WALL STREET PREP ACCOUNTING CRASH COURSE
EXAM (VERSION 1 & 2) - COMPLETE QUESTIONS AND
DETAILED SOLUTIONS LATEST UPDATE JUST RELEASED
Question 1: A company that sells smartphones and other computer
devices has collected $500,000 in cash and an additional $100,000
is due within the next 30 days for sales that it has made. It has
already shipped all the merchandise. Which of the following show
the correct journal entries for these activities?
A. Debit cash for $500,000, Debit Accounts Receivable for $100,000,
Credit Retained Earnings for $500,000, Credit Deferred Revenue for
$100,000.
B. Credit cash for $500,000, Credit Accounts Receivable for
$100,000, Debit Retained Earnings for $600,000.
C. Debit cash for $500,000, Debit Accounts Receivable for $100,000,
Credit Retained Earnings for $600,000.
D. Debit cash for $500,000, Debit Accounts Receivable for $100,000,
Credit Inventory for $600,000.
E. Credit cash for $500,000, Credit Accounts Receivable for
$100,000, Debit Inventory for $600,000.
Answer:
C) Debit cash for $500,000, Debit Accounts Receivable for $100,000,
Credit Retained Earnings for $600,000.
Question 2: A company that sells smartphones prepays $20,000 to
cover the next 12 months' worth of utilities. Which of the following
shows the correct journal entries for these activities?
A. Debit retained earnings for $20,000 and credit cash for $20,000.
, B. Credit retained earnings for $20,000 and debit cash for $20,000.
C. Debit prepaid expenses for $20,000 and credit cash for $20,000.
D. Credit prepaid expenses for $20,000 and debit cash for $20,000.
Answer:
C) Debit prepaid expenses for $20,000 and credit cash for $20,000.
Question 3: On June 30, 2020, a company that sells smartphones
prepaid $50,000 to cover the next 12 months' worth of utilities. 6
months later, the company reports their annual results. Assuming
no adjustments have been made since the original journal entries,
what journal entries should be made when reporting the annual
results?
A. No adjustment is required until June 30, 2021.
B. Credit prepaid expenses for $25,000 and debit retained earnings
for $25,000.
C. Debit prepaid expenses for $25,000 and credit retained earnings
for $25,000.
D. Debit prepaid expenses for $25,000 and credit cash for $25,000.
Answer:
B) Credit prepaid expenses for $25,000 and debit retained earnings for
$25,000.
Question 4: Imagine two identical companies, with only one
difference - Company A reports using LIFO, while Company B
reports using FIFO. Assume that prices of inventories steadily rise
over time. Which of the following is correct?
A. Company A will report lower net income than company B
, B. D) Company A and Company B will have identical shareholders
equity balances.
Answer:
A) Company A will report lower net income than company B
Question 5: Amazonia, an online retailer, lost $50 million in
inventory due to a fire. Which of the following journal entries will
likely occur as a result?
A. $50 million debit to inventory and $50 million credit to retained
earnings
B. $50 million debit to inventory and $50 million credit to cash
C. $50 million credit to inventory and $50 million debit to retained
earnings
D. $50 million credit to inventory and $50 million debit to cash
Answer:
C) $50 million credit to inventory and $50 million debit to retained
earnings
Question 6: On January 1, 2020, a company purchases equipment
with a useful life of 5 years for $50 million. The company uses
straight-line depreciation and has assumed no residual value for
the company. On January 1, 2023, the company sells the equipment
for $45 million. Which of the following is correct?
A. When the company sells the equipment, it will recognize a $15
million gain on sale on the income statement.
B. When the company sells the equipment, it will recognize a $5
million loss on sale on the income statement.
, C. When the company sells the equipment, it will recognize a $25
million gain on sale on the income statement.
D. When the company sells the equipment, it will recognize a $45
million gain on sale on the income statement.
Answer:
C) When the company sells the equipment, it will recognize a $25 million
gain on sale on the income statement.
Question 7: During 2014, Boston Company's assets increased
$95,500 and the liabilities decreased $17,300. Boston Company's
stockholders' equity at December 31, 2014 was $211,500. What
amount was stockholders' equity at January 1, 2014?
Answer:
$98,700
Question 8: Consider a single business transaction's impact on the
balance sheet. Which of the following could NOT possibly occur as
a result of this single transaction?
A. An increase in an asset and a decrease in an asset.
B. A decrease in stockholders' equity and a decrease in an asset.
C. An increase in a liability and a decrease in an asset.
D. An increase in stockholders' equity and an increase in an asset.
Answer:
C) An increase in a liability and a decrease in an asset.
Question 9: A company's June 1, 2014 balance sheet reported total
assets of $150,000 and total liabilities of $60,000. During June 2014,
EXAM (VERSION 1 & 2) - COMPLETE QUESTIONS AND
DETAILED SOLUTIONS LATEST UPDATE JUST RELEASED
Question 1: A company that sells smartphones and other computer
devices has collected $500,000 in cash and an additional $100,000
is due within the next 30 days for sales that it has made. It has
already shipped all the merchandise. Which of the following show
the correct journal entries for these activities?
A. Debit cash for $500,000, Debit Accounts Receivable for $100,000,
Credit Retained Earnings for $500,000, Credit Deferred Revenue for
$100,000.
B. Credit cash for $500,000, Credit Accounts Receivable for
$100,000, Debit Retained Earnings for $600,000.
C. Debit cash for $500,000, Debit Accounts Receivable for $100,000,
Credit Retained Earnings for $600,000.
D. Debit cash for $500,000, Debit Accounts Receivable for $100,000,
Credit Inventory for $600,000.
E. Credit cash for $500,000, Credit Accounts Receivable for
$100,000, Debit Inventory for $600,000.
Answer:
C) Debit cash for $500,000, Debit Accounts Receivable for $100,000,
Credit Retained Earnings for $600,000.
Question 2: A company that sells smartphones prepays $20,000 to
cover the next 12 months' worth of utilities. Which of the following
shows the correct journal entries for these activities?
A. Debit retained earnings for $20,000 and credit cash for $20,000.
, B. Credit retained earnings for $20,000 and debit cash for $20,000.
C. Debit prepaid expenses for $20,000 and credit cash for $20,000.
D. Credit prepaid expenses for $20,000 and debit cash for $20,000.
Answer:
C) Debit prepaid expenses for $20,000 and credit cash for $20,000.
Question 3: On June 30, 2020, a company that sells smartphones
prepaid $50,000 to cover the next 12 months' worth of utilities. 6
months later, the company reports their annual results. Assuming
no adjustments have been made since the original journal entries,
what journal entries should be made when reporting the annual
results?
A. No adjustment is required until June 30, 2021.
B. Credit prepaid expenses for $25,000 and debit retained earnings
for $25,000.
C. Debit prepaid expenses for $25,000 and credit retained earnings
for $25,000.
D. Debit prepaid expenses for $25,000 and credit cash for $25,000.
Answer:
B) Credit prepaid expenses for $25,000 and debit retained earnings for
$25,000.
Question 4: Imagine two identical companies, with only one
difference - Company A reports using LIFO, while Company B
reports using FIFO. Assume that prices of inventories steadily rise
over time. Which of the following is correct?
A. Company A will report lower net income than company B
, B. D) Company A and Company B will have identical shareholders
equity balances.
Answer:
A) Company A will report lower net income than company B
Question 5: Amazonia, an online retailer, lost $50 million in
inventory due to a fire. Which of the following journal entries will
likely occur as a result?
A. $50 million debit to inventory and $50 million credit to retained
earnings
B. $50 million debit to inventory and $50 million credit to cash
C. $50 million credit to inventory and $50 million debit to retained
earnings
D. $50 million credit to inventory and $50 million debit to cash
Answer:
C) $50 million credit to inventory and $50 million debit to retained
earnings
Question 6: On January 1, 2020, a company purchases equipment
with a useful life of 5 years for $50 million. The company uses
straight-line depreciation and has assumed no residual value for
the company. On January 1, 2023, the company sells the equipment
for $45 million. Which of the following is correct?
A. When the company sells the equipment, it will recognize a $15
million gain on sale on the income statement.
B. When the company sells the equipment, it will recognize a $5
million loss on sale on the income statement.
, C. When the company sells the equipment, it will recognize a $25
million gain on sale on the income statement.
D. When the company sells the equipment, it will recognize a $45
million gain on sale on the income statement.
Answer:
C) When the company sells the equipment, it will recognize a $25 million
gain on sale on the income statement.
Question 7: During 2014, Boston Company's assets increased
$95,500 and the liabilities decreased $17,300. Boston Company's
stockholders' equity at December 31, 2014 was $211,500. What
amount was stockholders' equity at January 1, 2014?
Answer:
$98,700
Question 8: Consider a single business transaction's impact on the
balance sheet. Which of the following could NOT possibly occur as
a result of this single transaction?
A. An increase in an asset and a decrease in an asset.
B. A decrease in stockholders' equity and a decrease in an asset.
C. An increase in a liability and a decrease in an asset.
D. An increase in stockholders' equity and an increase in an asset.
Answer:
C) An increase in a liability and a decrease in an asset.
Question 9: A company's June 1, 2014 balance sheet reported total
assets of $150,000 and total liabilities of $60,000. During June 2014,
