Accounting ACC 1800 1500 Final Exam | MCQ, Solutions, Journal & Inentory entries | 100% CORRECT

ACC 1800 1500 Final Exam | MCQ, Solutions, Journal & Inentory entries | 100% CORRECT 1) Under the specific-identification method, the physical flow of goods through the business will: A) have no relationship to the f ...

ACC 1800 1500 Final Exam | MCQ, Solutions, Journal & Inentory entries | 100% CORRECT 1) Under the specific-identification method, the physical flow of goods through the business will: A) have no relationship to the flow of costs through the accounting records. B) closely match the flow of costs through the accounting records. C)exactly match the flow of costs through the accounting records. D) does not apply to this scenario 2) Goods such as milk, bread, and cheese need to be sold quickly due to potential spoilage. Therefore, they would probably be costed using the: A) any method as the physical flow and the cost flow are different. B) FIFO method of inventory costing. C) average cost method of inventory costing. D) LIFO method of inventory costing. 3) Equipment sold is shown on the: A) Balance Sheet as an asset. B) Income Statement before gross profit. C) Statement of Retained Earnings. D) Income Statement after gross profit. 4) A change from one costing method of inventory to another inventory costing method from one year to the next could be viewed as a violation of which accounting concept or principle? A) Conservatism C) Materiality B) Entity D) Consistency 5) One lot of merchandise was counted at $122.87. A second count of the same merchandise showed $122.00. The difference could be ignored due to: A) Materiality. C) Conservatism. B) consistency. D) it should not be ignored. 6) Which concept or principle of accounting do footnotes support? A) Entity C) materiality B) Full disclosure D) conservatism 7) Beginning inventory + Net purchases = A) Cost of goods sold. B) Cost of goods available for sale. C) Gross profit. D) Ending inventory. 8) Cost of Goods Sold is often one of the largest: A) expenses on the Income Statement. B) long-term assets on the Balance Sheet. C) current assets on the Balance Sheet. D) part of general selling expenses. 9) For accounting information to be useful it must be all of the following EXCEPT: A) Reliable. C) Relevant B) understandable. D) economical 10) What agency writes U.S. GAAP? A) IRS. C) FASB. B) SEC. D) IASB. 11) What procedure is used to ensure financial reports abide to GAAP principles? A) An examination. C) A review. B) An audit. D) A confirmation. 12) Which of the following would NOT be considered part of the cost of a new long-term asset? A) Repairs and maintenance after start-up B) Packaging for delivery C) Repairs and maintenance after the asset is in operation D) Transportation and insurance costs to get the asset to the purchaser 13) What is the best method for depreciating items a vehicle? A) Straight-line method. B) single-declining balance method. C) units-of-production method. D) double-declining method. 14) Which of the following statements is correct regarding adjustments? a) Adjustments are optional b) All adjustments are made at the beginning of the accounting period c) Adjustments will correctly allocate cash to revenue or expenses d) Adjustments update assets, liabilities and owner's equity 15) Crediting income statement balances is part of the closing entry to: a) close revenue accounts for the year b) transfer revenue balances to cash c) close expense accounts for the year d) close the drawings account for the year 16) After posting the closing entries, a company must prepare a[n]: a) posting trial balance b) post-closing trial balance c) unadjusted trial balance d) adjusted trial balance 17) Which of the following is not an example of an operating expense? a) Cost of Goods Sold b) Insurance Expense c) Rent Expense d) Salaries Expense 18) The two systems of measuring inventory are: a) periodic and episodic b) perpetual and periodic c) C FIFO and Weighted average d) C control account and sub-ledger 19) Mary operates a wholesale business that distributes canned food. She receives a complaint from a customer and accepts $500 worth of product back from the customer that was billed on account. The cost of the product is $300. Which of the following entries is correct? a) Dr. Sales Returns and Allowances $500, Cr. A/R $500 b) Dr. Sales Returns and Allowances $500, Cr. A/R $500 and Dr. Inventory $300, Cr. COGS $300 c) Dr. A/R $500, Cr. Sales Returns and Allowances $500 d) Dr. A/R $500, Cr. Sales Returns and Allowances $500 and Dr. Inventory $300, Cr. COGS $300 20) As a result of inventory shrinkage: a) equity decreases b) there is no change to equity c) equity increases d) equity may or may not decrease depending on the inventory valuation method used 21) Which of the following statements about gross and/or net income is true? a) Net income is usually larger than gross profit b) Net income is the difference between sales and cost of goods sold c) Gross profit is the difference between sales and cost of goods sold d) Gross profit and net income can be found on the balance sheet 22) Which of the following methods for valuing inventory would most likely be used for high value items such as cars and houses? a) Specific Identification b) FIFO c) None of the options d) Weighted Average 23) Unearned revenue is classified as: a) revenue b) a liability c) an expense d) an asset 23) Accrued revenues will always increase a receivable account and decrease a revenue account. a) TRUE b) FALSE 24) Adjusted trial balance is the next accounting process after adjustments are made a) TRUE b) FALSE 25) Long-term assets are those that are likely to be converted into cash or used within the next 12 months through the day-to-day operation of the business. a) TRUE b) FALSE 26) Current liabilities are amounts due to be paid within the next 12 months. a) TRUE b) FALSE 27) Senior management and accountants are responsible to ensure controls are in place to accurate track the value of inventory from the point of purchase to the point of sale. a) TRUE b) FALSE 28) Perpetual inventory system only updates the inventory and COGS values after physically counting the items on hand. a) TRUE b) FALSE 29) Sales returns occur when undesirable products are returned to the buyer. a) TRUE b) FALSE 30) All revenue accounts are closed to the income summary account. a) TRUE b) FALSE 31) The income summary account is closed to the owner's capital account. a) TRUE b) FALSE 32) An overstatement of ending inventory results in an understatement of COGS and an understatement of net income. a) TRUE b) FALSE 33) A lower inventory days on hand means that inventory is less likely to become obsolete because it is sold in fewer days. a) TRUE b) FALSE   PROBLEM 2 - (5 point each = 40 points) Identify the section of the balance sheet in which the following accounts would be located: CA - Current Assets LTA - Long-Term Assets CL - Current Liabilities LTL - Long-Term Liabilities CL Salaries Payable CA Accounts Receivable LTA Accumulated Depreciation CA Cash LTA Equipment LTL Warranty Payable LTL Note Payable (due in 2 years) CL Interest Payable   Part III Journal Entries Elisa Doon is the owner of Island Services. The following transactions need to be recorded for her business. Island Services Elisa Doon Aug 1 Prepaid $4,200 of insurance for one year. $4,200 Aug 2 Prepaid $2,700 of rent for three months. $2,700 Aug 3 Received a maintenance bill for $900 which will be paid next month. $900 Aug 4 Received $3,090 cash for services provided. $3,090 Aug 7 Took out a loan from the bank for $5,000. $5,000 Aug 10 Paid telephone expenses for the month with $170 cash. $170 Aug 12 Paid $860 cash to reduce the balance of accounts payable. $860 Aug 31 Paid $20 of interest on the bank loan. $20 Aug 31 Adjusted prepaid insurance for one month for $350. $350 Aug 31 Depreciated equipment for $150. $150 Aug 31 Adjusted prepaid rent for one month for $900. $900 Required Journalize the transactions for Island Services. Date Account Title and Explanation Debit Credit August 01 Prepaid Insurance 4200 Cash 4200 02 Prepaid Rent 2700 Cash 2700 03 Maintenance Expense 900 Bill Payable 900 04 Cash 3090 Services revenue 3090 07 Cash 5000 Bank Loan 5000 10 Telephone Expense 170 Cash 170 Date Account Title and Explanation Debit Credit 12 Accounts payable 860 Cash 860 31 Interest Expense 20 Cash 20 31 Insurance Expense 350 Prepaid Insurance 350 31 Depreciation Expense 150 Accumulated Depreciation 150 31 Rent Expense 900 Prepaid Rent 900 Part IV Perpetual Inventory Entries The following information was presented by the bookkeeper for NorthWave Communications for the month of December 2016. Dec 8 Purchased $202,000 of inventory on account from Beta Wholesalers, terms 2/10, net 30 202000 Dec 10 A portion of the inventory purchased from Beta Wholesalers was defective. NorthWave returned $800 worth of inventory to the supplier. 800 Dec 12 Sold $93,900 of products to SouthShore on account, terms 2/10, net 30; cost of goods sold was $37,560 for this transaction. 93900 Dec 14 SouthShore returned $1,878 of goods purchased on account. The cost of goods sold for the returned inventory is $1,127. 1878 Dec 17 Purchased goods from EastCoast Trading Communications on account for $18,300 with terms of 3/10, net 30. 18300 Dec 18 Some of the inventory purchased from EastCoast Trading Communications was slightly damaged. NorthWave decided to keep the inventory, but will receive a $160 allowance. 160 Dec 19 Sold $48,200 of products to West Island on account, terms 2/10, net 30; cost of goods sold was $19,280 for this transaction. 48200 Dec 20 West Island discovered some scratches on some of the products they purchased on Dec 19. They will keep the product and NorthWave will offer a $240 allowance. 240 Dec 21 Paid the amount owing to Beta Wholesalers. Remember to account for the return. Dec 23 Received payment from SouthShore. Remember to account for the return. Dec 24 Received payment from West Island. Remember to account for the allowance and discount. Dec 25 Paid the amount owing to EastCoast Trading Communications Remember to account for the allowance and discount. Dec 31 A count of inventory shows that $550 is missing. Make a journal entry to record the inventory shrinkage. 550 Prepare the journal entries to record the above transactions. Assume the company uses the perpetual inventory system. Date Account Title and Explanation Debit Credit Dec 08 Inventory 202,000 Accounts Payables (Beta Wholesaler) 202,000 10 Accounts Payables (Beta Wholesaler) 900 Inventory 900 12 Accounts Receivables (South Shore) 93,900 Sales 93,900 Cost of Goods Sold 37,560 Inventory 37,560 14 Sales Return and Allowances 1,878 Accounts Receivables (South Shore) 1,878 Inventory 1,127 Cost of Goods Sold 1,127 17 Inventory 18,300 Accounts payable (East Coast) 18,300 18 Accounts payable (East Coast) 160 Discount and Allowances 160 19 Accounts Receivables (West Island) 48,200 Sales 48,200 20 Discount and Allowances 240 Accounts Receivables (West Island) 240 21 Accounts payable (Beta Wholesaler) (202,000-900) 201,100 Cash 201.100 23 Cash 90,181 Discount and Allowances Accounts Receivables (South Shore) 92,021 Date Account Title and Explanation Debit Credit 24 Cash 47,001 Discount and Allowances 959 Accounts Receivables (West Island) 47,960 25 Accounts payable (East Coast) 18,140 Discount and Allowances 544 Cash 17,596 31 Shrinkage Expense Account 550 Inventory 550