Accounting 290 Final Exam Answers. Updated and Verified for 2013

ACC 290 Final Exam Answers

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Accounting Principles I

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1.  Which financial statement is used to determine cash generated from operations?


Statement of cash flows

Explanation: The statement of cash flow is used to show cash generated by operations, financing, and investment.  

2. In terms of sequence, in what order must the four basic financial statements be prepared?

Income statement, capital statement, balance sheet, and statement of cash flows

 

Explanation: This sequence of financial statement preparation allows data to be applied to each subsequent statement. Failing to follow this sequence puts the financial statements at risk of containing inaccurate data. 

 

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3. In classifying transactions, which of the following is true in regard to assets?
A. Normal balances and increases are debits
B. Normal balances and decreases are credits
C. Normal balances can either be debits or credits for assets
D. Normal balances are debits and increases can be debits or credits
 
4. An increase in an expense account must be
A. debited
B. credited
C. either debited or credited, depending on the circumstances
D. capitalized
 
5. ABC Corporation issues 100 shares of $1 par common stock at $5 per share, which of the following is the correct journal entry?

Cash    $500    
Paid-in Capital, Excess of Par         $400
Common Stock         $100

6. In the first month of operations, the total of the debit entries to the cash account amounted to $1,400 and the total of the credit entries to the cash account amounted to $600. The cash account has a
A. $600 credit balance
B. $1,400 debit balance
C. $800 debit balance
D. $800 credit balance
 
7. Which ledger contains control accounts?
A. Accounts receivable subsidiary ledger
B. General ledger
C. Accounts payable subsidiary ledger
D. General revenue and expense ledger
 
8. Smith is a customer of ABC Corporation. Smith typically purchases merchandise from ABC on account. Which ledger would ABC use to keep track of the details of Smith’s account?
A. Accounts receivable subsidiary ledger
B. Accounts receivable control ledger
C. General ledger
D. Accounts payable subsidiary ledger
 
9. Under the cash basis of accounting
A. revenue is recognized when services are performed
B. expenses are matched with the revenue that is produced
C. cash must be received before revenue is recognized
D. a promise to pay is sufficient to recognize revenue
 
10. Under the accrual basis of accounting
A. cash must be received before revenue is recognized
B. net income is calculated by matching cash outflows against cash inflows
C. events that change a company’s financial statements are recognized in the period they occur rather than in the period in which the cash is paid or received
D. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles
 
11. The Vintage Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is
A. debit Laundry Expense, $2,000; credit Laundry Expense $2,000
B. debit Laundry Expense, $4,500; credit Laundry Supplies Expense, $4,500
C. debit Laundry Supplies, $2,000; credit Laundry Supplies Expense, $2,000
D. debit Laundry Supplies Expense, $4,500; credit Laundry Supplies, $4,500
 
12. Greese Company purchased office supplies costing $4,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,100 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be
A. debit Office Supplies Expense, $1,100; credit Office Supplies, $1,100
B. debit Office Supplies, $2,900; credit Office Supplies Expense, $2,900
C. debit Office Supplies Expense, $2,900; credit Office Supplies, $2,900
D. debit Office Supplies, $1,100; credit Office Supplies Expense, $1,100
 
13. An adjusted trial balance
A. is prepared after the financial statements are completed
B. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made
C. is a required financial statement under generally accepted accounting principles
D. cannot be used to prepare financial statements
 
14. Given the following adjusted trial balance:
                                                                                Debit                 Credit
Cash                                                                 $781
Accounts receivable                                           1,049
Inventory                                                           1,562
Prepaid rent                                                           43
Property, plant & equipment                                   150
Accumulated depreciation                                                                26
Accounts payable                                                                            41
Unearned revenue                                                                           61
Common stock                                                                             103
Retained earnings                                                                      3,305
Service revenue                                                                             134
Interest revenue                                                                              28
Salary expense                                                      80
Travel expense                                                        33                                                   
Total                                                               $3,698                 $3,698

Net income for the year is

A. $248
B. $135
C. $162
D. $49
 
15. Given the following adjusted trial balance, what will be the totals for the debit and credit columns of the post-closing trial balance?
                                                                Debit                 Credit
Cash                                                                 $1,562
Accounts receivable                                               2,098
Inventory                                                            3,124
Prepaid rent                                                             86
Property, plant, & equipment                                     300
Accumulated depreciation                                                           $52
Accounts payable                                                                           82
Unearned revenue                                                                        172
Common stock                                                                            206
Retained earnings                                                                     6,610
Service revenue                                                                            218
Interest revenue                                                                              56
Salary expense                                                  160
Travel expense                                                     66                          
Totals                                                               $7,396              $7,396


A. $7,396
B. $7,118
C. $7,334
D. $7,170
 
16. 3.2.1       Given the following adjusted trial balance:

   Given the following adjusted trial balance:
                                                                                        Debit                Credit
Cash                                                                      $781
Accounts receivable                                               1,049
Inventory                                                               1,562
Prepaid rent                                                               43
Property, plant & equipment                                      150
Accumulated depreciation                                                                   26
Accounts payable                                                                               41
Unearned revenue                                                                               61
Common stock                                                                                 103
Retained earnings                                                                          3,305
Service revenue                                                                                134
Interest revenue                                                                                  28
Salary expense                                                          80
Travel expense                                                           33                       
Total                                                       $3,698              $3,698
           
            After closing entries have been posted, the balance in retained earnings will be

A. $3,256
B. $3,170
C. $3,440
D. $3,354
 
17. Net income is recorded on the work sheet under the
A. debit column of the adjusted trial balance and the credit column of retained earnings
B. debit column of the income statement and the credit column of the balance sheet
C. credit column of the adjusted trial balance and the debit column of retained earnings
D. credit column of the income statement and the debit column of the balance sheet
 
18. At the beginning of the year, Uptown Athletic had an inventory of $400,000. During the year, the company purchased goods costing $1,500,000. If Uptown Athletic reported ending inventory of $600,000 and sales of $2,000,000, their cost of goods sold and gross profit rate would be
A. $900,000 and 65%
B. $1,300,000 and 35%
C. $900,000 and 35%
D. $1,300,000 and 65%
 
19. During the year, Sarah’s Pet Shop’s merchandise inventory decreased by $30,000. If the company’s cost of goods sold for the year was $450,000, purchases would have been
A. $480,000
B. $420,000
C. $390,000
D. Insufficient data to determine
 
20. At the beginning of the year, Wildcat Athletic had an inventory of $200,000. During the year, the company purchased goods costing $700,000. If acc 290 final exam Wildcat Athletic reported ending inventory of $300,000 and sales of $1,000,000, their cost of goods sold and gross profit rate would be
A. $400,000 and 60%
B. $600,000 and 40%
C. $400,000 and 40%
D. $600,000 and 60%
 
21. The entry to record of sale of $900 with terms of 2/10, n/30 will include a
A. debit to Sales Discount for $18
B. debit to Sales Revenue for $882
C. credit to Accounts Receivable for $900
D. credit to Sales Revenue for $900
 
22.Dobler Company uses a periodic inventory system. Details for the inventory account for the month of January 2012 are as follows:
An end of the month (1/31/2012), inventory showed that 140 units were on hand. If the company uses LIFO, what is the value of the ending inventory?
A. $737
B. $700
C. $762
D. $1,380
 
23. The difference between ending inventory using LIFO and ending inventory using FIFO is referred to as
A. FIFO reserve
B. inventory reserve
C. LIFO reserve
D. periodic reserve
 
24. A consistent application of an inventory costing method enhances
A. conservatism
B. accuracy
C. comparability
D. efficiency
 
25. The accountant at Patton Company has determined that income before income taxes amounted to $11,000 using the FIFO costing assumption. If the income tax rate is 30% and the amount of income taxes paid would be $300 greater if the LIFO assumption were used, what would be the amount of income before taxes under the LIFO assumption?
A. $11,300
B. $12,000
C. $10,000
D. $10,700
 
26. A very small company would have the most difficulty in implementing which of the following internal control activities?
A. Separation of duties    
B. Limited access to assets
C. Periodic independent verification
D. Sound personnel procedures
 
27. A system of internal control
A. is infallible
B. can be rendered ineffective by employee collusion
C. invariably will have costs exceeding benefits
D. is premised on the concept of absolute assurance
 
28. The custodian of a company asset should
A. have access to the accounting record for that asset
B. be someone outside the company
C. not have access to the accounting record for that asset
D. be an accountant
 
29. The Sarbanes Oxley Act (2002) applies to
A. U.S. companies but not international companies
B. international companies but not U.S. companies
C. U.S. and Canadian companies but not other international companies
D. U.S. and international companies

30. Which of the following financial statements is divided into major categories of operating, investing, and financing activities?
A. The income statement.
B. The balance sheet.
C. The retained earnings statement.
D. The statement of cash flows.

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