Financial Accounting

Question 1

Comparing actual outcomes with budget outcomes, then following up, is an example of a a. planning activities b. operating activities c. controlling activities d. accounting activities e. staffing activities

Answer 1

c. controlling activities

Question 2

Which of the following is typically a starting point for the budget process? a. a summary cash budget b. a sales budget c. a budget balance sheet d. a production budget e. a materials purchase budget

Answer 2

b. a sales budget

Question 3

Tax accounting is generally most used by: a. Share holder b. Manager c. Creditors d. Internal revenue service e. Decision makers

Answer 3

d. Internal revenue service

Question 4

Management accountant place more emphases on which of the following : a. certified financial statement b. future activities c. historial cost information d. cash flow e. annual tax returns

Answer 4

b. future activities

Question 5

Which of the following organization would be most likely to accept a process costing system? a. customer homebuilder b. law office c. paper manufacture d. dental office e. TV sale and services organization

Answer 5

c. paper manufacture

Question 6

The discount rate for use in capital budgeting decision is also referred to as a. a cost of capital b. the cost of capital c. the hurdle rate d. the minimum required rate of return e. all none

Answer 6

d. the minimum required rate of return

Question 7

What is breakeven point in units? Sale price $7.50 per unit Variable cost $2.25 per unit Fixed cost $10,000 Units sold 20,000

Answer 7

1905 Breakeven Point: Fixed Cost / (Price – VC) 10,000 / (7.50 - 2.25) = 1905

Question 8

A balance sheet shows a. revenues, liabilities, and stockholders’ equity. b. expenses, dividends, and stockholders’ equity. c. revenues, expenses, and dividends. d. assets, liabilities, and stockholders’ equity. e. none of the options listed

Answer 8

d. assets, liabilities, and stockholders’ equity.

Question 9

The excess of expenses over revenues for a period is: a. Net assets b. Equity c. Net loss d. Net income e. A liability

Answer 9

c. Net loss

Question 10

Liabilities a. are future economic benefits. b. are debts and obligations. c. possess service potential. d. are things of value owned by a business. e. none of the options listed

Answer 10

b. are debts and obligations.

Question 11

The common characteristic possessed by all assets is a. long life. b. great monetary value. c. tangible nature. d. future economic benefit. e. None of the options listed.

Answer 11

d. future economic benefit.

Question 12

Which of the following is not an accounting assumption? a. Integrity b. Going concern c. Time period d. Economic entity e. None of the options listed

Answer 12

a. Integrity

Question 13

Treasury stock is classified as: a. An asset account. b. A contra asset account. c. A revenue account. d. A contra equity account. e. A liability account.

Answer 13

d. A contra equity account.

Question 14

Olsen Company prepares its statement of cash flows using the indirect method. Indicate whether the item would be added to net income (increase), deducted from net income (decrease), or has no effect on net income to determine net cash flows from operating activities. A decrease in the value from the beginning of the year to the end of the year for Inventory, which is a current asset. a. Increase b. Decrease c. No effect d. None of the options listed e. All of the options listed

Answer 14

c. No effect

Question 15

An Accounts Receivable previously written off as uncollectable is finally collected. The amount collected was 500.Which of the following journal entries is correct (assuming the allowance method is used)? a. Cash 500 Accounts Receivable 500 b. Uncollectible Accounts (Bad Debt) Expense 500 Cash 500 c. Accounts Receivable 500 Uncollectible Accounts (Bad Debt) Expense 500 Cash 500 Accounts Receivable 500 d. Accounts Receivable $500 Allowance for Uncollectible Accounts $500 Cash 500 Accounts Receivable 500 e. None of the options listed

Answer 15

d. Accounts Receivable $500 Allowance for Uncollectible Accounts $500 Cash 500 Accounts Receivable 500

Question 16

A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that 15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubt full Accounts had a debit balance of 175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? a. Bad Debts Expense……………………………………………… 15,750 Allowance for Doubtful Accounts……………………….. 15,750 b. Bad Debts Expense……………………………………………… 15,575 Allowance for Doubtful Accounts……………………….. 15,575 c. Bad Debts Expense……………………………………………… 15,925 Allowance for Doubtful Accounts……………………….. 15,925 d. Accounts Receivable……………………………………………. 15,750 Bad Debts Expense……………………………………………… 175 Sales……………………………………………………………… 15,750 e. Accounts Receivable……………………………………………… 15,925 Allowance for Doubtful Accounts……………………….. 15,925

Answer 16

c. Bad Debts Expense……………………………………………… 15,925 Allowance for Doubtful Accounts……………………….. 15,925 (15,750 + 175)

Question 17

In present value calculations, the process of determining the present value is called a. allocating. b. pricing. c. negotiating. d. discounting the future amount e. none of the options listed

Answer 17

d. discounting the future amount

Question 18

Present value is based on a. the dollar amount to be received. b. the length of time until the amount is received. c. the interest rate. d. all of the options listed e. none of the options listed

Answer 18

d. all of the options listed

Question 19

Accrued revenue has: a. not been earned nor received b. been earned but not received c. not been earned but has been received d. been earned and received e. none of the options listed

Answer 19

b. been earned but not received

Question 20

What is the formula to calculate the current ratio? a. Assets ÷ Liabilities b. Cash + Accounts Receivables ÷ Current Liabilities c. Current Assets ÷ Current Liabilities d. Net Income ÷ Current Liabilities e. None of the options listed

Answer 20

c. Current Assets ÷ Current Liabilities

Question 21

For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is: a. Raises the current ratio. b. Lowers the current ratio. c. Doesn’t affect the current ratio. d. Depends on the amount paid. e. Not determinable based on the facts given.

Answer 21

a. Raises the current ratio.

Question 22

Obsolescence: a. Occurs when an asset is at the end of its useful life. b. Refers to a condition where a plant asset is no longer useful in producing goods 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 demands. Incorrect. Please review Top Ten Concept # 10. d. Occurs when an asset’s salvage value is less than its replacement cost. e. Does not affect plant assets.

Answer 22

b. Refers to a condition where a plant asset is no longer useful in producing goods and services.

Question 23

On January 1, 20X1, Williams Corporation acquired a machine costing 45,000. The estimated life is five years and the salvage value is 3,000. Determine the depreciation expense for the first two years using the 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 of the options listed

Answer 23

a. 8,400; 8,400 Annual Dep. Exp: (Cost – Salvage Value) / Useful Life (45,000 - 3,000) / 5 = 8,400

Question 24

Which financial statement would best indicate the proportion of debt and equity that a company uses to finance its assets? a. Statement of Cash Flows b. Retained Earnings Statement c. Income Statement d. Balance Sheet e. None of the options listed

Answer 24

d. Balance Sheet

Question 25

If owner’s equity is 30,000 and liabilities are 73,000, then assets equal: a. 30,000. b. 73,000. c. 103,000. d. 43,000.

Answer 25

c. 103,000. A = L + SE

Question 26

The relevant measure of value of the assets of a company that is going out of business is their: a. current market value b. book value c. historical cost d. higher of historical cost or current market value e. none of the options listed

Answer 26

a. current market value

Question 27

The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the: a. Recognition principle. I b. Cost principle. c. Cash basis of accounting. d. Matching principle. e. Time period principle.

Answer 27

d. Matching principle.

Question 28

Which of the following journal entries is correct for an issuance of 2,000 shares of 20 par value preferred stock in exchange for land valued at 45,000? a. Cash 45,000 Preferred Stock 40,000 Premium on Preferred Stock 5,000 Land 45,000 Cash 45,000 b. Cash 45,000 Preferred Stock 45,000 Land 45,000 Cash 45,000 c. Land 45,000 Preferred Stock 40,000 Premium on Preferred Stock 5,000 d. Land 45,000 Preferred Stock 45,000 e. None of the options listed

Answer 28

Cash 45,000 c. Land 45,000 Preferred Stock 40,000 Premium on Preferred Stock 5,000 2000*20=40 45000-40000=5000

Question 29

The Village Laundry Company purchased 6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies in dictated only 3,000 on hand. The adjusting entry that should be made by the company on June 30 is a. Debit Laundry Supplies Expense, 3,000; Credit Laundry Supplies, 3,000. b. Debit Laundry Supplies Expense, 3,500;CreditLaundrySupplies,3,000. Incorrect. Please review Top Ten Concept # 6. c. Debit Laundry Supplies, 3,500; Credit Laundry Supplies Expense, 3,500. d. Debit Laundry Supplies Expense, 3,500; Credit Laundry Supplies, 3,500. e. None of the options listed

Answer 29

d. Debit Laundry Supplies Expense, 3,500; Credit Laundry Supplies, 3,500. 6,500 - 3,000 = 3,500

Question 30

Under the accrual basis of accounting a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. e. none of the options listed

Answer 30

c. events that change a company’s financial statements are recognized in the period they occur rather than in the period in which cash is paid or received.

Question 31

A company had a market price of 37.50 per share, earnings per share of 1.25, and dividends per share of 0.40. This implies its price- earnings ratio equals: a. 3.1. b. 30.0. c. 93.8. d. 32.0. e. 3.3.

Answer 31

b. 30.0. Price- Earnings Ratio: Stock Price per Share / Earnings per Share 37.50 / 1.25 = 30

Question 32

Depreciation is the process of a. valuing an asset at its fair market value. b. increasing the value of an asset over its useful life in a rational and systematic manner. c. allocating the cost of an asset to expense over its useful life in a rational and systematic manner. d. writing down an asset to its real value each accounting period.

Answer 32

c. allocating the cost of an asset to expense over its useful life in a rational and systematic manner.

Question 33

Intangible assets are the rights and privileges that result from ownership of long-lived assets that a. must be generated internally. b. are depreciated over their useful life. c. have been exchanged at a gain. Incorrect. Please review Top Ten Concept # 10. d. do not have physical substance. e. none of the options listed

Answer 33

d. do not have physical substance.

Question 34

Net income results when a. Assets > Liabilities b. Revenues = Expenses. c. Revenues > Expenses. d. Revenues

Answer 34

c. Revenues > Expenses.

Question 35

The accounting equation is: a. Assets = Liabilities + Equity. b. Assets + Liabilities = Equity. c. Assets = Liabilities - Equity. d. Assets - Liabilities = Equity. e. Both A and D.

Answer 35

e. Both A and D.

Question 36

The balance sheet a. summarizes the changes in retained earnings for a specific period of time. b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time. c. reports the assets, liabilities, and stockholders’ equity at a specific date. d. presents the revenues and

Answer 36

c. reports the assets, liabilities, and stockholders’ equity at a specific date.

Question 37

An audit provides the following benefit(s) to users of financial statements: a. To help assure users that financial statements include relevant, reliable, and comparable information. b. Insures that users can safely invest in, or loan money to, a business. c. It tells users that the statements are prepared using accepted accounting principles. d. All of the above. e. A and C only.

Answer 37

e. A and C only.

Question 38

Revenue is properly recognized: a. When the customer’s order is received. b. Only if the transaction creates an account receivable. c. At the end of the accounting period. d. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price. e. When cash from a sale is received.

Answer 38

d. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.

Question 39

In order for accounting information to be relevant, it must a. have very little cost. b. help predict future events or confirm prior expectations. c. not be reported to the public. d. be used by a lot of different firms. e. none of the options listed

Answer 39

b. help predict future events or confirm prior expectations.

Question 40

A $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a a. credit to note payable. b. debit to cash. c. credit to notes receivable. d. credit to machinery. e. none of the options listed

Answer 40

a. credit to note payable.

Question 41

What type of activity is the following - “Exchanged 10,000 shares of common stock for 15-year bonds?”. a. Operating Activity b. Financing Activity c. Investing Activity d. Noncash Transaction e. None of the options listed

Answer 41

d. Noncash Transaction

Question 42

Which statement is false regarding the lower of cost or market (LCM) method of inventory? a. Market is defined as current replacement cost, not selling price. b. LCM is an example of an accounting concept of conservatism. c. Inventory is written down to its market value in the period in which the price decline occurs. d. All of the options listed are true regarding LCM. e. None of the options listed are true regarding LCM.

Answer 42

d. All of the options listed are true regarding LCM.

Question 43

In a service-type business, revenue is considered earned a. at the end of the month. b. at the end of the year. c. when the service is performed. d. when cash is received. e. none of the options listed

Answer 43

c. when the service is performed.

Question 44

Based on the following data, what is the amount of working capital? Accounts payable……………………………………………………….. $31,000 Accounts receivable…………………………………………………… ….57,000 Cash…………………………………………………………………… …15,000 Intangible assets………………………………………………………… 50,000 Inventory……………………………………………………… ………….69,000 Long-term investments……………………………………… ….80,000 Long-liabilities…………………………………… ………………………100,000 Marketable securities…………………………………………… …40,000 Notes payable (short-term)……………………………………………… ..28,000 Land, building, and equipment………………………………670,000 Prepaid expenses………………………………………………………1,000 a. $123,000 b. $151,000 c. $203,000 d. $53,000 e. None of the options listed

Answer 44

a. $123,000 (Total Current Asset – Total Current Liability) CA: 57,000+15,000+69,000+40,000+1,000 = 182,000 CL: 31,000+28,000 = 59,000 182,000 - 59,000 = 123,000

Question 45

Use the following information for Smart Company. Net Sales $300,000 Cost of Goods Sold 230,000 Gross Profit $ 70,000 Operating Expenses 25,000 Net Income $ 45,000 ======= What is the return on sales for Smart Company? a. 13% b. 15% c. 64% d. 35% e. None of the options listed

Answer 45

b. 15% (Net Income / Sales = 45,000 / 300,000 =15%)

Question 46

Noncurrent, intangible assets such as leasehold improvements and patents are all subject to: a. depreciation b. amortization c. depletion d. consolidation e. recognition

Answer 46

b. amortization

Question 47

The book value of a plant asset is the difference between the a. replacement cost of the asset and its historical cost. b. cost of the asset and the amount of depreciation expense for the year. c. cost of the asset and the accumulated depreciation to date. d. proceeds received from the sale of the asset and its original cost. e. none of the options listed

Answer 47

c. cost of the asset and the accumulated depreciation to date.

Question 48

NiKe has beginning equity of $4,350 million, net income of $490 million, dividends (withdrawals) of $100 million, and an increase in equity due to other items of $50 million. Its ending equity is: a. $3,810 million. b. $4,690 million. c. $4,790 million. d. $4,990 million. e. $3,710 million

Answer 48

c. $4,790 million. 4,350 + 490 – 100 + 50 = 4,790

Question 49

An income statement a. summarizes the changes in retained earnings for a specific period of time. b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time. c. reports the assets, liabilities, and stockholders’ equity at a specific date. d. presents the revenues and expenses for a specific period of time. e. none of the options listed

Answer 49

d. presents the revenues and expenses for a specific period of time.

Question 50

Accounting information should be neutral in order to enhance a. reliability. b. consistency. c. comparability. d. relevance. e. none of the options listed

Answer 50

a. reliability.

Question 51

Par value of a stock refers to the: a. Issue price of the stock. b. Value assigned to a share of stock by the corporate charter. c. Market value of the stock on the date of the financial statements. d. Maximum selling price of the stock. e. Dividend value of the stock.

Answer 51

b. Value assigned to a share of stock by the corporate charter.

Question 52

Retained earnings is: a. decreased by net income b. increased by expenses c. decreased by revenues d. increased by dividends declared e. increased by gains

Answer 52

e. increased by gains

Question 53

If you are able to earn an 8% rate of return, what amount would you need to invest to have $2,000 one year from now? (Round to the nearest dollar.) 8%, 1 year annually Factor Present value of $1 0.926 Future value of $1 1.080 Present value of an annuity 0.926 Future value of an annuity 1.000 a. $2160 b. $1,852 c. $2000 d. $1,980 e. None of the options listed

Answer 53

b. $1,852 PV: FV / (1 + r)^n PV: 2000 / (1+ 8%) = 1,852

Question 54

An individual is planning to set-up an education fund for her children. She plans to invest $10,000 annually at the end of each year. She expects to withdraw money from the fund at the end of 10 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 10 years? (Round to the nearest dollar) 8%, 10 years annually Factor Present value of $1 0.463 Future value of $1 2.159 Present value of an annuity 6.710 Future value of an annuity 14.487 a. $ 46,320. b. $ 67,107. c. $100,000. d. $144,870. e. $215,890.

Answer 54

d. $144,870. 10,000 * (1 + 8%)^10 10,000 * 14.487 = 144,870

Question 55

A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause a. expenses to be overstated. b. net income to be overstated. c. liabilities to be understated. d. revenues to be understated. e. none of the options listed

Answer 55

d. revenues to be understated.

Question 56

Charles Corporation reports the following information for 20X1. Accounts Receivable – 1/1 $100,000 Accounts Receivable – 12/31 150,000 Inventory – 1/1 40,000 Inventory – 12/31 55,000 Net Credit Sales 800,000 Cost of Goods Sold 450,000 Accumulated Depreciation 15,000 What is the average age of inventory for Charles Corporation? a. 32.4 days b. 39.9 days c. 44.6 days d. 38.5 days e. None of the options listed

Answer 56

d. 38.5 days

Question 57

A truck costing $12,000 and on which $9,000 of accumulated depreciation has been recorded was discarded as having no value. The entry to record this event would include a a. gain of $3,000. b. loss of $3,000. c. credit to accumulated depreciation for $9,000. d. credit to accumulated depreciation for $12,000. e. none of the options listed

Answer 57

b. loss of $3,000.

Question 58

Accountants do not attempt to measure the change in a plant asset’s market value during ownership because a. of the historical cost assumption. b. plant assets cannot be sold. c. losses would have to be recognized. d. it is management’s responsibility to determine fair values. e. none of the options listed

Answer 58

a. of the historical cost assumption.

Question 59

Liabilities of a company are owed to a. debtors. b. owners. c. creditors. d. stockholders. e. none of the options listed

Answer 59

c. creditors.

Question 60

Stockholders’ equity can be described as claims of a. creditors on total assets. b. owners on total assets. c. customers on total assets. d. debtors on total assets. e. none of the options listed

Answer 60

b. owners on total assets.

Question 61

Retained earnings is a. the stockholders’ claim on total assets. b. equal to cash. c. equal to revenues. d. the cumulative amount of net income kept in the corporation for future use. e. none of the options listed

Answer 61

d. the cumulative amount of net income kept in the corporation for future use.

Question 62

The necessity of making adjusting entries relates mostly to the a. economic entity assumption. b. time period assumption. c. going concern assumption. d. monetary unit assumption. e. none of the options listed

Answer 62

b. time period assumption.

Question 63

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, $55,000 in expenses, and dividends of $10,000. Stockholders’ equity at the end of the year was ? a. $45,000 b. $65,000 c. $55,000 d. $35,000 e. None of the options listed

Answer 63

a. $45,000 100,000-55,000=45000

Question 64

What type of activity is the following - “Sold 2,000 shares of a company’s own common stock for cash?” a. Operating Activity b. Financing Activity c. Investing Activity d. Noncash Transaction e. None of the options listed

Answer 64

b. Financing Activity

Question 65

Based on the following data, what is the amount of current assets? Accounts payable………………………………………………………..$31,000 Accounts receivable…………………………………………………….. 57,000 Cash………………………………………………………………………. 15,000 Intangible assets………………………………………………………… 50,000 Inventory…………………………………………………………………. 69,000 Long-term investments…………………………………………………. 80,000 Long-liabilities…………………………………………………………….100,000 Marketable securities……………………………………………………. 40,000 Notes payable……………………………………………………………. 28,000 Plant assets………………………………………………………………670,000 Prepaid expenses (assets)………………………………………..…..1,000 a. $142,000 b. 182,000 c. $113,000 d. $112,000 e. None of the options listed

Answer 65

b. 182,000 57,000+15,000+69,000+40,000+1,000 = 182,000

Question 66

If Susanna Metro invests $7,009.87 now and she will receive $20,000 at the end of 11 years, what annual rate of interest will she be earning on her investment? Future value of $1 Factor 7%, 11 years annually 2.105 8%, 11 years annually 2.332 9%, 11 years annually 2.580 10%, 11 years annually 2.853 a. 8% b. 7% c. 9% d. 10% e. None of the options listed

Answer 66

d. 10% 20,000 / 2.105 = 9,501 20,000 / 2.332 = 8,576 20,000 / 2.580 = 7,752 20,000 / 2.853 = 7,010 this amount is close to 7,009.87

Question 67

If the single amount of $900 is to be received in 3 years and discounted at 6%, its present value is: (Round to the nearest dollar.) 6%, 3 years annually Factor Present value of $1 0.840 Future value of $1 1.191 Present value of an annuity 2.673 Future value of an annuity 3.184 a. $756. b. $849. c. $780. d. $846. e. None of the options listed

Answer 67

a. $756. 900 * 0.840 = 756

Question 68

At December 31, 2001, before any year-end adjustments, Brant Company’s Prepaid Insurance account had a balance of $1,900. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Prepaid Insurance for the year would be a. $1,500. b. $400. c. $2,225. d. $1,125. e. None of the options listed

Answer 68

b. $400. 1,900 – 1,500 = 400

Question 69

Which financial statement is prepared first? a. Balance sheet b. Income statement c. Retained earnings statement d. Statement of cash flows e. None of the options listed

Answer 69

b. Income statement

Question 70

Resources owned by a business are referred to as a. stockholders’ equity. b. liabilities. c. assets. d. revenues. e. none of the options listed

Answer 70

c. assets.

Question 71

Which of the following journal entries is correct for an issuance of 1,000 shares of 10 par value common stock for 25 per share? a. Cash 25,000 Common Stock 25,000 b. Common Stock 25,000 Cash 25,000 c. Cash 25,000 Common Stock 10,000 Premium on Common Stock 15,000 d. Common Stock 10,000 Premium on Common Stock 15,000 Cash 15,000

Answer 71

c. Cash 25,000 Common Stock 10,000 Premium on Common Stock 15,000 1,000*25=25,000 1,000*10=10,000 25,000-10,000=15,000

Question 72

Westec Corporation has the following accounts on their financial statement. Calculate net income. Professional Fee Income 31,000 RentExpense7,000 Advertising Expense 10,000 Insurance Expense 6,000 Accumulated Depreciation 1,000 Interest Expense 1,000 Commission Expense 4,000 Dividends 2,000 a. 9,000 b. 0 c. 1,000 d. 3,000

Answer 72

d. 3,000 31,000 – (7,000+10,000+6,000+1,000+4,000) = 3,000

Question 73

Which of the following would not result in unearned revenue? a. Rent collected in advance from tenants b. Services performed on account c. Sale of season tickets to football games d. Sale of two-year magazine subscriptions e. None of the options listed

Answer 73

b. Services performed on account

Question 74

What is the formula to calculate the profit margin? a. Gross Profit ÷ Sale b. Net Income ÷ Sales c. Gross Profit ÷ Net Income d. Net Income ÷ Gross Profit e. None of the options listed

Answer 74

e. None of the options listed (Net Income / Revenue) or (Net Profit / Sales)

Question 75

What is the formula to calculate earnings per share? a. Net Income ÷ Common Stock Outstanding b. Market Price ÷ Common Stock Outstanding c. Gross Profit ÷ Total Stock Outstanding d. Market Price ÷ Total Stock Outstanding e. None of the options listed

Answer 75

a. Net Income ÷ Common Stock Outstanding

Question 76

Which of the following methods will result in the highest depreciation in the first year? a. Units-of-activity b. Time valuation c. Straight-line d. Declining-balance e. None of the options listed

Answer 76

d. Declining-balance

Question 77

An obligation of a business that represents the claims of others against the assets of the business is called: a. An Asset. b. An Expense. c. A Revenue. d. An Equity. e. A Liability.

Answer 77

e. A Liability.

Question 78

According to the FASB, the primary objective of financial reporting is to provide information: a. to the Internal Revenue Service b. to the Securities and Exchange Commission c. useful for making investing and lending decisions d. regarding the revenues and expenses of a business e. none of the options listed

Answer 78

b. to the Securities and Exchange Commission

Question 79

An annual report includes all of the following except a. management discussion and analysis section. b. notes to the financial statements. c. an auditor’s report. d. salary information for the key executives.

Answer 79

d. salary information for the key executives.

Question 80

The accounting equation may be expressed as: a. Assets = Stockholders’ Equity – Liabilities. b. Assets = Liabilities + Stockholders’ Equity. c. Assets + Liabilities = Stockholders’ Equity. d. Assets + Stockholders’ Equity = Liabilities. e. None of the options listed

Answer 80

b. Assets = Liabilities + Stockholders’ Equity.

Question 81

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-period adjusting entry to record the portion of those fees that has been earned is: a. Debit Cash and credit Legal Fees Earned. b. Debit Cash and credit Unearned Legal Fees. c. Debit Unearned Legal Fees and credit Legal Fees Earned. d. Debit Legal Fees Earned and credit Unearned Legal Fees. e. Debit Unearned Legal Fees and credit Accounts Receivable.

Answer 81

c. Debit Unearned Legal Fees and credit Legal Fees Earned.

Question 82

Paula Bonner invests $7,103.00 now for a series of $1,000 annual returns beginning one year from now. Paula will earn 10% on the initial investment. How many annual payments will Paula receive? Present value of an annuity 10% Factor 10 periods 6.145 12 periods 6.814 13 periods 7.103 14 periods 7.606 a. 10 b. 12 c. 13 d. 15

Answer 82

c. 13

Question 83

If the single amount of $400 is to be received in 2 years and discounted at 12%, its present value is: (Round to the nearest dollar.) 12%, 2 years annually Factor Present value of $1 0.797 Future value of $1 1.254 Present value of an annuity 1.690 Future value of an annuity 2.120 a. $502. b. $319. c. $676. d. $331. e. None of the options listed

Answer 83

b. $319. 400*.797=318.8

Question 84

Jim’s Tune-Up Shop follows the revenue recognition principle. Jim services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Jim on August 5. Jim receives the check in the mail on August 6. When should Jim show that the revenue was earned? a. July 31 b. August 1 c. August 5 d. August 6 Incorrect. Please review Top Ten Concept # 8.

Answer 84

a. July 31 Because he did the work.

Question 85

A truck was purchased for $15,000 and it was estimated to have a $3,000 salvage value (residual value) at the end of its useful life. The truck has a 4-year life. The annual depreciation expense using the straight-line method is a. $4,000 b. $4,500 c. $3,750 d. $3,000

Answer 85

d. $3,000 15,000-3,000/4=3,000

Question 86

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

Answer 86

D. To generate revenue

Question 87

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

Answer 87

B. Company B

Question 88

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

Answer 88

D. 1,600

Question 89

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

Answer 89

A. Contra assets reduce

Question 90

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

Answer 90

B. Cash in producing revenues

Question 91

In the annual report, where would a financial statement reader find out if the company’s financial statements give a fair depiction of its financial position and operating results? A. Management discussion and analysis section B. Notes to the financial statements C. An auditor report D. Survey information for the key executive

Answer 91

C. An auditor report

Question 92

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

Answer 92

B. Increase by 4,000 5000-1000=4000

Question 93

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

Answer 93

C. CGS will understated and Net income overstate

Question 94

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.

Answer 94

e. All of the above.

Question 95

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.

Answer 95

b. To provide financial statements to help users analyze an organization’s activities

Question 96

A $130 credit to Office Equipment was credited to Fees Earned by mistake. By what amounts are the accounts under or overstated as a result of this error? A. Office Equipment, understated $130; Fees Earned, overstated $130 B. Office Equipment, understated $260; Fees Earned, overstated $130 C. Office Equipment, overstated $130; Fees Earned, overstated $130 D. Office Equipment, overstated $130; Fees Earned, understated $130

Answer 96

C. Office Equipment, overstated $130; Fees Earned, overstated $130

Question 97

Prime object of a business is to increase equity

Answer 97

Acquiring assets

Question 98

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

Answer 98

Balance sheet

Question 99

A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the: a. Direct write-off method b. Aging of accounts receivable method c. Percentage of sales method d. Aging of investments method e. Percent of accounts receivable method

Answer 99

b. Aging of accounts receivable method

Question 100

A non-current intangible asset such as leasehold improvements and patents are all subject to: a. Amortization b. depreciation c. depletion

Answer 100

a. Amortization

Question 101

A dress shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The dress shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned? a. December 5 b. December 10 c. November 30 d. December 1

Answer 101

b. December 10

Question 102

Which of the following statements is incorrect? a. The normal balance of the accounts receivable account is debit b. The normal balance of the accounts payable is a credit c. The normal balance of an unearned revenues account is credit d. The normal balance of an expense account is credit

Answer 102

d. The normal balance of an expense account is credit