CAP Accounting Paraprofessional Skills and Knowledge Covered 3 — Questions and Answers
Question 1: Which depreciation method results in the highest depreciation expense in the early years of an asset's life?
- Straight-line method
- Double declining balance method (Correct answer)
- Units of production method
- Sum-of-the-years'-digits method
Correct answer: Double declining balance method
The double declining balance method applies a fixed percentage to the declining book value, producing the largest depreciation in early years.
Question 2: An employee earns $3,000 per month. Their federal income tax withholding is $420 and FICA is $229.50. What is the employee's net pay?
- $2,350.50 (Correct answer)
- $2,580.00
- $2,771.00
- $2,350.50
Correct answer: $2,350.50
$3,000 − $420 − $229.50 = $2,350.50 net pay after withholdings.
Question 3: Which of the following would be recorded as a capital expenditure rather than a revenue expenditure?
- Replacing a broken window in the office
- Purchasing a new delivery truck (Correct answer)
- Paying for routine equipment maintenance
- Buying office supplies
Correct answer: Purchasing a new delivery truck
A new delivery truck is a capital expenditure because it provides economic benefits beyond one year and is capitalized as an asset.
Question 4: The matching principle in accounting requires that:
- Assets equal liabilities plus equity
- Revenues and expenses are recorded in the same period they occur (Correct answer)
- Cash receipts match cash payments each period
- All debits equal all credits in every transaction
Correct answer: Revenues and expenses are recorded in the same period they occur
The matching principle states that expenses should be recognized in the same period as the revenues they helped generate.
Question 5: A company's gross profit margin is 40% and net sales are $500,000. What is the cost of goods sold?
- $200,000
- $300,000 (Correct answer)
- $150,000
- $350,000
Correct answer: $300,000
If gross profit margin is 40%, then COGS = 60% of sales; $500,000 × 0.60 = $300,000.
Question 6: Which account is used to record money owed to suppliers for goods purchased on credit?
- Accounts Receivable
- Notes Payable
- Accounts Payable (Correct answer)
- Accrued Liabilities
Correct answer: Accounts Payable
Accounts Payable represents amounts owed to vendors and suppliers for credit purchases and is a current liability.
Question 7: When preparing a bank reconciliation, a deposit in transit should be:
- Added to the bank balance (Correct answer)
- Subtracted from the bank balance
- Added to the book balance
- Subtracted from the book balance
Correct answer: Added to the bank balance
Deposits in transit are recorded in the company's books but haven't yet appeared on the bank statement, so they are added to the bank balance.
CAP Accounting Paraprofessional Skills and Knowledge Covered 3
Which depreciation method results in the highest depreciation expense in the early years of an asset's life?