$$ \sum \text{Debits} = \sum \text{Credits} $$

$$ \text{Weighted Average Cost per Unit} = \frac{\text{Cost of Goods Available for Sale}}{\text{Total Units Available for Sale}} $$

Question 1

Which of the following best describes the purpose of the general journal in financial accounting?

Accepted Answer

To record all business transactions in chronological order before posting to the general ledger

Question 2

A company purchased inventory on credit. Which journal entry correctly records this transaction?

Accepted Answer

Debit Inventory, Credit Accounts Payable

Question 3

Which equation is used to verify that the total debits equal total credits in a trial balance?

Accepted Answer

$$ \sum 	ext{Debits} = \sum 	ext{Credits} $$

Question 4

Which of the following is NOT one of the four types of adjusting entries?

Accepted Answer

Inventory purchases

Question 5

A company ships goods to a customer FOB shipping point. Who is responsible for the freight charges?

Accepted Answer

The customer

Question 6

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

Accepted Answer

Last-in, First-out (LIFO)

Question 7

If ending inventory is overstated by $5,000, what is the effect on net income?

Accepted Answer

Net income is overstated by $5,000

Question 8

Which of the following best describes the purpose of internal controls over cash?

Accepted Answer

To safeguard assets and ensure the accuracy of accounting records

Question 9

Which of the following is a reason for preparing a bank reconciliation?

Accepted Answer

To detect errors or fraud in the cash records

Question 10

Which formula is used to calculate the weighted average cost per unit for inventory?

Accepted Answer

$$ 	ext{Weighted Average Cost per Unit} = \frac{	ext{Cost of Goods Available for Sale}}{	ext{Total Units Available for Sale}} $$

Question 11

Which of the following is an example of an accrued expense?

Accepted Answer

Wages earned by employees but not yet paid

Question 12

A company uses the direct write-off method for uncollectible accounts. What is the journal entry to write off a $1,000 uncollectible account?

Accepted Answer

Debit Bad Debt Expense $$1,000; Credit Accounts Receivable 1$$,000

Question 13

Which of the following is a limitation of the direct write-off method for uncollectible accounts?

Accepted Answer

It may violate the matching principle

Question 14

Which of the following is the correct formula for calculating cost of goods sold (COGS)?

Accepted Answer

$$ 	ext{COGS} = 	ext{Beginning Inventory} + 	ext{Purchases} - 	ext{Ending Inventory} $$

Question 15

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

Accepted Answer

A customer pays for a one-year magazine subscription in advance

Question 16

Which of the following statements about the FIFO inventory method is correct?

Accepted Answer

The earliest purchased items are assumed to be sold first

Question 17

Which of the following is the correct formula for the gross profit ratio?

Accepted Answer

$$ 	ext{Gross Profit Ratio} = \frac{	ext{Gross Profit}}{	ext{Net Sales}} $$

Question 18

A company discovers that it failed to record $2,000 of accrued interest revenue at year-end. What is the effect on the financial statements?

Accepted Answer

Assets and net income are both understated

Question 19

Which of the following is NOT a purpose of preparing adjusting entries?

Accepted Answer

To update the cash account for bank errors

Question 20

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

Accepted Answer

Service Revenue

Key Learning Objectives in Financial Accounting: Transactions, Inventory, and Internal Controls

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