1.

The personal assets of the owner of a company will not appear on the company's balance sheet because of which
principle/guideline?
a. Cost             b. Economic Entity             c. Monetary Unit

 2. Which principle/guideline requires a company's balance sheet to report its land at the amount the company paid to
acquire the land, even if the land could be sold today at a significantly higher amount?
a. Cost             b. Economic Entity             c. Monetary Unit

 3. Which principle/guideline allows a company to ignore the change in the purchasing power of the dollar over time?
a.Cost             b. Economic Entity             c. Monetary Unit

4. Which principle/guideline requires the company's financial statements to have footnotes containing information that
is important to users of the financial statements?
a.Conservatism             b. Economic Entity             c. Full Disclosure

 5. Which principle/guideline justifies a company violating an accounting principle because the amounts are
immaterial?
a. Conservatism             b. Full Disclosure             c. Materiality

 6. Which principle/guideline is associated with the assumption that the company will continue on long enough to carry
out its objectives and commitments?
a.Economic Entity              b. Going Concern             c. Time Period

 7. A very large corporation's financial statements have the dollar amounts rounded to the nearest $1,000. Which
accounting principle/guideline justifies not reporting the amounts to the penny?
a. Full Disclosure              b. Materiality             c. Monetary Unit

 8. Accountants might recognize losses but not gains in certain situations. For example, the company might write-down
the cost of inventory, but will not write-up the cost of inventory. Which principle/guideline is associated with this
action?
a. Conservatism              b. Materiality             c. Monetary Unit

 9. Which principle/guideline directs a company to show all the expenses related to its revenues of a specified period
even if the expenses were not paid in that period?
a. Cost             b. Matching             c. Monetary Unit

10. When the accountant has to choose between two acceptable alternatives, the accountant should select the alternative
that will report less profit, less asset amount, or a greater liability amount. This is based upon which
principle/guideline?
a. Conservatism             b. Cost              c, Materiality

11. Public utilities' balance sheets list the plant assets before the current assets. This is acceptable under which
accounting principle/guideline?
a. Conservatism              b. Cost              c. Industry Practices

12. A large company purchases a $250 digital camera and expenses it immediately instead of recording it as an asset
and depreciating it over its useful life. This practice may be acceptable because of which principle/guideline?
a. Cost              b. Matching              c. Materiality

13. A corporation pays its annual property tax bill of approximately $12,000 in one payment each December 28. During
the year, the corporation's monthly income statements report Property Tax Expense of $1,000. This is an example of
which accounting principle/guideline?
a. Conservatism             b. Matching             c. Monetary Unit

14. A company sold merchandise of $8,000 to a customer in December. The company's sales terms require the
customer to pay the company in 30 days. The company's income statement reported the sale in December. This is
proper under which accounting principle/guideline?
a. Full Disclosure              b. Monetary Unit              c. Revenue Recognition

15. Accrual accounting is based on this principle/guideline.

a. Cost              b. Full Disclosure              c. Matching

16. The creative chief executive of a corporation who is personally responsible for numerous inventions and
innovations is not reported as an asset on the corporation's balance sheet. The accounting principle/guideline that
 prevents the corporation for reporting this person as an asset is
a. Conservatism              b. Cost             c. Going Concern

17. An asset with a cost of $120,000 is depreciated over its useful life of 10 years rather than expensing the entire
amount when it is purchased. This complies with which principle/guideline?
a. Cost              b. Full Disclosure              c. Matching

18. Near the end of the current year, a company required a customer to pay $200,000 as a deposit for work that is to
begin in the following year. At the end of the current year the company reported the $200,000 as a liability on its
balance sheet. Which accounting principle/guideline prevented the company from reporting the $200,000 on its
income statement for the current year?
a. Going Concern             b. Materiality              c. Revenue Recognition

19. A retailer wishes to report its merchandise inventory on its balance sheet at its retail value. This would violate
which accounting principle/guideline?
a. Cost              b. Full Disclosure              c. Monetary Unit

20. A company borrowed $100,000 in December and will make its only payment for interest when the note comes due
six months later. The total interest for the six months will be $3,600. On the December income statement the
accountant reported Interest Expense of $600. This action was the result of which accounting principle/guideline?
a. Cost             b. Matching              c. Revenue Recognition
 21. The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the
a. balance sheet              b. income statement            c.  statement of cash flows

 22. The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the
a. balance sheet             b. income statement              c. statement of cash flows

 23. Another name for the balance sheet is

a. Statement of Operations            b.  Statement of Financial Position

 24. The balance sheet heading will specify a

a. Period of time              b. Point in time

 25. Which of the following is a category or element of the balance sheet?

a. Expenses             b. Gains              c. Liabilities            d.  Losses

 26. Which of the following is an asset account?

a. Accounts Payable             b. Prepaid Insurance             c. Unearned Revenue

 27. Which of the following is a contra account?

a. Accumulated Depreciation             b. Mary Smith, Capital

28. Client Jay pays ABC Co. $1,000 in December for ABC to perform services for Jay in 45 days. ABC uses the
accrual basis of accounting. In December ABC will debit Cash for $1,000. What will be the other account involved
in the December accounting entry prepared by ABC (and what type of account is it)?
             a. Accounts Receivable (asset)           c.   Prepaid Services (asset)
             b. Service Revenues (revenue)           d. Unearned Revenues (liability)

29. ABC Co. performed services for Client Kay in December and billed Kay $4,000 with terms of net 30 days. ABC
follows the accrual basis of accounting. In January ABC received the $4,000 from Kay. In January ABC will debit
Cash, since cash was received. What account should ABC credit in the January entry?
a. Accounts Receivable             b. Service Revenue             c. Owner's Equity

30. ABC Co. follows the accrual basis of accounting and performs a service on account (on credit) in December. The
service was billed at the agreed upon amount of $3,500. ABC Co. debited Accounts Receivable for $3,500 and
credited Service Revenue for $3,500. The effect of this entry on the balance sheet of ABC is to increase assets by
$3,500 and to
a. Decrease assets by $3,500              b. Increase owner's (stockholders') equity by $3,500

31. Which of the following would not be a current asset?

a. Accounts Receivable             b. Land            c.  Prepaid Insurance            d.  Supplies

32. Which of the following would normally be a current liability?

 a.Note Payable due in two years            b.  Unearned Revenue

33. When an owner draws $5,000 from a sole proprietorship or when a corporation declares and pays a $5,000
dividend, the asset Cash decreases by $5,000. What is the other effect on the balance sheet?
a.Owner's/stockholders' equity decreases              b. None

34. ABC Co. incurs cleanup expense of $500 on December 30. The supplier's invoice states that the $500 is due by
January 10 and ABC will pay the invoice on January 9. ABC follows the accrual basis of accounting and its
accounting year ends on December 31. What is the effect of the cleanup service on the December balance sheet of
ABC?
a. Assets decreased             b. Liabilities increased             c. No effect on owner's equity

35. Deferred credits will appear on the balance sheet with the
a. Assets             b. Liabilities            c.  Owner's/Stockholders' Equity

36. Notes Payable could not appear as a line on the balance sheet in which classification?
a. Current Assets              b. Current Liabilities             c. Long-term Liabilities

37. On December 1, ABC Co. hired Juanita Perez to begin working on January 2 at a monthly salary of $4,000. ABC's
balance sheet of December 31 will show a liability of
a. $4,000             b. $48,000            c.  No Liability

38. ABC Co. has current assets of $50,000 and total assets of $150,000. ABC has current liabilities of $30,000 and total
liabilities of $80,000. What is the amount of ABC's owner's equity?
a. $20,000            b.  $30,000            c.  $70,000           d.   $120,000
39. A company purchases equipment for $30,000 on July 1, 2012. It estimates that the equipment will have a salvage
value of $2,000 and its useful life will be 7 years. Assuming that the company's accounting year ends on December
31 of each year, what will be the Depreciation Expense for the years 2012 and 2013 assuming straight-line
depreciation?
(a) Year 2012:  $__________             
(b) Year 2013:  $__________

40. On January 1, 2008 an asset was acquired for $30,000. Its useful life was expected to be 10 years and the salvage
value is expected to be $0. After four years of use, the company realized the asset would be useful for only three
more years. (In other words, the total useful life of the asset will be seven years instead of the original 10 years.)
The company uses the straight-line method of depreciation. What will be the Depreciation Expense in each of the
years 2012, 2013, and 2014?

41. A company recorded its check #2754 in its accounting records as $98. However, check #2754 was actually written
for $89 and it cleared the bank as $89. What adjustment is needed to the Cash balance per books?
a. Decrease by $9             b. Increase by $9             c. None needed

42. A company recorded its August 15 receipts on its books as $165. However, the receipts were actually $156. The
deposit slip for the bank was prepared correctly as $156. What adjustment is needed to the Cash balance per books?
a. Decrease by $9            b.   Increase by $9            c.  None needed

43. On June 1, $800 of goods are sold with credit terms of 1/10, n/30. How much should the seller expect to receive if
the buyer pays on June 8?
a. $720             b. $784            c.  $792           d.   $800

 44. On June 1, $800 of goods are sold with credit terms of 1/10, n/30. On June 3 the customer returned $100 of the
goods. How much should the seller expect to receive if the buyer pays on June 8?
a. $692             b. $693           c.    $700             d. $792

45. With credit terms of 2/10, n/30, the annual interest rate for paying in 10 days instead of 30 days is closest to
a. 2%             b. 24%             c. 30%             d. 36%

 46. When the terms of a sale are FOB ________________, ownership of goods will transfer to the customer at the
customer's dock.

 47. The seller is responsible for the costs of shipping its goods to the buyer when the terms of the sale are FOB
 a. Destination             b. Shipping Point

 48. The buyer is responsible for the costs of shipping when goods are sold with the terms FOB
a. Destination             b. Shipping Point

 49. When the Allowance for Doubtful Accounts appears on a company's financial statements, its balance will be a
__________ balance.
a. debit              b. credit

 50. On which financial statement would you expect to find Allowance for Doubtful Accounts?
a. balance sheet             b. income statement

51. Which method of reporting losses on accounts receivable is required in the U.S. for income tax purposes?
a. allowance             b. direct write-off

52. Which method of reporting losses on accounts receivable is to be used for financial reporting?
a. allowance             b. direct write-off

53. The seller of goods that is offering credit terms of net 30 days will likely be one of its customer's _____________
creditors until it receives payment.
a. secured              b. unsecured

54. After several years of operations, a company's Bad Debts Expense for a given year is likely to be the same as its
balance in Allowance for Doubtful Accounts.
a. True             b. False

55. A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for
Doubtful Accounts presently has a credit balance of $8,000. The adjusting entry will include a
___________________ to the Allowance for Doubtful Accounts.
      a. debit of $12,000      c. credit of $12,000
      b. debit of $28,000    d.   credit of $28,000

A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for
56. Doubtful Accounts presently has a credit balance of $18,000. The adjusting entry will include a
____________________ to Bad Debts Expense.
      a. debit of $2,000       c. credit of $2,000
      b. debit of $38,000      d. credit of $38,000

57. A company estimates that $20,000 of its $500,000 of accounts receivable will be uncollectible. Its Allowance for
Doubtful Accounts presently has a debit balance of $3,000. The adjusting entry will include a
_____________________ to Allowance for Doubtful Accounts.
      a. debit of $3,000       d. credit of $3,000
      b. debit of $17,000       e. credit of $17,000
      c. debit of $23,000      f. credit of $23,000

Use the following information for questions 17-21:

A company is expecting thousands of credit sales transactions each week with terms of net 30 days. The company uses
the allowance method and it prepares weekly financial statements. It believes that 0.001 of its credit sales will be
uncollectible. The company's credit sales for its first week of operations are $500,000. The credit sales for its second
week are $600,000.

58. The company's bad debts expense for its first week of operations will be $__________.

59. The balance in Allowance for Doubtful Accounts at the end of the first week will likely be $____________.

60. The company's bad debts expense for its second week of operations will be $___________.

61. The amount of accounts receivable that you expect will be written off by the end of the company's second week of
operations is $___________.

62. The balance in Allowance for Doubtful Accounts at the end of the second week of operations will likely be
$_____________.

Use the following information for questions 22-25:

A company's Allowance for Doubtful Accounts has a credit balance of $25,000. It learns that one of its accounts
receivable amounting to $1,800 is worthless and needs to be written off.

63. Which account should be debited for $1,800 when writing off the account?
      a. Allowance for Doubtful Accounts       b. Accounts Receivable     c.  Bad Debts Expense

64. Which account should be credited for $1,800 when writing off the account?
      a. Allowance for Doubtful Accounts      b. Accounts Receivable      c. Bad Debts Expense

65. Assuming that after the account is written off, the supplier receives full payment from the customer. Which account
will not be involved in the accounting entries made at the time when the payment is received?
      a. Allowance for Doubtful Accounts      b. Accounts Receivable      c. Bad Debts Expense

66. Under the direct write off method, which account is debited when a company writes off one of its accounts
receivable?
      a. Allowance for Doubtful Accounts      b. Accounts Receivable      c. Bad Debts Expense

67. Sorting a company's accounts receivable into classifications such as current, 1-30 days past due, and 31-60 days
past due is known as the ___________ of accounts receivables.

68. The receivable turnover ratio is computed by dividing the net credit __________ for the year by the average amount
of accounts receivable during the year.

69. The days' sales in accounts receivable is calculated by dividing ________ days by the receivables turnover ratio
during the year.

70. A company's accounts receivable minus its allowance for doubtful accounts equals the net ________________
value of the accounts receivable.

71. In some industries, companies often sell their accounts receivable to a firm known as a ______________.

 72. The inventory cost flow assumption where the cost of the most recent purchase is matched first against sales
revenues is
a. FIFO             b. LIFO              c. Average

 73. The inventory cost flow assumption where the cost of the most recent purchases are likely to remain in inventory
a. FIFO             b. LIFO             c. Average

 74. The inventory cost flow assumption where the oldest cost of inventory items is likely to remain on the balance
sheet is
a. FIFO             b. LIFO            c.   Average

 75. The account Inventory will appear on the balance sheet as a current asset at an amount that often reflects the
__________ of the merchandise on hand.
a. cost             b. sales value

 76. The inventory system that does NOT update the Inventory account automatically at the time of each purchase or
sales is the _______________ method/system.
a. periodic             b. perpetual

 77. If a company is experiencing continuous cost increases for the merchandise that it purchases, which cost flow
assumption will result in the least amount of profit and the least amount of income tax expense?
a. FIFO            b,   LIFO             c. Average

 78. A company in the computer industry is experiencing continuously lower costs. Which cost flow assumption will
result in less income tax expense for this company?
a. FIFO              b. LIFO              c. Average

 79. A company purchased items for inventory during 2011 at continuously higher costs. Its last two purchases of 2011
were 20 units on December 20 at a cost of $14 per unit and 30 units on December 30 at a cost of $15 per unit. On
December 28, 2011 the company made its last sale for the year when it sold 10 units. Which inventory cost flow
assumption will cause the $15 cost per unit to be expensed as part of the year 2011's cost of goods sold?
 a. LIFO periodic             b. LIFO perpetual            c.   Neither

Use the following information for questions 9 through 14:

A company purchased merchandise to be resold at increasing costs during the year 2011. The purchases
were made at the following costs...
January 1, 2011 (carried over from 2010) 20 units at $10
January 25, 2011 purchase 40 units at $11
June 20, 2011 purchase 40 units at $12
October 10, 2011 purchase 50 units at $13
The company sold 10 items at the end of each month.

 80. What are the number of units and the cost of the goods available for sale?
_____ units     $________ cost of goods available for sale

81. Assuming the LIFO periodic cost flow assumption, what will be the company's cost of goods sold for the 120
items sold in 2011?
a. $1,380             b. $1,386            c.   $1,400            d.  $1,460

82. Assuming the FIFO periodic cost flow assumption, what will be the company's cost of goods sold for the 120
items sold in 2011?
a. $1,380             b. $1,386             c. $1,410             d. $1,460

83. Assuming the periodic weighted-average cost flow assumption, what is the company's cost of goods sold for the
120 items sold in 2011?
a. $1,386            b.   $1,410            c.  $1,416            d.   $1,460

84. Assuming the LIFO perpetual cost flow assumption, what will be the company's cost of goods sold for the 120
items sold in 2011?
a. $1,386              b. $1,410            c.   $1,416            d.  $1,460

85. Assuming the perpetual moving-average cost flow assumption, what is the company's cost of goods sold for the
120 items sold in 2011?
a. $1,386             b. $1,410             c. $1,416            d.  $1,460

86. A company's inventory was destroyed in a fire on January 28, 2012. The company's December 31, 2011 inventory
had a cost of $40,000. The company's gross profit has consistently been 30% of sales. During January the company
purchased merchandise costing $36,000 and sales of $50,000 at regular selling prices. What is the estimated cost of
the inventory that was destroyed on January 28, 2012?
a. $26,000            b.  $35,000            c.   $41,000

87. A retailer has the following information:

December 31, 2011 ending inventory at cost $ 15,000
December 31, 2011 ending inventory at retail 21,000
January 2012 purchases at cost 12,000
January 2012 purchases at retail selling prices 15,000
January 2012 sales at regular retail prices 16,000
The estimated cost of inventory to be shown on the retailer's January 31, 2012 balance sheet is
a. $15,000             b. $16,000             c. $20,000

88. A company has properly recorded all of its purchases of merchandise inventory, but made an error when counting
its ending inventory. As a result of the error the company's Inventory account is overstated by $24,000. (This means
that the amount in the Inventory account is too high by $24,000.) What is the impact of this error on the company's
income statement? Specifically, the company's reported profit (ignoring income tax expense) in the period of the
error is....
a. Too High            b.  Too Low             c. Not Affected

89. Net Purchases is Gross Purchases minus Purchase Returns and Allowances and __________  ___________.

90. The difference between the Cost of Goods Available and the Cost of Goods Sold is __________  ___________.