Acc101 Principles of Accounting I
Assessment Task 2 Spring 2006
Outcome / # / Spring 2006 Comprehensive Final
1 / 1 / An entity where ownership is divided into shares of stock is a:
A)  mutual agency B) trade agreement C) corporation D) proprietorship
1 / 2 / The principle which states that assets acquired by the business should be recorded at their exchange price is the:
A) cost principle B) objectivity principle C) revenue recognition principle D) matching principle
1 / 3 / The business entity concept means that:
A) the business entity is organized according to the rules determined by the IRS
B) the business entity is considered a separate entity apart from the owner or owners
C) the owner of the business entity and the business entity are treated the same from a legal and accounting viewpoint
D) the business entity is organized according to the rules determined by the FASB
1 / 4 / A firm that earns it’s revenue by making the goods its sell is a____
A) service firm B) corporation C) manufacturing firm D) merchandizing firm
2 / 5 / Incurring an expense which is immediately paid in cash will require:
A) a debit to a liability and a credit to an expense B) a debit to an expense and a credit to cash
C) a debit to an expense and a credit to capital D) a debit to an expense and a credit to a liability
2 / 6 / Providing services for $2,000 on account will cause:
A) service revenue to be credited for $2,000 B) accounts payable to be credited for $2,000
C) accounts receivable to be credited for $2,000 D) service revenue to be debited for $2,000
2 / 7 / Purchasing supplies and office equipment on account would include a
A) debit to supplies and office equipment; credit to cash
B) debit to accounts payable; credit to office equipment and supplies
C) debit to office equipment; credit to supplies and accounts payable
D) debit to supplies and office equipment; credit to accounts payable
2 / 8 / Making a $450 payment on an account with a current balance of $800 would include a
A) debit to accounts payable and a credit to cash for $350 B) debit to accounts payable and a credit to cash for $450
C) debit to accounts receivable and a credit to capital for $450 D) debit to accounts receivable and a credit to cash for $350
2 / 9 / Given the following transactions, what is the balance in the cash account?
1. The owner started the company by investing $9,000 cash. 2. The company paid $3,000 for equipment.
3. The company performed $1,500 of services on account. 4. The company paid expenses totaling $800
A) $5,200 B) $8,500 C) $10,500 D) $9,200
4 / 10 / On September 1, 20X4, Four Brothers Company pays $48,000 cash for six months rent. The balance in prepaid rent on December 31, 20X4, after adjustment, would be:
A) $16,000 B) $6,000 C) $24,000 D) $12,000
4 / 11 / Essex Company records $8,000 of service revenue received in advance and $4,500 of accrued service revenue. Unearned revenue has a year-end balance of $4,900. The effect of these entries on total service revenue for the year is an increase of:
A) $9,400 B) $7,600 C) $12,900 D) $4,900
4 / 12 / A business pays weekly salaries on Friday of $25,000 for a five-day week ending on Friday. Assuming the fiscal period ends on a Thursday, the adjusting entry for accrued salaries would involve a
A) debit to salary payable for $5,000 B) credit to salary expense for $25,000
C) debit to salary expense for $20,000 D) credit to salary payable for $5,000
4 / 13 / Which of the following accounts will have a remaining balance after the closing process is completed?
A) the owner's withdrawals account B) accumulated depreciation C) depreciation expense D) service revenue
4 / 14 / If the amount of net income for the current period is less than the amount of the owner's withdrawals, there will be a(n):
A) increase in the cash account B) decrease in the owner's capital account
C) increase in the owner's capital account D) decrease in the cash account
8 / 15 / If the direct write-off method is used for uncollectible receivables, what account is debited when writing off a customer's account?
A) accounts receivable B) allowance for uncollectible accounts C) sales returns and allowances D) uncollectible-account expense
8 / 16 / A 90-day, 12% note for $20,000, dated July 10, is received from a customer. What is the maturity value of the note?
A) $21,200 B) $20,600 C) $20,000 D) $22,400
Bad News Company
Trial Balance / 12/31/2005 / 12/31/2004
Cash / 3,050 / 2,000
Accts receivable / 25,000 / 20,000
Inventory / 46,500 / 14,000
Prepaid Insurance / 2,000 / 2,000
Furniture & Equipment / 104,500 / 65,000
Accumulated Depreciation / 2,000 / 1,500
Accounts Payable / 30,000 / 35,900
Payroll Taxes Payable / 1,800 / 1,600
Sales Tax Payable / 1,250 / 4,000
Notes Payable Due 2007 / 40,000
Capital / 60,000 / 34,500
Withdrawals / 40,000 / 30,000
Sales / 300,000 / 250,000
Sales Returns / 2,000 / 1,500
Cost of Goods Sold / 160,000 / 150,000
Selling Expense / 20,000 / 16,000
Administrative Expense / 30,000 / 27,000
Interest Expense / 2,000
Total / 435,050 / 435,050 / 327,500 / 327,500
3 / 17 / Referring to Table 1 What is Operating Income for 2005?
A) 86,000 B) 55,500 C) 88,000 D) some other number
3 / 18 / Referring to Table 1 What is Gross Profit for 2004
A) 88,000 B) 98,500 C) 138,000 D)55,500
5 / 19 / Referring to Table 1, what is the current ratio for 2005
A) .65 B) .92 C) 1.79 D) 2.31
5 / 20 / Referring to Table 1, what is the inventory turnover for 2005
A) 13.33 B) 5.29 C) 3.44 D) some other number
5 / 21 / Referring to Table 1. Which of the following is true?
A) The change in the current ratio between 2004 & 2005 is caused by the increase in cost of goods sold
B) The current ratio didn’t change much between 2004 & 2005
C) The improvement in the current ratio between 2004 and 2005 is due to an increase in inventory
D) The wreaking of the current ratio between 2004 & 2005 is due to the note payable
3 / 22 / Referring to Table 1, In the 2005 Balance Sheet Capital would be?
A) 106,000 B) 60,000 C) 34,500 D)14,000
9 / 23 / 2) The entry to record the return of $25 of inventory to a supplier under the perpetual inventory system is recorded with a debit to:
A) accounts payable and a credit to purchase discounts B) inventory and a credit to accounts payable
C) accounts payable and a credit to inventory D) purchase returns and allowances and a credit to accounts payable
9 / 24 / 3) Rex Company purchased $2,400 of merchandise on account, terms 2/10 n/60. If payment was made within the discount period, the entry to record the payment under a perpetual inventory system would include a credit to:
A) cash for $2,400 B) cash of $2,352 C) accounts payable of $2,400 D) inventory of $2,352
9 / 25 / The inventory account shows an ending balance of $20,800. An actual count of inventory reveals $21,200 of inventory on hand. The adjusting entry involves:
A) debit to inventory for $400 B) credit to cost of goods sold for $20,100
C) debit to cost of goods sold for $400 D) credit to inventory for $20,500
9 / 26 / When prices are rising, the ending inventory balance reported on a LIFO basis is generally:
A) equally likely to be higher or lower on a LIFO basis as opposed to a FIFO basis B) greater than on a FIFO basis
C) equal to ending inventory reported on a FIFO basis D) lower than on a FIFO basis
9 / 27 / All of the following are reasons for choosing the LIFO method versus the FIFO method except:
A) LIFO allows owners and managers to manage reported income
B) LIFO generally results in lower income taxes paid
C) LIFO reports the most up-to-date inventory values on the balance sheet
D) LIFO uses more current costs in calculating cost of goods sold
9 / 28 / Referring to Table 2, assuming all goods are sold throughout the year for $19 per unit, gross profit calculated under the periodic LIFO method would be:
A)  $1,465 B) $1,260 C) $1,510 D) $1,570
8 / 29 / Starr Company had the following information relating to net credit sales for 20X5:
Accounts receivable, Dec. 31, 20X5 $20,000 dr.
Allowance for uncollectible accounts, Dec. 31, 20X5, prior to adjustment 600 dr.
Net credit sales during 20X5 95,000
Collections on account during 20X5 87,000
If uncollectible accounts are determined by the aging of receivables to be $3,450, the amount of net accounts receivable after adjusting entries for 20X5 would be:
A) $16,550 B) $14,550 C) $17,400 D) $15,150
10 / 30 / New equipment with a list price of $100,000, credit terms of 3/10 n/30 and transportation cost of $7,000 is acquired by a company. Insurance while in transit amounts of $200. Insurance on the equipment during its first year of use amounted to $800. Assuming the equipment is paid for within the discount period, the equipment should be recorded with a debit to equipment for:
A) $97,000 B) $105,000 C) $104,200 D) $107,200
10 / 31 / January 1, 20X5, Better Realty purchased a $45,000 vehicle to chauffeur clients to prospective homes. Better plans on driving the vehicle for five years or 100,000 miles. Expected residual value is $10,000. Better Realty drove the vehicle 25,000 miles in 20X7. The depreciation expense for 20X7 using the units-of-production method is:
A)  $6,200 B) $2,850 C) $6,480 D) $8,750
10 / 32 / When the amount of use of a plant asset varies from year to year, the method of determining depreciation that matches revenues and expenses would be the:
A) straight-line method B) units-of-production method
C) double-declining balance method D) either straight-line method or the double-declining balance method
10 / 33 / A gain is recorded on the disposal of plant assets when:
A) the asset's depreciable cost is greater than the cash received
B) the asset's book value is greater than the amount of cash received from the sale
C) an asset is sold for a price greater than the asset's book value
D) the asset's residual value is less than the cash received
10 / 34 / Golden Miners purchased a mine in 20X5 for $1,920,000. It was estimated that the mine contained 3,000,000 tons of ore, and would be totally worthless once all ore was extracted. Golden Miners extracted 250,000 tons in 20X5 and 300,000 tons in 20X6.
, depletion expense for 20X6 would equal:
A) $192,000 B) $160,000 C) $250,000 D) $300,000
8 / 35 / Bentley Enterprises purchased $8,000 of inventory by issuing a 180-day, 7.5% note payable on November 1, 20X6. Bentley has a December 31 year-end. The entry on maturity date to pay the note payable and interest would include a:
A) debit to interest payable of $100 B) credit to cash of $8,000
C) debit to interest expense of $300 D) credit to interest payable of $200
8 / 36 / Estimating a warranty expense in the same period as the sales revenue is recognized is an example of:
A) the matching principle B) the full disclosure principle C) the revenue recognition principle D) conservatism
Table 3
Richard and Gere are the only two employees of Bush Company. In January, 20X6, Richard's gross pay was $5,500 and Gere's gross pay was $5,200. Each employee pays federal income tax equal to 25% of gross pay. In addition, Gere pays $200 for insurance premiums and Richard pays $225. Each has $25 withheld for life insurance premiums. Assume a FICA tax rate of 8% on all earnings, a federal unemployment tax rate of .8%, and a state unemployment tax rate of 5.4%. The unemployment taxes are based on the first $7,000 of employee annual earnings.
8 / 37 / Referring to Table 3, the entry to record the payroll for January would include a:
A) credit to state unemployment tax payable for $578 B) credit to FICA tax payable for $856
C) debit to salary payable to employees for $6,694 D) credit to federal unemployment tax payable for $86
8 / 38 / Referring to Table 3, the entry to record the payroll taxes imposed on the employer would include a:
A) debit to FICA tax payable for $856 B) debit to employee income tax payable for $2,675
C) debit to federal unemployment tax payable for $86 D) credit to state unemployment tax payable for $578