26. Which of the following is a universally accepted measure of profitability?
A. Rate of return on investment.
B. Rate of return on retained earnings.
C. Rate of return on liabilities.
D. All of these.
27. If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan, relative to its working capital just prior to the loan, would be:
A. Higher.
B. Lower.
C. The same.
D. Would depend on the amount borrowed.
28. Which of the following accounts is part of working capital?
A. Retained Earnings
B. Sales
C. Merchandise Inventory
D. Common Stock
29. To accrue $5,500 of employee salaries for the last week of February, the employer's journal entry is:
A.
B.
C.
D.
Dr Salaries expense……….……….……….…… 5,500
Cr Salaries payable……….……….……….…… 5,50
30. Sage, Inc. has 20 employees who each earn $100 per day and are paid every Friday. The end of the accounting period is on a Wednesday. How much wages should the firm accrue at the end of the period?
A. $2,000.
B. $1,000.
C. $0.
D. $6,000.
31. Which of the following is not one of the 5 questions of transaction analysis?
A. What's going on?
B. Which accounts are affected?
C. Is this an accrual?
D. Does the balance sheet balance?
E. Does my analysis make sense?
32. The effect of an adjustment is:
A. To correct an entry that was not in balance.
B. To increase the accuracy of the financial statements.
C. To record transactions not previously recorded.
D. To close the books.
33. A journal entry recording an accrual:
A. Results in a better matching of revenues and expenses.
B. Will involve a debit or credit to cash.
C. Will affect balance sheet accounts only.
D. Will most likely include a debit to a liability account.
34. Wisdom Co. has a note payable to its bank. An adjustment is likely to be required on Wisdom's books at the end of every month that the loan is outstanding to record the:
A. Amount of interest paid during the month.
B. Amount of total interest to be paid when the note is paid off.
C. Amount of principal payable at the maturity date of the note.
D. Accrued interest expense for the month.
Martin & Associates borrowed $5,000 on April 1, 2010 at 8% interest with both principal and interest due on March 31, 2011.
35. Which of the following journal entries should the firm use to accrue interest at the end of each month?
A.
B.
C.
D.
Interest Expense XXX
Interest Payable XXX
36. How much should be in the firm's interest payable account at December 31, 2010?
A. $300
B. $400
C. $0
D. $333
37. Which of the following journal entries should the firm use to record the payment of interest on March 31, 2011?
A.
B.
C.
D.
Interest Payable……XXXX
Interest Expense……XXXX
Cash……….XXXX
38. The accountant at Abco, Inc. made an adjusting entry at the end of February to accrue interest on a note receivable from a customer. The effect of this entry is to:
A. Decrease ROI for February.
B. Increase ROI for February.
C. Decrease working capital at February 28.
D. Decrease the acid-test ratio at February 28.
39. The accounting concept/principle being applied when an adjustment is made is usually:
A. matching revenue and expense.
B. consistency.
C. original cost.
D. materiality.
40. The Interest Receivable account for February showed transactions totaling $8,500 and an adjustment of $11,200.All of the following responses are correct except:
A. The transactions probably resulted from accruing interest income earned.
B. The transactions were probably entered on the credit side of the account.
C. The adjustment was probably for cash receipts of interest receivable accrued in prior months.
D. The balance in the interest receivable account decreased $2,700.
41. The balance in the Accrued Wages Payable account increased from $12,200 at the beginning of the month to $15,000 at the end of the month. Wages accrued during the month totaled $61,000.
A. Wages paid during the month totaled $58,200.
B. Wages paid during the month totaled $64,800.
C. Wages expense for the month totaled $58,200.
D. Wages expense for the month totaled $76,000.
42. Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:
A. the accounts receivable asset should be stated at original cost.
B. the exact amount of the losses from bad debts is known.
C. revenues should be stated at realizable value.
D. all costs incurred in the current period should be subtracted from current period revenues.
43. When an uncollectible account receivable is written off against the allowance for bad debts:
A. total current assets decrease and expenses increase.
B. total current assets are not affected.
C. total current assets decrease and expenses decrease.
D. current assets decrease and expenses are not affected.
44. With respect to the write-off of an uncollectible account receivable against the allowance for bad debts, a sound system of internal control would require:
A. the write-off be approved by two employees.
B. an investigation of why credit was extended to this customer in the first place.
C. a lawsuit to be initiated to recover the uncollectible amount.
D. the write-off to be made within six months after the date of sale.
45. An organization's system of internal control is designed primarily to:
A. ensure that no employees steal the organization's property.
B. increase efficiency by letting one employee handle all aspects of a transaction from beginning to end.
C. ensure that the organization's balance sheet will always balance.
D. provide an operating framework for all employees as they work to achieve the organization's goals.
46. If an organization purchases $700 of supplies on account, with terms of 2/15, n50:
A. $650 must be paid within 15 days of the invoice date.
B. $698 must be paid within 50 days of the invoice date.
C. $686 can be paid within 15 days of the invoice date, or $700 must be paid within 50 days of the invoice date.
D. $686 can be paid within 15 days of the invoice date, or $714 must be paid within 50 days of the invoice date.
47. Trading and Available-for-Sale securities are reported on the balance sheet at:
A. Net realizable value.
B. Historical cost.
C. Weighted average cost.
D. Market value.
48. Which of the following is(are) a category for securities?
A. Trading.
B. Held-to-maturity.
C. Available-for-sale.
D. All of the above.
49. When a firm uses the LIFO inventory cost flow assumption:
A. cost of goods sold will be greater than if FIFO were used.
B. net income will be greater than if FIFO were used.
C. cost of goods sold will be the same as if FIFO were used.
D. better matching of revenue and expense is achieved than under FIFO.
50. Accounts receivable are reported at:
A. Net realizable value.
B. Historical cost.
C. Weighted average cost.
D. Market value.
Answer will be sent by email as attachment.
