Tracking Assets and Sales Practice Test

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• What does FIFO stand for in inventory valuation?
• In terms of accounting equations, if each transaction is recorded correctly, the equation will be:
• Which term best matches 'This type of asset is used for continuing operations'?
• Craig, the owner of a landscaping business, regards equipment as fixed assets. What does this mean?
• Promissory notes are typically drafted in which situation?
• Which transaction increases one asset and one liability by the same amount?
• Which item would be considered an asset for a sporting goods store?
• Accounts receivable is classified as what on financial records?
• Using FIFO, if purchases are 50 units at $10, 30 units at $12, and 20 units at $15, and 60 units are sold, what is the COGS?
• The cost of a lease is typically recorded as which two types of accounts on inception?
• Vehicles and equipment used to produce revenue are classified under which asset category?
• Which asset classification includes cash and accounts receivable?
• When are the revenues from these sales recognized in accrual accounting?
• In the given scenario, what is the new accounts receivable balance after collecting $1,000 from a $5,000 balance?
• What type of entry is used to correct inventory errors?
• When should inventory be counted and adjusted?
• Notes receivable are defined as written promises that an outside entity will pay by a specified date. Which option states this accurately?
• What is accumulated depreciation?
• What is the purpose of including a disclosure when inventory errors are corrected in financial reports?
• Assets are defined as what in a business context?
• Which statement best describes current assets?
• What happens to the net book value of the asset in one year when depreciation expense is recorded?
• Which depreciation method records more depreciation expense in the early years of the asset's life?
• What does it indicate if the depreciation expense account has a credit balance?
• The total cost involved in manufacturing a product, or the total cost of a product that is purchased and then sold, is known as what?
• Given Assets total 6,000 and Liabilities 1,000 and Equity 5,000, which statement is true?
• Which classification on the balance sheet best describes the soft-serve machine used in a business?
• What term describes money a customer owes that a business determines will not be paid back?
• The business purchased 100 units at $5, 200 units at $7, 150 units at $6. If 250 units are sold, what is the ending inventory value under FIFO?
• Is the cash account debited or credited when you receive $250 in cash?
• What is another name for an invoice received from a vendor?
• When correcting inventory errors, which accounts should be adjusted?
• Under accrual accounting, how should the two sales transactions be recorded?
• What is the maturity date period for the note described after conversion?
• Which two accounts are affected on the lessee’s books by a capital lease at inception?
• An invoice in a credit sale serves to describe what?
• When recording a lease, which account category should be used for a capital/financing lease asset?
• What does 2/10, n/60 mean in the sales terms?
• A donation of cash increases which kind of account on the balance sheet?
• What is the primary purpose of adding a disclosure to new financial reports after fixing inventory errors?
• Which depreciation method considers the usage or production level of an asset to calculate depreciation?
• Which of the following is not a direct consequence of overstating ending inventory?
• Depreciation expense normally has which type of balance on the trial balance?
• What is the formula used in the units of production method to calculate depreciation?
• After two years, how much accumulated depreciation would there be?
• When an asset is fully depreciated and sold for more than its book value, what is recorded?
• What does the cost of goods sold (COGS) represent?
• What happens to money moved to accounts uncollectible?
• When does a bookkeeper credit accounts receivable and debit the bank account?
• What is the total sales revenue recognized from the two transactions before tax?
• How do you calculate the cost of goods sold (COGS)?
• The cost of the soft-serve machine was $4,500. With $1,000 down and $3,500 financed on a lease. Which entry increases PP&E by the full asset cost?
• For recording a credit card sale, which entry is typically made?
• The credit card sale on Tuesday increases which accounts?
• The forklift has an estimated useful life of 6 years and no salvage value. The business indicates it wants to depreciate the asset evenly over 6 years. Based on the input from the business about wanting to spread the depreciation expense out evenly over the life of the asset, what is the appropriate depreciation method to use?
• Which term describes reducing the book value of a fixed asset over time?
• What does accumulated depreciation represent?
• Which statement is true about FIFO inventory method?
• Assets that can be converted into cash quickly are called:
• Judy had a hair cut and paid $100 with a credit card. What type of sale is this?
• What is the purpose of the balance sheet?
• Which statement best describes automatic records produced by POS systems?
• What document records the itemized bill of goods sold or services provided?
• Under FIFO, what is the ending inventory value after selling 250 units from 100 units at 50 and 200 units at 60?
• An invoice that serves as an itemized bill of goods sold or services provided is also called a:
• Bad debt is recorded as which of the following?
• In a transaction where a company sells $4,000 on credit and later collects, what amount is debited to Accounts Receivable?
• In the conversion entry, which account is credited to recognize the penalty when converting accounts receivable to a note?
• Which of the following is an asset?
• At lease inception for a capital lease, which entry would correctly reflect the liability associated with the asset?
• Assets that are expected to generate economic benefits and contribute to revenue for many years are called:
• After identifying the asset type, what is the next step in tracking assets?
• Which depreciation method records the same amount of depreciation expense each accounting period?
• Which statement best describes an operating lease?
• After the first payment, the outstanding balance is $12,500. What is the interest due on the second payment?
• Which inventory valuation method assumes that the first units purchased are the first ones sold?
• A pump classified as PP&E indicates which of the following?
• Notes payable is best described as
• How should inventory errors be fixed in the financial reports?
• Which statement should Priya review to learn how to improve performance?
• When comparing the receipt to the journal entry, are the amounts entered correctly?
• Which term describes assets that can be quickly converted into cash?
• Which accounts are impacted by the December 14th receipt at the apartment complex, including $12,004 for sprinkler repairs, $1,000 in product sales, and $500 in inventory?
• To calculate the average cost per unit, you divide the total _____ of goods by the total _____ of goods over a specific accounting cycle.
• Why are prepaid expenses considered assets?
• Spreading the cost of an asset and the loss of its value over time describes which accounting concept?
• Which of the following best describes how a POS system affects recording?
• A trading card business sold a rare card for $8,000 in cash. Which entries correctly record the sale?
• A cash sale is typically paid immediately with acceptable payment methods.
• Who is the party paying the rent to use the asset in a lease?
• In which financial statement would you find assets listed?
• What is the first step in tracking assets?
• FIFO inventory method journal entry on January 31 to record cost of goods sold and adjust the inventory under the given scenario is:
• In a periodic inventory system, when is the cost of goods sold typically calculated?
• Depreciation on the income statement is reported as what kind of expense?
• Which type of lease is typically chosen when the lessee intends to own the asset at the end of the term?
• To increase an asset you would?
• The cost of an asset that has been depreciated for a single period. It shows how much of the asset's value has been used up in that year.
• On which financial statement is depreciation expense typically reported?
• PP&E stands for which term in asset terminology?
• When a company loans cash to another business and records it as a note receivable, which is the correct initial journal entry?
• If a sale is $100,000 with terms 2/10, n/60 and payment is made in 10 days, what amount is paid?
• Which term describes the estimate of how long you can reasonably expect to use an asset for your business?
• Using the straight-line depreciation method, which amount is depreciated for the van?
• What term describes money a customer owes that was put on credit?
• If the lessee intends to own the asset at the end, the lease is classified as which type?
• Which describes depreciation?
• The earnings a business makes per item sold is referred to as which of the following?
• Which is the simplest and most common method to calculate depreciation?
• A book resale business converts a past-due accounts receivable of $100,000 into a notes receivable with a 5% penalty, a maturity of 6 months, and a 12% annual interest rate. How would you record this transaction?
• Which statement best defines inventory?
• Which statement correctly describes the effect of the two sales on the accounting equation for John's retail store?
• Which term best matches 'This type of asset has no physical form'?
• What is the book value of the forklift after 3 years given the above assumptions?
• Which action decreases one asset and equity by the same amount?
• If a computer store purchases ready-made computers from a manufacturer, what category of inventory does it fall under?
• What is the purpose of accumulated depreciation?
• What is the net effect on owner's equity from these two sales?
• Which financial statement shows the period's net income?
• The store paid $500 cash to acquire a rare original choreography notes. Which entry is correct for the cash account?
• Which term best matches 'Resources that belong to a business and help it earn economic benefits in the future'?
• An account that offsets the balance of the associated value on the balance sheet is called what?
• In recording a cash prize, which account is debited?
• A plumbing and heating business purchases a new pump for their truck. What type of asset is this?
• Which statement about asset accounts is true?
• What is the purpose of conducting regular inventory counts in a business?
• If ending inventory increases while beginning inventory and purchases remain constant, what is the likely effect on COGS?
• Which statement about accumulated depreciation is true?
• When an invoice is paid, which accounts are affected?
• Under the straight-line depreciation method, which statement best describes the depreciation expense over the asset's life?
• Spreading out the cost of an item over its expected life is called what?
• Which account categories are affected by the sales transactions?
• The revenue recognized from both sales increases which element of the accounting equation?
• Copyrights, patents, intellectual property, domain name, trademarks, and goodwill fall into which asset category?
• Which item is not considered inventory in a store?
• Which item is not considered inventory?
• Which of the following is typically included in a promissory note?
• If you want to answer a client's question about an asset, which financial statement would you refer to?
• Which method is commonly used for writing off bad debts?
• Which statement best defines current assets?
• Under LIFO, which costs are assigned to cost of goods sold?
• Which of the following is not typically considered an asset?
• What is the effect on the income statement when bad debt is recorded?
• Recording a service such as sprinkler repairs would primarily increase which revenue account?
• Which term describes money owed by customers to the business?
• After posting the cleaning service revenue of $250, what is the new equity balance given initial equity is $5,000?
• What is the annual depreciation expense for a 28,000 asset with a 10-year service life using straight-line depreciation (assuming no salvage value)?
• Which of the following accounts has a normal debit balance?
• Which method of depreciation allocates the cost of an asset evenly over its useful life?
• Which of the following is a true statement about depreciation expense when recorded?
• What term describes the normal debit or credit balance of an account?
• Do either of the two sales affect liabilities?
• In terms of an accounting equation, a singular transaction may affect accounts on which sides?
• The total amount of depreciation expense that has been allocated for an asset since the asset was put into use.
• To decrease an asset you would?
• What is the interest portion of the first payment on a 25,000 loan at 10% annual interest with two months to maturity and a first payment equal to half the principal plus interest?
• Bob left an invoice on the front door for yard work. What type of sale is this?
• If both sales were cash sales, the total increase in assets would be the sum of the cash increases, which is:
• Which inventory valuation method assumes the first units purchased are the first units sold?
• A carpet and flooring business owner invests profits in a money market account. What type of asset is this?
• Which option correctly represents the components included in the cost of goods sold (COGS)?
• Which three categories are shown on the balance sheet?
• Cash sales affect which financial statements?
• Which depreciation method ties depreciation expense to actual usage of the asset?
• Assets have a ________ debit balance.
• For a cleaning job paid in cash, which accounts are affected?
• Which item is an example of an intangible asset?
• What should you record as gross sales for the $4,000 sale?
• How is depreciation expense typically recorded in the books?
• Which journal entry correctly records the purchase of raw materials on credit?
• Which type of sale involves extending credit and creates accounts receivable?
• Purchasing property and equipment with cash affects the accounts by?
• For the credit card sale, which statement could be true depending on settlement timing?
• Is the showroom an asset or a liability?
• Using straight-line depreciation, what is the service life and how does it affect depreciation for a van purchased for 28,000 with an expected life of 10 years?
• When a business realizes a customer will not repay a debt, the money moves to accounts uncollectible. How is money from accounts uncollectible posted?
• The combined effect on total assets after both sales is:
• Which of the following statements accurately describes the nature of the depreciation expense account's balance?
• Under straight-line depreciation, which formula gives the annual depreciation expense?
• When recording a cash sale of $8,000, which entry correctly increases cash?
• In the units of production method, which factor is used to determine depreciation?
• Which asset category includes domain names and trademarks?
• The owner’s equity increases due to revenue. Which statement best describes this effect?
• Which entry reflects recognizing a note receivable from a customer?
• Which costs are typically included in COGS?
• Which statement best describes what a disclosure after inventory adjustments should include?
• Under a periodic inventory system, what is the journal entry to record the purchase of merchandise inventory on credit?
• The normal debit or credit balance of an account is called:
• Assets such as six months of insurance premiums are best described as which type of asset?
• What happens to assets and equity when ending inventory is understated?
• How is accumulated depreciation classified on the balance sheet?
• Which statement accurately describes property, plant, and equipment (PP&E)?
• Which statement best describes a contra asset account?
• Marisol won a cash prize of $1,500. What is the correct recording entry?
• Which statement about POS systems is true?
• Cash sales are recorded through a POS system. What type of record is that considered?
• What is the primary difference between perpetual and periodic inventory systems?
• Which transaction directly increases asset accounts?
• If a forklift has an initial value of $12,000, salvage value of $0, and a useful life of 6 years, what is the accumulated depreciation after 3 years?
• In which section of the income statement is the depreciation expense for an office copier machine located?
• Which item is NOT typically included in a promissory note?
• Merchandise on hand is the value of goods that are currently available for sale, including finished goods inventory.
• In a lease agreement, who owns the asset and rents it out?
• Money owed to a business and considered an asset is called:
• Which statement best describes gross profit?
• If the original purchase price of shirts was $2,000 and $300 was spent on shipping, what is the COGS when all shirts are sold for $4,000 and ending inventory is zero?
• For the cash sale, what is the immediate effect on cash balance?
• When comparing a receipt to the journal entry, is the date entered correctly?
• Which financial statement monitors incoming and outgoing money for a business?
• A donation of cash is recorded as a debit to which account?
• If gross profit is calculated as sales minus COGS and COGS increases while sales stay the same, what happens to gross profit?
• Which transaction decreases one asset and increases another asset by the same amount?
• Which term describes the money a business is owed for goods or services?
• How would you record the value of the showroom at the time of construction?
• A clothing manufacturing business buys equipment for $100,000 with depreciation expense of $10,000 per year. Where would you adjust the accounting equation to show depreciation one year later?
• When recording a credit sale of $4,000, how is Accounts Receivable affected?
• A cash sale typically results in increases to which two accounts?
• Which term best matches 'This type of asset can be converted to cash within one year'?
• If depreciation expense appears with a credit balance on the unadjusted trial balance, what does this typically indicate?
• One of the benefits of POS systems in bookkeeping is that they:
• Assets are anything the business owns or offers for sale. Which option best fits this definition?
• Depreciation expense is typically classified in financial statements as which of the following?
• Which accounts are affected when purchasing inventory on credit?
• Which statement is true about the impact of revenue from sales on the accounting equation?
• Which item is a current (short-term) asset?
• On the balance sheet, accumulated depreciation serves to show which of the following?
• On the balance sheet, how does accumulated depreciation relate to the asset's value?
• Which category includes goods in the process of being transformed into a finished product?
• Which inventory system updates both inventory and cost of goods sold with every purchase and sale?
• Which action increases one asset and decreases another asset by the same amount if sold at book value?
• Which financial term describes the amounts owed to suppliers?
• When there is a decrease in inventory between the last count and the current count, what should be done?
• Which type of sale occurs when the client pays immediately in cash at the time of service?
• When does a business typically create an invoice?
• Which accounts are typically affected by recording depreciation expense?
• Which is an example of raw materials?
• Which account type has a natural debit balance?
• What is the impact on assets and equity when ending inventory is overstated?
• Which depreciation method matches wear with usage rather than time?
• In bad debt recognition, what is a third step?
• If raw materials are purchased with cash, which account is credited in the journal entry?
• What best defines work-in-progress inventory?
• Which statement best explains why a cash receipt increases assets?
• The cash sale on Monday increases which accounts?
• How frequently should inventory be counted and inventory errors corrected?
• How is depreciation expense recorded over time?
• Which statement best describes a cash sale transaction?
• Money a customer owes after a number of months have passed with no payment.
• The forklift reaches the end of its useful life and is sold for salvage value of $7,000, while the book value is zero. What is the purpose of recording the asset purchase, depreciation, and disposition in the books?
• In a periodic inventory system, how is the inventory account updated?
• Cash sales are transactions where the customer pays for goods or services immediately. Which payment methods are considered valid for cash sales?
• What is the purpose of an accounts receivable aging report?
• Which of the following would be classified as current (short-term) assets?
• Money market account balances, stocks, and bonds are examples of which asset category?
• Which inventory valuation method uses a constant average cost per unit for both COGS and ending inventory?
• What is a benefit of using a periodic inventory system?
• Notes receivable are best described as:
• Which description best fits a credit sale?
• Which of the following accounts normally carries a debit balance?
• A business issues a promissory note to one of their clients for an overdue invoice. How is it tracked by a bookkeeper?
• Which of the following would be categorized as a fixed (long-term) asset?
• Using straight-line depreciation, what is the annual depreciation expense for an asset with an initial value of $12,000, a salvage value of $0, and a useful life of 6 years?
• If a note is issued for a $100,000 accounts receivable plus 5% penalty, what is the balance of Notes Receivable?
• What is the purpose of an asset account?
• If the business paid cash for materials and labor, what would be the impact on the accounting equation?
• In a periodic inventory system, which entry would correct the accounting equation after a purchase was recorded as a sale instead of inventory?
• Promissory notes issued by a business are tracked on which account?
• Assets, liabilities, and equity are all components of which financial statement?
• How is accumulated depreciation recorded in the chart of accounts?
• Which statement is true regarding the direct write-off method for uncollectible accounts?