MCQ - 40 Questions
1.
Which of the following is an incorrect
statement if ending inventory is understated?
A.
Gross profit is overstated.
B.
Net income is understated.
C.
Income tax is understated.
D.
Cost of goods sold is overstated.
2.
To pay the least income tax possible in periods of rising inventory costs, the company should use which
inventory costing method?
A.
Average cost
B.
LIFO
C.
Specific identification
D.
FIFO
3.
When a merchandiser sells on account, which of the following is not
needed to record the transaction?
A.
Accounts receivable
B.
Cash
C.
Cost of goods sold
D.
Inventory
4.
When a company repays the seller for shipping costs on an FOB shipping transaction, which of the
following is
true?
A.
A purchase discount can still be taken net of the prepaid shipping charges.
B.
The shipping costs don't affect the invoice cost.
C.
A purchase discount cannot be taken when shipping charges are prepaid.
D.
A purchase discount can still be taken on the gross amount of the invoice.
5.
A company has $8,200 in net sales, $1,100 in gross profit, $2,500 in ending inventory, and $2,000 in
beginning inventory. The company's cost of goods sold is
A.
$5,600.
B.
$5,700.
C.
$6,200.
D.
$7,100.
6.
Casey Company's beginning inventory and purchases during the fiscal year ended December 31, 2012,
were as follows: (
Note:
The company uses a perpetual system of inventory.)
What is the cost of goods sold for Casey Company for 2012 using LIFO?
Units Unit Price Total Cost
January 1—Beginning Inventory 20 $12 $240
March 8—Sold 14
April 2—Purchase 30 $13 $390
June 5—Sold 25
Aug 6—Purchase 25 $14 $350
Sept 11—Sold 22
Total Cost of Inventory $980
Ending inventory is 14 units.
A.
$264
B.
$308
C.
$784
D.
$801
7.
Casey Company's beginning inventory and purchases during the fiscal year ended December 31, 2012,
were as follows: (
Note:
The company uses a perpetual system of inventory.)
What is the ending inventory of Casey Company for 2012 using FIFO?
Units Unit Price Total Cost
January 1—Beginning Inventory 20 $12 $240
March 8—Sold 14
April 2—Purchase 30 $13 $390
June 5—Sold 25
Aug 6—Purchase 25 $14 $350
Total Cost of Inventory $980
Ending inventory is 14 units.
A.
$182
B.
$175
C.
$168
D.
$196
8.
Goods available for sale are $118,000; beginning inventory is $37,000; ending inventory is $42,000; and
cost of goods sold is $77,000. The inventory turnover is
A.
1.95.
B.
2.99.
C.
1.53.
D.
1.83.
9.
ABC Corporation pays an invoice for $350 in time to take a 3% discount. The journal entry to record
the payment of this invoice is
A.
debit Accounts Payable $340; debit Inventory $10; credit Cash $350.
B.
debit Accounts Payable $350; credit Cash $350.
C.
debit Accounts Payable $340; credit Cash $340.
D.
debit Accounts Payable $350; credit Inventory $10.50, credit Cash $339.50.
10.
Isaiah Sporting Goods uses the perpetual average cost method of determining inventory costs. Below is
the inventory record for Product C124:
What is the average cost per unit after the receipt of the June 21 inventory?
Date Received Sold Cost/Unit Balance
April 22 534 $6.58 $3,513.72
May 17 433 $6.70 $2,901.10
June 21 389 $6.76 $2,629.64
August 2 436 $6.44 $2,807.84
A.
$6.61
B.
$6.72
C.
$6.67
D.
$6.62
11.
One of the biggest factors in implementing SOX was
A.
the cost of implementing the system.
B.
reviewing the financial reports.
C.
establishing internal control procedures.
D.
disclosing deficiencies in internal controls.
12.
Goods such as milk, bread, and cheese would probably be costed using the _______ method of
inventory costing.
A.
specific-identification
B.
FIFO
C.
average
D.
LIFO
13.
Goods available for sale are $350,000; beginning inventory is $24,000; ending inventory is $32,000;
and cost of goods sold is $275,000. The inventory turnover is
A.
11.46.
B.
8.59.
C.
12.50.
D.
9.82.
14.
A low gross profit percentage means that
A.
the cost of goods sold was relatively high.
B.
the cost of goods sold was relatively low.
C.
general and administrative expenses are very high.
D.
selling expenses are very low.
15.
A drawback to using _______ when inventory costs are rising is that the company reports lower net
income.
A.
FIFO
B.
average costing
C.
specific-identification costing
D.
LIFO
16.
Which of the following may not
limit the effectiveness of internal control systems in an organization?
A.
Poorly designed controls
B.
Understanding of policies and procedures
C.
Duties not segregated
D.
Costs not worth benefits
17.
Meranda Company reports the following inventory information:
What is the total value of the merchandise under LCM (lower-of-cost or market)?
Inventory
Number
Inventory
Quantity Unit Cost
Unit Market
Value
APD 3838 325 $56.78 $55.32
CPZ 1212 506 $92.31 $92.78
IXL 4039 817 $77.89 $79.31
EOD 3902 382 $19.38 $19.02
DKS 4823 626 $33.46 $30.74
A.
$156,230.80
B.
$154,832.90
C.
$158,545.60
D.
$157,147.60
18.
Which items may not
limit the effectiveness of internal control systems in an organization?
A.
Collusion
B.
Costs not worth benefits
C.
Overriding controls
D.
Properly designed controls
19.
To overstate earnings, a company can
A.
overstate expenses and overstate revenue.
B.
overstate receivables and understate payables.
C.
understate unearned revenue and understate property, plant, and equipment.
D.
understate expenses and understate revenue.
20.
Physical inventory counts must be done
A.
when using bar-code scan technology.
B.
regardless of method inventory.
C.
when using the periodic method of inventory.
D.
when using the perpetual method of inventory.
1.
Brandon Company completed an aging of its accounts receivable and came up with an estimated amount
of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts
is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectable accounts, how much
will the credit be to the allowance for doubtful accounts if Brandon uses the estimate of aging receivables
as its method of estimating uncollectable accounts?
A.
$7,159
B.
$5,067
C.
$5,525
D.
$4,250
2.
Casey Company's bank statement shows a bank balance of $43,267. The statement shows a bank
service charge of $50 and a bank collection of $760 in Casey Company's behalf. Casey's book balance
should be adjusted by a total of
A.
–$710.
B.
+$760.
C.
+$710.
D.
+$810.
3.
Which of the following would not
be considered a contingent liability?
A.
Mortgage payable
B.
Potential fines from the EPA
C.
Cosigning a loan
D.
Pending legal action
4.
Meranda Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000
and is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced
14,500 units. To the nearest dollar, the depreciation for the first year under the units of production method
will be
A.
$31,250.
B.
$36,250.
C.
$33,350.
D.
$35,500.
5.
Brandon Company completed an aging of its accounts receivable and came up with an estimated amount
of $6,342. The credit sales for the period are $85,000. The balance in the allowance for doubtful accounts
is a debit of $817. If Brandon uses 5% of credit sales as its estimating uncollectible accounts, how much
will the credit be to the allowance for doubtful accounts if Brandon uses the percent of credit sales as its
method of estimating uncollectible accounts?
A.
$7,159
B.
$5,067
C.
$5,525
D.
$4,250
6.
Research and development costs (R&D) are generally
A.
listed as "current assets" on the balance sheet.
B.
listed as "other intangibles" on the balance sheet.
C.
expensed and become part of the income statement.
D.
listed as "long-term assets" on the balance sheet.
7.
Ryan Corporation made a basket purchase of three items. Item A was appraised at $35,000; item B was
appraised at $55,000; and item C was appraised at $60,000. The purchase price was $125,000. The
amount at which item B should be recorded is
A.
($55,000/$125,000) × $150,000.
B.
($55,000/$95,000) × $125,000.
C.
($55,000/$150,000) × $125,000.
D.
($55,000/$95,000) × $150,000.
8.
Brandon Corporation purchased a vein of mineral ore for $3,250,000. It is estimated that 15,000,000
tons of ore are available to be extracted. The salvage value is determined to be $400,000. The estimation
depletion expense for this year's extraction of 1,760,000 tons of ore (rounded to the nearest dollar) is
A.
$381,333.
B.
$400,000.
C.
$334,400.
D.
$428,267.
9.
Which of the following would be considered a contingent liability?
A.
Accounts payable obligation
B.
Sales tax obligation
C.
Pending legal action
D.
Mortgage obligation
10.
Using a 360-day year, the maturity value of a 69-day note for $1,500 at 7% annual interest is (rounded
to the nearest cent)
A.
$1,520.13.
B.
$20.13.
C.
$1,605.00.
D.
$1,584,88.
11.
Using a 365-day year, the maturity value of a 180-day note for $2,700 at 9% annual interest is
(rounded to the nearest cent)
A.
$2,819.84.
B.
$119.84.
C.
$2,943.00.
D.
$2,821.50.
12.
Tammy Industries inadvertently debited a $5,000 betterment as an ordinary expense. Which of the
following will occur as a result of this mistake?
A.
Retained earnings will be overstated by $5,000.
B.
The asset will be overstated by $5,000.
C.
The asset will be understated by $5,000.
D.
Net income will be overstated by $5,000.
13.
A $400,000 issue of bonds that sold for $363,000 matures on August 1, 2015. The journal entry to
record the payment of the bond on the maturity date is
A.
debit cash, $363,000; credit bonds payable, $363,000.
B.
debit bonds payable, $363,000; credit cash, $363,000.
C.
debit bonds payable, $400,000; credit cash, $400,000.
D.
debit cash, $400,000; credit bonds payable, $400,000.
14.
A patent has amortization this year of $2,300. The journal entry would be
A.
debit Amortization Expense - Patent, $2,300; credit Patent, $2,300.
B.
debit Amortization Expense - Patent, $2,300; credit Accumulated Depreciation - Patent, $2,300.
C.
debit Accumulated Amortization - Patent, $2,300; credit Patent, $2,300.
D.
debit Accumulated Amortization - Patent, $2,300; credit Amortization Expense - Patent, $2,300.
15.
Mackey Company has a five-year mortgage for $100,000. In the first year of the mortgage, Mackey
will report this liability as a
A.
current liability of $20,000 and a long-term liability of $80,000.
B.
long-term liability of $100,000.
C.
current liability of $100,000.
D.
current liability of $80,000 and a long-term liability of $20,000.
16.
Which of the following would not
be a liability according to FASB's definition of a liability?
A.
An obligation that's estimated in amount
B.
A note payable with no specified maturity date
C.
An obligation to provide goods or services in the future
D.
The signing of a three-year employment contract at a fixed annual salary
17.
Which of the following would be considered a cash equivalent?
A.
Currency
B.
Time deposits
C.
Money orders
D.
Checks
18.
Taylor Company has given you the following information from its aging of accounts receivable. The
current amount in the allowance for doubtful accounts is a $958 credit.
Using this information, what is the amount of the journal entry to record the allowance for doubtful
accounts?
Current $24,400 2% uncollectible
31–60 days 7,350 8% uncollectible
61–90 days 3,380 15% uncollectible
91 and up 1,220 30% uncollectible
A.
$991
B.
$2,457
C.
$1,949
D.
$541
19.
Which marketable securities are reported at cost on the balance sheet date?
A.
Held-to-maturity securities
B.
Available-for-sale securities
C.
Trading securities
D.
Trading and held-to-maturity securities
20.
If the amount extracted from a coal mine was different every year for four years, you would
A.
credit accumulated depletion - coal mine for the same amount each year.
B.
recompute the depletion expense rate per unit each year.
C.
debit depletion expense for the same amount each year.
D.
use the same depletion expense rate per unit each year.
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