Pre-Assessment

Question 1

What is an example of a macro factor in planning a budget?

Answer 1

Interest rates

Question 2

Which organization is focused on developing generally accepted accounting principles (GAAP) within the United States?

Answer 2

Financial Accounting Standards Board (FASB)

Question 3

Which statement is a financial accounting statement?

Answer 3

Income statement

Question 4

What is a benefit of adopting a single set of international accounting standards?

Answer 4

More uniform financial reporting among international companies

Question 5

What is a drawback of the United States using International Financial Reporting Standards (IFRS)?

Answer 5

It would cost U.S. companies time and money in the short term to adopt.

Question 6

What must an accountant record when journalizing a transaction?

Answer 6

Description of the transaction

Question 7

Which financial statement is used to ensure that all debits and credits balance?

Answer 7

Trial balance

Question 8

Which account balance is entered in the balance sheet columns from the adjusted trial balance?

Answer 8

Accounts receivable

Question 9

Which step should an accountant perform next after analyzing source documents to determine their effects on the basic accounting equation?

Answer 9

Journalize the transactions

Question 10

How is a worksheet used?

Answer 10

To help prepare adjusting entries and financial statements

Question 11

Which accounts do closing entries move to retained earnings?

Answer 11

Expense and revenue

Question 12

Why does a stockholder’s equity need to be completed prior to preparing a balance sheet?

Answer 12

The amount of ending balance from the statement of stockholder’s equity must be presented on the balance sheet.

Question 13

Which account appears on a post-closing trial balance?

Answer 13

Capital stock

Question 14

How can accounting technology affect small businesses?

Answer 14

By simplifying the daily posting of routine transactions with accounting packages

Question 15

A company has a lease that requires the company to pay its annual office space rent in advance on December 31 of each year. On a quarterly basis, this expense totals $10,000.

How should the rent expense be recorded on the firm’s books in the following year to account for this transaction?

Answer 15

It should be recorded as a decrease of $40,000 in the asset accounts under prepaid rent.

Question 16

When are revenue and expenses recognized in accrual basis accounting?

Answer 16

Revenue is recognized when earned, and expenses are recognized when incurred.

Question 17

Which account will be a part of the adjusting journal entry to record the interest that has been incurred, but not paid, on a note payable?

Answer 17

Interest payable

Question 18

What information is contained in the balance sheet and the income statement?

Answer 18

The balance sheet contains assets, liabilities, and stockholder’s equity, and the income statement contains revenues and expenses.

Question 19

Which statement reflects effective internal controls?

Answer 19

Each check should be matched to an approved invoice or payment authorization.

Question 20

A firm sells a truck to a customer for $35,000, and the customer is required to pay for the vehicle within 90 days.

How is this purchase entered on the firm’s accounts receivable ledger?

Answer 20

$35,000 debit

Question 21

Which method is used when calculating uncollectible accounts expense using the income statement approach?

Answer 21

Percentage of net credit sales

Question 22

A firm has the following assets and liabilities:

Cash: $10,500
Accounts Receivable: $35,000
Allowance for Doubtful Accounts: $2,000
Accounts Payable: $8,000

After preparing a classified balance sheet, what should the firm’s total assets and liabilities be?

Answer 22

Total assets of $43,500, and total liabilities of $8,000

Question 23

What should a journal entry include when a company purchases inventory on account?

Answer 23

Increase in liabilities

Question 24

An examination of Company A’s finances shows assets of $50,000 and stockholder’s equity of $45,000.

What are the liabilities for Company A?

Answer 24

$5,000

Question 25

A corporation paid $5,000 in gross pay to its employees for the current month’s payroll.

Which entry is needed?

Answer 25

Debit wages expense $5,000

Question 26

A company has four employees who are paid every two weeks. Each biweekly payroll has a total expense of $7,500 and covers ten working days. The company accountant is completing the bookkeeping for January, which includes four days of the current pay period.

Which adjustment will need to be entered for these accruals?

Answer 26

Credit salary payable for $3,000

Question 27

What determines the frequency of deposits of federal income taxes withheld and Social Security and Medicare taxes?

Answer 27

Amount owed by the firm

Question 28

Which concept is measured by the current ratio?

Answer 28

Liquidity

Question 29

Which characteristic of an organization is assessed using financial statement analysis?

Answer 29

Solvency

Question 30

How can potential creditors use financial statement analysis?

Answer 30

To determine a company’s ability to pay short-term debts

Question 31

What does horizontal analysis evaluate?

Answer 31

Increases or decreases in financial statement information over a period of time

Question 32

Which financial statement(s) contain the information needed to compute the current ratio?

Answer 32

Balance sheet

Question 33

Which financial statement(s) contain the information needed to compute return on sales?

Answer 33

Income statement

Question 34

Why would an accountant conduct financial forecasting?

Answer 34

To determine if a company will need additional investors

Question 35

Mindy owns a small accounting firm that is considering increasing their prices for some services. She calls the entire staff of 10 accountants to vote on which services should make price changes.

Which type of decision-making style is Mindy using?

Answer 35

Democratic

Question 36

James is a manager at a university. He has been asked to make a decision regarding the need for new employees. He asks Mary for advice, as she has made similar decisions in the past.

What role in the RACI matrix does Mary hold?

Answer 36

Consulted

Question 37

Alex received accounting information via a message that was formatted with a header that included date, to, from, and subject lines.

Which form of communication was used?

Answer 37

Memorandum

Question 38

Which form of communication should be used to convey to investors about the successes and future plans of the company?

Answer 38

Business report

Question 39

Where should deadlines be included in a business letter?

Answer 39

Conclusion

Question 40

Leticia knows that the income statement she is preparing for her organization will be shared with investors who are not accounting professionals.

What should Leticia do to ensure effective communication with the investors?

Answer 40

Have a verbal discussion with the investors to provide additional feedback after they have had an opportunity to read the income statement