PART ONE
1.Which of the following items is a current asset?
a.Contributed Capital
b.Supplies
c.Furniture and Equipment
d.Land
2.Which of the following is not an asset?
a.Accounts Payable
b.Furnishings and Equipment
c.Supplies
d.Cash
3.Stockholders’ Equity is:
a.The fair market value of a company
b.Liabilities minus assets
c.Contributed capital plus retained earnings
d.Revenue minus expenses
4.The chart of accounts:
a.Appears on the balance sheet
b.Appears on the income statement
c.Is a summary of all account names
d.Appears in the annual report of all publicly-held companies
5.If supplies are purchased for cash:
a.Total assets will increase
b.Total assets will decrease
c.Total assets will remain the same
d.Stockholders’ equity will increase
6.If supplies are purchased on credit:
a.Total assets will increase
b.Total assets will decrease
c.Total assets will remain the same
d.Stockholders’ equity will increase
7.United Co. pays a liability of $10,000. As a result:
a.Total assets will increase and total liabilities will increase
b.Total assets will decrease and total liabilities will decrease
c.Total assets will increase and total liabilities will decrease
d.Total assets will decrease and total liabilities will increase
8.American Corporation installed $25,000 of equipment, paying $5,000 in cash and promising to pay $20,000 in 90 days. As a result of this transaction:
a.Total assets will increase by $5,000
b.Total assets will increase by $20,000
c.Total assets will increase by $25,000
d.Total assets will increase by $30,000
9.National Corp. purchases $1,000 of supplies on credit. As a result its:
a.Current assets will increase by $1,000
b.Current assets will decrease by $1,000
c.Current assets will remain the same
d.Total assets will decrease by $1,000
10.A journal does all of the following except:
a.Summarizes all of the transactions that effect one account in a “T-account”.
b.Records all the assets of a company
c.Records each day’s transactions
d.Records all the revenues and expenses of a company
PART TWO
1.Which of the following will result in an increase in revenue?
a.Borrowing $10,000 from a bank
b.Shareholders investing $10,000 in a company
c.Selling $10,000 of concert tickets 4 months before the performance
d.Selling $10,000 of groceries.
2.Which of the following results in an expense for a company?
a.Purchase of land
b.Payment of advertising for last month
c.Payment of a dividend
d.Purchase of supplies
3.Which of the following items would be considered a gain?
a.The sale of a factory building for more than its cost
b.The sale of merchandise to customers
c.Performing a service for a client
d.Selling stock to shareholders
4.Which of the following items would be considered a loss?
a.A bad debt of a company
b.The payment of salaries
c.The sale of a factory for $100,000 that is recorded in the accounting records for $200,000
d.The payment of rent
5.Which of the following expenses is reported separately?
a.Loss from hurricane damage
b.Depreciation expense
c.Advertising expense
d.Rent expense
6.Homerdale Corp. received an order from a customer on November 10. It manufactured the ordered items on November 15, shipped the goods on November 17, and received payment on December 2. Under the accrual basis of accounting, it recorded revenue on:
a.November 10
b.November 15
c.November 17
d.December 2
7.Alice works for Playmart, Inc. earning $20 an hour. During the last two weeks of December, 2xx1, she worked 80 hours. Playmart calculated her hours for the month of December in January, 2xx2. However, Playmart did not make out her check and pay her until February, 2xx2. Playmart should record:
a.An expense in December, 2xx1
b.Deferred revenue in December 31, 2xx1
c.An expense in January, 2xx2
d.An expense in February, 2xx2
8.Which of the following situations results in unearned revenue:
a.Collection of $100 from a customer who charged the purchase of goods a month ago
b.The receipt of an order from a customer who will purchase and pay for goods in two weeks
c.The sale of $100 of goods today with payment due from the customer in 30 days
d.The receipt of $100 cash from a customer for an order of goods to be shipped next month.
9.A cost:
a.Is an item that appears on the income statement
b.Is the amount of resources used up to obtain other resources
c.Is an item that appears on the balance sheet
d.Is an expense
10.Which of the following is a capitalized cost:
a.Advance payment of rent
b.Salary expense
c.Advertising expense
d.Contributed capital
PART THREE
1.Which of the following companies is a merchandising company?
a.General Motors
b.Intel
c.Wal-Mart
d.IBM
2.Internal control involves all of the following except:
a.Consistent branding
b.Protection against theft of assets
c.Enhancement of the reliability of accounting information
d.Promoting efficient and effective operations
3.Which of the following is not considered to be cash?
a.Check
b.Money order
c.Bank draft
d.Treasury bill
4.Which of the following is not considered to be a category of business?
a.Service
b.Technology
c.Merchandising
d.Manufacturing
5.Which of the following is added to the ending cash balance per bank statement?
a.Outstanding checks
b. NSF checks
c.Deposit in transit
d.Bank service charge
6.Which of the following items is subtracted from the ending balance per bank statement?
a.Outstanding checks
b. NSF checks
c.Deposit in transit
d.Bank service charge
7.Which of the following items is subtracted from the ending cash balance per books?
a.Outstanding checks
b.NSF checks
c.Deposit in transit
d.Interest received from the bank
8.Which of the following items is added to the ending cash balance per books?
a.Outstanding checks
b.NSF checks
c.Deposit in transit
d.Interest received from the bank
9.The National Co. wrote a check to one of its creditors for $123, but recorded it in its accounting records as $132. On the bank reconciliation, it must:
a.Add $9 to the ending cash balance per books
b.Subtract $9 from the ending cash balance per books
c.Add $9 to the ending cash balance per bank statement
d.Subtract $9 from the ending cash balance per books
10.Which of the following items will require an adjusting journal entry on a company’s books?
a.Outstanding checks
b.Deposits in transit
c.Error made by the bank
d.NSF check
PART FOUR
1.Oberlin Co. had sales revenue of $500,000 this year and $400,000 last year. As a consequence, its year over year percentage change in sales is:
a.20%
b.25%
c.50%
d.100%
Questions 2 thru 6 are based on the following information:
The following information comes from the balance sheet and income statement of the Rocket Co. for the years 2xx2 and 2xx1:
Year ended December 31
2xx22xx1
Cash$12,000$10,000
Accounts Receivable19,00022,000
Inventory32,00025,000
Property & Equipment112,000109,000
Current Liabilities44,00040,000
Long-term Liabilities53,00050,000
Stockholders’ Equity78,00076,000
Net Sales Revenues340,000315,000
Cost of Goods Sold220,000210,000
Operating Expenses80,00075,000
Interest Expense5,0004,000
Income Tax Expense9,0008,000
2.What is the current ratio as of December 31, 2xx2?
a..70
b.1.43
c.1.80
d.3.98
3.What is the net profit margin for the year ended December 31, 2xx2?
a.7.6%
b.11.8%
c.19.4%
d.21.7%
4.What is the receivables turnover for the year ended December 31, 2xx2?
a.3.80
b.15.45
c.16.59
d.17.89
5.What is the times interest earned ratio for the year ended December 31, 2xx2?
a.2.2
b.5.2
c.6.2
d.8.0
6.What is the debt-to-assets ratio as of December 31, 2xx2?
a..55
b..65
c.1.54
d.1.80
7.Which ratio is a test of liquidity?
a.Net profit margin
b.Inventory turnover
c.Times interest earned
d.Debt-to-assets
8.Which ratio is not a test of profitability?
a.Gross profit margin
b.Fixed asset turnover
c.Earnings per share
d.Current ratio
9.If a company increases the selling price of the product it sells, and all other data on the financial statements remains the same, which of the following ratios will be unaffected?
a.Fixed asset turnover
b.Net profit margin
c.Inventory turnover
d.Earnings per share
10. The practice of reporting results on a quarterly basis is due to the:
a.Cost-benefit constraint
b.Time period assumption
c.Going concern assumption
d.Industry practices constraint