ACCT 207 FINAL EXAM QUESTIONS AND ACCURATE
ANSWERS
Linkin Park has a $7,800 liability to Motorhead. When Linkin Park makes a partial
payment of $2,800 on this liability, which of the following is true about the journal entry
made by Linkin to record this transaction?
a) Retained Earnings is credited for $2,800
b) Accounts Payable is credited for $5,000
c) Cash is debited for $2,800
d) Accounts payable is debited for $2,800 - Answers - d) Accounts payable is debited
for $2,800
Supplies is a (an):
a) Current Asset
b) Expense
c) Revenue
d) Liability - Answers - a) Current Asset
You issued 1,000 shares of Common Stock for $100,000. The entry includes a:
a) Credit to Common Stock
b) Debit to Common Stock
c) Credit to Cash
d) None of the above - Answers - a) Credit to Common Stock
You paid your car insurance six months in advance, paying $4,800 on October 1, 2014.
The adjusting entry on 12/31/2014 for October through December should include a:
a) Debit to Insurance Expense of $1,200
b) Debit to Insurance Expense of $2,400
c) Credit to Prepaid Insurance of $4,800
d) Debit to Prepaid Insurance of $2,400 - Answers - b) Debit to Insurance Expense of
$2,400
5. The payroll for the last four work days of 2014 has neither been recorded nor paid. It
is $4,000. Your adjusting entry at 12/31/14 should include a:
a) Credit to Cash of $5,000
b) Debit to Salaries Expense of $5,000 c) Debit to Salaries Payable of $4,000
d) Debit to Salaries Expense of $4,000 - Answers - d) Debit to Salaries Expense of
$4,000
,6. You borrow $10,000 on October 1, 2014. The interest and principal are not due until
7/31/18, but interest costs of $500 have been incurred as of 12/31/14. The adjusting
entry should include a:
a) Debit to Interest Expense of $500
b) Credit to Cash of $500
c) Debit to Interest Revenue of $500
d) Credit to Interest Revenue of $500 - Answers - a) Debit to Interest Expense of $500
7. Given the following information, find net income:
Accounts Receivable $98,000
*Income Tax Expense 69,000
Retained Earnings 252,000
*Sales Revenue 495,000
*Advertising Expense 15,000
Unearned Revenue 176,000
Accounts Payable 50,000
*Supplies Expense 46,000
*Utilities Expense 3,000
*Cost of Goods Sold 5,000
Net Income is:
a) $357,000
b) $347,000
c) $360,000
d) $342,000 - Answers - a) $357,000
8. Dave Matthews had the following transactions:
1/1/14 Purchased 200 hair dryers from Hootie for $10 each
1/5/14 Sold 40 of the above hair dryers for $40 each
Using the perpetual method, the entry from January 5 to record the removal of the
inventory from the store would include:
a) Credit to Cost of Goods Sold for $400
b) Debit to Cost of Goods Sold for $400 c) Debit to Inventory for $400
d) Credit to Sales for $400 - Answers - b) Debit to Cost of Goods Sold for $400
9. Kid Rock purchased $5,000 of inventory on account but decided to return it all. Using
the perpetual method to record the return, Kid Rock would:
a) Debit Inventory
b) Credit Inventory
c) Credit Purchase Discount
d) Credit Purchase Allowance - Answers - b) Credit Inventory
, 10. Chicago Pizza reports Net Sales of $1,000,000. Gross Profit of $550,000, and Net
Income of $80,000. Chicago's Cost of Goods Sold is:
a) $370,000
b) $450,000
c) $920,000
d) $630,000 - Answers - b) $450,000
1. Which of the following statements is NOT true regarding the Sarbanes-Oxley Act
("SOX") of 2002?
a. The Act calls for increased oversight responsibilities for boards of directors. b. The
Act has resulted in increased penalties for financial fraud by top management.
c. The Act calls for decreased independence of outside auditors reviewing corporate
financial statements.
d. The Act is meant to decrease the likelihood of unethical corporate behavior. -
Answers - c. The Act calls for decreased independence of outside auditors reviewing
corporate financial statements.
2. The liability created by a business when it purchases yellow highlighters and
paperclips on credit from suppliers is termed a(n)
a. Accounts Payable
b. Accounts Receivable
c. Supplies
d. Unearned Revenue - Answers - a. Accounts Payable
3. Autumn Candy Company recorded the following cash transactions for the year:
Paid $180,000 for salaries
Paid $80,000 to purchase office equipment
Paid $20,000 for utilities
Paid $8,000 in dividends
Collected $300,000 from customers
What was Autumn Candy's net cash provided by operating activities?
a. $100,000
b. $20,000
c. $120,000
d. $92,000 - Answers - a. $100,000
4. Which of the following is TRUE?
a. Amounts received from issuing stock are revenues.
b. Amounts paid out as dividends are not expenses.
c. Amounts paid out as dividends are reported on the Income Statement
ANSWERS
Linkin Park has a $7,800 liability to Motorhead. When Linkin Park makes a partial
payment of $2,800 on this liability, which of the following is true about the journal entry
made by Linkin to record this transaction?
a) Retained Earnings is credited for $2,800
b) Accounts Payable is credited for $5,000
c) Cash is debited for $2,800
d) Accounts payable is debited for $2,800 - Answers - d) Accounts payable is debited
for $2,800
Supplies is a (an):
a) Current Asset
b) Expense
c) Revenue
d) Liability - Answers - a) Current Asset
You issued 1,000 shares of Common Stock for $100,000. The entry includes a:
a) Credit to Common Stock
b) Debit to Common Stock
c) Credit to Cash
d) None of the above - Answers - a) Credit to Common Stock
You paid your car insurance six months in advance, paying $4,800 on October 1, 2014.
The adjusting entry on 12/31/2014 for October through December should include a:
a) Debit to Insurance Expense of $1,200
b) Debit to Insurance Expense of $2,400
c) Credit to Prepaid Insurance of $4,800
d) Debit to Prepaid Insurance of $2,400 - Answers - b) Debit to Insurance Expense of
$2,400
5. The payroll for the last four work days of 2014 has neither been recorded nor paid. It
is $4,000. Your adjusting entry at 12/31/14 should include a:
a) Credit to Cash of $5,000
b) Debit to Salaries Expense of $5,000 c) Debit to Salaries Payable of $4,000
d) Debit to Salaries Expense of $4,000 - Answers - d) Debit to Salaries Expense of
$4,000
,6. You borrow $10,000 on October 1, 2014. The interest and principal are not due until
7/31/18, but interest costs of $500 have been incurred as of 12/31/14. The adjusting
entry should include a:
a) Debit to Interest Expense of $500
b) Credit to Cash of $500
c) Debit to Interest Revenue of $500
d) Credit to Interest Revenue of $500 - Answers - a) Debit to Interest Expense of $500
7. Given the following information, find net income:
Accounts Receivable $98,000
*Income Tax Expense 69,000
Retained Earnings 252,000
*Sales Revenue 495,000
*Advertising Expense 15,000
Unearned Revenue 176,000
Accounts Payable 50,000
*Supplies Expense 46,000
*Utilities Expense 3,000
*Cost of Goods Sold 5,000
Net Income is:
a) $357,000
b) $347,000
c) $360,000
d) $342,000 - Answers - a) $357,000
8. Dave Matthews had the following transactions:
1/1/14 Purchased 200 hair dryers from Hootie for $10 each
1/5/14 Sold 40 of the above hair dryers for $40 each
Using the perpetual method, the entry from January 5 to record the removal of the
inventory from the store would include:
a) Credit to Cost of Goods Sold for $400
b) Debit to Cost of Goods Sold for $400 c) Debit to Inventory for $400
d) Credit to Sales for $400 - Answers - b) Debit to Cost of Goods Sold for $400
9. Kid Rock purchased $5,000 of inventory on account but decided to return it all. Using
the perpetual method to record the return, Kid Rock would:
a) Debit Inventory
b) Credit Inventory
c) Credit Purchase Discount
d) Credit Purchase Allowance - Answers - b) Credit Inventory
, 10. Chicago Pizza reports Net Sales of $1,000,000. Gross Profit of $550,000, and Net
Income of $80,000. Chicago's Cost of Goods Sold is:
a) $370,000
b) $450,000
c) $920,000
d) $630,000 - Answers - b) $450,000
1. Which of the following statements is NOT true regarding the Sarbanes-Oxley Act
("SOX") of 2002?
a. The Act calls for increased oversight responsibilities for boards of directors. b. The
Act has resulted in increased penalties for financial fraud by top management.
c. The Act calls for decreased independence of outside auditors reviewing corporate
financial statements.
d. The Act is meant to decrease the likelihood of unethical corporate behavior. -
Answers - c. The Act calls for decreased independence of outside auditors reviewing
corporate financial statements.
2. The liability created by a business when it purchases yellow highlighters and
paperclips on credit from suppliers is termed a(n)
a. Accounts Payable
b. Accounts Receivable
c. Supplies
d. Unearned Revenue - Answers - a. Accounts Payable
3. Autumn Candy Company recorded the following cash transactions for the year:
Paid $180,000 for salaries
Paid $80,000 to purchase office equipment
Paid $20,000 for utilities
Paid $8,000 in dividends
Collected $300,000 from customers
What was Autumn Candy's net cash provided by operating activities?
a. $100,000
b. $20,000
c. $120,000
d. $92,000 - Answers - a. $100,000
4. Which of the following is TRUE?
a. Amounts received from issuing stock are revenues.
b. Amounts paid out as dividends are not expenses.
c. Amounts paid out as dividends are reported on the Income Statement
