question

The two types of accounting are: a) profit and nonprofit b) financial and managerial c) internal and external d) bookkeeping and decision-orientented

answer

financial and managerial

question

The acronym GAAP stands for: a) generally acceptable authorized pronouncements b) government authorized accountant principles c) generally accepted accounting principles d) government audited accounting procnouncements

answer

generally accepted accounting principles

question

To be useful, accounting information must have the fundamental qualitative characteristics of: a) comparability and relevance b) relevance and faithful representation c) materiality and understandibility d) faithful representation and timeliness

answer

relevance and faithful representation

question

The accounting equation can be stated as: a) assets + equity = liabilities b) assets - liabilities = equity c) assets = liabilities - equity d) assets - equity + liabilities = 0

answer

assets - liabilities = equity

question

Net income is computed as: a) revenues - expenses - dividends b) revenues + expenses c) revenues - expenses d) revenues - expenses + dividends

answer

revenues - expenses

question

If an investor wants to know how much cash the company generated and spent during the year, the main financial statement they should look at is the: a) balance sheet b) statement of retained earnings c) income statement d) statement of cash flows

answer

statement of cash flows

question

Which of the following transactions will increase Stockholders' equity? a) The company pays a dividend to its shareholders b) The company issues common stock to new shareholders c) The president of the company buys a new personal automobile d) The company has a net loss from operations for one year

answer

The company issues common stock to new shareholders

question

Goods purchased on account for future use in the business, such as store supplies, are called: a) accrued liabilities b) expenses c) revenues d) prepaid expenses

answer

prepaid expenses

question

When services are performed on account for a customer: a) cash is increased b) revenue will not be recorded until the cash is received from the customer c) accounts receivable is increased d) accounts payable is increased

answer

accounts receivable is increased

question

When a business purchases land on account: a) both assets and stockholders' equity are increased b) assets are decreased and stockholders' equity is increased c) both assets and liabilities are increased d) assets are increased and liabilities are decreased

answer

both assets and liabilities are increased

question

Company Z sells land for the same amount it paid for it three years ago. When the company records this transaction: a) assets and stockholders' equity are increased b) one asset is increased and another asset is decreased c) one liability is increased and another liability is decreased d) assets are increased and liabilities are decreased

answer

one asset is increased and another asset is decreased

question

When a company borrows cash from the bank: a) total assets remain the same b) total liabilities remain the same c) retained earnings is decreased d) liabilities are increased

answer

liabilities are increased

question

An important fact to remember when analyzing the transactions of a company is that: a) the income statement data appears under common stock b) the balance sheet data includes the ending balances of the asset, liabilities and revenues of the company c) the income statement includes revenues and expenses d) dividends are added when computing the ending balance of retained earnings

answer

the income statement includes revenues and expenses

question

A company paid cash for an amount owed to a creditor. This transaction decreased cash and: a) decreased revenues b) decreased liabilities c) decreased expenses d) increased expenses

answer

decreased liabilities

question

An important rule to remember when analyzing the impact of business transactions on accounts is: a) net income increases stockholders' equity b) if expenses exceed revenues, the company will have a net income c) a net loss does not affect stockholders' equity d) stockholders' equity includes the two categories of income statement accounts, revenues and liabilities

answer

net income increases stockholders' equity

question

Company A received cash and issued stock to a new stockholder. In recording this transaction: a) cash would be debited b) common stock would be debited c) cash would be credited d) retained earnings woud be credited

answer

cash would be debited

question

Every transaction: a) must increase at least one account and decrease at least one account b) must debit at least one account and credit at least one account c) is recorded in either the journal or the ledger d) affects both an income statement account and a balance sheet account

answer

must debit at least one account and credit at least one account

question

A transaction that includes a debit to an expense and a credit to liability indicates that: a) revenues increased b) expenses increased c) liabilities decreased d) cash decreased

answer

expenses increased

question

On December 15, 2012, a company receives and order from a customer for services to be performed on December 28, 2012. Due to a backlog of orders, the company does not perform the services until January 3, 2013. The customer pays for the services on January 6, 2013. The revenue principle requires the revenue to be recorded by the company on: a) December 15, 2012 b) January 3, 2013 c) December 28, 2012 d) January 6, 2013

answer

January 3, 2013

question

Which of the following is a correct statement about the methods of accounting? a) cash-basis accounting records revenues when they are earned b) cash-basis accounting records expenses only at the end of the month c) GAAP requires accrual accounting d) accrual accounting records an expense when cash is paid

answer

GAAP requires accrual accounting

question

Adjusting entries are: a) not needed under the accrual basis of accounting b) prepared at the option of the accountant c) prepared at the beginning of the accounting period to update all accounts d) prepared at the end of the accounting period to update certain accounts

answer

prepared at the end of the accounting period to update certain accounts

question

The net book value of a plant asset is the: a) accumulated depreciation less the cost of the asset b) cost of the asset less the accumulated depreciation c) balance in the accumulated depreciation account d) cost of the asset

answer

cost of the asset less the accumulated depreciation

question

A liability that is recorded for an expense that has not yet been paid is a(n): a) unearned expense b) prepaid expense c) accrued liability d) accrued revenue

answer

accrued liability

question

The Accumulated Depreciation account: a) is a contra asset account b) represents the original cost of the cost c) is another term for depreciation expense d) has a normal balance which is the same as its companion account

answer

is a contra asset account

question

At the end of an accounting cycle all of the following accounts will be closed to Retained Earnings except for: a) cash b) service revenue c) dividends d) utilities expense

answer

cash

question

The cost of merchandise that is still on hand has not been sold to customers is called: a) cost of goods sold, an expense that appears on the income statement b) inventory, a current asset that appears on the income statement c) inventory, a current asset that appears on the balance sheet d) purchases, an expense that appears on the income statement

answer

inventory, a current asset that appears on the balance sheet

question

Which is the correct order for items to appear on the income statement? a) sales revenue, operating expenses, gross profit, net income b) sales revenue, gross profit, net income, operating expenses c) sales revenue, gross profit, cost of goods sold, operating expenses d) sales revenue, cost of goods sold, gross profit, net income

answer

sales revenue, cost of goods sold, gross profit, net income

question

The inventory system that uses computer software to keep a running record of inventory on hand is the: a) cost of goods sold inventory system b) periodic inventory system c) perpetual inventory system d) hybrid inventory system

answer

perpetual inventory system

question

How do purchase returns and allowances and purchase discounts affect gross purchases? a) both are added to purchases b) both are subtracted from purchases c) purchase returns and allowances are added to purchases; purchase discounts are subtracted from purchases d) purchase returns and allowances are subtracted from purchases; purchase discounts are added to purchases

answer

both are subtracted from purchases

question

A company purchased inventory for $800 per unit. The company later sold the inventory for $1,000 per unit. The entries to record the sale for cash and cost of goods sold would include debits to which of the following accounts? a) sales, $1,000; Inventory, $800 b) cash $1,000; cost of goods sold, $800 c) cash, $800; cost of good sold, $1,00 d) sales, $800; inventory, $800

answer

cash, $1,000; cost of goods sold, $800

question

To determine cost of goods sold under the FIFO method: a) the first costs into the inventory are the first costs assigned to cost of goods sold b) the last costs into the inventory are the first costs assigned to cost of goods sold c) the average cost of the inventory must be determined d) the company must first determine the specific units sold

answer

the first costs into the inventory are the first costs assigned to cost of goods sold

question

When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is: a) higher than cost of goods sold under the LIFO method b) lower than cost of goods sold under the LIFO method c) equal to the gross profit under the LIFO method d) equal to cost of goods sold under the LIFO method

answer

lower than cost of goods sold under the LIFO method

question

The two most common types of fraud impacting financial statements are: a) fraudulent financial reporting and e-commerce fraud b) misappropriation of assets and embezzlement c) fraudulent financial accounting and misappropriation of assets d) cooking the books and fraudulent financial accounting

answer

fraudulent financial accounting and misappropriation of assets

question

With a lock-box system which of the following is true? a) customers send their checks by mail directly to a post office box controlled by the company b) the bank posts the deposits to the company 's accounts receivable accounts c) it takes more time for the cash to be deposited into the company's bank account d) company personnel never touch the incoming cash

answer

company personnel never touch the incoming cash

question

Which of the following is an incorrect statement regarding short-term investments? a) short-term investments are also called marketable securities b) short-term investments are easily convertible to cash c) short-term investments must be held for less than three months d) short-term investments allow a company to invest cash and earn a return

answer

short-term investments must be held for less than three months

question

Stock investments that are to be sold in the near future with the intent of generating profits on the sale are: a) investments b) trading securities c) available-for-sale securities d) debt securities

answer

trading securities

question

ABC Company purchases a trading security for $12,000. The entry to record this transaction will include a: a) debit to the investment account b) credit to the investment account c) debit to the unrealized gain account d) credit to the dividend revenue account

answer

credit to the investment account

question

An unrealized gain: a) is recorded when a trading security is sold for more than its cost b) is recorded when a trading security is sold for less than its cost c) is recorded at the end of an accounting period when the fair value of the trading security is more than its cost d) is recorded at the end of an accounting period when the fair value of the trading security is less than its cost

answer

is recorded at the end of an accounting period when the fair value of the trading security is more than its cost

question

When goods are shipped FOB destination, revenue is recognized: a) when the goods leave the shipping dock b) after any returns are received by the seller c) only after cash payment is received d) when the goods are received by the customer

answer

when the goods are received by the customer

question

When a company sells a trading investment, the gain or loss on the sale is reported on the: a) revenues section of the income statement b) short-term investments section of the balance sheets c) other revenue, gains, and losses section of the balance sheet d) other revenue, gains, and losses section of the income statement

answer

other revenue, gains, and losses section of the income statement

question

The net realizable value of accounts receivable is the difference between accounts receivable and: a) allowance for uncollectible accounts b) net revenue c) uncollectible-account expense d) sales discount

answer

allowance for uncollectible accounts

question

The entry to write off a specific account under the allowance method for estimating uncollectible accounts: a) reduces total assets b) reduces net income c) has no effect on total assets or net income d) increases net income

answer

has no effect on total assets or net income

question

The journal entry to record accrued interest on a short-term note payable must include a debit to: a) interest payable and a credit to cash b) interest expense and a credit to cash c) interset expense and a credit to interest payable d) interest payable and a credit to notes payable

answer

interest expense and a credit to interest payable

question

Potential liabilities that depend on the future events arising out of past events are called: a) long-term liabilities b) estimated liabilities c) contingent liabilities d) current liabilities

answer

contingent liabilities

question

Curtis Corporation issued $200,000 of 10% bonds on January 1. The bonds pay interest semiannually on January 1 and July 1. The company has a fiscal year end of May 31. On May 31, the Curtis Corporation will: a) make a journal entry to accrue interest expense from July 1 through December 31 b) make a journal entry to accrue interest expense from January 1 through July 1 c) make a journal entry to accrue interest expense from January 1 through May 31 d) none of the above is correct

answer

make a journal entry to accrue interest expense from January 1 through May 31

question

At the end of the year, a company makes a journal entry to accrue the interest expense on a short-term note payable. As a result of this transaction: a) current liabilities increase and current assets increase b) current liabilities increase and equity increases c) current liabilities decrease and equity decreases d) current liabilities increase and equity decreases

answer

current liabilities increase and equity drecreases

question

Failure to record an accrued liability causes a company to: a) overstate income b) overstate assets c) understate liabilities d) understate owners' equity

answer

understate liabilities

question

Double taxation means that the: a) corporation's income tax is allocated to the shareholders based on ownership percentage b) corporate earnings are subject to state the federal income tax c) corporation pays tax on its earnings and the shareholders pay tax on dividends d) shareholder's dividends are taxed at the corporate tax rate

answer

corporation pays tax on its earnings and the shareholder's pay tax on dividends

question

Dividends are declared by: a) Chief Accounting Officer b) Board of Directors c) President d) Chief Financial Officer

answer

Board of Directors

question

The difference between the issue price of the stock and the par value of the stock is: a) market value b) par value c) additional paid-in capital d) preferred stock

answer

additional paid-in capital

question

Treasury stock has a: a) debit balance, the opposite of other equity accounts b) credit balance, the same as other equity accounts c) credit balance, the opposite of other equity accounts d) debit balance, the same as other equity accounts

answer

debit balance, the opposite of other equity accounts

question

Company A purchased a used piece of equipment. All of the following costs should be included in the cost of the equipment EXCEPT for: a) insurance while in transit b) sales tax paid c) installation costs d) maintenance costs after the equipment is up and running

answer

maintenance costs after the equipment is up and running

question

Which of the following should be included in the cost of land? a) construction cost of a parking lot b) landscaping c) real estate brokerage commission d) lighting

answer

real estate brokerage commission

question

The lump-sum purchase of assets: a) uses the market values of the assets to determine the cost of each individual asset b) requires the company to divide the total cost among the assets according to their historical cost c) requires the company to record the assets bought as a single asset d) is also known as the group purchase of assets

answer

uses the market value of the assets to determine the cost of each individual asset

question

The process of depreciating an asset over its useful life is an application of the ___ principle. a) full disclosure b) revenue recognition c) historical cost d) matching

answer

matching

question

If an asset is scrapped before being fully depreciated: a) the company will incur a loss on the disposal b) the equipment account will be credited c) the accumulated depreciation account will be debited d) all of the above will occur

answer

all of the above will occur

question

The main purpose of the statement of cash flows is to: a) provide information about the cash receipts and cash payments during a period b) provide information about the investing and financing activities during a period c) prove that revenues exceed expenses if there is a net income d) assist banking relationships

answer

provide information about the cash receipts and cash payments during a period

question

Creditors analyze the statement of cash flows to determine: a) total interest earned during the period b) the quality of the company's earnings c) whether or not the company can pay interest on debt d) if management was overpaid

answer

whether or not the company can pay interest on debt

question

Which of the following is considered to be a cash equivalent? a) investments in short-term U.S Government securities b) accounts receivable c) notes receivable d) trading securities

answer

investments in short-term U.S Government securities

question

Financing activities involve: a) issuing debt b) acquiring long-term assets c) lending money d) acquiring investments

answer

issuing debt

question

Which of the three types of activities reported on the statement of cash flows is the most critical? a) investing activities b) financing activities c) operating activities d) investing and financing activities

answer

operating activities

question

Increases and decreases in the long-term assets available to a company are reported on the statement of cash flows as: a) operating activities b) investing activities c) financing activities d) noncash activities

answer

investing activities

question

Salem Inc. uses the indirect method to prepare its statement of cash flows. Salem's accumulated depreciation trucks account increased during the period. Salem did not purchase or sell equipment during the period. The increase in accumulated depreciation trucks is: a) shown as a cash outflow on the investing activities section b) show as a cash outflow on the financing activities c) subtracted from net income to determine net cash provided by operating activities d) added to net income to determine net cash provided by operating activities

answer

added to net income to determine net cash provided by operating activities

question

On a statement of cash flows prepared using the indirect method, an increase in Accounts Payable during the period is: a) added to net income to determine net cash provided by operating activities b) deducted from net income to determine net cash provided by operating activities c) shown as a cash outflow on the investing activities section d) show as a cash outflow on the financing activities

answer

added to net income to determine net cash provided by operating activities

question

When preparing the statement of cash flows using the indirect method, which statement is NOT true? a) gains on the sale of long-term assets are subtracted from net income b) losses on the sale of long-term assets are subtracted from net income c) depreciation expense is added to net income d) increases in current liabilities are added to net income

answer

losses on the sale of long-term assets are subtracted from net income

question

Which of the following would be reported on a statement of cash flows as a financing activity? a) sale of equipment b) amortization expense c) purchase of treasury stock d) collection of notes receivable

answer

purchase of treasury stock

question

Steadily decreasing cost of goods sold as a percentage of net sales is a sign of: a) increasing earnings quality b) decreasing earnings quality c) lower sales d) higher sales

answer

increasing earnings quality

question

Ongoing expenses incurred by a retailer, other than direct expenses for merchandise and other costs directly related to sales are called: a) other expenses b) operating expenses c) costs of goods sold d) extraordinary items

answer

operating expenses

question

The operating expense section of an income statement would NOT include: a) interest expense b) utilities expense c) supplies expense d) salaries expense

answer

interest expense

question

There will be an income from operations if: a) revenues are greater than cost of goods sold b) revenues are greater than operating expenses c) gross profit is higher than operating expenses d) cost of goods sold is greater than operating expenses

answer

gross profit is higher than operating expenses

question

The formula to determine income tax expense is: a) taxable income( from the income tax return ) multiplied by the income tax rate b) taxable income( from the income statement ) multiplied by the income tax rate c) income before income tax expense ( from the tax return ) multiplied by the income tax rate d) income before income tax expense ( from the income statement ) multiplied by the income tax rate

answer

income before income tax expense ( from the income statement ) multiplied by the income tax rate

question

The gain or loss on the disposal of a business segment is shown on the income statement as: a) an extraordinary item b) part of discontinued operations c) part of income from operations d) other gains or losses

answer

part of discontinued operations

question

Which of the following statements is true? a) the income tax return is prepared by the GAAP b) the income tax return is prepared using rules set by the SEC c) the income tax return is prepared using rules set by the IRS d) the income tax return and the financial statements are the same documents

answer

the income tax return is prepared using rules set by the IRS

question

Which of the following would be considered as an extraordinary item? a) losses from a labor dispute b) losses from a natural disaster c) writing-down inventory to lower-of-cost or market d) losses from the sale of property

answer

losses from a natural disaster

question

Changes in accounting estimates: a) are not allowed under GAAP b) are a prior period adjustment c) are reported for the current and future periods on a new basis d) require prior financial statements to be restated

answer

are reported for the current and future periods on a new basis

question

The amount of a company's net income per share of its outstanding common stock is: a) earnings per share b) gross profit per share c) net income per share d) taxable income per share

answer

earnings per share

question

Earnings per share (EPS) is calculated as: a) the number of shares of common stock outstanding at the end of the year divided by net income b) net income divided by the number of shares of common stock outstanding at the end of the year c) net income divided by the average number of shares of common stock outstanding throughout the year d) the average number of shares of common stock outstanding throughout the year divided by net income

answer

net income divided by the average number of shares of common stock outstanding throughout the year

question

Components of earnings quality include all of the following except: a) low operating expenses b) high and improving gross margin c) a low gross profit d) proper revenue and expense recognition

answer

a low gross profit

question

A extraordinary item is: a) both infrequent and unusual for the company b) unusual for the company c) infrequent for the company d) material with respect to the business and infrequent

answer

both infrequent and unusual for the company

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