ACC 556 Week 5 Quiz

ACC 556 Week 5  Quiz | Assignment Help | Strayer University 

Midterm  Exam 

Question 1

 A small neighborhood barber shop that is operated by its owner would likely be organized as a

 

o   Proprietorship.

o   Corporation.

o   Joint venture.

o   Partnership.

 

Question 2

 Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?

 

o   Lower taxes.

o   Most common form of organization.

o   Reduced legal liability for investors.

o   Harder to transfer ownership.

 

Question 3

 A business organized as a separate legal entity is a

 

o   Partnership.

o   Government unit.

o   Corporation.

o   Proprietor.

 

Question 4

 Which of the following is not an advantage of the corporate form of business organization?

 

o   No personal liability.

o   Easy to transfer ownership.

o   Easy to raise funds.

o   Favourable tax treatment.

 

Question 5

 External users want answers to all of the following questions except:

 

o   Is the company earning satisfactory income?

o   How does the company compare in profitability with competitors?

o   Will the company be able to pay its debts as they come due?

o   Will the company be able to afford employee pay raises this year?

 

Question 6

 Which of the following statements concerning users of accounting information is incorrect?

 

o   Taxing authorities are considered external users.

o   Management is considered an internal user.

o   Present creditors are considered external users.

o   Regulatory authorities are considered internal users.

 

 

Question 7

 When collection is made on Accounts Receivable,

 

o   Stockholders equity will increase.

o   Total assets will increase.

o   Total assets will remain the same.

o   Total assets will decrease.

 

 

Question 8

 The sale of an asset on credit for what it cost

o   Decreases assets and increases liabilities.

o   Leaves total assets unchanged.

o   Increases assets and liabilities.

o   Decreases assets and liabilities.

Question 9

 All of the following are characteristics of every accounting information system except it is a system

 

o   That collects transaction data.

o   Of data storage hardware for the chart of accounts.

o   That communicates financial information to decision makers.

o   That processes transaction data.

 

 

Question 10

 A revenue generally

 

o   Leaves total assets unchanged.

o   Increases assets and liabilities.

o   Increases assets and stockholders’ equity.

o   Increases assets and decreases stockholders’ equity.

 

 

Question 11

 Sheffield Corp. provided consulting services and billed the client $2650. As a result of this event,

 

o   Both assets and equity increased by $2650.

o   Total assets remained unchanged.

o   Assets increased by $2650.

o   Equity increased by $2650

 

 

 

 

 

 

Question 12

 If expenses are paid in cash, then

 

o   Stockholders’ equity will increase.

o   Assets will decrease.

o   Assets will increase.

o   Liabilities will decrease.

 

Question 13

 Vaughn Manufacturing had a transaction that caused a $5100 increase in both assets and liabilities. This transaction could have been a(n)

 

o   Purchase of office equipment for $5100 cash.

o   Repayment of a $5100 bank loan.

o   Investment of $5100 cash in the business by the stockholders.

o   Purchase of office equipment for $12240, paying $7140 cash and issuing a note payable for the balance.

 

Question 14

 It is possible for an asset to be a current asset even though the expected conversion of that asset into cash is to be longer than one year or the normal operating cycle.

 

o   True

o   False

 

Question 15

 Long-term investments appear in the property, plant, and equipment section of the balance sheet.

 

o   True

o   False

 

 

Question 16

 The investment category on the balance sheet normally includes investments that are intended to be held for a short period of time (less than one year).

 

o   True

o   False

 

Question 17

 Stockholders’ equity is divided into two parts: common stock and retained earnings.

 

o   True

o   False

 

 

Question 18

 The main difference between intangible assets and property, plant and equipment is the length of the asset’s life.

 

o   True

o   False

 

Question 19

 Cash and supplies are both classified as current assets.

 

o   True

o   False

 

 

 

 

Question 20

 Which of the following items describe the two classifications of adjusting entries?

 

o   Deferrals and postponements.

o   Postponements and advances.

o   Accruals and advances.

o   Accruals and deferrals.

 

 

Question 21

 Before adjusting entries, unearned revenues are:

 

o   Recognized as revenue and already received and recorded.

o   Received and recorded as liabilities before they are recognized as revenue.

o   Recognized as revenue but not yet received or recorded.

o   Recognized as revenue and recorded as liabilities before they are received.

 

Question 22

Which one of the following is not a justification for adjusting entries?

 

o   Adjusting entries are necessary to ensure that the expense recognition principle is followed.

o   Adjusting entries are necessary to enable financial statements to be in conformity with GAAP.

o   Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

o   Adjusting entries are necessary to ensure that the revenue recognition principle is followed.

 

Question 23

 The primary difference between prepaid and accrued expenses is that prepaid expenses have:

 

o   Been recorded and accrued expenses have not.

o   Not been recorded and accrued expenses have.

o   Been incurred and accrued expenses have not.

o   Not been paid and accrued expenses

Question 24

 Under the cash basis of accounting:

 

o   Cash must be received before revenue is recognized.

o   A promise to pay is sufficient to recognize revenue.

o   Expenses are matched with the revenue that is produced.

o   Revenue is recognized when services are performed.

 

Question 25

 Pharoah Company had the following transactions during 2021:

 

• Sales of $11160 on account

• Collected $4960 for services to be performed in 2022

• Paid $4650 cash in salaries for 2021

• Purchased airline tickets for $620 in December for a trip to take place in 2022

 

What is Pharoah's 2021 net income using accrual accounting?

 

o   $6510

o   $7130

o   $12090

o   $11470

 

 

Question 26

A company spends $15 million dollars for an office building. Over what period should the cost be written off?

 

o   When the $15 million is expended in cash.

o   All in the first year.

o   After $15 million in revenue is earned.

o   None of these answer choices are correct.

 

Question 27

 Which of the following would not be considered a merchandising operation?

 

o   Retailer

o   Wholesaler

o   Merchandising company

o   Service firm

 

Question 28

 Detailed records of goods held for resale are not maintained under a

 

o   Perpetual inventory system.

o   Single entry accounting system.

o   Periodic inventory system.

o   Double entry accounting system.

 

Question 29

 Which of the following activities is not a component of the operating cycle?

 

o   Payment of employees’ salaries

o   Sale of merchandise

o   Collection of cash from merchandise sales

o   Purchase of merchandise

 

Question 30

 Two categories of expenses in merchandising companies are

 

 

 

o   Cost of goods sold and financing expenses.

o   Operating expenses and financing expenses.

o   Other expenses and cost of goods sold.

o   Cost of goods sold and operating expenses.

 

Question 31

 A merchandiser will earn an operating income of exactly $0 when

 

o   Net sales equals cost of goods sold.

o   Operating expenses equal net sales.

o   Gross profit equals operating expenses.

o   Cost of goods sold equals gross margin.

 

Question 32

 The figure for which of the following items is determined at a different time under the perpetual inventory method than under the periodic method?

 

o   Accounts Receivable

o   Cost of Goods Sold

o   Sales Revenue

o   Purchases

 

 

Question 33

 When is a physical inventory usually taken?

 

o   At the end of the company’s fiscal year.

o   When the company has its greatest amount of inventory.

o   When the company has its greatest amount of inventory and at the end of the company's fiscal year.

o   When goods are not being sold or received.

 

 

Question 34

 Which of the following should not be included in the physical inventory of a company?

 

o   Goods held on consignment from another company.

o   Goods in transit from another company shipped FOB shipping point.

o   Goods shipped on consignment to another company.

o   All of these answer choices should be included.

 

 

Question 35

 The term "FOB" denotes

 

o   Freight charge on buyer.

o   Free only (to) buyer.

o   Free on board.

o   Freight on board.

 

 

Question 36

 For companies that use a perpetual inventory system, all of the following are purposes for taking a physical inventory except to:

 

o   Determine the amount of wasted raw materials.

o   Determine losses due to employee theft.

o   Determine ownership of the goods.

o   Check the accuracy of the records.

 

 

 Question 37

 At December 31, 2022, Blossom Company inventory records indicated a balance of $886000. Upon further investigation it was determined that this amount included the following:

 

▪ $166000 in inventory purchases made by Blossom shipped from the seller 12/27/22 terms FOB destination, but not due to be received until January 2nd

▪ $125000 in goods sold by Blossom with terms FOB destination on December 27. The goods are not expected to reach their destination until January 6.

▪ $9100 of goods received on consignment from Maria Company

What is Blossom's correct ending inventory balance at December 31, 2022?

 

 

o   $876900

o   $710900

o   $720000

o   $585900

 

 

Question 38

 Reeves Company is taking a physical inventory on March 31, the last day of its fiscal year. Which of the following must be included in this inventory count?

 

o   Goods that Reeves is holding on consignment for Parker Company.

o   Goods in transit that Reeves has sold to Smith Company, FOB shipping point.

o   Goods in transit to Reeves, FOB destination.

o   Goods that Reeves is holding in inventory on March 31 for which the related Accounts Payable is 15 days past due.

 

 

Question 39

 When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory?

 

o   To check the accuracy of the perpetual inventory records.

o   To determine cost of goods sold for the accounting period.

o   To compute inventory ratios.

o   All are a purpose of taking a physical inventory when a perpetual inventory system is used.

 

 

Question 40

 Which of the following is not an internal control procedure for cash?

 

o   Only designated personnel are authorized to handle cash.

o   The same individual receives the cash and pays the bills.

o   Access to cash is limited.

o   Surprise audits of cash on hand should be made occasionally.

 

Question 41

 Supervisors counting cash receipts daily is an example of

 

o   Human resource controls.

o   Independent internal verification.

o   Establishment of responsibility.

o   Segregation of duties.

 

 

Question 42

 Which one of the following items would not be considered cash?

 

o   Coins.

o   Currency.

o   Postdated checks.

o   Money orders.

 

Question 43

 Control over cash disbursements is generally more effective when

 

o   Payments are made by check.

o   Disbursements are made by the accounts payable subsidiary clerk.

o   All purchases are made on credit.

o   All bills are paid in cash.

 

 

Question 44

 At Emerson Company, one bookkeeper prepares the cash deposits while the other bookkeeper enters the collections in the journal and ledger. Which of the following is the best explanation of this type of internal control principle over cash receipts?

 

o   Segregation of duties.

o   Mechanical controls.

o   Physical controls.

o   Documentation procedures.

 

 

 

 

Question 45

 Before a check authorization is issued, the following documents must be in agreement, except for the

 

o   Receiving report.

o   Purchase order.

o   Remittance advice.

o   Invoice.

 

 

 

 

Question 46

 Nash's sells softball equipment. On November 14, they shipped $3500 worth of softball uniforms to Ayayai Middle School, terms 1/10, n/30. On November 21, they received an order from Douglas High School for $2000 worth of custom printed bats to be produced in December. On November 30, Ayayai Middle School returned $400 of defective merchandise. Nash's has received no payments from either school as of month end. What amount will be recognized as accounts receivable, net on the balance sheet as of November 30?

 

 

o   $3500

o   $3100

o   $5900

o   $5500

 

 

Question 47

 Which of the following receivables would not be classified as an "other receivable"?

 

o   Notes receivable

o   Interest receivable

o   Advance to an employee

o   Refundable income tax

 

 

Question 48

 Three accounting issues associated with accounts receivable are

 

o   Depreciating, returns, and valuing.

o   Accrual, bad debts, and accelerating collections.

o   Depreciating, valuing, and collecting.

o   Recognizing, valuing, and accelerating collections.

 

 

Question 49

 On January 15, Tamarisk, Inc. sells merchandise on account to Pronghorn Associates for $5600 with terms 4/10, n/30. On January 20, Pronghorn returns merchandise worth $900 to Tamarisk. On January 24, payment is received from Pronghorn for the balance due. What is the amount of cash received?

 

o   $4512

o   $4476

o   $3500

o   $4700

 

 

Question 50

Accounts receivable are valued and reported on the balance sheet

 

o   At cash realizable value.

o   Only if they are not past due.

o   In the investments section.

o   At gross amounts less sales returns and allowances.