Question 1

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

Accepted Answer

Expenses should be matched with the revenues they help to generate in the same period.

Question 2

A company purchased equipment for $50,000. The equipment has a useful life of 10 years and no salvage value. Using the straight-line method, what is the annual depreciation expense?

Accepted Answer

$5,000

Question 3

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

Accepted Answer

Permanent account closing

Question 4

A company made a sale of $10,000 on account. The terms were 2/10, n/30. If the customer pays within 10 days, how much will the company receive?

Accepted Answer

$9,800

Question 5

Which equation correctly represents the basic accounting equation?

Accepted Answer

$$Assets = Liabilities + Owner's	ext{ }Equity$$

Question 6

Which of the following is a contra asset account?

Accepted Answer

Accumulated Depreciation

Question 7

Under the accrual basis of accounting, when is revenue recognized?

Accepted Answer

When the performance obligation is satisfied

Question 8

A company uses FIFO to value its inventory. If prices are rising, which statement is true?

Accepted Answer

Ending inventory will be higher and cost of goods sold will be lower.

Question 9

Which of the following is NOT a component of internal control?

Accepted Answer

Financial leverage

Question 10

A company estimates that 2% of its $50,000 accounts receivable will be uncollectible. What is the amount of the allowance for uncollectible accounts?

Accepted Answer

$1,000

Question 11

Which of the following best describes the purpose of a bank reconciliation?

Accepted Answer

To ensure the company’s cash balance matches the bank’s records

Question 12

Which inventory costing method results in the lowest net income during periods of rising prices?

Accepted Answer

LIFO

Question 13

Which of the following is NOT a temporary account?

Accepted Answer

Retained Earnings

Question 14

A company’s trial balance shows Supplies Expense of $$2,000 and Supplies on hand of 500. $$What was the beginning balance of Supplies if $1,000 was purchased during the period?

Accepted Answer

$1,500

Question 15

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

Accepted Answer

IFRS allows revaluation of property, plant, and equipment; US GAAP does not.

Question 16

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

Accepted Answer

Accrued interest expense

Question 17

A company’s income statement shows revenues of $$100,000 and expenses of 70$$,000. What is the net income?

Accepted Answer

$30,000

Question 18

Which of the following is an example of a deferred expense?

Accepted Answer

Prepaid insurance

Question 19

Which of the following is NOT a step in the accounting cycle?

Accepted Answer

Calculate depreciation expense

Question 20

A company uses the allowance method for uncollectible accounts. If it writes off a $500 account, what is the effect on total assets?

Accepted Answer

No effect

Financial Accounting 201 Final Exam Review: Comprehensive Study Notes

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