Accounting 201 Final Review Questions
with All Correct Answers
A company's ledger accounts and their end-of-period balances before closing entries
are posted are shown below. What amount will be posted to Tricia DeBarre, Capital in
the process of closing the Income Summary account? (Assume all accounts have
normal balances.)
A. $16,780 debit.
B. $7,180 credit.
C. $16,780 credit.
D. $18,280 credit.
E. $23,780 credit. - Answer-C. $16,780 credit.
The approach to preparing financial statements based on recognizing revenues when
they are earned and matching expenses to those revenues is:
A. Cash basis accounting.
B. The matching principle.
C. The time period assumption.
D. Accrual basis accounting.
E. Revenue basis accounting. - Answer-D. Accrual basis accounting.
A company uses the percent of receivables method to determine its bad debts expense.
At the end of the current year, the company's unadjusted trial balance reported the
following selected amounts:
All sales are made on credit. Based on past experience, the company estimates 3.5% of
credit sales to be uncollectible. What adjusting entry should the company make at the
end of the current year to record its estimated bad debts expense?
A. Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975.
B. Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C. Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475.
D. Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E. Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.
- Answer-C. Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts
$16,475.
,$435,000 * 0.035 = $15,225 + $1,250 = $16,475
A properly designed internal control system:
A. Lowers the company's risk of loss.
B. Is not necessary if the company uses a computerized system.
C. Eliminates the need for an audit.
D. Requires the use of non-computerized systems.
E. Insures profitable operations. - Answer-A. Lowers the company's risk of loss.
Interim financial statements refer to financial reports:
A. That cover less than one year, usually spanning one, three, or six-month periods.
B. That are prepared before any adjustments have been recorded.
C. That show the assets above the liabilities and the liabilities above the equity.
D. Where revenues are reported on the income statement when cash is received and
expenses are reported when cash is paid.
E. Where the adjustment process is used to assign revenues to the periods in which
they are earned and to match expenses with revenues. - Answer-A. That cover less
than one year, usually spanning one, three, or six-month periods.
Few companies take a physical count of inventory each year, and rely on inventory
records alone to determine the inventory value. - Answer-F
Merchandise inventory is reported in the long-term assets section of the balance sheet.
- Answer-F
The person that borrows money and signs a promissory note is called the payee. -
Answer-F
Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency
plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash
fund will include:
A. A debit to Cash for $377.50.
B. A credit to Cash Over and Short for $5.00.
C. A debit to Petty Cash for $382.50.
D. A credit to Cash for $387.50.
E. A debit to Cash for $387.50. - Answer-D. A credit to Cash for $387.50.
$450.00 - 62.50 - 382.50 = $5.00 cash shortage; $382.50 + 5.00 = $387.50
reimbursement and credit to cash
The following information is available on a depreciable asset owned by First Bank &
Trust:
, The asset's book value is $70,000 on October 1, Year 3. On that date, management
determines that the asset's salvage value should be $5,000 rather than the original
estimate of $10,000. Based on this information, the amount of depreciation expense the
company should recognize during the last three months of Year 3 would be:
A. $2,187.50
B. $1,718.75
C. $2,031.25
D. $2,321.43
E. $1,964.29 - Answer-C. $2,031.25
The asset's book value is $70,000 after having been depreciated for two full years. To
calculate the new rate of depreciation, subtract the revised salvage value of $5,000 from
the current book value of $70,000, yielding $65,000 of revised remaining depreciable
cost. Since that amount is to be recognized over the remaining eight years of useful life,
depreciation expense for the last quarter of Year 3 would be $2,031.25 [($65,000/8) *
3/12].
Cost of Goods Sold is debited to close the account during the closing process. -
Answer-F
Darby uses the allowance method to account for uncollectible accounts. Its year-end
unadjusted trial balance shows Accounts Receivable of $104,500, allowance for
doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are
estimated to be .5% of sales, what is the amount of the bad debts expense adjusting
entry?
A. $4,625
B. $3,960
C. $5,290
D. $4,750
E. $4,825 - Answer-A. $4,625
$925,000 * 0.005 = $4,625
A machine originally had an estimated useful life of 5 years, but after 3 complete years,
it was decided that the original estimate of useful life should have been 10 years. At that
point the remaining cost to be depreciated should be allocated over the remaining:
A. 10 years.
B. 2 years.
C. 7 years.
D. 5 years.
E. 8 years. - Answer-C. 7 years.
with All Correct Answers
A company's ledger accounts and their end-of-period balances before closing entries
are posted are shown below. What amount will be posted to Tricia DeBarre, Capital in
the process of closing the Income Summary account? (Assume all accounts have
normal balances.)
A. $16,780 debit.
B. $7,180 credit.
C. $16,780 credit.
D. $18,280 credit.
E. $23,780 credit. - Answer-C. $16,780 credit.
The approach to preparing financial statements based on recognizing revenues when
they are earned and matching expenses to those revenues is:
A. Cash basis accounting.
B. The matching principle.
C. The time period assumption.
D. Accrual basis accounting.
E. Revenue basis accounting. - Answer-D. Accrual basis accounting.
A company uses the percent of receivables method to determine its bad debts expense.
At the end of the current year, the company's unadjusted trial balance reported the
following selected amounts:
All sales are made on credit. Based on past experience, the company estimates 3.5% of
credit sales to be uncollectible. What adjusting entry should the company make at the
end of the current year to record its estimated bad debts expense?
A. Debit Bad Debts Expense $13,975; credit Allowance for Doubtful Accounts $13,975.
B. Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C. Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts $16,475.
D. Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E. Debit Bad Debts Expense $17,350; credit Allowance for Doubtful Accounts $17,350.
- Answer-C. Debit Bad Debts Expense $16,475; credit Allowance for Doubtful Accounts
$16,475.
,$435,000 * 0.035 = $15,225 + $1,250 = $16,475
A properly designed internal control system:
A. Lowers the company's risk of loss.
B. Is not necessary if the company uses a computerized system.
C. Eliminates the need for an audit.
D. Requires the use of non-computerized systems.
E. Insures profitable operations. - Answer-A. Lowers the company's risk of loss.
Interim financial statements refer to financial reports:
A. That cover less than one year, usually spanning one, three, or six-month periods.
B. That are prepared before any adjustments have been recorded.
C. That show the assets above the liabilities and the liabilities above the equity.
D. Where revenues are reported on the income statement when cash is received and
expenses are reported when cash is paid.
E. Where the adjustment process is used to assign revenues to the periods in which
they are earned and to match expenses with revenues. - Answer-A. That cover less
than one year, usually spanning one, three, or six-month periods.
Few companies take a physical count of inventory each year, and rely on inventory
records alone to determine the inventory value. - Answer-F
Merchandise inventory is reported in the long-term assets section of the balance sheet.
- Answer-F
The person that borrows money and signs a promissory note is called the payee. -
Answer-F
Assume that the custodian of a $450 petty cash fund has $62.50 in coins and currency
plus $382.50 in receipts at the end of the month. The entry to replenish the petty cash
fund will include:
A. A debit to Cash for $377.50.
B. A credit to Cash Over and Short for $5.00.
C. A debit to Petty Cash for $382.50.
D. A credit to Cash for $387.50.
E. A debit to Cash for $387.50. - Answer-D. A credit to Cash for $387.50.
$450.00 - 62.50 - 382.50 = $5.00 cash shortage; $382.50 + 5.00 = $387.50
reimbursement and credit to cash
The following information is available on a depreciable asset owned by First Bank &
Trust:
, The asset's book value is $70,000 on October 1, Year 3. On that date, management
determines that the asset's salvage value should be $5,000 rather than the original
estimate of $10,000. Based on this information, the amount of depreciation expense the
company should recognize during the last three months of Year 3 would be:
A. $2,187.50
B. $1,718.75
C. $2,031.25
D. $2,321.43
E. $1,964.29 - Answer-C. $2,031.25
The asset's book value is $70,000 after having been depreciated for two full years. To
calculate the new rate of depreciation, subtract the revised salvage value of $5,000 from
the current book value of $70,000, yielding $65,000 of revised remaining depreciable
cost. Since that amount is to be recognized over the remaining eight years of useful life,
depreciation expense for the last quarter of Year 3 would be $2,031.25 [($65,000/8) *
3/12].
Cost of Goods Sold is debited to close the account during the closing process. -
Answer-F
Darby uses the allowance method to account for uncollectible accounts. Its year-end
unadjusted trial balance shows Accounts Receivable of $104,500, allowance for
doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are
estimated to be .5% of sales, what is the amount of the bad debts expense adjusting
entry?
A. $4,625
B. $3,960
C. $5,290
D. $4,750
E. $4,825 - Answer-A. $4,625
$925,000 * 0.005 = $4,625
A machine originally had an estimated useful life of 5 years, but after 3 complete years,
it was decided that the original estimate of useful life should have been 10 years. At that
point the remaining cost to be depreciated should be allocated over the remaining:
A. 10 years.
B. 2 years.
C. 7 years.
D. 5 years.
E. 8 years. - Answer-C. 7 years.
