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Principles of Accounting: 10 questions

Can someone help with these review questions.

1.Technology:

A. Has replaced accounting.
B. Has not changed the work that accountants do.
C. Has closely linked accounting with consulting, planning, and other financial services.
D. In accounting has replaced the need for decision makers.
E. In accounting is only available to large corporations.

2. Which of the following statements is correct?

A. When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense.
B. Promises of future payment are called accounts receivable.
C. Increases and decreases in cash are always recorded in the owner's capital account.
D. An account called Land is commonly used to record increases and decreases in both the land and buildings owned by a business.
E. Accrued liabilities include accounts receivable.

3. According to generally accepted accounting principles, a company's balance sheet should show the company's assets at:

A. The cash equivalent value of what was given up.
B. The current market value of the asset received in all cases.
C. The cash paid only, even if something other than cash was given in the exchange.
D. The best estimate of a certified internal auditor.
E. The objective value to external users.

4. On April 30, Holden Company had an Accounts Receivable balance of $18,000. During the month of May, total credits to Accounts Receivable were $52,000 from customer payments. The May 31 Accounts Receivable balance was $13,000. What was the amount of credit sales during May?

A. $ 5,000.
B. $47,000.
C. $52,000.
D. $57,000.
E. $32,000

5. At the beginning of January of the current year, Thomas Law Center's ledger reflected a normal balance of $52,000 for accounts receivable. During January, the company collected $14,800 from customers on account and provided additional services to customers on account totaling $12,500. Additionally, during January one customer paid Thomas $5,000 for services to be provided in the future. At the end of January, the balance in the accounts receivable account should be:

A. $54,700.
B. $49,700.
C. $2,300.
D. $54,300.
E. $49,300.

6. A liability created by the receipt of cash from customers in payment for products or services that have not yet been delivered to the customers is:

A. Recorded as a debit to an unearned revenue account.
B. Recorded as a debit to a prepaid expense account.
C. Recorded as a credit to an unearned revenue account.
D. Recorded as a credit to a prepaid expense account.
E. Not recorded in the accounting records until the earnings process is complete.

7. Accounting professionals must sometimes choose between two or more acceptable methods of accounting for business transactions and events. Explain why these situations can involve difficult matters of ethical concern.

8. The manager of a small restaurant requires that the cashier immediately enter each cash sale when the customer brings the check to the register. Recently, the lunch hour traffic has increased and the assistant manager asked the cashier to avoid delays by taking the customer's cash and making the change without entering the sales. The assistant manager says he will add up the cash and enter the sales after the lunch rush. He also said that doing it this way, the cash will always match the sales and it will be balanced when the manager arrives later. a. Explain if there is a problem with the instructions the assistant manager gave to the cashier. If so, defend your answer. b. If you were the cashier, what would you do?

9. It is obvious that an error occurred in the preparation and/or posting of closing entries if:

A. all revenue and expense accounts have zero balances.
B. the owner's capital account is debited for the amount of the net loss for the period.
C. the income summary account is debited for the amount of net income for the period.
D. all balance sheet accounts have zero balances.
E. only permanent accounts appear on the post-closing trial balance.

10.The J. Godfrey, Capital account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800, and withdrawals are $9,000, what is the ending balance in the J. Godfrey, Capital account after all closing entries are made?

A. $ 8,000.
B. $15,400.
C. $23,400.
D. $17,000.
E. $32,400.

Solution Preview

1 C although I re-read B as it could be correct if it said 'has changed the processes but not the results needed. C is better.

2 B. Accounts receivable do represent rights to future payments. All the other answers are totally backwards.

3 A. Assets are always recorded at historical cost which equals the amount given up to get the asset. There can be some valuation issues after the fact, but the initial purchase or exchange is cost.

4 D. X = 18000 + 52000 - 13000

5 B. X = 52000 - 14800 + 12500. The customer who paid in advance would be recorded as a debit to cash and a credit to unearned revenue. It is a deposit to be earned later, and has no accounts receivable component at all.

6 C. An unearned revenue account is a liability until the sale is completed. The reason it remains a liability is that if the ...

Solution Summary

The 567 word solution is a thoughtful response to each question which includes the answer, the calculations for the answer and explanations about the answer. Questions 7 and 8 about ethics and fraud required longer responses than the other questions.

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