NEW YORK STATE FBLA

ACCOUNTING 1

2008
PLEASE DO NOT OPEN THIS TEST UNTIL DIRECTED TO DO SO

Test Directions

1. Complete the information requested on the answer sheet.

PRINT YOUR NAME on the “Name” line.

PRINT the name of the event, ACCOUNTING 1 on the “Subject” line.
PRINT the name of your CHAPTER on the “DATE” line.

2. All answers will be recorded on the answer sheet.

Please do not write on the test booklet.
Scrap paper will be provided.

3. Read each question completely before answering. With a NO. 2 pencil,

blacken in your choices completely on the answer sheet. Do not make any
other marks on the answer sheet, or the scoring machine will reject it.

4. You will be given 60 minutes for the test. You will be given a starting signal
and a signal after 50 minutes have elapsed.

5. Tie will be broken using the last 10 questions of the test.

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1. The last step in the posting procedures is writing

a. the entry date in the Date column of the account.
b. the journal page number in the Post Ref. column of the account.
c. the entry amount in the Debit or Credit column of the account.
d. none of these.

2. An account number in the journal’s Post Ref. column shows

a. the account to which an amount is posted.
b. the date of the entry.
c. that work on that journal page is completed.
d. none of these.

3. Posting references in a journal are

a. not necessary.
b. the first item recorded when posting.
c. always placed in an account’s Post Ref. column.
d. none of these.

4. A petty cash fund is always replenished

a. daily.
b. weekly.
c. at the end of the month.
d. none of these.

5. The bank statement shows an account balance of $5,500. There are outstanding checks totaling
$600 and an outstanding deposit of $400. The adjusted bank balance should be
a. $5,300.00
b. $5,700.00
c. $5,285.00
d. none of these.

6. On a work sheet, the balance of the Sales account is extended too the
a. Balance Sheet Debit Column
b. Balance Sheet Credit Column
c. Income Statement Debit Column
d. Income Statement Credit Column
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7. A net loss is entered in the work sheet’s
a. Income Statement Debit and Balance Sheet Credit Column
b. Income Statement Credit and Balance Sheet Debit Column
c. Balance Sheet Debit and Trial Balance Credit Columns
d. Income Statement Debit and Trial Balance Credit Columns

8. Preparing financial statements at the end of each monthly fiscal period is an

application of the accounting concept
a. Adequate Disclosure
b. Going Concern
c. objective Evidence
d. Accounting Period Cycle
9. The journal entry to adjust Supplies is
a. debit Supplies; credit Supplies Expense
b. debit Supplies Expense; credit Supplies
c. debit Income Summary; credit Supplies
d. debit Supplies Expense; credit Income Summary

10. After the adjusting entry for supplies has been posted, Supplies Expense has an up-to-date
balance that is the
a. same as the beginning balance for Supplies
b. same as the ending balance for Supplies
c. value of supplies bought during the fiscal period
d. value of supplies used during the fiscal period

11. After the adjusting entry for Prepaid Insurance has been posted, Insurance Expense has an
up-to-date balance that is the
a. same as the beginning balance for Prepaid Insurance.
b. same as the ending balance for Prepaid Insurance.
c. value of insurance premiums used during the fiscal period.
d. value of insurance premiums bought during the fiscal period.

12. The journal entry to close sales is

a. debit Income Summary; credit Sales.
b. debit Sales; credit Income Summary.
c. debit Income Summary; credit owner’s capital.
d. none of these.

13. The journal entry to close the expense accounts is

a. debit Income Summary; credit owner’s capital
b. debit Income Summary for the total expenses; credit each expense account.
c. debit each expense account; credit Income Summary.
d. none of these.
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14. An endorsement on the back of a check indicating that the check is to be accepted for deposit
only is a
a. blank endorsement.
b. special endorsement.
c. restrictive endorsement.
d. deposit endorsement.

15. The entry to establish a $200.00 petty cash fund is

a. debit cash, $200.00; credit Petty Cash, $200.00.
b. debit Miscellaneous Expense, $200.00; credit Cash $200.00.
c. debit Petty Cash, $200.00; credit Cash, $200.00.
d. debit Petty Cash, $200.00; credit Miscellaneous Expense, $200.00.

16. The formula for calculating the net income component percentage is
a. net income divided by total sales equals net income component percentage.
b. total sales divided by total expenses equals net income component percentage.
c. total sales minus total expenses divided by net income equals total net income
percentage.
d. none of these.

17. Following the same accounting procedures in the same way in each accounting period is an
application of the accounting concept
a. Matching Expenses with Revenue
b. Accounting Period Cycle
c. Consistent Reporting
d. Going Concern

18. An error in posting to a ledger

a. may cause the trial balance to be out of balance.
b. Will not affect the trial balance.
c. Will cause the cash to prove.
d. none of these.

19. The total of the schedule of accounts receivable should equal

a. the accounts receivable account balance in the general ledger.
b. The cash account.
c. The debit and credit proof.
d. None of these.

20. The withholding allowances of an employee affect

a. social security tax withheld.
b. Federal income tax withheld.
c. Federal unemployment tax owed
d. State unemployment tax owed.
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21. Some businesses deposit employee net pay directly to each employee bank account by using
a. payroll checks
b. payroll registers
c. EFT
d. None of these

22. In the entry to journalize paying the liability for the first quarter federal unemployment tax,
an account debited would be
a. Salary Expense.
b. Unemployment Tax Payable—Federal.
c. Payroll Taxes Expense.
d. Cash.

23. In the entry to journalize paying the liability for the first quarter federal unemployment tax,
an account credited would be
a. Salary Expense.
b. Unemployment Tax Payable—Federal.
c. Payroll Taxes Expense.
d. Cash.

24. Recording expenses in the fiscal period in which the expenses contribute to earning revenue
is an application of the accounting concept
a. Accounting Period Cycle
b. Adequate Disclosure.
c. Matching Expenses with Revenue.
d. Historical Cost.

25. The amount of prepaid insurance not expired during a fiscal period represents
a. an asset.
b. A liability.
c. Revenue.
d. An expense.

26. One way to increase gross profit on sales is to

a. decrease expenses.
b. Decrease sales revenue.
c. Increase sales revenue.
d. Increase cost of merchandise sold.

27. The distribution of net income statement shows each partner’s

a. share of withdrawals.
b. Total capital.
c. Share of net income or net loss.
d. None of these.
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28. Owner’s equity is changed by
a. cost of merchandise sold, net income, and withdrawals.
b. Gross profit on sales, revenues, and expenses.
c. Assets, liabilities, and capital.
d. Additional investments, withdrawals, and net income or loss.

29. A company has revenue of $250,000, gross profits of $175,000, and expenses of $55,000.
The component percentage for net income is
a. $120,000.
b. 78.0%
c. 48.0%
d. none of these.

30. The two types of journal entries needed to change general ledger account balances at the end
of the fiscal period are
a. adjusting and correcting entries.
b. Closing and correcting entries.
c. Adjusting and closing entries.
d. None of these.

31. Each revenue account must begin each fiscal period with a
a. debit balance
b. credit balance
c. zero balance
d. balance reflecting net income from the previous period.

32. To close the sales account,

a. debit Sales; credit Cash.
b. Debit Sales; credit Income Summary.
c. Debit Income Summary; credit Sales.
d. Debit Cash; credit Sales

33. To close the expense and cost accounts,

a. debit the expense and cost accounts; credit Income summary.
b. Debit the expense accounts; credit the capital accounts.
c. Debit Income summary; credit the expense and cost accounts.
d. Debit Income Summary; credit the capital accounts.

34. Withdrawals by partners

a. are an expense of the business.
b. Are not an expense of the business.
c. Increase the assets of the partnership.
d. Are closed to Income Summary.
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35. After closing entries have been posted, the accounts that remain open are the
a. asset, liability, and capital accounts.
b. Asset, liability and cost accounts.
c. Asset, liability, and drawing accounts.
d. Asset, liability, and expense accounts.

36. After adjusting and closing entries have been posted, a

a. balance sheet is prepared.
b. Trial balance is prepared.
c. Post-closing balance sheet is prepared.
d. Post-closing trial balance is prepared.

37. Items reported on a corporation income statement that are not reported on a partnership
income statement include
a. federal income tax expense and cash short & over.
b. net sales, net purchases, and federal income tax.
c. other revenue, other expense, and federal income tax.
d. federal income tax.

38. If the cost of merchandise sold component percentage for the current year is 63.4% and the
acceptable component percentage is 62%, a comparison indicates that
a. cost of merchandise sold component percentage is at an acceptable level.
b. cost of merchandise sold component percentage is at an unacceptable level.
c. more information is needed to determine if current cost of merchandise is at an
acceptable level.
d. net income earned is 63.4%.

39. A corporation’s total stockholder’s equity is increased by

a. net income
b. declaring dividends
c. paying dividends
d. receiving payment on account

40. The entry to journalize the closing entry for interest income is
a. debit Income Summary; credit Interest Income
b. debit Interest Income; credit Income Summary
c. debit Interest Income; credit Interest Receivable
d. debit Interest Receivable; credit Interest Income

41. Maturity value for a note is calculated as

a. principal plus interest equals maturity value
b. principal times interest equals maturity value.
c. principal times interest rate equals maturity value.
d. principal plus interest rate equals maturity value
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42. A partial payment made on a note includes
a. all interest until the total interest is paid.
b. all principal until the total amount of principal is paid.
c. an amount rounded to the nearest dollar.
d. part of the principal and part of the interest to be paid.

43. When a customer dishonors a note,

a. interest is earned but not recorded.
b. no interest is earned.
c. interest is both earned and recorded.
d. none of these.

44. Using the same inventory method for all fiscal periods is an application of the accounting
concept
a. Historical Cost
b. Accounting Cycle
c. Consistent Reporting
d. Objective Evidence

45. The weighted-average method is based on the assumption that the cost of merchandise sold
should be calculated using the
a. average cost per unit of beginning inventory.
b. average cost of ending inventory.
c. average cost of beginning inventory plus purchases during the fiscal period.
d. average cost of ending inventory plus purchases during the fiscal period.

46. Three general ledger accounts used to record information about each kind of plant asset are
a. a contra asset account, liability account, and expense account.
b. an asset account, contra asset account, and expense account.
c. an asset account, contra asset account, and liability account.
d. none of these.

47. The par value of common stock is reported on the

a. income statement
b. balance sheet
c. statement of stockholder’s equity
d. none of the financial statements

48. To record the declaring of a dividend,

a. debit Dividends Expense; credit Dividends Payable
b. debit Dividends; credit Cash
c. debit Dividends; credit Dividends Payable
d. debit Retained Earnings; credit Dividends Payable
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49. The depreciation adjustment includes a debit to Depreciation Expense—Office Equipment
and a credit to
a. Income Summary
b. Office Equipment
c. Retained Earnings
d. Accumulated Depreciation—Office Equipment

50. Uncollectible accounts receivable

a. are different from bad debts
b. should be estimated and recorded as an expense in the fiscal period in which the
related sales are recorded.
c. must be estimated using a percentage of total sales
d. does not result in a work sheet adjustment

51. If net sales is $100,000.00 and total operating expenses are $20,000.00, the component
percentage for total operating expenses is
a. 20%
b. 80%
c. 50%
d. 500%

52. If the cost of merchandise sold component percentage for the current year is 63.4% and the
acceptable component percentage is 62%, a comparison indicates that
a. cost of merchandise sold component percentage is at an acceptable level.
b. cost of merchandise sold component percentage is at an unacceptable level.
c. more information is needed to determine if current cost of merchandise sold is at an
acceptable level.
d. net income earned is 63.4% of sales.

53. An asset account that would not be included in the calculation of working capital is
a. Notes Receivable
b. Merchandise Inventory
c. Prepaid Insurance
d. Store Equipment

54. A liability account that would not be included in the calculation of the current ratio is
a. Notes Payable
b. Mortgage payable
c. Accounts Payable
d. Federal Income Tax Payable

55. An amount earned by a corporation and not yet distributed to stockholders is

a. Retained earnings
b. Net income
c. Capital stock
d. Stockholder’s equity
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56. After the federal income tax adjustment is recorded on the worksheet, the federal income
tax expense is extended into the
a. Balance Sheet Debit column.
b. Balance Sheet Credit column
c. Income Statement Debit column
d. Income Statement Credit column

57. The entry to journalize an international cash dale is a debit to Cash and a credit to
a. International Sales
b. Time Drafts Receivable
c. Sales
d. Internet Sales

58. Actual federal income tax expense is calculated on the amount of

a. Net sales
b. Net sales less total expenses
c. Net sales less cost of goods sold
d. Net income before federal income tax

59. During a period of rising prices, the highest cost of merchandise sold will result from
using the
a. FIFO inventory costing method
b. LIFO inventory costing method
c. Weighted average inventory method
d. None of the above

60. The entry to journalize an Internet cash sale, is a debit to Cash and a credit to
a. International Sales
b. Time Drafts Receivable
c. Sales
d. Internet Sales

61. The entry to journalize the receipt of cash for the value of a time draft would be
a. Debit Time Draft Receivable and credit Cash
b. Debit Time Draft Receivable and credit Sales
c. Debit Sales and credit Time draft Receivable
d. Debit Cash and credit Time draft Receivable

62. The entry to journalize the receipt of a time draft for an international sale would be
a. Debit Time Draft Receivable and credit Cash
b. Debit Time Draft Receivable and credit Sales
c. Debit Sales and credit Time draft Receivable
d. Debit Cash and credit Time draft Receivable
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63. The entry to journalize the receipt of cash for the value of a time draft would be recorded
in a
a. Cash payments journal
b. Cash receipts journal
c. General journal
d. Sales journal

64. The entry to journalize an international cash sale would be recorded in a

a. Cash payments journal
b. Cash receipts journal
c. General journal
d. Sales journal

65. The entry to journalize the receipt of a tune draft for an international sale would be
recorded in a
a. Cash payments journal
b. Cash receipts journal
c. General journal
d. Sales journal

66. Book value of a plant asset is original cost

a. Plus accumulated depreciation
b. Minus accumulated depreciation
c. Plus salvage value
d. Minus salvage value

67. Making an adjusting entry at the end of the fiscal period to record revenue earned but not
received is an application of the accounting concept
a. Adequate Disclosure
b. Matching Expenses with Revenue
c. Objective Evidence
d. Realization of Revenue

68. The entry to journalize the reversing entry for accrued interest income is
a. Debit Income summary; credit Interest Income
b. Debit Interest Income; credit Income Summary
c. Debit Interest Income; credit Interest Receivable
d. Debit Interest Receivable; credit Interest Income

69. A reversing entry for accrued interest expense will result in an account balance of
a. Interest Payable Debit
b. Interest Payable Credit
c. Interest Expense Debit
d. Interest Expense Credit
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70. Interest income of a business is
a. A normal operating revenue
b. An other revenue
c. An investment
d. An accounts receivable

71. When using the perpetual inventory method,

a. Periodic inventories are never taken
b. Day-to-day information about the quantity of merchandise on hand is not
available
c. It is not necessary to show the minimum balance on stock records
d. It is customary to take a periodic inventory at least one a fiscal period

72. When the FIFO method is used, cost of merchandise sold is valued at
a. The average price
b. The most recent price
c. The earliest price
d. None of these

73. Some examples of current assets are

a. Cash, accounts receivable, and cash register
b. Cash, accounts receivable, merchandise inventory
c. Cash, merchandise inventory, furniture
d. None of these

74. The purpose of recording depreciation is to

a. Earn revenue
b. Recover the cash spent on plant assets
c. Record an expense in the periods in which the asset is used to earn revenue
d. Earn money to replace the asset.

75. The Accumulated Earnings column of the employee earnings record

a. Shows net pay for the year
b. Is the total earnings since the first of the year
c. Shows net pay for one quarter
d. Is the gross earnings for one quarter.

76. An error in posting to a ledger

a. May cause the trial balance to be out of balance
b. Will not affect the trial balance
c. Will cause the cash to prove
d. None of these
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77. Which of the following statements is not an advantage of using a point-of-sale terminal
(POS terminal)?
a. Enables management to prepare a report of merchandise inventory to be recorded
b. Reports sales by time of day to assist management to effectively schedule
employees
c. Uses UPC symbols to increase the efficiency and accuracy of entering sales
d. Is required for a business to accept and process credit cards

78. The withholding allowances of an employee affect

a. Social security tax withheld
b. Federal income tax withheld
c. Federal unemployment tax owed
d. State unemployment tax owed

79. Some businesses deposit employee net pay directly to each employee bank account by
using
a. Payroll checks
b. Payroll registers
c. EFT
d. None of these

80. Preparing a work sheet at the end of each fiscal period is an applications of the
accounting concept
a. Accounting Period Cycle
b. Adequate Disclosure
c. Matching Expenses with Revenue
d. Historical Cost

81. Recording expenses in the fiscal period in which the expenses contribute to earning
revenue is an application of the accounting concept
a. Accounting Period Cycle
b. Adequate Disclosure
c. Matching Expenses with Revenue
d. Historical Cost

82. On a worksheet, Purchases is extended to the

a. Income Statement Debit column
b. Income Statement Credit column
c. Balance Sheet Debit column
d. Balance Sheet Credit column
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83. One way to improve an unacceptable component percentage for cost of merchandise sold
is to
a. Sell more merchandise
b. Increase selling prices
c. Purchase from different vendors who offer better prices
d. None of these

84. The par value of common stock is reported on the

a. Statement of stockholder’s equity
b. Balance sheet
c. Income statement
d. None of these financial statements

85. A company has revenue of $250,000.00, gross profit of $175,000.00, and expenses of
$55,000.00. The component percentage for net income is
a. $120,000.00
b. 78%
c. 48%
d. None of these

86. The two types of journal entries needed to change general ledger account balances at the
end of the fiscal period are
a. Adjusting and correcting entries
b. Closing and correcting entries
c. Adjusting and closing entries
d. None of these

87. Each revenue account must begin each fiscal period with a
a. Debit balance
b. Credit balance
c. Zero balance
d. Balance reflecting net income from the previous period

88. To close the sales account,

a. Debit sales; credit Cash
b. Debit Sales; credit Income Summary
c. Debit Income Summary; credit Sales
d. Debit Cash; credit Sales

89. To close the expense and cost accounts,

a. Debit the expense and cost accounts; credit Income Summary
b. Debit the expense accounts; credit the capital accounts
c. Debit Income Summary; credit the expense and cost accounts
d. Debit Income Summary; credit the capital accounts
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90. A company purchases office equipment for $1,300.00 having a 3-year useful life and
$100.00 salvage value. Using the straight-line method of depreciation, depreciation
expense in year 2 of the asset’s useful life will be
a. $250.00
b. $300.00
c. $400.00
d. $433.33

91. After closing entries have been posted, the accounts that remain open are the
a. Asset, liability, capital stock, and retained earnings accounts.
b. Asset, liability, and cost accounts.
c. Asset, liability, and dividends accounts.
d. Asset, liability, and expense accounts.

92. After adjusting and closing entries have been posted, a

a. Balance sheet is prepared.
b. Trial balance is prepared.
c. Post-closing balance sheet is prepared.
d. Post-closing trial balance is prepared.

93. A petty cash fund is always replenished

a. Daily
b. Weekly
c. At the end of the month
d. None of these

94. An account number in the journal’s Post Ref. column shows

a. The account to which an amount is posted
b. The date of the entry
c. That work on that journal page is completed
d. None of these

95. Posting references in a journal are

a. Not necessary.
b. The first item recorded when posting.
c. Always placed in an account’s Post. Ref. column.
d. None of these.

96. A lost check with a blank endorsement on it can be cashed by

a. Anyone who has the check
b. Only the person whose name follows the words “Pay to the order of”
c. Only the person who endorsed the check
d. No one.
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97. An endorsement on the back of a check indicating that the check is to be accepted for
deposit only is a
a. Blank endorsement
b. Special endorsement
c. Restrictive endorsement
d. Deposit endorsement

98. The formula for calculating the net income component percentage is
a. Net income divided by total sales equals net income component percentage
b. Total sales divided by total expenses equals net income component percentage
c. Total sales minus total expenses divided by net income equals total net income
percentage.
d. None of these.

99. The bank statement shows an account balance of $5,500.00. There are outstanding
checks totaling $600.00 and an outstanding deposit of $400.00. The adjusted bank
balance should be
a. $5,300.00
b. $5,700.00
c. $5,285.00
d. None of these

100. On a work sheet, the balance of the Sales account is extended to the
a. Balance Sheet Debit column
b. Balance Sheet Credit column
c. Income Statement Debit column
d. Income Statement Credit column
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Answer Key

1. D 45. C 89. C
2. A 46. B 90. C
3. D 47. C 91. A
4. C 48. C 92. D
5. A 49. D 93. C
6. D 50. B 94. A
7. B 51. A 95. D
8. D 52. B 96. A
9. B 53. D 97. C
10. D 54. B 98. A
11. C 55. A 99. A
12. B 56. C 100. D
13. B 57. C
14. C 58. D
15. C 59. B
16. A 60. C
17. C 61. D
18. A 62. B
19. A 63. B
20. B 64. B
21. C 65. C
22. B 66. B
23. D 67. D
24. C 68. C
25. A 69. D
26. C 70. B
27. C 71. D
28. D 72. C
29. C 73. B
30. C 74. C
31. C 75. B
32. B 76. A
33. C 77. D
34. B 78. B
35. A 79. C
36. D 80. A
37. D 81. C
38. B 82. A
39. A 83. C
40. B 84. A
41. A 85. C
42. D 86. C
43. C 87. C
44. C 88. B