Multiple Choice
Identify the choice that best completes the statement or answers the
question.
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1.
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What are the two accounts that
a company will have for every revenue item that is prepaid by a customer?
a. | Cash,
Revenue | b. | Cash, Accounts Payable | c. | Accounts Payable, Accounts
Receivable | d. | Cash, Unearned Revenue. | e. | None of the
above |
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2.
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Making adjustments to
accurately reflect changes to accounts due to the passage of time is known as:
a. | Cash
basis | b. | Free trade | c. | Accrual | d. | Bad Debt | e. | None of the above |
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3.
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What kind of account is HST
Payable?
a. | Asset | b. | Equity | c. | Liability | d. | Contra-Liability | e. | None of the above |
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4.
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Interest
is...
a. | Something I know nothing
about | b. | Something I want to know nothing about | c. | A pain in the neck | d. | The price of money | e. | The repayment of borrowed
money | f. | All of the above |
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5.
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If your company has just
purchased a delivery truck, which method would you probably use to amortize the
asset?
a. | Straight-Line | b. | Declining Balance | c. | None of the
above |
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6.
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Which account is NOT affected
in the Bad Debt process?
a. | Allowance for Doubtful Accounts
| b. | Bad Debt Expense
| c. | Accounts
Receivable | d. | Cash | e. | All of the above |
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7.
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What are the two contra
accounts associated with sales?
a. | Purchase Discounts, Purchase Returns
and Allowances | b. | Purchase Discounts, Accounts Payable | c. | Sales Revenue, Cash | d. | Sales Discounts, Sales Returns and
Allowances | e. | None of the above |
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8.
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Which of the following is a
contra revenue account, and thus has a debit balance even though it is listed with
revenues.
a. | Accumulated
amortization | b. | Drawings | c. | Purchase Discounts | d. | Allowance for doubtful
accounts | e. | Amorization Expense | f. | Sales
Discounts |
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9.
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If you are a landlord and you
recieve $12,000.00 of prepaid rent on January 1st, which accounts are affected on January
31st?
a. | Cash, Unearned Revenue
| b. | Unearned Revenue, Rental
Revenue | c. | Cash, Accounts Payable | d. | Cash, Retained Earnings | e. | None of the
above |
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10.
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If your company prepays rent
for an entire year on January 1st, which accounts are affected on January 31st after the first
month’s rent has been paid of?
a. | Prepaid Rent,
Cash | b. | Prepaid Rent, Accounts Payable | c. | Rent Expense, Prepaid
Insurance | d. | Rent Expense, Prepaid Rent | e. | None of the
above |
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11.
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HST Recoverable is
“married” to which of the following accounts?
a. | Cash | b. | Allowance for doubtful accounts | c. | Accounts Payable | d. | Accounts Receivable | e. | None of the
above |
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12.
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If on August 1st your company
sells $1,000.00 of product to a customer with a 2/10, n30 term, which accounts are affected on August
1st?
a. | Cash, Sales Discounts, Accounts
Receivable | b. | Accounts Payable, Cash, Purchase Discounts | c. | Supplies, Accounts Payable
| d. | Accounts Receivable, Sales
Revenue | e. | None of the above |
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13.
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What are the three accounts
associated with every long-term asset (except land)?
a. | Asset Account, Accumulated
Amortization, Amortization Expense | b. | Asset Account, Cash, Accumulated Amortization
| c. | Asset Account, Cash, Amortization
Expense | d. | Cash, Accumulated Amortization, Amortization
Expense | e. | None of the above |
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14.
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What is the purpose of
amortization?
a. | To make our lives
miserable | b. | To reflect the wearing out of an asset over time
| c. | To confuse
everyone | d. | There is no purpose | e. | None of the above
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15.
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What is Bad
Debt?
a. | Debt that did something it
wasn’t supposed to | b. | Debt that will not be paid back | c. | Debt that you have too much
of | d. | Debt that you can’t stop
worrying about | e. | None of the above |
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16.
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Why are there two steps to bad
debt?
a. | In case you only need to do one or
the other | b. | The second step is to expense the bad debt | c. | It allows the accountant to be conservative when there is
the possibility of bad debt, without erasing the accounts receivable
owing. | d. | The first step allows the accountant to erase the bad accounts receivable so
that people who look at the financial statements are not misled. | e. | All of the above | f. | None of the
above |
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17.
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Discounts only occur when cash
changes hands
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18.
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If you are expected to pay
interest monthly on the 15th, and your accounting period ends on a 31st, which accounts are affected
on the 31st?
a. | Interest Expense, Interest
Payable | b. | Cash, Interest Payable | c. | Cash, Interest Expense | d. | Interest Expense, Allowance for Doubtful Accounts
| e. | None of the above
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19.
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If your company has purchased
manufacturing machinery to use in the production process, which method would you use to amortize the
machinery?
a. | Straight-Line Method
| b. | Declining
Balance |
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20.
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What are the two steps in the
bad debt process?
a. | Make an allowance when there is a
possibility that the customer won’t pay, remove the A/R when you are sure they won’t
pay | b. | Make an allowance when there is a possibility that the customer won’t
pay, remove cash when you are sure they won’t pay | c. | Make an allowance when there is a possibility that the
customer won’t pay, remove A/P when you are sure they won’t
pay | d. | Make an allowance when there is a possibility that the customer won’t
pay, remove prepaid expense when you are sure they won’t pay | e. | None of the above
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21.
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If your company sells $1,000.00
of product during the accounting period, which accounts will be affected by the transaction?
a. | Supplies, HST Recoverable,
Cash | b. | Accounts Rec., HST Payable, HST Recoverable | c. | HST Recoverable, Cash, HST
Payable | d. | Cash, HST Payable, Revenue | e. | None of the
above |
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22.
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If your company purchases
$1,000.00 worth of supplies during the accounting period, which accounts will be affected by the
transation?
a. | Cash, HST Payable,
Revenue | b. | Cash, HST Recoverable, Supplies | c. | Cash, Supplies, Accumulated Amortization
| d. | Cash, Supplies, Prepaid
Expense | e. | None of the above |
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23.
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When is the HST Recoverable
account used with a revenue-related transaction?
a. | Never | b. | When the sale is on account or for credit | c. | When discounts apply | d. | When the revenue is a return, and you are refunding the
customer’s money | e. | None of the above |
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24.
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Why is the amount of your
revenue always the “ticket price” or “asking price” before any tax is
added?
a. | The extra money you collect is HST,
which is not yours. It belongs to the government. | b. | You can’t bill a customer more than you
advertise | c. | When discounts apply the amount will go down | d. | You aren’t allowed to charge more than
this |
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25.
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What does 2/10, n30
mean?
a. | If you pay in 2 days, 10% discount
for your next 30 purchases | b. | 2% discount if you pay in 30 days, with 10 days to pay without penalty
| c. | 2% discount if you pay in 10 days,
30 days to pay without penalty | d. | 10% discount if you pay in 2 days, 30 days to pay without penalty
| e. | None of the above
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26.
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What are the two corresponding
accounts that occur with every expense that a company prepays?
a. | Prepaid Expense Account, Expense
Account | b. | Cash, Expense Account | c. | Cash, Prepaid Expense
Account | d. | Cash, Accounts Payable | e. | None of the
above |
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27.
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If your company sells $1,000.00
of product on August 1st with 2/10, n30 term and receives payment on August 5th, which accounts are
affected on August 5th?
a. | Cash, Sales Discount, Accounts
Receivable | b. | Supplies, Accounts Payable | c. | Accounts Payable, Cash, Purchase Discounts
| d. | Accounts Receivable, Sales
Revenue | e. | None of the above |
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28.
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What is the purpose of
adjustments?
a. | To make sure the balance sheet
balances | b. | Adhere to GAAPs, ensure that accounting results reflect the actual performance
of a business | c. | Adhere to GAAPs | d. | Ensure that accounting results reflect actual performance of a
business | e. | None of the above |
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29.
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Which GAAP is not a major
reason for having to complete the process of adjustments?
a. | Conservatism | b. | Matching/Expense | c. | Revenue Recognition | d. | Historical Cost | e. | None of the
above |
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30.
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What is the meaning of the
mathematical difference between HST Recoverable and HST Payable?
a. | It is the difference between what
you sold and what you bought. | b. | It is how much money you own the government from sales to
customers | c. | It is the amount of your income tax | d. | It is the net balance owing to (or waiting to be received
from) the government |
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