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Acct WMBA > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

Which of the following would not be an example of a merchandising business?

a. Wal-Mart 

b. JCPenney	
c. Amazon.com	
d. The Walt Disney Company
A

d. The Walt Disney Company

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2
Q

Which of the items below is not a business organization form?

a. Proprietorship 

b. Venture entrepreneurship	
c. Corporation	
d. Partnership
A

b. Venture entrepreneurship

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3
Q

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

a. A corporation can elect to be taxed as a partnership. 

b. Corporations experience an ease in obtaining large amounts of resources by issuing stock.	
c. Corporations are organized as a separate legal taxable entity.	
d. Ownership is divided into shares of stock.
A

a. A corporation can elect to be taxed as a partnership.

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4
Q

Who has the first preference to assets in case a business fails?

a. Employees 

b. Customers	
c. Long-term creditors	
d. Stockholders
A

c. Long-term creditors

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5
Q

The resources a business owns are called:

a. stockholders

’

equity. 

b. liabilities.	
c. assets.	
d. earnings.
A

c. assets.

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6
Q

The purchase of factory equipment would be an example of which type of business activity?

a. Investing 

b. Operating	
c. Financing	
d. All of these choices are correc
A

a. Investing

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7
Q

_____ is the increase in assets from selling products and services.

a. Revenue 

b. Liabilities	
c. Products	
d. Stockholders' Equity
A

a. Revenue

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8
Q

_____ is the increase in assets from selling products and services.

a. Revenue 

b. Liabilities	
c. Products	
d. Stockholders' Equity
A

a. $27,000

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9
Q

The debt created by a business when it makes a purchase on account is referred to as an:

a. account receivable. 

b. expense payable.	
c. asset.	
d. account payable.
A

d. account payable

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10
Q

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or an year, is called a(n):

a. balance sheet. 

b. statement of retained earnings.	
c. prior period statement.	
d. income statement.
A

d. income statement

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11
Q

Tadeo, Inc. had the following account balances at September 30, 2015. What is Tadeo’s net income for the month of September?

Accounts Payable	$ 5,800
Capital Stock	12,000
Cash	15,500
Equipment	14,300
Fees Earned	53,000
Miscellaneous Expense	16,800
Rent Expense	4,000
Retained Earnings	7,000
Wages Expense	17,850

a. $14,350 

b. $27,500	
c. $14,450	
d. $10,800
A

a. $14,350

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12
Q

Which of the following is true about the cost principle?
a. It initially records assets in the accounting records at their purchase price.
b. It limits the economic data recorded in an accounting system to data related to the activities of that company.
c. It reports the revenues earned by a company for a period with the expenses incurred in generating the revenues.
d. It assumes that a company will continue in business indefinitely.
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A

a. It initially records assets in the accounting records at their purchase price.

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13
Q

Recording revenue when a sale is made most directly relates to which concept?

a. Periodicity concept 

b. Going concern concept	
c. Adequate disclosure concept	
d. Matching concept
A

d. Matching concept

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14
Q

Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept?

a. Objectivity concept 

b. Business entity concept	
c. Adequate disclosure concept	
d. Going concern concept
A

d. Going concern concept

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15
Q

Due to various fraudulent business practices and accounting coverups in the early 2000s, Congress enacted the Sarbanes-Oxley Act of 2002. The act was responsible for establishing a new oversight board for public accountants called the:

a. Congressional Accounting Oversight Board. 

b. Public Company Accounting Oversight Board.	
c. Generally Accepted Accounting Practices for Public Accountants Board.	
d. Financial Accounting Standards Board.
A

b. Public Company Accounting Oversight Board.

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16
Q

Which of the following is true of rate of return on assets?

a. It is a measure of the optimum capital structure. 

b. It is used to evaluate a company's ability to pay off its short-term debts.	
c. It is used to determine the financial leverage of a company.	
d. It is a measure of a company's profitability.
A

d. It is a measure of a company’s profitability.

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17
Q

The return on assets is calculated by _____.

a. dividing net income before taxes and interest expense by average total asset 

b. dividing net income before taxes and interest expense by average current assets	
c. dividing interest expense by average total asset and average current assets	
d. dividing average total asset and interest expense by net income taxes
A

a. dividing net income before taxes and interest expense by average total asset

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18
Q

eturn on assets of 4.25% implies:

a. $4.25 return on every $100 of total assets. 

b. $4.25 return on every $100 of debt.	
c. $4.25 return on every $100 of current assets.	
d. $4.25 return on every $100 invested to purchase new assets
A

a. $4.25 return on every $100 of total assets.

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19
Q

summary of revenue and expenses for a specific period of time

A

income statement

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20
Q

retained earnings

A

summary of the changes in the retained earning in the corporation

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21
Q

balance sheet

A

summary of cash receipts and cash payment for a period fo time

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22
Q

What is the order financial statement are prepared?

A 
IRBS:
Income Statement, 
Retained Earnings,
Balance Sheet,
Statement of cashflow
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23
Q

GAAP

A

Generally accepted accounting principles

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24
Q

FASB

A

Financial Accounting Standards Board

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25
Q

IASB

A

International Accounting Standards Board

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26
Q

Rate of Return on Assets

A

Net Income before taxes and expense/ average total assets Note: avg of total asset is beg. asset with ending balance/2

27
Q

What does rate of return on asset measure?

A

measures company’s profitability

28
Q

PCAOB

A

Public Company Accounting Oversight Board -SOX

29
Q

What does it mean when a company rate of return on assets is 38.1%?

A

$38.1 return on every $100 of total assets

30
Q

Ending cash on that statement of cash flow must equal _________ in the __________sheet?

A

cash, balance sheet

31
Q

net income on the ______statement must equal the net effects in the ____________.

A

income statement, retained earnings

32
Q

used to look at financial condition and performance over time

A

common size financial statement

33
Q

how do you calculate common size financials?

A

Take the number and divide it by the sales to get a percent.

34
Q

What are examples of prepaid/deferred expense?

A

car insurance, supplies used, depreciation of office equipment

35
Q

What are examples of deferred revenue?

A

concert ticket, airline tickets

36
Q

What is deferral?

A

Cash is received or paid after the revenue has been earned or expense has been incurred.

37
Q

What is an examples of accrual expense?

A

wages owed but not paid to employees

38
Q

What is an example of accrued revenue

A

service provided but not billed to insurance company

39
Q

All adjustment affect the balance sheet and income statement? True or False

A

True

40
Q

Working capital

A

current assets - current liabilities measures how a company pay for its liabilities

41
Q

current ratio

A

current assets/ current liaibilities = measures ability for company to pay

must be at least 2

42
Q

quick ratio

A

quick assets/current liabilities

if less than 1 then there is liquid concerns

43
Q

quick assets

A

cash, receivables, short term investment

does not include inventory or prepaid assets because it takes time to convert

44
Q

gross profit

A

sales
-cogs
= gross profit

45
Q

gross profit - _____= net income

A

operating expenses

46
Q

net sales

A

sales return & allowance - sales discounts

47
Q

what is contra account to sales?

A

sales returns and allowance

48
Q

FOB - free on board shipping point

A

buyer pays freight

49
Q

FOB destination

A

seller pays freight

50
Q

gross profit percent

A

gross profit/ net sales

51
Q

average markup percent

A

gross profit/ cogs

52
Q

ratio of sales to assets

A

net sales/ avg. total assets

used to asses how efficient a company generate sales from its assets

53
Q

What are element of internal control?

A 
Control environment
Risk Assessment
Control Procedures
Monitoring
Information and Communication
54
Q

What is part of control environment?

A
  1. manager’s philosophy and operating style
  2. organizational structure
  3. personnel policies
55
Q

What is part of control procedures?

A

competent personnel, separating responsibilities, separating operations, proof and security measures

56
Q

_________ the internal control system is used to locate weakness and improve controls?

A

Monitor

57
Q

ratio of cash to monthly cash expenses

A

cash and cash equivalent/ monthly cash expense

used to assess if it can continue to operate

58
Q

monthly cash expense

A

net cash flows from operations/12

59
Q

allowance for doubtful account

A

accounts receivable contra account affects income and balance sheet

60
Q

how does FIFO affects cgs and gross profit?

A

Lowers cgs,

higher gross profit

61
Q

how does LIFO affects cost of goods sold and gross profit?

A

Higher Cost of goods sold, and lower gross profit

62
Q

cost of merchandise purchased

A

purchase+freight

63
Q

net purchase

A 
purchase
- purchase returns and allowance
- purchase discounts
-------------------------------
net sale

Acct WMBA (7 decks)

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