USE ANSWER SHEET ON LAST PAGE TO RECORD YOUR ANSWERS (True or False) 1All business owners are personally liable for the debts of their businesses. 2Generally accepted accounting principles, or GAAP, are the rules and procedures established by the Financial Accounting Standards Board, or the FASB. t 3A journal entry is an event that has a financial impact on the business that can be reliably measured. 4Double-entry accounting records only those transactions affecting the income statement. 5When using accrual accounting, revenues are recorded when the business performs a service. 6Adjusting journal entries recorded at the end of an accounting period update revenue and expense accounts, as well as asset or liability accounts. 7To maintain effective internal control, employees responsible for handling cash should have access to the accounting records.8Differences between the bank statement and the company’s Cash account are primarily the result of timing errors made by the company. 9Trading securities are considered to be long-term investments.10If credit sales are $2,920,000, then one day’s sale is equal to $8,000.11Inventory is presented on the balance sheet at the selling price of the item.12In a period of increasing prices, LIFO generally results in a lower tax liability.(Multiple Choice)13The objectivity principle of accounting:A.holds that the entity will remain in operation for the foreseeable future.B.enables accountants to ignore the effect of inflation in the accounting records.C. maintains that each organization or section of an organization stands apart from other organizations and individuals.D. ensures that accounting records and statements are based on the most reliable data available.14An Oklahoma City business paid $15,000 cash for equipment used in the business. At the time of purchase, the equipment had a list price of $20,000. When the balance sheet was prepared, the value of the equipment later rose to $22,000. What is the relevant measure of the value of the equipment?A.Historical cost, $15,000B.Fair market cost, $20,000 C.Current market cost, $22,000D.$15,000 on the day of purchase, $22,000 on balance sheet date15Dividends:A.are expenses.B.always affect net income.C.are distributions to stockholders of assets (usually cash) generated by net income.D.are distributions to stockholders of assets (usually cash) generated by a favorable balance in retained earnings.16Which of the following must be added to beginning Retained Earnings to compute ending Retained Earnings?A.Net incomeB.ExpensesC.DividendsD.All of these answers are correct.17At the end of the current accounting period, account balances were as follows: Cash, $180,000; Accounts Receivable, $75,000; Common Stock, $20,000; Retained Earnings, $65,000. Liabilities for the period were:A.$ 70,000.B.$170,000.C.$190,000.D.$210,000.18Revenues were $170,000, expenses were $90,000, and cash dividends were $30,000. What was the net income and the change in retained earnings for the period? A.Net income was $50,000; change in retained earnings was $50,000B. Net income was $80,000; change in retained earnings was $50,000C. Net income was $80,000; change in retained earnings was $80,000D. Net income was $250,000; change in retained earnings was $250,00019If assets increase $210,000 during a given period and liabilities increase $65,000 during the same period, stockholders’ equity must:A.increase $145,000.B.decrease $275,000.C.decrease $145,000.D.increase $275,000.20Income taxes owed to the federal government would be classified as a(n):expense on the income statement.B.financing activity on the statement of cash flows.C.current asset on the balance sheet.D.current liability on the balance sheet.21The owner of a business paid cash from his personal checking account to purchase an automobile for his personal use. This transaction:A.increased a liability account and increased liabilities.B.decreased cash and increased expenses.C.increased assets and increased owners’ equity.D.is not a transaction recognized by the business.22Consider the following transactions:I.Borrowed cash on a note payable, $80,000II.Provided services on account, $10,000III.Received cash from a customer as payment on account, $8,000IV.Received a utility bill, $1,200Total assets would be:A.$96,800.B.$88,000.C.$90,000.D.$98,000.23The purchase of land for cash would:A.increase total assets.B.decrease stockholders’ equity.C.increase the total debits on the trial balance.D.have no effect on total assets.24Performing services on account would:A.decrease both assets and liabilities.B.increase assets and decrease stockholders’ equity.C.decrease revenue and decrease stockholders’ equity.D.increase net income and stockholders’ equity.25Consider the following transactions:I.Borrowed cash on a note payable, $80,000II.Provided services on account, $10,000III.Received cash from a customer as payment on account, $8,000IV.Received a utility bill, $1,200Total liabilities would be:A.$1,200.B.$81,200.C.$98,000.D.$80,000.26Consider the following transactions:I.Owners invested $8,000 cash to begin the businessII.Provided services for cash, $6,000III.Provided services on account, $4,000IV.Paid cash for expenses, $7,500How much cash does the business have? A.$ 2,500B.$ 4,500C.$ 6,500D.$10,50027Consider the following transactions:I.Owners invested $8,000 cash to begin the businessII.Provided services for cash, $6,000III.Provided services on account, $4,000IV.Paid cash for expenses, $7,500How much net income did the business have? A.$2,500B.$3,000C.$4,000D.$6,00028A trial balance prepared by an inexperienced accountant showed total debits of $540,000 and total credits of $450,000. This discrepancy is most likely due to which type of error?A.SlideB.TranspositionC.MislabelingD.Failure to post a transaction29An expense incurred in 2008 is not paid until 2009. Using the accrual basis of accounting, the expense should appear on:A.the 2008 income statement.B.the 2009 income statement.C.neither the 2008 nor the 2009 income statement.D.both the 2008 and 2009 income statements.30A company using the accrual basis of accounting pays $15,000 for a television advertising campaign. Commercials will run evenly in December, January, and February. How much expense will be reported on an income statement prepared for the month of December?A.$0B.$5,000C.$10,000D.$15,00031On November 1 of the current year, Prepaid Rent was debited $5,400 for three months of rent, in advance. The amount of the adjusting entry on December 31 is:A.$1,800.B.$3,600.C.$5,400.D.$0.32O’Connor Company purchased supplies totaling $21,600. By year end, $9,300 of supplies were still on hand. How much supplies expense should O’Connor recognize?A.$9,300B.$12,300C.$21,600D.$0B33Arizona Teak Company paid $54,000 for computers. These computers have an estimated service life of 3 years and a salvage value of $3,000. After one year of use, the book value of the computers will be:A.$17,000.B.$37,000.C.$51,000.D.$0.34Closing entries transfer the balances of revenue and dividends accounts to which account?A.Paid-in CapitalB.Net IncomeC.Common StockD.Retained Earnings35Current assets are $40,000 and long-term assets are $50,000. Total liabilities are $60,000, of which current liabilities are 50%. The current ratio is:A.1.33.B.1.50.C.3.00.D.9.00.36Rosewood Company had Current Assets of $582, Current Liabilities of $433, Total Assets of $732, and only Current Liabilities are Total Liabilities. If Rosewood executes a note for $500 for six months, what is the new debt ratio?A.0.59B.0.75C.1.27D.2.1537Requiring employees to take annual vacations is a part of which characteristic of internal control?A.Assignment of responsibilitiesB.Separation of dutiesC.Proper authorizationD.Competent and reliable personnel38Differences between the amount of cash reported on a company’s bank statement and the balance in the company’s Cash account before the bank reconciliation are primarily due to:A.errors in the accounting process by the company.B.errors made by the bank.C.differences between the cash basis and accrual basis of accounting.D.timing difference in recording transactions.39If a bookkeeper mistakenly recorded a disbursement as $810 instead of the correct amount of $180, the error should be shown on the bank reconciliation as a(n):A.$180 addition to the books.B.$180 deduction from the books.C.$630 addition to the books.D.$630 deduction from the books.40The bank statement balance is $6,450 and shows a service charge of $30, interest earned of $25, and a NSF check for $475. Deposits in transit total $1,850; outstanding checks are $1,125. What is the adjusted bank balance?A.$5,725B.$5,970C.$7,175D.$7,65541A purchase request:A.identifies the need for merchandise and begins the purchasing process.B.identifies that the merchandise has been received and ends the purchasing process.C.is sent by the purchasing department to the customer who purchases the item.D.includes the invoice, receiving report, purchase order and purchase request.42A receiving report is prepared by what department?A.AccountingB.ShippingC.PurchasingD.Marketing43An imprest petty cash fund of $400 was established for minor disbursements. At the end of the month, the fund included petty cash tickets for the purchase of $185 in supplies, $41 for postage, $86 for fuel and a delivery charge of $65. How much cash is required to replenish the fund?A.$ 23B.$226C.$312D.$37744Assuming a beginning cash balance of $2,000, estimated cash receipts of $105,900, and a desired ending cash balance of $3,500, then the estimated cash disbursements are:A.$105,400.B.$104,400.C.$106,900.D.$108,400.45An unrealized loss on a marketable security means that the:A.value of the security at the time of sale exceeded the historical cost of the security.B.current market value of the security exceeds its original cost.C.historical cost of the security is less its current market value.D.historical cost of the security exceeds its current market value.46Bigg and Talle Corporation uses the percentage-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $5,000,000 and management estimates 2% will be uncollectible. Allowance for Doubtful Accounts prior to adjustment has a credit balance of $16,000. After all necessary adjusting entries are made, the balance in Allowance for Uncollectible Accounts will be:A.$116,000.B.$100,000.C.$ 84,000.D.$ 16,000.47Calside Company signed a 15-month, $50,000, 6% note on June 1, 2008. The amount of interest to be accrued on December 31, 2008, is:A.$3,000.B.$1,750.C.$1,500.D.$1,141.48The maturity value of a $40,000 note at 11% for 5 months is:A.$41,833.B.$40,880.C.$44,400.D.$47,260.49VISA charges a fee for using credit cards. If Brunda’s is charged $40 on a sale of $1,600, what percentage is the fee?2.503.5050Alex Rhodes’ net sales for the current period were $114,000 and average receivables were $96,250. What is the amount of one day’s sales (rounded)?A.$312B.$264C.$427D.$55751A company has $40,000 in cash, $75,000 in short-term investments, $263,000 in net current receivables, and $110,000 in inventory. The total current liabilities of the firm are $305,000. The quick ratio of the company is:A.0.63.B.1.24.C.1.60.D.1.76.52A company with net sales of $800,000, a beginning balance of net receivables of $70,000, and an ending balance of net receivables of $90,000 has a collection period of (rounded):A.110 days.B. 41 days.C. 36 days.D. 32 days.53BMX Co. sells item XJ15 for $1,000 per unit, and has a cost of goods sold percentage of 80%. The gross profit to be found for selling 20 items is:A.$20,000.B.$16,000.C.$ 4,000.D.No gross margin can be calculated with a cost of goods sold percentage greater than 50%.54The purchasing manager for East Coast Hoggs is attempting to determine how much inventory to purchase for the upcoming month. The following information has been collected:Current inventory$ 32,000Budgeted cost of goods sold80,000$80,000The manager wishes to end the month with ending inventory of $25,000. How much inventory must the company purchase?A.$85,000B.$82,000C.$73,000D.$67,00055Given the following data, what is the value of cost of goods sold as determined by the FIFO method?Sales revenue300 units at $15 per unitBeginning inventory120 units at $9 per unitPurchases240 units at $10 per unitA.$2,880B.$2,912C.$2,940D.$4,50056Given the following data, what is the value of the gross profit as determined by the LIFO method?Sales revenue300 units at $15 per unitBeginning inventory120 units at $9 per unitPurchases240 units at $10 per unitA.$2,880B.$2,940C.$1,620D.$1,56057Given the following data, calculate the gross profit using the average-cost method, if the selling price was $20 per unit.DateItemUnit1/1Beginning inventory40 units at $12 per unit3/5Purchase of inventory18 units at $14 per unit5/30Purchase of inventory24 units at $18 per unit12/31Ending inventory20 unitsA.$851.71B.$634.78C.$359.90D.$283.9058Char Daniels, controller for Chaka Inc., has the following items:Sales revenue$300,000Cost of goods sold$180,000$85,000Ending inventory$65,000Inventory turnover is:A.4.00.B.2.40.C.2.12D.2.00.59Tonga Industries reported the following:Net Sales$450,000Cost of goods sold$360,000$60,000Tax Rate40%The gross profit percentage is:A.80%.B.60%.C.32%.D.20%.60Tonga Industries reported the following:Net Sales$450,000Cost of goods sold$360,000$60,000Tax Rate40%The net income is:A.$180,000.B.$ 30,000.C.$ 18,000.D.$ 12,000