Principle of Accounting Question

Question 1 of 30

3.3334 Points

A. collects interest revenue from the borrower.

B. establishes formal proof against the borrower.

C. has a specified interest rate and maturity date.

D. All of these answers are correct.

There was no accrual for interest on a promissory note receivable; this error would cause:

  A. the period’s net income to be overstated.  B. the period end assets to be overstated.  C. the period end liabilities to be understated.  D. the period’s net income to be understated. 

David borrows $2,000 from Matthew and gives him a promissory note. Matthew is the:

   A. payor.  B. payee.  C. maker.  D. drawer. 

Question 4 of 30

A. maturity date.

B. issue date.

C. interest note.

D. discount date.

The person or company that borrows money and signs a promissory note payable is the:

   A. drawer.  B. payee.  C. drawee.  D. maker. 

Question 6 of 30

A. potential liability.

B. dependent liability.

C. conditional liability.

D. contingent liability.

Question 7 of 30

A. entitles the maker to a discount.

B. is an oral promise to pay.

C. is a written promise to pay.

D. is due in 30 days.

In the basic formula for calculating interest on a promissory note, principal refers to:

   A. the maturity value.  B. the original amount-the discount.  C. the amount of interest to be paid.  D. the original amount loaned or borrowed. 

Question 9 of 30

A. the period’s net income to be understated.

B. the period end liabilities to be understated.

C. the period end assets to be understated.

D. None of these answers are correct.

The adjusting entry for accrued interest on a notes receivable includes:

   A. a debit to Interest Revenue; a credit to Accrued Interest Payable.  B. a debit to Accrued Interest Receivable; a credit to Interest Payable.  C. a debit to Interest Expense; a credit to Interest Revenue.  D. a debit to Accrued Interest Receivable; a credit to Interest Revenue. 

Question 11 of 30

A. percent per year.

B. percent per month.

C. percent per day.

D. percent per quarter.

Steadman’s Computer endorses a customer’s note dated June 17 to the bank on August The interest rate on the note is 10%, and the bank discount rate is 12%. The note matures on September 6. The discount period is:

   A. 60 days.  B. 0 days.  C. 81 days.  D. 21 days. 

D. debit Notes Receivable; credit Accounts Receivable.

Question 14 of 30

A. debit Accounts Receivable; credit Notes Payable.

B. debit Accounts Payable; credit Notes Payable.

C. debit Notes Payable; credit Accounts Payable.

Question 15 of 30

A. Total assets would be increased.

B. Owner’s equity would be increased.

C. Total liabilities would be increased.

Question 16 of 30

A. When they leave the seller’s location

B. When the goods arrive at the buyer’s location

C. When they are signed for

D. None of the above

D. it matches current selling prices and current costs.

The principle of consistency states that:

   A. changes in accounting methods should occur from one fiscal period to the next.  B. a company should switch from LIFO to FIFO every other period.  C. a company cannot change from one inventory valuation method to another.  D. by using the same method, the financial statements are more meaningful. 

A credit customer purchased $450 worth of items. Two days later, the customer returned $300 worth of those items. The entry to record this under the perpetual inventory method would include:

   A. a debit to Sales Returns and Allowances $300; credit Accounts Receivable $300.  B. a credit to Cost of Goods Sold for our cost.  C. a debit to Merchandise Inventory for our cost.  D. All of the above. 

Question 20 of 30

A. the retail method.

B. the weighted-average method.

C. the LIFO.

Possible reasons for a business estimating the value of the ending inventory should NOT include:

   A. the business uses perpetual system so a physical inventory is never needed.  B. the inventory is destroyed by fire.  C. the business uses periodic system and needs to prepare interim financial statements.  D. All of the above are valid reasons for estimating inventory. 

Question 22 of 30

A. Weighted-average

B. FIFO

C. LIFO

D. All would have the same tax effect.

Question 23 of 30

A. there will be no effect on net income for Year 2.

B. net income for Year 2 will be overstated.

C. net income for Year 2 will be understated.

D. ending inventory for Year 2 will be overstated.

Under the periodic inventory system, in addition to making the entry to record a sale, a company would:

   A. debit Cost of Goods Sold and credit Merchandise Inventory.  B. make no additional entry.  C. debit Cost of Goods Sold and credit Purchases.  D. debit Merchandise Inventory and credit Cost of Goods Sold. 

The perpetual inventory system is a system which:

   A. updates inventory continuously.  B. uses either FIFO, LIFO, weighted-average, or specific invoice method.  C. never needs a physical inventory taken.  D. both A and B. 

Question 26 of 30

A. specific invoice.

B. FIFO.

C. LIFO.

D. weighted-average.

Question 27 of 30

A. FIFO.

B. LIFO.

C. specific invoice.

Question 28 of 30

A. flow of goods and flow of costs are the same.

B. old costs are matched against current income.

C. an equal cost is assigned to each unit so net income does not fluctuate as much as with other methods.

Question 29 of 30

A. Weighted-average method

B. Specific invoice method

C. FIFO

D. LIFO

Question 30 of 30

A. debit Merchandise Inventory $200; credit Accounts Payable $200.

B. debit Accounts Payable $200; credit Purchases Returns and Allowances $200.

C. debit Accounts Payable $200; credit Merchandise Inventory $200.

D. debit Cost of Goods Sold $200; credit Accounts Payable $200.