10.The usual sequence of steps in the recording process is to a. analyze each tr
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10.The usual sequence of steps in the recording process is to
a. analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts.
b. analyze each transaction, enter the transaction in the ledger, and transfer the information to the journal.
c. analyze each transaction, enter the transaction in the book of accounts, and transfer the information to the journal.
d. analyze each transaction, enter the transaction in the book of original entry, and transfer the information to the journal.
11. The revenue recognition principle dictates that revenue should be recognized in the accounting records:
a. when cash is received.
b. when the performance obligation is satisfied.
c. at the end of the month.
d. in the period that income taxes are paid.
12. Flying Company had the following transactions during 2013:
Sales of $10,800 on account
Collected $4,800 for services to be performed in 2014
Paid $3,100 cash in salaries for 2013
Purchased airline tickets for $600 in December for a trip to take place in 2014
What is Flying’s 2013 net income using accrual accounting?
a. $8,300
b. $13,100
c. $12,500
d. $7,700
13. Which one of the following is not an objective of a system of internal controls?
a. Safeguard company assets.
b. Overstate liabilities in order to be conservative.
c. Enhance the accuracy and reliability of accounting records.
d. Reduce the risks of errors.
14. If a company fails to adjust a Prepaid Rent account for rent that has expired, what effect will this have on that month's financial statements?
a. Failure to make an adjustment does not affect the financial statements.
b. Expenses will be overstated and net income and stockholders’ equity will be under- stated.
c. Assets will be overstated and net income and stockholders’ equity will be understated.
d. Assets will be overstated and net income and stockholders’ equity will be overstated.
15. The primary source used in the preparation of the financial statements is the:
a. trial balance.
b. post-closing trial balance.
c. general trial balance.
d. adjusted trial balance.
16. A company purchased land for $84,000 cash. Real estate brokers' commission was $5,000 and $7,000 was spent for demolishing an old building on the land before construction of a new building could start. Proceeds from salvage of the demolished building was $1,200. Under the historical cost principle, the cost of land would be recorded at
a. $94,800.
b. $84,000.
c. $89,800.
d. $96,000
17. Which of the following is a true statement about inventory systems?
a. Periodic inventory systems require more detailed inventory records.
b. Perpetual inventory systems require more detailed inventory records.
c. A periodic system requires cost of goods sold be determined after each sale.
d. A perpetual system determines cost of goods sold only at the end of the accounting period.
18. At December 31, 2012 Mohling Company’s inventory records indicated a balance of $652,000. Upon further investigation it was determined that this amount included the following:
$112,000 in inventory purchases made by Mohling shipped from the seller 12/27/12 terms FOB destination, but not due to be received until January 2nd
$74,000 in goods sold by Mohling with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th.
$6,000 of goods received on consignment from Dollywood Company
What is Mohling’s correct ending inventory balance at December 31, 2012?
a. $540,000
b. $646,000
c. $460,000
d. $534,000
19. Financial information is presented below:
Operating expenses $ 35,000
Sales returns and allowances 12,000
Sales discounts 3,000
Sales revenue 140,000
Cost of goods sold 85,000
The profit margin would be
a. .32.
b. .16.
c. .03.
d. .04.
Explanation / Answer
10. First the transaction is recosrde in journal and then posted into ledgers. Therefore answer will be (a).
11. As per revenue recognition concept revenue should not be recognised unless performance obligation is satisfied. Therefore answer will be (b)
12. Net income as per accrual accounting = 10800 - 3100 = 7700
Thus answer will be (d)
13. Overstatting liabilities in order to be conservative is not an objective of Internal control system. Thus answer will be (b)
14. Prepaid rent account is shown as asset in balance sheet and rent is expenses, thus non adjustment of rent from prepaid rent account wll result in overstatement of asset and aver statement of income. Thus answer will be (d).
15. The primary source used in preparation of financial statement is Adjusted trial balance. Thus answer will be (d).
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