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| 1 | |
A company's accounting policy for recording revenues |
| | A) | must be the same as all other companies. |
| | B) | can be different than other companies. |
| | C) | must be disclosed if different than the revenue principle. |
| | D) | can be (B), and if so, (C) must follow. |
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| 2 | |
Credit card discounts are reported on the income statement as |
| | A) | a contra revenue. |
| | B) | a contra asset. |
| | C) | a selling expense. |
| | D) | both (A) and (C). |
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| 3 | |
You received an invoice that shows credit terms of 2/10, n/60. What does the number 10 in the credit terms refer to? |
| | A) | the number of days in the credit period. |
| | B) | the amount of sales discount available. |
| | C) | the number of days in the discount period. |
| | D) | the amount of the trade discount. |
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| 4 | |
A customer used a credit card to pay for $400 of services. The credit card company charged 2.5% for its services. How much did the company record as a deposit to its checking account as result of the sales transaction? |
| | A) | $400.00 |
| | B) | $410.00 |
| | C) | $390.00 |
| | D) | $388.00 |
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| 5 | |
A customer, who is given credit terms of 2/10, n/60, purchased goods with a retail price of $600. The amount charged to the customer's account receivable was |
| | A) | $612.00. |
| | B) | $600.00. |
| | C) | $588.00. |
| | D) | $601.20. |
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| 6 | |
A retailer purchased an item with a list price of $200, a trade discount of 20%, and credit terms of 2/10, n/30. If the invoice was paid within the discount period, the net payment was |
| | A) | $156.80 |
| | B) | $200.00 |
| | C) | $160.00 |
| | D) | $120.00 |
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| 7 | |
A retailer offers credit customers credit terms of 2/10, n/30. What is the annual rate of interest being offered to the customer if the customer buys $4,000 of goods and pays the invoice within the discount period. |
| | A) | 20.00% |
| | B) | 18.75% |
| | C) | 20.40% |
| | D) | 37.23% |
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| 8 | |
The Sunrise Equipment Company sold three separate pieces of office furniture to a customer for a total sales price of $2,100. One piece of the furniture, with a sales price of $200, was damaged in shipment and returned to the retailer before the invoice was paid. Which of the following is the correct journal entry to record the return of the item? |
| | A) | Sales Returns and Allowances, debit, $200; Accounts Receivable, credit, $200. |
| | B) | Accounts Receivable, debit, $200; Sales Returns and Allowances, credit, $200. |
| | C) | Sales Return and Allowances, debit, $200; Sales, credit, $200. |
| | D) | Accounts Receivable, debit, $200; Sales, credit, $200. |
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| 9 | |
Gross sales total $500,000, one-half of which were credit sales. Sales returns and allowances of $30,000 apply to the credit sales, sales discounts of 2% were taken on all of the net credit sales, and credit card sales of $200,000 were subject to a credit card discount of 3%. What is the dollar amount of net sales? |
| | A) | $454,000 |
| | B) | $459,600 |
| | C) | $500,000 |
| | D) | $480,000 |
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| 10 | |
Consider the following accounts and their balances:
| Gross Sales | $800,000 | | Sales Returns and Allowances | $12,000 | | Credit Card Discounts | $4,000 | | Sales Discounts | $3,000 | | Cost of Goods Sold | $670,000 |
What is the gross profit percentage?
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| | A) | 14.21% |
| | B) | 16.25% |
| | C) | 14.65% |
| | D) | 14.97% |
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| 11 | |
On the balance sheet, receivables may be classified as |
| | A) | trade and nontrade. |
| | B) | current and noncurrent. |
| | C) | trade and current, only. |
| | D) | both (A) and (B). |
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| 12 | |
Writing off a bad debt under the allowance method of accounting for bad debts will result in a journal entry that |
| | A) | debits Bad Debt Expense and credits Accounts Receivable. |
| | B) | debits Allowance for Doubtful Accounts and credits Accounts Receivable. |
| | C) | debits Allowance for Doubtful Accounts and credits Bad Debts Expense. |
| | D) | debits Bad Debt Expense and credits Allowance for Doubtful Accounts. |
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| 13 | |
When an account receivable that was previously written off as a bad debt under the allowance method of recognizing bad debts is collected, the |
| | A) | Cash account will decrease by the full amount of the reinstated account. |
| | B) | net book value of receivables will decrease. |
| | C) | the gross amount of receivables will decrease. |
| | D) | Allowance for Doubtful Accounts account will decrease. |
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| 14 | |
The unadjusted credit balance of the Allowance for Doubtful Accounts account is $650. Bad debt expense is estimated to be 3.5% of net credit sales of $600,000. After recording the appropriate journal entry for the bad debts expense, what will be the adjusted balance of the Allowance for Doubtful Accounts? |
| | A) | $21,650 |
| | B) | $21,000 |
| | C) | $20,350 |
| | D) | $650 |
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| 15 | |
The unadjusted credit balance of the Allowance for Doubtful Accounts account is $650. Uncollectible accounts are estimated to be $15,600, based on an analysis of a schedule of aging of accounts receivable. After recording the appropriate journal entry for the bad debts expense, what will be the adjusted balance of the Allowance for Doubtful Accounts? |
| | A) | $650 |
| | B) | $16,250 |
| | C) | $14,950 |
| | D) | $15,600 |
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| 16 | |
The unadjusted debit balance of the Allowance for Doubtful Accounts account is $350. Uncollectible accounts are estimated to be $15,800, based on an analysis of a schedule of aging of accounts receivable. After recording the appropriate journal entry for the bad debts expense, what will be the balance of the Bad Debt Expense account? |
| | A) | $15,800 |
| | B) | $15,450 |
| | C) | $16,150 |
| | D) | $350 |
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| 17 | |
Consider the following information:
| Net sales | $420,000 | | Cost of goods sold | $240,000 | | Beginning net trade accounts receivables | $40,000 | | Ending net trade accounts receivables | $50,000 | | Beginning merchandise inventory | $45,000 | | Operating expenses | $148,000 |
What is the trade (accounts) receivables turnover?
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| | A) | 10.00 |
| | B) | 8.75 |
| | C) | 9.33 |
| | D) | 10.50 |
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| 18 | |
When using the indirect method of preparing the "cash flows from operating activities" section of a statement of cash flows, a net increase between the beginning and ending balances of net accounts receivable will |
| | A) | be added to net income. |
| | B) | be deducted from net income. |
| | C) | not be considered. |
| | D) | be shown as deferred revenues. |
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| 19 | |
Which of the following is defined as "short-term investments with original maturities of three months or less that are readily convertible to cash and whose value is unlikely to change?" |
| | A) | notes receivable |
| | B) | cash equivalents |
| | C) | trade and nontrade receivables |
| | D) | intangible assets |
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| 20 | |
The following procedures are followed by a company cashier: count money in the cash drawer, compare the cash count with recorded daily sales, make notations of any differences on a preprinted form that is forwarded, along with the cash, to the accounting department. These procedures |
| | A) | will provide adequate internal control over cash. |
| | B) | are unacceptable, since they not follow good internal control practices. |
| | C) | are acceptable, since they adhere to internal control practices. |
| | D) | follow the broad principles of internal control. |
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| 21 | |
The owner of a small business relies on one person for the collection and deposit of cash, the ordering and payment of inventories and supplies, and preparing bank reconciliations. In order to impose some level of internal control, the owner should |
| | A) | require approval of cash payments. |
| | B) | prepare the bank reconciliations. |
| | C) | require daily deposits of cash. |
| | D) | do all of the above. |
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| 22 | |
The proper treatment on the bank reconciliation of outstanding checks is to |
| | A) | add them to the book balance of cash. |
| | B) | add them to the bank balance of cash. |
| | C) | deduct them from the book balance of cash. |
| | D) | deduct them from the bank balance of cash. |
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| 23 | |
The proper treatment on the bank reconciliation of deposits in transit is to |
| | A) | add them to the book balance of cash. |
| | B) | add them to the bank balance of cash. |
| | C) | deduct them from the book balance of cash. |
| | D) | deduct them from the bank balance of cash. |
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| 24 | |
The proper treatment on the bank reconciliation of NSF checks returned with the statement is to |
| | A) | add them to the book balance of cash. |
| | B) | add them to the bank balance of cash. |
| | C) | deduct them from the book balance of cash. |
| | D) | deduct them from the bank balance of cash. |
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| 25 | |
The proper treatment on the bank reconciliation of interest earned on the depositor's checking account is to |
| | A) | add it to the book balance of cash. |
| | B) | add it to the bank balance of cash. |
| | C) | deduct it from the book balance of cash. |
| | D) | deduct it from the bank balance of cash. |
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| 26 | |
The company bookkeeper recorded a bank deposit of daily sales as a debit to Cash for $450. The bank recorded the deposit at its correct amount of $540. The proper treatment on the bank reconciliation of this $90 error is to |
| | A) | add it to the book balance of cash. |
| | B) | add it to the bank balance of cash. |
| | C) | deduct it from the book balance of cash. |
| | D) | deduct it from the bank balance of cash. |
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| 27 | |
The company bookkeeper recorded a check with a debit to Advertising Expense and a credit to Cash for $136. The check was written for the correct amount of $163 and cleared the depositor's checking account. The proper treatment on the bank reconciliation of this $27 error is to |
| | A) | add it to the book balance of cash. |
| | B) | add it to the bank balance of cash. |
| | C) | deduct it from the book balance of cash. |
| | D) | deduct it from the bank balance of cash. |
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| 28 | |
A NSF check of $250 returned by the bank was originally received from a customer in payment of an account receivable. The correcting entry should |
| | A) | debit Cash and credit Accounts Receivable for $250. |
| | B) | debit Accounts Receivable and credit Cash for $250. |
| | C) | debit Bad Debt Expense and credit Cash for $250. |
| | D) | debit Allowance for Doubtful Accounts, debit Accounts Receivable, credit Bad Debt Expense, and credit cash, each for $250. |
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| 29 | |
The company bookkeeper recorded a check with a debit to Store Supplies and a credit to Cash for $340.56. The check was written for the correct amount of $430.65 and cleared the depositor's checking account. The proper treatment on the bank reconciliation of this $90.09 error is to |
| | A) | add it to the book balance of cash. |
| | B) | add it to the bank balance of cash. |
| | C) | deduct it from the book balance of cash. |
| | D) | deduct it from the bank balance of cash. |
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| 30 | |
The company correctly recorded a deposit of daily sales of $4,500. The bank recorded the deposit as $5,400. What is the appropriate action the company should follow regarding the $900 error? |
| | A) | add the $900 to its Cash account |
| | B) | inform the bank of the error |
| | C) | write a check for $900 to the company owner |
| | D) | treat the office staff to a $900 lunch. |
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