Level 1 - Elimination Round

1. A petty cash fund was established with a $400 balance. It currently has cash of $41 and petty cash tickets totaling $359. Which of the following would be included in the entry to replenish the fund?

• a. a credit to Petty Cash for $359

• b. a debit to Petty Cash for $41

• c. a credit to Cash for $41

• d. a credit to Cash for $359

2. A business's cash receipts and cash payments for a specific period are reported on a(n) ________.

• income statement

• balance sheet

• statement of cash flows

• cash reconciliation statement

3. Which of the following is a basic right of stockholders?

• A) Stockholders may sell their stock back to the company if they wish.

• B) Stockholders may authorize a business contract on behalf of the corporation.

• C) Stockholders may receive dividends from corporate earnings.

• D) Stockholders may determine the issue price of common stock.

4. If debits do not equal credits, the first step to find the error is to

• a. call your manager and ask for advice.

• b. add the debit and credit columns again.

• c. review the journal entries for errors.

• d. make correcting entries rather than adjusting entries.

5. Which of the following adjustments cannot be reversed in the next accounting period?

• a. Accruals for income or expense

• b. Prepayments initially recorded using the expense method

• c. Advanced collections initially recorded using the income method

• d. Prepayments initially recorded using the asset method

6. Which of the following statements is correct?

• a. A contra-asset account is increased through credit.

• b. Accounts receivable is increased through credit.

• c. Owner’s equity is increased through debit.

• d. Accounts payable is decreased through credit.

7. The business sells goods to a customer who orally promises to pay for the purchase price after 30 days.

• a. Accounts receivable

• b. Accounts payable

• c. Cash

• d. Cost of sales

8. It is the process of objectively evaluating evidence and expressing an opinion regarding the correspondence between management’s assertions and established criteria.

• a. Accounting education

• b. Auditing

• c. Accounting research

• d. Tax accounting

9. The net income of a company for the year was $600,000. The company has no preferred stock. Common stockholders' equity was $1,200,000 at the beginning of the year and $2,500,000 at the end of the year. Calculate the rate of return on common stockholders' equity. (Round your answer to two decimal places.)

• 24.00%

• 19.35%

• 50.00%

• 32.43%

10. Under this concept, some costs are initially recognized as assets and recognized only as expenses when the related revenue is recognized.

• a. Separate entity concept

• b. Historical cost concept

• c. Going concern

• d. Matching principle