INTERMEDIATE ACCOUNTING MCQ

QUESTION 1

Land was acquired in year 1 for a future building site at a cost of $40,000. The assessed valuation for tax purposes is $27,000, a qualified appraiser placed its value at $48,000, and a recent firm offer for the land was for a cash payment of $46,000. The land should be reported in the financial statements at:

$40,000.

$46,000.

$27,000.

$48,000.

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QUESTION 2

The New York Yankee baseball team has an account titled “Unearned Ticket Revenue”.   What type of account is this and on what financial statement is it reported?

Type of Account = Asset; Financial Statement = Balance Sheet

Type of Account = Liability; Financial Statement = Balance Sheet

Type of Account = Revenue; Financial Statement = Balance Sheet

Type of Account = Revenue; Financial Statement = Income Statement

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QUESTION 3

During  year 1 Eagle Corporation purchased supplies for $5,000 and recorded the entire amount in the suppliy asset account..  At the end of year 1, the supplies account reflected a balance of $1,500.  What is the correct adjusting entry at the end of year 1?

Debit supplies for $5,000 and credit cash for $5,000.

Debit supplies expense for $1,500 and credit supplies for $1,500.

Debit supplies expense for $3,500 and credit supplies for $3,500.

Debit supplies expense for $5,000 and credit supplies for $5,000.

No entry is required.

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QUESTION 4

On September 1, 2012, Eagle Corporation acquired a vehicle for $18,000.  Eagle estimates that that it will use the vehicle for 4 years and that at the end of that period, the vehicle will have a trade-in value of $3,000. What is the amount of depreciation expense for year 1?

0

$3,750

$4,000

$1,250

$4,500

$1,500

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QUESTION 5

Retained earnings for the Alpha Company as of January 1, year 1 was $200,800.  During year 2 the company earned revenue of $318,500, had expenses of $120,000 and paid a cash dividend of $12,000.The income statement for year 2 would show net income of:

$186,500

$198,500.

$399,300

$387,300

$210,500

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QUESTION 6

On December 31, Year 1, the end of Larry's Used Cars first year of operations, the accounts receivable was $53,600. The company estimates that $1,200 of the year-end receivables will not be collected. Accounts receivable in the year 1 balance sheet will be valued at:

$53,600.

$54,800.

$52,400.

$1,200.

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QUESTION 7

On March 1, Year 1, Eagle borrowed $240,000 from Chase Bank.  The terms of the note is that $24,000 must be paid back each year over the next 10 years.  The correct balance sheet presentation for the note is:

Current liability = $24,000; Long Term Liability = $216,000

Current liability = $240,000; Long Term Liability = 0

Current liability = 0; Long Term Liability = $240,000

Current asset = $240,000; Long Term Liability = $240,000

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QUESTION 8

In the middle of its year 1 fiscal year, Sand, Inc. paid $18,000 to its insurance company for one-year comprehensive insurance coverage. Sand recorded the entire expenditure as an expense in year 1.  Which of the following is true?

The insurance policy should be recorded as an expense in year 1.

The insurance policy should be recorded as an expense in year 2.

The insurance policy should be recorded as an expense in either year 1 or year 2 based on company policy.

The insurance policy should be recorded as an expense in year 1 only if paid for by cash.

That portion of the policy that has expired in year 1 should be recorded as an expense in year 1 with the remainder recorded as a prepaid expense in year 1.

That portion of the policy that has expired in year 1 should be recorded as an expense in year 1 with the remainder recorded as a deferred revenue in year 1.

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QUESTION 9

During November year 1 Asler, Inc. performed consulting services.  The client does not pay Asler until January year 2.  Which of the following statements is correct?

Using accrual accounting, the revenue is reported in January year 2.

Using accrual accounting, the revenue is reported in November year 1.

Using accrual accounting, the revenue is reported in December year 1.

Using accrual accounting, the revenue is reported when the expenses related to the service are paid by Asler.

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QUESTION 10

Eagle Corporation performed and completed services for clients in December, year 1.  $10,000 of the $25,000 of services performed during December was collected and recorded in December and the remainder will be collected in January.  What is the amount of revenue that should be recorded in year 1?

$10,000

$25,000

Either $10,000 or $25,000 depending on Eagle Corporation’s policy.

0

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QUESTION 11

Eagle Corporation leases some of its office space to another company.  On November 1, year 1, Eagle received a $5,400 check from its tenant .  They credited the check to Rent Revenue.  The check is to satisfy three months of rent.  What is the correct adjusting entry at December 3, the end of year 1 (if any)?

No entry is required. 

Debit cash for $5,400 and credit prepaid rent for $5,400.

Debit rent revenue for $5,400 and credit deferred revenue for $5,400.

Debit rent revenue for $1,800 and credit deferred revenue for $1,800.

Debit rent revenue for $5,400 and credit rent expense for $5,400.

Debit deferred revenue for $3,600 and credit rent revenue for $3,600.

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QUESTION 12

Mama's Pizza Shoppe borrowed $8,000 at 9% interest on May 1, year 1, with principal and interest due on October 31, year 2. The company's fiscal year ends June 30, year 1. What adjusting entry would the company record on June 30, year 1 in regard to this transaction?

No entry.

Debit interest expense for $240 and credit interest payable for $240.

Debit interest expense for $120 and credit interest payable for $120.

Debit prepaid interest for $120 and credit interest payable for $120.

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QUESTION 13

Management establishes a policy that purchases of small office equipment costing less than $50 should be expensed.  Which of the following is true?

All equipment regardless of cost should be capitalized and depreciated over its useful life.

As a result of this policy, the correct entry should be a debit to office equipment expense and a credit to cash (or accounts payable).

Small office equipment purchases should be debited to accumulated depreciation.

This entry violates the accounting principle of “matching”.

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QUESTION 14

During January, Joe’s Snow Removal Company plowed 18 driveways, all of which were paid in February.  The company uses the accrual basis of accounting.  How will these transactions affect the company’s financial statements?

The income statement will show the effect of the transactions in January.

The income statement will show the effect of the transactions in February.

The balance sheet will show no effect from the transactions in January.

The transactions have no effect on the balance sheet.

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QUESTION 15

At the end of its year 1 fiscal year, Dower, Inc. received an order from a customer for $6,000. The merchandise will ship early in year 2. Because the order was received in year 1, the controller recorded the sale in year 1.  Which of the following is true?

The order should be recorded in year 1.

The order should be recorded as a sale in year 2.

The order should be recorded as a sale in either year 1 or year 2 based on company policy.

The order should be recorded when paid.