Q: A business uses the periodic inventory system. At year-end, the following data is available: Beginning Inventory = $10,000, Purchases = $25,000, Ending Inventory = $8,000. What is the cost of goods sold?

$27,000 $\text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} = 10,000 + 25,000 - 8,000 = 27,000$

Q: A company uses the FIFO method for inventory costing. If the first purchase was 100 units at $10 each and the second purchase was 200 units at $12 each, what is the cost of 150 units sold?

$1,600 $\text{Cost} = (100 \times 10) + (50 \times 12) = 1,000 + 600 = 1,600$

Q: A company’s bank statement shows an ending balance of $8,500. Outstanding checks total $1,200, and deposits in transit are $700. What is the adjusted cash balance?

$8,000 $\text{Adjusted Cash Balance} = 8,500 - 1,200 + 700 = 8,000$

Question 1

Which of the following best describes the double-entry system of accounting?

Accepted Answer

Every transaction affects at least two accounts, with equal debits and credits.

Question 2

A company purchased inventory for $5,000 on account. Which journal entry correctly records this transaction?

Accepted Answer

Debit Inventory $5,000; Credit Accounts Payable $5,000

Question 3

Which inventory costing method results in the highest cost of goods sold during a period of rising prices?

Accepted Answer

LIFO (Last-In, First-Out)

Question 4

A business uses the periodic inventory system. At year-end, the following data is available: Beginning Inventory = $10,000, Purchases = $25,000, Ending Inventory = $8,000. What is the cost of goods sold?

Accepted Answer

$27,000

$	ext{COGS} = 	ext{Beginning Inventory} + 	ext{Purchases} - 	ext{Ending Inventory} = 10,000 + 25,000 - 8,000 = 27,000$

Question 5

Which of the following is NOT a key principle of internal control?

Accepted Answer

Combining responsibilities for related transactions

Question 6

A company estimates that 2% of its $50,000 credit sales will be uncollectible. Using the allowance method, what is the journal entry to record bad debt expense?

Accepted Answer

Debit Bad Debt Expense $1,000; Credit Allowance for Doubtful Accounts $1,000

$	ext{Bad Debt Expense} = 0.02 	imes 50,000 = 1,000$

Question 7

Which of the following best explains the matching principle in financial accounting?

Accepted Answer

Expenses should be recognized in the same period as the revenues they help generate.

Question 8

A company uses the FIFO method for inventory costing. If the first purchase was 100 units at $10 each and the second purchase was 200 units at $12 each, what is the cost of 150 units sold?

Accepted Answer

$1,600

$	ext{Cost} = (100 	imes 10) + (50 	imes 12) = 1,000 + 600 = 1,600$

Question 9

Which of the following transactions would require an adjusting entry at the end of the accounting period?

Accepted Answer

Accrued interest revenue earned but not yet received

Question 10

Which statement about the Sarbanes-Oxley Act (SOX) is correct?

Accepted Answer

SOX requires public companies to maintain effective internal controls over financial reporting.

Question 11

A company’s bank statement shows an ending balance of $8,500. Outstanding checks total $1,200, and deposits in transit are $700. What is the adjusted cash balance?

Accepted Answer

$8,000

$	ext{Adjusted Cash Balance} = 8,500 - 1,200 + 700 = 8,000$

Question 12

Which of the following is a real-world example of fraud that internal controls are designed to prevent?

Accepted Answer

An employee creates fictitious vendors and submits fake invoices for payment.

Question 13

Which of the following best describes the role of a Certified Public Accountant (CPA)?

Accepted Answer

A CPA is licensed to provide auditing, tax, and consulting services to the public.

Question 14

Which of the following is NOT a type of adjusting entry?

Accepted Answer

Inventory purchase entry

Question 15

A company discovers an error in its inventory count, resulting in an overstatement of ending inventory by $2,000. What is the effect on net income?

Accepted Answer

Net income is overstated by $2,000

Question 16

Which of the following best explains the difference between periodic and perpetual inventory systems?

Accepted Answer

Periodic systems update inventory balances only at the end of the period; perpetual systems update continuously.

Question 17

Which of the following is a key difference between US GAAP and IFRS?

Accepted Answer

IFRS allows revaluation of certain assets, while US GAAP generally does not.

Question 18

A company sells merchandise for $2,000 cash. The cost of the merchandise sold is $1,200. What is the correct journal entry?

Accepted Answer

Debit Cash $2,000; Credit Sales $2,000; Debit Cost of Goods Sold $1,200; Credit Inventory $1,200

Question 19

Which of the following best describes the lower-of-cost-or-market (LCM) rule for inventory?

Accepted Answer

Inventory is reported at the lower of its historical cost or current market value.

Question 20

Which of the following is an example of a contra-asset account?

Accepted Answer

Allowance for Doubtful Accounts

Comprehensive Study Guide: Financial Accounting Final Exam Learning Objectives

Study Guide - Practice Questions

Study Guide - Flashcards