Leader: Ben Practice Exam #2 Course: ACCT 284 Supplemental Instruction Instructor: Duffy Iowa State University Date: 10/18/15 1. On August 1st a company took out a loan for $12,000. The annual interest rate is 6%. What amount of interest expense should the company recognize? a. $720 b. $300 c. $240 d. $320 2. The unadjusted balance in supplies at December 31st was $1,100. A year end physical count indicates that supplies were equal to $300. What is the necessary adjusting entry? a. $800 b. $840 c. $1400 d. $1290 3. On June 1st a company paid for a year long insurance policy costing $50,000. What is the adjusting entry on December 31st? a. $32,000 b. $28,000 c. $29,166 d. $24,000 4. Which of the following accounts are permanent accounts? a. Cost of goods sold b. Revenue c. Inventory d. Dividends 5. At the beginning of the period supplies were equal to $3,000. Purchases were equal to $210 and $300. The ending balance was $1,500. What was supplies expense for the year? a. $2,000 b. $2,010 c. $1,100 d. $1,860 6. Which of the following is not a principle of control activities? a. Segregation of Duties b. Restricting access c. Independent verification d. Complex procedures 7. Peter decides to steal the extra interest when a bank program makes interest calculations. Peter writes the code for the interest software and processes the interest payments, what internal control technique would stop this fraud? a. Restricting access b. Complex procedures c. Segregation of duties d. Using prenumbered checks 8. Which of the following statements regarding closing journal entries is correct? a. Closing entries transfer net income (or loss) to the Retained Earnings account.

1060 Hixson-Lied Student Success Center v 515-294-6624 v [email protected] v http://www.si.iastate.edu b. The balance of the Dividends Declared account is transferred to the Retained Earnings account when closing entries are recorded c. All income statement accounts and the Dividends Declared account are reset to zero in the closing entry process d. All of the above are correct statements 9. Which of the following is not a part of the fraud triangle? a. Opportunity to commit fraud b. Effective internal controls c. Incentive to commit fraud d. Character to rationalize and conceal fraud 10. Which of the following is not a subtotal shown on the multistep income statement? a. Gross profit b. Income before tax c. Sales Revenue d. Income from operations 11. What item listed below is an item on the bank reconciliation that the bank doesn’t know about? a. Outstanding check b. Interest deposited c. NSF checks d. Service charges 12. COGS was equal to 900. Beginning Inventory is 300. Ending inventory is 200. What was Purchases? a. 750 b. 800 c. 600 d. 1400 13. Apple Inc. had beginning inventory of $379,000, ending inventory of $124,000, and purchases of $200,000. What was their cost of goods available for sale (COGAS) and cost of goods sold (COGS) for the year respectively? COGAS COGS a. $579,000 and $455,000 b. $455,000 and $579,000 c. $179,000 and $55,000 d. $55,000 and $179,000 14. A company has revenue of $18,000; COGS of $8,000. Operating income of $4,000; Income before tax of $4,000; Tax expense of $500. What is the company’s net income and Selling, General & Admin expense? a. $5,800 & $4,000 b. $6,000 & $3500 c. $10,000 & $6,000 d. $3,500 & $10,000 15. Consider the following information: beginning inventory (physically counted) was $4,000, ending inventory (physically counted) was $2,000; purchases during the period totaled $10,000; and the recorded cost of goods sold during the period totaled $9,000. What was the amount of shrinkage during the period? a. $1,000 b. $2,000 c. $3,000 d. $5,000 16. When a perpetual inventory system is used, recording a sale on account (on the day of the sale) would involve all of the following accounts except: a. Sales Discounts b. Cost of Goods Sold c. Inventory d. Sales Revenue 17. Which of the following statements is not correct? a. When goods are shipped FOB shipping point, the sale is recorded when the goods leave the seller’s shipping department. b. When goods are shipped FOB shipping point, the seller usually pays for all transportation costs. c. When goods are sold, the transfer of ownership occurs at a time specified in the written sales agreement. d. Merchandisers earn revenues by transferring ownership of merchandise to a customer, either for cash or no credit. 18. Klem Corp. makes a $1,000 sale to a customer with terms of 2/15.n/45. The customer the returns $200 of the merchandise. If the customer pays Klem within the discount period, what is the total amount that the customer will remit to Klem Corp. in full payment of its account? a. $800 b. $784 c. $980 d. $1,000 Akin Corp had the following information: Jan. 1 Beginning Inventory is comprised of 7 units @ $20 each Apr. 13 Purchased 8 units @ $22 each Aug. 31 Purchased 25 units @ $25 each Dec. 28 Sold 30 units 19. What is LIFO COGS using the above information? a. 735 b. 710 c. 800 d. 691 20. What is the FIFO COGS using the above information a. 756 b. 691 c. 815 d. 745 21. Which of the following would be credited when purchasing at a discount? a. COGS b. Inventory c. Accounts Payable d. Revenue 22. Which of the following is false regarding the understatement of inventory? a. COGS is overstated this year b. COGS is understated this year c. Net Income is understated d. Assets are understated 23. Target had beginning inventory equal to 1,000 and ending inventory equal to 2000. COGS was equal to 6,000. What was Target’s days to sell? a. 84 Days b. 99 Days c. 91 Days d. 87 Days 24. Adjusting entries will always affect both ______a. Cash and Revenue b. Liability and Asset c. Revenue and Expense d. Balance Sheet and Income Statement 25. Barnett Co. reports beginning inventory of $62,000, ending inventory of $73,000, Cost of Goods Sold of $330,000, and Net Sales of $700,000. What is the inventory turnover ratio? a. 4.89 times b. 7.05 times c. 8.31 times d. None of the above