Q, No: 01

(5 Marks)

1 . Ending inventory is equal to the cost of items on hand plus:

(a) items in transit sold f.o.b. shipping point
(b) purchases in transit f.o.b. destination
items in transit sold f.o.b. destination
(d) None of the above
2 . A physical inventory count is taken when using which of the following inventory methods?
(a) Perpetual
(b) Periodic
(c) Interim
(d) both perpetual and periodic methods
3 . Every adjusting entry involves the recognition of either revenue or expense. Which of the following is also true?

(a) There also must be a corresponding change in capital stock.

(b) There also must be a corresponding change in either assets or liabilities.
(c)There also must be a corresponding change in the cash account.
(d) Both (A) and (B).
4 . In a prior period cash was paid in advance for an incurring expense. The required adjusting entry recognizes which of the
following?
(a)The portion of the asset consumed or expensed, and reduces the balance of an asset account
(b) The portion earned as revenue, and reduces the balance of a liability account
(c )The expense incurred, and records a liability for future payment
(d) The revenue earned but not yet received, and records a receivable
5 . Which of the following is true about recording prepayments directly to an expense account?
( a)It is an acceptable practice.
(b) It is rarely, if ever, done.
(c)It should never be done
(d) It will always require a credit to the cash account
6 .Which of the following is true?
( a) Depreciation is an accurate measure of the allocation of the cost of an asset over its useful life.
( b )Depreciation is an estimated measure of the allocation of the cost of an asset over its useful life
(c )Depreciation provides for an accumulation of cash to replace the asset.
(d )Depreciation affects the cash flow of the entity
7 . Which of the following is false?
(a)The materiality concept permits charging purchases of low cost items directly to an expense account.
(b )Debiting utilities expense when paid, rather than as the services are used, adheres to the matching principle
(c )Immaterial amounts of unrecorded expenses may be ignored during the adjusting process
(d )Adjusting entries may be made based on estimates
8 . Using the adjusted trial balance as the basis for preparing the financial statements, the information needed to prepare the
income statement would start and end with the balances of the
(a ) Dividends account through the Income Taxes Expense account
(b ) Retained Earnings account through the Income Taxes Expense account.
( c) revenue accounts through the Income Taxes Expense account.
(d ) Capital Stock through the Interest Expense account
9 . Alternative titles for the statement showing the financial position at a specific time include which of the following?
(a ) Earnings statement
(b ) Statement of operations
(c ) Profit and loss statement
(d ) All of the above
(e ) None of the above
10 . The beginning balance of Retained Earnings was $140,000. Dividends declared and paid were $18,000. The ending
balance of Retained Earnings is $120,000. Which of the following is true
(a )Net income was $2,000.
(b )Net loss was $4,000
(c )Net loss was $2,000.
(d )Net income was $4.000