1. Which of the following is not true about the accumulated depreciation account?

a. It does not appear on the income statement

b. It is a contra asset account
c. Its balance is subtracted from the balance of the asset that it relates to in order to
calculate the asset’s carrying amount
d. It is shown in the current assets section of the statement of financial position
e. None

2. Bobs rentals ltd started the yr with total assets of $70,000 and total liabilities of $40,000. During
the year the business recorded $100,000 in car repair revenues, $65,000 in expenses, and paid
dividends of $5,000. Shareholder’s equity at the end of the year was:

A = 70k

Se = 30k

100-65= 35k

35k – 5k = 30 k

Ans : $60,000

3. MBS Inc. uses a periodic inventory system. During april 2015, the following transactions
occurred:
3 – purchased $2000 of merchandise terms 3/10,n/60
7- returned $300 of the merchandise purchased april 3rd
12 – paid for the goods purchased on april 3rd
13 – sold good on credit for $1000 terms 2/10,n/45
14 – the customer of april 13 returned $300 of the goods
23 – received payment from the customer of april 23rd

43. ANS :A
44. ANS: A

4. Which of the following would not be considered a user of accounting data?

a. Revenue canda
b. Ans: management
c. Creditors
d. Customers
e. Non
5. A business organized as a corp
a. Is owned by is shareholders (ans)
b. Is not a separate legal entitiy
 c. Requires shareholders to be personally liable
6. Which of the following activities involves raising necessary funds to support the business?
a. Ans: financing
b. Operating
c. Investing
d. Marketing
7. In order for accounting info to be used it must be”
a. Help predict future events
8. Accumulated depreciation
a. Is not shown in the current assets section of statement of financial position
9. Cost basis of accounting states that assets and liabilities should be recorded at their cost at the
time of acquisition (true)

10. Fair value rather than cost is a more relevant measure for certain types of assets and liabilities
to be reported (true)
11. Collection of a 1500$ accounts receivable
a. Has no effect on total assets
12. If services are performed on credit
a. Shareholders equity will increase (ans)
b. Assets will decrease
c. Liabilities will increase
d. Liabilities will decrease
e. None

13. The purchase of an asset on credit:

a. Increases assets and se
b. Increases assets and liabilities(ans)
c. Decr assets and incr liabilities
d. No effect on total assets
14. If the totals on a trial balance are not equal it could be bc
a. A failure to post a transaction
b. Recording the same incorrect amount for both debit and credit parts of a transaction
c. An error calculating error balance (ans)
d. Recording the transaction more than once
15. Which of the following is generally not a guideline for recognizing revenue
a. Management declares that revenue should be recognized (ans)
16. In general, revenue recognition occurs:
a. When it is earned (ans)
b. When cash is received
c. When expenses are incurred
d. The period that income taxes are paid
17. Which of the following is not a justification for adjusting entries
a. Necessary to bring general ledger accounts in line with the budget
18. Diff between prepaid and accrued expenses is that prepaid expenses have:
 a. Been incurred and accrued expenses have not
b. Not been paid and accrued expenses have not
c. Have been paid and accrued expenses have not (ans
19. Under perpetual inventory system:
a. Accounts record continuous amt of inventory
20. Net sales less cost of goods sold is
a. Gross profit (ans )
b. Operating profit
c. Profit
d. Profit before taxes
e. None
21. Which of the following accounts has a normal credit balance
a. Purchase
b. Sales returns and allowances
c. Freight in
d. Purchase discounts (ans)

22. If total liabilities incr y 15,000 and se incr by 15000 during a period of time, then total assets:
a. Incr by 30, 000
23. Corp borrows 10 mil on a 10 yr loan payable. How does this affect
a. Improves liquidity and hurts solvency ratio (ans)
b. Improves both
c. Hurts both
d. Opposite
e. None
24. Company has 6 mil in long term debt outstanding which it expects to repay

25. Mckay corp moved into its new place on nov 15, 2015. At that time, paid 6k for 1 yr insurance
policy.