Acct 3110 Sample Qualifying Exam
1. Equity is the
A. Total value of a firm’s resources.
B. Amount of revenue less expenses accumulated by a firm since its creation.
C. Residual amount left after subtracting firm debts and obligations from its assets.
D. Long-term financing of a firm, including long-term debt and common stock.
2. Expenses are
A. Debts owed by a firm.
B. Reported to investors on the balance sheet.
C. Resource outflows that decrease earnings.
D. Subtracted from revenues to derive net assets.
3. The primary purpose of financial accounting is to provide information
A. To investors and creditors for decision making.
B. For assessing the performance of management.
C. To managers for planning, directing and controlling operations.
D. To the Securities and Exchange Commission.
4. Generally Accepted Accounting Principles are
A. Established by the International Accounting Standards Board.
B. Recommended by a joint committee of the Congressional Budget Office and the Comptroller.
General’s office for adoption by the Securities and Exchange Commission.
C. Principally concerned with the cash basis of accounting.
D. Established by the Financial Accounting Standards Board.
5. On April 1, Eagle Company paid $6,000 to lease office space for six months. The journal entry
required to record the transaction is
A. Debit Cash $6,000, Credit Rent Expense $6,000.
B. Debit Cash $6,000, Credit Prepaid Rent $6,000.
C. Debit Rent Expense $6,000, Credit Cash $6,000.
D. Debit Prepaid Rent $6,000, Credit Cash $6, 000.
6. On April 1, Eagle Company purchased supplies to be used in the business. The supplies cost $1,000.
The journal entry required to record the transaction is
A. Debit Cash $1,000, Credit Supplies Expense $1,000.
B. Debit Cash $1,000, Credit Supplies $1,000.
C. Debit Supplies Expense $1,000, Credit Cash $1,000.
D. Debit Supplies $1,000. Credit Cash $1,000.
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7. April 1, Eagle Company performed a training session for Aggie Company on account. Eagle Company
charged $1,000 per hour for the 8 hour training session. To record the transaction, Eagle Company
would
A. Debit Accounts Receivable $8,000, Credit Service Revenue $8,000.
B. Debit Accounts Receivable $8,000, Credit Retained Earnings $8,000.
C. Credit Accounts Receivable $8,000, Debit Service Revenue $8,000.
D. Credit Accounts Receivable $8,000, Debit Retained Earnings $8,000.
8. Transactions and events are recorded
A. In a journal.
B. First in the balance sheet and then moved to the income statement as necessary.
C. In a trial balance.
D. Directly to the financial statements only if they are material.
9. To determine account balances, journal entries are posted
A. To the ledger.
B. To the adjusted trial balance.
C. Directly to the financial statements only if they are material.
D. First to the balance sheet and then moved to the income statement as necessary.
10. An account is a record
A. Of all increases and decreases to a particular element of financial statements.
B. Of cash needed to meet daily business needs.
C. Necessary for the preparation of the balance sheet, but not the income statement.
D. Necessary for the preparation of the income statement, but not the balance sheet.
11. A Trial Balance is
A. Only necessary when the company is involved in litigation.
B. Required by generally accepted accounting principles to be maintained both on the cash basis
and accrual basis to facilitate the preparation of the statement of cash flows.
C. A list of all company accounts and their balances before adjustments necessary to reflect accrual
accounting principles.
D. A list of all company accounts and their balances after adjustments necessary to reflect accrual
accounting principles.
12. Adjusting journal entries are posted to
A. The general journal.
B. The transaction analysis ledger.
C. The trial balance.
D. The financial statements.
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13. On April 30, the Eagle Company general ledger includes a balance in the Deferred Rent Revenue
account of $12,000 representing cash paid to Eagle Company on April 1st for the six month period
ending September 30. The adjusting journal entry required on April 30th is:
A. Debit Cash $12,000, Credit Rent Revenue $12,000.
B. Debit Deferred Rent Revenue $2,000, Credit Rent Revenue $2,000.
C. Credit Cash $12,000, Debit Rent Revenue $12,000.
D. Credit Deferred Rent Revenue $2,000, Debit Rent Revenue $2,000.
14. On April 30, the Eagle Company general ledger includes a balance in the Salaries Payable account of
$4,000. April 30 falls on a Saturday and Eagle Company owes employee wages of $1,000 per day for
the preceding Monday through Friday work week, to be paid on the following Monday. The
adjusting journal entry required on April 30th is:
A. Debit Salaries Expense $4,000, Credit Cash $4,000.
B. Debit Salaries Expense $5,000, Credit Cash $5,000.
C. Debit Salaries Expense $4,000, Credit Salaries Payable $4,000.
D. Debit Salaries Expense $1,000, Credit Salaries Payable $1,000.
15. On April 30, the Eagle Company general ledger includes a balance in the Supplies account of $1,000.
An inventory of supplies on hand indicated $300. The adjusting journal entry required on April 30th
is:
A. Debit Supplies Expense $300, Credit Supplies $300.
B. Debit Supplies $300, Credit Supplies Expense $300.
C. Debit Supplies Expense $700, Credit Supplies $700.
D. Debit Supplies $700, Credit Supplies Expense $700.
16. Adjusting entries are necessary to recognize
A. Revenues in the period goods or services are transferred to customers.
B. Cash is received from customers.
C. Cash has been paid for both assets and expenses.
D. Net income has been closed to Retained Earnings.
17. The balance sheet is
A. Measured at a point in time.
B. Measured over a period of time.
C. Measured using current costs.
D. Measured using net realizable value.
18. Current assets are found on the
A. Balance Sheet.
B. Income Statement.
C. Statement of Cash Flows.
D. Statement of Stockholder’s Equity.
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19. Gains and losses are found on the
A. Balance Sheet.
B. Income Statement.
C. Statement of Cash Flows.
D. Statement of Stockholder’s Equity.
20. Depreciation is
A. Deducted from Property, Plant and Equipment to derive the book value of Property, Plant and
Equipment.
B. Added back to Net Income to derive Cash from Operations on the Statement of Cash Flows.
C. Deducted on the Balance Sheet.
D. A contra asset account.
21. Closing entries occur
A. At the end of a sale of inventory.
B. At the end of a sale of long-term assets.
C. At the end of the period.
D. When a customer pays an account receivable.
22. The journal entry to debit Retained Earnings and credit Dividends is
A. A correcting entry.
B. An adjusting entry.
C. A reclassification entry.
D. A closing entry.
23. On a bank reconciliation, deposits in transit are
A. Added to the balance per bank.
B. Deducted from the balance per bank.
C. Added to the balance per books.
D. Deducted from the balance per books.
24. The Allowance for Doubtful Accounts is
A. A contra Asset account.
B. A normal debit balance.
C. Deducted from Sales to derive Net Sales.
D. The same as Bad Debt Expense.
25. The direct write-off of bad debts
A. Is appropriate for larger firms.
B. Is appropriate for smaller firms.
C. Can be used with cash basis accounting.
D. Is not a generally accepted accounting principle.
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26. Eagle Company loaned Frog Company $100,000 on January 1st for one year at 12% interest. Eagle
Company’s journal entry to record accrued interest on January 31st is
A. Debit Cash $12,000, Credit Interest Receivable $12,000.
B. Debit Interest Receivable $1,000, Credit Note Receivable $1,000.
C. Debit Interest Revenue $12,000, Credit Note Receivable $12,000.
D. Debit Interest Receivable $1,000, Credit Interest Revenue $1,000.
27. The inventory method that produces a larger Cost of Goods Sold in periods of rising prices is
A. First-in First-out (FIFO).
B. Last-in First-out (LIFO).
C. Average cost.
D. Specific identification.
28. Beginning inventory consists of 10 units at $10. Two purchases were made during the period of 20
units at $12 followed by another purchase of 20 units at $14. Ending inventory consists of 12 units.
What is the Cost of Goods Sold using FIFO?
A. $452.
B. $168
C. $280.
D. $100
29. The journal entry required to record the purchase of inventory on account is
A. Debit Accounts Payable, Credit Cost of Goods Sold.
B. Debit Accounts Payable, Credit Inventory.
C. Debit Inventory, Credit Accounts Payable.
D. Credit Inventory, Debit Cost of Goods Sold.
30. The compound journal entry required to record the sale of inventory on account would include
A. Debit Accounts Payable, Credit Cost of Goods Sold.
B. Debit Accounts Payable, Credit Inventory.
C. Debit Inventory, Credit Accounts Payable.
D. Debit Cost of Goods Sold, Credit Inventory.
31. Which of the following is not a capital expenditure:
A. Replacement of an old motor with a new one in a piece of equipment.
B. A tune up of a company vehicle.
C. An addition to a building.
D. The cost of installing a piece of equipment.
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32. Eagle Company sold a Building that originally cost $100,000 for $50,000. Accumulated Depreciation
is $60,000. The journal entry to record the sale of the building would include
A. Debit Accumulated Depreciation $50,000.
B. Debit Building $100,000.
C. Credit Building $40,000.
D. Credit Gain $10,000.
33. Eagle Company purchased land and a building for Cash of $10,000 and a Note Payable of $90,000 on
January 1, 20X1. The land and building will be used for 20 years and then sold. The land is allocated
$20,000 of the purchase price with the reminder allocated to the building. The depreciation on the
land for the first year is
A. $5,000.
B. $4,850.
C. $500.
D. $0.
34. Eagle Company purchased equipment for $50,000 on January 1, 20X1. The equipment has a five
year life and a salvage value of $5,000. Eagle Company uses straight-line depreciation. Depreciation
for the year is
A. $10,000.
B. $9,000.
C. $5,000.
D. $0.
35. Eagle Company purchased land for Cash of $10,000 and a Note Payable of $90,000 on January 1,
20X1. The Note Payable is for one year at 10% interest, principal and interest due at maturity of the
note. Eagle Company accrues interest expense monthly. The journal entry to record the purchase
of the land on January 1, 20X1 would include
A. Credit Note Payable $90,000.
B. Debit Note Payable $90,000.
C. Debit Interest Payable $10,000.
D. Credit Interest Payable $9,000.
36. Eagle Company purchased land for Cash of $10,000 and a Note Payable of $90,000 on January 1,
20X1. The Note Payable is for one year at 10% interest, principal and interest due at maturity of the
note. Eagle Company accrues interest expense monthly. The journal entry to record payment on
the note on January 1, 20X2 of the following year would include
A. Credit Cash $99,000.
B. Debit Note Payable $99,000.
C. Credit Interest Payable $9,000.
D. Credit Building $90,000.
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37. Equity includes
A. Contributed capital and borrowed capital.
B. Contributed capital and earned capital.
C. Net assets and borrowed capital.
D. Net assets and earned capital.
38. Eagle Company is a closely-held (i.e. not publicly held) company. The company issued 10,000 shares
of stock to shareholders. These shares represent
A. Debt owed by Eagle Company to the shareholders.
B. Shares that can be traded on a stock exchange.
C. Income to the shareholders for tax purposes.
D. Ownership in Eagle Company.
39. The formula to compute ending Retained Earnings is
A. Beginning Retained Earnings plus Dividends less Net Income equals Ending Retained Earnings.
B. Beginning Retained Earnings plus Net Income less Dividends equals Ending Retained Earnings.
C. Beginning Retained Earnings less Net Income less Dividends equals Ending Retained Earnings.
D. Beginning Retained Earnings plus Net Income plus Dividends equals Ending Retained Earnings.
40. Dividends are recorded as a reduction of
A. Retained Earnings.
B. Common Stock.
C. Common Stock and Retained Earnings.
D. Commons Stock, Retained Earnings and Treasury Stock.
Acct 3110 Sample Qualifying Answers
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