Practice Exam

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Practice Exam I with Answers

Problem 1 Multiple Choice Questions (2 Points each)

1. If assets are $99,000 and liabilities are $32,000, then equity equals:

A)$ 32,000.
B)$ 99,000.
C)$ 67,000.

Answer: C
Calculation: Equity = $99,000 - $32,000 = $67,000

2. A debit is:

A)An increase in an account.
B)The right-hand side of a T-account.
C)A decrease in an account.
D)The left-hand side of a T-account.
E)An increase to a liability account.

Answer: D

3. Accounting is an information and measurement system that:

A)Identifies business activities.
B)Records business activities.
C)Communicates business activities.
D)Helps people make better decisions.
E)All of the above.

Answer: E

4. The primary objective of financial accounting is:

A)To provide financial statements to help external users analyze and interpret an organization's activities.
B)To serve the decision-making needs of internal users.
C)To monitor and control company activities.
C)To provide information on both the costs and benefits of managing products and services.
D)To know what, when, and how much to produce.
E) None of the above.

Answer: A

5. Jan 15, Wal-mart sold a sofa to customer Danna on credit. The price of the sofa is $200. According to financing contract, Danna will pay $200 to Wal-mart 6 month later. Which accounting principle would prescribe that Wal-mart record $200 sale price as sales revenue on Jan 15?

A) Matching principle.
B)Going-concern principle.
C)Revenue recognition principle.
D)All of the above.
E) None of the above.

Answer: C

6. The area of accounting aimed at serving the decision making needs of internal users is:

A)Financial accounting.
B)Managerial accounting.
C)External auditing.
D)SEC reporting.
E)Governmental accounting.

Answer: B

7. Internal users of accounting information always include:


Answer: D

8. External users of accounting information include:

D)Government regulators.
E)All of the above.

Answer: E

9. Financial accounting and reporting standards in the United States are established primarily by:


Answer: B

10. Assets created by selling goods and services on credit are:

A) Accounts payable
B) Accounts receivable
C) Liabilities
D) Expenses
E) Equity

Answer: B

11. Revenue is properly recognized:

A)When the customer's order is received.
B)Only if the transaction creates an account receivable.
C)At the end of the accounting period.
D)Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.
E)When cash from a sale is received.

Answer: D

12. The process of transferring general journal information to the ledger is:

A)Double-entry accounting.
C)Balancing an account.
E) None of the above

Answer: B

13. A company pays its employee each Friday at the rate of $100 per day each for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employee worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:

A)Debit Unpaid Salaries $300 and credit Salaries Payable $300.
B)Debit Salaries Expense $200 and credit Salaries Payable $200.
C)Debit Salaries Expense $300 and credit Salaries Payable $300.
D)Debit Salaries Payable $200 and credit Salaries Expense $200.
E)Debit Salaries Expense $200 and credit Cash $200.

Answer: B
Calculation: 1 employee x 2 days x...
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