Accounting 211

A balance sheet balances because the sum of liabilities and stockholders' equity equals A. total assets. B. the difference between last year's revenues and last year's expenses. C. current assets. D. the difference between this year's revenues and this year's expenses.

A

A firm that reported negative net income during the year A. had more expenses than revenues. B. had more revenues than expenses. C. must have seen its cash increase during the year D. both A and C are correct.

A

A firm that reports negative gross profit will always have A. sales revenue less than cost of goods sold. B. an increase in cash during the period. C. a current ratio greater than 1.0. D. positive net income.

A

A firm that reports positive gross profit will always have A. more revenue than COGS B. Less revenue than COGS

A

A new capital lease will increase a company's debt. True or False? A.True, A new capital lease will increase a company's debt. (therefore, it also means that a new capital lease will increase a company's leverage). B.False, A new capital lease will decrease a company's debt. (therefore, it also means that a new capital lease will decrease a company's leverage).

A

A store that sold (think of the word "ISSUED" instead) a gift certificate (gift card) on November 18, 2016 would report A. a liability for unearned sales revenue on its 12/31/16 balance sheet. B. a liability for unearned sales revenue on its 2016 income statement. C. sales revenue for 2016 since the cash was received in 2016. D. an asset for unearned sales revenues on its 12/31/16 balance sheet.

A

Allowance for Doubtful (Uncollectible) Accounts appears A. In the Balance Sheet, subtracted from Accounts Receivable B. In the Income Statement as Revenue C. In the Balance Sheet, subtracted from Stockholder's Equity D. In the Balance Sheet, subtracted from Equipment E. In the Income Statement as an Expense

A

Based on the following data, what is the Ending Inventory and Cost of goods sold under the LIFO inventory costing methods? 1/2/19 Purchased 100 items of inventory for $8 each . 3/12/19 Purchased 80 items of inventory for $9 each 3/19/ 19 Purchased 50 items of inventory for $10 each On 3/29/19 70 items of inventory were sold for $46 each. A. END= 1340 COGS= 680 B. END= 1350 COGS= 660 C. END= 1360 COGS= 680 D. END= 1460 COGS= 560

A

Does this statement show the market capitalization of Danger Dive (i.e., the market value of outstanding shares)? A.NO B. YES

A

For financial statement reporting, most businesses A. calculate depreciation using the straight-line method. B. calculate depreciation using an accelerated method. C. use the weighted-average method for calculating depreciation. D. only record depreciation expense in years in which revenues exceed expenses.

A

Ignoring any additional expenses incurred, how would a capital lease affect a company's debt-to-equity ratio (calculated using balance sheet data alone)? A. It will increase the ratio. B. It will decrease the ratio. C. It will have no effect on the ratio. D. It depends on what is being leased.

A

Salaries should be expensed In the period in which the A. employees perform the work B.Annually on the balance sheet C.Only at the time that the salaries are paid D.None of the above

A

The accounting equation is represented by Assets= Liabilities + Stockholders' Equity. Would any of these transaction's cause a change in the Stockholders' Equity accounts Loss on the sale of a building? the loss on the sale of the building is treated as an expense A. Yes B. No

A

The accounting equation is represented by Assets= Liabilities + Stockholders' Equity. Would any of these transaction's cause a change in the Stockholders' Equity accounts Payment of interest expense on a note payable? Interest Expense A. Yes B. No

A

The accounting equation is represented by Assets= Liabilities + Stockholders' Equity. Which of the following would cause a change in the stockholders' equity accounts at the time of the transaction? A. Sale of a fixed asset for cash at an amount more than its book value B. Collection of an account receivable C. Payment of principal associated with a note payable D. Purchase of machinery for cash

A

Which depreciation method is considered an accelerated method of depreciation? A. Double declining balance B. Straight Line C. Units of Production

A

Which inventory method would result in the lowest dollar amount of ending inventory when inventory purchase costs have been increasing? A. LIFO B. Weighted-average C. FIFO D. Straight-line

A

A creditor who is considering lending money to a firm would prefer to see (check only one) A. A higher debt-to-equity ratio B. A lower debt-to-equity ratio meaning less debt, more equity.

B

An airline that sells a ticket to a passenger on June 1 for a June 9 flight would record ticket revenue A. on June 7, the midpoint of the 8-day period between June 1 and July 9. B. on July 9 when passenger takes the flight. C. on June 1 if the ticket is refundable. D. on June 9 if the ticket is not refundable.

B

Cash paid for the acquisition of an intangible asset will appear in which section of the statement of cash flows? A. Operating. B. Investing. C. Financing. D.Non-cash disclosures.

B

Compute the Book Value for the first 3 years of the following asset utilizing the Straight-Line method of depreciation: Equipment cost $40,000. Salvage Value is $2,000. 8-year useful life. A. 23,750 B. 25,750 C. 35,250 D. 30,500

B

Employees are paid a total of $50,000 every two weeks. The current pay period ends at the end of the first week of January 2020 when employees are paid $50,000. This pay is for work the employees performed for the last week of December 2019, and the first week of January 2020. How should the employer record salaries expense for this pay period? A. Paid $50,000 on the end of week one in January, 2020. Paid 50,000 on the end of month December 2019 B. Paid $50,000 on the end of week one in January, 2020. $25,000 (1/2/the 2-week period) expense incurred in 2019 (Last week of December 2019) $25,000 (1/2 the 2-week period) expense incurred in 2020 (First week of January

B

How else can the Accounting Equation be presented? A. No other way B.Assets - Liabilities = Stockholder's Equity C.Liabilities = Stockholder's Equity + Assets D. Liabilities -assets= Stockholder's Equity

B

In 2018, ABC Inc. income statement reported total sales revenue of $100,000. A comparison of the 2017 and 2018 comparative Balance Sheets showed that accounts receivable increased by $10,000. There no other receipts from credit sales (ie no payments from customers on account in 2018). How much were "cash receipts from customers" during 2018? A. 10,000 B. 90,000 C. 80,000 D. 1,000

B

Meyers Inc. has the following information from its 2018 Statement of cash flows. Cash provided by (used in) operating activities ($100,000) Cash provided by (used in) investing activities 35,000 Cash provided by (used in) financing activities 65,000 What inferences can you make from this data? A.The company did not need to rely on external financing and the sale of long-term assets to cover daily operating needs. B. The company had to rely on external financing and the sale of long-term assets to cover daily operating needs. C. The company had to rely on internal financing and the sale of long-term assets to cover daily operating needs. D.The company did not to rely on internal financing and the sale of long-term assets to cover daily operating needs.

B

On 1/1/16, a company purchases a truck at a cost of $100,000. The truck has a salvage value of $5,000, and a useful life of 10 years or 200,000 miles. The truck is driven for 10,000 miles during 2016. What is the 2016 deprecation expenses using the Straight Line method? A. $3,500 B. $9,500 C. $10,000 D. $4,750

B

Selling fixed assets for cash will appear in which section of the Statement of Cash Flows? A. Operating B. Investing C. Financing

B

The accounting equation is represented by Assets= Liabilities + Stockholders' Equity. Would any of these transaction's cause a change in the Stockholders' Equity accounts Payment of an accounts payable(Asset & Liability) A. Yes B.No

B

The accounting equation is represented by Assets= Liabilities + Stockholders' Equity. Would any of these transaction's cause a change in the Stockholders' Equity accounts Repayment of a note payable?(Asset & Liability) A. Yes B.No

B

What does the term Insolvency mean? A. A company is insolvent when their assets exceed their liabilities. B. company is insolvent when their liabilities exceed their assets. C. A company is insolvent when their liabilities exceed their shareholders equity. D.A company is insolvent when their assets exceed their shareholders equity.

B

Which depreciation method results in an equal amount of depreciation expense over the life of an asset A. Double Declining Balance B. Straight Line C. Units of production

B

Which of the following is most similar to the purchase of an asset with debt financing? A. Purchasing Treasury Stock. B. A capital lease. C. Unearned revenue. D. An operating lease.

B

Will the dividends Danger Dive pays to stockholders appear as revenue on an income statement? A.YES B. NO

B

.Matching Concept: Match revenues earned with related expenses in the same accounting period (i.e. in the same year) Does the Allowance Method of accounting for uncollectible Accounts Receivable (i.e. bad debts) meet the Matching Concept? A.No, as the bad debt expense is not reflected in the same period (same year) in which the credit sales were made. B.Yes, as the bad debt expense is not reflected in the same period (same year) in which the credit sales were made. C.Yes, as the bad debt expense is reflected in the same period (same year) in which the credit sales were made. D. No, as the bad debt expense is reflected in the same period (same year) in which the credit sales were made.

C

A company purchases inventory using $20,000 cash. Which of the following properly reflects this transaction? A. -20,000 Cash - 20,000 Accounts Payable B. +20,000 Cash +20,000 Accounts Payable C. +20,000 Inventory -20,000 Cash D. +20,000 Inventory -20,000 ( Inventory Expense)

C

A company's financial statements for the month of November 2016 reflect the following: Cost of Goods Sold: $200,000 Average Inventory for the month: $50,000 What is the average number of days it takes the company to sell its inventory? A. 6 days B. 52 days C. 91 days D. This cannot be determined from the given information

C

A firm that has a high current ratio but a very low quick ratio has A. low merchandise inventories B. Very few intangible assets C. High Merchandise Inventories D. Both A and B are correct

C

An adjusting entry for depreciation of $3,500 would have which of the following effects on the categories shown below? A. +3500 (NON CASH ASSETS)= +3500 (RETAINED EARNINGS) B. +3500 (LIABILITIES)= -3500 (RETAINED EARNINGS) C. -3500 (NON CASH ASSETS)= -3500 (RETAINED EARNINGS) D. -3500 (CASH)= -3500 (RETAINED EARNINGS)

C

Cyber Company's 2016 income statement reported total sales revenue of $360,000. The 2015-2016 comparative balance sheets showed that accounts receivable increased by $10,000. How much were "cash receipts from customers" during 2016? A.$ 20,000 B.$330,000 C.$350,000 D.$370,000

C

Ignoring any additional expenses incurred, how would a new operating lease affect a company's leverage? A. It will increase leverage. B. It will decrease leverage. C. It will have no effect on leverage. D. It depends on what is being leased.

C

In what financial Statement does Allowance for Doubtful (Uncollectible) Accounts appear A. Cash flows statement B. Income Statement C. Balance Sheet

C

Intangible assets A. include machinery but not equipment. B. have physical substance. C. lack physical substance. D. include machinery and equipment, but not buildings.

C

Lyme Incorporated issue 3,000 shares of its no par value common stock for $20 per share. What is the impact on the balance sheet and income statement? A.+$3,000 Cash (Assets) +$3,000 common stock (SE) +$3,000 (Revenues) B.+$60,000 Cash (Assets) +$3,000 common stock +$57,000 Additional paid in capital (SE) C.+$60,000 Cash (Assets) +$60,000 Common stock (SE) D. +$60,000 Cash (Assets) +$60,000 common stock (SE) +$60,000 (Revenues)

C

Paying off long-term debt with cash will appear in which section of the Statement of Cash? A. Operating B. Investing C. Financing

C

The Kent Company issues 1,000 shares of its $1.00 par value common stock for $40 per share. What is the impact on the balance sheet and income statement? A.+$1,000 Cash (Assets) +$1,000 common stock (SE) B. +$40,000 Cash (Assets) +$40,000 common stock (SE) +$40,000 (Revenues) C. +$40,000 Cash (Assets) +$1,000 common stock +$39,000 Additional paid in capital D. +$41,000 Cash (Assets) +$1,000 Additional paid in capital +40,000 common stock (SE) +$40,000 (Revenues) +$1,000 (Expenses) E. +$40,000 Cash (Assets) +$39,000 common stock +$1,000 Additional paid in capital

C

The advantages of obtaining long-term funds by issuing additional common stock, rather than issuing bonds, including which of the following? A. The funds obtained from stock issuances do not have to be repaid B. The company's risk of insolvency is lower with stock C. Both A. and B. are advantages of issuing stock. D.Neither A nor B is correct

C

The following items are reported on a firm's balance sheet: A. bad debt expense B. depreciation expense. C. accumulated depreciation. D. both A and B are correct. E.none are correct.

C

The statement of cash flows: A. reconcile differences between net income and cash receipts & disbursements. B. examine the factors that increased or decreased gross profit during the period. C. analyze elements that contributed to a company's net income or net loss. D. ensure that the cash account reconciles with bank statement balances.

C

Under the accrual basis of accounting, a company recognizes revenue when A. cash is received from customers. B. expenses when paid. C. revenue when services are performed. D. revenue and expenses when contracts are signed.

C

Which of the following inferences is most consistent with this company's cash flows? Cash provided by (used in) operating activities ($100,000) Cash provided by (used in) investing activities 35,000 Cash provided by (used in) financing activities 65,000 A. The company generated sufficient operating cash flows to fund expansion of its business through the growth of long-term assets. B. This reflects a healthy firm. C. The company had to rely on external financing and the sale of long-term assets to cover operating needs. D. The balance of cash at the end of the period was lower than at the beginning of the period.

C

Which of the following is NOT one of the reasons why net income differs from cash flows from operations under the indirect method of calculating cash flows? A. non-cash items, such as depreciation and amortization (both depreciation expense and amortization expense related to the income statement) B. changes in working capital accounts (working capital accounts relate to current assets and current liabilities. A current asset, such as Accounts Receivable, gives rise to Sales account. A current liability, such as accounts payable, gives rise to an expense. Therefore, these items do relate to the income statement.) C. sale or repurchase of Treasury Stock no impact to the income statement at all. Cash is decreased, and shareholders' equity is decreased. Answer C has no connection to the income statement at all. D. gains and losses related to the sale of plant, property, and equipment (gains relate to revenues, and losses relate to expenses. Both are connected to the income statement).

C

Which of the following ratios would best suggest lower leverage and better long-term-debt-paying ability for a given firm relative to other firms in the same industry? A. a low current ratio. B. a high debt-to-equity ratio. C. a low debt-to-equity ratio. D. a low average days in inventory.

C

Why is the operating activities section of the statement of cash flows often believed to be the most important of the three activities? A. Because it shows the extent to which the company is leveraged. B. Because it shows the net increase or decrease in total cash and cash equivalents during the period. C. Because it indicates a company's ability to generate cash from sales to meet current cash payments necessary to provide those goods or services. D. Because it gives the most information about a company's investments in fixed assets.

C

With a capital and operating lease would it increase the debt to owners equity ratio? A. C: Yes O: Yes B. C:No O: Yes C. C:Yes O: No D. C: No O: Yes

C

___________ Lease: A company would not include on its Balance Sheet a $500,000 machine that uses (but does not own) ____________Lease: A company would include on its Balance Sheet a $500,000 machine that uses (and is "treated" as the owner of the machine) A. Company, Operating B. Operating, Company C. Operating, Capital D. Capital, Operating

C

A firm's cash flows will differ from net income each period for which of the following reasons? A. cash receipts from customers do not necessarily occur in the same period in which revenue is recognized B.cash expenditures to suppliers and employees do not necessarily occur in the same period in which a firm incurs the expenses. C. cash inflows and outflows that pertain to financing activities do not immediately flow through the income statement. D. All of the above.

D

ABC, INC. has the following information from its 2018 Statement of Cash Flows. Net cash provided by operating activities $2 million Net cash used in investing activities $(400 million) Net cash provided by financing activities $402 million What can you infer from the above? A.ABC INC is using cash to invest in fixed assets B.ABC needed to fund the investments by financing (i.e. issue stock, issue bonds, take out a loan). C.ABC needed to rely on financing (i.e. issue stock, issue bonds, take out a loan) to run the day to day operations of the business D. All of the above

D

Based on the following data, what is the Ending Inventory and Cost of goods sold under the FIFO inventory costing methods? 1/2/19 Purchased 100 items of inventory for $8 each . 3/12/19 Purchased 80 items of inventory for $9 each 3/19/ 19 Purchased 50 items of inventory for $10 each On 3/29/19 70 items of inventory were sold for $46 each. A. END= 1340 COGS= 680 B. END= 1350 COGS= 660 C. END= 1360 COGS= 680 D. END= 1460 COGS= 560

D

Depending on the circumstances, it could be correct to recognize revenue A. months before cash is received from the customer. B. at the same time that cash is received from the customer. C. months after cash is received from the customer. D. all of the above are correct.

D

Good matching requires that firms record bad debt expense A. equally throughout the year. B. only when there is evidence that a specific customer is unable to pay. C. before the 10th day of each month. D. in the period in which the credit sales were made.

D

On 1/1/18, a company purchases a truck at a cost of $100,000. The truck has a salvage value of $4,000, and a useful life of 10 years or 200,000 miles. The truck is driven for 10,000 miles during 2018. What is the 2018 depreciation expenses using the Straight-Line method? A. 10,000 B. 4,800 C. 8,600 D. 9,600

D

Paying off a bond payable (ie long-term debt) with cash will appear in which section of the statement of cash flows? A.Operating. B. Investing. C. Does not appear on the statement of cash flows D. Financing.

D

Revenue is recognized (earned) in which scenario below: A.months before cash is received from the customer? B.at the same time that cash is received from the customer? C.months after cash is received from the customer? D. All of the above

D

The amount of shareholders' equity contributed by common stockholders to Danger Dive equals A. retained earnings and common stock B. treasury stock C. common stock D. common stock and additional paid-in capital

D

The balance of retained earnings A. equals assets - liabilities. B. is increased by expenses. C. equals total revenue since the firm began minus total dividends given to shareholders since the firm began. D.equals total earnings since the firm began minus total dividends given to shareholders since the firm began.

D

The book value of a three-year old machine A. is always equal to its market value at that point in time. B. will be greater than the book value of that machine was when it was only one year old. C. would be reported among operating expenses on a firm's balance sheet. D.will be lower than the book value of that machine when it was only one year old.

D

What would be reported as part of net cash flows from investing activities? A. Net cash from buying or selling fixed assets (e.g., land, building, equipment). B.Repayment of a notes payable C. Cash paid for the acquisition of a Trade Secret or other intangible asset (patent, copyright, goodwill, franchise). D. A and C only

D

Which of the following is a correct version of the Accounting Equation? A. Assets = Liabilities - Stockholder's Equity B. Assets + Liabilities = Stockholder's Equity C. Assets + Stockholder's Equity = Liabilities D. Assets = Liabilities + Stockholder's Equity

D

Which of the following is a measure of long-term solvency? A. working capital. B. current ratio. C. acid-test (quick) ratio. D.debt-to-equity ratio.

D

Which of the following would be reported as part of net cash flows from investing activities? A. Depreciation Expense. B. Dividends declared. C. The issuance of preferred stock. D. Net cash from buying or selling a building.

D

With rising inventory costs, firms that use FIFO A. will report higher cost of goods sold than if they had used LIFO. B. can legally pay less taxes than if they had used LIFO. C. could be reporting a very low inventory amount on their balance sheet. D.none of the above.

D

What is the debt-to-equity ratio for Danger Dive? A. 0.25 (25%) B. 0.56 (56%) C. 0.64 (64%) D.1.57 (157%) E. 5.24 (524%)

E

What were Danger Dive's Total Assets (in millions)? (tip: use accounting equation). A. $2,927.90 B. $7,533.50 C. $8,171.40 D. 8,795.70 E. $12,922.00

E

A company would INCLUDE in its balance sheet a $1 million machine that it A. purchased with cash. B. purchased with funds received from a bank loan. C. uses (but not owns) as a lessee under a capital lease. D. uses (but not owns) as a lessee under an operating lease. E. all the above. F. a,b & c only

F

Are there any differences in obtaining long-term funds (i.e. obtaining cash) by issuing additional common stock vs issuing bonds? A.Issue Stock - the company is not REQUIRED to pay back the money to the shareholders. Therefore, no debt is involved. B. Issue Stock - the company is not REQUIRED to pay dividends to the shareholders. Therefore, no debt is involved. C. Issue Bonds - the company is REQUIRED to pay back the money to the bondholders at maturity in the future. Therefore, debt is increased. D. Issue Stock - the company is REQUIRED to pay interest to the shareholders. Therefore, debt is increased. E. Issue Stock - the company is NOT REQUIRED to pay interest to the shareholders. Therefore, debt is increased. F. Answers A, B, C, and D only

F

Hotel Corp. has been in business for 20 years. In 2015 it reported $6 million of depreciation expense and $3 million of net income. Assume that it had no significant purchases, redemptions or maturities of available-for-sale securities (debt and bond securities of other companies). Net cash provided by operating activities: $10 million Net cash used in investing activities:(700 million) Net cash provided by financing activities: 800 million Its statement of cash flows (SCF) for the year ended 12/31/2015 showed: A. Total cash & cash equivalents were higher at the end of 12/31/2015 than 12/31/2014. B. The company was able to entirely fund investments internally from operating cash flows during 2015. C. Depreciation is likely the main reason for the difference between net cash provided by operations of $10 million and net income of $3 million. D. The company had to rely on lenders or shareholders to finance most of its growth in acquiring long-term assets during 2015. E. Hotel Corp. appears to be expanding through capital expenditures associated with major renovations, acquisitions of property, plant, and equipment, or construction of new buildings. F. A,C,D,E only

F