ACCT 217 Midterm Exam Review Package 2
PART 1 – MULTIPLE CHOICE
1. A company sold product to its customer for $1,000 on April 1 with terms 2/10 net 30. On April 8 payment
from the customer was received. Which journal entry would be recorded on April 8?
a) Debit cash $1,000 and credit accounts receivable $1,000
b) Debit cash $980 and credit accounts receivable $980
c) Debit cash $980, debit sales discounts $20 and credit sales $1,000
d) Debit cash $980, debit sales discounts $20 and credit accounts receivable $1,000
e) None of the above
2. In 20X8, the Dunder-Mifflin paper company has recorded opening inventory of $225,000, closing inventory of
$175,000 and cost of goods sold of $1,100,000. How much inventory did the company purchase during the
year?
a) $1,100,000
b) $1,150,000
c) $1,050,000
d) $175,000
e) $1,500,000
3. ABC Wholesaler uses the perpetual inventory method and sold 1,000 widgets to a major client on account.
The widgets sell for $3.75, which they buy from the manufacturer for $2.50 each. The appropriate journal
entry would be:
a) Cash 3,750
Sales 3,750
b) Accounts receivable 3,750
Cost of goods sold 2,500
Sales 3,750
Inventory 2,500
c) Accounts receivable 2,500
Sales 2,500
d) Account receivable 3,750
Unearned revenue 3,750
e) None of the above
4. At the end of last year, inventory was understated by $2,000 and this error was not corrected at that time.
During the current year, inventory costing $5,000 was counted twice at the end of the year. Based on the
above:
a) Ending inventory for the current year end is overstated by $5,000, while cost of goods sold for the
current year is understated by $7,000
b) Ending inventory for the current year end is overstated by $5,000, while cost of goods sold for the
current year is understated by $5,000
c) Ending inventory for the current year end is overstated by $5,000, while cost of goods sold for the
current year is understated by $3,000
d) Ending inventory for the current year end is overstated by $5,000, while cost of goods sold for the
1
, current year is overstated by $3,000
e) None of the above
5. At the beginning of the month, a company had 1 item in inventory at a cost of $1. During the month, the next
unit was purchased at $2 while the third unit was purchased at $3. Just prior to the purchase of the $3 unit,
the company sold one of the units. Based on the above information, cost of goods sold and ending inventory
using the periodic average method would be:
a) $2.00 and $3.00
b) $3.00 and $3.00
c) $1.00 and $5.00
d) $2.00 and $4.00
e) None of the above
6. At the beginning of the month, a company had 1 item in inventory at a cost of $1. During the month, the next
unit was purchased at $2 while the third unit was purchased at $3. Just prior to the purchase of the $3 unit,
the company sold one of the units. Based on the above information, cost of goods sold and ending inventory
using the perpetual average method would be:
a) $1.50 and $4.50
b) $2.00 and $4.00
c) $2.50 and $3.50
d) $1.00 and $5.00
e) None of the above
7. At the beginning of the month, a company had 1 item in inventory at a cost of $1. During the month, the next
unit was purchased at $2 while the third unit was purchased at $3. Just prior to the purchase of the $3 unit,
the company sold one of the units. Based on the above information, cost of goods sold and ending inventory
using the perpetual FIFO method would be:
a) $2.00 and $3.00
b) $3.00 and $3.00
c) $1.00 and $5.00
d) $2.00 and $4.00
e) None of the above
8. Bonding of employees and ensuring that all employees take vacations is an example of:
a) Segregation of duties
b) Documentation
c) Independent checks of performance
d) Human resources controls
e) None of the above
9. Which of the following items would be NOT be added to the bank balance when preparing a bank
reconciliation?
a) Deposits in transit
b) Outstanding cheques
c) NSF cheques that were received by the company
d) Bank service charges
e) None of the above
10. Before preparing a bank reconciliation it was determined that the bank balance at that time was $400. It was
also determined that outstanding cheques were $50, deposits in transit were $30, unrecorded bank services
were $10 and NSF cheques received from customers were $15. Based on the preceding, the adjusted bank
balance on the reconciliation should be:
2
, a) $350
b) $430
c) $380
d) $370
e) None of the above
11. Before preparing a bank reconciliation it was determined that the book balance before any adjustments at that
time was $405. It was also determined that outstanding cheques were $50, deposits in transit were $30,
unrecorded bank services were $10 and NSF cheques received from customers were $15. Based on the
preceding, the adjusted book balance on the reconciliation should be:
a) $350
b) $430
c) $380
d) $370
e) None of the above
12. At the end of last month, a company had outstanding cheques of $200 and deposits in transit of $80. At the
beginning of the month, the bank statement showed a balance of $1,000. During the current month, the
company issued cheques amounting to $5,000 and the bank statement showed that cheques amounting to
$4,800 were cleared through the bank account. Also during the current month, the company recorded deposits
amounting to $6,000 but the bank statement indicates deposits made of $5,800. There are no errors on the
bank statement or the company’s books. At the end of the current month, the adjusted bank and book balance
would be:
a) $880
b) $1,880
c) $2,000
d) $1,680
e) None of the above
13. Which of the following is not a method to control accounts receivable?
a) Require the approval of the customer’s credit history from someone who is not in the sales department
b) Track the age of accounts receivable and remind customers of overdue payments
c) Allow one accounting personnel to control both cash collection and record receivables
d) All of the above
e) None of the above
14. When preparing a bank reconciliation, which of the following items would be subtracted from the book
balance?
a) Deposits in transit
b) NSF cheques that were received by the company
c) Bank service charges
d) b and c
e) All of the above
15. Mark Jacobs is experiencing plumbing issues after a disastrous flood. He contacts XYZ Plumbing for help
and XYZ estimates the cost of the damage to be $20,000. Before XYZ Plumbing provides their service, they
require a deposit of 10%. When this deposit is received, which of the following entries would XYZ Plumbing
record?
a) Credit to Sales Revenue for $20,000
b) Debit to Deposit Expense for $2,000
c) Credit to Unearned Revenue for $2,000
d) Credit to Sales Revenue for $2,000
e) Debit to Unearned Revenue for $20,000
3
PART 1 – MULTIPLE CHOICE
1. A company sold product to its customer for $1,000 on April 1 with terms 2/10 net 30. On April 8 payment
from the customer was received. Which journal entry would be recorded on April 8?
a) Debit cash $1,000 and credit accounts receivable $1,000
b) Debit cash $980 and credit accounts receivable $980
c) Debit cash $980, debit sales discounts $20 and credit sales $1,000
d) Debit cash $980, debit sales discounts $20 and credit accounts receivable $1,000
e) None of the above
2. In 20X8, the Dunder-Mifflin paper company has recorded opening inventory of $225,000, closing inventory of
$175,000 and cost of goods sold of $1,100,000. How much inventory did the company purchase during the
year?
a) $1,100,000
b) $1,150,000
c) $1,050,000
d) $175,000
e) $1,500,000
3. ABC Wholesaler uses the perpetual inventory method and sold 1,000 widgets to a major client on account.
The widgets sell for $3.75, which they buy from the manufacturer for $2.50 each. The appropriate journal
entry would be:
a) Cash 3,750
Sales 3,750
b) Accounts receivable 3,750
Cost of goods sold 2,500
Sales 3,750
Inventory 2,500
c) Accounts receivable 2,500
Sales 2,500
d) Account receivable 3,750
Unearned revenue 3,750
e) None of the above
4. At the end of last year, inventory was understated by $2,000 and this error was not corrected at that time.
During the current year, inventory costing $5,000 was counted twice at the end of the year. Based on the
above:
a) Ending inventory for the current year end is overstated by $5,000, while cost of goods sold for the
current year is understated by $7,000
b) Ending inventory for the current year end is overstated by $5,000, while cost of goods sold for the
current year is understated by $5,000
c) Ending inventory for the current year end is overstated by $5,000, while cost of goods sold for the
current year is understated by $3,000
d) Ending inventory for the current year end is overstated by $5,000, while cost of goods sold for the
1
, current year is overstated by $3,000
e) None of the above
5. At the beginning of the month, a company had 1 item in inventory at a cost of $1. During the month, the next
unit was purchased at $2 while the third unit was purchased at $3. Just prior to the purchase of the $3 unit,
the company sold one of the units. Based on the above information, cost of goods sold and ending inventory
using the periodic average method would be:
a) $2.00 and $3.00
b) $3.00 and $3.00
c) $1.00 and $5.00
d) $2.00 and $4.00
e) None of the above
6. At the beginning of the month, a company had 1 item in inventory at a cost of $1. During the month, the next
unit was purchased at $2 while the third unit was purchased at $3. Just prior to the purchase of the $3 unit,
the company sold one of the units. Based on the above information, cost of goods sold and ending inventory
using the perpetual average method would be:
a) $1.50 and $4.50
b) $2.00 and $4.00
c) $2.50 and $3.50
d) $1.00 and $5.00
e) None of the above
7. At the beginning of the month, a company had 1 item in inventory at a cost of $1. During the month, the next
unit was purchased at $2 while the third unit was purchased at $3. Just prior to the purchase of the $3 unit,
the company sold one of the units. Based on the above information, cost of goods sold and ending inventory
using the perpetual FIFO method would be:
a) $2.00 and $3.00
b) $3.00 and $3.00
c) $1.00 and $5.00
d) $2.00 and $4.00
e) None of the above
8. Bonding of employees and ensuring that all employees take vacations is an example of:
a) Segregation of duties
b) Documentation
c) Independent checks of performance
d) Human resources controls
e) None of the above
9. Which of the following items would be NOT be added to the bank balance when preparing a bank
reconciliation?
a) Deposits in transit
b) Outstanding cheques
c) NSF cheques that were received by the company
d) Bank service charges
e) None of the above
10. Before preparing a bank reconciliation it was determined that the bank balance at that time was $400. It was
also determined that outstanding cheques were $50, deposits in transit were $30, unrecorded bank services
were $10 and NSF cheques received from customers were $15. Based on the preceding, the adjusted bank
balance on the reconciliation should be:
2
, a) $350
b) $430
c) $380
d) $370
e) None of the above
11. Before preparing a bank reconciliation it was determined that the book balance before any adjustments at that
time was $405. It was also determined that outstanding cheques were $50, deposits in transit were $30,
unrecorded bank services were $10 and NSF cheques received from customers were $15. Based on the
preceding, the adjusted book balance on the reconciliation should be:
a) $350
b) $430
c) $380
d) $370
e) None of the above
12. At the end of last month, a company had outstanding cheques of $200 and deposits in transit of $80. At the
beginning of the month, the bank statement showed a balance of $1,000. During the current month, the
company issued cheques amounting to $5,000 and the bank statement showed that cheques amounting to
$4,800 were cleared through the bank account. Also during the current month, the company recorded deposits
amounting to $6,000 but the bank statement indicates deposits made of $5,800. There are no errors on the
bank statement or the company’s books. At the end of the current month, the adjusted bank and book balance
would be:
a) $880
b) $1,880
c) $2,000
d) $1,680
e) None of the above
13. Which of the following is not a method to control accounts receivable?
a) Require the approval of the customer’s credit history from someone who is not in the sales department
b) Track the age of accounts receivable and remind customers of overdue payments
c) Allow one accounting personnel to control both cash collection and record receivables
d) All of the above
e) None of the above
14. When preparing a bank reconciliation, which of the following items would be subtracted from the book
balance?
a) Deposits in transit
b) NSF cheques that were received by the company
c) Bank service charges
d) b and c
e) All of the above
15. Mark Jacobs is experiencing plumbing issues after a disastrous flood. He contacts XYZ Plumbing for help
and XYZ estimates the cost of the damage to be $20,000. Before XYZ Plumbing provides their service, they
require a deposit of 10%. When this deposit is received, which of the following entries would XYZ Plumbing
record?
a) Credit to Sales Revenue for $20,000
b) Debit to Deposit Expense for $2,000
c) Credit to Unearned Revenue for $2,000
d) Credit to Sales Revenue for $2,000
e) Debit to Unearned Revenue for $20,000
3
