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ACCOUNTING (ACCT) Exam 2 Actual Exam

Questions 10% CORRECT


An item of merchandise that was sold for $600 cash by a business using the perpetual
inventory system. The item cost $400. After the sale entry has been recorded, what
additional entry would be required?

A) a debit to sales and credit to inventory for $600


B) a debit to inventory and a credit to cost of goods sold for $400
C) A debit to cost of goods sold and a credit to purchases for $400
D) A debit to cost of goods sold and a credit to inventory for $400 Correct Answer -
D) A debit to Cost of Goods Sold and a credit to Inventory for $400

What is NOT affected by the choice of an inventory costing method (that is, between
FIFO, LIFO, and weighted average)?

A) cost of goods sold


B) net sales
C) gross profit
D) net income Correct Answer -B) Net Sales

Mr Goeddee deposits $500 in his savings account at the end of every month for three
years. The account's annual interest rate is 6%. To determine the balance in the
account after three years, he should use:

A) i = 0.5%
B) n = 3.
C) C Table B.2, Future Value of 1
D) All of the above Correct Answer -i = % 0.5

When a firm writes off a bad debt under the allowance method of accounting for bad
debts, what occurs?

A) expenses will increase


B) total assets remain the same
C) both of the above
D) neither of the above Correct Answer -B) Total assets remain the same

Given the following information for Potter Company, what are Net Sales?

Beginning Inventory 10,000


Gross Profit 60,000
Ending Inventory 9,000
Net Purchases 45,000
A) $ 46,000
B) $ 55,000
C) $ 106,000
D) $ 105,000 Correct Answer -C) $ 106,000

Which of the following is true about Cost of Goods Sold?

A) it is a contra-asset on the balance sheet


B) it is an expense
C) it includes selling and administrative costs
D) it includes the cost of bad debts Correct Answer -b. it is an expense

Which accounting principle may allow a company to report an amount NOT in


accordance with GAAP?

A) materiality
B) cost
C) conservatism
D) there is no such principle Correct Answer -A) materiality

Which of the following would require a journal entry on Foster's books?

A) outstanding checks
B) deposits in transit
C) customer check returned by bank as NSF
D) all of the above would have required a journal entry to correct foster's books
Correct Answer -C) Customer Check returned by bank as NSF

What basic principle requires the lower-of-cost-or-market rule?

a) revenue recognition
b) consistency
c) time period
d) conservatism Correct Answer -D) Conservatism

If a merchandiser's ending inventory on December 31, 2011 is counted incorrectly,


which of the following will also be incorrect for 2011?

A) cost of goods sold


B) sales revenue
C) goods available for sale
D) all of the above Correct Answer -A) cost of goods sold

Ms Daly deposited $6,000 in an account that earns 4% per year, compounded quarterly.
How much will she have in the account at the end of four years?
a) $ 6,960.00
b) 7,019.40
c) $7,035.60
d) $ 11,238.00 Correct Answer -c) $7,035.60

Which of the following statements is true about the effects of inventory costing methods
during a period of rising prices?

A) FIFO results in the lowest taxes


B) LIFO results in the lowest Net Income
C) LIFO results in the highest inventory
D) All of the above Correct Answer -B) LIFO results in the lowest net income

In which case would Johnson Company report "Sales Discounts?"

A) Johnson puts its merchandise on sale.


B) Johnson's goods are reduced in price due to damage
C) Johnson buys merchandise and pays promptly
D) Johnson's customers buy merchandise and pays promptly Correct Answer -D)
Johnson's customers buy merchandise and pays promptly

Which of the following is/are true about the account "Allowance for Bad Debts?"

A) it is a contra-asset account
B) it appears on both the balance sheet and the income statement
C) it is added to accounts receivable to report a more conservative amount
D) all the above Correct Answer -a) it is a contra-asset account

Which of the following supports the use of an allowance account for accounting for bad
debts?
a. Matching principle.
b. Conservatism.
c. Both of the above.
d. Neither of the above. Correct Answer -C. Both of the Above

How should a company record freight cost on goods purchased?


a. Add to inventory purchases.
b. Subtract from cost of goods sold.
c. Add to cash.
d. Add to accounts receivable. Correct Answer -A) Add to Inventory Purchases

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