CLEP Financial Accounting Practice Exam – Flashcards
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What will always increase when net income increases?
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Equity
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Accounts receivable turnover helps determine
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How quickly a firm collects cash on its credit sales
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The income statement is designed to measure
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The results of business operations
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A company prepares a bank reconciliation to
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Determine the correct amount of cash balance
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An inventory valuation method such as FIFO or LIFO affects
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Both the income statement and balance sheet
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A liability for dividends is recorded on what date?
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The declaration date
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Assets are classified as intangible under which of the following conditions?
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They have no physical substance
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Return on assets help users of financial statements evaluate which of the following?
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Profitability
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What impact does collecting a receivable have?
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No impact on assets nor net income.
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The financial statement that includes classifications for operating, financing and investing activities of a business entity for a period of time is called:
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Statement of cash flows
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In a period of rising prices, which of the following inventory methods in the higher COGS?
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LIFO
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Dividends paid is shown on which of the following financial statements?
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Statement of cash flows
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The owners equity in a business increases from:
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Excess of revenue over expenses and investments by the owner
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Which of the following investing activities appears on the statement of cash flows?
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Selling a building
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Which of the following correctly indicates how retained earnings can be affected?
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Increased by net income, decreased by dividends, decreased by realized losses
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How is treasury stock reported on the balance sheet?
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Decrease in stockholder's equity
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Which of the following is true of accumulated depreciation expense?
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It allocates the cost of use of a long term asset to the revenue that it generates
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The matching concept matches
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expenses with revenues
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Equals the net assets of a company:
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Stockholder's equity
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Lower of cost or market is a application of:
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Conservatism
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Cash is reported as:
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A current asset
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Gross profit margin is useful for evaluating:
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Profitability
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What is the purpose of closing entries?
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To reduce revenues, expenses and dividends to zero for the next accounting period
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In a statement of cash flows prepared using the indirect method, which of the following is deducted from net income to determine cash provided by operating activities?
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Gain on sale of land
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Which of the following businesses is most likely to use specific identification in recording inventory purchases and cost of goods sold?
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Art Dealer
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Intangible assets include which of the following?
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Patents
