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Finance Accounting Flashcards

1
Q

Stockholders equity can be described as claims on A. Expense B. Liability C. Assets D. Revenue E. None

A

C

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2
Q

Stockholders equity consists of two parts

A

: common stock and retained earnings

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3
Q

On the balance sheet, which financial statement is prepared first

A

income statement

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4
Q

The rules adopted by the accounting profession as guides in measuring, recording, and reporting the financial affairs and activities of a business are: a. Both broad and specific principles. b. Known as geberally accepted accounting principles. c. Abbreviated as GAAP. d. Both b and c. e. All of the above.

A

E

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5
Q
  1. The primary objective of financial accounting is: a. To help organizations keep track of financing activities b. To provide financial statements to help users analyze an organization’s activities c. To help an organization define its ideas, goals, and actions. d. To help an organization keep track of its buying and selling of resources. e. All of the above
A

B

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6
Q

Which one of the following is not qualitative characteristic

A

chaptism ————————————————————————– no idea what this is haha >

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7
Q

A 20,000 machine is purchased by paying 5000 cash and signing a note payable for the remainder

A

the journal entry should involve a CREDIT on cash and debit on notes payable ————————————————————————- Inventory 20000 Cash 5000 Notes Payable 15000 *Notes Payable is normal credit balance. Does this sound familiar? Normal Debit: account increases with a debit Normal Credit: account increases with a credit.

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8
Q

Type of activity is the following “sold 2000 shares of a company own common stock for cash A. Operating activities B. Financial activities C. Investing activities D. Non cash transaction E. None

A

B. financing activity

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9
Q

An accounts receivable previously written off as uncollectible is finally collected

A

a reversal of the entry made to write off the account & recording the cash collection on the account ————————————————————————- Now: two steps: (1) a reversal of the entry that was made to write off the account, and (2) recording the cash collection on the account: 1.Reversal: Accounts Receivable XXXX Allowance for Uncollectible Accounts XXXX 2. Recording Collection: Cash XXXX Accounts Receivable XXXX

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10
Q

Which statement is false regarding the lower cost of market (LCM) method of inventory?

A

NOT ANSWER BUT LCM MEANS: LCM is an approach to valuing & reporting inventory assets such as inventory to be valued at either historical cost or at current replacement cost

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11
Q

Interest = 8 , PV = 10000, N = 10, FIND FV=?

A

Answer: 21589 ————————————————————————– FV = PV*(1 + r) ^ n FV = 10000 x (1+.08) ^ 10 FV = 10000 x 2.158925 FV = 21589.25

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12
Q

A dress shop makes a large sale for 1000 on November 30, sent statement on December 5, check received by shop on December 10 When is it recorded

A

December 10 ————————————————————————- Recognized/ recorded when the revenue is earned: November 30.

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13
Q

Company A current liability equal 500,000, working capital 120,000. Company B same amount of working capital, but total current liability of 30,000. The company with the better working capital position is? A. They both has exact the same working capital B. Company B C. Company A D. Don’t determined with the information given E. None

A

B ————————————————————————– Is the wording for this question correct? Working Capital = Current Assets - Current Liabilities. Since Company B has lower liabilities it looks like they have the better position, but im not sure.

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14
Q

Depreciation by Straight line method

A

company’s expense and equal amount of the depreciation of the assets useful life ————————————————————————– (Cost of the Asset - Scrap Value)/ Useful Life http://puu.sh/5iDOP.png

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15
Q

Declining-balance method

A

an accelerated depreciation method that yields larger depreciation expense during the early years of an asset’s life and less depreciation in the later years ————————————————————————– http://puu.sh/5iDMz.png

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16
Q

Units of activity method

A

charges a varying amount to expense for each period of an asset’s useful life depending on its usage ————————————————————————- Example - Units of Usage (Activity) Depreciation Plastic LTD purchases a steel mold costing $1 million to be used in the production of plastic glasses. The mold could be used in 8 production batches after which it will have a scrap value of $.2 million. During the first year, the company manufactures 2 batches of glasses. Depreciation charge for the year is calculated as follows: Depreciation Expense = ($1 - $0.2m) x 2 / 8 = $0.2 million

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17
Q

An obligation of a business that claims of others against the assets of the business is called A. Expense B. Liability C. Assets D. Revenue E. None

A

B

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18
Q

Accounting Equation is

A

Assets = Liability + Stockholders Equity

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19
Q

The common characteristic possessed by all assets is

A

future economic benefit

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20
Q

The relevant measure of a value of the assets of a company that is going out of business is there

A

current market value

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21
Q

Accounting information should be verifiable in order to enhance

A

reliability

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22
Q

What is retained earnings

A

Answer: it is the net income retained in the corporation

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23
Q

If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called unearned legal fees, the end of the period adjusting entry is to record is

A

debit legal fees earned & credit unearned legal fees

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24
Q

FV = 400, I= 12%, N= 2 years,

A

319

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25
Q

FV = 900, I = 6%, n=3, solve for PV

A

756

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26
Q
  1. the book value of the plant asset is the difference between the a. replacement cost of the asset + history b. cost of the asset + depreciation c. cost of the asset - accumulated depreciation d. proceeds received from the sale of the asset e. none of the above
A

B or C ————————————————————————– Cost - Accum. Dep. C.

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27
Q
  1. truck costing 12000, 9000 of accumulated depreciation has been recorded was discarded as having no value. The entry to record in this event would include a a. gain of 3000 b. loss of 3000 c. credit accumulated depreciation for 9000 d. credit accumulated depreciation for 120000 e. e. none of the above
A

A or B ————————————————————————- Cash 0 Accum. Dep 9000 Loss on Disposal of Asset 3000 Equipment 12000 Loss since the book value (12000 - 9000 = 3000) is greater than the value of the sale of the truck (0 since they threw it away). B.

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28
Q

Liabilities of a company are owed to

A

creditors

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29
Q

If owners equity is 30000, and liabilities are 73000, then asset equal

A

: 103,000 Asset=OE+ L=103,000

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30
Q

Liabilities are

A

: are debts and obligations

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31
Q

Treasury stock is classified as

A

contra equity account

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32
Q

An accounts receivable previously written off as uncollectable is finally collected. The amount collected was $500. Which of the following journal entries

A

cash 500 ————————————————————————– 1.Reversal: Accounts Receivable 500 Allowance for Uncollectible Accounts 500 2. Recording Collection: Cash 500 Accounts Receivable 500

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33
Q

What is accumulation depreciation

A

account shows the total amount of depreciation that the company has expensed thus for in the assets life

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34
Q

Which one is for auditors

A

: A & C

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35
Q

Inventory of product Y at January 1 consisted of 15000 units valued at a cost of $1125000. Purchases during the year were March 20 500 units at 7.74 per unit - $ 158875 November 28 8500 units at 8.44 per unit = $71740 Compute the December 31 inventory, using the last in, first out method

A

None of the above Add all the $

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36
Q

Last in first – out method A. 250,000 B. 228,750 C. 234,875 (WA) D. 225,550 E. None >>>>>>>>>>>>>>Not sure if this is the question

A

??? Prob E?

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37
Q

Y during accounting period the asset increases by 5,000 equity increased by 1,000. How did liability damage? A. Increase by 6,000 B. Increase by 4,000 C. Decrease by 4,000 D. Decrease by 6,000 E. Decrease by 1,000

A

B ————————————————————————— Assets = Liabilities + Owners Equity (+5000) ? (+1000) (+4000) Liabiities increase by 4000. B.

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38
Q

The revenue recognition principle dictates that revenue should be recognized in the accounting records

A

when it is earned

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39
Q

In the present value calculators, the process of determining the PV(present value) is called

A

discounting

40
Q

What is the formula to calculate earning per share

A

Answer: net income / Common stocks outstanding

41
Q

Obsolescence A. Occurs when as asset is at the end of its useful life B. Refers to a condition where plant asset is no longer useful in producing and services. C. Refers to a condition where the capacity of a company’s plant assets is too small to meet the company’s productive demand. (WA) D. Occurs when as assets salvage value is less than its replacement cost E. Does not affect plant asset.

A

B

42
Q

A non current intangible asset such as leasehold improvements and patents are all subject to: a. amortization. b. depreciation. c. accretion. d. capitalization. e. none of the options listed

A

A Amortization = Intangible asset Depreciation = Tangible asset.

43
Q
  1. Net income results when A. Assets > liability B. Revenue = expenses C. Revenue > expenses D. Revenue < expenses E. None
A

C

44
Q

. Resources owned by a business are referred to as A. Stockholders equity B. Liability C. Assets D. Revenue E. None

A

C

45
Q
  1. Expenses are incurred A. Only one rare occasion B. To produce asset C. To produce liability D. To generate revenue E. None.
A

D

46
Q
  1. Which is NOT an accounting assumption A. Integrity B. Going concern C. Time period D. Economic entity E. None.
A

A ————————————————————————– Accounting Assumptions: The Economic Entity Concept The Going Concern The Time Period The Monetary Unit

47
Q

Under the accurate (accrual) basis of accounting

A

Answer: C. Events that change a company’s financial statements are recognized in the Periods they occur rather than in the period in which cash flow is paid or received

48
Q

What type of activity is the following “sold $ 120,000 worth of product? A. Operating activities B. Financial activities C. Investing activities D. Non cash transaction E. None

A

A

49
Q
  1. The accumulated depreciation account is a (an) A. Contra assets B. Liability C. Assets D. Operating expanse E. none of the listed
A

A

50
Q

Operating cycle of a company is the average time that is require to go from cash to A. Sales B. Cash C. Inventory D. Accounts Receivable E. None

A

B/C/D ————————————————————————- Cash to Inventory to Accounts Receivable to Cash; Cash to Cash. B. hopefully o.o

51
Q

Present Value Formula

A

= Future Value ÷ (1+i) ^ n

52
Q

Price-Earnings Ratio Formula

A

Answer: (P-E) = STOCK PRICE PER SHARE/ EARNINGS PER SHARE

53
Q

Simple Interest formula

A

Answer: PRINCIPAL x RATE x Time (p) (i) (n)

54
Q

What is the price earning - ration formula

A

Market price of a share of common stock/Earnings per share

55
Q
  1. Which of the following accounts is used in the calculate of working capital a. retained earnings b. sales c. merchandise inventory d. common stock e. long term debt
A

C

56
Q

Cash flow has 3 categories

A

Answer: operating, investing, financing activitie

57
Q

Balance sheet reflects 3 statements

A

Answer: balance sheet, income statement and cash flow

58
Q

Profit margin is a measure of

A

Answer: profitability

59
Q

The operating cycle

A

Answer: is the average time required to collect the receivables resulting from producing revenues

60
Q

A current asset is

A

Answer: an asset that a company expects to convert to cash or use up within one year

61
Q

An intangible asset

A

Answer: does not have physical substance, yet often is very valuable

62
Q

Expenses are recognized in cash bases accounting

A

Answer: when cash is paid

63
Q

Expenses are recognized in accrual bases accounting

A

Answer: when Incurred

64
Q
  1. The cost principle requires that when assets are acquired, they be recorded at a. market value. b. the amount paid for them. c. selling price. d. list price. e. none
A

B. the amount paid for them. Also call exchange price paid.

65
Q

The accounting method that will be least likely to overstate assets and income is an example of the constraint of

A

Answer: Conservatism ————————————————————————– In reporting financial data, accountants follow the principle of conservatism, which requires that the less optimistic estimate be chosen when two estimates are judged to be equally likely.

66
Q

The time period assumption states that the economic life of a business can be divided into

A

Answer: artificial time periods

67
Q

Only those things that can be expressed in money are included in the accounting records

A

Answer: Monetary unit assumption

68
Q

Every economic entity that can separately be identified is called

A

Answer: Economic entity assumption

69
Q

A company that receives money in advance of performing a service

A

Answer: debit cash credit unearned revenue

70
Q

Profit margin

A

Answer: Net income/Sales—CORRECT

71
Q
  1. Intangible asset is a. research and development costs b. copyrights, patents, trademark c. organization cost d. goodwill e. none
A

B ———————————————————————— This question… B and D are both intangible assets o.o

72
Q

The income statement reports all of the following except: a. Revenues earned by a business b. Expenses incurred by a business c. Assets owned by a business d. Net income or loss earned by a business e. The time period over which the earnings occurred

A

Answer: Assets owned by a business C ————————————————————————- Assets are reported on the balance sheet (: C.

73
Q

Which one is a balance sheet

A

Answer: Assets = liabilities +stockholders equity

74
Q

Prime object of a business is to increase equity

A

Answer: Acquiring assets

75
Q

Amortize provides following benefit

A

Answer: To …assets users that financial statement and it will

76
Q

A financial statement that reports accounting data a specific date is the

A

Answer: Balance sheet

77
Q

FASB (financial accounting standards board)

A

Answer: is the primary accounting standard setting board in the U.S

78
Q

SEC (Securities and Exchange Commission)

A

Answer: is the agency of the U.S Government that oversees financial markets and accounting standards setting bodies

79
Q

IASB (International Accounting Standards Board)

A

Answer: is an accounting method used outside the U.S

80
Q

If ending inventory is overstated what effect will there be on cost of good and net income? A. COGS will overstated and Net income overstate B. COGS will overstated and Net income understated C. COGS will understated and Net income overstate D. COGS will understated and Net income understate E. None.

A

C ————————————————————————– reduces the amount of inventory that would otherwise have been charged to the cost of goods sold during the period. COGS is understated and Net Income will appear larger than it actually is. C.

81
Q

The principle entry business to be accounted for separating distinction from it owner or owners what principle would it be.

A

Answer: Business entity principle

82
Q

A method of estimating bad debt that in owns cash of outstanding debt

A

Answer: allowance method

83
Q

Depreciation is the process

A

Answer: is the process of allocating the depreciable cost of a long-lived asset to a number of years

84
Q

Johnny’s car repair shop started the year with total assets of $60,000 and total liabilities of $ 40,000. During the year the business recorded $100,000 in car repair revenues and $55,000 in expenses, and dividends of $10,000 The Net Income reported for the year was?

A

Answer: 45,000 ————————————————————————- Net Income = Revenues - Expenses = 100,000 - 55,000 = 45,000

85
Q

What is net income

A

Answer: retained earnings represent net income, (assets = liabilities)

86
Q

Define and articulate the three basic financial statements. a. The balance (or statement of financial position) describes the financial position of a firm at a particular point in time b. The income statement or a company compares its revenues to its expenses Revenues $20,000 Less Expenses $12,000 NET INCOME $ 8,000 c. The balance sheet and income statement are the traditional financial statements that have been parts of annual reports of companies for many years

A

? ————————————————————————– No idea about the a, b, c, d. The balance sheet represents a business’ assets, liabilities, and shareholders’ equity at a specific point in time. The income statement shows revenues, expenses, gains, and losses during a specific period. The cash flow statement shows the amount of cash generated and used by your business in a given period.

87
Q

If the single amount of $1,400 is to be received in 2 years and discount at 12% its present value? Present value $1 0.797 Future value $1 1,254 Present value annuity 1.690 Future value annuity 2,120 A. $502 B. 312 C. 676 D. 331 E. None

A

? Not D ————————————————————————– Equation:

88
Q

Susana metro invested $ 7,009.87 now, and will receive $20,000 at the end of 11 years. What annual arte of investment will she be earning on her investments? Fixed cost of $ 11 Factor 7% 11 years 2.105 8% 11 years 2.332 9% 11 years 2.580 10% 11 years 2.853 A. 8 % B. 7 % C. 9 % D. 10 % E. None

A

D ————————————————————————– PVOA = Payment x Annuity (Rate, Time) 20000 = 7,009.87 x ? 20000/7 = ? ? = 2.853 Factor of 2.853 corresponds to 10% rate 11 years. D.

89
Q

What is amount of working capital? Account payable 31,000 Accounts Receivable 57,000 Cash 15,000 Intangible asset 50,000 Inventory 69,000 Long-Term Investment 80,000 Long Liabilities 100,000 Market Scarcity 40,000 Notes payable (Short-term) 28,000 Land build and equipment 670,000 Prepaid expenses 1,000 A. 123,000 B. 151,000 C. 203,000 D. 53,000 E. None

A

E A (Wrong) ————————————————————————- CA: AR, Cash, Inv, Prepaid expenses CL: AP, NP 142k - 59k E. none

90
Q

Company used Strait-Line depreciation for an item that cost 12,000 had a salvage value of 2,000 and a 5 year useful life After depreciating the assets for 3 complete years, the salvage value was reduced to 1,200 and its total useful life was increased from 5 years to 6 years. Determine the amount of depreciation to be changed against the machine during each of the remaining years of its useful life. A 1,000 B. 1,800 C. 1,467 D. 1,600 E. 2,160

A

D

91
Q

Jan. 1st, 20X1 William corporation machine cost is 45,000, estimate life is 5 years and salvage value is 3,000, depreciation expense for the first 2 tears. Use straight line method. A. 8,400 : 8,400 B. 9,000 : 9,000 C. 9,600 : 9,600 D. 9,000 : 8,500 E. None

A

A

92
Q

On October 29, Company concluded a cost’s 4,400 account receivable was uncollectible and that a acet should be written off. What affect will this write off have on this company’s Net Income and Total Assets assuming the allowing method is used to account for bad debts. A. Decrease Net income, no effect on Total assets B. No effect on Net income, no effect on Total assets C. Decrease in Net income, decrease in Total assets. D. Increase in Net income, no effect on Total Assets. E. No effect on Net income, Decrease in Total Assets.

A

B

93
Q

Balance of 80,000 in Accounts Receivable and 4,000 credit balance in Contra account the customer account of 500 is ……, net realizable upon on the account receivable A. 75,500 (WRONG ANSWER) B. 76,000 C. 76,500 D. 79,500 E. None

A

?? ————————————————————————- the debit balance in the asset account Accounts Receivable minus the credit balance in the contra asset account Allowance for Uncollectible Accounts 80k - 4k definitely: if the 500 is received, then the answer is 76500. if the 500 isn’t part of the contra account, then it doesnt fit into the equation and the answer would be 76000. either B or C.

94
Q

A corporation is investing on a expected return 350,000 in 4 yrs. Interest is 12% 12 % 4 years Present value .636 Future value 1.574 Present value of annuity 3.037 Future value of annuity 4.780 A. 265,764 B. 55,600 C. 137,687 D. 222,600 E. 350,000

A

D ————————————————————————- 350000 (Expected return) = 1.574 (FV) x initial investment 350000/1.574 = initial initial = 222600 D.

95
Q

16,000:16,000

A

Answer to one of the questions

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