question

The balance sheet might also be called:

answer

Statement of Financial Position

question

A fiscal year

answer

is frequently selected based on the firm's operating cycle

question

The time frame associated with a balance sheet is:

answer

a point in time in the past

question

The balance sheet equation can be represented by

answer

Assets - Liabilities = Stockholders' Equity Assets = Liabilities + Stockholders' Equity Net Assets = Stockholders' Equity

question

Stockholders' equity refers to which to the following

answer

The ownership right of the stockholder(s) of the entity

question

The distinction between a current asset and other assets:

answer

is based on when the asset is expected to be converted to cash, or used to benefit the entity

question

The income statement shows amounts for:

answer

revenues, gains, expenses and losses

question

The time frame associated with an income statement is

answer

a past period of time

question

Revenues are:

answer

increases in net assets from selling a product

question

Expenses are:

answer

decreases in net assets resulting from usual operating activities

question

The purpose of the income statement is to show the

answer

net income or net loss for the period covered by the statement

question

Retained Earnings represents

answer

cumulative net income that has not been distributed to stockholders as dividends

question

The Statement of Cash Flows

answer

shows how cash changed during the period

question

The going concern concept refers to a presumption that

answer

the entity will continue to operate in the foreseeable future

question

Matching revenues and expenses refers to:

answer

accurately reflecting the results of operations for a fiscal period

question

Accrual accounting

answer

is designed to match revenues and expenses

question

The principle of consistency means that:

answer

the effect of any change in an accounting method will be disclosed in the financial statements or notes thereto

question

The principle of full disclosure pertains to:

answer

The entity fully discloses all necessary information to prevent a reasonably astute user of financial statements from being misled

question

The balance sheet of an entity:

answer

shows amounts that are not adjusted for changes in the purchasing power of the dollar.

question

An expanded version of the accounting equation could be:

answer

Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues - Expenses - Dividends

question

A credit entry will

answer

increase a liability account

question

A debit entry will:

answer

increase the balance of an expense account

question

The effect of an adjustment is:

answer

to increase the accuracy of the financial statements.

question

When a firm purchases supplies for use in its business, and the cost of the supplies purchased is recorded as an asset, the following adjustment to recognize the cost of supplies used will probably be required:

answer

Dr. Supplies Expense Cr. Supplies

question

When a firm purchases supplies for its business:

answer

an adjustment will probably be required as supplies are used

question

The effect of an adjustment on the financial statements is usually to:

answer

increase the accuracy of both the balance sheet and income statement

question

The current assets of most companies are usually made up of:

answer

cash and assets expected to be converted to cash within a year

question

Which of the following is the correct balance sheet presentation for current assets?

answer

Accounts receivable, inventories, prepaid expenses, other current assets

question

When a manufacturer invests in short-term marketable securities:

answer

risk avoidance is of great importance

question

A cash equivalent is a current asset that:

answer

is readily convertible into cash with a minimal risk

question

The accrual of interest on short-term marketable securities results in:

answer

an increase in current assets and an increase in net income

question

The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is:

answer

matching revenue and expense

question

The allowance for uncollectible accounts is a(n):

answer

contra current asset

question

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:

answer

all costs incurred in the current period should be subtracted from current period revenues

question

When an uncollectible account receivable is written off against the allowance for bad debts:

answer

total current assets are not affected

question

With respect to the write-off of an uncollectible account receivable against the allowance for bad debts, a sound system of internal control would require:

answer

the write-off be approved by two employees

question

An organization's system of internal control is designed primarily to:

answer

provide an operating framework for all employees as they work to achieve the organization's goals

question

When a firm uses the LIFO inventory cost flow assumption:

answer

better matching of revenue and expense is achieved than under FIFO

question

Accounts receivable are reported at:

answer

net realizable value

question

An accounts receivable results from the sale of:

answer

goods and services to customers on account

question

The inventory cost flow assumption describes the flow of product cost:

answer

into the asset (inventory) account and out to the expense (cost of goods sold) account

question

One inventory cost flow assumption will result in different cost of goods sold from another inventory cost flow assumption only if:

answer

the cost of inventory items changes during the year

question

When costs are rising over time:

answer

FIFO results in higher profits than LIFO

question

In an inflationary economic environment, the selling price set for a firm's products will:

answer

not be affected by the cost flow assumption used

question

One of the principal reasons for selecting the LIFO cost flow assumption instead of the FIFO cost flow assumption in an inflationary economic environment is that:

answer

income taxes will be lower

question

The balance sheet valuation of inventories is

answer

lower of cost or market

question

Which of the following inventory accounting systems has been made much more feasible as a result of computer systems developments?

answer

Perpetual

question

The effect of an error resulting in an understatement of ending inventory is to

answer

overstate cost of goods sold of the current period

question

Which of the following is true regarding notes receivables?

answer

A note is a more formal document than an account receivable

question

Regardless of the inventory cost flow assumption used, inventories on the balance sheet are stated at:

answer

he lower of cost or market

question

The balance sheet presentation of accounts receivable net of the allowance for doubtful accounts has the effect of stating accounts receivable at:

answer

net realizable value

question

One of the most important reasons for having a system of internal control is to:

answer

improve the effectiveness and efficiency of the operations of the organization

question

Which of the following is NOT an example of an inventory account a manufacturing firm might use?

answer

Merchandise inventory

question

When a firm buys land on which there is a building, and the building is torn down so that an appropriate new building can be constructed on the land:

answer

he total cost of the land and old building are capitalized as land cost

question

Expenditures capitalized as long-lived assets generally include those expenditures that:

answer

are material in amount and that have an economic benefit to the entity that extends beyond the current year

question

Which of the following statements best describes the process of accounting for depreciation?

answer

A process for recognizing the cost of an asset that should be matched against revenue earned as a result of using the asset

question

The entry to record depreciation expense:

answer

increases a contra asset and decreases net income

question

The net book value of a depreciable asset is:

answer

the difference between the asset's cost and accumulated depreciation

question

When an accelerated depreciation method is used to calculate depreciation expense:

answer

the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used

question

If there is a loss on the disposal of a depreciable asset:

answer

in retrospect, the depreciation expense recognized over the asset's life was too low

question

Depreciation, in accounting, is a process that results in:

answer

spreading the cost of an asset over its useful life to the entity

question

Leasehold is an example of which of the following types of assets?

answer

Intangible asset

question

The principal challenge to calculating depletion is estimating:

answer

the quantity of material to be recovered

question

Non-current, intangible assets such as leasehold improvements, patents, and copyrights are all subject to:

answer

amortization

question

When a depreciable asset is sold:

answer

a gain arises if the sales proceeds exceed the net book value

question

Goodwill is an asset that arises because the present value of an acquired company's estimated future earnings, discounted at the acquiring firm's ROI:

answer

is more than the fair value of the net assets of the acquired company

question

The intangible asset goodwill:

answer

may arise when one company purchases another company

question

Many companies use accelerated depreciation for tax purposes because:

answer

it results in lower taxable income than straight-line depreciation

question

A transaction that is likely to cause an increase in a current liability is:

answer

accrual of interest expense

question

The payment of a current liability will:

answer

not affect working capital

question

A working capital loan will generally:

answer

not affect working capital

question

Interest on a Note Payable is most appropriately accrued:

answer

as of the end of each accounting period during which the note is a liability.

question

Current maturities of long-term debt:

answer

permit a more accurate determination of working capital

question

A magazine publisher has an account called "Unearned Subscription Revenue." The transaction that causes the balance of this account to decrease is:

answer

magazines are mailed to subscribers

question

The adjusting entry to accrue Interest Expense results in:

answer

an increase in Interest Expense

question

Many current liabilities are affected by accrual accounting entries. This happens because:

answer

accrual accounting involves recognizing liabilities before they are paid

question

An Accounts Payable normally results from which of the following transactions?

answer

Purchasing goods and services from suppliers on credit

question

The current liability for Wages Payable (or Accrued Payroll) represents the:

answer

net pay earned by employees for which they have not yet been paid

question

The liability for product warranty claims is an example of a liability that:

answer

has been calculated using estimates, also resulted in a reduction of net income, has been recorded in the process of matching revenue and expense

question

Which of the following is true regarding bond discounts and/or premiums?

answer

Both bond discount and premium are amortized

question

The financial leverage characteristic of long-term debt results in:

answer

a magnification of ROE relative to what it would be without long-term debt

question

When a company issues a bond at a premium:

answer

the company's interest expense will be less than the interest paid each year

question

If the market price of a bond exceeds its face amount

answer

the coupon rate is more than the market interest rate

question

Financial leverage refers to which of the following?

answer

The difference between the rate of return earned on assets (ROI) and the rate of return earned on stockholders' equity (ROE)

question

When a company issues a bond at a discount:

answer

the company's interest expense will be more than the interest paid each year

question

When bonds are issued at a premium:

answer

interest expense on the bonds will be less than the interest paid

question

Which of the following is(are) a true statement(s) pertaining to bonds?

answer

Bonds can be sold at a discount, par, or premium

question

The amortization of bond discount:

answer

results in bond interest expense being greater than the interest paid to bondholders

question

Which of the following is not a stockholders' equity account?

answer

Accumulated depreciation

question

Retained earnings represents:

answer

cumulative net income of the firm since its beginning that has not been distributed to its stockholders in the form of dividends

question

When a firm purchases its own shares as treasury stock:

answer

total stockholders' equity is decreased

question

If a firm sells treasury stock for more than its cost:

answer

additional paid-in capital is increased

question

Which of the following is not usually associated with bonds?

answer

Maturity rate

question

The declaration of a cash dividend by the directors results in:

answer

a decrease in retained earnings and an increase in current liabilities

question

Another term frequently used to describe stockholders' equity is:

answer

net assets

question

Factors that usually affect retained earnings directly include:

answer

net income or loss, and dividends

question

Stockholders' equity refers to which to the following?

answer

The ownership right of the stockholder(s) of the entity

question

Which of the following entities would not require accounting information pertaining to their economic activities?

answer

Social clubs, Non for profit entities, state governments

question

Which of the following are qualified to express an auditor's opinion about an entity's financial statements?

answer

A certified public accountant

question

Cost accounting is a subset of which of the following?

answer

Managerial accounting

question

The ethical concept of integrity means that an individual must:

answer

attempt to be honest and forthright in dealings and communications with others

question

Expenditures capitalized as long-lived assets generally include those expenditures that

answer

are material in amount and that have an economic benefit to the entity that extends beyond the current year

question

Transactions are summarized in

answer

the entity's accounts

question

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. Which of the following journal entries should the firm use to accrue interest at the end of each month?

answer

dr. interest expense cr. interest payable

question

Sage, Inc. has 20 employees who work Monday through Friday each week; each employee earns $100 per day and is paid every Friday. The end of the accounting period is on a Wednesday. How much wages expense should the firm accrue at the end of the period?

answer

6000

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