General Financial Accounting Test Answer

General Financial Accounting Test Answer

The balance in the _______ account is the amount owed to the company by its customers.
a. Equity
b. Accounts Receivable
c. Cash
d. Accounts Payable
At the beginning of the year, XYZ Company reported a $7,200 balance in its Prepaid Insurance account. At year end, the company reported Insurance Expense of $9,000 in its Income Statement and a balance of $3,800 in the Prepaid Insurance account. What was the cost of the additional insurance that was purchased during the year?
a. $9,000
b. $12,400
c. $5,600
d. $12,800
XYZ Company has assets and liabilities of $15,000 and $12,000, respectively. If the company issues an additional $1,500 of stock for cash, what will be the balance in shareholders' equity following the transaction?
a. $15,000
b. $25,500
c. $4,500
d. $16,500
Firms may prepare reports of performance ____________.
a. using the calendar year as the accounting period
b. using a natural business year as the accounting period
c. for interim periods
d. All the above are correct in the appropriate circumstances.
Which of the following options would NOT be classified as a current liability account?
a. Accounts Payable
b. Interest Payable
c. Rent Received in Advance
d. All of the above are current liability accounts
Which of the following accounts is not closed during the closing process?
a. Wage Expense
b. Interest Expense
c. Utility Expense
d. Accumulated Depreciation
Which of the following is a permanent account?
a. Accumulated Depreciation
b. Advances from Customers
c. Both a and b
d. Neither a nor b
Which of the following is NOT an account title for liabilities?
a. Advances to suppliers
b. Advances from tenants
c. Rent received in advance
d. Advances from customers
On December 31 of Year 1, XYZ Company reported total shareholders' equity of $225,000, of which $180,000 represented contributed capital. If revenues, expenses, and dividends during Year 2 were $500,000, $420,000, and $30,000 respectively - and the total shareholders' equity is $290,000 on December 31 of Year 2 - how much additional capital was contributed by shareholders?
a. $15,000
b. $40,000
c. $65,000
d. $205,000
During the year, XYZ Company's inventory account balance increased from $26,000 to $31,500. During the year, the company made payments totaling $152,500 to creditors for inventory purchases and reported Cost of Goods Sold of $159,500 on its Income Statement. How much inventory was purchased during the year?
a. $165,000
b. $158,000
c. $152,500
d. $159,500
XYZ Company completed its second year of operations in Year 2. On January 1 of Year 2, the balance in Retained Earnings was $84,000. During the year, the company declared and paid a dividend of $65,000 to shareholders. The company reported net earnings of $105,000 in its Year 2 Income Statement. What was the balance in Retained Earnings on December 31 of Year 2?
a. $189,000
b. $170,000
c. $149,000
d. $124,000
Which of the following accounts would NOT appear on a corporation's Balance Sheet?
a. Owner Investment
b. Retained Earnings
c. Investment in ABC Stock
d. Premium on Common Stock
Stocks and bonds that can be readily converted into cash are called ____________.
a. Current Assets
b. Current Liabilities
c. Marketable Securities
d. Treasury Stock
Which of the following accounts is NOT a temporary account that should be closed during the closing process?
a. Prepaid Insurance
b. Cost of Goods Sold
c. Sales Revenue
d. Depreciation
In preparing its year-end adjusting entries, XYZ Company neglected to adjust prepaid insurance for the amount of insurance expired during Year 1. Which of the following reflects the result of this error?
a. Year 1 net income is understated, the balance in retained earnings is understated, and assets are understated.
b. Year 1 net income is overstated, the balance in retained earnings is overstated, and assets are correctly stated.
c. Year 1 net income is overstated, the balance in retained earnings is overstated, and assets are overstated.
d. None of the above
Amounts received for the par value of a firm's voting stock are called ___________.
a. Common Stock
b. Accounts Receivable
c. Preferred Stock
d. Retained Earnings
Amounts borrowed by a business for a relatively long period of time under a formal written contract or indenture are called ____________.
a. Unsecured Loans
b. Current Liabilities
c. Bonds Payable
d. Cash
The normal balances in Depreciation Expense and its related Accumulated Depreciation accounts are ____________.
a. debit and credit respectively
b. credit and debit respectively
c. Both are debit
d. Both are credit
The process of transferring entries in the general journal to the accounts in the general ledger is called ___________.
a. posting
b. journalizing
c. financial reporting
d. taxation
Which of the following liabilities would be accounted for at the present value of future cash payments?
a. Accounts Payable
b. Bonds Payable
c. Income Taxes Payable
d. Advances from Customers
________ refers to shares originally issued and outstanding that have been reacquired from the owners.
a. Treasury Stock
b. Common Stock
c. Preferred Stock
d. Retained Earnings
XYZ Company purchased some equipment for $120,000 on July 1 of Year 1. The equipment has an estimated useful life of 10 years and an estimated salvage value of $7,500. XYZ Company computes depreciation on a straight-line basis. How much depreciation should be recorded for Year 1?
a. $12,000
b. $11,250
c. $6,000
d. $5,625

Ms. Brown is an attorney who collects a retainer fee from all of her new clients. At the beginning of the year, the Unearned Retainer Fee account had a balance of $24,000. Ms. Brown collected additional retainer fees totaling $94,000 from her clients during the year. Her year-end Balance Sheet reports a $16,000 balance in the Unearned Retainer Fee account. How much of the retainer fees were earned by Ms. Brown during the year?
a. $108,000
b. $110,000
c. $86,000
d. $102,000
Different balance sheet items employ different valuation methods. Which of the following valuation applications is NOT generally accepted?
a. A major line of inventory has increased in value substantially above its cost and has been restated to its current replacement cost
b. Machinery is stated at its historical cost less the estimated amount of benefits consumed to date
c. Cash is received for goods to be delivered next month; the cost of goods to be delivered
d. Common stock is stated at the amount at which it was originally sold

A debit balance is normal for all of the following accounts except ___________.
a. Preferred Stock
b. Treasury Shares
c. Investment in Stock
d. All of the above
A trial balance prepared at the end of the accounting period after adjusting entries are made is called a/an ____________.
a. Pre-Adjustment Trial Balance
b. Prior Year Trial Balance
c. Adjusted Trial Balance
d. Balance Sheet
A right granted to an individual or company that excludes others from manufacturing, using, or selling a certain process or device is called a __________.
a. liability
b. trademark
c. tax liability
d. patent
A trial balance that shows revenue and expense accounts with zero balances and balance sheet accounts at the end of the period is called a ___________.
a. Balance Sheet
b. Pre-Closing Trial Balance
c. Post-Closing Trial Balance
d. Income Statement
Temporary revenue and expense accounts may be closed ___________.
a. individually by separate entries to Retained Earnings
b. in a single entry to Retained Earnings
c. to a temporary "Income Summary" account
d. Any of the above methods is acceptable.
Which of the following would cause the accounting equation to be out of balance?
a. Recording a purchase on account at the wrong amount
b. Recording a 2007 purchase in 2008
c. Posting the credit for a cash purchase at the wrong amount
d. All of the above
Which of the following transactions would NOT result in revenue being reported?
a. Sale of merchandise for cash
b. Sale of merchandise on account
c. Collection of an account receivable
d. All of the above
_________ is the financial obligation of a company in regards to a loan that accrues with the passage of time.
a. Interest Payable
b. Income Tax Payable
c. Income Tax Expense
d. Accounts Payable
Goods on hand that have been purchased for resale are called ___________.
a. cash
b. COGS
c. assets
d. inventory
The concept of present value ____________.
a. can be simply defined as today's value of a stream of future cash flows
b. implies that the value of receiving cash today will be less than the value of receiving it in the future
c. is employed extensively in the valuation of assets under current generally accepted accounting practices
d. determines the minimum amount that a buyer would be willing to pay for an asset
A manufacturing firm's cost of producing its product is called ____________.
a. direct labor
b. product costs
c. indirect labor
d. overhead
A residual claim of owners having certain preferences relative to other owners' claims is called __________.
a. Treasury Stock
b. Retained Earnings
c. Preferred Stock
d. Common Stock
XYZ Company has just completed its first year of operations in Year 1. The company distributed dividends of $50,000. If the ending balance of Retained Earnings on December 31 of Year 1 is $70,000, and the company had revenues of $400,000 from Year 1 sales, then what is the total of the company's Year 1 expenses?
a. $350,000
b. $330,000
c. $280,000
d. None of the above
Unused materials for manufacturing products are called __________.
a. COGS
b. Accounts Receivable
c. depreciation
d. inventory
Insurance premiums paid for future coverage are called ___________.
a. Deferred Income
b. Deferred Income taxes
c. Prepaid Insurance
d. Unearned Revenue
Amounts owed for goods or services acquired under an informal credit agreement are called __________.
a. Accounts Payable
b. Notes Payable
c. Money Market Funds
d. Common Stock

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