Acctg Mock Exam.pdf

Republic of the Philippines BULACAN STATE UNIVERSITY COLLEGE OF BUSINESS ADMINISTRATION City of Malolos, Bulacan Telephone Number : 7964131 or 919-7800 loc 1058, 1057 Webpage: www.bulsu.edu.ph

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1.

Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the information they already possess or can obtain from other sources, and their ability to process information. Consequently, for information to be useful there must be a linkage between these users and the decisions they make. This link is a. relevance. b. reliability. c. understandability. d. materiality.

2.

The overriding criterion by which accounting information can be judged is that of a. usefulness for decision making. b. freedom from bias. c. timeliness. d. comparability.

3. Information is neutral if it a. provides benefits which are at least equal to the costs of its preparation. b. can be compared with similar information about an enterprise at other points in time. c. would have no impact on a decision maker. d. is free from bias toward a predetermined result. 4. Financial information exhibits the characteristic of consistency when a. expenses are reported as charges against revenue in the period in which they are paid. b. accounting entities give accountable events the same accounting treatment from period to period. c. extraordinary gains and losses are not included on the income statement. d. accounting procedures are adopted which give a consistent rate of net income. 5. Information about different entities and about different periods of the same entity can be prepared and presented in a similar manner. Comparability and consistency are related to which of these objectives? a. b. c. d.

Comparability Entities Entities Periods Periods

Consistency Entities Periods Entities Periods

6. A decrease in net assets arising from peripheral or incidental transactions is called a(n) a. capital expenditure. b. cost. c. loss. d. expense. 7. What accounting concept justifies the usage of accruals and deferrals? a. Going concern assumption b. Materiality constraint c. Consistency characteristic d. Monetary unit assumption 8. The assumption that a business enterprise will not be sold or liquidated in the near future is known as a. economic entity assumption. b. monetary unit assumption. c. conservatism assumption. d. going concern 9. Valuing assets at their liquidation values rather than their cost is inconsistent with the a. periodicity assumption. b. matching principle. c. materiality constraint. d. historical cost principle. 10. Revenue is generally recognized when realized or realizable and earned. This statement describes the a. consistency characteristic. b. matching principle. c. revenue recognition principle. d. relevance characteristic.

11. Generally, revenue from sales should be recognized at a point when a. management decides it is appropriate to do so. b. the product is available for sale to the ultimate consumer. c. the entire amount receivable has been collected from the customer and there remains no further warranty liability. d. none of these. 12. Revenue generally should be recognized a. at the end of production. b. at the time of cash collection. c. when realized. d. when realized or realizable and earned. 13. The accounting principle of matching is best demonstrated by a. not recognizing any expense unless some revenue is realized. b. associating effort (expense) with accomplishment (revenue). c. recognizing prepaid rent received as revenue. d. establishing an Appropriation for Contingencies account. 14. Application of the full disclosure principle a. is theoretically desirable but not practical because the costs of complete disclosure exceed the benefits. b. is violated when important financial information is buried in the notes to the financial statements. c. is demonstrated by the use of supplementary information presenting the effects of changing prices. d. requires that the financial statements be consistent and comparable. 15. Which of the following statements about materiality is not correct? a. An item must make a difference or it need not be disclosed. b. Materiality is a matter of relative size or importance. c. An item is material if its inclusion or omission would influence or change the judgment of a reasonable person. d. All of these are correct statements about materiality. 16. Allowing firms to estimate rather than physically count inventory at interim (quarterly) periods is an example of a trade-off between a. verifiability and reliability. b. reliability and comparability. c. timeliness and verifiability. d. neutrality and consistency. 17. The information provided by financial reporting pertains to a. individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers. b. business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers. c. individual business enterprises, industries, and an economy as a whole, rather than to members of society as consumers. d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or industries. 18. When a customer purchases merchandise inventory from a business organization, she may be given a discount which is designed to induce prompt payment. Such a discount is called a(n) a. trade discount. b. nominal discount. c. enhancement discount. d. cash discount. 19. Which of the following methods of determining bad debt expense does not properly match expense and revenue? a. Charging bad debts with a percentage of sales under the allowance method. b. Charging bad debts with an amount derived from a percentage of accounts receivable under the allowance method. c. Charging bad debts with an amount derived from aging accounts receivable under the allowance method. d. Charging bad debts as accounts are written off as uncollectible. 20. The journal entries for a bank reconciliation a. are taken from the "balance per bank" section only. b. may include a debit to Office Expense for bank service charges. c. may include a credit to Accounts Receivable for an NSF check. d. may include a debit to Accounts Payable for an NSF check.

21. The following information is available for Reagan Company: Allowance for doubtful accounts at December 31, 2016 Credit sales during 2017 Accounts receivable deemed worthless and written off during 2017

8,000 400,000 9,000

As a result of a review and aging of accounts receivable in early January 2018, however, it has been determined that an allowance for doubtful accounts of 5,500 is needed at December 31, 2017. What amount should Reagan record as "bad debt expense" for the year ended December 31, 2017? a. 4,500 b. 5,500 c. 6,500 d. 13,500 22. King Co.'s allowance for uncollectible accounts was 95,000 at the end of 2017 and 90,000 at the end of 2016. For the year ended December 31, 2017, King reported bad debt expense of 13,000 in its income statement. What amount did King debit to the appropriate account in 2017 to write off actual bad debts? a. 5,000 b. 8,000 c. 13,000 d. 18,000 23.Under the allowance method of recognizing uncollectible accounts, the entry to write off an uncollectible account a. increases the allowance for uncollectible accounts. b. has no effect on the allowance for uncollectible accounts. c. has no effect on net income. d. decreases net income. 24. The following accounts were abstracted from Todd Co.'s unadjusted trial balance at December 31, 2017: Debit Credit Accounts receivable 750,000 Allowance for uncollectible accounts 8,000 Net credit sales 3,000,000 Todd estimates that 2% of the gross accounts receivable will become uncollectible. After adjustment at December 31, 2017, the allowance for uncollectible accounts should have a credit balance of a. 60,000. b. 52,000. c. 23,000. d. 15,000. 25. Which of the following most accurately reflects the concept of depreciation as used in accounting? a. The process of charging the decline in value of an economic resource to income in the period in which the benefit occurred. b. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset. c. A method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved. d. An accounting concept that allocates the portion of an asset used up during the year to the contra asset account for the purpose of properly recording the fair market value of tangible assets. 26. The book value of a plant asset is a. the fair market value of the asset at a balance sheet date. b. the asset's acquisition cost less the total related depreciation recorded to date. c. equal to the balance of the related accumulated depreciation account. d. the assessed value of the asset for property tax purposes. 27. On January 2, 2015, Payne Company acquired equipment to be used in its manufacturing operations. The equipment has an estimated useful life of 10 years and an estimated salvage value of 15,000. The depreciation applicable to this equipment was 70,000 for 2018, computed under the sum-ofthe-years'-digits method. What was the acquisition cost of the equipment? a. 535,000 b. 565,000 c. 550,000 d. 541,667 28. A machine with a five-year estimated useful life and an estimated 10% salvage value was acquired on January 1, 2015. The depreciation expense for 2017 using the double-declining balance method would be original cost multiplied by a. 90% × 40% × 40%. b. 60% × 60% × 40%. c. 90% × 60% × 40%. d. 40% × 40%.

29 On April 13, 2016, Foley Co. purchased machinery for 120,000. Salvage value was estimated to be 5,000. The machinery will be depreciated over ten years using the double-declining balance method. If depreciation is computed on the basis of the nearest full month, Foley should record depreciation expense for 2017 on this machinery of a. 20,800. b. 20,400. c. 20,550. d. 20,933. 30. The cost of land does not include a. costs of grading, filling, draining, and clearing. b. costs of removing old buildings. c. costs of improvements with limited lives. d. special assessments. 31. If a corporation purchases a lot and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on a. the significance of the cost allocated to the building in relation to the combined cost of the lot and building. b. the length of time for which the building was held prior to its demolition. c. the contemplated future use of the parking lot. d. the intention of management for the property when the building was acquired. 32. Historical cost is the basis advocated for recording the acquisition of property, plant, and equipment for all of the following reasons except a. at the date of acquisition, cost reflects fair market value. b. property, plant, and equipment items are always acquired at their original historical cost. c. historical cost involves actual transactions and, as such, is the most reliable basis. d. gains and losses should not be anticipated but should be recognized when the asset is sold. Seiler Co. purchased land as a factory site for 600,000. Seiler paid 60,000 to tear down two buildings on the land. Salvage was sold for 5,400. Legal fees of 3,480 were paid for title investigation and making the purchase. Architect's fees were 31,200. Title insurance cost 2,400, and liability insurance during construction cost 2,600. Excavation cost 10,440. The contractor was paid 2,200,000. An assessment made by the city for pavement was 6,400. Interest costs during construction were 170,000. 33. The cost of the land that should be recorded by Seiler Co. is a. 660,480. b. 666,880. c. 669,880. d. 676,280. 34. The cost of the building that should be recorded by Seiler Co. is a. 2,403,800. b. 2,404,840. c. 2,413,200. d. 2,414,240. 35. When using a perpetual inventory system, a. no Purchases account is used. b. a Cost of Goods Sold account is used. c. two entries are required to record a sale. d. all of these. 36. Which of the following items should be included in a company's inventory at the balance sheet date? a. Goods in transit which were purchased f.o.b. destination. b. Goods received from another company for sale on consignment. c. Goods sold to a customer which are being held for the customer to call for at his or her convenience. d. None of these. 37. Which of the following is correct? a. Selling costs are product costs. b. Manufacturing overhead costs are product costs. c. Interest costs for routine inventories are product costs. d. All of these. 38. The following information is available for Kerr Company for 2007: Freight-in Purchase returns Selling expenses Ending inventory

30,000 75,000 150,000 260,000

The cost of goods sold is equal to 400% of selling expenses. What is the cost of goods available for sale? a. 600,000. b. 890,000. c. 815,000. d. 860,000. 39. The following information applied to Grey, Inc. for 2017: Merchandise purchased for resale Freight-in Freight-out Purchase returns

300,000 8,000 5,000 2,000

Grey's 201p7 inventoriable cost was a. 300,000. b. 303,000. c. 306,000. d. 311,000. 40. Dark Co. recorded the following data pertaining to raw material X during January 2017: Units Date 1/1/17 1/11/17 1/22/17

Received Inventory Issue Purchase

Cost 8.00

Issued 1,600

4,000

9.40

On Hand 3,200 1,600 5,600

The moving-average unit cost of X inventory at January 31, 2017 is a. 8.70. b. 8.85. c. 9.00. d. 9.40. 41. Management and financial accounting are used for which of the following purposes? Management accounting a. b. c. d.

internal external internal external

Financial accounting external internal internal external

42. Accruals occur when cash flows: a. Occur before expense recognition. b. Occur after revenue or expense recognition. c. Are uncertain. d. May be substituted for goods or services. 43. An example of a contra account is: a. Depreciation expense. b. Accounts receivable. c. Sales revenue. d. Accumulated depreciation. 44. The purpose of closing entries is to transfer: a. Accounts receivable to retained earnings when an account is fully paid. b. Balances in temporary accounts to a permanent account. c. Inventory to cost of goods sold when merchandise is sold. d. Assets and liabilities when operations are discontinued.

45. Which of the following would not be used as an adjusting entry? a. Prepaid Rent Rent expense b. Cash Unearned revenue c. Interest expense Interest payable d. Bad debt expense Allowance for doubtful accounts 46. The adjusting entry required when amounts previously recorded as unearned revenues are earned includes: a. A debit to a liability. b. A debit to an asset. c. A credit to a liability. d. A credit to an asset.

47. Bland Foods purchased a two-year fire and extended coverage insurance policy on August 1, 2018, and charged the 4,200 premium to Insurance expense. At its December 31, 2018, yearend, Bland Foods would record which of the following adjusting entries? a. Insurance expense 875 Prepaid insurance 875 b. Prepaid insurance 875 Insurance expense 875 c. Insurance expense 875 Prepaid insurance 3,325 Insurance payable 4,200 d. Prepaid insurance 3,325 Insurance expense 3,325 48. The employees of Neat Clothes work Monday through Friday. Every other Friday the company issues payroll checks totaling 32,000. The current pay period ends on Friday, July 3. Neat Clothes is now preparing quarterly financial statements for the three months ended June 30. What is the adjusting entry to record accrued salaries at the end of June? a. Salaries expense 22,400 Prepaid salaries 9,600 Salaries payable 32,000 b. Salaries expense 6,400 Salaries payable 6,400 c. Prepaid salaries 9,600 Salaries payable 9,600 d. Salaries expense 22,400 Salaries payable 22,400 49. On December 31, 2017, Typical Fashions had balances in its Accounts receivable and Allowance for uncollectible accounts of 48,400 and 940, respectively. During 2018, Typical Fashions wrote off 820 in Accounts receivable and determined that there should be an Allowance for uncollectible accounts of 1,140 at December 31, 2018. Bad debt expense for 2018 would be: a. 320. b. 1,140. c. 820. d. 1,020. 50. Fink Insurance collected premiums of 18,000,000 from its customers during the current year. The adjusted balance in the Unearned premiums account increased from 6 million to 8 million dollars during the year. What was Fink's revenues from earned insurance premiums for the current year? a. 10,000,000. b. 16,000,000. c. 18,000,000. d. 20,000,000.