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Accounting > Hard Questions > Flashcards

Hard Questions Flashcards

1
Q
  1. Among the assets listed below, which one is considered the most liquid?
    a. Cash
    b. Accounts receivable
    c. Merchandise inventory
    d. Prepaid expenses
A

a. Cash

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2
Q
  1. Which one of the following is a financing activity of a business?
    a. Paying for purchases of inventory
    b. Issuing stock for cash
    c. Paying salaries
    d. Purchasing a manufacturing plant
A

b. Issuing stock for cash

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3
Q 
17.	The following information is given for Camino Company:
Cash: $ 50,000        
Inventory $ 45,000
Land   75,000          
Plant & Equipment     150,000 
Accumulated Depreciation 40,000
Accounts Payable 60,000

What are the company’s current assets?

a. $220,000
b. $155,000
c. $130,000
d. $ 95,000
e. None of the above

A

d. $ 95,000

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4
Q
  1. The cash payment of employee salaries has what effect on the accounting equation?
    a. Assets decrease and stockholders’ equity decreases.
    b. Liabilities decrease and stockholders’ equity decreases.
    c. Assets decrease and liabilities increase.
    d. Assets increase and liabilities decrease.
A

a. Assets decrease and stockholders’ equity decreases.

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5
Q
  1. Which one of the following statements is true?
    a. Good cash management practices dictate that a company should maintain as large a balance as possible in its cash account.
    b. Sound internal control practice dictates that disbursements should be made by check.
    c. The person handling the cash should also prepare the bank reconciliation.
    d. Petty cash can be substituted for a checking account to expedite the payment of all disbursements.
A

b Sound internal control practice dictates that disbursements should be made by check.

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6
Q

The accrual basis of accounting records revenues when they are:

a. Readily available for use
b. Earned
c. Cash is received
d. Contracted for
e. None of the above

A

b. Earned

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7
Q 
Which account increases equity?
aTreasury stock 
b. Revenues
c. Expenses
d. Cash withdrawal
A

b. Revenues

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8
Q

Pumpkin Company owns land that cost $100,000. If a “quick sale” of the land was necessary to generate cash, the company feels it would receive only $80,000. The company continues to report the asset on the balance sheet at $100,000. Which of the following concepts justifies this?

a. historical-cost principle
b. The land was not recorded as its appropriate value at its acquisition, therefore it is not justified
c. Neither of the above
d. Both (a) and (b)

A

a. historical-cost principle

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9
Q

Tara Company had the beginning value of total stockholders’ equity of $160,000. During the year, total assets increased by $240,000 and total liabilities increased by $120,000. Tara’s net income was $180,000. No additional investments were made. However, dividends did occur during the year. How much were the dividends?

a. $20,000
b. $60,000.
c. $140,000.
d. $220,000.
e. None of the above

A

b. $60,000.

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10
Q

Which of the following statements regarding the income statement is true?

a. The income statement can be thought of as the statement of operations of a business entity
b. The income statement reports revenue, expenses, and liabilities
c. The income statement only reports revenue for which cash was received at the point of sale
d. The income statement reports the financial position of a business at a particular point in time.

A

a. The income statement can be thought of as the statement of operations of a business entity

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11
Q

Which of the following statements regarding retained earnings is false?

a. Retained earnings is increased by net income
b. Retained earnings is a component of stockholders’ equity on the balance sheet
c. Retained earnings is an asset on the balance sheet
d. Retained earnings represents earning not distributed to stockholders in the form of dividends

A

c. Retained earnings is an asset on the balance sheet

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12
Q

Which of the following statements regarding the statement of cash flows is false?

a. The statement of cash flow separates cash inflow and outflows into three major categories:
operating, investing and financing

b. The ending cash balance shown on the statement of cash flows must be the same as the
amount shown on the balance sheet at the end of the same period

c. The total increase or decrease in cash shown on the statement of cash flows must be the same as the bottom line (net income or net loss) reported on the income statement
d. The statement of cash flows covers a period of time

A

c. The total increase or decrease in cash shown on the statement of cash flows must be the same as the bottom line (net income or net loss) reported on the income statement

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13
Q

A building with an appraisal value of $250,000 is made available at an offer price of $180,000. The purchaser acquires the property using a combination of financing sources. The purchaser thus pays; $35,000 in cash, a 90-day note payable for $65,000, and a mortgage (long term loan, including interest payment) amounting to $63,000. The cost basis recorded in the buyer’s accounting records to recognize this purchase is:
a. $250,000 b. $180,000 c. $163,000 d. $100,000

A

c. $163,000

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14
Q

The landlord records the security deposit she collects from the tenant as a(n):

a. asset
b. liability
c. contingent liability
d. contra liability

A

b. liability

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15
Q

A company has $8,000 in cash, $9,250 in accounts receivable, and $19,500 in inventory. If current liabilities are $14,350, then the quick ratio would be:

a. 5.0
b. 2.6
c. 2.0
d. 1.2

A

d. 1.2

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16
Q

Marsh Corporation borrowed $90,000 by issuing a 12%, six-month note payable, all due at the maturity date. After one month, the company’s total liability (loan and interest payable component) for this loan amounts to:

a. $91,800
b. $90,900
c. $90,450
d. $90,000
e. None of the above

A

b. $90,900

17
Q

On November 1, 2016, Brownsville Co. borrowed $80,000 from State Bank and signed a 12%, six-month note payable, all due at maturity. The interest on this loan is stated separately. At December 31, 2016, the adjusting entry for this note includes a:

a. Debit to Interest Expense for $3,200.
b. Credit to Notes Payable for $1,600.
c. Credit to Cash for $4,800.
d. Credit to Interest Payable for $1,600.
e. None of the above

A

d. Credit to Interest Payable for $1,600.

18
Q

“Claims to economic resources” are known as
A. Assets and liabilities
B. Liabilities and stockholders’ equity
C. Owners’ equity and stockholders’ equity
D. Retained earnings and revenues

A

B. Liabilities and stockholders’ equity

19
Q 
14. A credit means that
A. the event has an effect on the left side of an account.
B. theeventisunfavorable.
C. theeventisfavorable.
D. None of these choices.
A

D. None of these choices.

20
Q 
Zack Co. reported a net loss of $50,000 for 2016, yet its cash balance increased during the year. Which financial statement should Zack’s management refer to for an explanation of this situation?
A. Balance sheet
B. Incomestatement
C. Statement of Retained Earnings
D. Statement of Cash Flows
A

D. Statement of Cash Flows

21
Q

Your bookkeeper is off for the day and you are trying to figure out what her last entry in the journal could be for. Unfortunately, she only recorded the debit side of the transaction as $4,400 to Accounts Payable. It is possible that this debit could correspond to:
A. A purchase of equipment costing $4,400 on credit.
B. A payment of $4,400 to a supplier to settle a balance due.
C. A $4,400 sale to a customer.
D. A $4,400 issuance of the company’s capital stock

A

B. A payment of $4,400 to a supplier to settle a balance due.

22
Q

Dom’s Motor Mart sold merchandise to a customer for $3,000 on credit on March 10. The customer paid Fox Auto the amount due on March 31. Under the accrual basis of accounting, which of the following statements is true?
A. Fox Auto will recognize the revenue on March 31.

B. The March 10th transaction increases revenue, but has no effect on assets because cash has not been received.

C.Revenue is recognized after the cost of the merchandise sold has been paid by FoxAuto.

D. The March 31st transaction has no effect on total assets under the accrual basis.

A

D. The March 31st transaction has no effect on total assets under the accrual basis.

23
Q

8Sun Corp. sells merchandise to customers. Sun should normally recognize
A. Cash revenue only and the related expenses in the same accounting period as earned whether payment is received or not

B. Revenue when the cash is collected and the expenses when Mendes pays its creditor for the merchandise

C. Revenue and expenses after all payments are collected

D. Cash and credit revenue and the related expenses in the same accounting period as earned whether payment is received or not

A

D. Cash and credit revenue and the related expenses in the same accounting period as earned whether payment is received or not

24
Q

What effects on a retail store’s accounting equation occur when merchandise returned by customers is recorded?
A. Stockholders’ equity decreases and liabilities increase.
B. Assets and stockholders’ equity decrease.
C. Assets and stockholders’ equity increase.
D. Assets decrease and liabilities increase.

A

B. Assets and stockholders’ equity decrease.

25
Q 
Which one of the following could never be considered to be cash equivalents?
A. Common stock issued by a corporation
B. Moneymarketfunds
C. Corporatecommercialpaper
D. U.S. Treasury bills
A

A. Common stock issued by a corporation

26
Q

A building with an appraisal value of $250,000 is made available at an offer price of $180,000. The purchaser acquires the property for $35,000 in cash, a 90-day note payable for $65,000, and a mortgage amounting to $63,000. The cost basis recorded in the buyer’s accounting records to recognize this purchase is

A. $250,000
B. $180,000
C. $163,000
D. $100,000

A

C. $163,000

27
Q

Which one of the following statements regarding internal control is true?
A. Companies can design a system of internal control that is foolproof.

B. A well-designed internal control system is a luxury that few companies can afford.

C. It is easier to implement an effective internal control system in a small company because of the limited number of employees.

D. Large companies are able to devote a substantial amount of resources to internal control
systems because these companies have the assets to justify the cost.

A

D. Large companies are able to devote a substantial amount of resources to internal control
systems because these companies have the assets to justify the cost.

28
Q 
A company has $200 in cash, $500 in accounts receivable, and $700 in inventory. If current liabilities are $400, then the current ratio would be
A. 1.75 to 1
B. 3.50 to 1
C. 3.00 to 1
D. 2.25 to 1
A

B. 3.50 to 1

29
Q 
Walton Corporation shows the following in the stockholders' equity section of its balance sheet: The stated value of its common stock is $0.50 and the total balance in the common stock account is $37,500. Also noted is that 5,000 shares are currently designated as treasury stock. The number of shares outstanding is
A. 80,000. 
B. 75,000. 
C. 72,500. 
D. 70,000
A

D. 70,000

30
Q

hich of the following is least useful in evaluating a company’s financial statements?

A. Comparison of the company’s current period data with accounting data from 5 years ago

B. Comparison with other companies in the same industry

C. Comparison with government economic data for the economy as a whole.

D. Comparison of the company’s current period data with that of the last year

A

A. Comparison of the company’s current period data with accounting data from 5 years ago

Accounting (7 decks)

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