Bus. 312: Financial Accounting

Dr. Ahiarah.

 

Practice Tests for Final Exam on KWK Chapters 7 to 9.

 

 

Click on the link below and do the web quizzes on Chapters 7, 8 and 9.  Grade each chapter’s self-test by clicking on the GRADE THE TEST button

1.      http://bcs.wiley.com/he-bcs/Books?action=resource&bcsId=4573&itemId=0470239808&resourceId=14668


In addition to the MCs in the above, here are:


Additional Multiple Choice for Chapter 7

6.

Which of the following is not a principle of internal control?

A.

Segregation of duties

 

B.

Documentation procedures

 

C.

Collusion between employees

 

D.

Bonding of employees

7.

Computer programs that limit unauthorized access to certain files is an example of

A.

other controls.

 

B.

independent internal verification.

 

C.

documentation procedures.

 

D.

physical, mechanical, and electronic controls.

8.

Obtaining insurance protection against dishonest employees in an example of

A.

documentation procedures.

 

B.

bonding.

 

C.

establishing responsibility.

 

D.

segregation of duties.

 

 

9.

Reasonable assurance rests on the premise that

A.

the costs of internal controls does not exceed their benefit.

 

B.

bonding will prevent employees from stealing.

 

C.

employees are basically honest people.

 

D.

a system of internal controls will prevent errors.

 

 

 

 

10.

When the cashier also keeps the books for a company, which internal control principle is violated?

A.

Rotating employee duties

 

B.

Establishment of responsibility

 

C.

Segregation of duties

 

D.

Documentation procedures

11.

A bank would issue a credit memorandum to a depositor's account for

A.

an NSF check.

 

B.

interest earned.

 

C.

monthly service charges.

 

D.

outstanding checks.

 

12.

A bank would issue a debit memorandum to a depositor's account for

A.

interest earned.

 

B.

collection of a note receivable.

 

C.

deposits in transit.

 

D.

monthly service charges.

 

 

13.

Springer Company had outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. In addition, a check from one of Springer's customers in the amount of $500 was returned as NSF. The outstanding checks on the October bank reconciliation should total

A.

$5,900.

 

B.

$9,900.

 

C.

$10,400.

 

D.

$1,400.

14.

Jones Company collected the following information to prepare its May bank reconciliation:

Cash balance per books, May 31

$5,300

 

Deposits in transit

510

 

Notes receivable with interest collected by bank

580

 

Bank Service Charges

30

 

Outstanding checks

180

 

NSF check

150


The adjusted cash balance per books on May 31 is

A.

$5,700.

 

B.

$5,810.

 

C.

$6,210.

 

D.

$5,660.

 

 

 

 

15.

Barker Company collected the following information to prepare its November bank reconciliation:

Cash balance per bank, November 30    

$21,000

 

Note receivable plus interest collected

9,000

 

Outstanding checks

6,000

 

Deposits in transit

5,400

 

Bank service charges

85

 

NSF check

2,100


The cash balance per books, before adjustments to the book balance, is

A.

$20,400.

 

B.

$13,585.

 

C.

$6,815.

 

D.

$27,815.

 

 

 

 

 

16.

An adjusting entry is required for

A.

outstanding checks.

 

B.

deposits in transit.

 

C.

bank errors.

 

D.

NSF checks.

 

 

 

 

 

 

17.

For which of the following would an adjusting entry NOT be required?

A.

NSF checks.

 

B.

book errors.

 

C.

bank service charges

 

D.

deposits in transit

 

 

 

 

 

 

 

18.

Which of the following is NOT a basic principle of cash management?

A.

Keep inventory levels low.

 

B.

Grant customers as much time as they want to pay their receivables.

 

C.

Delay the payment of liabilities.

 

D.

Invest idle cash.

 

 

 

 

 

 

 

 

19.

The following information was taken from the Carson Company cash budget for the month of April:

Beginning cash balance

$45,000

 

Cash receipts

$27,000

 

Cash disbursements

$51,000


If the company has a policy of maintaining a minimum cash balance of $37,000, the amount the company would have to borrow is

A.

$24,000.

 

B.

$8,000.

 

C.

$16,000.

 

D.

$14,000.

 

 

 

 

 

 

 

 

 

20.

The following credit sales are budgeted by Burt Company:

May

$43,000

 

June

60,000

 

July

75,000

 

August    

55,000


In the past, the company collected 60% of its receivables in the month of sale, 30% in the month following the sale, and 7% in the second month following the sale. The budgeted collections from customers for the month of July is

A.

$66,010.

 

B.

$65,200.

 

C.

$140,710.

 

D.

$49,050.

SUGGESTED ANSWERS to above Chapter 7 Additional M/C: 6 C, 7 D, 8 B, 9 A, 10 C, 11 B, 12 D, 13 C, 14 A, 15 B, 16 D, 17 D, 18 B, 19  C, 20 A.

Additional Multiple Choice for Chapter 8

6.

Which of the following would be classified as an “other” receivable?

A.

Trade receivable

 

B.

Interest receivable

 

C.

Accounts receivable

 

D.

Notes receivable

7.

Accounts receivable are reported on the balance sheet at

A.

fair market value.

 

B.

present value.

 

C.

net realizable value.

 

D.

maturity value.

 

8.

When an account is written off under the allowance method the

A.

Bad Debts Expense account is debited.

 

B.

Accounts Receivable account is debited.

 

C.

Allowance for Doubtful Accounts is debited.

 

D.

Loss on Accounts Receivable account is debited.

 

 

9.

A short-term notes receivable is recorded at its

A.

face value.

 

B.

fair market value.

 

C.

present value.

 

D.

maturity value.

 

 

 

10.

The entry to record the dishonor of a note includes a debit to

A.

Allowance for Doubtful Accounts.

 

B.

Loss on Notes Receivable.

 

C.

Bad Debts Expense.

 

D.

Accounts Receivable.

 

 

 

 

11.

Which of the following accounts is debited when a company factors its accounts receivable?

A.

Service Charge Expense

 

B.

Internet Expense

 

C.

Loss on Sale of Accounts Receivable

 

D.

Accounts Receivable

12.

Ryan Leaf Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $100,000 at year-end and the total credit sales were $800,000. Management estimates that 4% of receivables will be uncollectible. What adjusting entry should be made if the Allowance for Doubtful Accounts has a credit balance of $800 before adjustment?

A.

Bad Debts Expense                              3,200
         Allowance for Doubtful Accounts               3,200

 

B.

Bad Debts Expense                              4,000
         Allowance for Doubtful Accounts               4,000

 

C.

Bad Debts Expense                              3,200
         Accounts Receivable                                  3,200

 

D.

Bad Debts Expense                              4,000
         Allowance for Doubtful Accounts               4,000

13.

When an uncollectible account is recovered after it has been written off, which of the following accounts will be credited in the process?

A.

Allowance for Doubtful Accounts and Cash.

 

B.

Cash and Account Receivable.

 

C.

Accounts Receivable and Allowance for Doubtful Accounts.

 

D.

Allowance for Doubtful Accounts and Bad Debt Expense.

 

 

 

 

 

 

 

14.

When a note receivable is paid on time, the journal entry to record the transaction will contain

A.

two debits and one credit.

 

B.

two credits and one debit.

 

C.

one debit and one credit.

 

D.

none of the above.

 

 

 

 

 

 

 

 

15.

The interest on a $5,000, 8%, 9-month note receivable is

A.

$300.

 

B.

$400.

 

C.

$30.

 

D.

$40.

 

 

 

 

 

 

 

 

 

16.

Wainwright Company receives a $3,000, 4-month, 10% note from Fulton Company as a payment of its account receivable. What entry will Wainwright Company make when it receives the note?

A.

Notes Receivable                              3,100
   Accounts Receivable-Fulton           3,100

 

B.

Notes Receivable                              3,100
   Accounts Receivable-Fulton           3,000

 

C.

Notes Receivable                              3,000
    Interest Receivable                    100
   Accounts Receivable-Fulton           3,000
   Interest Revenue                                100

 

D.

Notes Receivable                              3,000
   Accounts Receivable-Fulton           3,000

17.

Butte Co. loaned $25,000 to Beavis Co. on June 1, at 12% interest for 3 months. What adjusting entry will Butte Co. have to make on June 30 before preparing the financial statements on June 30?

A.

Interest Receivable       750
   Interest Revenue    750

 

B.

Interest Receivable       250
   Interest Revenue    250

 

C.

Interest Receivable     1,000
   Interest Revenue   1,000

 

D.

Interest Receivable     3,000
   Interest Revenue   3,000

18.

The maturity value of a $25,000, 12%, 90-day note receivable dated February 20 is

A.

$25,000.

 

B.

$28,000.

 

C.

$25,075.

 

D.

$25,750.

 

 

 

 

 

 

 

 

 

 

19.

The maturity value of a $25,000, 9%, 4-month note receivable is

A.

$25,250.

 

B.

$25,563.

 

C.

$25,750.

 

D.

$27,250.

 

 

 

 

 

 

 

 

 

 

 

20.

Laurel Company factors $300,000 of receivables to Hardy Factors. Hardy assesses a 3% fee on the amount of receivables sold. Laurel Co. factors its receivables to Hardy regularly. What journal entry does Laurel make when the factoring occurs?

A.

Cash                                291,000
Service Charge Expense       9,000
   Accounts Receivable          300,000

 

B.

Cash                                   291,000
   Accounts Receivable          291,000

 

C.

Cash                                      300,000
   Accounts Receivable             291,000
   Gain of Sale of Receivables           9,000

 

D.

Cash                                      291,000
Loss on Sale of Receivables       9,000
   Accounts Receivable          300,000

SUGGESTED ANSWERS to ABOVE Chapter 8 Additional M/C: 6 B, 7 C, 8 C, 9 A, 10 D, 11 A, 12 A, 13 C, 14 B, 15 A, 16 D, 17 B, 18 D, 19  C, 20 A.

 

Kimmel/Financial: Additional Multiple Choice for Chapter 9

6.

Which of the following is not a depreciable asset?

A.

Land improvements

 

B.

Equipment

 

C.

Buildings

 

D.

Land

7.

Which of the following costs would not be included in the cost of equipment?

A.

Annual insurance

 

B.

Installation

 

C.

Testing

 

D.

Freight

8.

Which of the following is not a factor affecting the computation of depreciation?

A.

Useful life

 

B.

Salvage value

 

C.

Book value

 

D.

Cost

 

9.

Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?

A.

Straight-line

 

B.

MACRS

 

C.

Units-of-activity

 

D.

Declining balance

10.

When an asset is retired the amount of the gain is equal to

A.

the asset's book value.

 

B.

zero.

 

C.

the accumulated depreciation.

 

D.

the amount of cash received.

 

11.

Coronado Company purchased land for $80,000. The company also paid $12,000 in accrued taxes on the property, incurred $5,000 to remove an old building, and received $2,000 from the salvage of the old building. The land will be recorded at

A.

$80,000.

 

B.

$95,000.

 

C.

$92,000.

 

D.

$83,000.

12.

Otay Company purchased land for $70,000 on 12/31/03. As of 5/30/04, the land's value had increased to $71,500. On 12/31/04, the land was appraised for $74,000. The Land account should be increased by

A.

$4,000.

 

B.

$1,500.

 

C.

$2,500.

 

D.

$0.

13.

A purchase of equipment for $18,000 also involved freight charges of $500 and installation costs of $2,500. The estimated salvage value and useful life are $2,000 and 4 years, respectively. Under the straight-line method, annual depreciation expense will be

A.

$4,750.

 

B.

$4,500.

 

C.

$4,125.

 

D.

$4,625.

14.

Monthly depreciation expense of $600 is recorded on a truck that was purchased for $27,000 and has a $3,000 estimated salvage value. The annual depreciation rate is

A.

25%.

 

B.

27%

 

C.

30%

 

D.

33%

15.

On September 1, 2004, Dulzura Company purchased an asset for $9,000, with a $1,500 estimated salvage value, and a 4-year useful life. The 2004 depreciation expense using the straight-line method would be

A.

$625.

 

B.

$750.

 

C.

$1,875.

 

D.

$2,250.

16.

An asset purchased on January 1 for $48,000 has an estimated salvage value of $3,000. The current year's depreciation expense is $5,000 and the balance of the Accumulated Depreciation account, after adjustment, is $20,000. If the company uses the straight-line method, what is the asset's remaining useful life?

A.

9 years

 

B.

4 years

 

C.

8 years

 

D.

5 years

 

17.

On January 1, 2002 Jamacha Company purchased some equipment for $15,000. The estimated salvage value and useful life are $3,000 and 4 years, respectively. On January 1, 2004, the company determines that the asset's remaining useful life is 3 years. What is the revised depreciation expense for 2004 if the company uses the straight-line method?

A.

$3,000

 

B.

$2,000

 

C.

$4,000

 

D.

$2,250

18.

On April 1, 2004 La Presa Company sells some equipment for $18,000. The original cost was $50,000, the estimated salvage value was $8,000, and the expected useful life was 6 years. On December 31, 2003 the Accumulated Depreciation account had a balance of $29,400. The gain or loss on the sale was

A.

$2,600 gain.

 

B.

$300 gain.

 

C.

$850 loss.

 

D.

$5,400 gain.

19.

On March 1, 2004, Moreno Company purchased a patent from another company for $90,000. The estimated useful life of the patent is 10 years, and its remaining legal life is 15 years. The Amortization Expense for 2004 is

A.

$9,000.

 

B.

$7,500.

 

C.

$6,000.

 

D.

$5,000.

20.

A company has the following asset account balances:

Buildings and Equipment

$9,200,000

 

Accumulated Depreciation

1,200,000

 

Patents      

750,000

 

Land Improvements

1,000,000

 

Land

5,000,000


The total amount reported on the balance sheet under Property, Plant, & Equipment would be

A.

$14,000,000.

 

B.

$13,000,000.

 

C.

$12,800,000.

 

D.

$13,550,000.

SUGGESTED ANSWERS to above Chapter 9 Additional M/C: 6 D, 7 A, 8 C, 9 D, 10 B, 11 B, 12 D, 13 A, 14 C, 15 A, 16 D, 17 B, 18 C, 19 B, 20 A.