Sample Review Problems for the ACC 101 Final ExamDocument Transcript
Sample Review Problems
If you study, I see
an “A” in your
Page 2 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
FORMAT AND PROCEDURES
• Exam consists of 60 multiple-choice questions
• Exam is given within your CengageNow account – you must be able to log
onto your CengageNow account in order to take the exam
• Exam is closed-notes, closed-books – you may NOT reference any materials
during this test
Note: Items with a “*” beside them indicate that they have more questions on the
test than do some of the other items
• Accounting concepts
• Accounting cycle – journalizing (including use of the Chart of Accounts), posting,
Trial Balance, Financial Statements
• * Journal entries – identifying what account(s) to debit and what account(s) to
• * Financial statements for service company and merchandiser – Income
Statement, Statement of Owner’s Equity, Balance Sheet
• * Adjusting entries – accruals and deferrals of both revenues and expense
• Journalizing sales, cash receipt, purchase, and cash payment transactions using
perpetual inventory – including those involving discounts
• Closing entries for service company and merchandiser
• Subsidiary ledgers and controlling accounts
• Special journals – identifying in which journal a transaction is recorded
• Internal controls
• Petty cash – including establishing the fund, disbursing from the fund,
reimbursing the fund, permanently changing the fund balance
• Bank reconciliation – including journal entries
• Perpetual inventory – understand how this system works and also determining
cost of ending inventory and COMS using LIFO, FIFO
• Gross profit method of estimating ending inventory
Page 3 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
The collection of an account receivable
a. Increases assets and increases owner’s equity.
b. Increases assets and decreases assets.
c. Decreases assets and decreases owner’s equity.
d. Decreases assets and increases liabilities.
Owner’s equity is affected by
a. Collection of accounts receivable.
b. Withdrawal by the owner of cash for personal expenses.
c. Purchase of an asset for cash.
d. Payment of a liability.
The recognition issue concerns
a. Where to record a business transaction.
b. How to classify a business transaction.
c. When to record a business transaction.
d. Assigning a dollar amount to a business transaction.
Which of the following accounts is an asset?
a. Unearned Insurance Fees
b. Insurance Payable
c. Insurance Expense
d. Prepaid Insurance
Gropp Company accepts an advance fee of $200 for services to be provided next
year. The entry to record this transaction would include a
a. Credit to Cash.
b. Debit to Accounts Receivable.
c. Credit to Unearned Service Fees.
d. Credit to Service Fees Earned.
Which of the following is not true about a proper journal entry?
a. The Posting Reference column is left blank until the entries are posted.
b. A line is skipped between each debit and each credit.
c. The name of the account to be debited is written next to the left margin of the
d. A brief explanation is written to explain and identify the transaction.
Which of the following is not a proper step in preparing a trial balance?
a. List each ledger account that has a balance, listing debit balances and credit
balances in the left and right columns, respectively.
b. List the accounts in alphabetical order.
c. Add each column.
d. Compare the totals of each column.
Page 4 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
The chart of accounts would be found at the beginning of a
a. Financial statement.
b. Trial balance.
Use the following information to calculate on, or for the year ended, December 31,
20xx Total assets, Supplies, Net income and Capital at year-end
Advertising Expense $ 2,500
Accounts Payable 1,000
Accounts Receivable 5,000
Fees Earned 19,000
Rent Expense 3,000
Rent Payable 1,000
A. Marcus, Capital, January 1, 20xx 11,000
A. Marcus, Capital, December 31, 20xx ?
A. Marcus, Drawing 4,000
The difficulties of income measurement are caused by all of the following except the
a. Accounting period issue.
b. Recognition issue.
c. Continuity issue.
d. Matching issue.
As time passes, the accumulated depreciation and the carrying value related to a
a. Both decrease.
b. Both increase.
c. Increase and decrease, respectively.
d. Decrease and increase, respectively.
Which of the following is an example of an accrual?
a. Commission earned but not yet recorded
b. Commission collected but not yet earned
c. Depreciation of an asset
d. Recording a cash sale
Page 5 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
The costs of goods and services used in the process of obtaining revenue are called
The order of preparing the financial statements from the adjusted trial balance is
a. Balance sheet, statement of owner’s equity, income statement.
b. Income statement, statement of owner’s equity, balance sheet.
c. Statement of owner’s equity, income statement, balance sheet.
d. Income statement, balance sheet, statement of owner’s equity.
Equipment is depreciated because
a. The value of the equipment has decreased.
b. The usefulness of the equipment has decreased.
c. The cost of the equipment must be matched with the revenue it produces
over its useful life.
d. Both a. and b
Adjusting entries must be made at the end of the accounting period for all of the
following situations except when
a. There are unrecorded expenses.
b. There are unrecorded revenues.
c. Revenues have been recorded that must be apportioned between two or
more accounting periods.
d. There are errors to be corrected.
Revenues of $2,000 are received and recorded on Monday of each week for day-
care services to be provided Monday through Friday. If the year ends on
Wednesday, what is the amount to be shown on the balance sheet in Unearned
Revenues at the end of the year?
A company began the year with $1,500 in supplies, purchased $1,000 in supplies
during the year, and ended the year with $500 in supplies. How much is Supplies
Expense for the period?
Page 6 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
A machine was purchased on January 4, 20xx. It had a cost of $100,000 and an
estimated useful life of five years, after which time it will be worthless. Its
depreciation is $20,000 per year. What is the machine’s carrying value after four
Revenue of $40,000 was earned, of which $25,000 has already been collected.
Expenses of $10,000 have been incurred, but only $5,000 has been paid. What is
the reported net income?
For each definition, write the letter that corresponds to the correct term in the blank
provided on the right. Use each letter only once.
a. Accounting e. Footing i. Post-closing trial balance
b. Accounting cycle f. Income statement
c. Closing entries g. Income Summary k. Working papers
d. Crossfooting h. Net income l. Work sheet
1. The sequence of steps followed in the accounting system, from
analyzing transactions to preparing financial statements and closing
2. Journal entries made at the end of the accounting period that set the
stage for the next accounting period by clearing the temporary
3. A temporary account used during the closing process in which all
revenues and expenses are summarized before the net income or loss
is transferred to the Owner’s Capital account.
4. A type of working paper that is used as a preliminary step and tool in
the preparation of financial statements.
Page 7 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
Which of the following accounts is not closed during the closing procedure?
a. B. Bailey, Capital
b. Income Summary
c. Rent Expense
d. Interest Income
Which of the following is not true about the preparation of financial statements?
a. They do not need to be prepared separately if a work sheet is used.
b. Their numbers may come from the work sheet.
c. They are prepared before the post-closing trial balance is prepared.
d. The column totals on the work sheet are different from the totals on the actual
The post-closing trial balance includes which of the following?
a. Nominal accounts only
b. Real accounts only
c. All accounts listed in the chart of accounts
d. Both a. and b.
a. Are optional.
b. Bring all permanent (real) accounts to a zero balance.
c. Transfer net income or loss into the Owner’s Capital account.
d. Are prepared at the beginning of the new accounting period.
The steps in the accounting cycle that could be completed with the aid of the work
a. Analyze, record, post.
b. Appropriate, enter, record.
c. Allocate, close, reverse.
d. Adjust, prepare, close.
Page 8 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
For each definition, write the letter that corresponds to the correct term in the blank
provided on the right. Use each letter only once.
a. Cost of merchandise sold f. Gross sales k. Physical inventory
b. FOB destination g. Merchandise inventory l. Purchases
c. FOB shipping point h. Net sales m. Operating budget
d. Freight in i. Operating expenses n. Sales discounts
e. Goods available for sale j. Perpetual inventory system o. Trade discount
1. Those expenses, other than the cost of goods sold, that are incurred in
running a business.
2. The amount paid for the goods sold during an accounting period.
3. Discounts given to customers for early payment for sales made on
credit; a contra-revenue account.
4. Term relating to transportation charges meaning that the buyer bears
the transportation costs from the point of origin.
5. Detailed listings of projected selling and general and administrative
6. An actual count of all merchandise on hand at the end of an
7. Determination of cost of goods sold by keeping continuous records of
the physical inventory as goods are bought and sold.
8. The total goods that could have been sold to customers during the
year; beginning merchandise inventory plus net cost of purchases.
9. A balance sheet account; goods available for sale to customers.
10. An account used under the periodic inventory system in which the cost
of all merchandise bought for resale is accumulated for that accounting
A company sold goods for $1,000 with a 10 percent trade discount, terms 2/10, n/30.
How much would be received if the account were paid within the discount period?
Page 9 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
Under the perpetual inventory system, in addition to making the entry to record a
sale, a company would
a. Debit Merchandise Inventory and credit cost of Goods. Sold.
b. Debit cost of Goods sold and credit Purchases.
c. Debit Cost of Goods sold and credit Merchandise Inventory.
d. Make no additional entry until the end of the period.
The account Freight Out (delivery expense) is shown on the income statement as a
a. Component of the cost of goods sold.
b. Deduction from sales.
c. Selling expense.
d. General and administrative expense.
Which of the following is deducted from goods available for sale to determine cost of
b. Freight in
c. Beginning merchandise inventory
d. Ending merchandise inventory
A company purchased goods for $600 and was given credit terms of 1/10, n/60. Its
entry upon payment fifteen days later would include a credit to
a. Cash for $594.
b. Purchases Discounts for $6.
c. Cash for $600.
d. Accounts Payable for $600.
Using the following information, calculate Net sales, Ending merchandise inventory,
Cost of goods sold, Selling expenses.
Beginning Merchandise Inventory $5,000
Freight In 100
General and Administrative Expenses 1,000
Gross Margin 4,100
Net Income 1,100
Purchases Returns and Allowances 300
Sales Returns and Allowances 100
Page 10 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
From which journal would a posting be made at the end of the day to the subsidiary
ledger for each transaction entered that day?
a. Cash payments journal
b. Cash receipts journal
c. Purchases journal
d. None of the above
Which of the following statements is true about the cash receipts journal?
a. It probably will contain a credit column for Sales Discounts.
b. It probably will have some postings to the accounts payable ledger.
c. It probably will have an end-of-month posting to the Accounts Receivable
d. Its Posting Reference column could have the reference “CR1”.
Which of the following accounts could be a controlling account?
b. Accounts Payable
d. All of the above
The direct source for the preparation of a schedule of accounts receivable is the
a. Adjusted trial balance.
b. Accounts receivable subsidiary ledger.
c. Accounts Receivable controlling account.
d. Cash receipts journal.
For each of the following transactions, indicate the journal that should be used by
placing the appropriate abbreviation in the space provided. S= sales journal, P=
multicolumn purchases journal, CR= cash receipts journal, CP= cash payments
journal, J= general journal.
Purchased merchandise on credit.
Paid a utility bill.
Sold merchandise on credit.
Returned merchandise purchased on credit.
Purchased merchandise for cash.
Paid a creditor for merchandise previously purchased on account.
Sold merchandise for cash.
Closed Income Summary to the Owner’s Capital account.
Page 11 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
Which of the following documents would be prepared by the treasurer, after verifying
all underlying documentation, and sent to the supplier?
b. Check Authorization
d. Receiving report
A company issues a check for $175 but records it as $157. On the bank
reconciliation, the $18 error should be
a. Deducted from the balance per books.
b. Added to the balance per books.
c. Deducted from the balance per bank.
d. Added to the balance per bank.
A very small company would have the most difficulty in fulfilling which of the
following attributes of internal control?
a. Reliable personnel
b. Sound personnel policies
c. Sound accounting system
d. Separation of duties
The petty cash fund always should be replenished
a. At varying intervals.
b. At the end of the accounting period.
c. When half the dollar amount has been used.
d. When the custodian of the fund deems it necessary.
Which of the following bank reconciliation items would result in an adjusting entry on
the company’s books?
a. Deposit in transit
b. NSF check
c. Outstanding checks
d. Bank error
Page 12 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
A company establishes a $100 petty cash fund. The fund is replenished in the
amount of $95, after petty cash vouchers of $50 for postage, $20 for donations, and
$22 for meals had accumulated. (a) Was there a cash shortage, overage, or neither?
(b) State the amount of the overage or shortage, if any.
On March 31, cash on the bank statement amounted to $950. In addition,
outstanding checks totaled $400, a note collected by the bank totaled $200, there
was a customer’s NSF check for $50, deposits in transit totaled $350, and bank
service charges were $10. What was the March 31 adjusted balance on the bank
reconciliation? Assuming the same facts as in above, what was the March 31
balance per books before adjustment?
Use the following inventory information for the month of May to answer questions 13
May 1 Beginning Inventory 50 units @ $20
7 Purchases 40 units @ $25
18 Sales 60 units
22 Purchases 10 units @ $30
29 Sales 25 units
Assuming that a perpetual inventory system is used, what is the cost of goods sold
on a FIFO basis?
d. $ 2,000
Assuming that a perpetual inventory system is used, what is the ending inventory on
a LIFO basis?
Page 13 of 13 ACC 111 Review problems for Final Exam—J. Stoudemire
Under declining prices, which of the following inventory methods probably will result
in the lowest ending inventory?
b. Specific identification
c. First-in, first-out
d. Last-in, first-out
If the estimated rate of gross profit is 40%, what is the estimated cost of the
merchandise inventory on June 30, based on the following data?
June 1 Merchandise inventory $ 75,000
June 1-30 Purchases (net) 150,000
June 1-30 Sales (net) 135,000
c. $ 81,000
d. $ 54,500
On the basis of the following data, what is the estimated cost of the merchandise
inventory on October 31 by the retail method?
Oct. 1 Merchandise Inventory $225,000 $324,500
Oct. 1-31 Purchases (net) 335,000 475,500
Oct. 1-31 Sales (net) 700,000
d. $ 70,000
Using the lower of cost or market 9item –by-item), what should the total inventory
value be for the following items:
Item Quantity Unit cost Unit Total cost Total
price market price market
A 200 $4 $4.50 $800 $900
B 100 $3 $3.10 300 $310
C 50 $9 $7.00 $450 $350