ACTG Practice Exam | 100% Correct Answers |
Verified | Latest 2024 Version
A company uses the Allowance method of accounting for Bad Debts. This means that in the period when
an Account Receivable actually becomes uncollectible, the company will reduce Accounts Receivable
and: - ✔✔Decrease the Allowance for Doubtful Accounts account (This is a "write-off". The journal entry
is a debit to Allowance for Doubtful Accounts and credit to Accounts Receivable.)
The concept of "accrual" accounting - ✔✔Recognizes revenues when they are earned, and expenses
when they are incurred.
The beginning balance in Accounts Receivable was $5,000. Sales on account amounted to $20,000 and
sales for cash amounted to $18,000. During the period, $7,000 of Accounts Receivable was written off. If
the ending balance in accounts receivable was $1,200, the amount of cash collected from customers is: -
✔✔16,800 (When sales revenue occurs and cash is immediately collected, you increase (debit) Cash and
increase (credit) Revenue. Therefore, the $18,000 is not included as an increase (debit) in A/R. The
$7,000 write-off decreases A/R.)
Our customer pays us in advance $500 for services which our company is to provide in a future period.
This event: - ✔✔Increases Assets and increases Liabilities
Which of the following accounts are NOT found in the "Closing Entry - ✔✔contributed capital
As a piece of equipment or property loses its value due to usage or the mere passage of time, the
company records an entry which: - ✔✔Credits Accumulated Depreciation
If we provide cash to our vendor in a period before the expense is actually incurred & recorded, the
expense is known as: - ✔✔deferral or deferred expense
ABC Company purchases 150 units of inventory at $400 each, under terms of FOB Shipping Point, 2-10-
Net 30. They pay $6 per unit transportation costs on inbound freight with cash. They pay the vendor's
invoice early, taking the early-payment cash discount. This means that one unit of inventory now has a
total acquisition cost of: - ✔✔398 (Set up an inventory T-account to help you solve this problem. Update
the T-account after each event takes place, starting with buying the inventory on account for $60,000 (=
150 units * $400). The journal entry is a debit to Inventory and credit to Accounts Payable.
, Next, record the cash payment of the freight expense of $900 (= 150 units * $6) as a debit to Inventory
and credit to Cash. The Inventory account increases because it was sold FOB Shipping Point.
Because we paid within the discount period, we reduce our inventory account by $1,200 (= $60,000 *
.02). This leaves us with an ending Inventory balance of $59,700 (= 60,000 + 900 - 1,200).
In order to get the acquisition cost of the inventory on a per unit basis, we must divide $59,700 by the
total number of units we bought (150) to get $398 per unit.)
P&G, Inc., started operations on June 1, 2017 with a $100,000 cash contribution from its owner. During
2017, the company earned $80,000 in revenue, and incurred $180,000 in Expenses. No other activity
happened during 2017.
During 2018, the company earned $210,000 in revenue, and incurred $180,000 in Expenses. A
distribution of $5,000 was made to owners during December 2018. What was P&G's Total Equity as
reported on their balance sheet as of December 31, 2018? - ✔✔140,000 (Beginning Balances for 2018:
Contributed Capital $100,000
Retained Earnings $15,000
No change in Contributed Capital, so that stays at $100,000. Retained Earnings increases by $25,000 (=
210,000 - 180,000 - 5,000). Therefore, Total Equity as of December 31, 2018 is $140,000 (= 100,000 +
15,000 + 25,000).)
All of the following appear as line items on the Balance Sheet except: - ✔✔revenues (On the Statements
of Changes in Owner's Equity:
Net Income (Rev - Exp) is added to the beginning balance of Retained Earnings and Dividends are
subtracted from the beginning balance of Retained Earnings to obtain the ending balance of Retained
Earnings, which is displayed as a line item on the Balance Sheet)
One of the primary functions of the independent financial auditor is to check for and discover any fraud
in the business. - ✔✔False (Independent financial auditors are not obligated to try and go out of their
way to find fraud in a business.)
Which of the three forms of business ownership almost always displays a separation of "ownership"
from "operations"? - ✔✔corporation
Dukes Corporation's Balance Sheet as of December 31, 2019, showed Total Assets of $600,000, Liabilities
of $230,000, Contributed Capital of $80,000. What was Dukes's Retained Earnings balance? -
✔✔290,000
Verified | Latest 2024 Version
A company uses the Allowance method of accounting for Bad Debts. This means that in the period when
an Account Receivable actually becomes uncollectible, the company will reduce Accounts Receivable
and: - ✔✔Decrease the Allowance for Doubtful Accounts account (This is a "write-off". The journal entry
is a debit to Allowance for Doubtful Accounts and credit to Accounts Receivable.)
The concept of "accrual" accounting - ✔✔Recognizes revenues when they are earned, and expenses
when they are incurred.
The beginning balance in Accounts Receivable was $5,000. Sales on account amounted to $20,000 and
sales for cash amounted to $18,000. During the period, $7,000 of Accounts Receivable was written off. If
the ending balance in accounts receivable was $1,200, the amount of cash collected from customers is: -
✔✔16,800 (When sales revenue occurs and cash is immediately collected, you increase (debit) Cash and
increase (credit) Revenue. Therefore, the $18,000 is not included as an increase (debit) in A/R. The
$7,000 write-off decreases A/R.)
Our customer pays us in advance $500 for services which our company is to provide in a future period.
This event: - ✔✔Increases Assets and increases Liabilities
Which of the following accounts are NOT found in the "Closing Entry - ✔✔contributed capital
As a piece of equipment or property loses its value due to usage or the mere passage of time, the
company records an entry which: - ✔✔Credits Accumulated Depreciation
If we provide cash to our vendor in a period before the expense is actually incurred & recorded, the
expense is known as: - ✔✔deferral or deferred expense
ABC Company purchases 150 units of inventory at $400 each, under terms of FOB Shipping Point, 2-10-
Net 30. They pay $6 per unit transportation costs on inbound freight with cash. They pay the vendor's
invoice early, taking the early-payment cash discount. This means that one unit of inventory now has a
total acquisition cost of: - ✔✔398 (Set up an inventory T-account to help you solve this problem. Update
the T-account after each event takes place, starting with buying the inventory on account for $60,000 (=
150 units * $400). The journal entry is a debit to Inventory and credit to Accounts Payable.
, Next, record the cash payment of the freight expense of $900 (= 150 units * $6) as a debit to Inventory
and credit to Cash. The Inventory account increases because it was sold FOB Shipping Point.
Because we paid within the discount period, we reduce our inventory account by $1,200 (= $60,000 *
.02). This leaves us with an ending Inventory balance of $59,700 (= 60,000 + 900 - 1,200).
In order to get the acquisition cost of the inventory on a per unit basis, we must divide $59,700 by the
total number of units we bought (150) to get $398 per unit.)
P&G, Inc., started operations on June 1, 2017 with a $100,000 cash contribution from its owner. During
2017, the company earned $80,000 in revenue, and incurred $180,000 in Expenses. No other activity
happened during 2017.
During 2018, the company earned $210,000 in revenue, and incurred $180,000 in Expenses. A
distribution of $5,000 was made to owners during December 2018. What was P&G's Total Equity as
reported on their balance sheet as of December 31, 2018? - ✔✔140,000 (Beginning Balances for 2018:
Contributed Capital $100,000
Retained Earnings $15,000
No change in Contributed Capital, so that stays at $100,000. Retained Earnings increases by $25,000 (=
210,000 - 180,000 - 5,000). Therefore, Total Equity as of December 31, 2018 is $140,000 (= 100,000 +
15,000 + 25,000).)
All of the following appear as line items on the Balance Sheet except: - ✔✔revenues (On the Statements
of Changes in Owner's Equity:
Net Income (Rev - Exp) is added to the beginning balance of Retained Earnings and Dividends are
subtracted from the beginning balance of Retained Earnings to obtain the ending balance of Retained
Earnings, which is displayed as a line item on the Balance Sheet)
One of the primary functions of the independent financial auditor is to check for and discover any fraud
in the business. - ✔✔False (Independent financial auditors are not obligated to try and go out of their
way to find fraud in a business.)
Which of the three forms of business ownership almost always displays a separation of "ownership"
from "operations"? - ✔✔corporation
Dukes Corporation's Balance Sheet as of December 31, 2019, showed Total Assets of $600,000, Liabilities
of $230,000, Contributed Capital of $80,000. What was Dukes's Retained Earnings balance? -
✔✔290,000
