Q: Which formula is used to calculate straight-line amortization expense?

$$ \text{Amortization Expense} = \frac{\text{Cost} - \text{Residual Value}}{\text{Useful Life}} $$

Q: What is the correct formula for calculating Net Sales Revenue?

$$ \text{Net Sales Revenue} = \text{Sales Revenue} - \text{Sales Discounts} - \text{Sales Returns} $$

Question 1

Which of the following best describes the purpose of adjusting entries at the end of an accounting period?

Accepted Answer

To update the accounts for preparation of the financial statements.

Question 2

A company purchased office supplies for $$200 and paid a delivery expense of 100 $$using petty cash. What is the correct journal entry to replenish the petty cash fund?

Accepted Answer

Debit Office Supplies $$200, Debit Delivery Expense 100$$, Credit Cash $300

Question 3

Which formula is used to calculate straight-line amortization expense?

Accepted Answer

$$ 	ext{Amortization Expense} = \frac{	ext{Cost} - 	ext{Residual Value}}{	ext{Useful Life}} $$

Question 4

Under the perpetual inventory system, which account is credited when inventory is sold to a customer?

Accepted Answer

Inventory

Question 5

Which of the following is NOT a component of internal control (CRIME)?

Accepted Answer

Financial leverage

Question 6

A company’s bank reconciliation shows the following: ending cash balance $$5,000, deposits in transit 1$$,200, outstanding cheques $800. What is the adjusted bank balance?

Accepted Answer

$$5,400$$

Question 7

Which of the following transactions would require an adjusting entry for accrued expenses?

Accepted Answer

Salaries earned by employees but not yet paid

Question 8

What is the correct formula for calculating Net Sales Revenue?

Accepted Answer

$$ 	ext{Net Sales Revenue} = 	ext{Sales Revenue} - 	ext{Sales Discounts} - 	ext{Sales Returns} $$

Question 9

Which of the following best describes the multi-step income statement under the perpetual inventory system?

Accepted Answer

It separates operating and non-operating activities and shows gross margin.

Question 10

According to the rules of debit and credit, which side of the T-account increases an asset account?

Accepted Answer

Left side (debit)

Question 11

Which adjusting entry is required for unearned revenue at the end of the period?

Accepted Answer

Debit Unearned Revenue, Credit Revenue

Question 12

A petty cash fund is established for $$500. At the end of the month, the fund has 100 in $$cash and receipts for $390. What is the amount of cash over or short?

Accepted Answer

$$10 short$$

Question 13

Which of the following is a control procedure for petty cash?

Accepted Answer

Designate a custodian for the petty cash fund.

Question 14

Under IFRS, how does revenue recognition for companies that sell inventory differ from previous standards?

Accepted Answer

Revenue is recognized when performance obligations are met.

Question 15

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

Accepted Answer

Depreciated liabilities

Question 16

A company’s adjusted book balance is calculated as follows: ending cash balance $$2,000, interest earned 50$$, bank service charge $20. What is the adjusted book balance?

Accepted Answer

$$2,030$$

Question 17

Which account is debited when recording an adjusting entry for amortization?

Accepted Answer

Amortization Expense

Question 18

When preparing a bank reconciliation, which item would NOT require a journal entry in the company’s books?

Accepted Answer

Deposits in transit

Question 19

Which of the following best describes the perpetual inventory system?

Accepted Answer

Inventory records are updated continuously as transactions occur.

Question 20

A company sells merchandise for $$1,000 with a sales discount of 50 $$and sales returns of $100. What is the net sales revenue?

Accepted Answer

$$850$$

Financial Accounting I: Key Concepts and Applications

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