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Principles of Accounting II

This document contains 30 multiple choice questions about principles of accounting II. It tests knowledge of concepts like appropriations, contingent liabilities, inventory costing methods, classification of assets and liabilities, accounting principles, and forms of business organization. The questions cover topics such as financial accounting, cost accounting, and the basic mechanics of accounting.

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samueladdissu92
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72 views5 pages

Principles of Accounting II

This document contains 30 multiple choice questions about principles of accounting II. It tests knowledge of concepts like appropriations, contingent liabilities, inventory costing methods, classification of assets and liabilities, accounting principles, and forms of business organization. The questions cover topics such as financial accounting, cost accounting, and the basic mechanics of accounting.

Uploaded by

samueladdissu92
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Principles Of Accounting II

Question 1:

_____ are restrictions of retained earnings that are recorded by formal journal entries.

Answer: a. Appropriations

Question 2:

A potential obligation that depends on future events arising out of past transaction or event is said
to be ______________.

Answer: a. contingent liability

Question 3:

A stock subscription is a contract that does not obligate an investor to purchase the corporation’s
stock at a later date.

Answer: b. False

Question 4:

BOB company has purchased a machine whose acquisition cost is birr 90,000. It has an estimated
useful life of 4 years and the residual value of 10,000 birr. Thus, the annual depreciation expense of
the machine is ______.

Answer: a. birr 40,000

Question 5:

Capital expenditure may fall in all of the following categories, except _________.

Answer: a. Exchange of goods

Question 6:

Cash and cash equivalent given out to purchase a plant asset is called___________.

Answer: a. acquisition cost

Question 7:

Dividend payable is recorded when the after the cash dividend is declared.
Answer: a. False

Question 8:

In revenue realization principle, at which point should the revenue be recorded?

Answer: d. When it is earned

Question 9:

In the declaration of a common stock dividend, which one is the appropriate journal entry?

Answer: c. Debiting common stock and crediting retained earnings.

Question 10:

In the period of inflation, FIFO reports the lowest income whereas LIFO reports the highest income.

Answer: b. False

Question 11:

Reliability principle is the underlying basis for the cost principle.

Answer: b. False

Question 12:

Sole proprietorship is more advantageous than partnership because it combines talent, capital, and
experience of two or more people.

Answer: b. False

Question 13:

The acquisition cost of a plant asset has no effect on the calculation of depreciation expense for that
asset.

Answer: b. True

Question 14:

The amount of money that the company expects to recover on the date of a plant asset sold at the
end of its benefit period is called __________.

Answer: c. residual value


Question 15:

The assignment of costs of goods sold and inventory using FIFO is the same for both the perpetual
and periodic inventory system.

Answer: b. True

Question 16:

The liabilities due within one year or the company’s operating cycle are called _____.

Answer: c. current liability

Question 17:

The reason that a business needs to estimate its product warranty expense is that the exact amount
of warranty expense cannot be known with certainty.

Answer: a. True

Question 18:

To pay dividends to common stockholder, first, the dividend should be pay to _______.

Answer: d. preferred stockholders

Question 19:

Trade names and trademarks are examples of an intangible asset.

Answer: b. True

Question 20:

Under which accounting concept is it stated that the life of the business will continue for an
indefinite period in the future?

Answer: b. Going-concern concept

Question 21:

What is the appropriate journal entry to record the closing of the drawing account?

Answer: b. Debit drawing and credit capital


Question 22:

When information is not useful for decision making, it is not comparable from period to period.

Answer: a. False

Question 23:

Which concept ensures that the accounting information is reported at regular intervals?

Answer: c. Time-period concept

Question 24:

Which method assumes that inventory items are sold in the order in which they are acquired?

Answer: a. FIFO

Question 25:

Which of the following is not the feature of a corporation?

Answer: a. Mutual agency.

Question 26:

Which one is not the major component of useful information?

Answer: d. Ambiguity

Question 27:

Which one of the following is the major deduction from an employee’s earnings?

Answer: d. Payroll taxes

Question 28:

Among the given alternatives, which one is not the major right for stockholders?

Answer: d. The right to taking money without any legal basis for their personal uses.

Question 29:

Revenue, expense, gains, and losses are the elements of __________.

Answer: b. income statement


Question 30:

Which one is not the cause that may lead to the liquidation of a partnership?

Answer: b. When the partner is linked with another partner by their resources

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