Principal of accounting 1
1. When using a periodic inventory method, what account is increased when you buy merchandise inventory?
a. cost of goods sold
b beginning inventory
c. ending inventory
d. purchases
3. Beginning inventory was $4,000, purchases totaled $22,000 and sales were $20,000. What is the ending inventory?
a. $2,000
b. $4,000
c. $6,000
d. $8,000
4. Which is true of the normal balance of an income summary?
a. the balance is debit.
b the balance is credit.
c. the account does not have a normal balance
d. it depends on which financial statement it appears
5. The goods a company has available to sell to customers are called:
a. supplies
b. sales
c. cost of goods sold
d. merchandise inventory
6. Which amount does NOT change during the period and is added to purchases when computing the cost of goods available for sale?
a. beginning inventory
b ending inventory
c. periodic inventory
d. freight-in
7. An account never used in a service business is :
a. consulting fee’s revenue
b. interest payable
c. merchandise inventory
d. accumulated depreciation-equipment
8. At the start of the year, northern lights had $8,000 worth of merchandise. what do we know about northern lights?
a. its a service business
b. its a retail business
c. the company ended with a new income last year.
d. the company ended with a net loss last year
9. The physical count of inventory was incorrect, which overstated the ending inventory. This would cause the:
a. cost of goods sold to be overstated
b.cost of goods sold to be understated
c. gross profit to be understated
d. net income to be understated.
10. When completing a worksheet,:
a. the ending inventory amount appears in the income statement debit column.
b. the beginning inventory amount appears in the adjustment credit column.
c. the ending inventory amount appears in the unadjusted trial balance debit column of the worksheet.
d. the beginning inventory amount appears in the balance sheet debit column of the worksheet.
11. The beginning merchandise inventory account appears in the _______ on the worksheet.
a. adjustment column
b. trial balance and the balance sheet columns
c. trial balance and adjustment columns
d. all of the above
12. Beginning and ending inventories for webster’s books are $9,000 and $6,000, respectively. The debit amounts (not including income summary. in the income statement columns of the worksheet total $14,000, and the credit amounts (not including income summary. total $15,500. the firm has a:
a. net income of $1,500
b.net loss of $1,500
c. net loss of $3,000
d. net income of $3,000
13. Which inventory appears in the balance sheet column of the worksheet?
a. ending inventory
b. beginning inventory
c. combination of beginning and ending inventories
d. none of the above.
14. Beginning merchandise inventory would be found on the worksheet in the:
a. income statement debit column
b. income statement credit column
c. balance sheet debit column
d. balance sheet credit column
15. The ending merchandise inventory account appears in the _____ on the worksheet.
a. adjusted trial balance and balance sheet columns
b. adjustment column
c. adjustment, adjusted trial balance, and income statement colums
d. adjustment, adjusted trial balance, and balance sheet column.
17. Net purchases + purchases returns and allowances + purchase discount equals:
a. net loss
b. net income
c. gross profit
d. gross purchases
18. Cost of goods sold includes:
a. freight-in
b. freight-out
c. interest income
d. net sales
19. The information to prepare the statement of owner’s equity comes from the:
a. income statement columns on the worksheet
b. adjustments columns on the worksheet
c. balance sheet columns on the worksheet
d. general ledger
20. A classified balance sheet provides more information about the company to:
a. owners
b. creditors
c. suppliers.
d. all of the above
21.Town and country saddle learns the account receivable for a customer is uncollectible. The journal entry under the allowance method to write-off an account is to:
a. debit allowance for doubtful accounts, credit accounts receivable
b. debit sales; credit allowance for doubtful accounts
c. debit bad debts expense; credit accounts receivable
d. debit allowance for doubtful accounts, credit bad debts expense.
22. Miami company uses allowance for doubtful accounts. when Miami writes off an uncollectible account, there is a(n):
a. decrease in accounts receivable
b. decrease in expense
c.increase in net income
d. none of the above
23. A company writes off a specific account as uncollectible, but later the customer pays. the journal entry to record the reinstatement under the allowance method includes a(n):
a. increase to cash
b.decrease to sales
c. decrease to allowance for doubtful accounts
d. decrease to bad debts expense.
24. What would be the basis for the following journal entry if it appears on travis company records? Travis uses the allowance method.
Allowance for doubtful accounts 150
accounts receivable - tim morgan 150
a. the firm is estimating its uncollectible accounts
b. the firm is writing off a specific account
c. the firm is making a collection of previously written-off account
d. it is a reversing entry
25. No entry was recorded to reinstate a bad debt when making a collection. the allowance method is being used. this error would cause:
a. total assets to be overstated
b. total liabilities to be understated
c. net income to be understated
d. none of these are correct.
26. If the allowance method of accounting for uncollectible receivables is used, what general ledger account is debited to write off a customer’s account as uncollectible?
a. allowance for doubtful accounts
b. bad debt expense
c. accounts payable
d. bad debts recovered
27. A company receives a letter from a customers named Mary stating that she is bankrupt. the entry to write off her balance of $1,250 would be:
a. allowance for doubtful accounts 1250
accounts receivable/mary 1250
b. accounts receivable/mary 1250
bad debt expense 1250
c. bad debt expense 1250
allowance for doubtful accounts 1250
d. none of the above
28. Colleen’s account was written off for $800. She received an inheritance from her uncle and wants to clear her account. The entry to record this is
a. Debit cash and credit accounts receivable/maggie
b. debit allowances for doubtful accounts, credit accounts receivable/maggie,debit cash, and credit accounts receivable/maggie.
c. debit accounts receivable/maggie, credit allowance for doubtful accounts, debit cash, and credit accounts receivable/maggie.
d. debit accounts receivable/maggie, credit allowance for doubtful accounts, debit accounts receivable/maggie, and credit cash.
29. The journal entry to write off an account judged to be uncollectible under the allowance would include a debit to:
A. sales.
b. accounts receivable
c. allowance for doubtful accounts
d. bad debts expense.
30. After having written off a customer under the direct write-off method, the account will be reopened when the customer:
a. sends the flu amount to pay off the account.
b. sends any amount to pay on their account
c. pays the collection bureau.
d. none of the above
31. Which method uses an aging of accounts receivable to calculate the bad debts expense?
a. income statement approach
b. balance sheet approach
c. aging the accounts receivable
d. direct write-off
32. Harry’s hardware estimates that approximately $1.75 out of every $100 of credit sales proves to be uncollectible. Barber calculates bad debts expense using the :
a. income statement approach
b. direct write-off method
c. balance sheet approach
d. aging the accounts receivable approach
33. Gross accounts receivable is $10,000. Allowance for doubtful accounts has a credit balance of $200. Net sales for the year are $150,000. In the past, 2% of sales had proved uncollectible, and an aging of the receivables indicates $1,200 is doubtful. under the income statement approach, the bad debts expense for the year is:
a. $1,000
b. $3,000
c. $2,800
d. $1,200.
34. Empire has a credit balance of $750 in its allowance for doubtful accounts. the balance in the accounts receivable account is $80,500, with $2,415 estimated to be uncollectible after aging the accounts. under the balance sheet approach, the debit to bad debt expense will be:
a. $2,415
b. $3,165
c. $1,665
d. $750
35. Indy sport and hobby’s allowance for doubtful accounts had an unadjusted credit balance of $400. The manager estimates that $900 of the accounts receivable is uncollectible. Using the balance sheet approach, the year-end adjusting entry for bad debts expense:
a. includes a credit to the bad debt expense account for $500.
b. includes a debit to the bad debts expense account for $900.
c. includes a credit to the bad debts expense account for $1,300
d. includes a debit to the bad debts expense account for $500.
36. As the past due time increases for an account, the likelihood of collecting that account:
a. usually goes up.
b. usually goes down.
c. stays the same
d. none of the above
37. After aging the receivables. tim’s toys estimates that $900 will not be collected, and allowance account has a debit balance of $325. The adjusting entry would be for:
a. $575
b. $900
c. $1,225
d. $325
38. After aging the accounts receivable, it is estimated that $2,450 will not be collected, and the allowance account has an existing debit balance of $300. If accounts receivable is $107,000, the net receivables would be:
a. $107,000
b. $106,900
c. $104,550
d. $104,250
39. Aging accounts receivable measures:
a. days a bill has been due but not paid.
b. months a bill has been due but not paid.
c. sales for the year.
d. all of the above.
40. A detailed analysis of accounts receivable to determine how long each account has been outstanding is called:
a. analyzing the accounts receivable
b. aging the uncollectible accounts
c. aging the accounts receivable
d. taking a percentage of sales on account.
