoo economics.
the cost principle.
conservatism.
all of the above.
Question 10 The use of the LIFO inventory costing method every year complies with the accounting principle of:
conservatism.
consistency.
profits.
efficiency.
Question 11 Which of the following statements is correct with respect to inventories?
The FIFO method assumes that the costs of the earliest goods acquired are the last to be sold.
It is generally good business management to sell the most recently acquired goods first.
Under FIFO, the ending inventory is based on the latest units purchased.
Under FIFO, the ending inventory is based on the oldest units purchased.
Question 12 If goods in transit are shipped FOB destination:
the seller has legal title to the goods until they are delivered.
the buyer has legal title to the goods until they are delivered.
the transportation company has legal title to the goods while the goods are in transit.
no one has legal title to the goods until they are delivered.
Question 13 Which inventory method usually gives higher net income when prices are rising?
LIFO.
Specific ID.
Average Cost.
FIFO.
Question 14 Cost of goods sold is not known until after the taking of a physical count of the inventory at the end of the year under which of the following inventory methods?
Periodic
Perpetual
NIFO
None of the above
Question 15 Which one of the following is not an objective of a system of internal controls?
Safeguard company assets
Enhance the accuracy and reliability of accounting records
Increase total sales
Reduce the risks of errors
Question 16 At Harley Davidson, the motorcycles on the assembly line are classified as
Work in Progress
Finished Goods
Raw Materials
Completed sales
Question 17 Which of the following promotes good internal control?
increased sales commissions
pay shareholders a larger dividend
undertake a new advertising campaign
one employee is assigned to handle the accounting for an asset and another employee has physical control over the asset.
Question 18 For which of the following errors should the appropriate amount be added to the balance per books on a bank reconciliation?
Check for $43 was incorrectly recorded on the books as $34
Deposit of $500 was incorrectly recorded by the bank as $50
A $200 check was incorrectly recorded by the bank as $20
Check for $35 was incorrectly recorded on the books as $53
Question 19 With respect to a bank reconciliation, a journal entry is required for which of the following
Deposits in Transit
Outstanding Checks
NSF Checks
All of the above
Question 20 The maturity value of a $2,000, 6%, 60-day note receivable dated February 10th is
$2,020.
$2,010.
$2,000.
$2,120.
Question 21 When an account is written off using the allowance method, accounts receivable:
is unchanged and the allowance account increases.
increases and the allowance account increases.
decreases and the allowance account decreases.
decreases and the allowance account increases.
Question 22 The gross profit rate is computed by dividing:
net sales by net income.
net sales by total assets.
gross profit by net sales.
net sales by gross profit.
Question 23 Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before adjustment, what is the amount of bad debt expense for the period?
$7,000
$21,000
$28,000
$35,000
Question 24 The Allowance for Doubtful Accounts account is:
an expense account.
a contra equity account.
a contra asset account
none of the above
Question 25 Matrix Company makes an 8% loan on November 1, 2008. The loan is due in 90 days. What is the due date of this loan?
January 30, 2009
February 1, 2009
January 1, 2009
March 1, 2009