Financial Accounting Flashcards by Ana Reyes

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

c. controlling activities

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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

b. a sales budget

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

d. Internal revenue service

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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

b. future activities

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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

c. paper manufacture

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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

d. the minimum required rate of return

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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

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

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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

d. assets, liabilities, and stockholders’ equity.

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

c. Net loss

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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

b. are debts and obligations.

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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.

d. future economic benefit.

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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

a. Integrity

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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.

d. A contra equity account.

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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

c. No effect

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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

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

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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

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

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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

d. discounting the future amount

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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

d. all of the options listed

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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

b. been earned but not received

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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

c. Current Assets ÷ Current Liabilities

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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.

a. Raises the current ratio.

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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.

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

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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

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

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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

d. Balance Sheet

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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.

c. 103,000. A = L + SE

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

a. current market value

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.

d. Matching principle.

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

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

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

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

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

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.

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.

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

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.

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

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

d. do not have physical substance.

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

c. Revenues \> Expenses.

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.

e. Both A and D.

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

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

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.

e. A and C only.

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.

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

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

b. help predict future events or confirm prior expectations.

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

a. credit to note payable.

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

d. Noncash Transaction

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.

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

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

c. when the service is performed.

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

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

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

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

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

b. amortization

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

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

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

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

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

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

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

a. reliability.

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.

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

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

e. increased by gains

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

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

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.

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

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

d. revenues to be understated.

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

d. 38.5 days

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

b. loss of $3,000.

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

a. of the historical cost assumption.

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

c. creditors.

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

b. owners on total assets.

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

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

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

b. time period assumption.

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

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

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

b. Financing Activity

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

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

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

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

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

a. $756. 900 \* 0.840 = 756

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

b. $400. 1,900 – 1,500 = 400

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

b. Income statement

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

c. assets.

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

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

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

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

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

b. Services performed on account

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

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

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

a. Net Income ÷ Common Stock Outstanding

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

d. Declining-balance

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.

e. A Liability.

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

b. to the Securities and Exchange Commission

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.

d. salary information for the key executives.

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

b. Assets = Liabilities + Stockholders’ Equity.

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.

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

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

c. 13

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

b. $319. 400\*.797=318.8

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.

a. July 31 Because he did the work.

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

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

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

D. To generate revenue

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

B. Company B

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

D. 1,600

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

A. Contra assets reduce

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

B. Cash in producing revenues

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

C. An auditor report

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

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

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.

C. CGS will understated and Net income overstate

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.

e. All of the above.

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.

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

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

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

Prime object of a business is to increase equity

Acquiring assets

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

Balance sheet

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

b. Aging of accounts receivable method

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

a. Amortization

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

b. December 10

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

d. The normal balance of an expense account is credit