ACCOUNTING COMPETENCY EXAM SAMPLE EXAM. Answers Provided at the End

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ACCOUNTING COMPETENCY EXAM SAMPLE EXAM 1. The accounting process does not include: a. interpreting d. observing b. reporting e. classifying c. purchasing 2. The financial statement or statements... that pertain to a stated period of time is (are) the: a. balance sheet b. balance sheet and journals c. balance sheet and income statement d. income statement e. none of the above 3. External users of financial accounting information include: a. lenders d. labor unions b. prospective owners e. all of the above c. customers 4. Expenses can be found in the: a. statement of owner’s equity d. both b and c b. income statement e. all of the above c. balance sheet 5. This account does not appear on the income statement: a. accumulated depreciation d. marketing expense b. depreciation expense e. interest expense c. sales revenue 6. A brand new company has a building costing $10,000, machinery costing $5,000, cash of $700, and a bank loan of $7,850. What is the owner’s equity? a. $8,850 d. cannot be determined b. $15,700 e. $7,850 c. $7,7507. An example of an economic exchange includes: a. a business owner purchases inventory on credit b. a dry cleaning business cleans 3 dresses for a customer c. an insurance agent sells a whole life policy d. a contractor purchases a new truck for cash e. all of the above 8. If a company has owner’s equity of $100,000, a. assets minus liabilities equal $100,000 b. total assets must equal $100,000 c. net income for the past year was $100,000 d. a total of $100,000 was invested by the owner e. none of the above 9. Providing services on account for $40,000 would: a. increase cash $40,000, decrease accounts receivable $40,000 b. decrease accounts receivable $40,000, decrease owner’s equity $40,000 c. increase accounts receivable $40,000, increase owner’s equity $40,000 d. increase accounts receivable $40,000, decrease owner’s equity $40,000 e. none of the above Use the following information to answer the next four questions. Joseph Forbes is the owner of his own business. On December 31, Forbes’ assets, liabilities, revenues and expenses were: Insurance Expenses $3,000 Accounts Payable $4,000 Miscellaneous Expenses 900 Accounts Receivable 5,000 Rent Expenses 2,500 Cash 14,000 Salaries Expense 19,000 Equipment 11,000 Supplies Expense 1,200 Notes Payable 4,600 Services Performed 45,000 Supplies on hand 700 10. On December 31, total assets are equal to: a. $25,700 d. $30,700 b. $19,700 e. none of the above c. $22,100 11. On December 31, net income is equal to: a. $18,400 d. $17,400 b. $45,000 e. none of the above12. On December 31, if net income equals $15,000 and the ending owner’s equity is $20,000, and Forbes invested an additional $2,600 in his business, while withdrawing $6,000 during the year, the beginning owner’s equity for this year was: a. $7,100 d. $7,430 b. $7,400 e. none of the above c. $8,400 13. On December 31, current assets equal: a. $9,000 b. $19,700 c. $19,000 d. $23,000 e. none of the above 14. New Font Software provided services for customers of $7,000. What is the entry if it billed customers for the total amount. a. Debit accounts receivable $7,000; credit service revenue $7,000 b. Debit notes receivable $7,000; credit service revenue $7,000 c. Debit cash $7,000; credit service revenue $7,000 d. Debit service revenue $3,000; credit accounts receivable $7,000 e. none of the above 15. Current Landscaping paid salaries of $560 in cash. The accounting entry is: a. Debit salaries expense $560; credit salaries payable $560 b. Debit salaried expense $560; credit cash $560 c. Debit cash $560; credit salaries expense $560 d. Debit accounts payable $560; credit cash $560 e. none of the above 16. The Philip Company received a bill for natural gas. The bill is for $550 and is payable in 30 days. The accounting entry is: a. Debit accounts receivable $550; credit service revenue $550 b. Debit accounts payable $550; credit cash $550 c. Debit natural gas expense $550; credit accounts payable $550 d. Debit natural gas expense $550; credit cash $550 e. none of the above17. The following includes the accounts of the Perry Company on December 31. What is the total trial balance? Accounts Receivable $1,000 Supplies Expense 250 Cash 4,500 Drawing Account 300 Equipment 4,000 Advertising Expense 50 Salaries Expense 1,600 Accounts Payable 3,050 Revenue Earned 2,800 Capital Account 6,050 Rent Expense 200 a. $11,900 d. $11,600 b. $12,000 e. none of the above c. $9,100 18. Which of the following transactions require a compound journal entry? a. An owner invests personal cash on his/her business b. Purchase of $ 100 of supplies; some cash and the rest on account c. Purchase three kinds of supplies for cash d. Received cash from customers as payment for services e. none of the above 19. Cross-indexing: a. shows the analysis of each transaction. b. ties the journal and ledger together. c. supplies an explanation of each transaction d. removes complicated explanations from the accounts. e. c and d 20. A truck was purchased on July 1 for $20,000. The estimated salvage value is $2,000. The estimated useful life is 3 years. Using straight-line method of depreciation, the amount of depreciation in the adjusting entry at fiscal year-end on December 31 is: a. Depreciation Expense-Truck $555.56 Accumulated Depreciation-Truck $555.56 b. Accumulated Depreciation- Truck $1,500 Depreciation Expense- Truck $1,500 c. Depreciation Expense- Truck $500 Accumulated Depreciation- Truck $500 d. Depreciation Expense- Truck $3,000 Accumulated Depreciation- Truck 3,00021. A company paid in advance $4,800 for two years of prepaid insurance, which started on May 1. The adjusting entry on fiscal year ending December 31 of that year is: a. Debit Insurance Expense; Credit Prepaid Insurance, $1,200 b. Debit Insurance Expense; Credit Prepaid Insurance, $800 c. Debit Prepaid Insurance; Credit Insurance Expense , $1,600 d. Debit Insurance Expense; Credit Prepaid Insurance, $1,600 22. On December 1 a company purchased supplies for $1,300. On December 31, an actual physical inventory showed that $800 of supplies were on hand. The closing adjusting entry is: a. Debit Supplies Expense; Credit Supplies on Hand, $800 b. Debit Supplies Expense; Credit Supplies on Hand, $1,300 c. Debit Supplies Expense; Credit Supplies on Hand, $500 d. Debit Supplies on Hand; Credit Cash, $500 23. The first step in the accounting cycle is: a. Prepare financial statements b. Post journal entries to the accounts in the ledger c. Journalize transactions in the journal d. Analyze transactions by examining source documents 24. The Futures Company had revenues of $50,000 and expenses of $30,000 for the year. Mr. Futures withdrew $5,000 from the business during the year. The accounting entry to close the Income Summary Account is: a. Income Summary $20,000 Mr. Futures capital $20,000 b. Mr. Futures capital $20,000 Income Summary $20,000 c. Income Summary $5,000 Mr. Futures Drawing $5,000 d. Mr. Futures, Drawing $5,000 Income Summary $ 5,000 25. An example of an adjusting entry for deferred items is: a. expense to asset c. revenue to liability b. asset to expense d. liability to expense26. CMU Corp, has 4 500,000 of accounts receivable and has found an average 3 percent of its credit sales are uncollectible. Suppose CMU Corp. determines that a customer owing $10,000 will never pay. What would be the journal entry? a. Uncollectible Accounts Expense $300 Allowance for Uncollectible Accounts $300 b. Allowance for Uncollectible Accounts 300 Accounts Receivable 300 c. Uncollectible Accounts Expense 10,000 Allowance for Uncollectible Accounts 10,000 d. Allowance for Uncollectible Accounts 10,000 Accounts Receivable 10,000 27. Rowe Inc. has a contract to construct a building for a price of $100. So far it has spent $60 of costs and it estimates an additional $20 will be needed to finish the building. How much profit can be recognized using the percentage of completion method? a. 0 d. $40 b. $15 e. none of the above c. $20 28. Warriner, Ltd. Sells widgets for $100, costing $70 with payments to be made in 10 equal installments of $10. If 3 payments have been received this year, using the installment basis of revenue recognition, what is the realized profit? a. o c. $9 b. $3 d. $30 29. Identify the advantage(s) of recognizing revenue at the time of sale. a. The actual transaction is an observable event. b. The likelihood of the sold item being returned for credit is remote. c. All of the above d. None of the above 30. Rowe, Inc. has a contract to construct a building for a price of $100. So far it has spent $60 of costs and it estimates an additional $20 will be needed to finish the building. How much profit can be recognized using the completed contract method? a. 0 c. $20 b. $15 d. $40Using the following 2 tables, answer the next four questions. Table of Inventory Purchases Date Units Unit Cost Total cost Beginning Inventory 10 $3 $30 February 3 5 4 20 April 10 15 5 75 June 12 12 7 84 August 20 20 8 160 Total 62 369 Sales Date Units Identified Units Price Total March 5 February 5 $6 $30 May 2 April 10 6 60 July 4 June 2 10 20 September 1 June 8 10 80 25 $190 31. Determine the cost of ending inventory under specific identification a. $190 c. $160 b. $229 d. $369 32. Determine the FIFO cost of ending inventory a. $179 c. $269 b. $190 d. $369 33. Determine the LIFO cost of ending inventory a. $185 c. $190 b. $174 d. $369 34. Determine the ending inventory under weighted average method. a. $190 c. $249 b. $220 d. $36935. From merchandiser’s income statement you know that Sales revenue is $ 650,000 and the gross margin is 20%. What is the cost of Goods Sold? a. $650,000 c. $26,000 b. $130,000 d. $520,000 36. A manufacturer has beginning and ending finished goods inventory of $70, 000 and $90,000 respectively. Also, the cost of goods manufactured is $200,000. What is the Cost of Goods Sold? a. $20,000 c. $180,000 b. $70,000 d. $270,000 Using the following table answer the next four questions. Machine Purchase price $80,000 Estimated Salvage Value $20,000 Estimated Useful Life 5 years Estimated Units of Production1 2,000 37. What is the depreciation on the second year using the straight-line method? a. 0 c. $12,000 b. $5,000 d. $16,000 38. What is the depreciation using the units of production method in the second year when 4,000 units are made? a. $4,000 c. $20,000 b. $10,000 d. $27,000 39. What is the depreciation in the second year using the sum-of-the-years’-digits method? a. $36,000 c. $16,000 b. $48,000 d. $21,333 40. What is the depreciation using the double declining balance method in the second year? a. $32,000 c. $19,200 b. $11,520 d. $8,80041. When a plant asset is retired from productive service and has no salvage value, and that originally cost $50,000 and had accumulated depreciation of $40,000, the correct accounting treatment is: a. Plant Asset $50,000 Accumulated Depreciation $40,000 Loss 10,000 b. Loss 10,000 Accumulated Depreciation 40,000 Plant Asset 50,000 c. Loss on Plant Asset 10,000 Plant Asset 10,000 d. Nothing. The firm still has it. 42. Brooks Company declared a cash dividend of $5,000 on June 1 and paid it on September 1. What would be the journal entry or entries? a. Depletion Expense $5,000 Accumulated Depletion $5,000 b. Depletion Expense 5,000 Cash 5,000 c. Depletion Expense 5,000 Depletable Asset 5,000 d. Accumulated Depletion 5,000 Depletion Expense 5,000 43. Smith. Corp. sold 100 shares of $50 par value common stock for $70 per share. What would be the correct journal entry? a. Cash $7,000 Common Stock $7,000 b. Cash 7,000 Common Stock 5,000 Paid in Capital 2,000 c. Common Stock 7,000 Cash 7,000 d. Cash 7,000 Common Stock 2,000 Paid in Capital 5,00044. Park Inc. earned EBIT $10,000,000 last year. If its tax rate was 40%, interest expense $2,000,000 and number of common shared 1,000,000 what would be the EPS? a. $8.00 c. $4.80 b. $6.00 d. $4.00 45. Brooks Co. declared and paid a cash dividend of $5,000. What would be the journal entries? a. Retained Earnings $5,000 Cash $5,000 b. Retained Earnings 5,000 Dividends Payable 5,000 c. Dividends Payable 5,000 Cash 5,000 Retained Earnings 5,000 Dividends Payable 5,000 d. Retained Earnings 5,000 Dividend Payable 5,000 Dividends Payable 5,000 Cash 5,000 46. A corporation issues $50,000 of a 8% coupon, $1,000 par value bond. What would be the semi-annual interest payment journal entry? a. Bands Payable $4,000 Cash $4,000 b. Bonds Interest Expense 4,000 Cash 4,000 c. Bonds Payable 2,000 Cash 2,000 d. Bond Interest expense 2,000 Chas 2,000 47. Given the following balance sheets of three firms, which appears to have greater financial leverage? Firm A Firm B Firm C Debt $2 $40 $15 Equity $8 $60 $35 Total Assets $10 $100 $50 a. Firm A b. Firm B c. Firm C d. All the same48. Given the following income statements of three companies, which appears to have greater financial leverage based upon the times interest earned ratio which is EBIT divided by interest? Firm A Firm B Firm C EBIT $50 $100 $75 Interest 10 15 5 EBT 40 85 70 Taxes 20 45 50 EAT 20 40 20 a. Firm A b. Firm B c. Firm C d. All the same 49. What is the maximum life that the intangible asset patent value can be amortized? a. The asset’s legal life b. The useful life c. 17 years d. 40 years 50. A company is being sued for $100,000. What would be recorded on the balance sheet? a. Nothing b. $100,000 Set-aside Cash c. $100,000 Liability d. $100,000 Contingent LiabilitySAMPLE EXAM KEY [Show More]

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