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					Test 1 Summer 2005 Accounting 2301                                     Name:___________________________

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

____    1. Allowance for Doubtful Accounts has a credit balance of $800 at the end of the year (before adjustment), and an
           analysis of accounts in the customers ledger indicates doubtful accounts of $15,000. Which of the following entries
           records the proper provision for doubtful accounts?
           a. debit Uncollectible Accounts Expense, $800; credit Allowance for Doubtful Accounts,
                $800
           b. debit Uncollectible Accounts Expense, $14,200; credit Allowance for Doubtful Accounts,
                $14,200
           c. debit Allowance for Doubtful Accounts, $800; credit Uncollectible Accounts Expense,
                $800
           d. debit Allowance for Doubtful Accounts, $15,800; credit Uncollectible Accounts Expense,
                $15,800
____    2. Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before adjustment), and
           uncollectible accounts expense is estimated at 3% of net sales. If net sales are $600,000, the amount of the adjusting
           entry to record the provision for doubtful accounts is:
           a. $12,000
           b. $6,800
           c. $18,000
           d. $ 1,800
____    3. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of
           $450,000 and Allowance for Doubtful Accounts has a balance of $25,000. What is the net expected realizable value
           of the accounts receivable?
           a. $25,000
           b. $425,000
           c. $450,000
           d. $455,000
____    4. In using the allowance method of accounting for uncollectible receivables, the two ways of estimating the amount of
           uncollectibles are analysis of receivables and percentage of:
           a. payables
           b. cash sales
           c. purchases on account
           d. net sales on account
____    5. The due date of a 90-day note dated July 1 is:
           a. September 30
           b. September 28
           c. September 29
           d. October 1
____    6. A 90-day, 12% note for $10,000, dated May 1, is received from a customer on account. The maturity value of the
           note is:
           a. $10,000
           b. $10,300
           c. $450
           d. $9,550
____    7. What entry is required in the depositor's accounts to record outstanding checks?
           a. None
           b. debit Cash; credit Accounts Receivable
           c. debit Cash; credit Accounts Payable
           d. debit Accounts Receivable; credit Cash
____    8. Accompanying the bank statement was a debit memorandum for an NSF check received from a customer. This item
           would be included on the bank reconciliation as a(n):
           a. deduction from the balance per depositor's records
           b. addition to the balance per bank statement
           c. deduction from the balance per bank statement
           d. addition to the balance per depositor's records
____    9. A check drawn by a depositor in payment of a voucher for $925 was recorded in the journal as $295. What entry is
           required in the depositor's accounts?
           a. debit Accounts Payable; credit Cash
           b. debit Cash; credit Accounts Receivable
           c. debit Cash; credit Accounts Payable
           d. debit Accounts Receivable; credit Cash
____   10. The type of account and normal balance of Petty Cash is a(n):
           a. revenue, credit
           b. asset, debit
           c. liability, credit
           d. expense, debit
____   11. Merchandise inventory is classified on the balance sheet as a:
           a. Current Liability
           b. Current Asset
           c. Long-Term Asset
           d. Long-Term Liability
____   12. Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a:
           a. debit to Sales
           b. debit to Merchandise Inventory
           c. credit to Merchandise Inventory
           d. credit to Sales
____   13. In credit terms of 1/10, n/30, the "1" represents the:
           a. number of days in the discount period
           b. full amount of the invoice
           c. number of days when the entire amount is due
           d. percent of the cash discount
____   14. Under a perpetual inventory system, the costs of all sales of merchandise are credited to the account entitled:
           a. Sales Discounts
           b. Cost of Merchandise Sold
           c. Sales Returns and Allowances
           d. Merchandise Inventory
____   15. Which of the following accounts has a normal debit balance?
           a. Accounts Payable
           b. Sales Returns and Allowances
           c. Sales
           d. Interest Revenue
____ 16. A sales invoice included the following information: merchandise price, $8,000; transportation, $400; terms 2/10,
         n/eom, FOB shipping point. Assuming that a credit for merchandise returned of $800 is granted prior to payment,
         that the transportation is prepaid by the seller, and that the invoice is paid within the discount period, what is the
         amount of cash received by the seller?
         a. $7,200
         b. $7,456
         c. $7,600
         d. $7,056
____ 17. What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?
         a. gross profit
         b. income from operations
         c. net income
         d. gross sales
____ 18. The statement of owner's equity shows:
         a. only net income, beginning and ending capital
         b. only total assets, beginning and ending capital
         c. only net income, beginning capital, and withdrawals
         d. all the changes in the owner's capital as a result of net income, net loss, additional
              investments, and withdrawals
____ 19. Which of the following would be reported on the statement of owner's equity for the current year?
         a. sales
         b. withdrawals for the current year
         c. cost of merchandise sold
         d. merchandise inventory
____ 20. The difference between the totals of the debit and credit columns of the Adjusted Trial Balance columns on a work
         sheet:
         a. is the amount of net income or loss
         b. indicates there is an error on the work sheet
         c. is not unusual when preparing the work sheet
         d. is the net difference between revenue, expenses, and drawing
____ 21. Which of the following appears in the Balance Sheet columns of the work sheet?
         a. Unearned Fees
         b. Rent Expense
         c. Salaries Expense
         d. Service Revenue
____ 22. Accumulated Depreciation appears on the:
         a. balance sheet in the current assets section
         b. balance sheet in the fixed assets section
         c. balance sheet in the long-term liabilities section
         d. income statement as an operating expense
____ 23. Unearned Fees appears on the:
         a. balance sheet in the current assets section
         b. balance sheet as a current liability
         c. balance sheet in the owner's equity section
         d. income statement as revenue
____ 24. Which one of the fixed asset accounts listed below will not have a related contra asset account?
         a. Office Equipment
         b. Land
         c. Delivery Equipment
         d. Building
____ 25. The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a:
         a. fixed asset
         b. current asset
         c. contra asset
         d. current liability
____ 26. At the end of an accounting year, in what statement would a balance in the prepaid insurance account appear?
         a. balance sheet
         b. income statement
         c. statement of cash flows
         d. statement of owner's equity
____ 27. Adjusting entries:
         a. need not be journalized since they appear on the work sheet
         b. need not be posted if the financial statements are prepared from the work sheet
         c. are not needed if reversing entries are prepared
         d. must be journalized and posted
____ 28. Closing entries:
         a. need not be journalized if reversing entries are prepared
         b. need not be posted if the financial statements are prepared from the work sheet
         c. are not needed if adjusting entries are prepared
         d. must be journalized and posted
____ 29. Closing entries are dated in the journal as of:
         a. the date they are actually journalized, although they are generally prepared after the end of
             the accounting period
         b. the last day of the accounting period, although they are actually journalized after the end of
             the accounting period
         c. the first day of the accounting period, although they are actually journalized after the end of
             the accounting period
         d. the first day of the subsequent accounting period
____ 30. Which of the following accounts should be closed to Income Summary at the end of the fiscal year?
         a. Supplies Expense
         b. Accumulated Depreciation
         c. Prepaid Expenses
         d. Unearned revenues
____ 31. Which of the following accounts ordinarily appears in the post-closing trial balance?
         a. Drawing
         b. Supplies Expense
         c. Fees Earned
         d. Unearned Rent
____ 32. The following accounts were taken from the Adjusted Trial Balance columns of the work sheet:

           Accumulated Depreciation                                                              $ 3,000
           Fees Earned                                                                            20,000
           Depreciation Expense                                                                    3,500
           Insurance Expense                                                                       1,000
           Prepaid Rent                                                                            4,000
           Supplies                                                                                  500

           Net income for the period is:
           a. $15,500
           b. $ 8,000
           c. $15,000
           d. $11,000
____ 33.   The matching concept:
           a. addresses the relationship between the journal and the balance sheet
           b. determines whether the normal balance of an account is a debit or credit
           c. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance
           d. determines that expenses related to revenue be reported at the same time the revenue is
               reported
____ 34.   Accrued expenses have:
           a. not yet been incurred, paid, or recorded
           b. been incurred, not paid, but have been recorded
           c. been incurred, not paid, and not recorded
           d. been paid but have not yet been incurred
____ 35.   Accrued revenue has:
           a. been earned and cash received
           b. been earned and not recorded as revenue
           c. not been earned but recorded as revenue
           d. not been recorded as revenue but cash has been received
____ 36.   Deferred expenses have:
           a. not yet been recorded as expenses or paid
           b. been recorded as expenses and paid
           c. been incurred and paid
           d. not yet been recorded as expenses
____ 37.   Deferred revenue is revenue that is:
           a. earned and the cash has been received
           b. earned but the cash has not been received
           c. not earned and the cash has not been received
           d. not earned but the cash has been received
____ 38.   The balance in the prepaid rent account before adjustment at the end of the year is $15,000, which represents three
           months' rent paid on December 1. The adjusting entry required on December 31 is:
           a. debit Rent Expense, $5,000; credit Prepaid Rent, $5,000
           b. debit Prepaid Rent, $10,000; credit Rent Expense, $5,000
           c. debit Rent Expense, $10,000; credit Prepaid Rent, $5,000
           d. debit Prepaid Rent, $5,000; credit Rent Expense, $5,000
____ 39. At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which
         of the following statements is true?
         a. Salary Expense for the year was understated.
         b. The total of the liabilities at the end of the year was overstated.
         c. Net income for the year was understated.
         d. Owner's equity at the end of the year was understated.
____ 40. The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and
         the supplies on hand at June 30 were $2,000. The amount to be used for the appropriate adjusting entry is:
         a. $4,500
         b. $2,500
         c. $9,700
         d. $5,700
____ 41. The entry to adjust for the cost of supplies used during the accounting period is:
         a. Supplies, debit; Income Summary, credit
         b. Income Summary, debit; Supplies, credit
         c. Accounts Payable, debit; Supplies Expenses, credit
         d. Supplies Expense, debit; Supplies, credit
____ 42. What is the proper adjusting entry at June 30, the end of the fiscal year, based on a supplies account balance before
         adjustment, $4,200, and supplies inventory on June 30, $1,200?
         a. debit Supplies, $1,200; credit Supplies Expense, $1,200
         b. debit Supplies Expense, $1,200; credit Supplies, $1,200
         c. debit Supplies Expense, $3,000; credit Supplies, $3,000
         d. debit Supplies, $4,200; credit Supplies Expense, $4,200
____ 43. A business pays weekly salaries of $20,000 on Friday for a five-day week ending on that day. The adjusting entry
         necessary at the end of the fiscal period ending on Thursday is:
         a. debit Salaries Payable, $16,000; credit Cash, $16,000
         b. debit Salary Expense, $16,000; credit Drawing, $16,000
         c. debit Salary Expense, $16,000; credit Salaries Payable, $16,000
         d. debit Drawing, $16,000; credit Cash, $16,000
____ 44. The balance in the prepaid insurance account before adjustment at the end of the year is $10,000. If the additional
         data for the adjusting entry is (1) "the amount of insurance expired during the year is $8,500," as compared to
         additional data stating (2) "the amount of unexpired insurance applicable to a future period is $1,500," for the
         adjusting entry:
         a. the debit and credit amount for (1) would be the same as (2) but the accounts would be
              different
         b. the accounts for (1) would be the same as the accounts for (2) but the amounts would be
              different
         c. the accounts and amounts would be the same for both (1) and (2)
         d. there is not enough information given to determine the correct accounts and amounts
____ 45. The adjusting entry to record the depreciation of equipment for the fiscal period is:
         a. debit Depreciation Expense; credit Equipment
         b. debit Depreciation Expense; credit Accumulated Depreciation
         c. debit Accumulated Depreciation; credit Depreciation Expense
         d. debit Equipment; credit Depreciation Expense
____ 46. The net income reported on the income statement is $90,000. However, adjusting entries have not been made at the
         end of the period for supplies expense of $2,500 and accrued salaries of $3,400. Net income, as corrected, is:
         a. $84,100
         b. $96,600
         c. $90,000
         d. $97,500
____ 47. The entry to adjust the accounts for wages accrued at the end of the accounting period is:
         a. Wages Payable, debit; Wages Income, credit
         b. Wages Income, debit; Wages Payable, credit
         c. Wages Payable, debit; Wages Expense, credit
         d. Wages Expense, debit; Wages Payable, credit
____ 48. The unearned rent account has a balance of $20,000. If $5,000 of the $20,000 is unearned at the end of the
         accounting period, the amount of the adjusting entry is:
         a. $5,000
         b. $10,000
         c. $15,000
         d. $20,000
____ 49. Which of the following accounts is a liability account?
         a. Notes Payable
         b. Prepaid Insurance
         c. Capital
         d. Cash
____ 50. The gross increases in owner's equity attributable to business activities are called:
         a. assets
         b. liabilities
         c. revenues
         d. net income
____ 51. A chart of accounts is:
         a. the same as a balance sheet
         b. usually a listing of accounts in alphabetical order
         c. usually a listing of accounts in financial statement order
         d. used in place of a ledger
____ 52. The debit side of an account:
         a. depends on whether the account is an asset, liability or owner's equity
         b. can be either side of the account depending on how the accountant set up the system
         c. is the right side of the account
         d. is the left side of the account
____ 53. An account is said to have a debit balance if:
         a. the amount of the debits exceeds the amount of the credits
         b. there are more entries on the debit side than on the credit side
         c. its normal balance is debit without regard to the amounts or number of entries on the debit
             side
         d. the first entry of the accounting period was posted on the debit side
____ 54. A debit may signify a(n):
         a. decrease in asset accounts
         b. decrease in liability accounts
         c. increase in the capital account
         d. decrease in drawing account
____ 55. Which of the following types of accounts have a normal credit balance?
           a. Drawing
           b. Assets
           c. Expense
           d. Liability
____ 56.   A credit signifies a decrease in:
           a. drawing
           b. liabilities
           c. capital
           d. revenue
____ 57.   Resources owned by a business are referred to as:
           a. assets
           b. liabilities
           c. equities
           d. revenues
____ 58.   If total liabilities increased by $30,000 during a period of time and owner's equity increased by $5,000 during the
           same period, the amount and direction (increase or decrease) of the period's change in total assets is:
           a. $35,000 increase
           b. $20,000 decrease
           c. $25,000 increase
           d. $25,000 decrease
____ 59.   Earning revenue:
           a. increases assets, increases owners' equity.
           b. increases assets, decreases owner's equity
           c. increases one asset, decreases another asset
           d. decreases assets, increases liabilities
____ 60.   A vacant lot, originally purchased for $40,000, is sold for $80,000 in cash. What is the effect of the sale on the
           accounting equation?
           a. assets increase $80,000; owner's equity increases $80,000
           b. assets increase $40,000; owner's equity increases $40,000
           c. assets increase $80,000; liabilities decrease $40,000; owner's equity increases $40,000
           d. assets increase $40,000; no change for liabilities; owner's equity increases $80,000
Problem

      1. The bank statement for Corley Co. indicates a balance of $9,000.00 on June 30. After the journals for June had been
         posted, the cash account had a balance of $4,675.00. Prepare a bank reconciliation on the basis of the following
         reconciling items:

          (a)   Cash sales of $342 had been erroneously recorded in the cash receipts journal as
                $324.
          (b)   Deposits in transit not recorded by bank, $500.00.
          (c)   Bank debit memorandum for service charges, $25.00.
          (d)   Bank credit memorandum for note collected by bank, $1,850, including $50 interest.
          (e)   Bank debit memorandum for $218.00 NSF (not sufficient funds) check from Alice
                Martin, a customer.
          (f)   Checks outstanding, $3,200.00.
2.The balances for the accounts listed below appeared in the Adjusted Trial Balance columns of the work sheet. Indicate whether
            each balance should be extended to (a) the Income Statement columns or (b) the Balance Sheet columns.

            (1)     Salaries Payable ____                  (7)      L. Wang, Drawing ____
            (2)     Fees Earned ____                       (8)      Equipment ____
            (3)     Accounts Payable ____                  (9)      Accounts Receivable ____
            (4)     L. Wang, Capital ____                  (10)     Accumulated Depreciation ____
            (5)     Supplies Expense ____                  (11)     Salary Expense ____
            (6)     Unearned Rent ____                     (12)     Depreciation Expense ____
3.The total assets and total liabilities of Missy's Draperies, a proprietorship, at the beginning and at the end of the current fiscal
             year are as follows:

                                                                       January 1             December 31
            Total assets                                               $250,000                $430,000
            Total liabilities                                           200,000                 140,000

            (a)    Determine the amount of net income earned during the year. The owner did not
                   invest any additional assets in the business during the year and made no withdrawals.
            (b)    Determine the amount of net income during the year. The assets and liabilities at the
                   beginning and at the end of the year are unchanged from the amounts presented
                   above. However, the owner withdrew $32,000 in cash during the year (no additional
                   investments).
            (c)    Determine the amount of net income earned during the year. The assets and
                   liabilities at the beginning and at the end of the year are unchanged from the amounts
                   presented above. However, the owner invested an additional $40,000 in cash in the
                   business in June of the current fiscal year (no withdrawals).
            (d)    Determine the amount of net income earned during the year. The assets and
                   liabilities at the beginning and at the end of the year are unchanged from the amounts
                   presented above. However, the owner invested an additional $10,000 in cash in
                   August of the current fiscal year and made twelve monthly cash withdrawals of
                   $3,000 each during the year.
Test 1 Summer 2005 Accounting 2301
Answer Section

MULTIPLE CHOICE

      1.   B
      2.   C
      3.   B
      4.   D
      5.   C
      6.   B
      7.   A
      8.   A
      9.   A
     10.   B
     11.   B
     12.   C
     13.   D
     14.   D
     15.   B
     16.   B
     17.   A
     18.   D
     19.   B
     20.   B
     21.   A
     22.   B
     23.   B
     24.   B
     25.   B
     26.   A
     27.   D
     28.   D
     29.   B
     30.   A
     31.   D
     32.   A
     33.   D
     34.   C
     35.   B
     36.   D
     37.   D
     38.   A
     39.   A
     40.   D
     41.   D
   42.   C
   43.   C
   44.   C
   45.   B
   46.   A
   47.   D
   48.   C
   49.   A
   50.   C
   51.   C
   52.   D
   53.   A
   54.   B
   55.   D
   56.   A
   57.   A
   58.   A
   59.   A
   60.   B


PROBLEM

   61.
                                                   Corley Co.
                                              Bank Reconciliation
                                                 June 30, 20--

         Cash balance according to bank statement                                $9,000.00
         Add deposits in transit not recorded by bank                               500.00
                                                                                 $9,500.00
         Deduct outstanding checks                                                3,200.00
         Adjusted balance                                                        $6,300.00
                                                                                 =========
         Cash balance according to depositor's records                           $4,675.00
         Add: Note collected by bank, including
                $50 interest                                        $1,850.00
              Error in recording cash sales of
                $342 as $324                                            18.00     1,868.00
                                                                                 $6,543.00
         Deduct: NSF check from Alice Martin                        $   218.00
                 Bank service charges                                    25.00      243.00
         Adjusted balance                                                        $6,300.00
                                                                                 =========
   62.
         (a)   Income statement: 2, 5, 11, 12
         (b)   Balance sheet: 1, 3, 4, 6, 7, 8, 9, 10
   63.
         (a)    Owner's equity at end of year                                     $290,000
                Owner's equity at beginning of year                                 50,000
      Net income                             $240,000
                                             ========
(b)   Increase in owner's equity as in (a    $240,000
      Add withdrawals                          32,000
      Net income                             $272,000
                                             ========
(c)   Increase in owner's equity as in (a)   $240,000
      Deduct additional investment             40,000
      Net income                             $200,000
                                             ========
(d)   Increase in owner's equity as in (a)   $240,000
      Add withdrawals                          36,000
                                             $276,000
      Deduct additional investment             10,000
      Net income                             $266,000
                                             ========

				
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