Financial Accounting Midterm 1 (Multiple Choice)

question

Which of the following financial statements is for a particular date rather than a period of time? a. income statement b. cash flow statement c. statement of stockholder’s equity d. balance sheet
answer

d. balance sheet
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Which of the following items would be shown as part of the Stockholders’ Equity on the balance sheet? a. cash b. notes payable c. retained earnings d. accounts receivable
answer

c. retained earnings
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Assets equal $450,000, liabilities equal $120,000, and common stock equals $200,000. What is the dollar amount of retained earnings? a. $80,000 b. $330,000 c. $320,000 d. $130,000
answer

d. $130,000
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A company sold $400,000 of merchandise for cash and $120,000 of merchandise on credit to customers who will pay for the merchandise in a later time period. How much revenue should be reported on the income statement of the current time period? a. $280,000 b. $520,000 c. $400,000 d. $120,000
answer

b. $520,000
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The beginning balance of retained earnings was $7,500. The dividends paid to stockholders were $1,500. The ending balance of retained earnings is $5,000. What was the net income or net loss for the accounting period? a. net loss of $1,000 b. net income of $1,000 c. net loss of $2,000 d. net income of $2,500
answer

a. net loss of $1,000
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Which cash flow activity is related to borrowing money on a long-term basis? a. operating activities b. investing activities c. financing activities d. investing and financing activities
answer

c. financing activities
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Which of the following transactions would be considered an investing activity on a Statement of Cash Flows? a. purchased equipment for cash b. sold stock for cash to stockholders c. borrowed $200,000 on a long-term note d. paid $45,000 for inventory for resale
answer

a. purchased equipment for cash
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Which of the following would not appear on an income statement? a. sales revenue b. accounts payable c. rent expense d. cost of goods sold
answer

b. accounts payable
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Which organization has primary responsibility for developing United States’ generally accepted accounting principles? a. American Institute of Certified Public Accountants b. financial accounting standards board c. securities and exchange commission d. internal revenue service
answer

b. financial accounting standards board
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The primary purpose of an audit (examination) of the financial reports of a company is to: a. uncover fraud b. determine who is guilty of malpractice c. determine whether the financial reports conform to GAAP d. examine every document and transaction to verify it was accurately reported
answer

c. determine whether the financial reports conform to GAAP
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The major objective of financial reporting is to provide a. essential information to internal users of financial reports b. useful economic information about the business to help external parties make sound financial decisions c. information to internal users about the cash position of the business d. information to the IRS and the Securities Exchange Commission
answer

b. useful economic information about the business to help external parties make sound financial decisions
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Which of the following is not necessary for information to be considered useful? a. relevancy b. comparability c. consistency d. predictability
answer

d. predictability
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A company purchased a computer, office furniture, and office supplies by issuing a check for $5,000 and a note payable for $19,500. The list price of the items was $26,300. The total recorded value of the items is: a. $26,300 b. $19,500 c. $24,500 d. $31,300
answer

c. $24,500
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Liabilities are listed on the balance sheet in: a. order of heir relative dollar size b. order of their maturity c. alphabetical order d. no particular order
answer

b. order of their maturity
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Cost of goods sold is classified as which type of account? a. asset b. liability c. revenue d. expense
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d. expense
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Retained Earnings is classified as which type of account? a. asset b. liability c. stockholder’s equity d. expense
answer

c. stockholder’s equity
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A company purchased office supplies on credit. What two accounts are affected by the transaction? a. supplies and cash b. supplies and accounts payable c. equipment and accounts payable d. stockholder’s equity and accounts payable
answer

b. supplies and accounts payable
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A company sold 10,000 shares of its common stock for a total of $45,000. What two accounts are affected by the transaction? a. cash and retained earnings b. cash and revenue c. cash and contributed capital d. cash and accounts receivable
answer

c. cash and contributed capital
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A company purchased office equipment by issuing a short-term note payable. What two accounts are affected by this transaction? a. equipment and cash b. equipment and accounts payable c. equipment and notes payable d. equipment and stockholder’s equity
answer

c. equipment and notes payable
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A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to: a. decrease assets and liabilities b. increase assets and stockholder’s equity c. decrease assets and stockholder’s equity d. increase liabilities and decrease stockholder’s equity
answer

d. increase liabilities and decrease stockholder’s equity
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Which type of company usually has a long operating cycle? a. restaurant b. grocery c. ship builder d. clothing store
answer

c. ship builder
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Consider the following totals: Sales Revenue=$100,000 Cost of Goods Sold=$25,000 Rent Expense=$15,000 Investment Return=$5,000 Income Taxes=$18,000 Gain on Land Sale=$2,000. What was the operating income? a. $42,000 b. $55,000 c. $60,000 d. $37,000
answer

c. $60,000
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The matching principle: a. matches revenue to a time period b. matches expenses to a customer c. matches costs to a product d. matches revenues with expenses
answer

d. matches revenue with expenses
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Current year sales revenue total $1,250,000. The total assets at the end of the previous year totaled $900,000. Total assets at the end of the current year totaled $980,000. What is the asset turnover? a. 1.330 b. 1.389 c. 1.276 d. 1.156
answer

a. 1.330
question

Brenden’s Pizza sold $25,000 worth of pizzas in 2013. They received $15,000 in cash and the balance of $10,000 will be paid in 2014. The reported revenues for 2013 are: a. $15,000 b. $25,000 c. $10,000 d. $5,000
answer

b. $25,000
question

Which of the following accounts would be increased with a debit? a. contributed capital b. retained earnings b. revenues d. expenses
answer

d. expenses
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Langhurst received $2,000 in supplies. The company paid for half and charged the balance. What it the journal entry? a. Supplies 2,000 Cash 2,000 b. Supplies 2,000 Accounts Payable 2,000 c. Supplies Expense 2,000 Cash 2,000 d. Supplies 2,000 Cash 1,000 Accounts Payable 1,000
answer

d. Supplies 2,000 Cash 1,000 Accounts Payable 1,000
question

Which of the following groups of accounts would appear in the credit column of an unadjusted trial balance? a. accounts payable, unearned revenue, cost of sales, and investment income b. unearned revenue, accumulated depreciation, prepaid expense c. accounts payable, unearned revenue, accumulated depreciation d. contributed capital, retained earnings, cost of sales
answer

c. accounts payable, unearned revenue, accumulated depreciation
question

How is net book value calculated? a. acquisition cost of the asset minus its accumulated depreciation b. acquisition cost of the asset minus its depreciation expense c. estimated value of the asset minus its accumulated depreciation d. acquisition cost of the asset plus its accumulated depreciation
answer

a. acquisition cost of the asset minus its accumulated depreciation
question

If the accountant forgets to adjust the Prepaid Expenses account there will be: a. an understatement of net income b. an overstatement of net income c. an overstatement of expense d. no under or over statement of net income
answer

b. an overstatement of net income
question

Which of the following is TRUE about every adjusting entry? a. they affect only income statement accounts b. they affect a balance sheet account and an income statement account c. they affect only balance sheet accounts d. they can affect cash
answer

b. they affect a balance sheet account and an income statement account
question

The net income available to stockholders is $230,000. The beginning number of common shares outstanding was 100,000. The ending number of common shares outstanding was 150,000. What is the earnings per share? a. $1.84 b. $2.30 c. $1.533 d. $0.543
answer

a. $1.84
question

Which account would be listed on a post closing trial balance? a. sales revenue b. depreciation expense c. retained earnings d. income tax expense
answer

c. retained earnings

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