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1) Which statement is correct?

• As long as company consistently uses cash basis of accounting, generally accepted accounting principles allow its use.
• The use of the cash basis of accounting violates both revenue recognition and expense recognition principles.
• The cash basis of accounting is objective because no one could be certain of the amount of revenue until cash is received.
• As long as management is ethical, there are no problems with using cash basis of accounting.

2) On May 25, Yellow House Company received a $650 check from Grizzly Bean for services to be performed in the future. Bookkeeper for Yellow House Company incorrectly debited Cash for $650 and credited Accounts Receivable for $650. The amounts have been posted to the ledger. To correct this entry, the bookkeeper must:

• debit Cash $650 and credit Unearned Service Revenue $650.
• debit Accounts Receivable $650 and credit Service Revenue $650.
• debit Accounts Receivable $650 and credit Cash $650.
• debit Accounts Receivable $650 and credit Unearned Service Revenue $650.

3) Closing entries might be prepared from all but which one of the following sources?

• Adjusted balances in the ledger
• Income statement and balance sheet columns of the worksheet
• Balance sheet
• Income and owner's equity statements

4) Which of the following companies will be least likely to use the worksheet to facilitate adjustment process?

• Large company with numerous accounts
• Small company with numerous accounts
• All companies, since worksheets are required under generally accepted accounting principles
• Small company with few accounts

5) The account, Supplies, would appear in the following debit columns of worksheet.

• Trial balance
• Adjusted trial balance
• Balance sheet
• All of these

6) A post-closing trial balance must be prepared

• before closing entries are posted to the ledger accounts.
• after closing entries are posted to the ledger accounts.
• before adjusting entries are posted to the ledger accounts.
• only if an error in the accounts is detected

7) Which of the following steps in the accounting cycle might be performed most frequently?

• Prepare a post-closing trial balance
• Journalize closing entries
• Post closing entries
• Prepare a trial balance

8) A post-closing trial balance is prepared

• after closing entries have been journalized and posted.
• before closing entries have been journalized and posted.
• after closing entries have been journalized but before the entries are posted.
• before closing entries have been journalized but after the entries are posted.

9) Which of the following expressions is incorrect?

• Gross profit – operating expenses = net income
• Sales revenue – cost of goods sold – operating expenses = net income
• Net income + operating expenses = gross profit
• Operating expenses – cost of goods sold = gross profit

10) After gross profit is computed, operating expenses are deducted to find out

• gross margin.
• net income.
• gross profit on sales.
• net margin.

11) Which of the following is a true statement about inventory systems?

• Periodic inventory systems need more detailed inventory records.
• Perpetual inventory systems need more detailed inventory records.
• A periodic system requires cost of goods sold be determined after each sale.
• A perpetual system determines cost of goods sold only at the end of the accounting period.

12) Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2012 are as follows:
An end of the month (1/31/12) inventory showed that 140 units were on hand. If the company uses LIFO, what is the value of the ending inventory?

• $700
• $728
• $742
• $762

13) Which of the following statements is true regarding inventory cost flow assumptions?

• A company might use more than one costing method concurrently.
• A company should comply with the method specified by industry standards.
• A company should use the same method for domestic and foreign operations.
• A company might never change its inventory costing method once it has chosen a method.

14) Eneri Company's inventory records show the following data:

A physical inventory on December 31 shows 2,000 units on hand. Eneri sells the units for $13 each. The company has an effective tax rate of 20%. Eneri uses the periodic inventory method.

Under the FIFO method, the December 31 inventory is valued at

• $14,000.
• $16,133.
• $16,480.
• $18,400.

15) Which one of the following inventory methods is often impractical to use?

• Specific identification
• Average cost

16) Under lower-of-cost-or-market basis in valuing inventory, market is defined as

• current replacement cost.
• selling price.
• historical cost plus 10%.
• selling price less markup.

17) The accountant at Cedric Company has determined that income before income taxes amounted to $7,000 using FIFO costing assumption. If income tax rate is 30% and amount of income taxes paid will be $225 greater if the LIFO assumption were used, what will be the amount of income before taxes under the LIFO assumption?

• $6,250
• $7,000
• $7,225
• $7,750

18) If companies have identical inventoriable costs but use different inventory flow assumptions when price of goods have not been constant, then the

• cost of goods sold of the companies will be identical.
• cost of goods available for sale of the companies will be identical.
• ending inventory of the companies will be identical.
• net income of the companies will be identical.

19) In periods of rising prices, inventory method that results in inventory value on balance sheet that is closest to current cost is the

• FIFO method.
• LIFO method.
• average-cost method.
• tax method.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92711

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