The document is a practice exam for ACC 290 Final Exam that contains 31 multiple choice questions covering key accounting concepts. Some of the concepts addressed include: - The statement of cash flows is used to determine cash generated from operations. - The basic financial statements must be prepared in a specific order: balance sheet, income statement, statement of cash flows, notes to financial statements. - Under the accrual basis of accounting, revenues are recognized when earned rather than when cash is received. - Inventory is adjusted at the end of the period to reflect the actual value on hand through an adjusting journal entry. - The adjusted trial balance proves the equality of debit and credit balances after all adjustments have been

1. ACC 290 Final Exam
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ACC 290 Final Exam
1. Which financial statement is used to determine cash generated from operations?
A. Income statement

2. B. Statement of operations
C. Statement of cash flows
D. Retained earnings statement
2. In terms of sequence, in what order must the four basic financial statements be
prepared?
A. Balance sheet, income statement, statement of cash flows, and capital
statement
B. Income statement, capital statement, statement of cash flows, and balance
sheet
C. Balance sheet, capital statement, statement of cash flows, and income
statement
D. Income statement, capital statement, balance sheet, and statement of cash
flows
3. In classifying transactions, which of the following is true in regard to assets?
A. Normal balances and increases are debits
B. Normal balances and decreases are credits
C. Normal balances can either be debits or credits for assets
D. Normal balances are debits and increases can be debits or credits
4. An increase in an expense account must be

3. A. debited
B. credited
C. either debited or credited, depending on the circumstances
D. capitalized
5. ABC Corporation issues 100 shares of $1 par common stock at $5 per share,
which of the following is the correct journal entry?
Cash $500
Paid-in Capital, Excess of Par $400
Common Stock $100
6. In the first month of operations, the total of the debit entries to the cash account
amounted to $1,400 and the total of the credit entries to the cash account
amounted to $600. The cash account has a
A. $600 credit balance
B. $1,400 debit balance
C. $800 debit balance
D. $800 credit balance
7. Which ledger contains control accounts?

4. A. Accounts receivable subsidiary ledger
B. General ledger
C. Accounts payable subsidiary ledger
D. General revenue and expense ledger
8. Smith is a customer of ABC Corporation. Smith typically purchases merchandise
from ABC on account. Which ledger would ABC use to keep track of the details of
Smith’s account?
A. Accounts receivable subsidiary ledger
B. Accounts receivable control ledger
C. General ledger
D. Accounts payable subsidiary ledger
9. Under the cash basis of accounting
A. revenue is recognized when services are performed
B. expenses are matched with the revenue that is produced
C. cash must be received before revenue is recognized
D. a promise to pay is sufficient to recognize revenue
10. Under the accrual basis of accounting
A. cash must be received before revenue is recognized

5. B. net income is calculated by matching cash outflows against cash inflows
C. events that change a company’s financial statements are recognized in the
period they occur rather than in the period in which the cash is paid or received
D. the ledger accounts must be adjusted to reflect a cash basis of accounting
before financial statements are prepared under generally accepted accounting
principles
11. The Vintage Laundry Company purchased $6,500 worth of laundry supplies on
June 2 and recorded the purchase as an asset. On June 30, an inventory of the
laundry supplies indicated only $2,000 on hand. The adjusting entry that should be
made by the company on June 30 is
A. debit Laundry Expense, $2,000; credit Laundry Expense $2,000
B. debit Laundry Expense, $4,500; credit Laundry Supplies Expense, $4,500
C. debit Laundry Supplies, $2,000; credit Laundry Supplies Expense, $2,000
D. debit Laundry Supplies Expense, $4,500; credit Laundry Supplies, $4,500
12. Greese Company purchased office supplies costing $4,000 and debited Office
Supplies for the full amount. At the end of the accounting period, a physical count
of office supplies revealed $1,100 still on hand. The appropriate adjusting journal
entry to be made at the end of the period would be
A. debit Office Supplies Expense, $1,100; credit Office Supplies, $1,100
B. debit Office Supplies, $2,900; credit Office Supplies Expense, $2,900
C. debit Office Supplies Expense, $2,900; credit Office Supplies, $2,900
D. debit Office Supplies, $1,100; credit Office Supplies Expense, $1,100

6. 13. An adjusted trial balance
A. is prepared after the financial statements are completed
B. proves the equality of the total debit balances and total credit balances of ledger
accounts after all adjustments have been made
C. is a required financial statement under generally accepted accounting principles
D. cannot be used to prepare financial statements
14. Given the following adjusted trial balance:
Debit Credit
Cash $781
Accounts receivable 1,049
Inventory 1,562
Prepaid rent 43
Property, plant & equipment 150
Accumulated depreciation 26
Accounts payable 41
Unearned revenue 61
Common stock 103
Retained earnings 3,305

7. Service revenue 134
Interest revenue 28
Salary expense 80
Travel expense 33
Total $3,698 $3,698
Net income for the year is
A. $248
B. $135
C. $162
D. $49
15. Given the following adjusted trial balance, what will be the totals for the debit
and credit columns of the post-closing trial balance?
Debit Credit
Cash $1,562
Accounts receivable 2,098
Inventory 3,124
Prepaid rent 86

8. Property, plant, & equipment 300
Accumulated depreciation $52
Accounts payable 82
Unearned revenue 172
Common stock 206
Retained earnings 6,610
Service revenue 218
Interest revenue 56
Salary expense 160
Travel expense 66
Totals $7,396 $7,396
A. $7,396
B. $7,118
C. $7,334
D. $7,170
16. 3.2.1 Given the following adjusted trial balance:
Given the following adjusted trial balance:

9. Debit Credit
Cash $781
Accounts receivable 1,049
Inventory 1,562
Prepaid rent 43
Property, plant & equipment 150
Accumulated depreciation 26
Accounts payable 41
Unearned revenue 61
Common stock 103
Retained earnings 3,305
Service revenue 134
Interest revenue 28
Salary expense 80
Travel expense 33
Total $3,698 $3,698
After closing entries have been posted, the balance in retained earnings will be

10. A. $3,256
B. $3,170
C. $3,440
D. $3,354
17. Net income is recorded on the work sheet under the
A. debit column of the adjusted trial balance and the credit column of retained
earnings
B. debit column of the income statement and the credit column of the balance
sheet
C. credit column of the adjusted trial balance and the debit column of retained
earnings
D. credit column of the income statement and the debit column of the balance
sheet
18. At the beginning of the year, Uptown Athletic had an inventory of $400,000.
During the year, the company purchased goods costing $1,500,000. If Uptown
Athletic reported ending inventory of $600,000 and sales of $2,000,000, their cost
of goods sold and gross profit rate would be
A. $900,000 and 65%
B. $1,300,000 and 35%
C. $900,000 and 35%
D. $1,300,000 and 65%

11. 19. During the year, Sarah’s Pet Shop’s merchandise inventory decreased by
$30,000. If the company’s cost of goods sold for the year was $450,000, purchases
would have been
A. $480,000
B. $420,000
C. $390,000
D. Insufficient data to determine
20. At the beginning of the year, Wildcat Athletic had an inventory of $200,000.
During the year, the company purchased goods costing $700,000. If acc 290 final
exam Wildcat Athletic reported ending inventory of $300,000 and sales of
$1,000,000, their cost of goods sold and gross profit rate would be
A. $400,000 and 60%
B. $600,000 and 40%
C. $400,000 and 40%
D. $600,000 and 60%
21. The entry to record of sale of $900 with terms of 2/10, n/30 will include a
A. debit to Sales Discount for $18
B. debit to Sales Revenue for $882
C. credit to Accounts Receivable for $900
D. credit to Sales Revenue for $900

12. 22.Dobler Company uses a periodic inventory system. Details for the inventory
account for the month of January 2012 are as follows:
An end of the month (1/31/2012), inventory showed that 140 units were on hand. If
the company uses LIFO, what is the value of the ending inventory?
A. $737
B. $700
C. $762
D. $1,380
23. The difference between ending inventory using LIFO and ending inventory
using FIFO is referred to as
A. FIFO reserve
B. inventory reserve
C. LIFO reserve
D. periodic reserve
24. A consistent application of an inventory costing method enhances
A. conservatism
B. accuracy
C. comparability

13. D. efficiency
25. The accountant at Patton Company has determined that income before income
taxes amounted to $11,000 using the FIFO costing assumption. If the income tax
rate is 30% and the amount of income taxes paid would be $300 greater if the LIFO
assumption were used, what would be the amount of income before taxes under
the LIFO assumption?
A. $11,300
B. $12,000
C. $10,000
D. $10,700
26. A very small company would have the most difficulty in implementing which of
the following internal control activities?
A. Separation of duties
B. Limited access to assets
C. Periodic independent verification
D. Sound personnel procedures
27. A system of internal control
A. is infallible
B. can be rendered ineffective by employee collusion
C. invariably will have costs exceeding benefits

14. D. is premised on the concept of absolute assurance
28. The custodian of a company asset should
A. have access to the accounting record for that asset
B. be someone outside the company
C. not have access to the accounting record for that asset
D. be an accountant
29. The Sarbanes Oxley Act (2002) applies to
A. U.S. companies but not international companies
B. international companies but not U.S. companies
C. U.S. and Canadian companies but not other international companies
D. U.S. and international companies
30. Which of the following financial statements is divided into major categories of
operating, investing, and financing activities?
A. The income statement.
B. The balance sheet.
C. The retained earnings statement.
D. The statement of cash flows.

15. 31. Based on the account balance below, what is the total of the debit
credit columns of the adjusted trial balance?
Service Revenue $3,300
Equipment $6,400
Cash 1,525
Prepaid Insurance 1,225
Unearned Revenue 5,320
Depreciation Expense 640
Salary 1,050
Accum. Depreciation 1,280
Common stock 390
Retained earnings 550
A. $9,150
B. $10,840
C. $9,560
D. $10,430

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