final

Question 1

what is NOT accomplished by accounting?

Answer 1

eliminates the need for interpreting financial data

Question 2

who is an EXTERNAL user of accounting information?

Answer 2

lender

Question 3

the primary objective of financial accounting is to:

Answer 3

provide accounting information that serves external users

Question 4

the area of accounting aimed at serving the decision-making needs of internal users is:

Answer 4

managerial accounting

Question 5

who is NOT an external user of accounting information?

Answer 5

customers

Question 6

what is NOT true regarding ethics?

Answer 6

ethics do not affect the operations or outcome of a company

Question 7

the rule that requires financial statements to assume that business will continue operating instead of being closed or sold is the:

Answer 7

going-concern assumption

Question 8

how should a purchase of land be recorded in the purchasers book? the worth or the final selling price?

Answer 8

final selling price

Question 9

the rule that requires revenue to be recognized when (1) goods and services are provided to the costumer and (2) the amount expected to be received from the customer is called the:

Answer 9

revenue recognition principle

Question 10

which accounting principle would require an accounting firm to record the bookkeeping revenue in the following year and not the year the cash was received?

Answer 10

revenue recognition principle

Question 11

which accounting principle requires that all goods and services purchased be recorded at actual cost?

Answer 11

measurement (cost) principle

Question 12

which accounting principle prescribes that a company record its expenses incurred to generate the revenue reported?

Answer 12

expense recognition (matching) principle

Question 13

revenue is properly recognized:

Answer 13

when goods or services are provided to customers and at the amount expected to be received from the customer

Question 14

if a company uses $1,300 of its cash to purchase supplies, the effect on the accounting equation would be:

Answer 14

one asset increases $1,300 and another asset decreases $1,300, causing no effect

Question 15

if a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be:

Answer 15

assets increase $4,500 and liabilities increase $4,500

Question 16

net income:

Answer 16

occurs when revenue exceeds expenses

Question 17

resources a company owns or controls that are expected to yield future benefits are:

Answer 17

assets

Question 18

increases in equity from a company’s sales of products or services to customers are:

Answer 18

revenues

Question 19

the difference between a company’s assets and its liabilities (net assets) is:

Answer 19

equity

Question 20

creditors’ claims on assets are called:

Answer 20

liabilities

Question 21

the description of the relation between a company’s assets, liabilities, and equity, which is expressed as Assets=Liabilities+equity is known as the:

Answer 21

accounting equation

Question 22

revenues are:

Answer 22

increases in equity from a company’s sales of products and services

Question 23

when expenses exceed revenues, the result is called:

Answer 23

net loss

Question 24

assets created by selling goods and services on CREDIT are:

Answer 24

accounts receivable

Question 25

a company paid off $30,000 of its accounts payable in cash. what would be the effects of this transaction on the accounting equation?

Answer 25

assets decrease $30,000; liabilities decrease $30,000

Question 26

if a company billed a client for $10,000 of consulting work completed, the accounts receivable asset increases by $10,000 and:

Answer 26

revenue increases by $10,000

Question 27

if a company paid $38,000 of its accounts payable in cash, what was the effect on the accounting equation?

Answer 27

assets would decrease $38,000, liabilities would decrease $38,000, equity remains unchanged

Question 28

equity is:

Answer 28

the owner’s claim on assets

Question 29

which of the following is not a financial statement:

Answer 29

statement of changes in assets

Question 30

the financial statement that reports whether the business earned a profit also lists the revenues and expenses is called the:

Answer 30

income statement

Question 31

a balance sheet lists:

Answer 31

the types and amounts of assets, liabilities, and equity of a business at a point in time

Question 32

a financial statement providing information that helps users understand a company’s financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date is called a:

Answer 32

balance sheet

Question 33

a company purchases a truck for $20,000 after talking the seller down from $22,000. the company believes the truck is worth $30,000 and that they got a great deal. what amount should the company record on its financial statements for the truck?

Answer 33

$20,000

Question 34

accounts payable appear on which type of financial statement?

Answer 34

balance sheet

Question 35

which term is NOT reported on the INCOME statement?

Answer 35

assets owned by a business

Question 36

rent expense appears on which statement?

Answer 36

income statement

Question 37

what is NOT an asset account?

Answer 37

accounts payable

Question 38

what is NOT included in calculation of net income?

Answer 38

accounts receivable

Question 39

what is NOT classified as a liability?

Answer 39

accounts receivable

Question 40

example of a liability account:

Answer 40

accounts payable

Question 41

what account is NOT included in the asset section of the balance sheet?

Answer 41

services revenue

Question 42

what is NOT included in the calculation of net income?

Answer 42

cash

Question 43

example of net loss on income statement:

Answer 43

total revenues: $70,000, total expenses: $74,000

Question 44

are accounts receivable increased by customer payments?

Answer 44

no

Question 45

a record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is knows as:

Answer 45

an account

Question 46

a company purchased $20,100 of equipment on credit. the journal entry to record this transaction consists of a:

Answer 46

debit to equipment for $20,100; credit to accounts payable for $20,100

Question 47

what is NOT used to calculate net income?

Answer 47

-cash
-accounts receivable
-office supplies
-office equipment
-land
-accounts payable

Question 48

unearned revenues are:

Answer 48

liabilities recorded when customers pay in advance for products or services

Question 49

a company’s written promissory note to pay a future amount is a:

Answer 49

note payable

Question 50

prepaid accounts (or prepaid expenses) are:

Answer 50

assets from prepayments of future expenses

Question 51

the collection of all accounts and their balances is called a:

Answer 51

ledger (or general ledger)

Question 52

a credit (T-account):

Answer 52

is on the right side of a T-account

Question 53

a debit (T-account):

Answer 53

is on the left side of a T-account

Question 54

correct or incorrect: the normal balance of an expense account is a credit

Answer 54

incorrect

Question 55

a credit is used to record an increase in this account:

Answer 55

accounts payable

Question 56

what account is classified as a liability in a company’s chart of accounts:

Answer 56

unearned revenue

Question 57

what account is classified as an asset in a company’s chart of accounts:

Answer 57

accounts receivable

Question 58

is supplies an asset account?

Answer 58

yes

Question 59

example of a liability account:

Answer 59

accounts payable

Question 60

example of an account that impacts the equity of a business:

Answer 60

utilities expense

Question 61

what is NOT an equity account?

Answer 61

unearned revenue

Question 62

what is NOT an asset account?

Answer 62

services revenue

Question 63

a tool that represents a ledger amount and is used to show the effects of transactions is called a:

Answer 63

T-account

Question 64

an account balance is:

Answer 64

the difference between the total debits and total credits for an account including the beginning balance

Question 65

what is a wages payable account’s normal balance?

Answer 65

credit

Question 66

a decrease to an unearned revenue account is recorded by using a:

Answer 66

debit

Question 67

a credit entry:

Answer 67

decreases asset accounts and increases liability accounts

Question 68

a double-entry accounting system is an accounting system:

Answer 68

that records the effect of each transaction in at least two accounts, with at least one debit and one credit

Question 69

a company paying a utilities bill is recorded in the general journal entry as:

Answer 69

debit to utilities expense for $300

Question 70

a company purchasing office supplies on credit would be recorded in the general journal entry as:

Answer 70

credit to accounts payable

Question 71

a company purchases $7,000 of supplies in cash. it appears in the journal as:

Answer 71

debit supplies $7,000; credit cash $7,000

Question 72

a company paid their $500 utility bill in cash. it appears in the journal as:

Answer 72

debit utilities expense $500; credit cash $500

Question 73

what is the journal entry for a company that purchases a 5-month insurance policy that begins that day in cash for $2,500?

Answer 73

debit prepaid insurance $2,500; credit cash $2,500

Question 74

what is the journal entry if a company billed its client for catering services of $1,000?

Answer 74

debit accounts receivable $1,000; credit catering revenue $1,000

Question 75

what is the journal entry for a company that receives a $1,500 payment from a client for the previous month’s services?

Answer 75

debit cash $1,500; credit accounts receivable $1,500

Question 76

what is the journal entry for a company that receives $2,000 cash in advance for a service not yet provided?

Answer 76

debit cash $2,000; credit unearned revenue $2,000

Question 77

what is the journal entry for a company that paid $300 cash to employees for work performed in a current period?

Answer 77

debit salaries expense $300; credit cash $300

Question 78

what is the journal entry for a company that receives $400 cash immediately after providing a service?

Answer 78

debit cash $400, credit revenue $400

Question 79

what is the journal entry for a company that provided a service for $12,000 and will be payed in 30 days?

Answer 79

debit accounts receivable $12,000; credit services revenue $12,000

Question 80

what is the journal entry for a company paid $12,000 in cash immediately after providing a service?

Answer 80

debit cash $12,000; credit services revenue $12,000

Question 81

what is the journal entry for a company that pays $200 cash for a months utilities?

Answer 81

debit utilities expense $200, credit cash $200

Question 82

the process of transferring journal entry information to the ledger is called:

Answer 82

posting

Question 83

a company purchased equipment for cash. the journal entry include a:

Answer 83

credit to the cash account

Question 84

what are the accounts that would normally have balances in the debit column of a business’s trial balance?

Answer 84

assets and expenses

Question 85

what are the accounts that would normally have balances in the credit column of a business’s trial balance?

Answer 85

revenues and liabilities

Question 86

a list of all ledger accounts and their balances at a point in time is called a:

Answer 86

trial balance

Question 87

what is NOT an asset account?

Answer 87

supplies expense

Question 88

accounts that would be classified as asset accounts on the chart of accounts:

Answer 88

cash, prepaid insurance, equipment

Question 89

which financial statement reports an organization’s financial position at a single point in time?

Answer 89

balance sheet

Question 90

net income:

Answer 90

occurs when revenues exceed expenses

Question 91

a balance sheet lists:

Answer 91

the types and amounts of assets, liabilities, and equity of a business at a point in time

Question 92

what is NOT included in the liabilities section of the balance sheet?

Answer 92

cash

Question 93

a credit is used to record an increase in which account?

Answer 93

accounts payable

Question 94

identify an account that is classified as an asset account:

Answer 94

supplies

Question 95

identify an account classified as a liability account:

Answer 95

accounts payable

Question 96

identify an account that normally has a credit balance:

Answer 96

wages payable

Question 97

a decrease in an unearned revenue account is recorded as:

Answer 97

a debit

Question 98

a credit entry decreases and increases what accounts?

Answer 98

decreases asset accounts and increases liability accounts

Question 99

what is NOT a time period commonly used by companies in reporting account information?

Answer 99

fourteen-month interval

Question 100

the length of time covered by a set of periodic financial statements (which could be monthly, quarterly, semiannually, or annually) is referred to as the:

Answer 100

accounting period

Question 101

the accounting principle that requires revenue to be recorded when goods or services are provided to customers at an amounts expected to be received from customers is the:

Answer 101

revenue recognition principle

Question 102

adjusting entries affect:

Answer 102

both income statement and balance sheet accounts

Question 103

the main purpose of adjusting entries is to:

Answer 103

recognize transactions and events that are not yet recorded

Question 104

the principle that requires expenses to be reported in the same period as the revenues that were recognized as a result of those expenses is the:

Answer 104

expense recognition (matching) principle

Question 105

what is NOT accomplished by an adjusting entry

Answer 105

assuring that external transaction amounts remain unchanged

Question 106

the approach to preparing financial statements based on recording revenues when products and services are delivered and recording expenses incurred is:

Answer 106

accrual basis accounting

Question 107

prepaid expenses, depreciation expense, accrued expenses, unearned revenues, and accrued revenues are all examples of:

Answer 107

items that require adjusting entries

Question 108

accrual basis accounting:

Answer 108

increases the comparability of financial statements from period to period

Question 109

what account item does NOT require an adjusting entry

Answer 109

cash

Question 110

on July 1 a company paid $7,500 cash for management services to be performed over a two-year period. on July 1 the company should record:

Answer 110

a debit to a prepaid expense and a credit to cash for $7,500

Question 111

accrued revenues:

Answer 111

at the end of one accounting period result in cash receipts in a future period

Question 112

the contra account that includes total depreciation expense for all prior periods for which as asset was used:

Answer 112

is referred to as accumulated depreciation

Question 113

the expense recorded from allocating the cost of equipment to the periods in which is it used is called:

Answer 113

depreciation expense

Question 114

prior to recording adjusting entries, the office supplies account has a $380 debit balance. a physical count of the supplies showed $103 of unused supplies available. the required adjusting entry is:

Answer 114

debit office supplies expense $277 and credit office supplies $277

Question 115

cash received in advance from clients for legal services is recorded in unearned revenue. the end-of-period adjusting entry to record the portion of revenue that has been EARNED is:

Answer 115

debit unearned revenue and credit legal revenue

Question 116

unearned revenue is reported in the financial statements as:

Answer 116

a liability on the balance sheet

Question 117

what asset is NOT depreciated?

Answer 117

land

Question 118

the adjusting entry at the end of an accounting period to record the unpaid salaries of employees for work provided is:

Answer 118

debit salaries expense and credit salaries payable

Question 119

the adjusting entry to record salaried earned, but unpaid, at the end of teh accounting period should be recorded as follows:

Answer 119

debit salaries expense and credit salaries payable

Question 120

the difference between the cost of an asset and the accumulated depreciation for that asset is called:

Answer 120

book value

Question 121

id accrued salaries were recorded on December 31 with a debit to salaries expense and a credit to salaries payable, the entry to record payment of these wages on the follow January 5 would include:

Answer 121

a debit to salaries payable and a credit to cash

Question 122

the correct adjusting entry to accrued and unpaid employee salaried of $8,000 on December 31 is:

Answer 122

debit salary expense $8,000; credit salaries payable $8,000

Question 123

a trial balance prepared AFTER adjustments have been recorded is called an:

Answer 123

adjusted trial balance

Question 124

a trial balance prepared BEFORE any adjustments have been recorded is an:

Answer 124

unadjusted trial balance

Question 125

financial statements are typically prepared in the following order:

Answer 125

income statement, statement of retained earnings, balance sheet

Question 126

an annual reporting period consisting of any twelve consecutive months or 52 weeks is known as:

Answer 126

fiscal year

Question 127

the two accounting principles that are critical to the adjusting process used in accrual accounting are:

Answer 127

revenue recognition and expense recognition (matching)

Question 128

on December 31, a company received a $215 utility bill for December that it will not pay until January 15. the adjusting entry needed on December 31 to accrue this expense is:

Answer 128

debit utilities expense $215; credit accounts payable $215

Question 129

what account is a permanent account:

Answer 129

accounts payable

Question 130

journal entries that transfer the end-of-period balances in revenue accounts to a permanent equity account as known as:

Answer 130

closing entries

Question 131

closing entries are necessary at the end of each period to:

Answer 131

ensure that temporary accounts begin each period with zero balances

Question 132

the recurring steps performed each reporting period in preparing financial statements, starting with analyzing and recording transactions in the journal and continuing through preparing the post-closing trial balance is referred to as the:

Answer 132

accounting cycle

Question 133

a classified balance sheet:

Answer 133

organizes assets and liabilities into subgroups

Question 134

two common subgroups for liabilities on a classified balance sheet are:

Answer 134

current liabilities and long-term liabilities

Question 135

what is classified as a current asset?

Answer 135

accounts receivable

Question 136

what is classified as a plant asset?

Answer 136

equipment

Question 137

the temporary account used only for the closing process that contains a credit for total revenues (and gains) and a debit for total expenses (and losses) is the:

Answer 137

income summary account

Question 138

a company paid the sole shareholder $5,000 in dividends during the current year. the entry to close the dividends account at the end of the year is:

Answer 138

debit retained earnings $5,000; credit dividends $5,000

Question 139

the income summary account is used to:

Answer 139

closed the revenue and expense accounts

Question 140

after preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $34,000. the entry to close the income summary account will be:

Answer 140

debit retained earnings $34,000; credit income summary $34,000

Question 141

inventory is classified on the balance sheet as a:

Answer 141

current asset

Question 142

what is untrue regarding merchandising inventory?

Answer 142

merchandise inventory appears on the balance sheet of a service company

Question 143

multiple-step income statements show

Answer 143

both gross profit and income from operations

Question 144

sales less sales discounts, less sales returns and allowances equals:

Answer 144

net sales

Question 145

sales returns:

Answer 145

refer to customers returning merchandise back to the seller for a refund

Question 146

gross profit is equal to:

Answer 146

sales less cost of goods sold

Question 147

the arrangements between buyer and seller as to when payments for merchandise are to be made are called:

Answer 147

credit terms

Question 148

in credit terms of 3/15, n/45, the “3” represents the:

Answer 148

percent in cash discount

Question 149

the credit terms 2/10, n/30 are interpreted as:

Answer 149

a 2% cash discount if the amount is paid within 10 days, or the full balance due in 30 days

Question 150

who is responsible for the freight costs when the terms are FOB shipping point?

Answer 150

the buyer

Question 151

who is responsible for the freight costs when the terms are FOB destination?

Answer 151

the seller

Question 152

what type of company would normally offer trade discounts to its customers

Answer 152

wholesalers

Question 153

the inventory system employing accounting records that continuously disclose the amount of inventory is called:

Answer 153

perpetual

Question 154

under the periodic inventory system, the journal entry to record the purchase of inventory will include a debit to:

Answer 154

purchases

Question 155

the primary difference between the periodic and perpetual inventory systems is that a:

Answer 155

periodic system determines the inventory on hand only at the end of the accounting period

Question 156

when purchases of merchandise are made on an account with a perpetual inventory system, the transaction is recorded as:

Answer 156

debit inventory; credit accounts payable

Question 157

a company sold merchandise for $10,000 cash. the cost of the goods sold was $7,590. the journal entries to record this transaction under the PERPETUAL inventory system would be:

Answer 157

debit cash $10,000; credit sales $10,000
debit cost of goods sold $7,590; credit inventory $7,590

Question 158

expenses that support a company’s overall operations and include expenses related to accounting, human resources, and finance are known as:

Answer 158

general and administrative expenses

Question 159

expenses that are incurred directly or entirely in connection with the selling of merchandise are classified as:

Answer 159

selling expenses

Question 160

inventory shrinkage is recorded when:

Answer 160

there is a difference between a physical count of inventory and the inventory records

Question 161

which document authorizes the purchase of inventory from an approved vendor?

Answer 161

the purchase order

Question 162

what document is NOT used for inventory control?

Answer 162

a petty cash voucher

Question 163

taking a physical count of inventory:

Answer 163

should be done near year-end

Question 164

physical counts of inventory are used to:

Answer 164

adjust the inventory account balance to the actual inventory available

Question 165

which method is appropriate for a business whose inventory consists of a relatively small number of unique, high cost items?

Answer 165

specific identification

Question 166

ending inventory is made up of the oldest purchases when a company uses:

Answer 166

last in, first out

Question 167

when merchandise sold is assumed to be in the order in which the purchases were made, the company is using

Answer 167

first in, first out

Question 168

the inventory costing method that smooths out erratic changes in costs is:

Answer 168

weighted average

Question 169

what is NOT an inventory costing method?

Answer 169

gross margin method

Question 170

if the cost of an item of inventory is $60 and the current replacement cost is $75, the amount included in the inventory according to the lower of cost market is:

Answer 170

$60

Question 171

damaged, obsolete (out-of-date), and/or deteriorated goods that can be sold:

Answer 171

are included in inventory at their net realizable value

Question 172

internal control systems are:

Answer 172

required by Sarbanes-Oxley (SOX) to be documented and verified if the company’s stock is traded on an exchange (a public company)

Question 173

the objectives of internal control are to:

Answer 173

provide reasonable assurance that assets are safeguarded and used for business purposes, business information is accurate, and laws and regulations are complied with

Question 174

what reflects a weak control system?

Answer 174

a single employee is responsible for collecting and recording of cash

Question 175

what are the processes and procedures a company uses to safeguard its assets, process information correctly, and ensure its compliance with laws and regulations called?

Answer 175

internal controls

Question 176

internal control does NOT consist of policies and procedures that

Answer 176

guarantee the company will earn a profit

Question 177

the cash account in the company’s ledger is an

Answer 177

asset with a normal debit balance

Question 178

cash equivalents:

Answer 178

are readily convertible to a known cash amount

Question 179

what would NOT be included with the cash and cash equivalents on the balance sheet?

Answer 179

short-term receivables

Question 180

a bank statement:

Answer 180

shows the activity that increased or decreased the company’s account balance

Question 181

a bank reconciliation should be prepared periodically because:

Answer 181

and differences between the company’s records and the bank’s records should be determined, and any errors made by either party should be discovered and corrected

Question 182

the amount of deposits in transit is included on the bank reconciliation as an:

Answer 182

addition to the balance per bank statement

Question 183

outstanding checks refer to checks that have been:

Answer 183

written by the depositor, subtracted on the depositor’s books, and sent to the payee but not yet turned in for payment at the bank statement date

Question 184

the amount of outstanding checks is included on the bank reconciliation as a:

Answer 184

deduction from the balance per bank statement

Question 185

a bank reconciliation should be prepared:

Answer 185

to explain ant difference between the company’s balance per books with the balance per bank

Question 186

the entry to establish a petty cash fund includes:

Answer 186

a debit to petty cash; a credit to cash

Question 187

the type of accounts and normal balance of petty cash is an:

Answer 187

asset, debit

Question 188

the amount of cash to be reported on the balance sheet at June 30 is the:

Answer 188

adjusted balance appearing in the bank reconciliation for June 30

Question 189

a promissory note received from a customer in exchange for an account receivable is recorded by the payee as:

Answer 189

a note receivable

Question 190

a company pledges its receivables so it can:

Answer 190

borrow money

Question 191

a promissory note:

Answer 191

is a written promise to pay a specified amount, usually with interest, either on demand or at a stated future date

Question 192

a finance company or bank that acquires ownership of another company’s accounts receivable is called a:

Answer 192

factor

Question 193

what is NOT a benefit to factoring receivables?

Answer 193

there are no fees for factoring

Question 194

the allowance method that assumes a percent of a company’s credit sales for the period is noncollectable is:

Answer 194

the percent of sales method

Question 195

a method of estimating bad debts expense that involves classifying receivables by how long they are past due is called the:

Answer 195

aging of accounts receivable method

Question 196

what is FALSE about allowance for doubtful accounts?

Answer 196

it is a liability account

Question 197

how to accept a note from customer:

Answer 197

debit notes receivable; credit accounts receivable

Question 198

using the allowance method for bad debts, the end of the period adjusting entry for estimated bad debts is:

Answer 198

debit bad debts expense; credit allowance for doubtful accounts

Question 199

plant assets are defined as

Answer 199

tangible assets used in a company’s operations that have a useful life of more than one accounting period

Question 200

what is NOT a relevant factor in computing depreciation?

Answer 200

market value

Question 201

salvage value is:

Answer 201

an estimate of an asset’s value at the end of its useful life

Question 202

depreciation:

Answer 202

is the process of allocating the cost of a plant asset to expense while it is in use

Question 203

the useful life of a plant asset is:

Answer 203

the length of time it is used in a company’s operations

Question 204

the straight-line depreciation method and double-declining-balance depreciation method:

Answer 204

produce the same total depreciation over an asset’s useful life

Question 205

what is NOT classified as a plant asset?

Answer 205

patent

Question 206

the formula to compute annual straight-line depreciation is:

Answer 206

(cost minus salvage value) divided by the useful life in periods

Question 207

the total cost of an asset minus accumulated depreciation is called:

Answer 207

book value

Question 208

once the estimated depreciation expense for an asset is calculated:

Answer 208

it may be revised to reflect changes in the asset’s estimated salvage value or useful life

Question 209

the depreciation method that charges the same amount of expense to each period of the asset’s useful life is called:

Answer 209

straight-line depreciation

Question 210

the depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Answer 210

units-of-production depreciation

Question 211

the depreciation method which uses a depreciation rate that is a multiple of the straight-line rate is called

Answer 211

declining-balance depreciation

Question 212

an asset is said to be fully depreciated when:

Answer 212

accumulated depreciation equals the asset’s cost

Question 213

natural resources are:

Answer 213

assets that are physically consumed when used such as standing timber, mineral deposits, and oil and gas fields

Question 214

depletion is:

Answer 214

the process of allocating the cost of a natural resource to the period when it is consumed

Question 215

intangible assets do NOT include

Answer 215

land held as an investment

Question 216

amortization is:

Answer 216

allocation of the cost of an intangible asset to expense over its estimated useful life

Question 217

what is NOT part of the cost of equipment

Answer 217

repair costs due to damage from unpacking

Question 218

liabilities that are due within one year (or the company’s operating cycle if longer) are:

Answer 218

current liabilities

Question 219

obligations due after one year (or the company’s operation cycle if longer) are reported as:

Answer 219

long-term liabilities

Question 220

accounts payable are:

Answer 220

amounts owed to suppliers for products or services purchased on credit

Question 221

amounts received in advance from customers for future products or services:

Answer 221

are liabilities

Question 222

sales taxes payable is reported as a:

Answer 222

current liability

Question 223

when a note comes due, the difference between the amount borrowed and the amount repaid is:

Answer 223

interest

Question 224

gross pay is:

Answer 224

total compensation earned by an employee before any deductions

Question 225

the employer should record payroll deductions as:

Answer 225

current liabilities

Question 226

federal insurance contributions act (FICA) taxes include:

Answer 226

social security and medicare taxes

Question 227

the amount of federal income taxes withheld from an employee’s paycheck is determined by:

Answer 227

the employee’s incomes and number of withholding allowances the employee claims

Question 228

the wage and tax statement given to each employee annually is:

Answer 228

form W-2

Question 229

employer payroll taxes:

Answer 229

are an added expense beyond the wages and salaries earned by employees

Question 230

a bond is issued at par value when:

Answer 230

the market rate of interest is teh same as the contract rate of interest

Question 231

when a bond sells at a premium:

Answer 231

the contract rate is above the market rate

Question 232

a bond sells at a discount when:

Answer 232

contract rate is below the market rate

Question 233

The legal contract between the bond issuer and the bondholders is called a:

Answer 233

bond indenture

Question 234

The document which bondholders receive that is evidence of the issuing company’s debt is referred to as a:

Answer 234

bond certificate

Question 235

A disadvantage of bond financing is:

Answer 235

bonds pay periodic interest and require the repayment of par value at maturity

Question 236

the advantage of bonds is:

Answer 236

bonds do not affect owner control

Question 237

the discount on bonds payable account is:

Answer 237

a contra liability

Question 238

the premium on bonds payable account is an:

Answer 238

adjunct liability account

Question 239

The carrying value of bonds at maturity always equals:

Answer 239

the par value of the bond

Question 240

Amortizing a bond discount:

Answer 240

allocates a portion of the total discount to interest expense each interest period

Question 241

A discount on bonds payable:

Answer 241

occurs when a company issues bonds with a contract rate less than the market rate

Question 242

If an issuer sells bonds at a premium:

Answer 242

the carrying value DECREASES from the issue price to the par value over the bond’s term

Question 243

A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a:

Answer 243

credit to premium on bonds payable

Question 244

The following are true about the corporate form of organization:

Answer 244

• A corporation is an entity created by law
• Corporations exist separately from the owners
• A corporation has rights and privileges
• A corporation can be privately held

Question 245

The following are advantages of a corporation:

Answer 245

• Separate legal entity
• Transferable ownership rights
• Continuous life
• No mutual agency for stockholders

Question 246

The following are disadvantages of a corporation:

Answer 246

• Governmental regulation
• Corporate taxation
• Being subject to the same property and payroll taxes as proprietorships
• Double taxation

Question 247

Rights of stockholders include:

Answer 247

• The ability to sell or otherwise dispose of their stock
• The ability to vote at stockholders’ meetings
• The ability to receive dividends if declared
• The ability to share in any assets remaining after creditors are paid in a liquidation

Question 248

market value per share is:

Answer 248

the price at which a stock is bought and sold

Question 249

the board of directors of a corporation:

Answer 249

is responsible for overseeing corporate activities

Question 250

the number of shares that a corporation’s charter allows it to sell is referred to as:

Answer 250

authorized stock

Question 251

Par value of a stock refers to the:

Answer 251

amount assigned per share by the corporation in its charter

Question 252

When all authorized shares of a corporation’s stock have the same rights and characteristics, the stock is called:

Answer 252

common stock

Question 253

The total amount of cash and other assets that a corporation receives from its stockholders in exchange for its stock is:

Answer 253

referred to as paid-in capital

Question 254

retained earnings:

Answer 254

is the cumulative net income (and loss) not distributed as dividends to its stockholders

Question 255

Prior period adjustments to financial statements can result from:

Answer 255

material math errors

Question 256

Prior period adjustments are reported in the:

Answer 256

statement of retained earnings

Question 257

The distribution of additional shares to stockholders according to their percent ownership is known as a:

Answer 257

stock split

Question 258

Stocks that pay large cash dividends on a regular basis are called:

Answer 258

income stocks

Question 259

Stocks that pay little or no cash dividends but are attractive to investors because of expected stock price increases are known as:

Answer 259

growth stocks

Question 260

a premium on stock:

Answer 260

occurs when a corporation sells its stock for more than par or stated value

Question 261

The date the directors vote to declare and pay a dividend is called the:

Answer 261

date of declaration

Question 262

The date for identifying the stockholders to receive dividends is called the:

Answer 262

date of record

Question 263

A liability for cash dividends is recorded:

Answer 263

on the date of declaration

Question 264

A corporation’s distribution of additional shares of its own stock to its stockholders without any payment in return is called a:

Answer 264

stock dividend

Question 265

A dividend preference for preferred stock means that:

Answer 265

preferred stockholders are paid their dividends before any dividends are paid to common stockholders

Question 266

Stock shares that are reacquired by the issuing corporation are called:

Answer 266

treasury stock

Question 267

Treasury stock is classified as:

Answer 267

a contra equity account

Question 268

Reasons that a company buys back its own stock:

Answer 268

• To avoid a takeover of the company.
• To have shares available to acquire another company.
• To give it to employees as compensation.
• To maintain a strong market for their stock.

Question 269

The following statements regarding Treasury Stock are true:

Answer 269

• Corporations do not record gains or losses on transactions involving their own stock.
• Purchasing Treasury Stock reduces the corporation’s assets and equity by equal amounts.
  ****Dr. Treasury Stock, Cr. Cash
• Treasury Stock is presented on the balance sheet as a contra equity account.
• Treasury Stock does not have voting rights.