Q: A company purchased equipment for $50,000 on October 1. The equipment has a useful life of 5 years and no residual value. Using straight-line depreciation, what is the depreciation expense for the year ended December 31?

$$2,500 \text{ (3 months' depreciation)}$$ $$\text{Depreciation per year} = \frac{50,000}{5} = 10,000$$ $$\text{Depreciation for 3 months} = 10,000 \times \frac{3}{12} = 2,500$$

Q: A company issues a $10,000, 6-month, 8% note payable on November 1. What is the interest expense to be accrued at December 31?

$$133.33$$ $$\text{Interest} = 10,000 \times 0.08 \times \frac{2}{12} = 133.33$$

Question 1

Which of the following best describes the primary purpose of financial accounting?

Accepted Answer

To communicate financial information to external stakeholders such as investors and creditors.

Question 2

A company purchased equipment for $50,000 on October 1. The equipment has a useful life of 5 years and no residual value. Using straight-line depreciation, what is the depreciation expense for the year ended December 31?

Accepted Answer

$$2,500 	ext{ (3 months' depreciation)}$$

$$	ext{Depreciation per year} = \frac{50,000}{5} = 10,000$$ 
$$	ext{Depreciation for 3 months} = 10,000 	imes \frac{3}{12} = 2,500$$

Question 3

Which of the following transactions would NOT affect the accounting equation ($$	ext{Assets} = 	ext{Liabilities} + 	ext{Equity}$$)?

Accepted Answer

Signing a contract to purchase inventory in the future.

Question 4

If a company receives $5,000 cash from a customer for services to be performed next month, how should this transaction be recorded?

Accepted Answer

Debit Cash $$5,000; Credit Unearned Revenue 5$$,000

Question 5

Which financial statement shows a company’s financial position at a specific point in time?

Accepted Answer

Balance Sheet

Question 6

A company had the following balances at year-end: Assets $$120,000, Liabilities 45$$,000. What is the company’s equity?

Accepted Answer

$75,000

Question 7

Which of the following is an example of an accrual?

Accepted Answer

Recording interest expense that has been incurred but not yet paid.

Question 8

A company’s trial balance shows Supplies $$2,000. At year-end, a physical count reveals only 500 of $$supplies remain. What is the adjusting entry?

Accepted Answer

Debit Supplies Expense $$1,500; Credit Supplies 1$$,500

Question 9

Which of the following best describes the matching principle?

Accepted Answer

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

Question 10

A company issues a $10,000, 6-month, 8% note payable on November 1. What is the interest expense to be accrued at December 31?

Accepted Answer

$$133.33$$

$$	ext{Interest} = 10,000 	imes 0.08 	imes \frac{2}{12} = 133.33$$

Question 11

Which of the following accounts would NOT appear on a post-closing trial balance?

Accepted Answer

Service Revenue

Question 12

A company’s beginning inventory is $$5,000, purchases are 20$$,000, and ending inventory is $4,000. What is the cost of goods sold?

Accepted Answer

$19,000

Question 13

Which of the following is NOT a characteristic of useful financial information according to the conceptual framework?

Accepted Answer

Profitability

Question 14

A company paid $12,000 for a one-year insurance policy on July 1. What is the insurance expense for the year ended December 31?

Accepted Answer

$6,000

Question 15

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

Accepted Answer

Each transaction affects at least two accounts, with debits equaling credits.

Question 16

A company’s bank statement shows an ending balance of $$8,000. Outstanding checks total 1$$,500, and deposits in transit are $2,000. What is the adjusted cash balance?

Accepted Answer

$$8,000 - 1,500 + 2,000 = 8,500$$

Question 17

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

Accepted Answer

Accumulated Depreciation

Question 18

A company’s net income for the year is $$25,000. Beginning retained earnings are 10$$,000, and dividends declared are $5,000. What are ending retained earnings?

Accepted Answer

$30,000

Question 19

Which of the following best describes the purpose of adjusting entries?

Accepted Answer

To update account balances before preparing financial statements.

Question 20

A company’s total assets increased by $$15,000 and total liabilities increased by 10$$,000 during the year. By how much did equity change?

Accepted Answer

$5,000 increase

Financial Accounting Course Schedule and Assessment Overview

Study Guide - Practice Questions

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