Sample MCQ Questions Mid 2

Sample MCQ Questions Mid 2

Chapter 04

1.The net income (or loss) for the period

a.is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet.

b.cannot be found on the worksheet.

c.is found by computing the difference between the income statement columns of the worksheet.

d.is found by computing the difference between the trial balance totals and the adjusted trial balance totals.

Ans: C,

2.Closing entries are necessary for

a.permanent accounts only.

b.temporary accounts only.

c.both permanent and temporary accounts.

d.permanent or real accounts only.

Ans: B,

3. The income summary account

a.is a permanent account.

b.appears on the balance sheet.

c.appears on the income statement.

d.is a temporary account.

Ans: D

4. Closing entries are journalized and posted

a.before the financial statements are prepared.

b.after the financial statements are prepared.

c.at management’s discretion.

d.at the end of each interim accounting period.

Ans: B,

5. In preparing closing entries

a.each revenue account will be credited.

b.each expense account will be credited.

c.the owner’s capital account will be debited if there is net income for the period.

d.the owner’s drawings account will be debited.

Ans: B,

6.The income statement for the month of June, 2012 of Camera Obscura Enterprises contains the following information:

Revenues$7,000

Expenses:

Salaries and Wages Expense$3,000

Rent Expense1,000

Advertising Expense800

Supplies Expense300

Insurance Expense 100

Total expenses 5,200

Net income$1,800

The entry to close the revenue account includes a

a.debit to Income Summary for $1,800.

b.credit to Income Summary for $1,800.

c.debit to Income Summary for $7,000.

d.credit to Income Summary for $7,000.

Ans: D,

7.The income statement for the month of June, 2012 of Camera Obscura Enterprises contains the following information:

Revenues$7,000

Expenses:

Salaries and Wages Expense$3,000

Rent Expense1,000

Advertising Expense800

Supplies Expense300

Insurance Expense 100

Total expenses 5,200

Net income$1,800

After the revenue and expense accounts have been closed, the balance in Income Summary will be

a.$0.

b.a debit balance of $1,800.

c.a credit balance of $1,800.

d.a credit balance of $7,000.

Ans: C,

8.The income statement for the month of June, 2012 of Camera Obscura Enterprises contains the following information:

Revenues$7,000

Expenses:

Salries and Wages Expense$3,000

Rent Expense1,000

Advertising Expense800

Supplies Expense300

Insurance Expense 100

Total expenses 5,200

Net income$1,800

At June 1, 2012, Camera Obscura reported owner’s equity of $35,000. The company had no owner drawings during June. At June 30, 2012, the company will report owner’s equity of

a.$29,800.

b.$35,000.

c.$36,800.

d.$42,000.

Ans: C,

9. The income statement for the year 2012 of Fugazi Co. contains the following information:

Revenues$70,000

Expenses:

Salaries and Wages Expense$45,000

Rent Expense12,000

Advertising Expense8,000

Supplies Expense6,000

Utilities Expense2,500

Insurance Expense 2,000

Total expenses 75,500

Net income (loss)$(5,500)

After all closing entries have been posted, the Income Summary account will have a balance of

a.$0.

b.$5,500 debit.

c.$5,500 credit.

d.$34,500 credit.

Ans: A,

10. .A post-closing trial balance will show

a.zero balances for all accounts.

b.zero balances for balance sheet accounts.

c.only balance sheet accounts.

d.only income statement accounts.

Ans: C, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting

Chapter 05

1. Paden Company purchased merchandise from Emmett Company with freight terms of FOB shipping point. The freight costs will be paid by the

a.seller.

b.buyer.

c.transportation company.

d.buyer and the seller.

Ans: B

2. Glenn Company purchased merchandise inventory with an invoice price of $7,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Glenn Company pays within the discount period?

a.$6,300

b.$6,440

c.$6,860

d.$7,000

Ans: C,

3. If a company is given credit terms of 2/10, n/30, it should

a.hold off paying the bill until the end of the credit period, while investing the money at 10% annual interest during this time.

b.pay within the discount period and recognize a savings.

c.pay within the credit period but don’t take the trouble to invest the cash while waiting to pay the bill.

d.recognize that the supplier is desperate for cash and withhold payment until the end of the credit period while negotiating a lower sales price.

Ans: B,

4. Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in

a.Freight Expense

b.Freight – In

c.Inventory

dFreight – Out

Ans: C,

5. On November 2, 2012, Kasdan Company has cash sales of $4,500 from merchandise having a cost of $2,700. The entries to record the day’s cash sales will include:

a.a $2,700 credit to Cost of Goods Sold.

b.a $4,500 credit to Cash.

c.a $2,700 credit to Inventory.

da $4,500 debit to Accounts Receivable.

Ans: C,

6. Cleese Company sells merchandise on account for $3,000 to Langston Company with credit terms of 2/10, n/30. Langston Company returns $600 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of the check?

a.$2,352

b.$2,400

c.$2,940

d.$2,952

Ans: A,

7. The credit terms offered to a customer by a business firm are 2/10, n/30, which means that

a.the customer must pay the bill within 10 days.

b.the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date.

c.the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date.

d.two sales returns can be made within 10 days of the invoice date and no returns thereafter.

Ans: C,

8. With respect to the income statement,

a.contra-revenue accounts do not appear on the income statement.

b.sales discounts increase the amount of sales.

c.contra-revenue accounts increase the amount of operating expenses.

d.sales discounts are included in the calculation of gross profit.

Ans: D,

9. The respective normal account balances of Sales Revenue, Sales Returns and Allowances, and Sales Discounts are

a.credit, credit, credit.

b.debit, credit, debit.

c.credit, debit, debit.

d.credit, debit, credit.

Ans: C,

10. During August, 2012, Baxter’s Supply Store generated revenues of $30,000. The company’s expenses were as follows: cost of goods sold of $18,000 and operating expenses of $2,000. The company also had rent revenue of $500 and a gain on the sale of a delivery truck of $1,000.

Baxter’s non-operating income (loss) for the month of August, 2012 is

a.$0.

b.$500.

c.$1,000.

d.$1,500.

Ans: D,

Chapter 06

1. If goods in transit are shipped FOB destination

a.the seller has legal title to the goods until they are delivered.

b.the buyer has legal title to the goods until they are delivered.

c.the transportation company has legal title to the goods while the goods are in transit.

d.no one has legal title to the goods until they are delivered.

Ans: A

2. Fetherston Company’s goods in transit at December 31 include:

sales madepurchases made

(1)FOB destination(3)FOB destination

(2)FOB shipping point(4)FOB shipping point

Which items should be included in Fetherston’s inventory at December 31?

a.(2) and (3)

b.(1) and (4)

c.(1) and (3)

d.(2) and (4)

Ans: B,

3. The LIFO inventory method assumes that the cost of the latest units purchased are

a.the last to be allocated to cost of goods sold.

b.the first to be allocated to ending inventory.

c.the first to be allocated to cost of goods sold.

d.not allocated to cost of goods sold or ending inventory.

Ans: C,

4. A company just starting business made the following four inventory purchases in June:

units$ 390

units585

units630

June28150 units 510

$2,115

A physical count of merchandise inventory on June 30 reveals that there are 200 units on hand.

The inventory method which results in the highest gross profit for June is

a.the FIFO method.

b.the LIFO method.

c.the weighted average unit cost method.

d.not determinable.

Ans: A

5. In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the

a.FIFO method.

b.LIFO method.

c.average-cost method.

d.tax method.

Ans: A,

6. In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense?

a.FIFO

b.LIFO

c.Average Cost

d.Income tax expense for the period will be the same under all assumptions.

Ans: B,

7. If beginning inventory is understated by $13,000, the effect of this error in the current period is

Cost of Goods SoldNet Income

a.UnderstatedUnderstated

b.OverstatedOverstated

c.UnderstatedOverstated

d.OverstatedUnderstated

Ans: C,

8. Overstating ending inventory will overstate all of the following except

a.assets.

b.cost of goods sold.

c.net income.

d.owner’s equity.

Ans: B,

9. Two companies report the same cost of goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using

a.LIFO will have the highest ending inventory.

b.FIFO will have the highest cost of good sold.

c.FIFO will have the highest ending inventory.

d.LIFO will have the lowest cost of goods sold.

Ans: C,

The cost of goods available for sale is allocated between

a.beginning inventory and ending inventory.

b.beginning inventory and cost of goods on hand.

c.ending inventory and cost of goods sold.

d.beginning inventory and cost of goods purchased.

Ans: C,