This summarizes a 30 question multiple choice exam on accounting topics like the accounting cycle, financial statements, inventory methods, and internal controls. It tests knowledge of concepts like net income calculation, adjusting entries, inventory cost flow assumptions, and segregation of duties. The exam provides short scenarios or financial information for each question and requires selecting the correct multiple choice response.

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Question 1
Jackson Company recorded the following cash transactions for
the year:
Paid $135,000 for salaries.
Paid $60,000 to purchase office equipment.
Paid $15,000 for utilities.
Paid $6,000 in dividends.
Collected $245,000 from customers.
What was Jackson’s net cash provided by operating activities?
$89,000
$95,000
$110,000
$35,000

2. Question 2
Which of the following describes the classification and normal
balance of the Unearned Rent Revenue account?
Asset, debit
Expense, debit
Liability, credit
Revenues, credit
Question 3
Posting
involves transferring all debits and credits on a journal page to
the trial balance.
is accomplished by examining ledger accounts and seeing
which ones need updating.
should be performed in account number order.
accumulates the effects of journalized transactions in the
individual accounts.
Question 4
The following is selected information from L Corporation for
the fiscal year ending October 31, 2014.
Cash received from customers $300,000
Revenue earned 390,000

3. Cash paid for expenses 170,000
Cash paid for computers on November 1, 2013 that will be used
for 3 years 48,000
Expenses incurred including any depreciation 216,000
Proceeds from a bank loan, part of which was used to pay for
the computers 100,000
Based on the accrual basis of accounting, what is L
Corporation’s net income for the year ending October 31, 2014?
$204,000
$220,000
$174,000
$158,000
Question 5
La More Company had the following transactions during 2013.
• Sales of $4,500 on account
• Collected $2,000 for services to be performed in 2014
• Paid $1,325 cash in salaries
• Purchased airline tickets for $250 in December for a trip to
take place in 2014

4. What is La More’s 2013 net income using cash basis
accounting?
$4,925
$675
$425
$5,175
Question 6
Which one of the following is not a justification for adjusting
entries?
Adjusting entries are necessary to bring the general ledger
accounts in line with the budget.
Adjusting entries are necessary to enable financial statements
to be in conformity with GAAP.
Adjusting entries are necessary to ensure that the revenue
recognition principle is followed.
Adjusting entries are necessary to ensure that the expense
recognition principle is followed.
Question 7
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 indi-
cated only $1,000 on hand. The adjusting entry that should be
made by the company on June 30 is:

5. debit Laundry Expense, $5,500; credit Laundry Supplies,
$5,500.
debit Laundry, $1,000; credit Laundry Supplies Expense,
$1,000.
debit Laundry Expense, $1,000; credit Laundry Supplies,
$1,000.
debit Laundry, $5,500; credit Laundry Supplies Expense,
$5,500.
Question 8
Similarities between International Financial Reporting
Standards (IFRS) and U.S. GAAP in-clude all of the following
except
Cash-basis accounting is not in accordance with either IFRS or
U.S. GAAP.
Both IFRS and U.S. GAAP divide the economic life of companies
into artificial time periods.
The form and content of financial statements are very similar
under IFRS and U.S. GAAP.
Both IFRS and U.S. GAAP allow revaluation of items such as land
and buildings to fair value.
Question 9
Conway Company purchased merchandise inventory with an
invoice price of $9,000 and credit terms of 2/10, n/30. What is

6. the net cost of the goods if Conway Company pays within the
discount period?
$8,280
$9,000
$8,820
$8,100
Question 10
Stan’s Market recorded the following events involving a recent
purchase of inventory:
Received goods for $90,000, terms 2/10, n/30.
Returned $1,800 of the shipment for credit.
Paid $450 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company’s inventory
increased by $88,650.
increased by $86,886.
increased by $86,877.
increased by $86,436.
Question 11

7. Financial information is presented below:
Operating expenses $36,000
Sales revenue 150,000
Cost of goods sold 105,000
Gross profit would be
$45,000.
$24,000.
$114,000.
$36,000.
Question 12
At December 31, 2014 Mohling Company’s inventory records
indicated a balance of $602,000. Upon further investigation it
was determined that this amount included the following:
▪ $112,000 in inventory purchases made by Mohling shipped
from the seller 12/27/14 terms FOB destination, but not due to
be received until January 2nd
▪ $74,000 in goods sold by Mohling with terms FOB destination
on December 27th. The goods are not expected to reach their
destination until January 6th
▪ $6,000 of goods received on consignment from Dollywood
Company
What is Mohling’s correct ending inventory balance at
December 31, 2014?

8. $410,000
$490,000
$484,000
$596,000
Question 13
Olympus Climbers Company has the following inventory data:
July 1 Beginning inventory 20 units at
$19 $380
7 Purchases 70 units at $20
1,400
22 Purchases 10 units at $22
220
$2,000
A physical count of merchandise inventory on July 30 reveals
that there are 32 units on hand. Using the FIFO inventory
method, the amount allocated to cost of goods sold for July is
$1,380.
$620.
$660.
$1,340.
Question 14

9. Jenks Company developed the following information about its
inventories in applying the lower of cost or market (LCM) basis
in valuing inventories:
Product Cost Market
A $57,000 $60,000
B 40,000 38,000
C 80,000 81,000
If Jenks applies the LCM basis, the value of the inventory
reported on the balance sheet would be
$179,000.
$175,000.
$177,000.
$181,000.
Question 15
Nilson Company gathered the following reconciling information
in preparing its August bank reconciliation:
Cash balance per books, 8/31 $21,000
Deposits in transit 900

10. Notes receivable and interest collected by bank
5,100
Bank charge for check printing 120
Outstanding checks 12,000
NSF check 1,020
The adjusted cash balance per books on August 31 is
$24,960.
$24,060.
$14,760.
$13,800.
Question 16
Which of the following is not a basic principle of cash
management?
Increase collection of receivables.
Keep inventory levels low.
Pay all liabilities early.
Invest idle cash.
Question 17
Use the following data to determine the total dollar amount of
assets to be classified as property, plant, and equipment.
Eddy Auto Supplies

11. Balance Sheet
December 31, 2014
Cash $84,000 Accounts payable
$110,000
Accounts receivable 80,000 Salaries and
wages payable 20,000
Inventory 140,000 Mortgage payable
180,000
Prepaid insurance 60,000 Total
liabilities $310,000
Stock Investments 170,000
Land 190,000
Buildings $226,000 Common stock
$240,000
Less: Accumulated depreciation (40,000)
186,000 Retained earnings 500,000
Trademarks 140,000 Total stockholders'
equity $740,000
Total assets $1,050,000 Total
liabilities and stockholders' equity $1,050,000
$516,000

12. $556,000
$376,000
$686,000
Question 18
Accounting information is relevant to business decisions
because it
confirms prior expectations.
has been verified by external audit.
is prepared on an annual basis.
is neutral in its representations.
Question 19
Howard Company had a transaction that caused a $5,000
increase in both assets and total liabilities. This transaction
could have been a(n)
investment of $5,000 cash in the business by the stockholders.
purchase of office equipment for $12,000, paying $7,000 cash
and issuing a note payable for the balance.
purchase of office equipment for $5,000 cash.
repayment of a $5,000 bank loan.

13. Question 20
Can financial statements be prepared directly from the
adjusted trial balance?
Yes, adjusting entries have been recorded in the general
journal and posted to the ledger accounts.
No, the adjusted trial balance merely proves the equality of the
total debit and total credit balances in the ledger after
adjustments are posted. It has no other purpose.
They can because that is the only reason that an adjusted trial
balance is prepared.
They cannot. The general ledger must be used.
Question 21
Which trial balance will consist of the greatest number of
accounts?
All of these answer choices will contain the same number of
accounts.
Post-closing trial balance
Trial balance
Adjusted trial balance
Question 22
All of the following are required steps in the accounting cycle
except:

14. preparing a post-closing trial balance.
preparing an adjusted trial balance.
preparing a work sheet.
journalizing and posting closing entries.
Question 23
A sales discount does not
increase a contra revenue account.
increase an operating expense account.
reduce the amount of cash received from a credit sale.
provide the purchaser with a cash saving.
Question 24
American Importers reports net income of $50,000 and cost of
goods sold of $450,000. If the company’s gross profit rate was
40%, net sales were
$1,125,000.
$1,175,000.
$825,000.
$750,000.

15. Question 25
The manager of Weiser is given a bonus based on net income
before taxes. The net income after taxes is $35,700 for FIFO and
$29,400 for LIFO. The tax rate is 30%. The bonus rate is 20%.
How much higher is the manager's bonus if FIFO is adopted
instead of LIFO?
$6,300
$9,000
$1,800
$12,600
Question 26
Classic Floors has the following inventory data:
July 1 Beginning inventory 15 units at
$6.00
5 Purchases 60 units at $6.60
14 Sale 40 units
21 Purchases 30 units at $7.20
30 Sale 28 units
Assuming that a perpetual inventory system is used, what is the
cost of goods sold on a LIFO basis for July?
$348.00

16. $702.00
$236.40
$465.60
Question 27
Classic Floors has the following inventory data:
July 1 Beginning inventory 15 units at
$6.00
5 Purchases 60 units at $6.60
14 Sale 40 units
21 Purchases 30 units at $7.20
30 Sale 28 units
Assuming that a perpetual inventory system is used, what is the
value of ending inventory on a LIFO basis for July?
$236.40
$465.60
$702.00
$354.00

17. Question 28
Which of the following is not one of the main factors that
contribute to fraudulent activity?
Opportunity.
Rationalization.
Incompatible duties.
Financial pressure.
Question 29
What is the rationale for the internal control principle,
segregation of duties?
The work of one employee should, without duplication of effort,
provide a reliable basis for evaluating the work of another
employee.
History has shown that employees are generally dishonest and
thus cannot be entrusted with performing related duties.
Control is most effective when only one person is responsible
for a give task.
Segregation of duties causes companies to hire more employees
and thus it supports the economy.
Question 30

18. Under IFRS
comparative prior-period information is not required, but
financial statements must be provided annually.
comparative prior-period information must be presented, but
financial statements need not be provided annually.
comparative prior-period information must be presented, and
financial statements must be provided annually.
comparative prior-period information is not required, but
financial statements need not be provided annually.