question

T/F: In an LLP, each partner is liable for partnership debts only to the extent of their investment in the partnership plus their share of the liabilities.

answer

True

question

What is the term that means that each partner may conduct business in the name of the partnership and can legally bind all the partners without limit for the partnership's debts.

answer

Mutual agency of a partnership

question

T/F:Financial accounting provides budgeting information to a company's managers.

answer

FALSE

question

Management accounting: A) includes information such as budgets and forecasts. B) is used to make strategic decisions for the entity. C) must be relevant to decision makers within the entity. D) is all of the above.

answer

D

question

Who ultimately controls a corporation? A) Board of Directors B) The Chief Executive Officer (CEO) C) The stockholders D) The President

answer

C

question

Financial statements are: A) standard documents issued by outside consultants who are hired to analyze key operations of the business in financial terms. B) the business documents that companies use to report the results of their financial activities to various user groups. C) reports created by management that states it is responsible for the acts of the corporation. D) the mechanical part of accounting.

answer

B

question

For which form of business ownership are the owners of a business legally distinct from the business? A) Corporation B) Partnership C) Proprietorship D) All of the above

answer

A

question

Owners of an LLC are called: A) partners. B) sole proprietors. C) members. D) stockholders.

answer

C

question

All of the following are forms of business organizations EXCEPT for the: A) proprietorship. B) limited liability partnership. C) limited proprietorship. D) limited liability company.

answer

C

question

For accounting purposes, the business entity should be considered separate from its owners if the business is organized as a: A) proprietorship. B) corporation. C) partnership. D) any of the above.

answer

D

question

T/F: Generally accepted accounting principles, or GAAP, are the rules and procedures established by the Financial Accounting Standards Board, or the FASB.

answer

TRUE

question

T/F: One overall objective of accounting is to provide financial information that is useful to potential capital providers who are making investment and lending decisions.

answer

TRUE

question

T/F: To be relevant, accounting information must be capable of making a difference to the decision maker.

answer

TRUE

question

T/F: The entity assumption is the most basic accounting concept.

answer

TRUE

question

What is another name for the continuity assumption?

answer

Going-concern assumption.

question

T/F: Cost is a verifiable measure that is relatively free from bias.

answer

TRUE

question

T/F: Accounting is moving in the direction of reporting more and more assets and liabilities at their fair values.

answer

TRUE

question

T/F: The stable monetary unit concept means that the type of currency used for the financial statements is NOT expected to change.

answer

FALSE

question

T/F: Since we live in a global economy, all countries have adopted the same accounting standards for business transactions.

answer

FALSE

question

T/F: No major differences exist between the accounting standards issued by the FASB and the IASB.

answer

FALSE

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 pronouncements.

answer

C

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 understandability. D) faithful representation and timeliness

answer

B

question

All of the following are characteristics of useful accounting information EXCEPT: A) comparability. B) timeliness C) informative. D) verifiability.

answer

C

question

When information is important enough to the informed user, so that, if it was omitted or erroneous, it would make a difference in the user's decision, it is:

answer

Material

question

Accounting information is subject to the constraints of: A) comparability and consistency. B) comparability and verifiability. C) materiality and cost. D) relevance and faithful representation.

answer

C

question

The accounting assumption that states that the business, rather than its owners, is the reporting unit is the:

answer

Entity Assumption

question

The continuity (going-concern) assumption of accounting: A) enables accountants to ignore the effect of inflation in the accounting records. B) holds that the entity will remain in operation long enough to use its existing assets. C) maintains that each organization, or section of an organization, stands apart from other organizations and individuals. D) ensures that accounting records and statements are based on the most reliable data available.

answer

B

question

The principle stating that assets acquired by the business should be recorded at their actual cost on the date of purchase is the:

answer

Cost (Historical Cost) Principle

question

The relevant measure of the value of the assets of a company that is going out of business is the:

answer

Current Market Value

question

An Oklahoma City business paid $15,000 cash for equipment used in the business. At the time of purchase, the equipment had a list price of $20,000. When the balance sheet was prepared, the value of the equipment was $22,000. What is the relevant measure of the value of the equipment? A) Historical cost, $15,000 B) Fair market cost, $20,000 C) Current market cost, $22,000 D) $15,000 on the day of purchase, $22,000 on balance sheet date

answer

A

question

An office building is appraised for $250,000 and offered for sale at $260,000. The buyer pays $245,000 for the building. The building should be recorded on the books of the buyer at: A) $250,000. B) $260,000. C) $245,000. D) some other amount.

answer

C

question

The FASB: A) is working towards a convergence of standards with the IASB. B) will not accept IASB rules. C) does not want US companies to adopt IFRS standards. D) feels that the global use of IFRS will significantly increase costs of doing global business.

answer

A

question

T/F: The accounting equation expresses the idea that Resources - Insider claims = Outsider claims.

answer

TRUE

question

T/F: The financial statements are based on the accounting equation.

answer

...

question

T/F: The word "payable" always signifies a liability.

answer

TRUE

question

T/F: The accounting equation must always be in balance.

answer

TRUE

question

T/F: Liabilities are divided into "outsider claims" and "insider claims."

answer

FALSE

question

T/F: "Net assets", as stockholders' equity is often referred to, represents the residual amount of business assets which can be claimed by the owners.

answer

TRUE

question

T/F: Stockholders' equity is the stockholders' interest in the assets of the corporation.

answer

TRUE

question

T/F: Common stock and retained earnings are the main components of paid-in capital.

answer

FALSE

question

T/F: Dividends never affect net income.

answer

TRUE; Dividends are not expenses

question

T/F: Dividend payments are NOT classified as expenses.

answer

TRUE

question

T/F: The calculation of ending retained earnings considers beginning retained earnings, current net income or net loss and dividends.

answer

TRUE

question

T/F: The owners' equity of proprietorships and corporations are the same.

answer

FALSE

question

The accounting equation can be stated as: A) Assets + Stockholders' Equity = Liabilities. B) Assets -Liabilities = Stockholders' Equity. C) Assets = Liabilities - Stockholders' Equity. D) Assets - Stockholders' Equity + Liabilities = Zero.

answer

B

question

The owners' interest in the assets of a corporation is known as:

answer

Stockholder's Equity

question

The two main components of stockholders' equity are:

answer

Retained earnings and paid-in capital.

question

The owners' equity of any business is its: A) revenues minus expenses. B) assets minus liabilities. C) assets plus liabilities. D) paid-in capital plus assets.

answer

B

question

The amount that stockholders have invested in a corporation is called: A) retained earnings. B) investment. C) revenue. D) paid-in capital.

answer

D

question

The major types of transactions that affect retained earnings are: A) paid-in capital and common stock. B) assets and liabilities. C) revenues, expenses, and dividends. D) revenues and liabilities.

answer

C

question

The sum of "outsider claims" plus "insider claims" equals: A) net income. B) total liabilities. C) total assets. D) total stockholders' equity.

answer

C

question

Dividends

answer

Distributions to stockholders of assets (usually cash) generated by a favorable balance in retained earnings.

question

A corporation's paid-in capital includes: A) revenues and expenses. B) assets and liabilities. C) common stock. D) net income.

answer

C

question

The heading John Smith, Capital, indicates the owners' equity of a: A) proprietorship. B) corporation. C) not-for-profit. D) regulatory body.

answer

A

question

On January 1, 2010, total assets for Liftoff Technologies were $125,000; on December 31, 2010, total assets were $145,000. On January 1, 2010, total liabilities were $110,000; on December 31, 2010, total liabilities were $115,000. What is the amount of the change and the direction of the change in Liftoff Technologies' stockholders' equity for 2010? A) Decrease of $15,000 B) Increase of $15,000 C) Increase of $30,000 D) Decrease of $30,000

answer

B

question

T/F: Cost of goods sold is the major expense of merchandising and manufacturing companies.

answer

TRUE

question

T/F: If expenses have exceeded sales revenue during the life of the company, the accumulation of these losses will result in an accumulated deficit in retained earnings.

answer

TRUE

question

T/F: Stockholders determine if a corporation will pay dividends.

answer

FALSE

question

T/F: Net income appears on both the income statement and the balance sheet.

answer

FALSE

question

T/F: The statement of cash flows is organized in terms of the organization's operating, investing, and financing activities.

answer

TRUE

question

T/F: The amount of cash received on the sale of the company's stock in excess of par value is called retained earnings.

answer

FALSE

question

T/F: The statement of cash flows contains three "parts"—operating activities, investing activities, and stock activities.

answer

FALSE

question

T/F: In accounting, the word "net" refers to an amount after a subtraction.

answer

TRUE

question

T/F: A balance sheet reports the company's financial position at a specific point in time.

answer

TRUE

question

T/F: Net income and net profit mean the same thing to accountants.

answer

TRUE

question

A company sells its product for $100. The cost of the product to the company is $60. Selling expenses are $15. Cost of goods sold is: A) $100. B) $60. C) $40. D) $75.

answer

B

question

Retained earnings is increased by: A) net income. B) net loss. C) dividends. D) expenses.

answer

A

question

Dividends appear on: A) the Statement of Retained Earnings. B) both the Statement of Retained Earnings and the Income Statement. C) the Income Statement. D) the Balance Sheet.

answer

A

question

Assets appear on: A) the Balance Sheet. B) the Income Statement. C) the Statement of Retained Earnings. D) both the Balance Sheet and the Statement of Retained Earnings.

answer

A

question

Common stock appears on: A) the Balance Sheet. B) the Income Statement. C) the Statement of Cash Flows and the Statement of Retained Earnings. D) none of the above.

answer

A

question

A company's gross profit for the period is reported on the: A) Balance Sheet. B) Income Statement. C) Statement of Cash Flows. D) Statement of Retained Earnings.

answer

B

question

Gains and losses appear on which of the financial statements listed below? A) Balance Sheet B) Income Statement C) Statement of Cash Flows D) Statement of Retained Earnings

answer

B

question

The ending balance in Retained Earnings appears on the: A) Balance Sheet only. B) Balance Sheet and Statement of Retained Earnings. C) Statement of Retained Earnings only. D) Income Statement and Statement of Cash Flows.

answer

B

question

Cash dividends: A) decrease revenue on the income statement. B) decrease retained earnings on the statement of retained earnings. C) increase expenses on the income statement. D) decrease operating activities on the statement of cash flows.

answer

B

question

Which of the following financial statements shows the net increase or decrease in cash during the period? A) Balance Sheet only B) Statement of Operations C) Statement of Retained Earnings and Balance Sheet D) Statement of Cash Flows

answer

D

question

An investor wishing to assess a company's overall financial position at the end of the period would probably examine the: A) Statement of Cash Flows and the Income Statement. B) Income Statement only C) Balance Sheet. D) Statement of Retained Earnings.

answer

C

question

A potential investor interested in evaluating a company's financial earning performance for the current period would probably examine which of the following financial statements? A) Balance Sheet only B) Income Statement only C) Statement of Cash Flows and Income Statement D) Statement of Retained Earnings and Balance Sheet

answer

B

question

Which statement(s) summarizes the revenues and expenses of an entity? A) Balance Sheet only B) Statement of Cash Flows and Income Statement C) Statement of Retained Earnings and Statement of Operations D) Income Statement

answer

D

question

Which financial statement provides a "snapshot photo" of one moment in time for the whole entity? A) Balance Sheet only B) Income Statement only C) Statement of Retained Earnings and Income Statement D) Statement of Cash Flows only

answer

A

question

An example of a selling, general, and administrative expense is: A) cost of goods sold. B) sales. C) sales commissions paid to employees. D) interest expense.

answer

C

question

Cost of goods sold appears on the: A) Statement of Retained Earnings as an addition to beginning retained earnings. B) Income Statement as a deduction from sales. C) Balance Sheet as a deduction from sales. D) Income Statement as a deduction from gross profit.

answer

B

question

The balance sheet is also known as the: A) statement of profit and loss. B) operating statement. C) assets statement. D) statement of financial position.

answer

D

question

The income statement is prepared to determine: A) the change in cash due to results of operations. B) the change in retained earnings due to the results of operations. C) the change in assets and liabilities due to the results of operations. D) all of the above.

answer

B

question

Current assets are assets expected to be converted to cash, sold, or consumed within the next: A) 12 months or within the business's normal operating cycle if longer than a year. B) 12 months or within the business's normal operating cycle if less than a year. C) 6 months. D) 24 months.

answer

A

question

Equipment would appear on the: A) Balance Sheet with the long-term assets. B) Income Statement with the revenues. C) Income Statement with the operating expenses. D) Balance Sheet with the current assets.

answer

A

question

Accumulated depreciation is normally associated with which asset on the Balance Sheet? A) Inventory B) Accounts receivable C) Land D) Property, plant and equipment

answer

D

question

Income taxes owed to the federal government would be classified as a(n): A) expense on the Income Statement. B) financing activity on the Statement of Cash Flows. C) current asset on the Balance Sheet. D) current liability on the Balance Sheet.

answer

D

question

In relation to the cash flow statement, purchases and sales of long-term assets are examples of: A) investing activities. B) accrual activities. C) financing activities. D) operating activities.

answer

A

question

Stockholders' equity decreases as a result of: A) owner investments. B) a net loss during the period. C) a net income during the period. D) both A and C.

answer

B

question

What is the proper order for the categories of the statement of cash flows? A) Financing activities, investing activities, and operating activities B) Operating activities, investing activities, and financing activities C) Operating activities, financing activities, and investing activities D) Investing activities, financing activities, and operating activities

answer

B

question

Where would cash received from the sale of stock appear on the statement of cash flows? A) In the operating activity section B) In the non-cash financing activity section C) In the investing activity section D) In the financing activity section

answer

D

question

The main source of cash from its main business comes from: A) current assets on the balance sheet. B) operating activities on the statement of cash flows. C) financing activities on the statement of cash flows. D) investing activities on the statement of cash flows.

answer

B

question

T/F: The ethical factor recognizes that while certain actions might be both economically profitable and legal, they may still not be right.

answer

TRUE

question

Retained earnings appears on which of the following financial statements? A) Statement of Retained Earnings, Statement of Cash Flows, and Balance Sheet, but not the Income Statement B) Statement of Retained Earnings, Statement of Cash Flows, and Income Statement, but not the Balance Sheet C) Statement of Retained Earnings and Statement of Cash Flows, but not the Income Statement or Balance Sheet D) Statement of Retained Earnings and Balance Sheet, but not the Income Statement or Statement of Cash Flows

answer

D

question

An investor who wished to answer the question, "Can the company sell its products?" should investigate the: A) operating activities section of the cash flow statement. B) current and projected inventory levels. C) sales revenue trends and projected sales. D) net income for the current period and projected net income for the next period

answer

C

question

An investor who wished to answer the question, "Can the company pay its current liabilities?" should investigate: A) the financing activities section of the cash flow statement. B) the current assets and current liabilities on the balance sheet. C) the sales revenue trend. D) none of the above.

answer

B

question

Generally, three factors influence business and accounting decisions— A) operating, investing, and financing activities. B) assets, liabilities, and equity. C) economic, legal, and ethical. D) revenues, expenses, and dividends.

answer

C

question

Which of the following questions should be asked in making an ethical analysis? A) Which option results in treating others as I would want to be treated? B) Which options are the most honest, open, and truthful? C) Which options create the greatest good for the greatest number of stakeholders? D) All of the above questions should be considered.

answer

D

question

T/F: A journal entry is a record of an event that has a financial impact on the business that can be reliably measured.

answer

TRUE

question

T/F: The Retained Earnings account represents the excess of net income over dividends retained in the business since its inception.

answer

TRUE

question

T/F: The Dividends account indicates an increase in common stock.

answer

FALSE

question

T/F: Income statement data appears as revenues and expenses under Retained Earnings.

answer

TRUE

question

A business transaction has occurred when: A) an event affects the entity's financial position. B) the event can be reliably measured. C) the accountant determines that the event is important enough to be a business transaction. D) both A and B occur.

answer

D

question

A record of all the changes in a particular asset, liability, or stockholders' equity during a period is called a (n): A) transaction. B) trial balance. C) journal D) account.

answer

D

question

Prepaid expense accounts appear on: A) the Income Statement. B) the Balance Sheet. C) the Statement of Retained Earnings and on the Income Statement. D) both the Income Statement and Balance Sheet.

answer

B

question

Goods purchased on account for future use in the business, such as Office Supplies, are called: A) Accrued liabilities. B) Prepaid expenses. C) Revenues. D) Expenses.

answer

B

question

A company received cash in exchange for issuing stock. This transaction increased assets and: A) increased expenses. B) increased revenues. C) increased liabilities. D) increased equity.

answer

D

question

Transactions affecting Stockholders' Equity include: A) sale of common stock and payment of expenses. B) revenues and purchase of supplies on account. C) purchase of land and a sale on account. D) payment of a liability and payment of expenses.

answer

A

question

A company performed services for a customer on account. This transaction increased assets and: A) decreased equity. B) increased liabilities. C) increased expenses. D) increased revenues

answer

D

question

What type of account is prepaid insurance? A) A liability B) An expense C) Stockholders' equity D) An asset

answer

D

question

Which of the following accounts are a standard component of stockholders' equity? A) Prepaid Expenses B) Dividends C) Additional Paid In Stock D) Unearned Income

answer

B

question

Which of the following business events would NOT be recorded in a company's accounting records? A) The company paid a monthly utility bill of $1,000. B) The company issued 100 shares of common stock for $75,000. C) The company purchased two acres of land for future plant expansion for $600,000. D) The company signed a contract to provide services in the next accounting period for $125,000.

answer

D

question

Receiving a payment from a customer on account would: A) increase stockholders' equity. B) have no effect on total assets. C) decrease stockholders' equity. D) decrease liabilities.

answer

B

question

Performing services on account would: A) decrease both assets and liabilities. B) increase assets and decrease stockholders' equity. C) decrease revenues and decrease stockholders' equity. D) increase net income and stockholders' equity.

answer

D

question

The collection of cash from a cash sale would: A) increase assets and stockholders' equity. B) increase assets and decrease liabilities. C) decrease assets and increase net income. D) have no effect on net income or stockholders' equity.

answer

A

question

Receiving a utility bill would increase what account?

answer

Liabilities

question

If Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash, what is the company's net income for the month? A) $8,000 B) $5,000 C) $3,000 D) None of the above

answer

A; $10,000 - $2,000 = $8,000

question

Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash. What is the amount of total assets? A) $80,000 B) $78,000 C) $88,000 D None of the above

answer

C; 80,000-60,000+40,000+20,000+10,000-5,000+5,000-2,000 = $88,000

question

Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash. The amount of stockholders' equity at the end of the period is: A) $60,000. B) $80,000. C) $140,000. D) none of the above.

answer

D; 80,000+10,000-2,000=88,000

question

T/F: Accounts are records of increases and decreases in individual financial statement items.

answer

TRUE

question

T/F: Dividends and expenses are specialized stockholders' equity accounts that are increased by debits.

answer

TRUE

question

Which statement is NOT true? A) A credit increases a liability account. B) A debit increases an asset account C) Revenues are increased by a debit. D) Expenses are increased by a debit.

answer

C

question

Which accounts are increased by debits? A) Assets and owners' equity B) Expenses and owners' equity C) Assets, expenses and dividends D) Assets, expenses and owners' equity

answer

C

question

An account is increased by a debit and has a normal balance of a debit. This account is: A) an expense account. B) a liability account. C) an asset account. D) both an expense account and an asset account.

answer

D

question

T/F: The cash account is always debited.

answer

FALSE

question

T/F: Entering a transaction in the journal automatically gets the data into the ledger.

answer

FALSE

question

T/F: The balance of an account is the difference between the account's total debits and its total credits.

answer

TRUE

question

T/F: The chart of accounts would be the same for General Motors and Wal-Mart.

answer

FALSE

question

T/F: A journal shows a chronological listing of the accounting activities of a business.

answer

TRUE

question

T/F: If a company wanted to know how much cash it had available, it would look in the journal.

answer

FALSE

question

Accounting transactions are initially recorded in the: A) T-account. B) ledger. C) journal. D) financial statements.

answer

C

question

The process of recording a transaction in the journal is called: A) posting. B) summarizing. C) journalizing. D) preparing the financial statements.

answer

C

question

The process of copying the information from the journal to the ledger is called: A) posting. B) summarizing. C) journalizing. D) preparing the financial statements.

answer

A

question

A listing of all of the accounts that make up the ledger is called the: A) T-account. B) ledger. C) journal. D) chart of accounts.

answer

D

question

What is the listing of all of the accounts that make up the ledger?

answer

The Chart of Accounts

question

A chronological record (or history) of an entity's transactions is called a:

answer

Journal

question

Which statement about the journal is NOT true? A) The journal lists transactions in chronological order. B) The journal entry lists debits before credits. C) The journal entry shows a complete transaction in one place. D) The journal entry shows the balance in each account.

answer

D

question

Accounts are listed in the ledger: A) alphabetically. B) chronologically. C) in random order. D) in the same order as they appear on the financial statements.

answer

D

question

What is the first step in the journalizing process? A) Record the transaction in the journal. B) Post the transaction to the ledger. C) Determine whether each account is increased or decreased by the transaction. D) Specify each account affected by the transaction and classify each account by type.

answer

D

question

In accounting, the process of posting involves transferring data from the: A) ledger to the journal. B) journal to the ledger. C) source documents to the ledger. D) source documents to the journal.

answer

B

question

A grouping of all the T-accounts with their balances is called the: A) accounting equation. B) trial balance. C) journal. D) ledger.

answer

D

question

Which element(s) of an accounting system provide(s) information about the balance in each account? A) Source documents B) Journals C) Ledgers D) Accrual record

answer

C

question

The normal balance of an account: A) is always a debit. B) is always a credit. C) is the side that increases the account balance. D) can be determined from the journal.

answer

C

question

Credits to revenue accounts ultimately result in a(n): A) decrease in stockholders' equity and assets. B) increase in stockholders' equity and assets. C) decrease in assets and liabilities. D) increase in liabilities and assets.

answer

B

question

The entry to record the payment of salaries to employees would include a: A) credit to Salary Expense. B) debit to Accounts Payable. C) debit to Salary Expense. D) debit to Accounts Receivable.

answer

C

question

The payment for monthly rent of an office building would include a: A) debit to Cash. B) debit to Prepaid Rent. C) debit to Rent Expense. D) credit to Revenue.

answer

C

question

The purchase of office furniture for cash would include a debit to: A) Accounts Payable. B) Office Furniture. C) Office Furniture Expense. D) Cash.

answer

B

question

The purchase of an automobile involving a cash down payment and a promise to pay the balance in the future would include a debit to: A) Note Payable and a credit to Cash. B) Cash and a credit to Automobile. C) Cash and a debit to Note Payable. D) none of the above.

answer

D

question

Paying a previous dividend due to the company's stockholders would include a debit to: A) Cash and a credit to Dividends. B) Dividends Payable and a credit to Cash. C) Retained Earnings and a credit to Cash. D) Accounts Payable and a credit to Retained Earnings.

answer

B

question

T/F: A trial balance is a list of all accounts and their balances for a period of time.

answer

FALSE

question

T/F: When the trial balance is out of balance due to a transposition error, the difference between total debits and total credits will be evenly divisible by 2.

answer

FALSE

question

T/F: When the trial balance is out of balance due to a slide-type error, the difference between total debits and total credits will be evenly divisible by 9.

answer

TRUE

question

T/F: When the trial balance is out of balance due to an incorrect posting of a debit as a credit , the difference is evenly divisibly by 2.

answer

TRUE

question

T/F: If the payment of a utilities bill is not posted, assets will be overstated.

answer

TRUE

question

T/F: The normal balance for any account is always the side of the account (debit or credit) where the largest amount is found.

answer

FALSE

question

T/F: The T-account is a tool for visualizing business transactions and usually can be easily prepared.

answer

TRUE

question

The trial balance is used to determine whether: A) total assets equal total liabilities. B) total debits equal total credits. C) total revenues plus gains equal total expenses plus losses. D) total increases in accounts equal total decreases in accounts

answer

B

question

If the debit amount of an entry to record the purchase of supplies on account was not posted: A) assets would be understated. B) assets would be overstated. C) liabilities would be understated. D) liabilities would be overstated.

answer

A

question

If a posting error has occurred when recording a transaction by posting a debit as a credit, then the out-of-balance amount will be evenly divisible by: A) 11. B) 9. C) 2. D) 5.

answer

C

question

A trial balance showed total debits of $360,000 and total credits of $36,000. This discrepancy is most likely due to which type of error? A) Slide B) Transposition C) Mislabeling D) Failure to post a transaction

answer

A

question

A trial balance showed total debits of $540,000 and total credits of $450,000. This discrepancy is most likely due to which type of error? A) Slide B) Transposition C) Mislabeling D) Failure to post a transaction

answer

B

question

If the credit amount of an entry to record the payment of salaries was not posted: A) assets would be overstated and owners' equity would be overstated. B) liabilities would be understated and owners' equity would be overstated. C) expenses would be understated and owners' equity would be understated. D) there would be no effect on stockholders' equity.

answer

D

question

If the total debits and the total credits of a trial balance are not equal, the error could be due to: A) recording the same transaction twice. B) recording both the debit and credit of the journal entry for the same incorrect amount. C) an error in determining an account balance. D) forgetting to record a transaction.

answer

C

question

Which of the following statements regarding a trial balance is TRUE? A) A trial balance may be taken at any time during the accounting period. B) A trial balance is a list of all accounts with their balances. C) A trial balance shows that total debits equals total credits. D) All of the above are true.

answer

D

question

A trial balance has total debits of $720,000 and total credits of $850,000, with a debit balance of $65,000 for notes payable. This situation indicates: A) a slide. B) an incorrect posting. C) a transposition. D) that none of the above are correct.

answer

B

question

A chart of accounts is: A) prepared as the first step in analyzing transactions. B) a source document. C) a list of all of the accounts of the organization. D) a list of all of the accounts of the organization and their related account numbers.

answer

D

question

When using a four-column ledger account format, the pair of columns on the far right is used to show the: A) names of the accounts being debited and credited. B) transaction dates and journal reference. C) account balance. D) debit and credit amounts posted from journal entries.

answer

C

question

Joe Donaldson deposited $80,000 in a bank account, purchased a company for $60,000 cash (Building $40,000 and Inventory $20,000), performed services for clients for $10,000 cash, purchased supplies for $5,000 cash, and paid utilities of $2,000 cash. What is the amount of credits in the trial balance for the month? A) $78,000 B) $88,000 C) $80,000 D) $90,000

answer

D

question

T/F: Businesspeople must often make decisions without the benefit of a complete accounting system

answer

TRUE

question

T/F: To see how transactions affect a business, managers can go directly to T- accounts.

answer

TRUE

question

T/F: Managers who need information quickly can analyze the transaction by using T-accounts.

answer

TRUE

question

T/F: When using accrual accounting, revenues are recorded when the business earns a service Fee.

answer

TRUE

question

T/F: Your equity is increased when you make a sale, not when you collect the cash.

answer

TRUE

question

T/F: Under the cash basis of accounting, there are two defects—one on the balance sheet and one on the income statement.

answer

TRUE

question

T/F: Companies generally have a year that ends at the low point in their business activity.

answer

TRUE

question

There are two methods used to account for transactions. These methods are: A) deferral and prepaid. B) accrual and deferral. C) cash and deferral. D) cash and accrual.

answer

D

question

AMR received $1,600 on a sale using the cash basis of accounting and did not record a sale on account. This transaction should have been recorded under accrual accounting. The balance sheet problem, using the cash basis of accounting, is the failure to record an entry to which account? A) Cash B) Accounts Receivable C) Sales D) Both Accounts Receivable and Sales

answer

B

question

Chunky Bags sold items for $20,000 cash using the cash basis of accounting and did not record a sale on account. This transaction should have been recorded under accrual accounting. The income statement defect of the cash basis with respect to this transaction is the failure to record an entry to which account? A) Cash B) Accounts Receivable C) Sales D) Both Accounts Receivable and Sales

answer

C

question

An interim period is generally:

answer

Less than one year

question

Which time period indicates that a company has prepared interim statements? A) For the year ended December 31 B) For the month ended June 30 C) For the quarter ended April 30 D) Both the month ended June 30 and the quarter ended April 30 are correct.

answer

D

question

The process of going out of business is called: A) time-period concept. B) revenue principle. C) liquidation. D) bankruptcy.

answer

C

question

The accounting period that ends on a date other than December 31 is called a: A) fiscal year. B) year end. C) calendar year. D) revolving year.

answer

A

question

T/F: The amount of revenue to record is the cash value of the goods or services transferred to the customer.

answer

FALSE

question

T/F: The revenue principle states that revenue should be recorded in the same period as the cash is received.

answer

FALSE

question

T/F: Under the adjusting principle, a business should record revenue when it is earned, regardless of when payment is received from the customer.

answer

FALSE

question

T/F: The matching principle requires the identification of expenses and matching them with the cash used to pay them.

answer

FALSE

question

T/F: The matching principle states that expenses should be recorded in the same period as the related revenues.

answer

TRUE

question

The cost of assets used up in the process of earning revenue are considered:

answer

Expenses

question

T/F: Cash accounting provides some ethical challenges that accrual accounting avoids.

answer

FALSE

question

On December 15, 2010, a company receives an order from a customer for services to be performed on December 28, 2010. Due to a backlog of orders, the company does not perform the services until January 3, 2011. The customer pays for the services on January 6, 2011. The matching principle requires the revenue to be recorded by the company on: A) December 15, 2010. B) January 3, 2011. C) December 28, 2010. D) January 6, 2011.

answer

B

question

A company using the accrual basis of accounting pays $15,000 for a television advertising campaign. Commercials will run evenly in December, January, and February. How much expense will be reported on an income statement prepared for the month of December? A) $0 B) $5,000 C) $10,000 D) $15,000

answer

B

question

Thompson Company executives are planning a $5 million advertising campaign. The expense of this advertising campaign should be recognized when: A) planning for the campaign is complete. B) cash is paid to the television stations which will run the commercials. C) commercials are filmed. D) commercials are broadcast.

answer

D

question

The matching principle includes two steps: A) measure the expenses and record the revenue. B) identify all the expenses incurred during the accounting period and measure the expenses and match them against the revenue earned. C) when to record revenue and the amount of revenue to record, D) when to record the revenue and identify all the expenses incurred during the accounting period.

answer

B

question

Expenses can: A) be paid in cash. B) arise from using up an asset. C) occur when a company creates a liability. D) be all of the above.

answer

D

question

T/F: Adjusting journal entries recorded at the end of an accounting period update revenues or expense accounts, as well as asset or liability accounts.

answer

TRUE

question

T/F: Certain accounts do not need to be adjusted at the end of the period, since the day-to-day transactions provide all the data for these accounts.

answer

TRUE

question

T/F: Accrued revenues have been recorded and need adjusting, while deferred revenues have never been recorded before the adjusting process.

answer

FALSE

question

T/F: In a deferral adjustment, the expense or revenue is recognized after the cash is paid or received.

answer

TRUE

question

T/F: In accrual adjustments, the revenue or expense is recognized before the cash is received or paid.

answer

TRUE

question

T/F: An asset that is appreciating in value is still depreciated for accounting purposes.

answer

TRUE

question

T/F: If deferred revenue has been earned by the end of the current period and no adjustment is recorded, net income for the current period will be understated.

answer

TRUE

question

T/F: An unadjusted trial balance is prepared to assist the accountant in determining the adjusting entries.

answer

TRUE

question

T/F: Recording an expense in order to measure net income is consistent with the matching principle.

answer

TRUE

question

T/F: Unearned service revenue is a current liability because the company is obligated to perform the service.

answer

TRUE

question

The term deferral refers to an event where the: A) recognition of an expense or revenue is recorded after the cash is paid or received. B) liability for an expense is recorded before the expense is actually incurred. C) liability for an expense is recorded after the expense is actually incurred. D) recognition of an expense or revenue is recorded before the cash is paid or received.

answer

A

question

The following accounts are up-to-date and need no adjustment at the end of the period:

answer

Cash, dividends and common stock.

question

The three basic categories of adjusting entries are:

answer

Deferrals, depreciation and accruals.

question

Unearned rent is reported on the balance sheet as a(n): A) expense. B) liability. C) asset. D) contra asset.

answer

B

question

Which account is credited in the adjusting entry to allocate the cost of equipment? A) Equipment Expense B) Depreciation Expense C) Accumulated Equipment D) Accumulated Depreciation

answer

D

question

Ben George, Inc. has an unadjusted balance in Accumulated Depreciation?Truck of $9,000 as of December 31, 2010. This relates to a Truck purchased for $15,000 with an expected useful life of 5 years that is depreciated using the straight line method. After recording the depreciation expense for 2011, the adjusted balance in the Accumulated Depreciation?Truck account as of December 31, 2011 is: A) $15,000. B) $12,000. C) $3,000. D) $1,000.

answer

B

question

Which account is debited in the adjusting entry to record salaries owed to employees, but not paid until next accounting period? A) Salary Expense B) Unearned Salaries C) Salary Payable D) Deferred Salary

answer

A

question

On November 1 of the current year, Prepaid Rent was debited $5,400 for three months of rent, paid in advance. The amount of the adjusting entry on December 31 is: A) $1,800. B) $3,600. C) $5,400. D) $0.

answer

B

question

On September 1, Banger Bros. Company paid $9,000 for one year of rent, in advance. Which of the following accounts and amounts will appear on an adjusted trial balance prepared on December 31? A) Prepaid Rent, $9,000 B) Prepaid Rent, $3,000 C) Rent Expense, $6,000 D) Rent Expense, $3,000

answer

D

question

On August 1 of the current year, Jamie Simmons received $5,400 for legal services to be performed evenly throughout the next six months. The adjusting entry on December 31 of the current year would include a: A) credit to Unearned Service Revenue of $4,500. B) debit to Unearned Service Revenue of $900. C) debit to Service Revenue of $900. D) credit to Service Revenue of $4,500.

answer

D

question

The Houston Rockets basketball team receives $5,000 for season tickets on August 1. By December 31, they have earned $2,000 of the revenue. The adjusting entry to be made on December 31 by the Houston Rockets includes a: A) credit to Unearned Revenue of $2,000. B) debit to Unearned Revenue of $2,000. C) debit to Service Revenue of $2,000. D) credit to Prepaid Revenue of $3,000.

answer

B

question

On August 1 of the current year, Magic Carpet Entertainment received $4,800 for services to be performed evenly over the next twelve months. The adjusting entry on December 31, 2008, would include a: A) debit to Cash for $4,800. B) credit to Service Revenue for $4,800. C) debit to Unearned Service Revenue for $2,000. D) debit to Unearned Service Revenue for $2,800.

answer

C

question

On August 1 of the current year, Jamie Simmons received $5,400 for legal services to be performed evenly throughout the next six months. An adjusted trial balance prepared on December 31 of the current year will show a credit balance in Unearned Revenue in the amount of: A) $0. B) $900. C) $4,500. D) $5,400.

answer

B

question

O'Connor Company purchased supplies totaling $21,600. By year end, $9,300 of supplies were still on hand. How much Supplies Expense should O'Connor recognize? A) $9,300 B) $12,300 C) $21,600 D) $0

answer

B

question

On December 31, 2010, salaries owed to employees total $4,150. These will be paid on January 4, 2011. An adjusted trial balance prepared on December 31, 2010, includes which of the following? A) Salaries Expense, $4,150 B) Salaries Payable, $4,150 C) Unearned Salaries, $4,150 D) Both Unearned salaries, $4,150 and Salaries Payable, $4,150

answer

B

question

On December 31, 2010, salaries owed to total $4,150. These will be paid on January 4, 2011. The adjusting entry prepared on December 31, 2010, includes a: A) debit to Salary Expense for $4,150. B) debit to Salary Payable for $4,150. C) credit to Cash for $4,150. D) credit to Salary Expense for $4,150.

answer

B

question

Associated Services Company paid twelve months' insurance in advance totaling $9,000. At the end of the first month, the adjusting entry would include a: A) debit to Prepaid Insurance for $8,250. B) debit to Prepaid Insurance for $750. C) debit to Insurance Expense for $8,250. D) debit to Insurance Expense for $750.

answer

D

question

An adjusting journal entry contains a debit to an expense account and a credit to an asset account. This is an example of a(n): A) accrued revenue. B) deferred revenue. C) accrued expense. D) deferred expense.

answer

D

question

Which of the following financial statements is prepared using the adjusted trial balance? A) Both the balance sheet and the income statement B) Neither the balance sheet nor the income statement C) The balance sheet only D) The income statement only

answer

A

question

The Unearned Revenue account was not adjusted for work performed in the current period. What is the effect of this error? A) The assets will be understated and expenses will be understated. B) The assets will be overstated and liabilities will be overstated. C) The liabilities will be overstated and revenues will be understated. D) The liabilities will be understated and revenues will be understated.

answer

C

question

How does an accrued expense adjustment affect the financial statements? The adjustment: A) increases expenses and decreases assets. B) increases expenses and increases liabilities. C) decreases expenses and increases liabilities. D) decreases expenses and increases assets.

answer

B

question

What effect does an accrued revenue adjustment have on a company's net income? A) The adjustment has no effect on net income. B) The adjustment increases net income for the period. C) The adjustment decreases net income for the period. D) The effect of the adjustment cannot be determined with the information given.

answer

B

question

The adjusting entry to record the accrual of income tax expense includes a: A) debit to income tax payable. B) credit to income tax expense. C) credit to accounts payable. D) credit to income tax payable.

answer

D

question

T/F: The beginning balance of retained earnings appears on the Balance Sheet and the ending balance of retained earnings appears on the Statement of Retained Earnings

answer

FALSE

question

The beginning balance in Retained Earnings is found on: A) only the Statement of Retained Earnings. B) only the Balance Sheet. C) both the Income Statement and the Balance Sheet. D) both the Statement of Retained Earnings and the Balance Sheet.

answer

A

question

T/F: The Dividends account is closed by an entry crediting Retained Earnings and debiting Net Income.

answer

FALSE

question

Assume the beginning balance in the Retained Earnings account is zero. If a debit balance of $5,000 exists in Retained Earnings after closing out revenues and expenses at the end of the current period, it indicates: A) that the company had net income of $5,000. B) an increase in cash of $5,000. C) the company had a net loss of $5,000. D) a decrease in cash of $5,000.

answer

C

question

Permanent accounts include: A) cash, service revenue and land. B) cash, prepaid expenses and unearned revenue. C) cash, land and salaries expense. D) service revenue, salaries expense and utilities expense.

answer

B

question

The entry to close expense account(s): A) increases total assets. B) decreases total assets. C) decreases retained earnings. D) increases retained earnings.

answer

C

question

The entry to close the Dividends account would include a debit to: A) Dividends and a credit to Net Income. B) Dividends and a credit to Retained Earnings. C) Retained Earnings and a credit to Dividends. D) Net Income and a credit to Dividends.

answer

C

question

T/F: The quick ratio measures a company's ability to pay its total liabilities.

answer

FALSE

question

T/F: A company with a low debt ratio is well-positioned to pay its outstanding debt.

answer

TRUE

question

Current assets include: A) cash and receivables only. B) cash and payables only. C) cash, receivables and inventory. D) cash, payables and retained earnings.

answer

C

question

As a general rule of thumb, a strong current ratio is: A) 1.0 or higher. B) .50 or higher. C) 1.5 or higher. D) none of the above.

answer

C

question

The operating cycle is the time required to:

answer

acquire goods and services for sale to customers; sell the goods and services; and collect cash from customers.

question

Assume that a firm has total assets of $1,000,000 and current liabilities of $700,000. Eighty percent of the assets are current assets. An analyst reviewing this firm's current ratio would most likely conclude that the: A) current ratio is extremely strong. B) firm should have little trouble paying its current debt. C) firm may experience some trouble paying its debts. D) firm will definitely experience trouble paying its debts.

answer

C

question

The debt ratio measures a firm's ability to:

answer

pay both current and long-term debt.

question

Current assets are $40,000 and long-term assets are $50,000. Total liabilities are $60,000, of which current liabilities are 50%. The debt ratio is: A) 0.58. B) 0.67. C) 0.17. D) 0.86.

answer

B

question

Lefton Company made a $2 million sale on account. How will this transaction affect the current ratio and the debt ratio? A) It improves the current ratio and has no effect on the debt ratio. B) It improves both the current ratio and the debt ratio. C) It hurts the current ratio and has no effect on the debt ratio. D) It hurts both the current ratio and the debt ratio.

answer

B

question

Rosewood Company had current assets of $582, current liabilities of $433, total assets of $732, and no long-term liabilities. If Rosewood executes a six-month note for $500, what is the new current ratio? A) 0.62 B) 1.16 C) 1.34 D) 2.50

answer

B

question

Rosewood Company had current assets of $582, current liabilities of $433, total assets of $732, and no long-term liabilities. If Rosewood executes a note for $500 for six months, what is the new debt ratio? A) 0.59 B) 0.76 C) 1.27 D) 2.15

answer

B

question

T/F: Short-term investments may be divided into held-to-maturity securities, trading securities and available-for-sale securities.

answer

TRUE

question

T/F: Trading securities are reported on the balance sheet at their current market value.

answer

TRUE

question

T/F: Cash is always the most liquid asset. The next most liquid asset is trading securities.

answer

TRUE

question

T/F: Current assets are listed on the balance sheet in order of their liquidity.

answer

TRUE

question

T/F: Trading securities are originally recorded at their cost, which includes broker's commissions.

answer

TRUE

question

T/F: AVX Co. has an investment in BYG Co. that is classified as a trading security. The purchase price was $50,000, and the market value is now $62,000. AVX has a realized gain of $12,000 on this investment.

answer

FALSE

question

T/F: Unrealized gains and losses on trading securities are reported as part of current income.

answer

TRUE

question

The three categories of short-term investments are:

answer

trading, available-for-sale and held-to-maturity.

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 investments. C) available-for-sale investments. D) debt securities.

answer

B

question

The purpose of owning trading securities is to: A) increase cash reserves. B) hold for a long-term period. C) sell the investment for more than its cost. D) sell the investment to decrease net income.

answer

C

question

Investments in trading securities are reported on the Balance Sheet at their _________ value. A) current market B) investment C) market or investment D) fair

answer

A

question

Unrealized gains or losses on trading securities are reported on:

answer

the income statement as Other Revenue, Gains, and Losses.

question

An unrealized loss on a marketable security means that the: A) value of the security at the time of sale exceeded the historical cost of the security. B) current market value of the security exceeds its original cost. C) historical cost of the security is less its current market value. D) historical cost of the security exceeds its current market value.

answer

D

question

When a company sells a trading investment, the gain or loss on the sale is reported in the: A) revenues section of the income statement. B) short-term investments section of the balance sheet. C) other revenue, gains, and losses section of the balance sheet. D) other revenue, gains, and losses section of the income statement.

answer

D

question

Trading securities purchased in 2010 for $85,000 were valued at $80,000 on December 31, 2010. The securities were sold at the beginning of 2011 for $83,000. The 2011 income statement should report a(n): A) realized loss of $2,000. B) realized gain of $3,000. C) unrealized loss of $5,000 and a realized gain of $3,000. D) unrealized gain recovered of $3,000.

answer

B

question

Strategies to increase the current ratio may include: A) increasing sales. B) paying off current liabilities before the end of the year. C) the questionable practice of reclassifying long-term investments as short-term investments. D) all of the above.

answer

D

question

T/F: Accounts (trade) receivables are amounts to be collected from customers from the sale of goods or services.

answer

TRUE

question

T/F: Other receivables include loans to employees and company officers.

answer

TRUE

question

T/F: Subsidiary records provide no information about control accounts.

answer

FALSE

question

T/F: The accounts receivable account in the general ledger serves as a control account that summarizes the total amount receivable from all customers.

answer

TRUE

question

T/F: The benefit of extending credit to customers is the potential increase in sales.

answer

TRUE

question

A separate account for each customer is kept in a(n) :

answer

Subsidiary ledger

question

Notes receivable are: A) more formal contracts than accounts receivable. B) are due on the maturity date. C) may require the borrower to pledge security for the loan. D) all of the above.

answer

D

question

One method of establishing proper internal control over collections of accounts receivable is to:

answer

Establish a bank lock box.

question

The most important internal control over cash is to: A) have all customers pay by check. B) separate cash-handling duties from cash-accounting duties. C) separate cash-handling from the mailroom. D) do none of the above.

answer

B

question

Under a lockbox system, customers' payments are initially received by the company's: A) accounts receivable department. B) mail room clerk. C) receiving department. D) bank.

answer

D

question

T/F: Uncollectible-account expense is used to record the bad debts expense for the period.

answer

TRUE

question

T/F: The Allowance for Uncollectible Accounts has a credit balance of $500. The sales for the current year were $800,000, and the historical bad debt percentage has been 2% of sales. The adjusting journal entry amount should be $15,500 under the percent-of-sales method.

answer

FALSE

question

T/F: The allowance method of accounting for bad debts records collection losses on the basis of historical collection patterns, rather than waiting to determine which customers will not pay.

answer

TRUE

question

T/F: Under the direct write off method, the entry to write off an account that has been deemed uncollectible has no impact on the net income of the firm.

answer

FALSE

question

T/F: Using the direct write-off method, an account with a balance of $875 would be a debit to Uncollectible- Account Expense for $875 and a credit to Accounts Receivable for $875.

answer

TRUE

question

T/F: Under the direct write-off method, uncollectible-account expense is recorded in the same accounting period as the sale.

answer

FALSE

question

T/F: The Allowance for Uncollectible Accounts may have a debit balance before the adjusting entry is recorded at the end of the year.

answer

TRUE

question

Another term for uncollectible-account expense is: A) doubtful-account expense. B) bad-debt expense. C) both A and B D) none of the above.

answer

C

question

The net realizable value of accounts receivable is: A) the difference between accounts receivable and its contra asset account. B) the difference between accounts receivable and uncollectible-account expense. C) the amount of accounts receivable that the company expects to collect. D) both A and C.

answer

D

question

The percent-of-sales method: A) is not an acceptable method of estimating bad debts. B) is a balance sheet approach, since it focuses on sales. C) is an income statement approach, since it focuses on the amount of expense to be reported on the income statement. D) is concerned with the balance in the Allowance for Doubtful Accounts.

answer

C

question

The aging-of-receivables method is: A) not an acceptable method of estimating bad debts. B) a balance sheet approach, since it focuses on accounts receivable. C) an income statement approach, since it focuses on the amount of expense to be reported on the income statement. D) not concerned with the balance in the Allowance for Doubtful Accounts.

answer

B

question

The two methods of estimating uncollectible receivables are the:

answer

percent- of- sales method and the aging-of-receivables method

question

Allowance for Uncollectible Accounts is classified as: A) a contra-expense account. B) a contra-revenue account. C) a contra-asset account. D) none of the above.

answer

C

question

Which account shows the amount of accounts receivable that the business does NOT expect to collect? A) Sales Returns and Allowances B) Unearned Accounts Receivable C) Allowance for Uncollectible Accounts D) Uncollectible Accounts Expense

answer

C

question

Net accounts receivable is calculated as:

answer

accounts receivable less allowance for uncollectible accounts.

question

The net realizable value of accounts receivable is the:

answer

amount the company expects to collect from customers.

question

The percent-of-sales method of computing uncollectible accounts is used for: A) interim statements because it is more accurate than the aging method. B) annual statements because it is more accurate than the aging method. C) interim statements because it is easier than the aging method. D) annual statements because it is easier than the aging method.

answer

C

question

The entry to write off an 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

C

question

Under the allowance method for estimating uncollectible accounts, the entry to record the estimated bad debts: A) increases total assets. B) reduces net income. C) has no effect on total assets or net income. D) increases net income and decreases total assets.

answer

B

question

Under the allowance method, the entry to reinstate an account previously written off: A) increases total assets. B) increases net income and increases total assets. C) decreases net income and increases total assets. D) has no effect on net income or total assets.

answer

D

question

Under the allowance method, the entry to record the bad debts estimate includes a debit to: A) Accounts Receivable and a credit to Allowance for Uncollectible Accounts. B) Allowance for Uncollectible Accounts and a credit to Uncollectible-Account Expense. C) Allowance for Uncollectible Accounts and a credit to Accounts Receivable. D) Uncollectible-Account Expense and credit to Allowance for Uncollectible Accounts.

answer

D

question

A debit balance in the Allowance for Uncollectible Accounts: A) cannot occur. B) is the normal balance. C) occurs when the actual bad debt write-offs are less that what was estimated. D) occurs when the actual bad debt write-offs are greater than what was estimated.

answer

D

question

The balance in the Allowance for Uncollectible Accounts is considered prior to the year end adjustment under: A) the direct write-off method. B) the percent-of-sales method. C) the aging-of- receivables method. D) both the percent-of-sales and aging-of- receivables method.

answer

C

question

The following item appeared on a balance sheet: Receivables, less allowance of $1,150 .....$8,100 Uncollectible-account expense for the period was $1,250. The gross balance in Accounts Receivable before the allowance was deducted was: A) $6,950. B) $8,100. C) $9,250. D) $9,350.

answer

C

question

Net Realizable Value Equation

answer

Net Realizable Value = Total Accounts Receivable - Allowance for Doubtful Accounts The amount the firm anticipates it will actually be able to collect (not what is owed).

question

Using the aging-of-receivables method to estimate uncollectibles, Greeley Corporation estimates that $9,500 of its accounts receivable will be uncollectible. Prior to adjustment, the Allowance for Uncollectible Accounts has a debit balance of $3,000. After all necessary adjusting entries are made, the balance in Allowance for Uncollectible Accounts will be: A) $12,500. B) $ 9,500. C) $ 6,500. D) $ 3,000.

answer

B

question

Bigg and Talle Corporation uses the percentage-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $5,000,000 and management estimates 2% will be uncollectible. Allowance for Doubtful Accounts prior to adjustment has a credit balance of $16,000. After all necessary adjusting entries are made, the balance in Allowance for Uncollectible Accounts will be: A) $116,000. B) $100,000. C) $ 84,000. D) $ 16,000.

answer

A

question

The following item appeared on the December 31, 2011, balance sheet of The Cyclery: Receivables, less allowance of $1,100 .....$18,000 On January 5, 2009, owner Sean Viesters wrote off a $1,000 customer account. After the write-off, what is the value of the net receivables? A) $17,000 B) $18,000 C) $16,900 D) $17,900

answer

B

question

Portia Incorporated uses the percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $2,000,000, and management estimates 2% will be uncollectible. Allowance for Uncollectible Accounts prior to adjustment has a debit balance of $1,900. The amount of expense reported on the income statement and the balance in Allowance for Uncollectible Accounts, respectively, will be: A) $41,900 and $40,000. B) $40,000 and $38,100. C) $38,100 and 40,000. D) $40,000 and $41,900.

answer

B

question

Most companies will use: A) the percent-of-sales method for interim statements and the aging-of-receivables method at the end of the year. B) the aging-of-receivables method for interim statements and the percent-of-sales method at the end of the year. C) the direct write-off method. D) all of the above.

answer

A

question

T/F: The payee of the note records interest on a note receivable as interest revenue.

answer

TRUE

question

T/F: The maturity value of a note is the sum of the principal amount of a note less the interest due at maturity.

answer

FALSE

question

T/F: When a note matures, the note receivable and the interest receivable are closed out.

answer

TRUE

question

T/F: The fee charged by a bank credit card company increases the amount of sales revenue a merchant receives in a sales transaction.

answer

FALSE

question

T/F: Accounts receivable can be sold to a factor as a means of speeding up cash flows.

answer

TRUE

question

T/F: Armistad Inc. wishes to speed up cash flow and contacts Free Cash.com to sell $600,000 in Accounts Receivable, receiving 98% in cash for the receivables. Armistad should debit cash for $588,000, debit Financing Expense for $12,000, and credit Accounts Receivable for $600,000.

answer

TRUE

question

When a note matures, the maker should record: A) interest expense. B) interest revenue. C) interest payable. D) unearned revenue.

answer

A

question

The maker of a note payable is the:

answer

Recipient; debitor

question

The payee of a note a payable is the:

answer

Provider; creditor

question

The journal entry to record a note received from a customer to apply on account is: A) debit Note Receivable and credit Service Revenue. B) debit Service Revenue and credit Note Receivable. C) debit Note Payable and credit Note Receivable. D) debit Note Receivable and credit Accounts Receivable.

answer

D

question

The Last Bank lends money to a customer on a six month note. The bank accrues interest on the note at the end of the year. The journal entry would include: A) a debit to Cash and a credit to Interest Revenue. B) a debit to Cash and a credit to Interest Payable. C) a debit to Interest Receivable and a credit to Interest revenue. D) a debit to Interest Revenue and a credit to Interest Receivable.

answer

C

question

The due date of a 120 day, 10% note for $30,000, dated April 12 is: A) August 9. B) August 10. C) August 11. D) August 12.

answer

B

question

On December 31, 2011, the payee on a $4,500, 120-day, 10% note dated November 1, 2011, will recognize: (Use a 365 day year and round to the nearest dollar.) A) Interest Receivable, $148. B) Interest Receivable, $74. C) Interest Payable, $148. D) Interest Payable, $74.

answer

B

question

How does accepting payments by a bank-issued credit card affect the recognition of an individual sales transaction? A) Increases loss B) Increases operating expense C) Decreases sales revenue D) Decreases sales revenue and increases operating expense

answer

B

question

Chauky's Catering accepted a bank-issued credit card in payment of a $4,000 sales transaction. Chauky's bank charges 3% to process the transaction. The journal entry to record the sales transaction will include: A) a credit to Sales Revenue for $3,880. B) a debit to Cash for $4,000. C) a debit to Financing Expense for $120. D) all of these.

answer

C

question

If Extol's Inc. sells items to a customer who uses a credit for $800, and there is a credit card fee of 2%, what is the amount of the credit to Sales Revenue? A) $816 B) $800 C) $784 D) $768

answer

B

question

Selling accounts receivable typically: A) decreases assets and increases revenues. B) decreases assets and increases expenses. C) increases assets and increases revenues. D) has no effect on assets and decreases expenses.

answer

B

question

T/F: In order to effectively evaluate the days' sales in receivables, it should be compared to the company's credit terms.

answer

TRUE

question

T/F: The collection period is computed as 365 divided by one day's sales.

answer

FALSE

question

Equation for One Day's Sales

answer

One Days Sales = Net Sales/365

question

Average Receivables Equation

answer

Average Receivables = (Beginning Net AR + Ending Net AR) / 2

question

Collection Period Equation

answer

Collection Period = Average Receivables / One Day's Sales

question

Current Ratio

answer

Current Assets/Current Liabilities

question

Debt Ratio

answer

Total Liabilities/Total Assets

question

Acid-Test (Quick) Ratio

answer

(Cash + Short-term Assets + Net AR) / Current Liabilities Numerator is current assets, excluding inventory.

question

Liquidity Ratios

answer

Acid-Test (Quick) Ratio and Current Ratio

question

T/F: If credit sales are $2,920,000, then one day's sale is equal to $8,000.

answer

TRUE

question

T/F: If the current ratio of a company equals 2.1, the quick ratio will always be lower than 2.1. (Assume that the company also has inventory and prepaid expenses.)

answer

TRUE

question

Which of the following is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio? A) Accounts payable B) Quick ratio C) Liquidity ratio D) Collection period

answer

B

question

A measure of the ability of an entity to pay all of its current liabilities if they come due immediately is the:

answer

Quick Ratio Higher ratio is better!

question

Acid-Test (Quick) Ratio

answer

A measure of the ability of an entity to pay all of its current liabilities if they come due immediately

question

An indication of how many days' sales remain in Accounts Receivable awaiting collection is the:

answer

Days' sales in receivables

question

Days' sales in receivables

answer

THE COLLECTION PERIOD: asset management ratio An indication of how many days' sales remain in Accounts Receivable awaiting collection Or, The number of days it takes to collect the average amount of receivables (average time it takes a customer to pay their AR) Tells us about the firms CREDIT POLICY - collection period is high, the firm will have larger UNcollectables

question

The quick ratio and the number of days' sales in receivables measure: A) a company's ability to pay its long-term debts. B) a company's profitability. C) a company's liquidity. D) all of the above

answer

C

question

The number of days it takes to collect the average amount of receivables is called the:

answer

Day's sales in receivables.

question

Are prepaid expenses considered current or long-term assets?

answer

Current Assets

question

To shorten the collection period, a company may: A) increase average receivables. B) decrease average receivables. C) decrease the discount offered. D) both increase average receivables and decrease total sales.

answer

B

question

On a statement of cash flows, collections of accounts receivables are classified as: A) an operating activity. B) an investing activity. C) a financing activity. D) none of the above.

answer

A

question

On October 15, 2011, Maxx Duggan Enterprises accepts a $10,000 note receivable from the YNR Company in exchange for cash. The acceptance of the note receivable would be classified on Maxx Duggan's 2011 statement of cash flows as: A) an operating activity. B) an investing activity. C) a financing activity. D) none of the above.

answer

B

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