Q. How is the straight-line method of depreciation calculated?
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A.
Cost - Salvage Value / Useful Life
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B.
Cost + Salvage Value / Useful Life
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C.
Cost / Useful Life
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D.
Cost - Useful Life
Solution
The straight-line method of depreciation is calculated as (Cost - Salvage Value) / Useful Life.
Correct Answer:
A
— Cost - Salvage Value / Useful Life
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Q. What is the effect of recording an adjusting entry for accrued expenses?
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A.
Increase assets and decrease liabilities
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B.
Increase liabilities and decrease equity
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C.
Increase expenses and increase liabilities
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D.
Decrease assets and increase expenses
Solution
Recording an adjusting entry for accrued expenses increases expenses and increases liabilities.
Correct Answer:
C
— Increase expenses and increase liabilities
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Q. What is the journal entry for recording depreciation expense?
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A.
Debit Depreciation Expense, Credit Accumulated Depreciation
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B.
Debit Accumulated Depreciation, Credit Depreciation Expense
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C.
Debit Depreciation Expense, Credit Cash
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D.
Debit Cash, Credit Depreciation Expense
Solution
The correct entry is to debit Depreciation Expense to recognize the expense and credit Accumulated Depreciation to reduce the asset's book value.
Correct Answer:
A
— Debit Depreciation Expense, Credit Accumulated Depreciation
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Q. What is the journal entry for the sale of goods on credit?
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A.
Debit Cash, Credit Sales Revenue
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B.
Debit Accounts Receivable, Credit Sales Revenue
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C.
Debit Sales Revenue, Credit Accounts Receivable
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D.
Debit Sales Revenue, Credit Cash
Solution
The correct entry is to debit Accounts Receivable to recognize the amount owed and credit Sales Revenue to record the sale.
Correct Answer:
B
— Debit Accounts Receivable, Credit Sales Revenue
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Q. What is the journal entry to record the sale of goods for cash?
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A.
Debit Cash, Credit Sales Revenue
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B.
Debit Sales Revenue, Credit Cash
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C.
Debit Accounts Receivable, Credit Sales Revenue
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D.
Debit Sales Revenue, Credit Accounts Receivable
Solution
The correct entry is to debit Cash to increase it and credit Sales Revenue to recognize the income.
Correct Answer:
A
— Debit Cash, Credit Sales Revenue
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Q. What is the purpose of a trial balance?
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A.
To prepare financial statements
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B.
To ensure that debits equal credits
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C.
To calculate net income
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D.
To assess liquidity
Solution
The primary purpose of a trial balance is to ensure that total debits equal total credits.
Correct Answer:
B
— To ensure that debits equal credits
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Q. Which inventory valuation method results in the highest ending inventory during inflation?
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A.
FIFO
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B.
LIFO
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C.
Weighted Average
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D.
Specific Identification
Solution
During inflation, FIFO results in the highest ending inventory value because it uses the cost of the oldest inventory first.
Correct Answer:
A
— FIFO
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