wgu d102 pre assesment

What information is contained in a balance sheet?

Report of a company's financial position during a period of time.

Report of a company's operating performance as of a point in time.

Report of a company's financial position as of a point in time.

Report of a company's operating performance during a period of time.

Report of a company's financial position as of a point in time.

What is an owners' equity item?

Loans payable

Accounts receivable

Capital stock

Cash

Capital stock

A company ended July with assets of $150,000 and owner's equity of $60,000.

What is the amount of liabilities at the end of July?

$60,000

$90,000

$150,000

$300,000

$90,000

What is reported in a multiple-step income statement that is not reported in a single-step income statement?

Gross profit

Dividends

Retained earnings

Cash collected from customers

Gross profit

How is gross profit computed?

Sales minus cost of goods sold.

Sales minus operating expenses.

Cash minus dividends.

Total revenues minus total expenses.

Sales minus cost of goods sold.

The following are some accounts from a company's financial statements:

-accounts receivable

-cost of goods sold

-cash

-retained earnings

-sales

-inventory

-income tax expense

-accounts payable

Which set is a list of all of the items that are used in computing this company's net income?

Cash, accounts receivable, and accounts payable.

Cash, retained earnings, and accounts payable.

Sales, cost of goods sold, and income tax expense.

Inventory, accounts payable, and retained earnings.

Sales, cost of goods sold, and income tax expense.

What cash flow category contains activities whereby cash is obtained from or repaid to owners or creditors?

Financing

Investing

Equity

Revenue

Financing

Here are some financial statement items for the year for a company.

-Cash received from customers

-Cash received from the sale of land

-Cash paid for dividends

-Cash paid to employees for wages

-Cash paid to purchase a new building

-Cash paid for rent

-Cash received as new investment from owners

Which set of items is a list of items that are used in computing the company's financing cash flow for the year?

Cash received from customers and cash paid for rent.

Cash paid to purchase a new building and cash received from the sale of land.

Cash paid for dividends and cash received as new investment from owners.

Cash received from customers, and cash paid to employees for wages.

Cash paid for dividends and cash received as new investment from owners.

Here are some financial statement items for a company.

-Net income

-Cash flow from financing activities

-Cash balance at the beginning of the year

-Sales Cash flow from investing activities

-Accounts receivable

-Retained earnings at the beginning of the year

-Cash flow from operating activities

What items are used in computing the company's ending cash balance for the year?

Cash balance at the beginning of the year, net income, cash flow from investing activities, and retained earnings at the beginning of the year.

Retained earnings at the beginning of the year, cash flow from operating activities, accounts receivable, cash flow from investing activities, and cash flow from financing activities.

Net income, sales, cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

Cash balance at the beginning of the year, cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

Cash balance at the beginning of the year, cash flow from operating activities, cash flow from investing activities, and cash flow from financing activities.

How is revenue typically recorded with debits and credits?

As a credit, representing a reduction in assets.

As a credit, representing an increase in equity.

As a debit, representing an increase in assets.

As a debit, representing a reduction in equity.

As a credit, representing an increase in equity.

What is the proper way to record an increase in an asset account and an increase in an equity account?

Asset, credit; equity, debit

Asset, credit; equity, credit

Asset, debit; equity, debit

Asset, debit; equity, credit

Asset, debit; equity, credit

A company was started last year when the shareholders invested $70,000 cash into it. At that time, the company also borrowed $100,000 cash from a local bank. The company used $140,000 cash to purchase inventory for $140,000. This year the company sold all of the inventory for $95,000 cash (and that is not a typographical error; the amount received for all of the inventory was only $95,000 cash).

Which account balance is correct with respect to this company's balance sheet after the sale of the inventory?

Total owners' equity is $115,000.

Total owners' equity is $25,000.

Cash is $45,000.

Total owners' equity is $70,000.

Total owners' equity is $25,000.

On January 1, a company had these assets, liabilities, and equities:

Cash$100

Inventory$140

Accounts payable$70

Paid-in capital$150

Retained earnings$20

During the year, the company entered into these transactions:

Selling inventory costing $140 for a total of $200; cash of $30 was received, and the remaining $170 was put on account.

Paying cash for rent of $45.

Paying cash dividends of $30.

What is this company's total equity at the end of the year?

$130

$150

$155

$210

$155

A company made a $3,000 cash payment on a loan. Of the $3,000 cash paid, $2,400 was for interest expense and $600 was a payment to reduce the loan balance.

What is included in the journal entry necessary to record this loan payment?

Debit to interest expense for $2,400.

Credit to loan payable for $600.

Debit to loan payable for $3,000.

Credit to interest expense for $2,400.

Debit to interest expense for $2,400.

A company was started last year when the shareholders invested $70 cash into the company. At that time, the organization also borrowed $30 cash from a local bank. The organization used $80 cash to purchase inventory for $80. This year the company sold all of the inventory for $55 cash. (That is not a typographical error; the amount received for all of the inventory was only $55 cash.)

Assuming that there is no interest on the loan, what is true with respect to this company's balance sheet after the sale of the inventory?

Total owners' equity is $45.

Total owners' equity is $95.

Inventory is $25.

Cash is $55.

Total owners' equity is $45.

How are expenses typically recorded with debits and credits?

As a credit, representing an increase in equity.

As a credit, representing a reduction in assets.

As a debit, representing a reduction in equity.

As a debit, representing an increase in assets.

As a debit, representing a reduction in equity.

A company purchased inventory for $5,000. The company paid $1,000 cash and the remainder of the purchase was made on account.

What is included in the journal entry necessary to record this inventory purchase?

Debit to accounts payable for $4,000.

Credit to accounts payable for $4,000.

Credit to accounts receivable for $4,000.

Debit to accounts receivable for $4,000.

Credit to accounts payable for $4,000.

A company sold inventory that cost $1,300 for $2,000. It received $500 cash and the remainder was on account.

What is included in the journal entry or entries necessary to record this sale of inventory?

Debit to accounts receivable for $1,500.

Credit to cost of goods sold for $1,300.

Debit to sales for $1,300.

Debit to accounts payable for $1,500.

Debit to accounts receivable for $1,500.

On August 1 of Year 1, a company paid $7,200 for two years' rent. The rental period starts on August 1 of Year 1.

Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 of Year 1?

Credit to rent expense for $1,500.

Debit to rent expense for $1,500.

Debit to rent expense for $5,100.

Credit to prepaid rent for $5,100.

Debit to rent expense for $1,500.

The revenue recognition principle states that revenues are recorded when two main criteria have been met. One of those criteria is that cash has been collected or collectability is reasonably assured.

What is the other criterion?

Overhead has been properly allocated.

Expense targets for the period have been reached.

You Selected

All taxes - sales tax, income tax, and value-added tax - have been paid.

The earnings process is substantially complete.

The earnings process is substantially complete.

What is the matching principle?

Retained earnings are recorded in the same period in which the corresponding asset is recorded.

Expenses are recorded in the same period in which the corresponding revenue is recorded.

Liabilities are recorded in the same period in which the corresponding asset is recorded.

Revenues are recorded in the same period in which the earnings process becomes complete.

Expenses are recorded in the same period in which the corresponding revenue is recorded.

For large, publicly traded companies, why is accrual basis accounting preferred over cash basis accounting?

Accrual basis accounting provides a more accurate picture of a company's economic profitability.

Cash basis accounting requires complex estimates and judgments that make the reported numbers less reliable.

Accrual basis accounting is much easier to implement because no estimates are needed and internal controls are not necessary.

Cash basis accounting is inconsistent with the income tax requirements for large companies.

Accrual basis accounting provides a more accurate picture of a company's economic profitability.

On October 1 of Year 1, a company made a $60,000 cash loan to another company. The interest rate on the loan is 5%. No cash payments will be collected on the loan until September 30 of Year 2.

Which debit or credit is correctly included in the adjusting journal entry necessary on the company's books (the lender) on December 31 with respect to this loan?

Debit to interest revenue for $2,250.

Credit to interest revenue for $2,250.

Debit to interest revenue for $750.

Credit to interest revenue for $750.

Credit to interest revenue for $750.

On May 1 of Year 1, a company received $24,000 cash for rent in advance. This $24,000 rental receipt covers the period from May 1 of Year 1 to April 30 of Year 2.

Which debit or credit is correctly included in the journal entry necessary on May 1 to record this cash received for rent in advance?

Credit to unearned rent for $24,000.

Debit to rent revenue for $24,000.

Credit to cash for $24,000.

Debit to unearned rent for $24,000.

Credit to unearned rent for $24,000.

On January 1, a company had office supplies costing $4,600. During the year, the company bought (and recorded) additional office supplies costing $9,900. On December 31, a physical count of office supplies revealed that supplies costing $2,900 remained.

Which debit or credit is correctly included in the adjusting journal entry necessary on December 31 to record the supplies that the company used during the year?

Debit to office supplies for $11,600.

Debit to cash for $11,600.

Credit to office supplies for $11,600.

Credit to office supplies expense for $11,600.

Credit to office supplies for $11,600.

At the end of the year, before any closing entries are made, which account has a debit balance?

Sales revenue

Cost of goods sold

Accounts payable

Capital stock

Cost of goods sold

What is a nominal account?

Equipment

Long-term debt

Capital stock

Salaries

Salaries

In preparing a bank reconciliation, what is the proper treatment of a deposit in transit?

Add it to the reported cash balance in the bank statement.

Subtract it from the reported cash balance in the company's books.

Subtract it from the reported cash balance in the bank statement.

Add it to the reported cash balance in the company's books.

Add it to the reported cash balance in the bank statement.

A company received a bank statement at the end of the month. The statement contained these items:

Bank service charge for the month$300

Interest earned and added by the bank to the account balance$100

Ending balance (reflects interest and bank service charge)$9,000

In comparing the bank statement to its own cash records, the controller of the company found these items:

Deposits made but not yet recorded by the bank$10,000

Checks written and mailed but not yet recorded by the bank$4,000

Before making any adjustment suggested by the bank statement, the cash balance according to the company's books is $4,200.

What is the correct adjusted general ledger balance as of the end of the month?

$9,000

$9,200

$15,000

$15,200

$15,000

A company rents a building that it uses in its operations. The accountant for the company mistakenly input a $1,000 rental payment on the building as $10,000 in the accounting records.

What is the impact of this error on the financial statements?

Revenues are too high, so reported net income is too high.

Expenses are too low, so reported net income is too high.

Expenses are too high, so reported net income is too low.

Revenues are too low, so reported net income is too low.

Expenses are too high, so reported net income is too low.

The accountant for a company mistakenly posted an expense amount as an asset in the general ledger.

What is the financial statement impact of this error?

Assets are too low, and retained earnings are too high.

Assets are too high, and retained earnings are too high.

Assets are too low, and retained earnings are too low.

Assets are too high, and retained earnings are too low.

Assets are too high, and retained earnings are too high.

The accountant for a company mistakenly posted a liability amount as a revenue in the general ledger.

What is the financial statement impact of this error?

Liabilities are too low, and retained earnings are too low.

Liabilities are too high, and retained earnings are too high.

Liabilities are too high, and retained earnings are too low.

Liabilities are too low, and retained earnings are too high.

Liabilities are too low, and retained earnings are too high.

Proper segregation of duties requires that one person not perform three specific separate functions with respect to a single transaction. Two of those functions are authorization and record keeping.

What is the third function that should be performed by a different person if proper segregation of duties is to be maintained?

Financing structure

Management communication

Risk assessment

Custody of assets

Custody of assets

Why are daily cash deposits important?

They maintain the balance between the nominal and the real accounts.

They maintain the balance between the accounts payable and the accounts receivable.

They prevent the accumulation of a large amount of cash.

They keep the ledger accounts separate from the journal accounts.

They prevent the accumulation of a large amount of cash.

On July 10, goods were sold for $10,000. Cash of $4,000 was received, and the $6,000 remainder was on account. The customer returned the goods before paying any of the remaining $6,000 on account.

Which debit or credit should be included in the journal entry on the seller's books to record the return of the goods?

Debit accounts receivable for $6,000

Debit accounts receivable for $10,000

Credit sales returns and allowances for $10,000

Credit accounts receivable for $6,000

Credit accounts receivable for $6,000

Gross sales for the year were $100,000. During the year, sales discounts of $3,000 were recorded. In addition, sales returns and allowances for $7,000 were recorded. The total amount of cash collected from customers during the year was $88,000. Many accounts remain uncollected at the end of the year.

What is the amount of net sales to be reported for the year?

$90,000

$93,000

$96,000

$97,000

$90,000

What is the direct write-off method with respect to bad debts?

Estimating and recognizing bad debt expense in the same period in which the associated sale takes place.

Including bad debt expense in the computation of cost of goods sold in the same period in which the sale takes place.

Recognizing bad debt expense only when the associated sales discount is not taken.

Recognizing bad debt expense after confirming that a specific customer is not going to pay.

Recognizing bad debt expense after confirming that a specific customer is not going to pay.

On January 6, a credit sale was made for $1,000. Terms for the sale were 4/10, n/30. Cash for the sale was collected on January 25.

Which debit or credit should be included in the journal entry to record the cash collection on January 25?

Debit cash for $1,000

Debit accounts receivable for $1,000

Debit sales discounts for $40

Debit sales discounts for $960

Debit cash for $1,000

A company's controller estimated bad debt expense using the percentage of accounts receivable method. Total sales for the year were $1,500,000. The ending balance in accounts receivable was $300,000. An examination of the outstanding accounts at the end of the year indicates that approximately 7% of these accounts will ultimately prove to be uncollectible. Before any adjustment, the balance in the allowance for bad debts is $4,000 (credit). Total accounts written off as uncollectible during the year were $15,000.

Which debit or credit is included in the adjusting entry to record bad debt expense for the year?

Credit allowance for bad debts for $17,000

Debit allowance for bad debts for $15,000

Credit allowance for bad debts for $21,000

Debit allowance for bad debts for $25,000

Credit allowance for bad debts for $17,000

Which costs are included in work-in-process inventory?

Materials, labor, and overhead

Interest, taxes, and depreciation

Selling, general, and administrative

Advertising, sales commissions, and showroom storage

Materials, labor, and overhead

Who owns goods in transit?

If the shipping terms are FOB destination, the goods belong to the buyer while in transit.

If the shipping terms are FOB destination, the goods belong to the seller while in transit.

If the shipping terms are FOB shipping point, the goods belong to the seller while in transit.

If the shipping terms are FOB destination, the goods belong to the seller after reaching the destination.

If the shipping terms are FOB destination, the goods belong to the seller while in transit.

On November 1, a company purchased inventory costing $1,000 on account. The payment terms are 2/10, n30. The company paid on November 6 to receive the 2% discount.

What is the impact on the company's financial statements of the cash payment of this account within the discount period?

Decrease cash by $1,000

Increase liabilities by $1,000

Increase inventory by $20

Decrease inventory by $20

Decrease inventory by $20

A company uses a perpetual inventory system. Beginning inventory for the period was $160,000. Purchases for the period totaled $700,000. A physical count of ending inventory revealed inventory of $130,000. Cost of goods sold according to the perpetual system is $690,000.

What is the amount of inventory shrinkage?

$10,000

$30,000

$40,000

$80,000

$40,000

With a LIFO inventory cost flow assumption, what is assumed about the units that are sold and the units that remain in ending inventory?

New units sold, new units in ending inventory

New units sold, old units in ending inventory

Old units sold, new units in ending inventory

Old units sold, old units in ending inventory

New units sold, old units in ending inventory

The following are inventory purchase and sales data for a company:

Purchased on January 1: 500 units, $9 cost per unit

Purchased on January 16: 300 units, $8 cost per unit

Sold on January 31: 600 units, $10 selling price per unit

There was no inventory before the purchase made on January 1. Assume the company uses the LIFO method for inventory valuation.

What is the cost of goods sold for January?

$4,700

$5,100

$5,300

$6,000

$5,100

The following are inventory purchase and sales data for a company:

Purchased on January 1: 500 units, $8 cost per unit

Purchased on January 16: 100 units, $9 cost per unit

Sold on January 31: 200 units, $10 selling price per unit

There was no inventory before the purchase made on January 1. Assume the company uses the LIFO method for inventory valuation.

What is the reported cost of ending inventory at the end of January?

$3,200

$3,400

$3,500

$4,000

$3,200

When a machine is purchased, what is the proper accounting for the amount paid for sales tax on the purchase price?

As a liability in the balance sheet

As part of the cost of the machine

As part of cost of goods sold in the year of the machine purchase

As an operating expense in the year of the machine purchase

As part of the cost of the machine

On January 1 of Year 1, a company purchased a machine for $20,000. The machine is expected to have a 10-year useful life and a salvage value of $1,000. The company uses straight-line depreciation.

What is the book value of this machine at the end of Year 6?

$8,000

$8,600

$9,000

$9,600

$8,600

On January 1 of Year 1, a company purchased a machine for $10,000. The machine is expected to have a five-year useful life and a salvage value of $2,000. The company uses double-declining balance depreciation.

What is the amount of depreciation expense on this machine for Year 2?

$1,600

$2,000

$2,400

$3,200

$2,400

On January 1 of Year 1, a company purchased a patent for $400,000. The patent had an original legal life of 20 years, but only eight years remained on the date the patent was purchased. The patent is expected to have continuing economic value during this eight years. The patent is assumed to have zero salvage value at the end of its economic useful life. The company uses straight-line amortization.

What is the book value of this patent at the end of Year 3?

$50,000

$150,000

$250,000

$340,000

$250,000

How does a company report an externally purchased trademark in its financial statements?

As owners' equity in the balance sheet

As an asset in the balance sheet

As an operating expense in the income statement

As an administrative expense in the income statement

As an asset in the balance sheet

A company purchased a patent from another company for $5,000 cash.

What is needed in the journal entry to record this patent purchase?

Debit to patent for $5,000

Debit to cash for $5,000

Credit to patent for $5,000

Debit to operating expense for $5,000

Debit to patent for $5,000

On January 1 of Year 1, a company purchased a franchise for $100,000. The franchise is expected to have a 20-year economic useful life. The franchise is assumed to have zero salvage value at the end of its economic useful life. The company uses straight-line amortization.

What is needed in the journal entry to record amortization expense on this franchise at the end of Year 1?

Credit to amortization expense for $5,000

Credit to franchise for $100,000

Credit to amortization expense for $100,000

Credit to franchise for $5,000

Credit to franchise for $5,000

The following are payroll data for the employees of a company:

Salaries Withholding Taxes Payable$20,000

Salaries Payable400,000

Federal Withholding Taxes Payable48,000

FICA Taxes Payable, Employees26,000

What is needed in the journal entry to record the given employee payroll data?

Credit to state withholding taxes payable $48,000

Debit to salary expense for $400,000

Debit to salaries payable for $400,000

Credit to federal withholding taxes payable for $48,000

Credit to federal withholding taxes payable for $48,000

William is an employee of a company and earns a salary of $300 per day. In addition, for every 10 days that he works, William earns the right to take a paid sick day at some point in the future. Ignore any payroll taxes and assume that William's salary has not yet been paid in cash.

What is needed in the journal entry to record William's salary for the most recent pay period, which involved 20 working days?

Debit to salaries payable for $6,000

Debit to salaries expense for $6,000

Debit to salaries expense for $6,600

Debit to sick days payable for $600

Debit to salaries expense for $6,600

A company made retail sales of $20,000 to its customers. The sales tax rate is 8.0%. All sales are cash sales.

What is needed in the journal entry to record these sales?

Debit to sales revenue for $20,000

Credit to cash for $20,000

Debit to cash for $21,600

Credit to sales revenue for $21,600

Debit to cash for $21,600

How does a mortgage loan differ from an ordinary loan?

A mortgage loan is for a shorter period.

A mortgage loan is related to a specific asset.

A mortgage loan cannot be repaid early.

A mortgage loan has no interest.

A mortgage loan is related to a specific asset.

A company borrowed $10,000 in cash by signing a $10,000, five-year note payable with a 10% annual interest rate.

What is needed in the journal entry to record this borrowing of $10,000?

Debit to cash for $10,000

Credit to interest expense for $5,000

Debit to note payable for $10,000

Credit to cash for $15,000

Debit to cash for $10,000

A company has a long-term loan on which it is making annual payments of $10,000. This year, the $10,000 payment is composed of $8,000 in interest and $2,000 that goes toward repaying the loan.

What is needed in the journal entry to record this $10,000 cash loan payment?

Credit to interest expense for $8,000

Debit to interest expense for $10,000

Debit to loan payable for $2,000

Credit to loan payable for $2,000

Debit to loan payable for $2,000

A company has a five-year, $200,000 note payable on which it has been making annual interest payments of $15,000. This is the final year of the note, and the company has made a $215,000 payment to pay this year's interest as well as to repay the note itself.

What is needed in the journal entry to record this $215,000 cash payment?

Debit to interest expense for $15,000

Debit to interest expense for $215,000

Credit to note payable for $200,000

Credit to interest expense for $15,000

Debit to interest expense for $15,000

A company has issued 300,000 new shares to shareholders in exchange for $5,000,000 cash. The shares are $1 par common shares.

What is needed in the journal entry to record this issuance of shares?

Debit to paid-in capital in excess of par for $5,000,000

Credit to paid-in capital in excess of par for $4,700,000

Credit to common stock, $1 par for $5,000,000

Debit to common stock, $1 par for $300,000

Credit to paid-in capital in excess of par for $4,700,000

On March 23, a company declared a dividend of $3.00 per share to be paid on July 12 to shareholders of record on June 6. There are 20,000 shares outstanding.

What is needed in the journal entry to record the declaration of the dividends on March 23?

Debit to dividends for $60,000

Debit to cash for $60,000

Credit to dividends for $60,000

Credit to cash for $60,000

Debit to dividends for $60,000

On January 1, a company had the following equity account balances:

Retained earnings$200

Paid-in capital$150

The following information was true about the company during the year:

Shareholders invested an additional $70 cash in the business.

The company's net loss for the year was $100.

Dividends for the year were $20.

It is unusual, but not impossible, for a company to pay dividends even in a year in which it reports a net loss instead of net income.

What is the company's retained earnings at the end of the year?

$80

$150

$180

$230

$80

On March 23, a company declared a dividend of $3.00 per share to be paid on July 12 to shareholders of record on June 6. There are 60,000 shares outstanding.

What is needed in the journal entry to record the payment of the dividends on July 12?

Credit to dividends for $180,000

Debit to dividends payable for $180,000

Debit to paid-in capital in excess of par for $180,000

Credit to paid-in capital in excess of par for $180,000

Debit to dividends payable for $180,000