ACC 101 MCQs Assignment 28909

1. Which of the following is the fundamental accounting equation?

Current assets + Current liabilities = Owners' equity

Assets + Owners' equity = Liabilities

Cash = Debts + Common stock

Assets = Liabilities + Owners' equity

2.

On December 31, 2014, Track Record Inc.'s sales people have firm outstanding orders totaling $1.66 million, which, it has guaranteed its customers, will be fulfilled during the month of January 2015.

If Track Record includes the $1.66 million in its sales figures for 2014, it will be violating the:

Materiality concept

Historical cost concept

Dual-aspect concept

Realization concept

4.

To be recorded as an asset, an item must meet four specific conditions. Three of them are: it must have been acquired at measurable cost, it must be obtained or controlled by the entity, and it must have been obtained or controlled in a past transaction.

Which one of the following is the fourth condition?

The item must have a measurable resale value

It must be expected to have future economic benefits

It must have been fully paid for

The entity must have a legal document confirming ownership of the item

5.

Neura Pharma, Inc. has purchased a drug patent with a remaining useful life of 13 years. How should this new asset be classified?

A current tangible asset

A non-current tangible asset

A non-current intangible asset

A current intangible asset

6.

June Smith, a process engineer, has sold her 15-year patent for a new etching process to Silica Labs, Inc. In return, she has received $500,000 in cash and, based on its value on the sale date, $200,000 in common stock in Silica Labs. The stock is forecasted to double in market value over the next two months.

How would this transaction be recorded by Silica Labs?

Debit patent account $700,000; credit cash $500,000; credit common stock $200,000

Debit cash $500,000; debit common stock $200,000; credit patent account $700,000

Debit cash $500,000; credit patent account $500,000

Debit patent account $500,000; credit cash $500,000

7.

Consider the same scenario as in the previous question:

June Smith, a process engineer, has sold her 15-year patent for a new etching process to Silica Labs, Inc. In return, she has received $500,000 in cash and, based on its value on the sale date, $200,000 in common stock in Silica Labs. The stock is forecasted to double in market value over the next two months.

Assuming that Silica Labs holds some long-term debt, which of the following describes the effect of the transaction on Silica Labs?

Current ratio will decrease and total debt to equity ratio will increase

Current ratio will increase and total debt to equity ratio will decrease

Current ratio will increase and total debt to equity ratio will increase

Current ratio will decrease and total debt to equity ratio will decrease

8.

Lucky Lee, a video-game store in New York city, purchases a game machine directly from Taiwan for $30,000. In the U.S., the same machine will probably cost at least $36,000. Pick the most appropriate accounting action for Lucky Lee:

Record the machine at $36,000

Record the machine at $30,000

Record the machine for [($30,000+$36,000)/2] = $33,000

Have the machine examined by an independent appraiser and record it at the appraised value

9.

Which one of the following is an item of owners' equity?

Bank loan

Suppliers' monetary claims

Prepaid expenses

Earnings generated by the entity

10.

Complete the following sentence: The Conservatism Concept directs an entity to consider recognizing a liability when it is __________________.

absolutely certain economic resources may be sacrificed in the future

remotely possible economic resources may be sacrificed in the future

reasonably possible economic resources may be sacrificed in the future

reasonably certain economic resources may be sacrificed in the future

11.

The realization concept states that revenue is recorded when:

It has been earned and realized or realizable

All the associated costs have been paid in cash

It has been received in cash

12.

On its June 30, 2015 balance sheet, Barrows Corporation has total assets of $100,000, current liabilities of $40,000, and owners' equity of $60,000.

Which one of the following statements must be true on June 30, 2015?

It has current assets of $40,000

It has no long-term liabilities

It has a cash balance of $40,000 raised through short-term debt

None of the above

13.

Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On August 5, 2015, which one of the following accounting entries, related to the $10,000 special order, should be recorded in Turnadot's financial accounting system?

Debit accounts receivable $10,000; credit revenues $10,000

Debit cash $3,000; credit revenues $3,000

Debit cash $3,000; credit a liability 'advances from customers' $3,000

Debit cash $3,000; debit accounts receivable $7,000; credit revenues $10,000

14.

Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On August 5, 2015, which one of the following accounting entries, related to the $1,000 deposit paid to the supplier for the planters, should be recorded in Turnadot's financial accounting system?

Debit the current asset 'advances to suppliers' $1,000; credit cash $1,000

Debit inventory $1,000; credit cash $1,000

Debit cost of goods sold $4,000; credit cash $1,000; credit accounts payable $3,000

Debit cost of goods sold $1,000; credit revenues $1,000

15.

Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On August 27, 2015, upon delivery of planters to Turnadot's warehouse and payment of $3,000 balance due to the supplier, which one of the following journal entries best reflects the economic impact of the transaction?

Debit inventory $3,000; credit cash $3,000

Debit inventory $4,000; credit the current asset 'advances to suppliers' $1,000; credit cash $3,000

Debit cost of goods sold $4,000; credit cash $3,000; credit accounts payable $1,000

Debit inventory $4,000; credit revenues $4,000

16.

Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

On September 5, 2015, when the planters are delivered and the balance of $7,000 due from the customer is collected, which one of the following journal entries best reflects the full economic impact of the special order on Turnadot's financial condition?

Dr. Cash 7,000, Cr. Revenues 7,000 and

Dr. COGS 4,000, Cr. Inventory 4,000

Dr. Cash 7,000, Cr. Revenues 7,000 and

Dr. Inventory 4,000, Cr. COGS 4,000

Dr. Cash 7,000, Dr. Advances from customers (liability) 3,000, Cr. Revenues 10,000 and

Dr. COGS 4,000, Cr. Inventory 4,00

17.

Turnadot & Sons is a small wholesaler of decorative cast iron objects. The following events, related to a special customer order, occur as described below:

August 5, 2015: Turnadot receives the special order for 200 outdoor planters at a selling price of $50 each, including delivery at a future convenient time and location. The customer, with whom Turnadot has had a long-term, trouble-free relationship, pays $3,000 as a deposit and agrees to pay the rest on delivery. Turnadot immediately orders $4,000 worth of planters from its supplier and pays a $1,000 deposit for them.

August 27, 2015: Turnadot pays $3,000 balance due to the supplier upon delivery of the planters to its warehouse.

September 5, 2015: The customer calls for delivery of the planters, and pays the balance of $7,000 when they arrive at the customer site.

What is the dollar gross margin earned by Turnadot on the special order for 200 planters?

$2,000

$7,000

$9,000

$6,000

18.

The next 6 questions refer to Quentin Company's December 31, 2014 Balance Sheet.

Quentin began 2014 with the following non-current asset balances: Plant and equipment (net) $59,000; Patent (net) $28,000. No long-term assets were purchased or sold during the year. How much amortization and depreciation expense did Quentin record during 2014?

$3,000

$4,000

$7,000

Cannot be estimatedMacintosh hd:users:wali:desktop:screen shot 2014-08-18 at 5.39.31 pm.png

19.

Quentin's 2014 net income was $5,000. No dividends were declared or paid during 2014. What was Quentin's retained earnings balance on December 31, 2013?

$39,000

$49,000

$34,000

Cannot be estimatedMacintosh hd:users:wali:desktop:screen shot 2014-08-18 at 5.40.52 pm.png

20.

Quentin's current ratio on December 31, 2014 is:

1.25

0.80

0.53

1.125Macintosh hd:users:wali:desktop:screen shot 2014-08-18 at 5.41.46 pm.png

21.

Quentin's total debt to equity ratio on December 31, 2014 is:

2.12

1.52

1.19

0.53Macintosh hd:users:wali:desktop:screen shot 2014-08-18 at 5.42.30 pm.png

22.

Quentin Company's year-end 2014 total assets equals its year-end 2014 total liabilities and owners' equity. This is most likely the result of the company following the:

Historical Cost concept

Dual-aspect concept

Materiality concept

Money measurement conceptMacintosh hd:users:wali:desktop:screen shot 2014-08-19 at 10.38.08 pm.png

23.

Quentin's December 31, 2013 inventory T-account debit balance was also $56,000. During 2014, its inventory purchases amounted to $25,000, and there were no inventory-related write-downs or losses. What was Quentin's 2014 cost of goods sold expense?

$5,000

$67,000

$20,000

$45,000

Macintosh hd:users:wali:desktop:screen shot 2014-08-19 at 10.39.40 pm.png

24.

The next 6 questions refer to Carlita Company's 2014 Income Statement.

Carlita's 2014 gross margin percentage is:

50%

33%

30%

25%

Macintosh hd:users:wali:desktop:screen shot 2014-08-19 at 10.40.40 pm.png

25.

During 2014, Carlita's competitor Farside had double the sales of Carlita, but it also earned a gross margin of $30,000. Farside's 2014 gross margin percentage was:

25%

50%

12.5%

Insufficient information; cannot be calculated

Macintosh hd:users:wali:desktop:screen shot 2014-08-19 at 10.40.40 pm.png

26.

Carlita began 2014 with a retained earnings account balance of $132,000. During 2014, it declared and paid dividends of $5,000. Its December 31, 2014 retained earnings account balance is:

$132,000

$120,000

$139,000

Cannot be calculatedMacintosh hd:users:wali:desktop:screen shot 2014-08-19 at 10.40.40 pm.png

27.

Carlita's 2014 return on sales percentage is:

25%

16.67%

15%

10%

Macintosh hd:users:wali:desktop:screen shot 2014-08-19 at 10.45.17 pm.png

28.

Carlita began 2014 with an interest payable account balance of $13,000. During 2014, it paid $5,000 in interest to its lenders. On December 31, 2014, its interest payable account balance is:

$15,000

$10,000

$13,000

Cannot be calculatedMacintosh hd:users:wali:desktop:screen shot 2014-08-19 at 10.45.17 pm.png

29.

Carlita began 2014 with a taxes payable account balance of $3,000. On December 31, 2014, its taxes payable account balance is $7,000. How much did Carlita pay to the tax authorities during the year?

$2,000

$6,000

$4,000

Cannot be calculatedMacintosh hd:users:wali:desktop:screen shot 2014-08-19 at 10.45.17 pm.png

30.

On January 1, 2015, Jon Sports has a bond payable of $200,000. During 2015, it pays off $20,000 of the outstanding bond principal and issues a new $70,000 bond. There are no other transactions related to the bond payable account.

What is Jon Sports' December 31, 2015 bond payable balance?

A debit balance of $250,000

A credit balance of $150,000

A debit balance of $150,000

A credit balance of $250,000

31.

The next 7 questions are based on Panjim Trading Company's cash T-account for 2015.

Based on Panjim's 2015 cash T-account, which one of the following statements must be true?

During 2015, Panjim's total merchandise sales were $60,000

During 2015, Panjim's total merchandise purchases were $44,000

During 2015, Panjim issued $75,000 of debt

Panjim did not record any tax expense for 2015

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32.

Panjim began 2015 with salaries payable balance of $75,000. It had 2015 salary expense of $80,000. Its 2015 ending salaries payable balance must be:

$95,000

$55,000

$155,000

$105,000

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33.

Panjim's 2015 cash flow from operations is:

A net outflow of $90,000

A net inflow of $90,000

A net inflow of $85,000

A net outflow of $85,000

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34.

Panjim's 2015 cash flow from investing activities is:

A net outflow of $7,000

A net inflow of $3,000

A net inflow of $7,000

A net outflow of $3,000

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35.

Panjim's 2015 cash flow from financing activities is:

A net outflow of $91,000

A net inflow of $86,000

A net outflow of $86,000

A net inflow of $91,000

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36.

Panjim recorded an interest expense of $6,000 for 2015. Which one of the following line items would be included in the operating section of the Panjim's 2015 indirect method statement of cash flows?

Add increase in interest payable...$1,000

Subtract increase in interest payable...($1,000)

Add increase in interest payable...$6,000

Subtract decrease in interest payable...($5,000)

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37.

Panjim's prepaid expense account consists only of garage rental prepayments. Its 2015 beginning and ending balance were the same. Which one of the following statements must be true?

Panjim had no garage rental expenses during 2015

Panjim's prepaid expense account balance never varied during 2015

Panjim's prepaid expense account balance varied during 2015

None of the above statements is true

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38.

Juan Foods purchases a computer system in 2015 for $20,000. Its expected useful life is 5 years. At the end of 2015, it has to record depreciation on the computer system of $2,000.

What is the correct journal entry to record the depreciation?

Debit computer system $2,000; credit depreciation expense $2,000

Debit accumulated depreciation $2,000; credit computer system $2,000

Debit depreciation expense $2,000; credit accumulated depreciation $2,000

Debit computer system $2,000; credit accumulated depreciation $2,000

39.

Jackie's Crafts is a successful retailer of fabric by the yard and other sewing supplies. If Jackie were to shut down the store, the bolts of fabrics and the bins of lace and trim, inventory valued at $20,000, on average, at any point in time, would have to be sold for about 10% of that value. But, Jackie's accountant does not feel the need to reduce the value of the inventory on the books.

This is a reflection of the:

Consistency concept

Materiality concept

Historical cost concept

Going-concern concept

40.

Weldon Engineering owes one of its creditors $20,000. To settle the debt, Weldon pays $5,000 cash and also issues common stock valued at $15,000 to the creditor.

How would this repayment of the $20,000 debt be recorded in Weldon's books?

Debit debt owed $20,000; credit cash $5,000; credit common stock $15,000

Debit common stock $15,000; debit cash $5,000; credit debt owed $20,000

Debit common stock $15,000; debit debt owed $5,000; credit cash $20,000

Debit debt owed $5,000; credit cash $5,000