UNIVERSIDAD CARLOS III DE MADRID

Accounting I
Mid-term exam
Name: NIU Group:

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
There is only one correct answer. Grading system: correct answer = 1 point; incorrect answer = -0,33 points;
no answer = 0 points.

1. Which of the following groups are considered to be internal users of accounting information?
a. Employees and customers
b. Customers and vendors
c. Employees and managers
d. Government and banks

2. Shareholders in a corporation have an interest in the company because

a. they provide incentives for the company to market their products.
b. they are part of the Marketing Department that is responsible for promoting the
products or services to increase the business profits.
c. they help market their products to customers or find vendors to supply needed
inputs.
d. they provide major financing for the business.

3. How does the collection of cash from a customer who was previously put on account affect the
accounting equation?
a. assets decrease; owner's equity decreases
b. assets increase; owner's equity increases
c. assets increase; assets decrease
d. assets increase; liabilities increase

4. Which of the following group of accounts are all assets?

a. Cash, Accounts Payable, Buildings
b. Accounts Receivable, Revenue, Cash
c. Prepaid Expenses, Buildings, Patents
d. Unearned Revenues, Prepaid Expenses, Cash

5. The following selected transactions for April 2008 have been journalized. Identify the transaction that
has been recorded incorrectly and answer the question below.
April 1 Received cash from the investment made by the owner, $14,000.
2 Received cash for providing accounting services, $9,500.
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 3 Billed customers on account for providing services, $4,200.

Date Description Debit Credit

April 1 Cash 14,000
Capital, Owner 14,000

April 2 Cash 9,500

Revenues 9,500

April 3 Revenues 4,200

Accounts payable 4,200

a. Entries for April 1 and April 2 are wrong

b. Entries for April 1 and April 3 are wrong
c. Entries for April 2 and April 3 are wrong
d. Entries for April 1 and April 2 are right

6. The balance in the office supplies account on June 1 was $6,300, supplies purchased during June were
$3,100, and the supplies on hand at June 30 were $2,500. The amount to be used for the appropriate
adjusting entry is
a. $3,700
b. $11,900
c. $5,700
d. $6,900

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

a. Salary owed but not yet paid
b. Fees received but not yet earned
c. Supplies on hand
d. A two-year premium paid on a fire insurance policy

8. FUNNY Company sold merchandise for cash, $7,200. The cost of the merchandise sold was $3,950.
The journal entry(s) to record this transaction would be
a. Cash 7,200
Merchandise Inventory 7,200
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 Cost of Merchandise Sold 3,950
Sales 3,950
b. Cash 7,200
Sales 7,200

Cost of Merchandise Sold 3,950

Merchandise Inventory 3,950
c. Cash 7,200
Sales 7,200

Cost of Merchandise Sold 7,200

Merchandise Inventory 7,200
d. Cash 3,950
Sales 3,950

Cost of Merchandise Sold 3,950

Merchandise Inventory 3,950

9. Under which method of cost flows is the inventory assumed to be composed of the most recent costs?
a. average cost
b. last-in, first-out
c. first-in, first-out
d. weighted average

10. A potential investor interested in evaluating a company’s financial earning performance for the current
period would probably examine which of the following financial statements?
A) Balance Sheet
B) Income Statement
C) Statement of Cash Flows and Income Statement
D) Statement of Retained Earnings and Balance Sheet

11. Cost of goods sold appears on the:

A) Statement of Retained Earnings as an addition to beginning retained earnings.
B) Income Statement as a deduction from sales.
C) Balance Sheet as a deduction from sales.
D) Income Statement as a deduction from gross profit.

12. A retail store sells t-shirts for $85 and purchases them for $60. The store’s cost of goods sold would be:
A) $25.
B) $85.
C) $60.
D) none of the above.

13. The amount of net income shown on the income statement also appears on the:
A) balance sheet and operations statement.
B) statement of assets.
C) statement of financial position.
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D) statement of retained earnings.

14. The entry to record the payment of $925 to a supplier for office supplies previously purchased on
account would be:

A) Cash 925
Accounts Payable 925
B) Accounts Payable 925
Cash 925
C) Office Supplies 925
Expense
Cash 925
D) Office Supplies 925
Expense
Accounts Payable 925

15. If the debit amount of an entry to record the purchase of supplies on account was not posted:
A) assets would be understated.
B) assets would be overstated.
C) liabilities would be understated.
D) liabilities would be overstated.

16. Cash for merchandise delivered to the customer in 2010 is received in 2011. Using the accrual basis of
accounting, the revenue should appear on:

A) the 2010 income statement.

B) the 2011 income statement.
C) neither the 2010 nor the 2011 income statement.
D) both the 2010 and 2011 income statements.

17. Which of the following statements is TRUE?

a. The matching principle states that expenses should be recorded in the same period as the related
revenues.
b. The revenue principle states that revenue should be recorded in the same period as the cash is
received.
c. Under the adjusting principle, a business should record revenue when it is earned, regardless of
when payment is received from the customer.
d. The matching principle requires the identification of expenses and matching them with the cash
used to pay them.

18. Ben George, Inc. has an unadjusted balance in Accumulated Depreciation-Truck of $9,000 as of
December 31, 2010. This relates to a Truck purchased for $15,000 with an expected useful life of 5 years
that is depreciated using the straight line method. After recording the depreciation expense for 2011, the
adjusted balance in the Accumulated Depreciation-Truck account as of December 31, 2011 is:
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a) $15,000.
b) $12,000.
c) $3,000.
d) $1,000.

19. Which account is debited in the adjusting entry to record salaries owed to employees, but not paid until
the next accounting period?
a) Salary Expense
b) Unearned Salaries
c) Salary Payable
d) Deferred Salary

20. The use of the FIFO method generally increases taxable income:
a) when prices are constant.
b) when prices are declining.
c) when prices are increasing.
d) under all circumstances.