ACCY 200 Exam 1 – Flashcards
105 test answers
Unlock all answers in this set
Unlock answers 105question
Stockholders' equity refers to which to the following
answer
The ownership right of the stockholder(s) of the entity
Unlock the answer
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
Unlock the answer
question
The income statement shows amounts for:
answer
revenues, gains, expenses and losses
Unlock the answer
question
The time frame associated with an income statement is
answer
a past period of time
Unlock the answer
question
Revenues are:
answer
increases in net assets from selling a product
Unlock the answer
question
Expenses are:
answer
decreases in net assets resulting from usual operating activities
Unlock the answer
question
The purpose of the income statement is to show the
answer
net income or net loss for the period covered by the statement
Unlock the answer
question
Retained Earnings represents
answer
cumulative net income that has not been distributed to stockholders as dividends
Unlock the answer
question
The Statement of Cash Flows
answer
shows how cash changed during the period
Unlock the answer
question
The going concern concept refers to a presumption that
answer
the entity will continue to operate in the foreseeable future
Unlock the answer
question
Matching revenues and expenses refers to:
answer
accurately reflecting the results of operations for a fiscal period
Unlock the answer
question
Accrual accounting
answer
is designed to match revenues and expenses
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
The balance sheet of an entity:
answer
shows amounts that are not adjusted for changes in the purchasing power of the dollar.
Unlock the answer
question
An expanded version of the accounting equation could be:
answer
Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues - Expenses - Dividends
Unlock the answer
question
A credit entry will
answer
increase a liability account
Unlock the answer
question
A debit entry will:
answer
increase the balance of an expense account
Unlock the answer
question
The effect of an adjustment is:
answer
to increase the accuracy of the financial statements.
Unlock the answer
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
Unlock the answer
question
When a firm purchases supplies for its business:
answer
an adjustment will probably be required as supplies are used
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
Which of the following is the correct balance sheet presentation for current assets?
answer
Accounts receivable, inventories, prepaid expenses, other current assets
Unlock the answer
question
When a manufacturer invests in short-term marketable securities:
answer
risk avoidance is of great importance
Unlock the answer
question
A cash equivalent is a current asset that:
answer
is readily convertible into cash with a minimal risk
Unlock the answer
question
The accrual of interest on short-term marketable securities results in:
answer
an increase in current assets and an increase in net income
Unlock the answer
question
The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is:
answer
matching revenue and expense
Unlock the answer
question
The allowance for uncollectible accounts is a(n):
answer
contra current asset
Unlock the answer
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
Unlock the answer
question
When an uncollectible account receivable is written off against the allowance for bad debts:
answer
total current assets are not affected
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
When a firm uses the LIFO inventory cost flow assumption:
answer
better matching of revenue and expense is achieved than under FIFO
Unlock the answer
question
Accounts receivable are reported at:
answer
net realizable value
Unlock the answer
question
An accounts receivable results from the sale of:
answer
goods and services to customers on account
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
When costs are rising over time:
answer
FIFO results in higher profits than LIFO
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
The balance sheet valuation of inventories is
answer
lower of cost or market
Unlock the answer
question
Which of the following inventory accounting systems has been made much more feasible as a result of computer systems developments?
answer
Perpetual
Unlock the answer
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
Unlock the answer
question
Which of the following is true regarding notes receivables?
answer
A note is a more formal document than an account receivable
Unlock the answer
question
Regardless of the inventory cost flow assumption used, inventories on the balance sheet are stated at:
answer
he lower of cost or market
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
Which of the following is NOT an example of an inventory account a manufacturing firm might use?
answer
Merchandise inventory
Unlock the answer
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
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
The entry to record depreciation expense:
answer
increases a contra asset and decreases net income
Unlock the answer
question
The net book value of a depreciable asset is:
answer
the difference between the asset's cost and accumulated depreciation
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
Depreciation, in accounting, is a process that results in:
answer
spreading the cost of an asset over its useful life to the entity
Unlock the answer
question
Leasehold is an example of which of the following types of assets?
answer
Intangible asset
Unlock the answer
question
The principal challenge to calculating depletion is estimating:
answer
the quantity of material to be recovered
Unlock the answer
question
Non-current, intangible assets such as leasehold improvements, patents, and copyrights are all subject to:
answer
amortization
Unlock the answer
question
When a depreciable asset is sold:
answer
a gain arises if the sales proceeds exceed the net book value
Unlock the answer
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
Unlock the answer
question
The intangible asset goodwill:
answer
may arise when one company purchases another company
Unlock the answer
question
Many companies use accelerated depreciation for tax purposes because:
answer
it results in lower taxable income than straight-line depreciation
Unlock the answer
question
A transaction that is likely to cause an increase in a current liability is:
answer
accrual of interest expense
Unlock the answer
question
The payment of a current liability will:
answer
not affect working capital
Unlock the answer
question
A working capital loan will generally:
answer
not affect working capital
Unlock the answer
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.
Unlock the answer
question
Current maturities of long-term debt:
answer
permit a more accurate determination of working capital
Unlock the answer
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
Unlock the answer
question
The adjusting entry to accrue Interest Expense results in:
answer
an increase in Interest Expense
Unlock the answer
question
Many current liabilities are affected by accrual accounting entries. This happens because:
answer
accrual accounting involves recognizing liabilities before they are paid
Unlock the answer
question
An Accounts Payable normally results from which of the following transactions?
answer
Purchasing goods and services from suppliers on credit
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
Which of the following is true regarding bond discounts and/or premiums?
answer
Both bond discount and premium are amortized
Unlock the answer
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
Unlock the answer
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
Unlock the answer
question
If the market price of a bond exceeds its face amount
answer
the coupon rate is more than the market interest rate
Unlock the answer
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)
Unlock the answer
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
Unlock the answer
question
When bonds are issued at a premium:
answer
interest expense on the bonds will be less than the interest paid
Unlock the answer
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
Unlock the answer
question
The amortization of bond discount:
answer
results in bond interest expense being greater than the interest paid to bondholders
Unlock the answer
question
Which of the following is not a stockholders' equity account?
answer
Accumulated depreciation
Unlock the answer
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
Unlock the answer
question
When a firm purchases its own shares as treasury stock:
answer
total stockholders' equity is decreased
Unlock the answer
question
If a firm sells treasury stock for more than its cost:
answer
additional paid-in capital is increased
Unlock the answer
question
Which of the following is not usually associated with bonds?
answer
Maturity rate
Unlock the answer
question
The declaration of a cash dividend by the directors results in:
answer
a decrease in retained earnings and an increase in current liabilities
Unlock the answer
question
Another term frequently used to describe stockholders' equity is:
answer
net assets
Unlock the answer
question
Factors that usually affect retained earnings directly include:
answer
net income or loss, and dividends
Unlock the answer
question
Stockholders' equity refers to which to the following?
answer
The ownership right of the stockholder(s) of the entity
Unlock the answer
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
Unlock the answer
question
Which of the following are qualified to express an auditor's opinion about an entity's financial statements?
answer
A certified public accountant
Unlock the answer
question
Cost accounting is a subset of which of the following?
answer
Managerial accounting
Unlock the answer
question
The ethical concept of integrity means that an individual must:
answer
attempt to be honest and forthright in dealings and communications with others
Unlock the answer
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
Unlock the answer
question
Transactions are summarized in
answer
the entity's accounts
Unlock the answer
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
Unlock the answer
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
Unlock the answer
