Practice Exam #2
Supplemental Instruction
Iowa State University / Leader: / Vince
Course: / ACCT 284
Instructor: / Dr. Clem
Date: / 10/17/16

1.  On August 1st a company took out a loan for $12,000. The annual interest rate is 6%. What amount of interest expense should the company recognize?

  1. $720
  2. $300
  3. $240
  4. $320

2.  The unadjusted balance in supplies at December 31st was $1,100. A year end physical count indicates that supplies were equal to $300. What is the necessary adjusting entry?

  1. $800
  2. $840
  3. $1400
  4. $1290

3.  On June 1st a company paid for a year long insurance policy. What is the adjusting entry on December 31st?

  1. $32,000
  2. $28,000
  3. $29,000
  4. $24,000

4.  Which of the following accounts are permanent accounts?

  1. Cost of goods sold
  2. Revenue
  3. Inventory
  4. Dividends

5.  At the beginning of the period supplies were equal to $3,000. Purchases were equal to $210 and $300. The ending balance was $1,500. What was supplies expense for the year?

  1. $2,000
  2. $2,010
  3. $1,100
  4. $1,860

6.  Which of the following is not a principle of control activities?

  1. Segregation of Duties
  2. Restricting access
  3. Independent verification
  4. Complex procedures

7.  Peter decides to steal the extra interest when a bank program makes interest calculations. Peter writes the code for the interest software and processes the interest payments, what internal control technique would stop this fraud?

  1. Restricting access
  2. Complex procedures
  3. Segregation of duties
  4. Using prenumbered checks

8.  Which of the following statements regarding closing journal entries is correct?

  1. Closing entries transfer net income (or loss) to the Retained Earnings account.
  2. The balance of the Dividends Declared account is transferred to the Retained Earnings account when closing entries are recorded
  3. All income statement accounts and the Dividends Declared account are reset to zero in the closing entry process
  4. All of the above are correct statements

9.  Which of the following is not a part of the fraud triangle?

  1. Opportunity to commit fraud
  2. Effective internal controls
  3. Incentive to commit fraud
  4. Character to rationalize and conceal fraud

10.  Which of the following is not a subtotal shown on the multistep income statement?

  1. Gross profit
  2. Income before tax
  3. Sales Revenue
  4. Income from operations

11.  What item listed below is an item on the bank reconciliation that the bank doesn’t know about?

  1. Outstanding check
  2. Interest deposited
  3. NSF checks
  4. Service charges

12.  COGS was equal to 900. Beginning Inventory is 300. Ending inventory is 200. What was Purchases?

  1. 750
  2. 800
  3. 600
  4. 1400

13.  Apple Inc. had beginning inventory of $379,000, ending inventory of $124,000, and purchases of $200,000. What was their cost of goods available for sale (COGAS) and cost of goods sold (COGS) for the year respectively?

COGAS COGS

  1. $579,000 and $455,000
  2. $455,000 and $579,000
  3. $179,000 and $55,000
  4. $55,000 and $179,000

14.  A company has revenue of $18,000; COGS of $8,000. Operating income of $4,000; Income before tax of $4,000; Tax expense of $500. What is the company’s net income and Selling, General & Admin expense?

  1. $5,800 & $4,000
  2. $6,000 & $3500
  3. $10,000 & $6,000
  4. $3,500 & $10,000

15.  Consider the following information: beginning inventory (physically counted) was $4,000, ending inventory (physically counted) was $2,000; purchases during the period totaled $10,000; and the recorded cost of goods sold during the period totaled $9,000. What was the amount of shrinkage during the period?

  1. $1,000
  2. $2,000
  3. $3,000
  4. $5,000

16.  Apple Inc. had beginning inventory of $379,000, ending inventory of $124,000, and purchases of $200,000. What was their cost of goods available for sale (COGAS) and cost of goods sold (COGS) for the year respectively?

COGAS COGS

  1. $579,000 and $455,000
  2. $455,000 and $579,000
  3. $179,000 and $55,000
  4. $55,000 and $179,000

17.  When a perpetual inventory system is used, recording a sale on account (on the day of the sale) would involve all of the following accounts except:

  1. Sales Discounts
  2. Cost of Goods Sold
  3. Inventory
  4. Sales Revenue

18.  Which of the following statements is not correct?

  1. When goods are shipped FOB shipping point, the sale is recorded when the goods leave the seller’s shipping department.
  2. When goods are shipped FOB shipping point, the seller usually pays for all transportation costs.
  3. When goods are sold, the transfer of ownership occurs at a time specified in the written sales agreement.
  4. Merchandisers earn revenues by transferring ownership of merchandise to a customer, either for cash or no credit.

19.  Klem Corp. makes a $1,000 sale to a customer with terms of 2/15.n/45. The customer the returns $200 of the merchandise. If the customer pays Klem within the discount period, what is the total amount that the customer will remit to Klem Corp. in full payment of its account?

  1. $800
  2. $784
  3. $980
  4. $1,000

Akin Corp had the following information:

Jan. 1 Beginning Inventory is comprised of 7 units @ $20 each

Apr. 13 Purchased 8 units @ $22 each

Aug. 31 Purchased 25 units @ $25 each

Dec. 28 Sold 30 units

20.  What is LIFO COGS using the above information?

  1. 735
  2. 710
  3. 800
  4. 691

21.  What is the FIFO COGS using the above information?

  1. 756
  2. 691
  3. 815
  4. 745

22.  Which of the following would be credited when purchasing at a discount?

  1. COGS
  2. Inventory
  3. Accounts Payable
  4. Revenue

23.  COGS was equal to 900. Beginning Inventory is 300. Ending inventory is 200. What was Purchases?

  1. 750
  2. 800
  3. 600
  4. 1400

24.  Which of the following is false regarding the understatement of inventory?

  1. COGS is overstated this year
  2. COGS is understated this year
  3. Net Income is understated
  4. Assets are understated

25.  Target had beginning inventory equal to 1,000 and ending inventory equal to 2000. COGS was equal to 6,000. What was Target’s days to sell?

  1. 84 Days
  2. 99 Days
  3. 91 Days
  4. 87 Days

26.  Which of the following statements regarding closing journal entries is correct?

  1. Closing entries transfer net income (or loss) to the Retained Earnings account.
  2. The balance of the Dividends Declared account is transferred to the Retained Earnings account when closing entries are recorded
  3. All income statement accounts and the Dividends Declared account are reset to zero in the closing entry process
  4. All of the above are correct statements

27.  Adjusting entries will always affect both ______

  1. Cash and Revenue
  2. Liability and Asset
  3. Revenue and Expense
  4. Balance Sheet and Income Statement

28.  Barnett Co. reports beginning inventory of $62,000, ending inventory of $73,000, Cost of Goods Sold of $330,000, and Net Sales of $700,000. What is the inventory turnover ratio?

  1. 4.89 times
  2. 7.05 times
  3. 8.31 times
  4. None of the above