acct 200 final

81. The section of the Statement of Cash Flows that is the best measure of the companies chances to generate enough cash to continue as a going concern is A) cash flows from operating activities B) cash flows from investing activities C) cash flows from investing activities D) not determinable from any of the above

A) cash flows from operating activities

30. On January 14, Decker Industries purchased supplies of $500 on account. They entry to record the purchase will include A) debit to supplies, credit to accounts payable B) debit to supplies expense, credit to accounts receivable C) debit to supplies, credit to cash D) debit to accounts receivable, credit to supplies

A) debit to supplies, credit to accounts payable

52. Mrs. Smith has worked for Bosco Inc. for 20 years without taking a vacation. An internal control feature that would address this situation would be A) human resource controls B) establishment of responsibility C) physical controls D) documentation procedures

A) human resource controls

7. Which of the following is not an advantage of the corporate form of business organization? A) no personal liability B) easy to transfer ownership C) favorable tax treatment D) Easy to raise funds

C) favorable tax treatment

83. A bond with a face value of $100,000 and a quoted price of 104¼ has a selling price of A) $104,250 B) $104,025 C) $100,425 D) $104,000

A) $104,250

4. An accounting time period that is one year in length is called: A) a fiscal year B) an interim period C) the time period assumption D) a reporting period

A) a fiscal year

49. If a check correctly written and paid by the bank for $628 is incorrectly recorded on the company's books for $682, the appropriate treatment on the bank reconciliation would be to A) add $54 to the book's balance B) subtract $54 from the book's balance C) deduct $54 from the bank's balance D) deduct $628 from the book's balance

A) add $54 to the book's balance

71. In the financial statements of a corporation, treasury stock is A) deducted from paid-in capital and retained earnings B) an asset C) deducted from paid-in capital-common stock D) a liability

A) deducted from paid-in capital and retained earnings

10. Which of the following groups uses accounting information to determine whether the company's net income will result in a stock price increase? A) investors in common stock B) marketing managers C) creditors D) chief financial officer

A) investors in common stock

79. Using the indirect method to depict cash flows, which of the following would be classified in the Financing section on the statement of cash flows? A) long-term debt retired with cash B) purchase of property, plant, and equipment C) cash outflows to suppliers of inventory D) cash outflows for employees for wages

A) long-term debt retired with cash

53. Which of the following is not an internal control procedure for cash? A) payments should be made with cash B) there should be limited access to cash C) the amount of cash on hand should be kept to a minimum D) cash should be deposited daily

A) payments should be made with cash

38. Unearned revenues are: A) received and recorded as liabilities before they are earned B) earned and recorded as liabilities before they are received C) earned but not yet received or recorded D) earned and already received and recorded

A) received and recorded as liabilities before they are earned

19. Two of the major characteristics that make accounting information useful are A) relevance and faithful representation B) verifiability and timeliness C) comparability and flexibility D) understandability and consistency

A) relevance and faithful representation

77. A major disadvantage for a company using bonds as a means of obtaining long-term capital is A) the company locks in fixed payments that must be paid in good times and in bad B) stockholders retain full control of the company C) return on stockholder's equity may be higher D) bond interest is a deductible tax expense

A) the company locks in fixed payments that must be paid in good times and in bad

85. Which of the following statements regarding the effective interest method of accounting for bonds is true: A) the periodic interest expense increases over the life of the discounted bond issue B) GAAP does not require the use of the effective interest method under and circumstance C) interest percentage varies each period D) carrying value decreases each period for discounted bonds

A) the periodic interest expense increases over the life of the discounted bond issue

35. Using accrual accounting, expenses are recorded and reported only: A) when they are incurred whether or not cash is paid B) when they are incurred and paid at the same time C) if they are paid before they are incurred D) if they are paid after they are incurred

A) when they are incurred whether or not cash is paid

33. Which of the following is a measure of liquidity? A) working capital B) profit margin C) earnings per share D) debt to equity ratio

A) working capital

44. Bonkers Bananas has the following inventory data: July 1 Beginning inventory 20 units at $20 $400 7 Purchases 70 units at $21 $1,470 22 Purchases 10 units at $22 $220 $2,090 A physical count of merchandise inventory on July 30 reveals there are 30 units on hand. Using the LIFO inventory method, the amount allocated to ending inventory for July is A) $660 B) $610 C) $600 D) $630

B) $610

42. In a period of rising prices, which of the following inventory methods generally results the lower net income figure? A) average cost B) LIFO C) FIFO D) need more information to answer

B) LIFO

40. Conway Company purchased merchandise inventory with an invoice price of $8,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Conway Company pays within the discount period? A) $8,000 B) $7,840 C) $7,200 D) $7,360

B) $7,840

16. Use the following data to calculate the current ratio. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash 50,000 Accounts Payable 55,000 Prepaid Insurance 30,000 Salaries Payable 10,000 Accounts Receivable 40,000 Mortgage Payable 90,000 Inventory 70,000 Total Liabilities 155,000 Land held for invest. 80,000 Land 75,000 Buildings 110,000 Common Stock 120,000 Less Accum Retained Earnings 250,000 Dep. (20,000) 90,000 Total Stock. Equity 370,000 Trademarks 70,000 Total Liabilities and Total Assets 525,000 Stockholder's Equity 525,000 A) 1.85:1 B) 2.92:1 C) 3.45:1 D) 1.38:1

B) 2.92:1

15. Use the following data to determine the total amount of working capital. Eddy Auto Supplies Balance Sheet December 31, 2014 Cash 100,000 Accounts Payable 110,000 Prepaid Insurance 60,000 Salaries Payable 20,000 Accounts Receivable 80,000 Mortgage Payable 180,000 Inventory 140,000 Total Liabilities 310,000 Land held for invest. 160,000 Land 150,000 Buildings 220,000 Common Stock 240,000 Less Accum Retained Earnings 500,000 Dep. (40,000) 180,000 Total Stock. Equity 740,000 Trademarks 140,000 Total Liabilities and Total Assets 1,050,000 Stockholder's Equity 1,050,000 A) 410,000 B) 250,000 C) 100,000 D) 160,000

B) 250,000

45. In a period of increasing prices, which inventory flow assumption will result in the lowest amount of income tax expense? A) FIFO B) LIFO C) average cost D) income tax expense for the period will be the same under all assumptions

B) LIFO

90. Madson Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 90,000 subscriptions in January at $10 each. What entry is made in January to record the sale of the subscription? A) Subscription receivable 900,000 Subscription revenue 900,000 B) Cash 900,000 Unearned subscription revenue 900,000 C) Subscription receivable 150,000 Unearned subscription revenue 150,000 D) Prepaid subscriptions 900,000 Cash 900,000

B) Cash 900,000 Unearned subscription revenue 900,000

84. If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at: A) a premium B) a discount C) par D) both a and b are correct

B) a discount

55. A company maintains the asset account, Cash in Bank, on its books, while the bank maintains a reciprocal account that is A) a contra asset account B) a liability account C) also an asset account D) an owner's equity account

B) a liability account

26. Posting A) should be performed in account number order B) accumulates the effects of journalized transactions in the individual accounts C) involves transferring all debits and credits on a journal page to the trail balance D) is accomplished by examining ledger accounts and seeing which ones need updating

B) accumulates the effects of journalized transactions in the individual accounts

9. The accounting equations may be expressed as: A) assets = stockholder's equity - liabilities B) assets = liabilities + stockholder's equity C) assets + liabilities = stockholder's equity D) assets + stockholder's equity = liabilities

B) assets = liabilities + stockholder's equity

2. The operating cycle of a company is the average time that is required to go from cash to A) sales in producing revenues B) cash in producting revenues C) inventory in producing revenues D) accounts receivable in producing revenues

B) cash in producing revenues

48. When two or more people get together for the purpose of circumventing prescribed controls, it is called A) a fraud committee B) collusion C) a division of duties D) bonding of employees

B) collusion

62. You have just received notice that a customer or yours with an account receivable balance of $100 has gone bankrupt an will not make any future payments. Assuming you use the allowance method, the entry you make is to A) debit allowance for doubtful accounts, credit bad debt expense B) debit allowance for doubtful accounts, credit accounts receivable C) debit bad debt expense, credit allowance for doubtful accounts D) debit bad debt expense, credit accounts receivable

B) debit allowance for doubtful accounts, credit accounts receivable

61. To record estimated uncollectible accounts using the allowance method, the adjusting entry would be a A) debit to accounts receivable, credit to allowance for doubtful accounts B) debit to bad debts expense, credit to allowance for doubtful accounts C) debit to allowance for doubtful accounts, credit to accounts receivable D) debit to loss on credit sales, credit accounts receivable

B) debit to bad debts expense, credit to allowance for doubtful accounts

29. When a company receives a utility bill but will not pay it right away, it should A) debit utilities expense, credit accounts receivable B) debit utilities expense, credit accounts payable C) debit accounts payable, credit utilities expense D) make no entry until the bill is paid

B) debit utilities expense, credit accounts payable

28. When a company performs a service but has not yet received payment, it A) debits service revenue, credits accounts receivable B) debits accounts receivable, credits service revenue C) debits service revenue, credits accounts payable D) makes no entry until cash is received

B) debits accounts receivable, credits service revenue

20. Which of the following is a constraint in accounting? A) comparability B) materiality C) consistency D) relevance

B) materiality

51. Which of the following bank reconciliation items would not result in an adjusting entry? A) service charge B) deposit in transit C) NSF check of customer D) collection of note by the bank

B) deposit in transit

6. The expense recognition principle matches: A) customers with business B) expenses with revenues C) assets with liabilities D) creditors with business

B) expenses with revenues

69. A loss on disposal of plant assets is reported in the financial statements A) in the other revenues and gains section of the income statement B) in the other expenses and losses section of the income statement C) as a direct increase to the capital account on the balance sheet D) as a direct decrease to the capital account on the balance sheet

B) in the other expenses and losses section of the income statement

73. Dividends in arrears on cumulative preferred stock A) never have to be paid, even if common dividends are paid B) must be paid before common stockholders can receive a dividend C) should be recorded as a current liability until they are paid D) enable the preferred stockholders to share equally in corporate earnings with the common stockholder's

B) must be paid before common stockholders can receive a dividend

12. Retained earnings at the end of the period is equal to: A) retained earnings at the beginning of the period plus net income minus liabilities B) retained earnings at the beginning of the period plus net income minus dividends C) net income D) assets plus liabilities

B) retained earnings at the beginning of the period plus net income minus dividends

80. In addition to the three basic financial statements, which of the following is also a required financial statement? A) the cash budget B) statement of cash flows C) statement of cash inflows and outflows D) the cash reconciliation

B) statement of cash flows

24. The cost principle requires that when assets are acquires, they be recorded at A) market value B) the amount paid for them C) selling price D) list price

B) the amount paid for them

70. All of the following statements are true regarding the declining balance method of depreciation except A) the declining balance method ignores salvage value when calculating depreciation B) the declining balance method produces lower depreciation expense in the early years as opposed to the later years C) the declining balance method is compatible with the matching principle D) the declining balance method is appropriate when assets lose their usefulness rapidly

B) the declining balance method produces lower depreciation expense in the early years as opposed to the later years

22. The periodicity assumption states A) the business will remain in operation for the foreseeable future B) the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared C) every economic entity can be separately identified and accounted for D) only those things that can be expressed in money are included in the accounting records

B) the life of a business can be divided into artificial time periods and that useful reports covering those periods can be prepared

5. The revenue recognition principle dictates that revenue should be recognized in the accounting records: A) when cash is received B) when it is earned C) at the end of the month D) in the period that income taxes are paid

B) when it is earned

66. A plant asset with a cost of $180,000 and accumulated depreciation of $171,000 sold for $21,000. What is the amount of the gain/loss on disposal of the plant asset? A) $21,000 loss B) $12,000 loss C) $12,000 gain D) $21,000 gain

C) $12,000 gain

67. Mitchell Corporation bought equipment on January 1, 2012. The equipment cost $120,000 and had an expected salvage value of $20,000. The life of the equipment was estimated to be 6 years. The depreciation expense using the straight-line method of depreciation is A) $23,333 B) $24,000 C) $16,667 D) none of the above

C) $16,667

17. Using the following balance sheet and income statement data, what is the earnings per share? Current Assets 14,000 Net income 24,000 Current Liabilities 8,000 Stockholder's Equity 42,000 Average Assets 80,000 Total Liabilities 18,000 Total Assets 60,000 Average common shares outstanding was 10,000. A) $4.20 B) $6.00 C) $2.40 D) $0.42

C) $2.40

43. Grape Gratuities Company has the following inventory data: July 1 Beginning inventory 20 units at $20 $400 7 Purchases 70 units at $21 $1,470 22 Purchases 10 units at $22 $220 $2,090 A physical count of merchandise inventory on July 30 reveals that there are 30 units on hand. Using the FIFO inventory method, the amount allocated to ending inventory for July is A) $600 B) $610 C) $640 D) $660

C) $640

39. Sales revenues are usually considered earned when A) cash is received from credit sales B) an order is received C) Goods have been transferred from the seller to the buyer D) adjusting entries are made

C) Goods have been transferred from the seller to the buyer

82. West Country Bank agrees to lend Drake Builders Company $100,000 on January 1. Drake Builders Company signs a $100,000, 6%, 6-month note. What is the adjusting entry required if Drake Builders Company prepares financial statements on March 30? A) Interest Expense 3,000 Interest Payable 3,000 B) Interest Expense 3,000 Cash 3,000 C) Interest Expense 1,500 Interest Payable 1,500 D) Interest Payable 1,500 Interest Expense 1,500

C) Interest Expense 1,500 Interest Payable

1. Which one of the following questions is most likely asked by an internal human resources director for the company? A) Which product line is most profitable? B) What price for our product will maximize the company income? C) What average pay raise is affordable for employees this year? D) Should any product line be eliminated?

C) What average pay raise is affordable for employees this year?

36. Depreciation is the process of: A) valuing an asset at its fair market value B) increasing the value of an asset over its useful life in a rational and systematic manner C) allocating the cost of an asset to expense over its useful life in a rational and systematic manner D) writing down an asset to its real value each accounting period

C) allocating the cost of an asset to expense over its useful life in a rational and systematic manner

41. The lower of cost or market basis of valuing inventories is an example of A) comparability B) the cost principle C) conservatism D) consistency

C) conservatism

8. Which of the following groups uses accounting information to determine whether the company can pay its obligations? A) investors in common stock B) marketing managers C) creditors D) chief financial officer

C) creditors

37. Sally Jones has performed $1,000 of legal services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sally make? A) debit cash, credit unearned revenue B) debit accounts receivable, credit unearned revenue C) debit accounts receivable, credit service revenue D) debit unearned revenue, credit service revenue

C) debit accounts receivable, credit service revenue

31. A company that receives money in advance of performing a service A) debit cash, credit prepaid fees B) debit unearned fees, credit accounts payable C) debit cash, credit unearned fees D) debit cash, credit accounts receivable

C) debit cash, credit unearned fees

47. Which one of the following is not an objective of a system of internal controls? A) safeguard company assets B) enhance the accuracy and reliability of accounting records C) fairness of the financial statements D) reduce the risks of errors

C) fairness of the financial statements

56. An aging of a company's accounts receivable indicates that $4,000 are estimated to be uncollectible. If Allowance for Doubtful Accounts has $1,200 credit balance, the adjustment to record bad debts for the period will require a A) debit to Bad Debt Expense for $4,000 B) debit to Allowance for Doubtful Accounts for $2,800 C) debit to Bad Debt Expense for $2,800 D) debit to Allowance for Doubtful Accounts for $4,000

C) debit to Bad Debt Expense for $2,800

57. An aging of a company's accounts receivable.....uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, what adjustment is needed to record bad debts for the period? A) debit to Bad Debt Expense for $4,000 B) debit to Allowance for Doubtful Accounts for $5,200 C) debit to Bad Debt Expense for $5,200 D) credit to Allowance for Doubtful Accounts for $4,000

C) debit to Bad Debt Expense for $5,200

89. Liabilities are classified as current or long-term based on their A) description B) payment terms C) due date D) amount

C) due date

32. A measure of profitability is the A) current ratio B) debt to total assets ratio C) earnings per share D) working capital

C) earnings per share

11. A corporation has which of the following set of characteristics? A) shared control, tax advantages, increased skills and resources B) simple to set up and maintains control with founder C) easier to transfer ownership and raise funds, no personal liability D) harder to raise funds and gives owner control

C) easier to transfer ownership and raise funds, no personal liability

23. An item is considered material if A) it doesn't cost a lot of money B) it is of a tangible good C) it is likely to influence the decision of an investor or creditor D) the cost of reporting the item is greater than its benefits

C) it is likely to influence the decision of an investor or creditor

75. If common stock is issued for an amount greater than par value, the excess should be credited to A) cash B) retained earnings C) paid-in capital in excess of par value D) legal capital

C) paid-in capital in excess of par value

50. The control principle related to not having the same person authorize and pay fr goods is known as A) establishment of responsibility B) independent internal verification C) separation of duties D) rotation of duties

C) separation of duties

58. Under the allowance method of accounting for uncollectable accounts, A) the cash realizable value of accounts receivable is greater before an account is written off than after it is written off B) Bad Debts Expense is debited when a specific account is written off as uncollectable C) the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off D) allowance for doubtful accounts is closed each year to income summary

C) the cash realizable value of accounts receivable in the balance sheet is the same before and after an account is written off

27. All of the following are significant contributions that the journal makes to the recording process except A) the journal discloses the complete effect of a transaction in one place B) the journal helps prevent or locate errors because debits and credits can be readily compared C) the journal keeps complete information about changes in a specific account balance in one place D) the journal provides a chronological record of transactions

C) the journal keeps complete information about changes in a specific account balance in one place

87. A bond with a face value of $200,000 and a quoted price of 98½ has a selling price of A) $196,500 B) $196,100 C) $196,010 D) $197,000

D) $197,000

18. Using the following balance sheet and income statement data, what is the debt to total assets? Current Assets 14,000 Net income 24,000 Current Liabilities 8,000 Stockholder's Equity 42,000 Average Assets 80,000 Total Liabilities 18,000 Total Assets 60,000 Average common shares outstanding was 10,000. A) 23% B) 13% C) 70% D) 30%

D) 30%

46. Ace Company is a retailer operating in an industry that experiences inflation (rising prices). Ace wants the most realistic ending inventory. Which inventory costing method should Ace consider using? A) average because all inventory costs will then represent an average amount B) Specific identification is the most realistic method because it involves the actual costs C) LIFO because ending inventory represents the earliest costs D) FIFO because ending inventory represents the latest or current costs

D) FIFO because ending inventory represents the latest or current costs

63. In the table below, the information for four companies is provided. Company Receivables Turnover Average Collection Period Martin 13.9 26.3 Lewis 13.3 27.4 Danforth 10.4 35.1 Garner 14.5 25.2 Industry Average 13.0 28.1 Assuming all four companies are in the same industry, which company appears to have the greatest likelihood of paying its current obligations? A) Martin B) Lewis C) Danforth D) Garner

D) Garner

68. The following information is provided for Nguyen Company and Northwest Corporation. (in million $) Nguyen Company Northwest Corporation Net income 2012 $275 $390 Net sales 2012 $1,500 $4,100 Total assets 12/31/11 $1,050 $3,000 Total assets 12/31/12 $1,150 $4,000 If Nguyen and Northwest are in the same industry and the industry average for the return on assets its equal to 30%, which of the following statements is true? A) Nguyen is more profitable than the average company in the industry B) Northwest is more profitable than Nguyen C) Both Nguyen and Northwest are more profitable than the average company in their industry D) Nguyen is more profitable than Northwest

D) Nguyen is more profitable than Northwest

74. Treasury stock is A) stock issued by the US Treasury Department B) stock purchased by a corporation and help as an investment in its treasury C) corporate stock issued by the treasurer of a company D) a corporation's own stock, which has been reacquired and held for future use

D) a corporation's own stock, which has been reacquired and held for future use

64. The balance in the Accumulated Depreciation account represents the A) cash fund to be used to replace plant assets B) amount to be deducted from the cost of the plant asset to arrive at its fair market value C) amount charged to expense in the current period D) amount charged to expense since the acquisition of the plant asset

D) amount charged to expense since the acquisition of the plant asset

78. Using the indirect method, if equipment is sold at a gain, the A) sale proceeds received are deducted in the operating activities section B) sale proceeds received are added in the operating activities section C) amount of the gain is added in the operating activities section D) amount of the gain is deducted in the operating activities section

D) amount of the gain is deducted in the operating activities section

88. The contractual rate of interest is usually stated as a(n) A) monthly rate B) daily rate C) semiannual rate D) annual rate

D) annual rate

14. A balance sheet shows A) revenues, liabilities, and stockholder's equity B) expenses, dividends, and stockholder's equity C) revenues, expenses, and dividends D) assets, liabilities, and stockholder's equity

D) assets, liabilities, and stockholder's equity

72. The paid-in capital in excess of par value is increased in the accounting records when A) the number of shares issued exceeds par value B) the stated value of capital stock is greater than the par value C) the market value of the stock rises above par value D) capital stock is issued at an amount greater than par value

D) capital stock is issued at an amount greater than par value

76. If Pratt Company issues 3,000 shares of $5 par value common stock for $210,000, the account A) common stock with be credited for $195,000 B) paid-in capital in excess of par value will be credited for $210,000 C) paid in capital in excess of par value will be credited for $215,000 D) cash will be debited for $210,000

D) cash will be debited for $210,000

34. A useful measure of solvency is the A) current ratio B) earnings per share C) return on assets ratio D) debt to total assets ratio

D) debt to total assets ratio

65. Which of the following methods will result in the highest depreciation in the first year? A) sum-of-year's-digits B) time valuation C) straight-line D) declining-balance

D) declining-balance

54. A NSF check should appear in which section of the bank reconciliation? A) addition to the balance per books B) deduction from the balance per bank C) addition to the balance per bank D) deduction from the balance per books

D) deduction from the balance per books

3. The unearned service revenue account is classified as a(n) A) asset B) revenue C) expense D) liability

D) liability

60. If the amount of uncollectible account expense is overstated at year end A) net income will be overstated B) stockholder's equity will be overstated C) allowance for doubtful accounts will be understated D) net accounts receivable will be understated

D) net accounts receivable will be understated

59. If the amount of uncollectible account expense is understated at year end A) net income will be understated B) stockholder's equity will be understated C) allowance for doubtful accounts will be overstated D) new accounts receivable will be overstated

D) new accounts receivable will be overstated

13. An income statement A) summarizes the changes in retained earnings for a specific period of time B) reports the changes in assets, liabilities, and stockholder's equity over a period of time C) reports the assets, liabilities, and stockholder's equity at a specific date D) presents the revenues and expenses for a specific period of time

D) presents the revenues and expenses for a specific period of time

25. The primary purpose of the trial balance is to A) disclose the complete effect of a transaction in one place B) maker sure a journal entry is not posted twice C) transfer journal entries to the ledger accounts D) prove the equality of the debit and credit amounts after posting

D) prove the equality of the debit and credit amounts after posting

86. The contractual interest rate on a bond is often referred to as the A) callable rate B) the maturity rate C) market rate D) stated rate

D) stated rate

21. The going concern assumption assumes that the business A) will be liquidated in the near future B) will be purchased by another business C) is in a growth industry D) will remain in operation for the foreseeable future

D) will remain in operation for the foreseeable future