Ivy Tech Accounting 101 Final Practice Exam

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• Under accrual accounting, revenue is recognized when:
• What is the equation for net income?
• What happens to inventory when it is sold?
• Which equation expresses the fundamental accounting equation?
• Explain the difference between service company and merchandising company accounting with respect to inventory.
• What are closing entries and what is the purpose of a post-closing trial balance?
• Under the allowance method, bad debt expense is estimated and recorded in what type of account?
• Proceeds from issuing stock would appear in which section of the cash flow statement?
• Which of the following is a liability that would appear on the balance sheet?
• Under straight-line depreciation, what is the annual depreciation for an asset costing 100000 with a salvage value of 10000 and a useful life of 8 years?
• What is the primary objective of financial reporting?
• Which cash flow category would include cash receipts from customers?
• Which statement best describes the difference between the allowance method and the direct write-off method for bad debts?
• Which statement best describes working capital?
• How do you record an outstanding check on bank reconciliation?
• How are accounts typically organized in a chart of accounts?
• What does FOB shipping point mean?
• Bond premium true statement:
• When bonds are issued at a premium, cash proceeds are:
• Which statement describes when revenue from accrued revenue is recognized?
• How does purchasing equipment on credit affect the accounting equation?
• Which statement describes straight-line depreciation and its effect on the financial statements?
• Under the allowance method, how is bad debt expense recognized?
• What is the proper format of a journal entry and how is it posted to the ledger?
• How is overhead allocated to jobs using a predetermined rate?
• When a specific bad debt is written off under the allowance method, what is the entry?
• Which statement about the current ratio is true?
• What is the function of the Allowance for Doubtful Accounts?
• How is the book value of an asset calculated?
• Which cash flow category includes borrowing funds?
• Which statement best distinguishes job-order costing from process costing?
• Which of the following is a financing activity?
• Why is an adjusting entry for unearned revenue necessary, and how is it recorded?
• If Net Sales are 1,000,000 and All expenses are 750,000, Net Income equals:
• Which of the following represents a deferral adjusting entry?
• Which item best describes a journal entry?
• The current ratio is used to assess which aspect of a company?
• Which accounts are classified as current liabilities?
• Which statement best describes the effect of selling inventory on financial statements?
• How is the current ratio calculated and what does it indicate?
• What are the three sections of the statement of cash flows and what does each show?
• Under which method do ending inventories consist of the oldest items?
• Explain why a balance sheet prepared under accrual accounting differs from one prepared under cash basis accounting.
• Which journal entry reflects depreciation expense recognizing depreciation over time?
• Which statement about accrual accounting is true?
• Which of the following is an accrual adjusting entry example?
• What is the definition of revenue?
• What is accrued revenue and how is it recorded?
• Which of the following statements best describes a company with a low current ratio and a high debt-to-equity ratio?
• How is accrued interest revenue recorded on financial statements?
• Which financial statement shows revenues and expenses for a period?
• Which accounts are reported on the income statement?
• Under the direct write-off method, when is bad debt expense recognized?
• What journal entry would you record to replenish a petty cash fund?
• What is the adjusting entry for accrued wages?
• Which accounts are reported on the balance sheet?
• If total debits do not equal total credits on a trial balance, what is the usual next step?
• What is the adjusting entry for a prepaid expense at period end?
• What is the effect of a stock split?
• Which item would be classified as investing activities?
• Which statement best describes the difference between the allowance method and the direct write-off method for uncollectible accounts?
• Which sequence correctly outlines the steps in performing a bank reconciliation?
• What are typical errors that could cause the trial balance to not balance, and how would you approach them?
• Which statement accurately describes capital expenditures versus revenue expenditures?
• What is the purpose of a subsidiary ledger and its relation to the general ledger?
• How is the bond interest payment calculated?
• Which of the following best describes the required components of a journal entry?
• What does "2/10, n/30" mean?
• Why do investors purchase preferred stock?
• Which statement correctly differentiates amortization and depletion?
• Explain how inventory shrinkage is accounted for.
• Which asset category is associated with depletion rather than depreciation or amortization?
• What is the impact of purchasing equipment on credit versus paying cash?
• If Sales are 700,000 and Sales Returns and Allowances are 40,000, Net Sales are:
• Which describes a capital expenditure versus an operating expense?
• Explain the difference between a cash flow statement's direct and indirect methods.
• What is the formula for gross margin and net income margin?
• Which statement best describes why double-entry bookkeeping is used?
• How is the Statement of Owner's Equity prepared for a sole proprietorship?
• What is the purpose of the closing entry for drawings in a sole proprietorship?
• Which accounts are deducted from an employee's earnings?
• What is the effect of recognizing an accrued revenue on the balance sheet at period end?
• How are break-even units calculated?
• What happens to stockholders' equity when a dividend is issued?
• A trial balance primarily verifies that debits equal credits and can reveal which of the following?
• Which of the following is a liability?
• Which statements are typically produced at year-end and what does each show?
• Which type of business typically shows higher inventory turnover?
• In a perpetual inventory system, when a sale is made on credit, what is the correct journal entry to record the sale?
• When is revenue recognized in relation to unearned revenue?
• Which statement about straight-line depreciation is correct?
• Total Equity amount equals:
• Accrued expenses are expenses incurred but not yet paid. Which journal entry reflects this?
• What is the normal balance for assets, liabilities, revenues, and expenses?
• If a piece of PPE is disposed of for an amount greater than its book value, what is recognized?
• Under which method do ending inventories consist of the newest items?
• A grocery store is often cited as having higher which metric among firms?
• Which costs are included in the cost of a parcel of land?
• Define cash basis vs accrual basis accounting and give one scenario where they differ.
• In double-entry accounting, which accounts typically increase with debits?
• Which of the following is an example of an asset?
• Identify and explain three types of budgeting commonly used in accounting courses.
• Under LIFO, which costs are used for ending inventory?
• In a period of rising prices, which statement correctly compares the effects of FIFO, LIFO, and Weighted-Average on COGS and ending inventory?
• Under a perpetual inventory system, how is COGS determined?
• A high debt-to-equity ratio signals what about a company?
• If Net Sales equal 500,000 and CoGS equals 320,000, what is Gross Profit?
• Accrued revenue is revenue earned but not yet billed or collected. How is it recorded?
• Which statement about depreciation is true?
• How do you record deposit in transit on bank reconciliation?
• How are bank service charges and interest income recorded in the accounting records?
• If FIFO is used, ending inventory equals?
• How do you determine whether a cost should be capitalized as an asset or expensed immediately?
• Which accounts are typically closed into Retained Earnings?
• What is the equation for net sales?
• What is accumulated depreciation and how does it affect the financial statements?
• How is petty cash replenished and accounted for in the records?
• What does variance analysis for materials compare and indicate?
• What is an accrued expense and how is it recorded?
• What are the three primary financial statements and what does each show?
• What is the equation for gross profit?
• What is the purpose of internal controls and list three common control activities.
• What is a bank loan covenant?
• Which method estimates bad debt expense and records the amount in a contra-asset allowance account?
• Distinguish gross profit from net income and how each is calculated.
• Which accounts are included in long term liabilities?
• If a business buys equipment for cash, what is the effect on the accounting equation?
• If an asset costs 80000 and has accumulated depreciation of 25000, and it is sold for 60000, what is the gain or loss on the sale?
• What is the distinctive feature of straight-line depreciation compared to units-of-production depreciation, and when should each be used?
• What is the formula to calculate accrued interest on a notes receivable?
• Which statement about the trial balance is true?
• Which of the following is an example of a control activity?
• What is the definition of journalizing?
• Which of the following is an investing activity?
• Closing entries are used to:
• What is the formula for the debt-to-equity ratio and what does it indicate?
• Which statement describes declining-balance depreciation?
• How is depreciation recorded at year-end?
• How do you record a loan repayment that includes both principal and interest components?
• Long-term liabilities include which of the following?
• What is a trial balance?
• How is cost per unit determined in the weighted-average method?
• Ending Inventory is calculated as:
• Under the allowance method, which entry records bad debt expense?
• Accumulated depreciation and how it affects the asset's book value: which statement is true?
• Which item is NOT a financing activity?
• What does inventory turnover measure?
• Ending Inventory problem: Beginning Inventory 40,000; Purchases 60,000; CoGS 50,000; Ending Inventory equals?
• In double-entry accounting, every transaction must ...
• In a T-account framework, which side records increases for assets, and which side records increases for liabilities and equity?
• What is the primary responsibility of the Financial Accounting Standards Board (FASB)?
• What is the effect of depreciation on financial statements?
• In a period of rising prices, how does FIFO compare to LIFO in terms of COGS?
• If LIFO is used, ending inventory equals?
• Define the current ratio and quick ratio and what they measure.
• Which are two common variances in standard costing?
• What is the formula for the predetermined overhead rate?
• What is the definition of depreciation?
• What type of goods use the Specific Identification inventory method?
• What are adjusting entries and why are they necessary at period end?
• What is the definition of retained earnings?
• What is the post-closing trial balance used for?
• What is the current ratio formula?
• Which inventory method is commonly used for expensive, unique items?
• What is the purpose of a closing entry for drawings/draws in a sole proprietorship?
• Which statement describes inventory turnover?
• How is accumulated depreciation presented on the balance sheet?
• Long-term notes payable are typically due in:
• What is the purpose of a trial balance and how is it used in the accounting cycle?
• How is gain or loss on sale of an asset determined?
• Which statement best describes the effect of depreciation, amortization, and depletion on financial statements?
• If bonds' coupon rate is higher than the market rate, the bonds are traded at:
• Which is the purpose of closing entries, and which accounts are typically closed?
• Which journal entry records interest expense and interest payable on notes payable when interest is accrued?
• Which statement about accounts receivable and notes receivable regarding interest is true?
• A prepaid expense is paid in advance and is expensed over time through adjusting entries. Which option correctly describes this concept?
• What does FOB destination mean?
• Which item would be classified as operating activities?
• What is the primary purpose of a bank reconciliation?
• What are typical payroll entries in accrual accounting?
• What is the straight-line depreciation formula?
• What is an unearned (deferred) revenue?
• Which statement correctly describes revenue and expenses on the income statement?
• What is the normal balance for liabilities?
• What type of account is inventory?
• Which method records bad debt expense when an account is deemed uncollectible?
• Which financial statement reports the company's financial position at a specific date?
• Which statement best contrasts accrual basis and cash basis accounting for revenue and expenses?
• What is the purpose of a statement of changes in owners' equity in partnerships or sole proprietorships?
• Which group of accounts normally increases with credits?
• Which journal entries correctly record a sale on credit and indicate the purpose of the Allowance for Doubtful Accounts?
• If a note has principal 25000 and annual interest rate 6% for 4 months, what is the accrued interest?
• What does recording accrued interest revenue imply?
• Which statement about a note receivable is true?
• Accumulated depreciation is best described as which type of account?
• When are revenue and expenses recognized in accrual accounting?
• In bank reconciliations, deposits in transit are treated as what?
• How are current vs noncurrent assets classified and presented on the balance sheet?
• Permanent accounts include which type of accounts?
• What is the purpose of posting to the general ledger from the journal?
• Process costing is typically used for which type of production?
• Which item would be classified as financing activities?
• What is a petty cash fund and how is it replenished?
• The purpose of a trial balance is to verify that:
• After closing entries, which accounts still have balances?
• Which statement about depreciation in general is true?
• If you purchase equipment on credit, which journal entry is recorded?
• Which of the following is an operating activity?
• Permanent accounts and temporary accounts have different natures. Which of the following correctly describes them?
• How are break-even sales calculated?
• What inventory method would result in lower net income during a period of rising prices?
• Which statement about the quick ratio is correct?
• What is the accounting equation?
• Net realizable value of accounts receivable is calculated as which of the following?
• Using straight-line depreciation for a delivery truck, cost 50,000, salvage 5,000, life 5 years, what is the annual depreciation and the correct journal entry?
• In determining total equity, which item reduces the equity balance?
• Is Cost of Goods Sold (CoGS) considered an expense?
• What are the five basic types of accounts in a chart of accounts?
• If accounts receivable total 50000 and the allowance for doubtful accounts is 3000, what is the net realizable value?
• Which statement best defines break-even point?
• Under the revenue recognition principle, when is revenue recognized for service and product sales?
• What is the purpose of the statement of cash flows?
• How do you compute ending retained earnings for a period?
• Par value of common stock is:
• What is the standard journal entry to record depreciation expense?
• Which of the following journal entries correctly records depreciation expense under straight-line depreciation?
• Purchase returns and allowances affect financial statements by doing what?
• Which statement correctly describes the classification and presentation of current vs noncurrent assets and liabilities on the balance sheet?
• Which equation expresses the fundamental accounting equation?
• What is the order of accounts on a trial balance?
• What advantages does the allowance method offer for bad debts in financial reporting?
• Which statement best describes the proper accounting treatment when disposing of property, plant, and equipment?
• In a manufacturing company, which formula correctly expresses COGS?
• Under FIFO, which costs are used to determine the ending inventory?
• What does the debt-to-equity ratio measure and how is it calculated?
• How does Par Value stock issuance affect Common Stock and Additional paid-in capital?
• What is the formula for interest revenue on a note receivable?
• Which item would be reported as an asset on the balance sheet?
• What is the purpose of a chart of accounts and how are accounts organized?
• What is the difference between a liability and a payable?