Accounting 2 Semester 1 Final Exam Review

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1 Accounting 2 Semester 1 Final Exam Review True/False Indicate whether the sentence or statement is true or false. 1. In a departmental accounting system, net income is calculated for each department. 2. To identify the gross profit by department, the general ledger includes separate departmental accounts. 3. An account showing deductions from a purchases account is a contra purchases account. 4. The only type of entries recorded in a cash payments journal are cash payments for merchandise purchases. 5. When a cash discount is taken after a purchase return or allowance has been granted, the discount is calculated using the original amount of the invoice. 6. To replenish petty cash, a check is written for the amount spent from the fund. 7. Proving the purchases journal means that all amount columns are totaled and double lines are placed across the amount columns to indicate that the totaling process is complete. 8. The vendor name is entered in the Account Debited column of the purchases returns and allowances journal. 9. In a four-digit account numbering system, a fifth digit may be used to identify departmental accounts. 10. Using a separate account to record purchases returns and allowances allows a business to determine what portion of merchandise was returned to vendors. 11. A business should reconcile its bank statement yearly to provide an accurate balance of cash for year-end financial statements. 12. Decreases in expense accounts are on the credit side. 13. A business with many daily transactions may use special journals. 14. A sales allowance results in a credit to the customer's account and is often granted when the customer receives less merchandise than was ordered. 15. To have complete departmental data, purchases, sales, cash receipts and cash payments must be analyzed by department. 16. In states that have a sales tax, businesses include a Sales Tax Payable Credit column in the sales journal. 17. The source document used for a sales returns and allowances transactions is the cancelled sales invoice. 18. The debit column in the sales journal is Accounts Receivable Debit. 19. A cash discount on sales is known as a sales discount. 20. After the sales journal has been proved and ruled, column totals are posted to the general ledger accounts indicated in the column headings. 21. Sales discounts are calculated on the amount owed at the time the invoice is paid. 22. A cash discount on sales is called a sales discount. 23. Overtime pay is paid for hours worked in excess of eight hours per day. The typical overtime rate is $1.00 more than the regular hourly rate.

2 24. Depositing payroll checks directly to an employee's checking or savings accounts in a specific bank is called an automatic check deposit. 25. The money paid for employee services is called payroll. 26. Employers make periodic payments to the government for all payroll taxes withheld from employees, as well as for employer payroll taxes. 27. Employer payroll taxes include federal income tax, social security tax, Medicare tax, federal unemployment tax, and state unemployment tax. 28. A tax base is the lowest amount of earnings on which a tax is calculated. 29. The total amount earned by all employees for a pay period is called a payroll. 30. Any employee may indicate on Form W-4 that they do not want any taxes withheld from their pay. 31. A payroll register does not need to categorize earnings by department, since the employee earnings record provides the departmental information. 32. Taxes based on the payroll of a business are called payroll taxes. 33. If the business uses a special bank account for payroll, the general ledger will include an account commonly known as Payroll Checking. 34. Benefit hours used are recorded on each employee's time card. 35. The source document for journalizing employer payroll taxes is a memorandum. 36. Beginning and ending inventory amounts on interim departmental statements of gross profit for a merchandising business using a periodic inventory are determined by estimating the inventory. 37. When recording closing entries, the difference between the debit to Income Summary General and the credit to Income Summary General represents in net income or net loss for the fiscal period. 38. The two major sections of a statement of stockholders' equity are capital stock and retained earnings. 39. Net income appears on the work sheet as the difference between the Adjustments Debit and Credit columns and the Income Statement Debit and Credit columns. 40. Financial information that a business records are summarized in financial statements. 41. Two sources of information used to determine acceptable levels of performance are a business' historical records and nationwide business performance statistics published in newspapers and magazines. 42. Businesses seek to keep the gross profit percentage as low as possible. 43. A departmentalized business does not prepare a post-closing trial balance. 44. A departmentalized business has a separate income summary account for each department. 45. The decrease in the value of equipment because of use and passage of time is an operating expense. Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 46. Transferring information from a journal entry to a ledger account is called. a. ordering c. posting b. recording d. none of the above

3 47. A journal used to record only one kind of transaction is called a(n). a. ledger c. source document b. special journal d. none of the above 48. A report of deposits, withdrawals, and bank balance sent to a depositor by a bank is called a(n). a. bank statement c. balancing statement b. reconciliation statement d. none of the above 49. The procedure for arranging accounts in a general ledger, assigning account numbers, and keeping records current is called. a. accounting c. controlling accounting b. double-entry accounting d. none of the above 50. A ledger that is summarized in a single general ledger account is called a(n). a. controlling account ledger c. maintenance ledger b. subsidiary ledger d. none of the above 51. The amount remaining after the value of all liabilities is subtracted from the value of all assets is called. a. owner's balance c. owner's liability b. owner's equity d. none of the above 52. An amount of cash kept on hand and used for making small payments is called. a. cash on hand c. quick cash b. petty cash d. none of the above 53. A ledger that contains all accounts needed to prepare financial statements is called a(n). a. special ledger c. subsidiary ledger b. general ledger d. none of the above 54. An account that reduces a related account on a financial statement is called a(n). a. liability account c. credit account b. contra account d. none of the above 55. A business that purchases and sells goods is called a(n). a. service business c. selling business b. merchandising business d. none of the above Wriston Billiards and Darts sells equipment and supplies for the two sports. The company is divided into two departments, Billiards and Darts. The sales tax rate is 5%. All sales are made on terms of 2/10, n/30. Transaction #1. Sold dart supplies to Headley Games Emporium, $450.00, plus sales tax, $12.50; total, $ Sales Invoice No Transaction #2. Received cash on account from Headley Games Emporium covering Sales Invoice 201 (see above), less 2% discount, and less sales tax on the discount amount. Receipt No Refer to transaction number one in the Wriston Billiards and Darts Scenario. The account(s) debited for this transaction is (are). a. Accounts Receivable c. Accounts Receivable and Sales Darts b. Sales Darts and Sales Tax Payable d. Accounts Receivable and Cash 57. Refer to transaction number two in the Wriston Billiards and Darts Scenario. The account(s) credited for this transaction is (are). a. Accounts Receivable and Sales Tax Payable b. Accounts Receivable c. Sales Tax Payable, Sales Discount Darts and Cash

4 d. Accounts Receivable and Cash 58. Refer to transaction number two in the Wriston Billiards and Darts Scenario. The amount of cash received for this transaction is. a. $ c. $ b. $ d. $ When journalizing a transaction in the sales returns and allowances journal, the account(s) credited is (are). a. Accounts Receivable b. Accounts Receivable and Sales Returns and Allowances c. Sales Tax Payable and Sales d. Sales Returns and Allowances and Sales Tax Payable Small Ones Outfitters sells infant and toddler clothing to large retail clothing chains. The company has two departments, Infants and Toddlers. The sales tax rate is 5%. All sales are made on terms of 2/10, n/30. Transaction #1. Sold infant clothing, $ and toddler clothing, $1, to KidsValu, Inc., plus sales tax, $95.00; total, $1, Sales Invoice No Transaction #2 KidsValu, Inc. returned $ of toddler clothing, plus sales tax from Sales Invoice No Credit Memorandum No Refer to transaction number one in the Small Ones Outfitters Scenario. The account(s) debited for this transaction is (are). a. Accounts Receivable b. Sales Infants, Sales Toddlers, and Sales Tax Payable c. Accounts Receivable, Sales Infants, and Sales Toddlers d. Accounts Receivable and Cash 61. When journalizing a cash receipt transaction for cash and credit card sales, the account(s) debited is (are). a. Sales Tax Payable and Sales c. Cash b. Sales and Cash d. Cash and Credit Card Sales 62. In a departmental business, when golf equipment is sold on account. a. Sales is debited c. Sales Golf is debited b. Sales is credited d. Sales Golf is credited 63. The account credited when a customer returns merchandise or is granted an allowance is. a. Accounts Payable b. Sales Returns and Allowances c. the appropriate departmental sales account d. none of the above 64. If employer payroll taxes are paid using the Electronic Federal Tax Payment System (EFTPS), the entry is recorded in the. a. general journal c. cash payments journal b. payroll register d. electronic payments journal 65. Current period earnings are $ Deductions for the payroll period are $ The previous period's accumulated earnings are $12, The new accumulated earnings are. a. $13, c. $13, b. $13, d. $14,974.89

5 66. Ross Wagner earns $8.00 per hour for all hours worked up to 40 each week. He earns 1 1/2 his hourly rate for all hours worked in excess of 40 hours. He is paid biweekly. If Ross works 43 hours one week and 40 hours the next week, his total biweekly earnings are. a. $604 c. $676 b. $640 d. $ In a payroll register, the net pay represents. a. total earnings c. departmental earnings b. total earnings less total deductions d. total earnings less taxes withheld 68. When journalizing a payroll, the liability amounts are entered in the cash payments journal in the. a. General Debit column c. Accounts Payable Debit column b. General Credit column d. Payroll Credit column 69. The two journal entries to record payroll data are entered in a. a. general journal b. cash payments journal c. general journal and cash payments journal d. none of the above 70. A trial balance prepared after the closing entries are posted is a(n). a. closing trial balance c. opening trial balance b. post-closing trial balance d. balance sheet trial balance 71. The portion of a plant asset's cost that is transferred to an expense account in each fiscal period during a plant asset's useful life is. a. accumulated depreciation c. plant asset expense b. depreciation expense d. salvage value 72. Total shares of ownership in a corporation are called. a. capital stock c. ownership shares b. common stock d. equity 73. Earnings distributed to stockholders are called. a. capital stock c. distributed earnings b. dividends d. retained earnings 74. A merchandise inventory determined by counting, weighing, or measuring items of merchandise on hand is a(n). a. estimated inventory c. perpetual inventory b. periodic inventory d. counted inventory 75. The adjusting entry for supplies involves a. a. debit to Supplies and a credit to Supplies Expense b. debit to Supplies Expense and a credit to Supplies c. debit to Supplies and a credit to Income Summary d. debit to Supplies Expense and a credit to Income Summary

6 Accounting 2 Semester 1 Final Exam Review Answer Section TRUE/FALSE 1. ANS: F PTS: 1 2. ANS: T PTS: 1 3. ANS: F PTS: 1 4. ANS: F PTS: 1 5. ANS: F PTS: 1 6. ANS: T PTS: 1 7. ANS: F PTS: 1 8. ANS: T PTS: 1 9. ANS: T PTS: ANS: T PTS: ANS: F PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: F PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: F PTS: ANS: T PTS: ANS: F PTS: ANS: T PTS: ANS: F PTS: ANS: F PTS: ANS: T PTS: ANS: F PTS: ANS: F PTS: ANS: T PTS: ANS: F PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: T PTS: ANS: F PTS: ANS: T PTS: ANS: F PTS: ANS: F PTS: ANS: F PTS: ANS: T PTS: ANS: T PTS: 1 MULTIPLE CHOICE 46. ANS: C PTS: ANS: B PTS: ANS: A PTS: ANS: D PTS: ANS: B PTS: ANS: B PTS: ANS: B PTS: ANS: B PTS: ANS: B PTS: ANS: B PTS: ANS: A PTS: ANS: B PTS: ANS: B PTS: ANS: A PTS: ANS: A PTS: ANS: C PTS: ANS: D PTS: ANS: D PTS: ANS: C PTS: ANS: A PTS: ANS: C PTS: ANS: B PTS: ANS: B PTS: ANS: C PTS: ANS: B PTS: ANS: B PTS: ANS: A PTS: ANS: B PTS: ANS: B PTS: ANS: B PTS: 1

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