Friday, August 5, 2016

General Financial Accounting Test Answers



Ques : Which of the journal entries below is incorrectly recorded?
Ans  : Dr: Prepaid Insurance, Dr: Cash - Paid in advance for a 1-year insurance policy

Ques :  Which of the following transactions would NOT result in revenue being reported?
Ans  : Collection of an account receivable

Ques : XYZ Company publishes a monthly sports magazine. The company has fiscal year of Jan-Dec. On July 1 of Year 1, the company sold 1000 two-year subscriptions for $200 each. On December 31 of Year 1, the amount reported as a liability on the Balance Sheet and the amount reported as revenue on the Income Statement are, respectively:
Ans  :  $150,000 and $50,000

Ques : From the following list of accounts and account balances, determine the amount that would be properly classified as Property, Plant, & Equipment.

$100,000 - Land Used in Business
$60,000 - Machinery Leased from Others
($80,000) - Accumulated Depreciation
$140,000 - Inventories
$40,000 - Land Held for Future Plant Site
$200,000 - Building
$50,000 - Investment in Stock of Construction Company
Ans  : $360,000

Ques : XYZ Company has just completed its first year of operations in Year 1. The company distributed dividends of $50,000. If the ending balance of Retained Earnings on December 31 of Year 1 is $70,000, and the company had revenues of $400,000 from Year 1 sales, then what is the total of the company's Year 1 expenses?
Ans  :  $280,000

Ques : A ____________ is the right to use property owned by someone else.
Ans  : lease

Ques : XYZ Company has assets and liabilities of $15,000 and $12,000, respectively. If the company issues an additional $1,500 of stock for cash, what will be the balance in shareholders' equity following the transaction?
Ans  : $4,500

Ques : XYZ Company purchased a 1-year insurance policy for $3,000 on April 1 of Year 1. The amount of prepaid insurance reported on the Balance Sheet and the amount of insurance expense reported on the Income Statement on December 31 of Year 1 are, respectively:
Ans  :  $750 and $2,250

Ques : Unused materials for manufacturing products are called ______________.
Ans  : inventory

Ques : XYZ Company is interested in disposing of one of its subsidiaries and is trying to decide on the maximum price it might be able to charge. Which valuation method below would the company be most likely to use?
Ans  :  Present Value

Ques : At the beginning of the year, XYZ Company owed $14,500 to its creditors for inventory purchases. At year end, the company owed $9,150. During the year, the company made payments totaling $48,500 to its creditors for inventory purchases. What was the cost of the additional inventory that was purchased during the year?
Ans  :  $43,150

Ques : Amounts due from customers, for which the claim is in the form of a written promise to pay, are called ________________.
Ans  : Notes Receivable

Ques : Which of the following operations is NOT considered part of the accounting process leading to financial statement preparation?
Ans  : Auditing statements

Ques : Amounts borrowed by a business for a relatively long period of time under a formal written contract or indenture are called _________________.
Ans  : Unsecured Loans

Ques : Amounts owed for goods or services acquired under an informal credit agreement are called ___________________.
Ans  : Notes Payable

Ques : The process of transferring entries in the general journal to the accounts in the general ledger is called ________________.
Ans  : journalizing

Ques : The balance in all asset accounts combined is $100,000 on December 1. During December, the following transactions took place:

- Purchase of $10,000 of inventory for cash
- Purchase of $15,000 of machinery on account
- Retirement of $20,000 in bonds with cash

Given this information, what is the combined balance in the asset accounts on December 31?
Ans  :  $95,000

Ques : Amounts received for the par value of a firm's voting stock are called ___________.
Ans  :  Common Stock

Ques : Amounts received for the par value of a firm's voting stock are called ___________.
Ans  : Common Stock

Ques :  The Accumulated Depreciation account reflects _____________________.
Ans  : cumulative depreciation on the asset since acquisition

Ques : Which of the following accounts represents distributions of earnings to shareholders of the firm?
Ans  : Dividends

Ques : XYZ Company reported a balance in Accounts Receivable of $40,500 on January 1 of year 2. During Year 2, the company collected $127,500 from its customers who had purchased on account. On December 31 of Year 2, the company reported a balance in Accounts Receivable of $21,250. How much were XYZ Company's credit sales for Year 2?
Ans  : $146,750

Ques : Which of the following accounts is NOT an expense?
Ans  :  Dividends Declared

Ques : At the beginning of the year, XYZ Company reported a $7,200 balance in its Prepaid Insurance account. At year end, the company reported Insurance Expense of $9,000 in its Income Statement and a balance of $3,800 in the Prepaid Insurance account. What was the cost of the additional insurance that was purchased during the year?
Ans  : $5,600

Ques : During the year, XYZ Company's inventory account balance increased from $26,000 to $31,500. During the year, the company made payments totaling $152,500 to creditors for inventory purchases and reported Cost of Goods Sold of $159,500 on its Income Statement. How much inventory was purchased during the year?
Ans  :  $158,000

Ques :  Which of the following accounts is not closed during the closing process?
Ans  : Accumulated Depreciation

Ques : XYZ Company purchased some equipment for $120,000 on July 1 of Year 1. The equipment has an estimated useful life of 10 years and an estimated salvage value of $7,500. XYZ Company computes depreciation on a straight-line basis. How much depreciation should be recorded for Year 1?
Ans  :  $11,250

Ques : A right granted to an individual or company that excludes others from manufacturing, using, or selling a certain process or device is called a _____________.
Ans  : patent

Ques : Which of the following accounts is NOT a temporary account that should be closed during the closing process?
Ans  : Prepaid Insurance

Ques : A trial balance that shows revenue and expense accounts with zero balances and balance sheet accounts at the end of the period is called a __________________.
Ans  : Post-Closing Trial Balance

Ques : Which of the following is NOT an example of a period expense?
Ans  : Inventory costs

Ques : Which of the following accounts would NOT appear on a corporation's Balance Sheet?
Ans  : Premium on Common Stock

Ques : ________________ is the financial obligation of a company in regards to a loan that accrues with the passage of time.
Ans  : Interest Payable

Ques : XYZ Company failed to record the purchase of inventory on account at the end of 2008. In which of the following ways is the Balance Sheet misstated?
Ans  : Assets and liabilities are both understated.

Ques : Which of the following is recorded only when another business enterprise is acquired?
Ans  : Goodwill

Ques : ______________ refers to shares originally issued and outstanding that have been reacquired from the owners.
Ans  : Preferred Stock

Ques : Amounts paid for various fees incurred in organizing a corporation are called ____________.
Ans  : Organization Costs

Ques : A manufacturing firm's cost of producing its product is called ______________.
Ans  : product costs

Ques : Which of the following accounts accumulate amounts for only a single accounting period?
Ans  : Temporary Accounts

Ques : Which of the following would cause the accounting equation to be out of balance?
Ans  : All of the above

Ques : At the beginning of the year, XYZ Company reported Accounts Receivable of $39,000. During the year, the company had credit sales totaling $288,000. At year end, the Accounts Receivable balance was $8,000 higher than the beginning balance. How much cash was collected on the accounts during the year?
Ans  : $280,000

Ques :  A trial balance prepared at the end of the accounting period after adjusting entries are made is called a/an _________________.
Ans  :  Adjusted Trial Balance

Ques : Which of the following assets is a monetary asset?
Ans  : Accounts Receivable

Ques : A debit balance is normal for all of the following accounts except _______________.
Ans  : Preferred Stock

Ques : Payments made in advance for goods or services a firm will receive at a later date are called ______________.
Ans  : Advances to Suppliers

Ques :  A residual claim of owners having certain preferences relative to other owners' claims is called __________________.
Ans  : Preferred Stock

Ques : XYZ Company completed its second year of operations in Year 2. On January 1 of Year 2, the balance in Retained Earnings was $84,000. During the year, the company declared and paid a dividend of $65,000 to shareholders. The company reported net earnings of $105,000 in its Year 2 Income Statement. What was the balance in Retained Earnings on December 31 of Year 2?
Ans  : $124,000

Ques : Temporary revenue and expense accounts may be closed _________________.
Ans  : to a temporary "Income Summary" account

Ques : ________________ is/are a measure of the inflow of net assets from selling goods and providing services.
Ans  : Revenues

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