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Test answers for General Financial Accounting Test 2016

(48 / 31, CL) Last updated: March 25
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48 Answered Test Questions:

1. Which of the following is NOT an example of a period expense?

Answers:

• Administrative costs

• Inventory costs

• Accounting costs

• Selling costs

2. Which of the journal entries below is incorrectly recorded?

Answers:

• Dr: Cash, Cr: Investment in ABC Co. - Sale of an investment for cash

• Dr: Prepaid Insurance, Dr: Cash - Paid in advance for a 1-year insurance policy

• Dr: Accounts Receivable, Cr: Merchandise Inventory - Returned defective merchandise for credit

• Dr: Machinery, Cr: Notes Payable - Gave a 1-year note to acquire machinery

3. Which of the following accounts would NOT appear on a corporation's Balance Sheet?

Answers:

• Owner Investment

• Retained Earnings

• Investment in ABC Stock

• Premium on Common Stock

4. Which of the following transactions would NOT result in revenue being reported?

Answers:

• Sale of merchandise for cash

• Sale of merchandise on account

• Collection of an account receivable

• All of the above

5. ________________ is the financial obligation of a company in regards to a loan that accrues with the passage of time.

Answers:

• Interest Payable

• Income Tax Payable

• Income Tax Expense

• Accounts Payable

6. XYZ Company failed to record the purchase of inventory on account at the end of 2008. In which of the following ways is the Balance Sheet misstated?

Answers:

• Assets and liabilities are both understated.

• Assets are understated and liabilities are overstated.

• Assets and shareholders' equity are both understated.

• Assets, liabilities, and shareholders' equity are all correctly stated.

7. Which of the following is recorded only when another business enterprise is acquired?

Answers:

• Cash

• Equity

• Accounts Payable

• Goodwill

8. ______________ refers to shares originally issued and outstanding that have been reacquired from the owners.

Answers:

• Treasury Stock

• Common Stock

• Preferred Stock

• Retained Earnings

9. Amounts paid for various fees incurred in organizing a corporation are called ____________.

Answers:

• Organization Costs

• Current Assets

• Deferred Taxes

• Current Liabilities

10. A manufacturing firm's cost of producing its product is called ______________.

Answers:

• direct labor

• product costs

• indirect labor

• overhead

11. XYZ Company publishes a monthly sports magazine. The company has fiscal year of Jan-Dec. On July 1 of Year 1, the company sold 1000 two-year subscriptions for $200 each. On December 31 of Year 1, the amount reported as a liability on the Balance Sheet and the amount reported as revenue on the Income Statement are, respectively:

Answers:

• $0 and $200,000

• $50,000 and $150,000

• $100,000 and $100,000

• $150,000 and $50,000

12. Which of the following accounts accumulate amounts for only a single accounting period?

Answers:

• Permanent Accounts

• Temporary Accounts

• Assets

• Liabilities

13. Which of the following would cause the accounting equation to be out of balance?

Answers:

• Recording a purchase on account at the wrong amount

• Recording a 2007 purchase in 2008

• Posting the credit for a cash purchase at the wrong amount

• All of the above

14. From the following list of accounts and account balances, determine the amount that would be properly classified as Property, Plant, & Equipment.

$100,000 - Land Used in Business
$60,000 - Machinery Leased from Others
($80,000) - Accumulated Depreciation
$140,000 - Inventories
$40,000 - Land Held for Future Plant Site
$200,000 - Building
$50,000 - Investment in Stock of Construction Company

Answers:

• $220,000

• $360,000

• $260,000

• $280,000

15. At the beginning of the year, XYZ Company reported Accounts Receivable of $39,000. During the year, the company had credit sales totaling $288,000. At year end, the Accounts Receivable balance was $8,000 higher than the beginning balance. How much cash was collected on the accounts during the year?

Answers:

• $296,000

• $288,000

• $280,000

• $272,000

16. XYZ Company has just completed its first year of operations in Year 1. The company distributed dividends of $50,000. If the ending balance of Retained Earnings on December 31 of Year 1 is $70,000, and the company had revenues of $400,000 from Year 1 sales, then what is the total of the company's Year 1 expenses?

Answers:

• $350,000

• $330,000

• $280,000

• None of the above

17. A ____________ is the right to use property owned by someone else.

Answers:

• purchase

• lease

• prepaid asset

• deferred revenue

18. A trial balance prepared at the end of the accounting period after adjusting entries are made is called a/an _________________.

Answers:

• Pre-Adjustment Trial Balance

• Prior Year Trial Balance

• Adjusted Trial Balance

• Balance Sheet

19. XYZ Company has assets and liabilities of $15,000 and $12,000, respectively. If the company issues an additional $1,500 of stock for cash, what will be the balance in shareholders' equity following the transaction?

Answers:

• $15,000

• $25,500

• $4,500

• $16,500

20. XYZ Company purchased a 1-year insurance policy for $3,000 on April 1 of Year 1. The amount of prepaid insurance reported on the Balance Sheet and the amount of insurance expense reported on the Income Statement on December 31 of Year 1 are, respectively:

Answers:

• $750 and $2,250

• $2,250 and $750

• $1,000 and $2,000

• $2,000 and $1,000

21. Unused materials for manufacturing products are called ______________.

Answers:

• COGS

• Accounts Receivable

• depreciation

• inventory

22. XYZ Company is interested in disposing of one of its subsidiaries and is trying to decide on the maximum price it might be able to charge. Which valuation method below would the company be most likely to use?

Answers:

• Acquisition Cost

• Net Realizable Value

• Present Value

• Replacement Cost

23. Which of the following assets is a monetary asset?

Answers:

• Patent

• Land

• Inventory

• Accounts Receivable

24. A debit balance is normal for all of the following accounts except _______________.

Answers:

• Preferred Stock

• Treasury Shares

• Investment in Stock

• All of the above

25. At the beginning of the year, XYZ Company owed $14,500 to its creditors for inventory purchases. At year end, the company owed $9,150. During the year, the company made payments totaling $48,500 to its creditors for inventory purchases. What was the cost of the additional inventory that was purchased during the year?

Answers:

• $7,650

• $43,150

• $53,650

• $39,350

26. Payments made in advance for goods or services a firm will receive at a later date are called ______________.

Answers:

• Deferred Income

• Deferred Tax liability

• Advances to Suppliers

• Unearned Revenue

27. Amounts due from customers, for which the claim is in the form of a written promise to pay, are called ________________.

Answers:

• Trade Payables

• Accounts Receivable

• Equity

• Notes Receivable

28. A residual claim of owners having certain preferences relative to other owners' claims is called __________________.

Answers:

• Treasury Stock

• Retained Earnings

• Preferred Stock

• Common Stock

29. Which of the following operations is NOT considered part of the accounting process leading to financial statement preparation?

Answers:

• Journalizing transactions

• Posting to the general ledger

• Adjusting accounts

• Auditing statements

30. Amounts borrowed by a business for a relatively long period of time under a formal written contract or indenture are called _________________.

Answers:

• Unsecured Loans

• Current Liabilities

• Bonds Payable

• Cash

31. Amounts owed for goods or services acquired under an informal credit agreement are called ___________________.

Answers:

• Accounts Payable

• Notes Payable

• Money Market Funds

• Common Stock

32. The process of transferring entries in the general journal to the accounts in the general ledger is called ________________.

Answers:

• posting

• journalizing

• financial reporting

• taxation

33. The balance in all asset accounts combined is $100,000 on December 1. During December, the following transactions took place:  

- Purchase of $10,000 of inventory for cash
- Purchase of $15,000 of machinery on account
- Retirement of $20,000 in bonds with cash

Given this information, what is the combined balance in the asset accounts on December 31?

Answers:

• $80,000

• $115,000

• $105,000

• $95,000

34. XYZ Company completed its second year of operations in Year 2. On January 1 of Year 2, the balance in Retained Earnings was $84,000. During the year, the company declared and paid a dividend of $65,000 to shareholders. The company reported net earnings of $105,000 in its Year 2 Income Statement. What was the balance in Retained Earnings on December 31 of Year 2?

Answers:

• $189,000

• $170,000

• $149,000

• $124,000

35. Temporary revenue and expense accounts may be closed _________________.

Answers:

• individually by separate entries to Retained Earnings

• in a single entry to Retained Earnings

• to a temporary "Income Summary" account

• Any of the above methods is acceptable.

36. Amounts received for the par value of a firm's voting stock are called ___________.

Answers:

• Common Stock

• Accounts Receivable

• Preferred Stock

• Retained Earnings

37. ________________ is/are a measure of the inflow of net assets from selling goods and providing services.

Answers:

• Revenues

• Liabilities

• Assets

• Equity

38. The Accumulated Depreciation account reflects _____________________.

Answers:

• depreciation for the current accounting period only

• cumulative depreciation on the asset since acquisition

• the amount of depreciation that can be taken in future periods

• None of the above

39. Which of the following accounts represents distributions of earnings to shareholders of the firm?

Answers:

• Dividends

• Retained Earnings

• Rent Expense

• Payroll Expense

40. XYZ Company reported a balance in Accounts Receivable of $40,500 on January 1 of year 2. During Year 2, the company collected $127,500 from its customers who had purchased on account. On December 31 of Year 2, the company reported a balance in Accounts Receivable of $21,250. How much were XYZ Company's credit sales for Year 2?

Answers:

• $108,250

• $129,500

• $146,750

• $148,750

41. Which of the following accounts is NOT an expense?

Answers:

• Depreciation

• Sales Salaries

• Dividends Declared

• Delivery Expense

42. At the beginning of the year, XYZ Company reported a $7,200 balance in its Prepaid Insurance account. At year end, the company reported Insurance Expense of $9,000 in its Income Statement and a balance of $3,800 in the Prepaid Insurance account. What was the cost of the additional insurance that was purchased during the year?

Answers:

• $9,000

• $12,400

• $5,600

• $12,800

43. During the year, XYZ Company's inventory account balance increased from $26,000 to $31,500. During the year, the company made payments totaling $152,500 to creditors for inventory purchases and reported Cost of Goods Sold of $159,500 on its Income Statement. How much inventory was purchased during the year?

Answers:

• $165,000

• $158,000

• $152,500

• $159,500

44. Which of the following accounts is not closed during the closing process?

Answers:

• Wage Expense

• Interest Expense

• Utility Expense

• Accumulated Depreciation

45. XYZ Company purchased some equipment for $120,000 on July 1 of Year 1. The equipment has an estimated useful life of 10 years and an estimated salvage value of $7,500. XYZ Company computes depreciation on a straight-line basis. How much depreciation should be recorded for Year 1?

Answers:

• $12,000

• $11,250

• $6,000

• $5,625

46. A right granted to an individual or company that excludes others from manufacturing, using, or selling a certain process or device is called a _____________.

Answers:

• liability

• trademark

• tax liability

• patent

47. Which of the following accounts is NOT a temporary account that should be closed during the closing process?

Answers:

• Prepaid Insurance

• Cost of Goods Sold

• Sales Revenue

• Depreciation

48. A trial balance that shows revenue and expense accounts with zero balances and balance sheet accounts at the end of the period is called a __________________.

Answers:

• Balance Sheet

• Pre-Closing Trial Balance

• Post-Closing Trial Balance

• Income Statement


31 NOT Answered Yet Test Questions:

(hold on, will be updated soon)
49. Which of the following is NOT an account title for liabilities?

Answers:

• Advances to suppliers

• Advances from tenants

• Rent received in advance

• Advances from customers

50. On December 31 of Year 1, XYZ Company reported total shareholders' equity of $225,000, of which $180,000 represented contributed capital. If revenues, expenses, and dividends during Year 2 were $500,000, $420,000, and $30,000 respectively - and the total shareholders' equity is $290,000 on December 31 of Year 2 - how much additional capital was contributed by shareholders?

Answers:

• $15,000

• $40,000

• $65,000

• $205,000

51. Which of the following options would NOT be classified as a current liability account?

Answers:

• Accounts Payable

• Interest Payable

• Rent Received in Advance

• All of the above are current liability accounts

52. The amount of income tax postponed for payments to future years is called ________________.

Answers:

• Deferred Income Taxes

• Deferred Income

• Unearned Revenue

• Advances to Suppliers

53. Insurance premiums paid for future coverage are called ______________.

Answers:

• Deferred Income

• Deferred Income taxes

• Prepaid Insurance

• Unearned Revenue

54. Which of the following does NOT represent an acceptable presentation of the Balance Sheet equation?

Answers:

• Assets - Liabilities = Owners Equity

• Assets = Liabilities + Capital Stock + Capital Contributed in Excess of Par Value + Retained Earnings

• Assets = Equity

• All of the above are acceptable.

55. Which of the following liabilities would be accounted for at the present value of future cash payments?

Answers:

• Accounts Payable

• Bonds Payable

• Income Taxes Payable

• Advances from Customers

56. The process of recording transactions in the general journal or in a special journal is called ________________.

Answers:

• journalizing

• posting

• financial reporting

• cash reporting

57. Which of the following is a type of liquid asset, such as a demand deposit?

Answers:

• Cash

• Notes Receivable

• Accounts Receivable

• Fixed Assets

58. Which of the following statements about the rules of debit and credit is incorrect?

Answers:

• Credits always mean decreases.

• Debits reduce shareholders' equity.

• Assets have debit balances.

• Debits are always recorded on the left.

59. Deduction or valuation accounts that accumulate amounts subtracted from other accounts are called _____________________.

Answers:

• contra accounts

• depreciation accounts

• asset accounts

• Owners Equity

60. From the following list of selected account balances, determine the total for the shareholders' equity section of the Balance Sheet for XYZ Company.

$2,500   - Investment in Stock of ABC Company
$5,000   - Retained Earnings
$3,000   - Cash
$2,000   - Note Payable to Suppliers
$10,000 - Common Stock
$7,500   - 8% Preferred Stock

Answers:

• $20,500

• $22,500

• $24,500

• $25,500

61. The balance in the _________________ account reflects the cumulative depreciation of an asset since its acquisition.

Answers:

• Depreciation Expense

• Income Tax Liability

• Rent Expense

• Accumulated Depreciation

62. The amount subtracted from the cost of a fixed asset to get the Net Book Value is called the ___________________.

Answers:

• Asset Base

• Tax Liability

• Accumulated Depreciation

• Cash

63. The Balance Sheet reflects the application of various valuation methods. Which of the following methods may be used on a Balance Sheet that follows generally accepted accounting principles?

Answers:

• Acquisition cost

• Current cash equivalent value

• Present value of future cash flows

• All of the above

64. The charge made to the current operations for the portion of cost of long-lived assets consumed during the current period is called _________________.

Answers:

• accumulated depreciation

• rent expense

• indirect labor

• depreciation

65. Stocks and bonds that can be readily converted into cash are called _____________.

Answers:

• Current Assets

• Current Liabilities

• Marketable Securities

• Treasury Stock

66. Which of the following is a permanent account?

Answers:

• Accumulated Depreciation

• Advances from Customers

• Both a and b

• Neither a nor b

67. In preparing its year-end adjusting entries, XYZ Company neglected to adjust prepaid insurance for the amount of insurance expired during Year 1. Which of the following reflects the result of this error?

Answers:

• Year 1 net income is understated, the balance in retained earnings is understated, and assets are understated.

• Year 1 net income is overstated, the balance in retained earnings is overstated, and assets are correctly stated.

• Year 1 net income is overstated, the balance in retained earnings is overstated, and assets are overstated.

• None of the above

68. Goods on hand that have been purchased for resale are called ______________.

Answers:

• cash

• COGS

• assets

• inventory

69. The following entry was made on March 12 for XYZ Company:

Dr: Machinery
Cr: ACCounts Payable

For which of the following transactions was this entry made?

Answers:

• Payment for purchase of machinery

• Sale of machinery

• Depreciation of machinery

• Purchase of machinery

70. The concept of present value ____________________.

Answers:

• can be simply defined as today's value of a stream of future cash flows

• implies that the value of receiving cash today will be less than the value of receiving it in the future

• is employed extensively in the valuation of assets under current generally accepted accounting practices

• determines the minimum amount that a buyer would be willing to pay for an asset

71. The estimated and unpaid liability for current income taxes is called ______________.

Answers:

• Tax Expense

• Accounts Payable

• Income Taxes Payable

• Cash

72. Different balance sheet items employ different valuation methods. Which of the following valuation applications is NOT generally accepted?

Answers:

• A major line of inventory has increased in value substantially above its cost and has been restated to its current replacement cost

• Machinery is stated at its historical cost less the estimated amount of benefits consumed to date

• Cash is received for goods to be delivered next month; the cost of goods to be delivered

• Common stock is stated at the amount at which it was originally sold

73. In preparing its Year 1 adjusting entries, the XYZ Company neglected to adjust rental fees received in advance from the amount of rental fees earned during Year 1. Which of the following reflects the result of this error?

Answers:

• Year 1 net income is understated, the balance in retained earnings is understated, and liabilities are overstated.

• Year 1 net income is overrated, the balance in retained earnings is overstated, the liabilities are correctly stated.

• Year 1 net income is understated, the balance in retained earnings is understated, and liabilities are understated.

• None of the above

74. The cumulative amount of net income in excess of dividends declared that has been earned by a business since its inception is called ___________________.

Answers:

• Premium on Preferred Stock

• Common Stock

• Retained Earnings

• Cash

75. The balance in the ________________ account is the amount owed to the company by its customers.

Answers:

• Equity

• Accounts Receivable

• Cash

• Accounts Payable

76. Ms. Brown is an attorney who collects a retainer fee from all of her new clients. At the beginning of the year, the Unearned Retainer Fee account had a balance of $24,000. Ms. Brown collected additional retainer fees totaling $94,000 from her clients during the year. Her year-end Balance Sheet reports a $16,000 balance in the Unearned Retainer Fee account. How much of the retainer fees were earned by Ms. Brown during the year?

Answers:

• $108,000

• $110,000

• $86,000

• $102,000

77. On December 26 of Year 1, XYZ Company hired three sales associates to begin work immediately on an after-Christmas sale. The associates were paid on January 9 of Year 2. Disregarding amounts, what entry should have been made on December 31 of Year 1?

Answers:

• Dr: Salary Expense, Cr: Salary Payable

• Dr: Salary Expense, Cr: Cash

• Dr: Salary Payable, Cr: Cash

• Dr: Salary Payable, Cr: Salary Expense

78. The amount of proceeds from the sales of Preferred Stock in excess of par value is called _______________.

Answers:

• Common Stock

• Retained Earnings

• Premium on Preferred Stock

• Current Assets

79. The normal balances in Depreciation Expense and its related Accumulated Depreciation accounts are ______________________.

Answers:

• debit and credit respectively

• credit and debit respectively

• Both are debit

• Both are credit