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Multiple Choice

I have attached the problems.

1. The basic accounting equation may be expressed as:
A.
Assets = Equities.
B.
Assets - Liabilities = Owner's Equity.
C.
Assets = Liabilities + Owner's Equity.
D.
all of the above.

2. Owner's Equity is increased by:
A.
drawings.
B.
revenue.
C.
expenses.
D.
liabilities

3. Jerry's Car Repair Shop started the year with total Assets of $90,000 and total Liabilities of $60,000. During the year, the business recorded $150,000 in car repair revenues and $95,000 in expenses; Jerry also withdrew $15,000.

Jerry's Capital Balance at the end of the year was:
A.
$70,000
B.
$40,000
C.
$85,000
D.
$55,000

4. Collection of a $500 Accounts Receivable:
A.
increases an Asset $500; decreases an Asset $500.
B.
increases an Asset $500; decreases a Liability $500.
C.
decreases a Liability $500; increases Owner's Equity $500.
D.
decreases an Asset $500; decreases a Liability $500.

5. Which one of the following represents the expanded basic accounting equation?
A.
Assets = Liabilities + Owner's capital + Owner's drawings - Revenue - Expenses
B.
Assets + Owner's drawings + Expenses = Liabilities + Owner's capital + Revenue
C.
Assets - Liabilites - Owner's drawings - Owner's capital + Revenues - Expenses
D.
Assets = Revenues + Expenses - Liabilities

6. The usual sequence of steps in the recording process is to:
A.
analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts.
B.
analyze each transaction, enter the transaction in the ledger, and transfer the information to the journal.
C.
analyze each transaction, enter the transaction in the book of accounts, and transfer the information to the journal.
D.
analyze each transaction, enter the transaction in the book of original entry, and transfer the information to the journal.

7. Which of the following statements is true?
A.
Debits increase Assets and increase Liabilities.
B.
Credits decrease Assets and decrease Liabilities.
C.
Credits decrease Assets and increase Liabilities.
D.
Debits increase Liabilities and increase Assets.

8. Which of the following statements is NOT true?
A.
Expenses increase Owner's Equity.
B.
Expenses have normal debit balances.
C.
Expenses decrease Owner's Equity.
D.
Expenses are a negative factor in the computation of Net Income.

9. A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Legal Fees. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause:
A.
expenses to be overstated.
B.
Net Income to be overstated.
C.
liabilities to be understated.
D.
revenues to be understated.

10. Quirk Company purchased office supplies costing $3,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $1,200 still on hand. The appropriate adjusting journal entry to be made at the end of the period would be:
A.
debit Office Supplies Expense, $1,200; credit Office Supplies, $1,200.
B.
debit Office Supplies, $1,800; credit Office Supplies Expense $1,800.
C.
debit Office Supplies Expense, $1,800; credit Office Supplies, $1,800.
D.
debit Office Supplies, $1,200; credit Office Supplies Expense, $1,200.

11. Accrued revenues are:
A.
received and recorded as liabilities before they are earned.
B.
earned and recorded as liabilities before they are received.
C.
earned but not yet received or recorded.
D.
earned and already received and recorded.

12. Nance Realty Company received a check for $15,000 on July 1 representing a 6-month advance payment of rent on a building it rents to a client. Unearned Rent was credited for the full $15,000. Financial Statements will be prepared on July 31. Nance Realty should make which of the following adjusting entries on July 31?
A.
debit Unearned Rent, $2,500; credit Rental Revenue, $2,500
B.
debit Rental Revenue, $2,500; credit Unearned Rent, $2,500
C.
debit Unearned Rent, $15,000; credit Rental Revenue, $15,000
D.
debit Cash, $15,000; credit Rental Revenue, $15,000

13. If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's Financial Statements?
A.
Failure to make an adjustment does not affect the Financial Statements.
B.
Expenses will be overstated and Net Income and Owner's Equity will be understated.
C.
Assets will be overstated and Net Income and Owner's Equity will be understated.
D.
Assets will be overstated and Net Income and Owner's Equity will be overstated.

14. After closing entries are posted, the balance in the Owner's Capital Account in the ledger will be equal to:
A.
the beginning Owner's Capital reported on the Owner's Equity Statement.
B.
the amount of the Owner's Capital reported on the Balance Sheet.
C.
zero.
D.
the Net Income for the period.

15. The first required step in the accounting cycle is:
A.
reversing entries.
B.
journalizing transactions in the book of original entry.
C.
analyzing transactions.
D.
posting transactions.

16. Which of the following depicts the proper sequence of steps in the accounting cycle?
A.
journalize the transactions, analyze business transactions, prepare a Trial Balance
B.
prepare a Trial Balance, prepare Financial Statements, prepare adjusting entries
C.
prepare a Trial Balance, prepare adjusting entries, prepare Financial Statements
D.
prepare a Trial Balance, post to ledger accounts, post adjusting entries

17. If a company determines Cost of Goods Sold each time a sale occurs, it:
A.
must have a computer accounting system.
B.
uses a combination of the Perpetual and Periodic Inventory Systems.
C.
uses a Periodic Inventory System.
D.
uses a Perpetual Inventory System.

18. Two companies report the same Cost of Goods available for sale but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using:
A.
LIFO will have the highest ending inventory.
B.
FIFO will have the highest Cost of Goods Sold.
C.
FIFO will have the highest ending inventory.
D.
LIFO will have the lowest Cost of Goods Sold.

19. The Jansen Company uses the Periodic Inventory System and weighted average method to value inventories. On August 1, there were 5,000 units valued at $15,000 in the beginning inventory. On August 10, 10,000 units were purchased for $6 per unit. On August 15, 12,000 units were sold. The amount charged to Cost of Goods Sold should be:
A.
$40,000.
B.
$60,000.
C.
$72,000.
D.
$54,000.

20. An Income Statement:
A.
summarizes the changes in Owner's Equity for a specific period of time.
B.
reports the changes in Assets, Liabilities, and Owner's Equity over a period of time.
C.
reports the Assets, Liabilities, and Owner's Equity at a specific date.
D.
presents the revenues and expenses for a specific period of time.

21. The following information for Olsen Company was available on June 30, 2007, the end of a monthly accounting period. You are to prepare the necessary adjusting journal entries for Olsen Company for the month of June for each situation given. Appropriate adjusting entries had been recorded in previous months. You may omit journal entry explanations.

Olsen Company purchased a 2-year insurance policy on February 1, 2007 and debited Prepaid Insurance for $2,400.
Answer
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22. The following information for Olsen Company was available on June 30, 2007, the end of a monthly accounting period. You are to prepare the necessary adjusting journal entries for Olsen Company for the month of June for each situation given. Appropriate adjusting entries had been recorded in previous months. You may omit journal entry explanations.

On January 1, 2007, a tenant in an apartment building owned by Olsen Company paid $4,800 which represents six months' rent in advance. The amount received was credited to the Unearned Rent account.
Answer
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23. The following information for Olsen Company was available on June 30, 2007, the end of a monthly accounting period. You are to prepare the necessary adjusting journal entries for Olsen Company for the month of June for each situation given. Appropriate adjusting entries had been recorded in previous months. You may omit journal entry explanations.

On June 1, 2007, the balance in the Office Supplies account was $200. During June, office supplies costing $750 were purchased. A physical count of office supplies at June 30 revealed that there was $240 still on hand.
Answer
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24. The following information for Olsen Company was available on June 30, 2007, the end of a monthly accounting period. You are to prepare the necessary adjusting journal entries for Olsen Company for the month of June for each situation given. Appropriate adjusting entries had been recorded in previous months. You may omit journal entry explanations.

On March 31, 2007, Olsen Company purchased a delivery van for $36,000. It is estimated that the annual depreciation will be $7,200.
Answer
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25. The following information for Olsen Company was available on June 30, 2007, the end of a monthly accounting period. You are to prepare the necessary adjusting journal entries for Olsen Company for the month of June for each situation given. Appropriate adjusting entries had been recorded in previous months. You may omit journal entry explanations.

Olsen Company has two employees who earn $80 and $100 per day, respectively. They are paid each Friday for a five-day work week that begins each Monday. Assume June 30 is a Wednesday in 2007.
Answer
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26. The balance of Allowance for Doubtful Accounts prior to making the adjusting entry to record estimated uncollectible accounts:
A.
is relevant when using the percentage of receivables basis.
B.
is relevant when using the percentage of sales basis.
C.
is relevant to both bases of adjusting for uncollectible accounts.
D.
will never show a debit balance at this stage of the accounting cycle.

27. Ken's Copy Shop bought equipment for $48,000 on January 1, 2006. Ken estimated the useful life to be 3 years with no salvage value, and the Straight-Line Depreciation Method will be used. On January 1, 2007, Ken decides that the business will use the equipment for 5 years.

What is the Revised Depreciation Expense for 2007?
A.
$16,000
B.
$6,400
C.
$8,000
D.
$12,000

28. Porter Company purchased equipment for $180,000 on January 1, 2006, and will use the Double-Declining-Balance Depreciation Method. It is estimated that the equipment will have a 3-year life and an $8,000 salvage value at the end of its useful life.

The amount of Depreciation Expense recognized in 2008 will be:
A.
$20,000.
B.
$12,000.
C.
$21,776.
D.
$13,776.

29. Lane Company uses the percentage of sales method for recording Bad Debts Expense. For the year, cash sales are $500,000 and credit sales are $2 million. Management estimates that 1% is the sales percentage to use.

What adjusting entry will Lane Company make to record the Bad Debts Expense?
A.
Bad Debts Expense, $25,000 (Dr.); Allowance for Doubtful Accounts $25,000 (Cr.)
B.
Bad Debts Expense, $20,000 (Dr.); Allowance for Doubtful Accounts $20,000 (Cr.)
C.
Bad Debts Expense, $20,000 (Dr.); Accounts Receivable $20,000 (Cr.)
D.
Bad Debts Expense, $25,000 (Dr.); Accounts Receivable $25,000 (Cr.)

30. On July 1, 2007, Meed Kennels sells equipment for $22,000. The equipment originally cost $60,000 and had an estimated 5-year life and an expected salvage value of $10,000. The Accumulated Depreciation account had a balance of $35,000 on January 1, 2007, using Straight-Line Depreciation.

The gain or loss on disposal is:
A.
$3,000 gain.
B.
$2,000 loss.
C.
$3,000 loss.
D.
$2,000 gain.

31. The dominant form of business organization in the United States in terms of dollar sales volume, earnings, and employees is:
A.
the sole proprietorship.
B.
the partnership.
C.
the corporation.
D.
not known.

32. If Vickers Company issues 2,000 shares of $5 par value common stock for $160,000:
A.
Common Stock will be credited for $160,000.
B.
Paid-In Capital in Excess of Par Value will be credited for $10,000.
C.
Paid-In Capital in Excess of Par Value will be credited for $150,000.
D.
Cash will be debited for $150,000.

33. The acquisition of treasury stock by a corporation:
A.
increases its total assets and total stockholders' equity.
B.
decreases its total assets and total stockholders' equity.
C.
has no effect on total assets and total stockholders' equity.
D.
requires that a gain or loss be recognized on the income statement.

34. Three thousand shares of treasury stock of Meyer, Inc., previously acquired at $16 per share, are sold at $24 per share.

The entry to record this transaction will include a:
A.
credit to Treasury Stock for $72,000.
B.
debit to Paid-In Capital from Treasury Stock for $24,000.
C.
debit to Treasury Stock for $48,000.
D.
credit to Paid-In Capital from Treasury Stock for $24,000.

35. Dividends in arrears on cumulative preferred stock:
A.
never have to be paid.
B.
must be paid before common stockholders can receive a dividend.
C.
should be recorded as a current liability until they are paid.
D.
enable the preferred stockholders to share equally in corporate earnings with the common stockholders.

36. How will the declaration of a cash dividend affect the following balance sheet sections?
A.
increase total assets, decrease total liabilities, no change to total stockholders' equity
B.
no change to total assets, increase total liabilities, decrease total stockholders' equity
C.
decrease total assets, increase total liabilities, decrease total stockholders' equity
D.
decrease total assets, no change to total liabilities, increase total stockholders' equity

37. The declaration of a stock dividend will:
A.
increase paid-in capital.
B.
change the total of stockholders' equity.
C.
increase total liabilities.
D.
increase total assets.

38. On October 1, Steve's Carpet Service borrows $50,000 from First National Bank on a 3-month, $50,000, 8% note.

The entry by Steve's Carpet Service to record payment of the note and accrued interest by January 1 is:
A.
Notes Payable, $51,000 (Dr.); Cash, $51,000 (Cr.).
B.
Notes Payable, $50,000 (Dr.); Interest Payable, $1,000 (Dr.); Cash, $51,000 (Cr.).
C.
Notes Payable, $50,000 (Dr.); Interest Payable, $4,000 (Dr.); Cash, $54,000 (Cr.).
D.
Notes Payable, $50,000 (Dr.); Interest Expense, $1,000 (Dr.); Cash, $51,000 (Cr.).

39. Which of the following statements is NOT considered a disadvantage of the corporate form of organization?
A.
additional taxes
B.
government regulations
C.
limited liability of stockholders
D.
separation of ownership and management

40. The par value of a stock:
A.
is legally significant.
B.
reflects the most recent market price.
C.
is selected by the SEC.
D.
is indicative of the worth of the stock.

41. A corporation has the following account balances: Common stock, $1 par value, $30,000; Paid-in Capital in Excess of Par Value, $700,000.

Based on this information, the:
A.
legal capital is $730,000.
B.
number of shares issued is 30,000.
C.
number of shares outstanding is 730,000.
D.
average price per share issued is $2.43.

42. The date on which a cash dividend becomes a binding legal obligation is on the:
A.
declaration date.
B.
date of record.
C.
payment date.
D.
last day of the fiscal year-end.

43. If a corporation declares a 10% stock dividend on its common stock, the account to be debited on the date of declaration is:
A.
Common Stock Dividends Distributable.
B.
Common Stock.
C.
Paid-In Capital in Excess of Par.
D.
Retained Earnings.

44. A net loss:
A.
occurs if operating expenses exceed cost of goods sold.
B.
is not closed to Retained Earnings if it would result in a debit balance.
C.
is closed to Retained Earnings even if it would result in a debit balance.
D.
is closed to the paid-in capital account of the stockholders' equity section of the balance sheet.

45. If a transaction cannot be recorded in a Special Journal:
A.
the company must refuse to enter into the transaction.
B.
it is recorded in the General Journal.
C.
it is recorded directly in the accounts in the General Ledger.
D.
it is recorded as an adjustment on the Worksheet.

46. An employee authorized to sign checks should not record:
A.
owner cash contributions.
B.
mail receipts.
C.
cash disbursement transactions.
D.
sales transactions.

47. An Accounts Payable clerk also has access to the approved supplier master file for purchases.

The control principle of:
A.
establishment of responsibility is violated.
B.
independent internal verification is violated.
C.
documentation procedures is violated.
D.
separation of duties is violated.

48. Assuming a FICA tax rate of 8% on the first $75,000 in wages, and a Federal income tax rate of 20% on all wages, what would be an employee's Net Pay for the year if he earned $90,000 for the year?
A.
$84,000
B.
$64,800
C.
$72,000
D.
$66,000

49. The tax that is paid equally by the employer and employee is the:
A.
Federal income tax.
B.
Federal unemployment tax.
C.
state unemployment tax.
D.
FICA tax.

50. Yenn Company developed the following reconciling information in preparing its September bank reconciliation: Cash balance per bank on 9/30, $11,000; Notes Receivable collected by bank, $4,000; Outstanding checks, $6,000; Deposits in transit, $3,000; Bank service charge, $50; and NSF check, $800.

Using the above information, what is the cash balance per books (before adjustment) for Yenn Company?
A.
$8,850
B.
$14,000
C.
$4,850
D.
$11,000

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