practice exam

Question 1

A total of $3,600 in supplies was purchased during the month. At the end of the month $860 of the supplies were left. The adjusting entry needed at the end of the month is:

Answer 1

debit Supplies Expense $2,740 and credit Supplies $2,740.

Question 2

Falcone Company bought equipment on January 3, 20X1, for $34,300. At the time of purchase, the equipment was estimated to have a useful life of 4 years and a salvage value of $1,180. Using the straight-line method, the amount of one year’s depreciation is

Answer 2

$8,280

($34,300 − $1,180)/4 years = $8,280 per year

Question 3

On September 1, 20X1, Carpet Kings purchased a one-year insurance policy for $960. The correct adjusting entry on December 31, 20X1, is:

Answer 3

debit Insurance Expense $320 and credit Prepaid Insurance $320.

Question 4

Equipment cost $57,600 and is expected to be useful for 6 years and have no salvage value. Under the straight-line method, monthly depreciation will be:

Answer 4

$800.

($57,600 − $0)/72 months = $800 depreciation expense per month

Question 5

If long-term assets are not depreciated, expenses on the income statement:

Answer 5

will be understated.

Question 6

On October 25, 20X1, the company paid $31,200 rent in advance for the six-month period November 20X1 through April 20X2. On December 31, 20X1, the adjustment for expired rent would include:

Answer 6

an $10,400 debit to Rent Expense.

Question 7

The Ending Capital balance would appear on all of the following except the:

a) balance sheet.

b) income statement.

c) post-closing trial balance.

d) statement of owner’s equity.

Answer 7

b) income statement.

Question 8

The entry to replenish a petty cash fund typically includes:

Answer 8

debits to various asset and expense accounts and a credit to Cash.

Question 9

A firm’s bank reconciliation statement shows a book balance of $15,880, an NSF check of $430, and a service charge of $23. Its adjusted book balance is:

Answer 9

$15,427.

$15,880 book balance − $430 NSF check − $23 service charge = $15,427 adjusted book balance

Question 10

During the month a company paid $45.75 for office supplies and $54.22 for miscellaneous expenses from the petty cash fund. The entry to replenish the petty cash fund at the end of the month would include:

Answer 10

a credit to Cash for $99.97.

$45.75 office supplies + $54.22 miscellaneous expenses = $99.97 credit to Cash

Question 11

Which of the following is not an essential cash payment internal control?

a) Enter promptly in the accounting records all cash payment transactions.

b) Issue checks only with an approved bill, invoice, or other document that describes the reason for the payment.

c) Have checks prepared and recorded in the checkbook or check register by the same person who approves the payments.

d) Have only designated personnel, who are experienced and reliable, approve bills and invoices.

Answer 11

c) Have checks prepared and recorded in the checkbook or check register by the same person who approves the payments.

Question 12

The beginning capital balance shown on a statement of owner’s equity is $46,000. Net loss for the period is $14,000 and the owner withdrew $18,000 cash from the business and made no additional investments during the period. The owner’s capital balance at the end of the period is:

Answer 12

$14,000.

$46,000 beginning capital balance − $14,000 net loss − $18,000 owner withdrawal = $14,000 ending capital balance

Question 13

A company reported gross profit of $90,000, total operating expenses of $48,000 and interest expense of $3,500. What is the net income from operations?

Answer 13

$42,000

$90,000 gross profit − $48,000 operating expenses = $42,000 net income from operations

Question 14

For the current fiscal year, Purchases were $260,000, Purchases Returns and Allowances were $4,100 and Freight In was $20,000. If the beginning merchandise inventory was $165,000 and the ending merchandise inventory was $86,000, the Cost of Goods Sold is:

Answer 14

$354,900.

$165,000 beginning merchandise inventory + $260,000 purchases + $20,000 freight in − $4,100 purchases returns and allowances − $86,000 ending merchandise inventory = $354,900 cost of goods sold

Question 15

At the end of the year Corner Five and Ten had the following balances: Sales $710,000; Sales Discounts $2,660; Sales Returns and Allowances $15,800; Sales Salaries Expense $77,000. The Net Sales for the year are:

Answer 15

$691,540.

$710,000 sales − $2,660 sales discounts − $15,800 sales returns and allowances = $691,540 net sales

Question 16

A classified income statement showed net sales of $465,000, cost of goods sold of $194,000, and total operating expenses of $171,000 for the fiscal year ended June 30, 20X1.

1. What was the gross profit on sales?
2. What was the net income from operations?

Answer 16

1. $271,000

$465,000 net sales − $194,000 cost of goods sold = $271,000 gross profit on sales

2. $100,000

$271,000 gross profit on sales − $171,000 total operating expenses = $100,000 net income from operations