Accounting 200

current ratio =

(current assets) / (current liabilities)

A&M Co. purchased land for $50,000 with $10,000 paid in cash and $40,000 in a note payable due three years from now. What effect does this transaction have on the accounts under the accrual basis of accounting? a. Net increase in assets of $40,000 and a net increase in liabilities of $40,000 b. Net increase in assets and liabilities of $50,000 c. Net increase in assets of $50,000 and a net decrease in liabilities of $40,000 d. Net increase in assets of $60,000 and a net decrease in liabilities of $40,000

a. Net increase in assets of $40,000 and a net increase in liabilities of $40,000

Which of the following is not considered as cash? a. commercial paper b. checks c. money orders d. coins

a. commercial paper

At the end of the period, Bryan Corporation pays dividends to stockholders. The effect of this transaction is to: a. decrease retained earnings and capital stock b. decrease cash and retained earnings c. decrease cash only d. decrease retained earnings only

a. decrease cash and retained earnings

Which of the following would increase the stockholders' equity of a business? a. earning revenues in excess of expenses b. paying dividends c. purchasing more assets d. incurring more expenses than revenues e. both a. and b.

a. earning revenues in excess of expenses

Gowin Company received cash from fees earned during the year. How does this transaction affect the Statement of Cash Flows? a. increase cash from Operating Activities b. increase cash from Investing Activities c. increase cash from Financing Activities d. no effect on the Statement of Cash Flows

a. increase cash from Operating Activities

Increases in assets from selling products and services are called: a. revenue b. liabilities c. expenses d. stockholders' equity e. both a. and d.

a. revenue

A distinguishing feature of the corporate business form is that it allows a business to obtain large amounts of resources by issuing a. stock to investors b. cash to investors c. loans to creditors d. products to customers e. both a and c

a. stock to investors

Hawkins Company incorrectly recorded the payment of $10,000 for expenses as an increase in cash of $10,000 and a decrease in retained earnings of $10,000. What is the effect of this error on Hawkins' balance sheet? a. total assets will exceed total liabilities and stockholders' equity by $20,000 b. total assets will exceed total liabilities and stockholders' equity by $10,000 c. total assets will be less than total liabilities and stockholders' equity by $20,000 d. total assets will be less than total liabilities and stockholders' equity by $10,000

a. total assets will exceed total liabilities and stockholders' equity by $20,000

Under a premium-price emphasis, a business designs products that possess _____ for which customers are willing to pay a premium price. a. unique attributes b. high costs c. high demand d. standard features

a. unique attributes

a higher number current ratio means

assets are growing quicker than liabilities

Internal controls are important because they: a. prevent fraud and misleading financial statements. b. deter fraud, theft, and other abuses. c. eliminate fraud. d. guarantee accurate financial statements.

b. deter fraud, theft, and other abuses.

Which of the following transactions increases Revenue on the income statement? a. receipt of cash for sale of land at a price equal to the land's historical cost b. receipt of cash from sale of merchandise inventory c. receipt of cash from the sale of stock d. receipt of cash from a bank loan e. all of the above

b. receipt of cash from sale of merchandise inventory

A&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M's accounts? a. Increase accounts receivable and cash by $1,000,000 each b. Increase accounts receivable and revenues by $1,000,000 each c. Increase accounts receivable and unearned revenues by $1,000,000 each d. Increase cash and decrease accounts receivable by $1,000,000 each

b. Increase accounts receivable and revenues by $1,000,000 each

Which of the following is an appropriate representation of the accounting equation? a. assets + liabilities = stockholders' equity b. assets = liabilities + stockholders' equity c. assets = liabilities d. assets = liabilities + retained earnings

b. assets = liabilities + stockholders' equity

Using accrual accounting to record business transactions, cash is always increased when: a. revenue is earned b. cash is received from customers c. operating activities are conducted d. both a and b e. all of the above

b. cash is received from customers **you have an increase in revenue when you earn it but your cash does not increase until you actually receive it**

Costs incurred in operating a business are also known as: a. revenues b. expenses c. liabilities d. dividends e. either b or c

b. expenses

Which of the following transactions decreases stockholders' equity? a. stock issued for cash b. expenses paid with cash c. repayment of notes payable d. equipment purchased for cash

b. expenses paid with cash

On 1-01-13, Murphy Corporation paid $3,600 for an insurance premium on a three-year insurance policy. How did Murphy record the 1-01-13 transaction? a. increase insurance expense and decrease cash by $3,600 each b. increase prepaid insurance and decrease cash by $3,600 each c. increase unearned insurance and decrease cash by $3,600 each d. no effect on accounts until insurance is used

b. increase prepaid insurance and decrease cash by $3,600 each

A company's monthly bank reconciliation: a. should be prepared by an employee who records cash transactions b. is part of the internal control system c. is for information purposes only d. is sent to the bank for verification e. both a and b

b. is part of the internal control system

During 2013, Kaspar, Inc. reported revenues of $287,000, expenses of $175,000, and dividends of $52,000. Which of the following statements is correct? a. net income for 2013 totaled $60,000 b. net income for 2013 totaled $112,000 c. the net increase to retained earnings was $112,000 in 2013 d. the net decrease to retained earnings was $52,000 in 2013 e. both b. and d.

b. net income for 2013 totaled $112,000

Separating the custody of assets from accounting for assets is a part of which element of internal control? a. Information and communication b. Monitoring c. Control procedures d. The control environment

c. Control procedures

During 2013, Masher Corporation borrowed $50,000 cash, giving a note payable due in 2020. On the Statement of Cash Flows, the transaction would be classified as: a. cash inflow from operating activities c. cash inflow from financing activities b. cash inflow from investing activities d. cash inflow from borrowing activities

c. cash inflow from financing activities

Loral Company rendered $58,000 of services to customers on account. How will Loral record this transaction? a. increase accounts receivable and increase unearned fees b. increase cash and increase fees revenue c. increase accounts receivable and increase fees revenue d. increase unearned fees and decrease fees revenue

c. increase accounts receivable and increase fees revenue

A bank reconciliation should be prepared periodically because: a. the depositor's records and the bank's records are in agreement. b. the bank has not recorded all of its transactions. c. any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected. d. the bank must make sure that its records are correct.

c. any differences between the depositor's records and the bank's records should be determined, and any errors made by either party should be discovered and corrected.

During 2013, Stephens Corporation reported an increase in total assets of $70,000 and an increase in total liabilities of $90,000. Capital stock increased by $5,000 and no dividends were paid. Compute Stephens' net income or net loss for 2013. a. net loss of $15,000 b. net loss of $20,000 c. net loss of $25,000 d. net income of $15,000 e. net income of $ 5,000

c. net loss of $25,000

If the month ends on Tuesday, with wages paid on Friday, how much wage expense will Thomas Company record in the end-of-period adjustment? a. $ 500 c. $2,500 b. $1,500 d. $1,000

d. $1,000

The Sarbanes-Oxley Act of 2002 requires companies to: a. report on the financial activities of the company. b. report on any fraud and theft detected in the company. c. report on the state of the economy and likelihood of fraud d. report on the effectiveness of the company's internal controls.

d. report on the effectiveness of the company's internal controls.

The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and the supplies on hand at June 30 were $1,500. The amount to be used for the appropriate adjusting entry is: a. $6700 b. $2500 c. $9200 d. $6200

d. $6200 (beg balance) + (amount purchased) - (amount remaining)

At the end of the business day, White Company's manager checked the cash register. Actual cash received from the day's sales was $23,480.97. Total sales indicated on the cash register tape was $22,651.20. The entry to record White's sales for the day will include: a. $829.77 cash short (other income) c. $829.77 cash short (other expense) b. $829.77 cash over (other expense) d. $829.77 cash over (other income)

d. $829.77 cash over (other income)

A firm's internal control environment is influenced by: a. management's operating style. b. organizational structure. c. personnel policies. d. all of these.

d. all of these

Internal business stakeholders are: a. stockholders b. suppliers c. customers d. employees

d. employees

The rules of accounting are called: a. general financial statement regulations b. internal revenue code regulations c. accounting preparation principles d. generally accepted accounting principles

d. generally accepted accounting principles

On April 1, Markum Corporation received $37,500 from customers in advance of rendering services. How will Markum record the April 1 transaction? a. increase fees revenue and decrease unearned fees b. increase cash and decrease unearned fees c. increase cash and increase fees revenue d. increase cash and increase unearned fees

d. increase cash and increase unearned fees

Dunbar Corporation determined that annual depreciation on its equipment totaled $42,000. What end-of-period adjustment will Dunbar make? a. increase depreciation expense and decrease cash by $42,000 each b. increase accumulated depreciation and decrease cash by $42,000 each c. increase depreciation expense and decrease accumulated depreciation by $42,000 each d. increase depreciation expense and increase accumulated depreciation by $42,000 each

d. increase depreciation expense and increase accumulated depreciation by $42,000 each

Yancey Company purchased $4,500 of supplies on account. How will it record this transaction? a. increase supplies and decrease cash b. increase supplies expense and increase accounts payable c. increase supplies expense and decrease accounts payable d. increase supplies and increase accounts payable

d. increase supplies and increase accounts payable

Capital market stakeholders have an interest in the company because: a. they provide incentives for the company to market their products. b. they are part of the Marketing Department that is responsible for promoting the products or services to increase the business profits. c. they help market their products to customers or find vendors to supply needed inputs. d. they provide major financing for the business.

d. they provide major financing for the business.

Receiving cash for fees earned affects which of the financial statements? a. income statement b. statement of retained earnings c. balance sheet d. statement of cash flows e. all of the above

e. all of the above