gyu questions before the midterm

Question 1

what are the effects of writing off bad debts on net earnings and net accounts receivable?

Answer 1

The write-off of bad debts using the allowance method decreases the asset accounts receivable and the contra asset allowance for doubtful accounts by the same amount

as a consequence, (a) net earnings are unaffected and (b) accounts receivable, net, is unaffected.

Question 2

accounts receivables are typically collected with¡n three months from date of sale can they be considered cash equivalents?

Answer 2

Accounts receivable cannot be considered cash equivalents

They are normally collected within three months and therefore meet part of the definition of cash equivalents.

However, they are not readily convertible to cash as the conversion to cash depends on the actions of others (e.g., the customer)

there may be a significant amount of risk that the value will change in that the collection may not be assured

Question 3

what is the purpose of a bank reconciliation?

which are the balances reconciled?

Answer 3

determine the “true” cash balance

provide data to adjust the Cash account to that balance

provide control over the cash account through independent verification

Bank reconciliation involves reconciling the balance in the Cash account at the end of the period with the balance shown on the bank statement at end of the same period

Question 4

how is working capital affected by a write off of an uncollectible amount?

Answer 4

it has no impact when allowance method I used

The asset account (Accounts receivable) and the contra- asset account (allowance for uncollectible account) are both reduced by the same amount

Question 5

how is working capital affected by a bad debt expense?

Answer 5

Working capital is decreased when bad debt expense is recorded

the contra–asset account (Allowance for Uncollectible Accounts) is increased

Question 6

how are net earnings affected by a write of an allowance for uncollectible account?

Answer 6

not affected

Question 7

how are net earnings affected by a write of a bad debt expense?

Answer 7

they are reduced

Question 8

what does the gross profit percentage measure?

Answer 8

how much gross profit is generated from every sales dollar

It reflects the ability to charge premium prices and purchase or produce goods and services at low cost

Question 9

what does the receivables turnover ratio measure?

Answer 9

how many times trade accounts receivable are recorded and collected during the period

for the year, you do 365/x

gives the average amount of time that receivables are paid at

Question 10

does the estimated unreceivables affect the Accounts Receivable account in the statement of financial position?

Answer 10

yeeee

it decreases it

Question 11

what is the direct write-off method?

Answer 11

saves time and effort in estimating the amount of receivables that may not be collected in the future

you just consider the bad debt expense for the period as the amount that has already been written off

boyyy

Question 12

when is the direct write off method acceptable?

Answer 12

if the amounts that are written off annually are relatively small or if they are close to the amount that would be considered uncollectible under the allowance method

Question 13

A company makes an adjusting entry to reduce a liability. This adjustment would:

A. decrease an asset account by the same amount.

B. increase an expense account by the same amount.

C. increase a revenue account by the same amount.

D. decrease a liability account by the same amount.

Answer 13

C. increase a revenue account by the same amount.

unearned revenue is decreased by¡because revenues has now been earned

when adjusting entries, you recognize revenues and liabilities

Question 14

12. Examples of internal transactions include all of the following except:

A. writing off an uncollectible account.

B. recording the expiration of prepaid insurance.

C. recording unpaid wages.

D. paying wages to company employees.

Answer 14

D. paying wages to company employees.

Question 15

13. Permanent accounts would not include:

A. Interest expense.

B. Wages payable.

C. Prepaid rent.

D. Deferred revenues.

Answer 15

A. Interest expense.

Question 16

what is a permanent account

Answer 16

real accounts

accounts that do not close at the end of the accounting year

the shit that isn’t supposed to show in the adjusted statement of financial position

Question 17

Corporations provide shareholders with quarterly and annual financial statements. This is an
example of the following concept:

A. Going Concern

B. Monetary Unit.

C. Periodicity

D. Relevance

Answer 17

C. Periodicity

Question 18

Which of the following statements is correct?

A. Adjusting entries to decrease prepaid expenses involve previously recorded assets.

B. Adjusting entries to record accrued revenues involve assets that have not yet been
recorded.

C. Adjusting entries to decrease deferred revenues involve previously recorded liabilities.

D. All of these statements are correct.

Answer 18

D. All of these statements are correct.

Question 19

how do you record a sale with a credit card charge?

Answer 19

CASH as debit

Credit card fee/discount as debit

       Sales revenue as credit

is this shit wrong boy?

Question 20

Which of the following is a temporary account:

a. Retained earnings
b. Deferred revenue
c. Accumulated depreciation
d. Interest expense

Answer 20

d. Interest expense

Question 21

Which of the following statements is incorrect about earnings per share?

a. It is required to be disclosed on the income statement.
b. It equals Retained Earnings divided by the number of shares outstanding.
c. A steady increase in earnings per share is a signal of good management.
d. It is used to evaluate a company’s profitability.

Answer 21

b. It equals Retained Earnings divided by the number of shares outstanding.

it is the average*** shares outstanding

Question 22

The usefulness of the debt-to-equity ratio is that it allows interested parties to assess

a. how the company finances its assets.
b. the relative risk assumed by the company because of debt financing.
c. whether the company should expand its use of debt to finance assets.
d. All of the above.

Answer 22

d. All of the above.

Question 23

Which of the following statements best describes the matching process?

a. Total assets should equal the sum of total liabilities and shareholders’ equity.
b. Revenues should be recognized when they are earned, instead of when cash is received.

c. Revenue and the expenses that were incurred to earn that revenue should be reported in
the same accounting period.

d. The total amount of debits should always equal the total amount of credits.

Answer 23

c. Revenue and the expenses that were incurred to earn that revenue should be reported in
the same accounting period.

Question 24

13. The time it takes for a company to pay cash to suppliers, sell goods and services to customers,
    and collect cash from customers is called:

a. Revenue cycle
b. Life cycle
c. Operating cycle
d. Cash cycle

Answer 24

c. Operating cycle

Question 25

Which of the following statements reflects a weak internal control procedure for cash?

a. At the end of a business day, the person who handles cash disbursement is allowed to
keep no more than $1,000 cash in his safe.

b. All cash receipts should be deposited in a bank on a daily basis.
c. For payment larger than $10,000, signatures from two authorized personnel are required.

d. Only one person should handle cash receipts and cash disbursements so as to reduce
labour costs and limit access to cash.

Answer 25

d. Only one person should handle cash receipts and cash disbursements so as to reduce
labour costs and limit access to cash.

Question 26

Which of the following is not a contra-revenue account?

a. Credit card discounts
b. Sales discounts
c. Sales returns and allowances
d. Allowance for doubtful accounts

Answer 26

d. Allowance for doubtful accounts

Question 27

18. Accounting information is considered to be relevant when
    a. it represents the economic conditions and events that it is intended to represent.
    b. it is capable of making a difference in a decision.
    c. it is understandable by reasonably informed users.
    d. it is verifiable and neutral.

Answer 27

b. it is capable of making a difference in a decision.

Question 28

The bookkeeper of Giants Co. recorded a cash collection on account by debiting Cash and
crediting Trades Payable. As a result of this error,

a. The trial balance will still balance.
b. Total liabilities will be overstated on the trial balance.
c. Total assets will be overstated on the trial balance.
d. All statements above are correct.

Answer 28

d. All statements above are correct.

Question 29

Which of the following situations would cause investors to overpay for the acquisition of a company from its current owners?

a) Understated trade payables and overstated inventory.
b) Understated revenues and overstated expenses.
c) Understated assets and overstated expenses.
d) Understated assets and overstated revenues.

Answer 29

a) Understated trade payables and overstated inventory.

Question 30

Which statement is false regarding the financial statements?

a) Current assets reported in the statement of financial position are generally
reported in order of their liquidity.

b) Distributions to owners (dividends) are reported in the statement of earnings.
c) Expenses on the statement of earnings are reported as incurred, not as paid.

d) The statement of cash flows reports the sources and uses of cash during the
accounting period.

Answer 30

b) Distributions to owners (dividends) are reported in the statement of earnings.

Question 31

In order for accounting information to be relevant, it must

a) Have very little cost.
b) Help predict future economic events or confirm prior expectations.
c) Be verifiable.
d) Be used by a lot of different organizations.

Answer 31

b) Help predict future economic events or confirm prior expectations.

Question 32

When the auditors give an unqualified opinion, it means the company’s financial statements do not conform to international financial reporting standards.

a) True
b) False

Answer 32

b) False

Question 33

The balance in Allowance for Doubtful Accounts would have a debit balance when

a) The percentage of receivables basis is used.
b) An uncollectible account is later recovered.
c) Write-offs during the year have been less than previous estimates.
d) Write-offs during the year have exceeded previous estimates.

Answer 33

d) Write-offs during the year have exceeded previous estimates.

Question 34

If a cheque correctly written and paid by the bank for $521 is incorrectly recorded on the company’s books for $251, the appropriate treatment on the bank reconciliation
would be to

a) Add $270 to the balance per bank.
b) Add $270 to the balance per books.
c) Deduct $270 from the balance per books.
d) Deduct $270 from the balance per bank.

Answer 34

c) Deduct $270 from the balance per books.

Question 35

Which of the following is not an objective of internal control?

a. Maximizing profit
b. Ensuring the accuracy and reliability of accounting records
c. Safeguarding assets
d. Complying with legal requirements

Answer 35

a. Maximizing profit

Question 36

Which are two of the most common adjustments made to the bank statement balance during the
bank reconciliation process?

a. Deducting customer NSF cheques and adding bank service charge fees.
b. Deducting deposits in transit and adding outstanding cheques.
c. Adding NSF cheques and deducting service charge fees.
d. Adding deposits in transit and deducting outstanding cheques.

Answer 36

d. Adding deposits in transit and deducting outstanding cheques.

Question 37

once again, does the write off of an uncollectible have an effect on the net amount of accounts receivables?

Answer 37

nah

because you remove a contra asset and an asset by the same amount

Question 38

The conceptual framework of accounting helps to ensure that

a. users with no accounting or business knowledge will understand financial statements.
b. a rule will be in place for every possible situation.
c. there are consistent standards prescribing the nature, functions and limits of financial statements.
d. all countries have their own unique accounting standards.

Answer 38

c. there are consistent standards prescribing the nature, functions and limits of financial statements.

Question 39

What is the primary purpose of hiring a public accounting firm to examine the financial statements of the company?

a. To assure no fraud has been committed by the company’s management.
b. To provide credibility that the financial information conforms with international financial reporting standards in all material respects.
c. To detect all accounting errors made by the accounting system and employees.
d. To detect fraud committed by employees.

Answer 39

b. To provide credibility that the financial information conforms with international financial reporting standards in all material respects.

Question 40

An understatement of the beginning inventory results in

a. no effect on the period’s earnings.
b. an overstatement of earnings.
c. an understatement of earnings.
d. a need to adjust purchases.

Answer 40

b. an overstatement of earnings.

Question 41

The two qualitative characteristics that are defined in terms of what influences or makes a difference to a decision maker are

a. faithful representation and materiality.
b. comparability and verifiability.
c. relevance and completeness.
d. materiality and relevance.

Answer 41

d. materiality and relevance.

Question 42

On the statement of cash flows, how would a company report the purchase of machinery?

a. As cash used in operating activities.
b. As cash used in financing activities.
c. As cash used in investing activities.
d. It doesn’t matter how it is reported as long as it is shown as an outflow of cash.

Answer 42

c. As cash used in investing activities.

Question 43

Accounting information should be neutral to enhance:

a) Faithful representation.
b) Relevance
c) Comparability
d) Understandability.

Answer 43

a) Faithful representation.

Question 44

XYZ Company discovered that its ending inventory at December 31, 2015 was overstated by $10,000 after completing its financial statements. This error affects the 2015 financial statements as follows.

a. Assets are understated and net earnings is overstated.
b. Assets are overstated and net earnings is understated.
c. Assets are understated and net earnings is understated.
d. Assets are overstated and net earnings is overstated.

Answer 44

d. Assets are overstated and net earnings is overstated.

Question 45

Which of the financial statement(s) addresses the question: “What is the financial picture of the organization on a given day?”

a) Statement of Retained Earnings.
b) Statement of Cash Flows.
c) Statement of Comprehensive Income.
d) Statement of Financial Position.
e) All of the above.

Answer 45

d) Statement of Financial Position.

Question 46

Which of the following transactions decreases earnings under the accrual basis but does not decrease earnings under the cash basis?

a. Payment of the current period’s telephone bill.
b. Payment of rent for two months in advance.
c. Expiration of prepaid rent.
d. Return of defective inventory purchased on account, where full credit was given.

Answer 46

c. Expiration of prepaid rent.