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Accounting: Multiple choice questions.

See attached file for clarity.

1. All of the following are true regarding journal entries except:
A. Journal entries show the effects of transactions.
B. Journal entries provide account balances.
C. The debited account titles are listed first.
D. Each journal entry should begin with a date.

2. Marvin's Art Inc. purchases paints, canvases and art supplies from Magic Art Co. for sale to consumers. What type of company is Marvin's Art Inc.?
A. Service
B. Wholesaler
C. Retail merchandiser
D. Manufacturer

3. A company purchased $2,000 of merchandise on November 2 with terms 2/10, n130. On November 8, it returned $500 worth of merchandise. On November 10, it paid the invoice. The amount paid on November 10 equals.
A. $1,470.
B. $1,960.
C. $2,000.
D.$1,500.

4. Sales returns refer to:
A. Merchandise that customers return to the seller after the sale.
B. Reductions in the selling price of merchandise sold to customers.
C. Cash discounts taken by customers.
D. Merchandise inventory that is marked down.

5. Which of the following accounts is not increased with a debit?
A. Sales Discounts.
B. Sales Returns and Allowances.
C. Sales Revenue.
D. Cost of goods sold

7. A _________is a list of individual accounts, usually in financial statement order, prepared as a check on the accounting system.
A. Trial balance
B.General ledger
C. Balance sheet
D. Financial statement

8. Which of the following is not true regarding the use of special journals?
A. Special journals are used to record repetitive, frequent transactions.
B. The use of the General Journal is eliminated by the use of special journals.
C. The Purchases Journal is used to record purchases or expenses on account.
D. The Revenue Journal is used only for recording revenues earned on account.

9. FOB destination means that title to goods purchases is transferred when the:
A. Goods leave the seller's shipping department.
B. Seller sends the invoice.
C. Goods reach the buyers place of business.
D. Buyer records the receipt of inventory.

10. Transactions involving customer payments are often recorded in a:
A. General Journal.
B. Cash Receipts Journal.
C. T-account.
D. Revenue Journal.

57. A debit to Sales Returns and Allowances and a credit to Accounts Receivable:
A. Is recorded when a customer pays within the discount period.
B. Recognizes that a customer returned merchandise or received an allowance.
C. Reflects an increase in the amount due from a customer.
D. Reflects a direct decrease in total sales revenue.

58. Mandy's Ice Cream Shoppe purchased $500 worth of supplies on account from ICEE Inc. In which special journal should this transaction be recorded?
A. Revenue Journal
B. Purchases Journal
C. Cash receipts Journal
D. Cash payments Journal

59. Expenses are:
A. Incurred only when cash is paid.
B. Costs incurred to generate revenues.
C. Increases to owner's equity.
D. Recorded as credits in journal entries.

60. The term "FOB Shipping Point" means
A. The buyer records transportation expense.
B. The seller pays the shipping cost.
C. The buyer pays the shipping cost.
D. The buyer does not assume ownership until the goods are received.

66. The unadjusted trial balance contains which type of accounts?
A. Income statement accounts
B. Balance sheet accounts
C. Both income statement and balance sheet accounts.
D. The final balances for all accounts.

67. The amount recorded in merchandise inventory includes all of the following except:
A. Purchase discounts
B. Freight costs paid by the buyer. C. Freight costs paid by the seller.
D. Purchase returns and allowances.

68. Terms for the left and right side of an account are known as:
A. Increase/Decrease.
B. Debit/Credit.
C. Up/Down.
D. Positive/Negative.

Use the following account numbers and corresponding account titles to answer the next two questions.
Account
No. Account Title
(1) Cash
(2) Inventory
(3) Cost of goods sold
(4) Transportation-
(5) out
(6) Dividends
(7) Common stock
(8) Selling expense

70. Which accounts would appear on the income statement?
A. Account numbers 3, 4, and 7.
B. Account numbers 2, 4, and 5.
C. Account numbers 1, 3, and 7.
D. Account numbers 2, 5, and 7.

71. Which accounts would appear on the balance sheet?
A. Account numbers 2, 4, and 5.
B. Account numbers 1, 3, and 7.
C. Account numbers 1, 2, and 6.
D. Account numbers 3, 4, and 7.
Account No.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)

Account Title Cash
Service Revenue Accounts Receivable Salaries Expense Dividends
Common Stock Salaries Payable Retained Earnings

Service Revenue Accounts Receivable Salaries Expense Dividends
Common Stock Salaries Payable Retained Earnings

73. Select the true statement (note: an answer may be true even if it does not identify all accounts that appear on a articular statement).
Account numbers 1, 3, and 7 will appear on the balance sheet.
B. Account numbers 2, 4, and 5 will appear on the income statement.
C. Account numbers 2, 5, and 8 will appear on the statement of cash flows.
D. Account numbers 4, 5, and 6 will appear on the statement of changes in equity.

74. Select the true statement (note: an answer may be true even if it does not identify all accounts that have debit balances).
Account numbers 2, 4, and 5 normally have debit balances. B Account numbers 1, 3, and 5 normally have debit balances.
C. Account numbers 2, 5, and 8 normally have debit balances.
D. Account numbers 4, 5, and 6 normally have debit balances.

Assume the perpetual inventory method is used.
1) The company purchased $10,000 of merchandise on account under terms 2/10, n/30.
2) The company returned $1,200 of merchandise to the supplier before payment was made
3) The liability was paid within the discount period.
4) All of the merchandise purchased was sold for $13,000 cash.

75. The amount of gross margin from the four transactions is:
A. $4,376.
B. $4,258.40.
C. $8.,800.
D. $8,624.

SECTION B
1. Below are listed several transactions that a business may enter into.
Provide services to customers on account
Purchase land by paying cash
Purchase a fire insurance policy that will provide coverage for a two-year period Acquire cash by issuing common stock
Recognize expense for amount of office supplies that had been used during the period Receive payment from a customer for services that will be provided over the next six months

Required:

a) In the table below, indicate the accounts that would be debited and credited for each of the preceding transactions.

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Solution Summary

The question set illustrate different issues in accounting: Gross margin calculation, preparation of the income statement and balance sheet, different accounting terms etc.

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