question

D. All of the above require accounting information.

answer

1. Which of the following entities would not require accounting information pertaining to their economic activities? A. Social clubs. B. Not-for-profit entities. C. State governments. D. All of the above require accounting information. E. None of the above requires accounting information.

question

B. To measure the current market value of the business enterprise.

answer

2. Which of the following is not an objective of financial reporting described in FASB Concepts Statement No. 1? A. To provide information about how management of an enterprise has discharged its stewardship responsibility to owners. B. To measure the current market value of the business enterprise. C. To provide information so potential investors or creditors can make their own predictions of future earnings. D. To focus primarily on information about earnings and its components. E. All of the above are objectives of financial reporting.

question

C. The FASB follows a due process procedure that permits input from interested parties before a standard is issued.

answer

3. Which of the following statements about the Financial Accounting Standards Board is correct? A. The FASB is an agency of the Federal government. B. The FASB has the authority to fine a noncompliant firm. C. The FASB follows a due process procedure that permits input from interested parties before a standard is issued. D. The FASB is controlled by the American Institute of CPA's. E. None of the above statements is correct.

question

C. financial accounting, national accounting, cost accounting.

answer

4. Major classifications of accounting activity would not include: A. financial accounting, internal auditing, public accounting. B. internal auditing, governmental accounting, managerial accounting. C. financial accounting, national accounting, cost accounting. D. auditing, income tax accounting, governmental accounting.

question

B. Probability of success of a new product development.

answer

5. Which of the following is not an example of a decision or informed judgment that a potential investor would make from accounting information? A. Future profitability based on past profitability. B. Probability of success of a new product development. C. A forecast of dividends. D. Assessment of risk that a company may have more debt than it can repay if the economy enters a recession.

question

A. Personnel turnover statistics (i.e., hiring and terminations).

answer

6. Which of the following is not an example of a decision or informed judgment that a potential employee could make from accounting information? A. Personnel turnover statistics (i.e., hiring and terminations). B. Probability of the company's ability to make profit sharing plan contributions in the future. C. Assessment of the risk that the company may become bankrupt in the near future. D. The extent of the company's commitment to a research program.

question

D. A Certified Public Accountant.

answer

7. Which of the following is qualified to express an auditor's opinion about an entity's financial statements? A. A Comptroller. B. A Certified Management Accountant. C. A Certified Internal Auditor. D. A Certified Public Accountant. E. None of the above.

question

C. Managerial accounting.

answer

8. Which classification of accounting is most concerned with the use of economic and financial information to plan and control many of the activities of the entity? A. Financial accounting. B. Auditing-Public accounting. C. Managerial accounting. D. Income tax accounting.

question

D. states that they are presented in conformance with generally accepted accounting principles.

answer

9. An unqualified auditors' opinion about an entity's financial statements: A. is a clean bill of health. B. means that all of the entity's transactions during the audited period were checked out. C. guarantees that the entity was not involved in or the victim of any fraudulent activities during the audited period. D. states that they are presented in conformance with generally accepted accounting principles.

question

D. Managerial accounting.

answer

10. Cost accounting is a subset of which of the following? A. Internal auditing. B. Public auditing. C. Cost analysis. D. Managerial accounting.

question

A. FASB.

answer

11. The officer of a corporation responsible for the firm's published financialstatements would be most concerned about pronouncements of the: A. FASB. B. AICPA. C. GASB. D. SEC. E. IRS.

question

D. All of the above are characteristics or limitations of the kind of information that financial reporting by business enterprises can provide.

answer

12. Which of the following is not a characteristic or limitation of the kind of information that financial reporting by business enterprises can provide? A. The information results in approximate, rather than exact, measures. B. The information largely reflects the financial effects of transactions that have already happened. C. The information is provided and used at a cost. D. All of the above are characteristics or limitations of the kind of information that financial reporting by business enterprises can provide.

question

C. By an auditing firm cannot own any stock in the company being audited.

answer

13. The ethical concept of independence means that an accountant employed: A. By a corporation cannot prepare financial statements for use by the company's bank. B. By one company cannot work part-time for another company. C. By an auditing firm cannot own any stock in the company being audited. D. By one company cannot accept a job with another company in the same industry.

question

B. Focus on providing information for resource providers, rather than investors.

answer

14. The objectives of financial reporting for nonbusiness enterprises: A. Are exactly the same as those for business enterprises. B. Focus on providing information for resource providers, rather than investors. C. Have more of an internal utilization rather than external reporting focus. D. Do not give consideration to the cost of providing information.

question

D. Attempt to be honest and forthright in dealings and communications with others.

answer

15. The ethical concept of integrity means that an individual must: A. Sign a pledge to abide by all laws and regulations. B. Report to a supervisor any violation of the code of conduct of her company that is observed. C. Read, understand, and agree to follow all provisions of her employer's code of conduct. D. Attempt to be honest and forthright in dealings and communications with others.

question

D. Financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and changes in those resources and claims to them.

answer

16. Which of the following is an objective of financial reporting by business enterprises? A. Financial reporting should provide assurance that all liabilities of business enterprises will be paid. B. Financial reporting should show the timing and amount of future cash dividends to potential investors. C. The primary focus of financial reporting is information about the assets of the entity. D. Financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and changes in those resources and claims to them.

question

C. Both A and B are correct.

answer

17. Which of the following is true about the IASB? A. Created to promote world acceptance and observation of accounting and financial reports. B. The IASB is a private body and the pronouncements cannot be enforced. C. Both A and B are correct. D. None of the above is correct.

question

E. A, B and C are correct.

answer

18. The provisions of the Sarbanes-Oxley Act of 2002 had the following components: A. Enforce auditing. B. Attestation. C. Quality control. D. None of the above are provisions. E. A, B and C are correct.

question

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

answer

All of these require accounting information.

question

The authoritative financial accounting standards-setting body in the United States is presently the:

answer

Financial Accounting Standards Board (FASB).

question

Which of the following statements about the Financial Accounting Standards Board is correct?

answer

The FASB follows a due process procedure that permits input from interested parties before a standard is issued.

question

Major classifications of accounting activity would not include

answer

financial accounting, national accounting, cost accounting.

question

Which of the following is not an example of a decision or informed judgment that a potential investor would make from accounting information?

answer

Probability of success of a new product development.

question

Which of the following is not an example of a decision or informed judgment that a potential employee could make from accounting information?

answer

Personnel turnover statistics (i.e., hiring and terminations).

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

Which classification of accounting is most concerned with the use of economic and financial information to plan and control many of the activities of the entity?

answer

Managerial accounting.

question

An unqualified auditors' opinion about an entity's financial statements:

answer

states that they are presented in conformance with U.S. generally accepted accounting principles.

question

Cost accounting is a subset of which of the following?

answer

Managerial accounting.

question

The officer of a corporation responsible for the firm's published financial statements would be most concerned about pronouncements of the

answer

FASB.

question

Which of the following is not a characteristic or limitation of the kind of information that financial reporting by business enterprises can provide?

answer

All of these are characteristics or limitations of the kind of information that financial reporting by business enterprises can provide.

question

The ethical concept of independence means that an accountant employed:

answer

by an auditing firm cannot own any stock in the company being audited.

question

The objectives of financial reporting for nonbusiness enterprises:

answer

focus on providing information for resource providers, rather than investors.

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

Which of the following is an objective of financial reporting by business enterprises?

answer

Financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and changes in those resources and claims to them.

question

Which of the following is true about the International Accounting Standards Board (IASB)?

answer

Only the IASB has been working with the FASB in recent years to achieve convergence of International Financial Reporting Standards (IFRS) and U.S. GAAP and the goal of the IASB is to develop a single set of high quality, understandable, enforceable, and globally accepted financial reporting standards based upon clearly articulated principles are correct.

question

The provisions of the Sarbanes-Oxley Act of 2002 had the following components:

answer

Enforce auditing, Attestation and Quality control are correct.

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

On January 31, an entity's balance sheet showed net assets of $1,025 and liabilities of $225. Stockholders' equity on January 31 was:

answer

$1,025

question

The balance sheet might also be called:

answer

Statement of Financial Position.

question

Which of the following is not a transaction to be recorded in the accounting records of an entity?

answer

Receipt of a plaque recognizing the firm's encouragement of employee participation in the United Way fund drive.

question

Stockholders' equity refers to which to the following?

answer

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

question

At the beginning of the year, paid-in capital was $82 and retained earnings was $47. During the year, the stockholders invested $24 and dividends of $6 were declared and paid. Retained earnings at the end of the year were $52. Total stockholders' equity at the end of the year was:

answer

$158

question

Matching revenues and expenses refers to:

answer

accurately reflecting the results of operations for a fiscal period.

question

The balance sheet of an entity:

answer

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

question

At the beginning of the fiscal year, the balance sheet showed assets of $1,364 and stockholders' equity of $836. During the year, assets increased $74 and liabilities decreased $38. Liabilities at the end of the year totaled:

answer

$490

question

Revenues are:

answer

increases in net assets from selling a product.

question

At the end of the year, retained earnings totaled $1,700. During the year, net income was $250, and dividends of $120 were declared and paid. Retained earnings at the beginning of the year totaled:

answer

$1570

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

Which of the following accounting methods accomplishes much of the matching of revenues and expenses?

answer

Accrual accounting.

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 time frame associated with a balance sheet is:

answer

a point in time in the past.

question

The income statement shows amounts for:

answer

revenues, gains, expenses and losses

question

Transactions are summarized in:

answer

The entity's accounts.

question

A concept or principle that relates to transactions is:

answer

original cost

question

Paid-in Capital represents:

answer

the amount invested in the entity by the stockholders

question

The Statement of Changes in Stockholders' Equity shows:

answer

net income and dividends for the period.

question

Financial statement ratios support informed judgments and decision making most effectively:

answer

when the trend of entity data is compared to the trend of industry data.

question

When comparing entity financial ratios with industry ratios:

answer

relative values at a point in time may not be significant.

question

The return on investment measure of performance:

answer

is calculated using net income as the amount of return.

question

Another term for return on investment is:

answer

Return on assets.

question

The return on investment measure of performance:

answer

is used by individuals to compare investment performance.

question

An advantage of the DuPont model for calculating ROI is that:

answer

it focuses on asset utilization as well as net income.

question

A firm has an ROI of 15%, turnover of 3, and sales of $6 million. The firm's margin is:

answer

5%

question

A firm's net income is $315,000 on sales of $31.5 million. Average assets for the period were $7 million. For the year:

answer

margin was 1%, turnover was 4.5, and ROI was 4.5%.

question

Another term for return on equity is:

answer

none of these

question

Return on equity:

answer

relates net income and stockholders' equity.

question

A firm's net income for the year was $200,000. Average assets totaled $1.5 million, and average liabilities totaled $0.3 million. Return on equity was:

answer

16.7%

question

Which of the following is not usually considered a measure of an entity's liquidity?

answer

Cash ratio

question

A current ratio of 6.0 is usually an indication that the firm:

answer

has not made the most productive use of its assets.

question

For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is that it:

answer

raises the current ratio.

question

Which of the following is a universally accepted measure of profitability?

answer

Return on investment.

question

If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan, relative to its working capital just prior to the loan, would be:

answer

The same.

question

Which of the following accounts is part of working capital?

answer

Merchandise Inventory.

question

An expanded version of the accounting equation could be:

answer

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

question

In the seller's records, the sale of merchandise on account would:

answer

increase assets and increase expenses.

question

In an advertiser's records, a newspaper ad submitted and published this week with the agreement to pay for it next week would:

answer

increase liabilities and increase expenses.

question

In the buyer's records, the purchase of merchandise on account would:

answer

increase assets and increase liabilities.

question

A newspaper ad submitted and published this week, with the agreement to get paid for it next week would, in the newspaper's records:

answer

increase assets and increase revenues.

question

A debit entry will:

answer

increase an expense account.

question

A credit entry will:

answer

increase a liability account.

question

A credit entry will:

answer

increase the balance of a revenue account.

question

A debit entry will:

answer

increase the balance of an expense account.

question

An engineering consultant provided $300 of services to a client; the client paid $50 when the bill was submitted and will pay the balance within a week. The consultant will record this transaction by:

answer

Option A

question

To accrue $3,200 of employee salaries for the last week of February, the employer's journal entry is:

answer

Option B

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

question

Which of the following is not one of the 5 questions of transaction analysis?

answer

Is this an accrual?

question

The effect of an adjustment is:

answer

to increase the accuracy of the financial statements.

question

A journal entry recording an accrual:

answer

results in a better matching of revenues and expenses.

question

Wisdom Co. has a note payable to its bank. An adjustment is likely to be required on Wisdom's books at the end of every month that the loan is outstanding to record the:

answer

accrued interest expense for the month.

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

Option C

question

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. How much should be in the firm's interest payable account at December 31, 2013?

answer

$400

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 record the payment of interest on March 31, 2014?

answer

Option A

question

The accountant at Abco, Inc. made an adjusting entry at the end of February to accrue interest on a note receivable from a customer. The effect of this entry is to:

answer

increase ROI for February.

question

The accounting concept/principle being applied when an adjustment is made is usually:

answer

matching revenue and expense.

question

The Interest Receivable account for February showed transactions totaling $8,500 and an adjustment of $11,200.

answer

The transactions were probably entered on the credit side of the account.

question

The balance in the Wages Payable account increased from $12,200 at the beginning of the month to $15,000 at the end of the month. Wages accrued during the month totaled $61,000.

answer

Wages paid during the month totaled $58,200.

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

Option C

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

A cash equivalent is a current asset that:

answer

is readily convertible into cash with a minimal risk.

question

The valuation of short-term marketable securities on the balance sheet is likely to be for an amount that is approximately equal to the cost of these investments because:

answer

the high quality and close maturity date of the securities cause their market values to be relatively stable.

question

A firm has used LIFO for several years during which costs have trended higher. If this firm achieves a substantial reduction in inventory quantities in 2014 by selling more merchandise than it purchases, the effect on 2014 net income of the inventory reduction, compared to having no change in inventory quantity from the beginning to the end of 2014, is:

answer

net income for 2014 will be greater if the inventory quantity declines.

question

The principal reason for reconciling the cash balance per books with the balance shown on the bank statement is to:

answer

determine the amount of cash in the account actually available to the entity.

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

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

answer

an increase in current assets and an increase in net income.

question

A firm has used LIFO for several years during which costs have trended higher. The effect on 2014 net income using LIFO, relative to FIFO, will be:

answer

net income for 2014 will be less under LIFO than FIFO.

question

Prepaid expenses classified as current assets represent:

answer

current year cash payments that will be matched against revenues of the next year or for several future years.

question

The amount of cash related to a particular bank checking account that is shown on the balance sheet at December 31 is:

answer

the cash balance shown in the general ledger account for this checking account as of the close of business on December 31, after recognizing any bank service charges and/or interest income from the December 31 bank account reconciliation.

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

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

An accounts receivable results from the sale of:

answer

goods and services to customers on account.

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 balance sheet valuation of inventories is:

answer

lower of cost or market.

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

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

answer

the lower of cost or market.

question

For which of the following reconciling items would an adjusting entry be necessary on the company's book?

answer

A bank service charge.

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

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

The accounting concept or principle applied when the cost of short-term marketable securities is adjusted to market value is:

answer

matching revenue and expense.

question

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

answer

Intangible asset.

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

If an organization has an obligation to pay $5,000 to a supplier two years from now, the present value of the obligation:

answer

is less than $5,000.

question

The Modified Accelerated Cost Recovery System (MACRS) specifies which of the following depreciation methods for land?

answer

Land is not a depreciable asset.

question

Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all subject to:

answer

amortization.

question

The entry to record depreciation expense:

answer

increases a contra asset and decreases net income.

question

Moped, Inc. purchased machinery at a cost of $22,000 on January 1, 2014. The expected useful life is 5 years and the asset is expected to have salvage value of $2,000. Moped depreciates its assets using the double-declining balance method. What is the firm's depreciation expense for the year ended December 31, 2014?

answer

$8800

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

Many companies use accelerated depreciation for tax purposes because:

answer

it results in lower taxable income than straight-line depreciation.

question

The present value concept is widely applied in business because:

answer

money has value over time.

question

Which of the following accounting concepts/principles is most significant in the development of a capitalization policy?

answer

Materiality.

question

Accounting for natural resources:

answer

involves estimating the quantity of the natural resource to be recovered.

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 present value of an obligation of $4,000 payable in 7 years at 8% is:

answer

$2334

question

A particular common stock has an annual cash dividend of $2.00 per share and is predicted to have a market value of $30 per share 5 years from now. Assuming a discount rate of 10%, a fair market price for the stock today is:

answer

$26.21

question

The intangible asset goodwill:

answer

may arise when one company purchases another company.

question

When a depreciable asset is sold:

answer

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

question

The net book value of a depreciable asset is:

answer

the difference between the asset's cost and accumulated depreciation.

question

The present value of $3,000 to be received every year for 9 years, at 10%, is:

answer

$17,277.00.

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

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

Which of the following is not usually associated with bonds?

answer

Maturity rate.

question

The market value of a bond is the sum of the present value of future interest payments and the present value of the amount to be repaid at maturity, discounted at:

answer

the market rate.

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 not sometimes associated with bonds?

answer

Cumulative

question

The amortization of bond discount:

answer

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

question

The purpose of reporting Current Maturities of Long-Term debt is to:

answer

all of these.

question

In consolidated financial statements:

answer

the parent's and subsidiary's financial statements are reported on a combined basis.

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

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

Many airlines have frequent flyer programs that permit travelers to accumulate credits that can be applied to the cost of tickets for future flights. Most airlines recognize the cost of their frequent flyer programs when the credits are used to purchase tickets. This practice, which seems to ignore the matching concept, results in:

answer

understating liabilities and expenses.

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

The payment of a current liability will:

answer

not affect working capital.

question

If the market price of a bond exceeds its face amount:

answer

the coupon rate is more than the market interest rate.

question

When borrowing money, the most important objective of the borrower should be to:

answer

minimize the APR.

question

Bonner's, Inc. borrowed $12,000 for 4 months on a discount basis. The lender used an interest rate of 8% to calculate the discount. The amount of cash Bonner's, Inc. actually had available to use from this loan was:

answer

$11,680

question

A loan discount is:

answer

None of these.

question

Cassady, Inc. borrowed $5,000 for 3 months at an APR of 10%. The amount of interest paid on this loan was:

answer

$125.

question

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

answer

accrual accounting involves recognizing liabilities before they are paid.

question

The largest item of the Deferred Tax Liability for most companies is caused by:

answer

differences in depreciation methods (accelerated vs. straight-line) for tax versus financial accounting purposes.

question

In most states, par value of issued shares represents:

answer

legal capital.

question

When a stock dividend is declared and issued:

answer

total stockholders' equity does not change.

question

Which of the terms is not used to identify owners' equity or stockholders' equity?

answer

Additional-paid-in-retained earnings.

question

When common stock has a par value:

answer

there will probably be additional paid-in capital on the balance sheet.

question

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

answer

additional paid-in capital is increased.

question

The declaration date pertains to:

answer

The date on which the board of directors declares a dividend.

question

The number of shares of a class of stock that are outstanding is:

answer

the number of shares issued minus the number of shares held as treasury stock.

question

If a common stock has no par value:

answer

there will not be any additional paid-in capital related to it.

question

Which of the following is not a right or attribute of common stock ownership?

answer

Determining dividend policy.

question

The principal reason for a company having a common stock split is to:

answer

decrease the market value per share of common stock.

question

Additional paid-in capital is most likely to appear on the balance sheet of a corporation that:

answer

has par value stock.

question

When a company splits its common stock 3 for 1:

answer

the market value of the company's stock normally falls by two-thirds.

question

Preferred stock is used much less than long-term debt in the capital structure of most industrial and merchandising companies principally because:

answer

for income tax purposes, dividends paid on preferred stock are not deductible, but interest on long-term debt is deductible.

question

Balance sheet disclosures for preferred stock include all of the following except:

answer

The credit or market value.

question

Braco has 40,000 shares of $100 par value common stock outstanding, and 10,000 shares in the treasury. The number of additional shares that would be issued in a 5% stock dividend is:

answer

2,000

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

The dollar amount of the common stock on the balance sheet of a corporation that has common stock with a par value is the number of shares:

answer

issued, multiplied by the par value per share.

question

The term preemptive right pertains to which of the following?

answer

Present shareholders' right to purchase shares from any additional share issuances.

question

A stock dividend is similar to a cash dividend in that:

answer

retained earnings and the amount of potential future dividends is reduced by each.

question

Which of the following is one of the two generally practiced methods for electing corporate directors?

answer

Cumulative voting.

question

The first caption in most income statements in annual reports is:

answer

net sales.

question

Gains differ from revenues because gains:

answer

are not a result of the entity's ongoing, central operations.

question

Under most circumstances, in order to recognize revenue:

answer

the revenue must be realized or realizable, and earned.

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The concept of matching revenue and expense refers to the fact that:

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all costs incurred in the process of earning revenues during a period are recorded as expenses in that period.

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Most entities satisfy the accounting criteria for recognizing an expense when:

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a cost is incurred in the revenue generating process.

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The gross profit ratio is useful to the manager for each of the following purposes except that:

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it can be used to estimate the amount of operating expenses for a period.

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Which of the following accounts/captions are not ever included in the calculation for Gross Profit?

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General and Selling Expenses.

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When the periodic inventory system is used:

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cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and net purchases.

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Income from operations is:

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sometimes used in the ROI calculation.

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The earnings per share of common stock calculation:

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is complicated by the presence of preferred stock in the capital structure.

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An item that cost $90 is sold for $120. The gross profit ratio for this item is:

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33.3%

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An item that cost $240 is to be sold for a price that will yield a gross profit ratio of 20%. The selling price should be:

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300

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Recognition of revenue in accrual accounting requires:

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that the revenue be realized or realizable, and earned.

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The major difference between the indirect and the direct method of a statement of cash flows appears in which the following activities section(s)?

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The operating activities section only.

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Which of the following is an accurate statement regarding a statement of cash flows?

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All material operating, investing, and financing activities are included.

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In the statement of cash flows, depreciation and amortization expense is added back to net income because:

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these expenses do not affect cash, but were subtracted in the determination of net income.

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In the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would:

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be subtracted from net income because this means that revenues were more than cash collected.

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Revenue may be recognized:

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if a company trades inventory at its usual selling price for newspaper advertising.

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The term, "realization," in revenue recognition refers to which of the following?

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The product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash.

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The term, "earned," in revenue recognition refers to which of the following?

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The entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits.

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Corporate governance includes concerns about:

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business ethics and social responsibility. the responsibilities of the board of directors. equitable treatment of all stakeholders. disclosures and transparency.

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The most powerful corporate governance legislation to date has been:

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the Sarbanes-Oxley Act (SOX) of 2002.

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The Sarbanes-Oxley Act (SOX) of 2002 does not specifically prohibit an independent auditor from performing the following non-audit function(s) for an audit client:

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tax services.

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Which is the following descriptions is not one of the "Thirteen Financial Shenanigans" identified by Schilit and Perler, and listed in Exhibit 10-1:

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failing to record intangible assets which the company has ownership rights to.

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The notes to the financial statements:

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should be referred to if more than a cursory, and perhaps misleading impression of a firm's financial position and its results of operations is to be achieved.

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The nature and content of disclosures relate to all of the following except:

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management's plans for the future.

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Which of the following is not a topic that is likely to be discussed as a significant accounting policy?

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Method of estimating uncollectible accounts receivable.

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The notes to the financial statements:

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explain the significant accounting policies of the company.

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Significant accounting policies are described in the notes to the financial statements because:

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the reader must be aware of which of the alternative generally accepted accounting practices have been used.

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When an entity changes its accounting from one generally accepted method to another generally accepted method:

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the dollar effect of the change on both the balance sheet and income statement must be disclosed.

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The impact of changing price levels on amounts reported in financial statements is:

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encouraged, but not required to be described in the notes to the financial statements.

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Management's statement of responsibility:

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affirms that management is responsible for assuring adherence to internal control policies and procedures.

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A firm's cash dividends were $3.96 per share of common stock for calendar 2013. In 2014, the stock was split 3-for-1, and in 2015 a 10% stock dividend was issued. Dividends per share for 2013, to be reported in the firm's annual report for 2015, are:

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$1.20

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For 2013, Skresso Co. reported $3.64 of earnings per share of common stock. During 2014, the firm had a 4% common stock dividend. The 2013 earnings per share to be reported in the annual report for 2014 are:

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$3.50

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Management's statement of responsibility:

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usually refers to the company's system of internal controls.

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Which of the following is the proper paragraph sequence for an independent Auditor's Report?

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Introduction, scope, opinion.

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A firm's independent auditors have the responsibility to:

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assess the firm's accounting policies.

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The independent auditors' report usually:

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includes an opinion that the financial statements present fairly, in all material respects, financial information about the company.

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An audit conducted in accordance with generally accepted auditing standards includes each of the following except:

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evaluation of the efficiency and effectiveness of management.

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Which of the following requires an explanatory paragraph in the independent auditors' report?

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Basing the opinion on the work of another auditor, uncertainties about the outcome of a significant event that would have affected the presentation of the financial statements and substantial doubt about the entity's viability to continue as a going concern are correct.

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Which of the following is not a category of financial statement ratios?

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Prospectus.

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Management's use of resources can best be evaluated by focusing on measures of:

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activity

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An individual interested in making a judgment about the profitability of a company should:

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review the trend of the company's ROI for several years.

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An entity's current ratio will be influenced by:

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the inventory cost flow assumption used.

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A potential creditor's judgment about granting credit would be most influenced by the potential customer's:

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practice with respect to taking cash discounts offered by current suppliers.

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The comparison of activity measures of different companies is complicated by the fact that:

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different inventory cost flow assumptions may be used.

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The inventory turnover calculation:

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is an alternative way of expressing the number of days' sales in inventory.

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If a firm's payment terms for sales made on account to its customers were 2/10, n30, the number of days' sales in accounts receivable would be expected to be:

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between 10 and 25.

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Asset turnover calculations:

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should be evaluated by observing the turnover trend over a period of time.

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When a firm has financial leverage:

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risk is greater than if there wasn't any leverage.

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The dividend payout ratio describes:

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the proportion of earnings paid as dividends.

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The price/earnings ratio:

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is a measure of the relative expensiveness of a firm's common stock.

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If the P/E ratio of a company's common stock were 12, and its earnings were $2.50 per common share:

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an increase in earnings of $0.20 per share, with no change in the multiple, would result in a market price increase of $2.40 per share.

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Another term for the price/earnings ratio is:

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earnings multiple.

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A higher P/E ratio means that:

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the stock is relatively expensive.

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When a corporation has both common stock and preferred stock outstanding:

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dividends on preferred stock must be paid before dividends on common stock can be paid.

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A management that wanted to increase the financial leverage of its firm would:

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raise additional capital by selling fixed interest rate long-term bonds.

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If a firm's debt ratio was 25%, its debt/equity ratio would be:

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33.33%

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A leveraged buyout refers to:

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a firm goes heavily into debt in order to obtain the funds to purchase the shares of the public stockholders and thus take the firm private.

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Book value per share of common stock of a manufacturing company:

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is not a very useful measure most of the time.

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A common size income statement:

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expresses items as a percentage of revenues.

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Financial leverage:

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arises because most borrowed funds have a fixed interest rate.

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Which of the following is(are) an example of a measure of leverage?

answer

Debt/equity ratio.

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For the fiscal year ended March 31, 2014, a company reported earnings per share of $3.25 and cash dividends per share of $0.50. During fiscal 2015, the company had a 3-for-2 stock split. In the annual report for the fiscal year ended March 31, 2015, earnings per share and cash dividends for fiscal 2014 would be reported, respectively, as:

answer

$2.17 and $0.33.

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