Accounting Exam 3 Review

31 Questions | Total Attempts: 115

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Accounting Quizzes & Trivia

Questions and Answers
  • 1. 
    If a company issues common stock for $40,000 and uses $30,000 of the cash to purchase a truck, 
    • A. 

      Assets will be increased by $10,000

    • B. 

      Equity will be reduced by $40,000

    • C. 

      Assets will be increased by $40,000

    • D. 

      Assets will be unchanged

  • 2. 
    West county bank agrees to lend drake builders company $200,000 on january 1. drake builders company signs a $200,000, 6% 6 month note. What entry will Drake Builders Company make to pay off the note and interest at maturity assuming that interest has been accrued to june 30?
    • A. 

      Notes payable........................................206,000 -----cash...................................................................206,000

    • B. 

      Notes payable................................................200,000 interest payable.............................................6,000 -----cash..........................................................................206,000

    • C. 

      Interest expense............................................6,000 notes payable................................................200,000 -----cash................................................................................206,000

    • D. 

      Interest payable......................................3,000 notes payable.........................................200,000 interest expense.....................................3,000 -----cash.................................................................206,000

  • 3. 
    The Allowance for Doubtful Accounts is a liability account
    • A. 

      True

    • B. 

      False

  • 4. 
    Under the allowance method, Bad Debt Expense is debited when an account is deemed uncollectible and must be written off
    • A. 

      True

    • B. 

      False

  • 5. 
    When an account recievable that was previously written off is collected, it is first necessary to reverse the entry to reinstate the customers
    • A. 

      True

    • B. 

      False

  • 6. 
    The normal balance of sales returns and allowances is a credit
    • A. 

      True

    • B. 

      False

  • 7. 
    The normal balance of cost of good sold is a credit
    • A. 

      True

    • B. 

      False

  • 8. 
    The normal balance of inventory is a credit
    • A. 

      True

    • B. 

      False

  • 9. 
    The normal balance of accounts payable is a credit
    • A. 

      True

    • B. 

      False

  • 10. 
    Recording depreciation on plant assets affects the balance sheet and the income statement
    • A. 

      True

    • B. 

      False

  • 11. 
    When a business sells an item and collects a state sales tax on it, a current liability arises
    • A. 

      True

    • B. 

      False

  • 12. 
    The acquisition of treasury stock by a corporation increases total assets and total stockholders' equity
    • A. 

      True

    • B. 

      False

  • 13. 
    The issuance of common stock affects both paid-in capital and retained earnings
    • A. 

      True

    • B. 

      False

  • 14. 
    When an asset us sold, a gain occurs when the
    • A. 

      Sale price exceeds the book value of the asset sold

    • B. 

      Sale price exceeds the original cost of the asset sold

    • C. 

      Book value exceeds the sale price of the asset sold

    • D. 

      Sale price exceeds the depreciable cost of the asset sold

  • 15. 
    Plant assets are ordinarily presented in the balance sheet 
    • A. 

      At current market values

    • B. 

      At replacement cost

    • C. 

      At cost less accumulated depreciation

    • D. 

      In separate section along with intangible assets

  • 16. 
    Interest is usually associated with
    • A. 

      Accounts receivable

    • B. 

      Notes receivable

    • C. 

      Doubtful accounts

    • D. 

      Bad debts

  • 17. 
    When an account becomes uncollectible and must be written of
    • A. 

      Allowance for doubtful accounts should be credited

    • B. 

      Accounts receivable should be credited

    • C. 

      Bad debt expense should be credited

    • D. 

      Sales revenue should be debited

  • 18. 
    A company using a perpetual inventory system that returns goods previously purchased on credit would
    • A. 

      Debit accounts payable and credit inventory

    • B. 

      Debit sales and credit accounts payable

    • C. 

      Debit cash and credit accounts payable

    • D. 

      Debit accounts payable and credit purchases

  • 19. 
    The journal entry to record a credit sale ignoring cost of good sold is
    • A. 

      Cash .........Sales Revenue

    • B. 

      Cash .........Service Revenue

    • C. 

      Accounts Receivable ...........Sales Returns and Allowances

    • D. 

      Accounts Receivable ............Sales Revenue

  • 20. 
    The entry to record the return of goods from a customer would include a 
    • A. 

      Debit to Sales Revenue

    • B. 

      Credit to Sales Revenue

    • C. 

      Debit to Sales Returns and Allowances

    • D. 

      Credit to Sales Returns and Allowances

  • 21. 
    Which sales accounts normal have a debit balance?
    • A. 

      Sales Revenue

    • B. 

      Sales Returns and Allowances

  • 22. 
    Erin Corporation purchases $500 of merchandise on credit. Using the periodic inventory approach, Erin would record this transaction as:
    • A. 

      DR. Inventory......500------------------CR. Accounts Payable......500

    • B. 

      DR. Accounts Payable.......500-----------------CR. Purchases.......500

    • C. 

      DR. Purchases.......500--------------------CR. Accounts Payable.......500

    • D. 

      DR. Accounts Payable.......500---------------------CR. Inventory.........500

  • 23. 
    Crowder Corporation recorded the return of $200 of goods originally sold on credit to Discount Industries. Using the periodic inventory approach, Crowder would record this transaction as:
    • A. 

      Inventory.....200------------------Accounts Receivable....200

    • B. 

      Sales Returns and Allowances....200------------Accounts Receivable.....200

    • C. 

      Accounts Payable....200-------------Sales Returns and Allowances......200

    • D. 

      Accounts Receivable....200-----------Sales Returns and Allowances....200

  • 24. 
    Turner Corporation returned $150 of goods originally purchased on credit from Morgan Industries. Using the period Inventory approach, Turner would record this transaction as:
    • A. 

      Inventory....150 ----------Accounts Payable.....150

    • B. 

      Accounts Payable.....150 ------------Inventory.....150

    • C. 

      Purchase Returns and Allowances.....150 ---------Accounts Payable.....150

    • D. 

      Accounts Payable.....150 ------------Purchase Returns and Allowances....150

  • 25. 
    As interest is recorded on an interest-bearing note, the Interest Expense account is
    • A. 

      Increase; the Notes Payable account is increased

    • B. 

      Increased; the Note Payable account is decreased

    • C. 

      Increased; the Interest Payable account is increased

    • D. 

      Decreased; the Interest Payable account is increased

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