Question

16. Clean Sweep, Inc. started the month of June with $800 worth of cleaning supplies. During the month, Clean Sweep purchased $300 of supplies for cash. At June 30, $200 worth of supplies was unused. How will the company report its unused supplies on June 30?

A) $200 of unused supplies will appear as an expense on the income statement.

B) $900 of unused supplies will appear as an expense on the income statement.

C) $200 of unused supplies will appear as an asset on the balance sheet.

D) $900 of unused supplies will appear as an asset on the balance sheet.

18. Which financial statement shows Cash collected from customers?

A) income statement

B) statement of changes in shareholders’ equity

C) statement of cash flows

D) balance sheet

19. Miss Happ of Ace Electronics forgot to make the adjusting entry for depreciation on the company’s equipment. As a result of this mistake ________.

A) total liabilities are too low

B) net income is too high

C) net income is too low

D) shareholders’ equity is too low

20. Which of the following accounts typically needs to be adjusted?

A) Cash

B) Land

C) Unearned revenue

D) Common stock

Learning Objective 3-5

21. Use the following information from Hormel Foods Corporation’s income statement to calculate the company’s 2012 profit margin on sales ratio.

(in thousands)	Fiscal Year Ended
	October 26, 2012	October 28, 2011
Net sales	$6,754,903	$6,193,032
Net income	$285,500	$301,892

A) 23.7%

B) 4.2%

C) 4.4%

D) 5.0%

22. Use the following information from Hot Spots, Inc.’s income statement to calculate the company’s 2012 profit margin on sales ratio.

	December 31, 2012	December 31, 2011
Net sales	$6,000,000	$4,000,000
Net income	$600,000	$500,000

A) 10.0%

B) 12.0%

C) 12.5%

D) 20.0%

Learning Objective 3-6

23. Which of the following risks is NOTassociated with financial information?

A) errors in recording and updating the financial accounting information

B) unauthorized access to the financial accounting records

C) loss of the data in the financial accounting records

D) loss of product quality

24. A computerized accounting system stores duplicate accounting data in a secure, remote location. This control is primarily designed to prevent ________.

A) errors in recording and updating the financial accounting information

B) unauthorized access to the financial accounting records

C) loss of the data in the financial accounting records

D) incorrect acceptance of material items

25. An accounting clerk compares a bill received from a supplier with the packing slip that accompanied the shipment from the supplier. This control is primarily designed to prevent ________.

A) errors in recording and updating the financial accounting information

B) unauthorized access to the financial accounting records

C) loss of the data in the financial accounting records

D) incorrect acceptance of material items

Learning Objective 4-2

26. Cash is found on the ________.

A) Income statement

B) Balance sheet

C) Statement of changes in shareholders’ equity

D) Statement of operations

27. Which of these is a cash equivalent?

A) U.S. treasury bills that mature in three months or less

B) a note receivable that matures in six months

C) a note payable due in three months or less

D) accounts receivable due in three months or less

28. Accounts receivable are ________.

A) current assets

B) current liabilities

C) long-term assets

D) long-term liabilities

31. Which of the following methods of accounting for uncollectible accounts matches sales with bad debts expense?

A) direct write-off method

B) allowance method

C) contra-asset method

D) reconciliation method

32. The allowance for uncollectible accounts is a(n) ________.

A) contra-expense account

B) contra-revenue account

C) contra-asset account

D) expense account

33. Which of the following statements is FALSEabout the allowance method for uncollectible accounts?

A) Bad debt expense is estimated and matched with sales.

B) Expense is recorded during end of the period adjustments.

C) This method is not acceptable under GAAP.

D) The method is acceptable under GAAP.

39. What is the effect on the accounting equation when a company collects an account receivable?

A) Total assets increase, total liabilities increase, and total shareholders’ equity stays the same.

B) Total assets stay the same, total liabilities stay the same, and total shareholders’ equity stays the same.

C) Total assets decrease, total liabilities stay the same, and total shareholders’ equity decreases.

D) Total assets stay the same, total liabilities increases, and total shareholders’ equity decreases.

42. Credit card sales benefit companies because ________.

A) the risk of uncollectible accounts is transferred to credit card companies

B) fewer customers will be able to buy products or services

C) the credit card company is not responsible for evaluating customers’ credit-worthiness

D) they will receive less than the full amount of the sale from the credit card company

44. Team Shirts decided to accept bankcards from credit customers. Team Shirts should expect ________.

A) an increase in its allowance for uncollectible accounts

B) a decrease in its bad debts expense

C) a decrease in its credit card expense

D) an increase in its write-off of specific customer accounts

45. Magic Cow Co. made a sale for $5,000 to a customer who paid with MasterCard. MasterCard charges Magic Cow a fee of 3% of sales. MasterCard will directly deposit the cash from this sale within 24 hours. How much cash will MasterCard deposit?

A) $5,000

B) $4,850

C) $150

D) $5,150

47. Magic Cow Co. made a sale for $5,000 to a customer who paid with MasterCard. MasterCard charges Magic Cow a fee of 3% of sales. How much sales revenue will Magic Cow record?

A) $5,000

B) $4,850

C) $150

D) $5,150

48. Ace Electronics accepted a promissory note from Fenstermaker, who promised to pay Ace $2,000 plus 6% interest at the end of six months. What is the amount of interest that will be paid at the end of the six-month period?

A) $120

B) $240

C) $60

D) $2,060

49. Ace Electronics accepted a promissory note from Fenstermaker, who promised to pay Ace $2,000 plus 6% interest at the end of six months. When Ace first accepts the note, it should record interest receivable of ________.

A) $120

B) $0

C) $60

D) $240

Answer 1

1.

Clean Sweep, Inc. started the month of June with $800 worth of cleaning supplies. During the month, Clean Sweep purchased $300 of supplies for cash. At June 30, $200 worth of supplies was unused.

$200 of unused supplies will appear as an asset on the balance sheet.

Correct option is (c)

2.

Cash collected from customers is shown by the statement of cash flows.

Correct option is (c)

In the statement of cash flows, all cash inflows and cash outflows are shown.

3.

Miss Happ of Ace Electronics forgot to make the adjusting entry for depreciation on the company’s equipment. As a result of this mistake net income is too high.

Correct option is (B)

Depreciation is an expense. If an expense is not recorded, it leads to overstatement of the net income.

4.

Unearned revenue needs to be adjusted.

Correct option is (c)

Unearned revenue is the revenue which has been received in advance from the customers. It needs to be adjusted to find out income of the current period.

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