Q: A company uses the moving-weighted-average cost method. If it purchases 100 units at $$5 each and then 200 units at 6 $$each, what is the weighted average cost per unit?

$$\frac{(100 \times 5) + (200 \times 6)}{100 + 200} = \frac{500 + 1200}{300} = \frac{1700}{300} = 5.67$$

Q: Which equation correctly calculates the interest for a note payable?

$$Interest = Principal \times Rate \times Time$$

Q: A company uses FIFO inventory method. If the first purchase was 100 units at $$4 each and the second purchase was 200 units at 5 $$each, and 150 units are sold, what is the cost of goods sold?

$$(100 \times 4) + (50 \times 5) = 400 + 250 = 650$$

Q: A company makes a lump sum purchase of assets: land ($$50,000), building (150$$,000), and equipment ($$100,000) for a total price of 270$$,000. What is the allocated cost for the building using the relative fair value method?

$$\frac{150,000}{50,000 + 150,000 + 100,000} \times 270,000 = \frac{150,000}{300,000} \times 270,000 = 0.5 \times 270,000 = 135,000$$

Question 1

Which of the following best describes the perpetual inventory system?

Accepted Answer

Inventory is updated continuously as purchases and sales occur.

Question 2

A company purchased land for $$100,000 and made improvements costing 20$$,000. What is the total amount to be capitalized as the cost of land on the balance sheet?

Accepted Answer

$120,000

Question 3

Which formula is used to calculate the gross margin?

Accepted Answer

$$Gross\ Margin = Net\ Sales - Cost\ of\ Goods\ Sold$$

Question 4

A company uses the moving-weighted-average cost method. If it purchases 100 units at $$5 each and then 200 units at 6 $$each, what is the weighted average cost per unit?

Accepted Answer

$$\frac{(100 	imes 5) + (200 	imes 6)}{100 + 200} = \frac{500 + 1200}{300} = \frac{1700}{300} = 5.67$$

Question 5

Which of the following is NOT an example of internal control?

Accepted Answer

Allowing one employee to handle all cash transactions

Question 6

If a company estimates that $2,000 of its accounts receivable will be uncollectible, which journal entry should be made to record the allowance for doubtful accounts?

Accepted Answer

Debit Bad Debt Expense $$2,000; Credit Allowance for Doubtful Accounts 2$$,000

Question 7

Which equation correctly calculates the interest for a note payable?

Accepted Answer

$$Interest = Principal 	imes Rate 	imes Time$$

Question 8

A company sells goods for $10,000 cash. Which account is credited in the journal entry?

Accepted Answer

Sales Revenue

Question 9

Which of the following best describes the matching objective in accounting?

Accepted Answer

Expenses are recorded in the same period as the revenues they help generate.

Question 10

A company uses FIFO inventory method. If the first purchase was 100 units at $$4 each and the second purchase was 200 units at 5 $$each, and 150 units are sold, what is the cost of goods sold?

Accepted Answer

$$(100 	imes 4) + (50 	imes 5) = 400 + 250 = 650$$

Question 11

Which of the following is a real-world example of a land improvement that should be capitalized separately from the cost of land?

Accepted Answer

Parking lot paving

Question 12

Which account is debited when a company receives cash from a customer for a previous credit sale?

Accepted Answer

Cash

Question 13

Which of the following transactions would require a journal entry involving both cash and accounts receivable?

Accepted Answer

Collection of cash from a customer who previously bought on credit

Question 14

A company makes a lump sum purchase of assets: land ($$50,000), building (150$$,000), and equipment ($$100,000) for a total price of 270$$,000. What is the allocated cost for the building using the relative fair value method?

Accepted Answer

$$\frac{150,000}{50,000 + 150,000 + 100,000} 	imes 270,000 = \frac{150,000}{300,000} 	imes 270,000 = 0.5 	imes 270,000 = 135,000$$

Question 15

Which of the following is an accrued expense?

Accepted Answer

Wages earned by employees but not yet paid

Question 16

Which of the following is the correct journal entry for the withdrawal of cash by the owner in a sole proprietorship?

Accepted Answer

Debit Owner's Withdrawals; Credit Cash

Question 17

Which of the following best describes the purpose of a worksheet in accounting?

Accepted Answer

To assist in preparing financial statements and adjusting entries

Question 18

A company has $10,000 in accounts receivable and estimates 5% will be uncollectible. What is the allowance for doubtful accounts?

Accepted Answer

$$10,000 	imes 0.05 = 500$$

Question 19

Which of the following is NOT a function of the auditor in financial accounting?

Accepted Answer

Preparing the company's financial statements

Question 20

Which of the following is the correct formula for calculating the ending inventory under the periodic inventory system?

Accepted Answer

$$Ending\ Inventory = Beginning\ Inventory + Purchases - Cost\ of\ Goods\ Sold$$

Financial Accounting: Key Topics and Concepts Study Guide

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