ACCY200

The time frame associated with an income statement is:

A past period of time

Objectivity

Accountants' desire to have a given transaction recorded in the same way in all situations

The closing balance in an account can be determined as:

Beginning Balance + Input - Output = Ending Balance

The Allowance for Bad Debts account is a(n):

Contra current asset

If ending inventory was UNDERSTATED at the end of Year 1 but counted correctly at the end of Year 2 and this error was not discovered until sometime in Year 3, then:

Cost of goods sold was OVERSTATED in Year 1 and UNDERSTATED in Year 2 but the error would have self-corrected in total.

If ending inventory was overstated at the end of Year 1 but counted correctly at the end of Year 2 and this error was not discovered until sometime in Year 3, then: Multiple choice question.

Cost of goods sold was understated in Year 1 and overstated in Year 2 but the error would have self-corrected in total.

Assume that on September 1, Year 1, a six-month property insurance premium of $12,000 was paid for a policy whose coverage began on that day. Also assume that the Prepaid Insurance account was debited for $12,000 at this time. The December 31, Year 1, adjustment with respect to the this policy will include a:

Credit to Prepaid Insurance for $8,000.

Assume that on September 1, Year 1, a six-month property insurance premium of $12,000 was paid for a policy whose coverage began on that day. Assume also that the Prepaid Insurance account was debited for $12,000 at this time. The December 31, Year 1, adjustment with respect to the this policy will include a:

Debit to Insurance Expense for $8,000

Crosby Co. leases a machine and agrees to make annual lease payments of $11,000 for 5 years. The present value of all of the lease payments is $40,000. The entry to record this transaction is:

Dr. Equipment 40,000 Cr. Lease Liability 40,000

he entry made to record the impairment of goodwill is:

Dr. Goodwill Impairment Loss Cr. Goodwill

When costs are rising over time:

FIFO results in higher profits than LIFO

Comparative Financial Statements

Financial statements with a column for the current year and the prior year

Unit of measurement

For companies reporting their financial statements in United States dollars, no adjustments are made for the effects of inflation

Which group of accounts would be closed in the year-end closing process?

Insurance Expense, Service Revenue, Loss on Sale of Equipment, and Sales (In the closing process, all income statement accounts (revenues, expenses, gains, and losses) and dividends are closed)

Consistency

Limiting a firm's ability to switch back and forth between alternative generally accepted accounting methods

Conservatism

Making judgments and estimates that result in lower profits and asset valuation estimates rather than higher profits and asset valuation estimates

Most assets are reported on the balance sheet based on their __

Original/ Historical Cost

The stockholders' equity section of a balance sheet contains two major components:

Paid-in Capital and Retained Earnings

On the balance sheet, _________ would reflect premiums paid to an insurance company for an insurance policy.

Prepaid expense

In the closing process, all income statement accounts (revenues, expenses, gains, and losses) and dividends are closed. What is the name of the account into which all those accounts are closed?

Retained Earnings

The balance sheet might also be called:

Statement of Financial Position

Statement of Stockholder's Equity

The investments by and the distributions to owners during a reporting period

Accounting Period

The period of time selected for reporting financial statements

Going Concern

The presumption that the entity will continue to operate in the future

Collateral

The security pledged by the borrower to support the loan

A firm prepares comparative financial statements so that __

The users of the data can easily spot changes in the firm's financial position and in its results of operations

T/F: Accounts are summarized in financial statements

True

T/F: Net income affects retained earnings

True

If we paid employees in cash this month, we would debit __________ .

Wages expense

The 3 concepts/ principles that relate to the entire model are:

accounting equation, accounting entity, going concern

The accrual of interest on short-term marketable securities results in:

an increase in current assets and an increase in net income

Leasehold improvements made with respect to leased assets are recorded as:

assets by the lessee for the cost of expenditures properly capitalized

Periodically, the petty cash fund is reimbursed to

bring the cash in the fund back to the original amount

A cash equivalent is a current asset that:

is readily convertible into cash with a minimal risk

Transactions are initially recorded in a ___

journal

In times of rising prices, LIFO results in:

lower ending inventory value and higher cost of goods sold value than FIFO

Goodwill is an asset that arises because the purchase price of the acquired company is:

more than the fair value of the net assets of the acquired company

The effect of an error resulting in an understatement of ending inventory is to: (regarding cost of goods sold)

overstate cost of goods sold of the current period.

An organization's system of internal control is designed primarily to:

provide an operating framework for all employees as they work to achieve the organization's goals

Depletion is usually recognized:

straight line basis

Transactions are summarized in:

the entity's accounts

Regardless of the inventory cost flow assumption used, inventories on the balance sheet are stated at:

the lower of cost or market

The "market" in the lower of cost of market valuation is generally:

the replacement cost of the inventory

he "market" in the lower of cost of market valuation is generally:

the replacement cost of the inventory.

When a firm buys land on which there is a building, and the building is torn down so that an appropriate new building can be constructed on the land:

the total cost of the land and old building are capitalized as land cost.

Buildings and equipment are recorded at their original cost, which includes the purchase price plus all ordinary and necessary costs incurred:

to get the building or equipment ready for its use in the operations of the firm.

Which of the following accounts are examples of intangible assets?

- Franchises - Trademarks - Brand names - Patents

Which of the following items are capitalized as part of the cost of land acquired?

- Legal fees - Title fees - Cost of razing an old building on the land, net of salvage proceeds - Purchase price of the land

Which of these would be included in the Cash account, which is reported as an asset on the balance sheet?

- Money on hand in petty cash funds - Checking account balances - Undeposited receipts, including checks - Savings account balances

Under accrual accounting, year-end adjustments are made:

- to ensure that revenues are recognized in the year in which they are earned. - because the cash disbursement for expenses may occur before or after the event that causes expense recognition.

Matching Concept

- Revenues are recorded in the period they are earned - Expenses are recorded in the period they are incurred

Which of the following are true of intangible assets?

- The cost of obtaining intangible assets should be capitalized. - Intangible assets are amortized over their remaining useful life or their statutory life, whichever is shorter.

The cost of an inventory item is released to the income statement as an:

- expense when the product becomes worthless - expense when the product is sold - expense when the product is lost or stolen

T/F: Transactions are summarized in accounts

True

The time frame associated with a balance sheet is:

a point in time in the past

Which of the following is not typically classified as a current liability? a) Accounts Payable. b) Short-Term Notes Payable. c) Bonds Payable. d) Unearned Subscription Revenue. e) Interest Payable.

c) Bonds Payable

Relative to the straight-line method, the effects of using an accelerated depreciation method during inflationary times are:

greater amounts reported as depreciation expense and lower amounts reported as net income

The sum of the cash on hand in the petty cash box and the receipts in support of disbursements (called petty cash vouchers) ______.

should equal the amount initially put in the petty cash fund

Short-term marketable debt securities that are in the held-to-maturity category are reported on the balance sheet at

the entity's cost of the securities

When the tenant of an office building makes modifications to the office space, the cost of these modifications is a capital expenditure to be amortized over their useful life _____.

to the tenant or over the life of the lease, whichever is shorter

Deferred tax liabilities arise because of the _____. (SELECT TWO) a) accounting process of matching revenues and expenses b) difference between a company's book income and taxable income c) accounting process of recording the expenses as and when they are paid for d) difference between a company's book value and market value

- accounting process of matching revenues and expenses - difference between a company's book income and taxable income

Transactions

- are summarized in accounts, and accounts are further summarized in financial statements - can be seen as the bricks that build financial statements

The amount in the Cash account, which is reported as an asset on the balance sheet, includes:

- demand deposit balances - undeposited receipts, including checks - petty cash fund balances - savings account balances - checking account balances

Without considering the other factors, a maintenance expenditure should be capitalized if the expenditure does which of the following?

- increases the salvage value of the asset. - extends the useful life of the asset.

A corporation's annual report contains the reporting firm's financial statements and

- management's discussion and analysis of the financial statements - the report of the external auditor's examination of the financial statements - the notes to the financial statements

Buildings and equipment are recorded at their original cost, which includes the purchase price plus:

- material, labor, and overhead costs for equipment made by a firm's own employees. - installation and shakedown costs. - interest costs incurred during the construction phase of a building.

The financial statement effects of the entry to record actual warranty costs in the year in which the warranty is honored include: (SELECT TWO) - no effect on net income. - a decrease to current liabilities and a decrease to cash (or repair parts inventory). - an increase to current liabilities and no effect on cash. - a decrease to current liabilities and a decrease to cash (or repair parts inventory).

- no effect on net income. - a decrease to current liabilities and a decrease to cash (or repair parts inventory).

A note receivable:

- often identifies collateral pledged by the borrower to support the loan. - normally includes a maturity date. - often includes covenants made by the borrower.

Assume that the balances in Accounts Receivable and the Allowance for Bad Debts accounts were $50,000 and $3,000, respectively, before a write-off entry for $1,000 was recorded. How much would have been reported on the balance sheet as "Net accounts receivable" after the write-off entry was recorded?

$47,000 - The net change in the net accounts receivable after a write-off is zero because Accounts Receivable will be reduced by the same amount as the Allowance for Bad Debts account.

Identify the true statements regarding the balance sheet presentation of accounts receivable.

- "Net accounts receivable" represents the balance of an asset account less the balance of a contra asset account. - The allowance for bad debts is subtracted from accounts receivable while presenting the accounts receivable in the balance sheet. - "Net accounts receivable" is the net realizable value reported on the balance sheet.

Which of the following items are normally included as key components of a corporation's annual report?

- A five-year (or longer) summary of key financial data - The notes to the financial statements - The report of the external auditor's examination of the financial statements

Which of the following concepts/ principles relate to bookkeeping procedures and the accounting process

- Accounting Period - Matching - Revenue Recognition - Accrual

The balance sheet equation can be represented by:

- Assets = Liabilities + Stockholders' Equity - Assets - Liabilities = Stockholders' Equity - Net Assets = Stockholders' Equity

Which depreciation method results in equal depreciation expense for each year of an asset's useful life?

Straight-Line

Select all that apply Identify the true statements regarding noncontrolling interest. More than one answer may be correct. a) It signifies that a portion of the net assets controlled by the reporting entity are attributable to the ownership interests of outside parties. b) It arises in the consolidation process when a subsidiary is 100 percent owned by the parent company. c) It is sometimes called a minority interest. d) It is the portion of equity in a parent not attributable, directly or indirectly, to the subsidiary company.

a) It signifies that a portion of the net assets controlled by the reporting entity are attributable to the ownership interests of outside parties. c) It is sometimes called a minority interest.

Select all that apply How does a stock dividend affect the financial statements of the company? More than one answer may be correct. a) Its total assets are not affected. b) Its total liabilities are increased. c) Its retained earnings account is decreased. d) Its total stockholders' equity is not affected. e) Its cash is decreased.

a) Its total assets are not affected. c) Its retained earnings account is decreased. d) Its total stockholders' equity is not affected.

The adjusting entry to accrue Interest Expense results in: a) an increase in Interest Expense. b) a decrease in Interest Expense. c) a decrease in Cash. d) a decrease in Interest Payable.

a) an increase in Interest Expense.

Interest on a Note Payable is most appropriately accrued: a) at the end of each accounting period during which the note is a liability. b) when principal payments on the note are made. c) when the interest is paid. d) when the note is signed.

a) as of the end of each accounting period during which the note is a liability.

Treasury stock involves shares which are: a) authorized and issued, but not currently outstanding. b) issued and outstanding, but not yet authorized. c) authorized, issued, and outstanding. d) not yet authorized

a) authorized and issued, but not currently outstanding.

Which of the following companies should be most willing to take on more financial leverage? a) A utility company with a steady cash flow stream b) A semi-conductor company with a volatile cash flow stream c) A bio-tech company with a volatile cash flow stream

a) company with a steady cash flow stream

Select all that apply Common stockholders: a) do not have any personal liability for corporate debts and thus cannot be forced by creditors to invest additional amounts to make up for losses. b) have a claim to all assets that remain in the entity after all liabilities and preferred stock claims have been satisfied. c) are entitled to receive specific predetermined amounts of dividends each year, either as a dollar amount or percentage of par value.

a) do not have any personal liability for corporate debts and thus cannot be forced by creditors to invest additional amounts to make up for losses. b) have a claim to all assets that remain in the entity after all liabilities and preferred stock claims have been satisfied.

Current maturities of long-term debt are reported _____. a) in the current liability section but separately from short-term debt b) in the current liability section along with short-term debt c) in the noncurrent liability section but separately from long -term debt d) in the noncurrent liability section but separately from long -term debt

a) in the current liability section but separately from short-term debt

When bonds are issued at a premium: a) interest expense on the bonds will be less than the interest paid. b) the bonds are sold for less than their face amount. c) interest expense on the bonds will be more than the interest paid. d) the coupon interest rate is less than the market interest rate.

a) interest expense on the bonds will be less than the interest paid.

Which is NOT true of deferred tax liabilities: a) involve a straightforward computational process and are a noncontroversial and easily understood liability category. b) are provided for temporary differences between income tax and financial statement recognition of revenues and expenses. c) are one of the most significant liabilities shown on the balance sheet for many firms. d) are normally long term in nature.

a) involve a straightforward computational process and are a noncontroversial and easily understood liability category.

Current maturities of long-term debt are a current liability representing that portion of long-term debt that: a) will be maturing within a year of the balance sheet date b) has been refinanced with the bank as short-term debt c) is expected to be used as part of a debt/equity swap transaction d) is similar to an account payable owed to suppliers for the purchase of goods in the normal course of business

a) will be maturing within a year of the balance sheet date

The financial statement effects of the accrual of estimated warranty liability in the year in which products are sold include: (SELECT TWO) a) an increase to expenses and a decrease to net income. b) a decrease to expenses and an increase to net income. c) an increase to current liabilities and no effect on cash. d) a decrease to current liabilities and a decrease to cash (or repair parts inventory).

an increase to expenses and a decrease to net income & an increase to current liabilities and no effect on cash.

In a bank reconciliation, NSF (not sufficient funds) checks ______

are subtracted from the company's book balance

Which of these are included in the entry to record an issuance of a small stock dividend when the market price per share of stock is greater than the par value per share? More than one answer may be correct. a) A debit to the Net Income account for the market price per dividend share issued b) A credit to the Additional Paid-in Capital account for the difference between the market price and par value per dividend share issued c) A credit to the Stockholders' Expense account d) A debit to the Retained Earnings account for the market price per dividend share issued

b) A credit to the Additional Paid-in Capital account for the difference between the market price and par value per dividend share issued d) A debit to the Retained Earnings account for the market price per dividend share issued

Select all that apply Paid-in capital includes which of these? More than one answer may be correct. a) Treasury stock b) Additional paid-in capital c) Preferred stock d) Retained earnings e) Common stock

b) Additional paid-in capital c) Preferred stock e) Common stock

Which statements regarding net income (loss) and retained earnings are correct? Dividends declared during the period increase net loss. Dividends declared during the period decrease retained earnings. Retained earnings is not affected by the declaration of dividends. Net loss for the period decreases retained earnings.

b) Dividends declared during the period decrease retained earnings. d) Net loss for the period decreases retained earnings.

Accumulated other comprehensive income (loss) is a stockholders' equity category that may include which of the following components? a) Preferred stock b) Gains or losses on certain derivative instruments c) Noncontrolling interests (or minority interests) d) Cumulative foreign translation adjustments

b) Gains or losses on certain derivative instruments d) Cumulative foreign translation adjustments

How does a stock dividend affect the financial statements of the company? More than one answer may be correct. a) Its total stockholders' equity is decreased. b) Its net income is not affected. c) Its total assets are decreased. d) Its common stock is increased. e) Its total paid-in capital is increased.

b) Its net income is not affected. d) Its common stock is increased. e) Its total paid-in capital is increased.

Select all that apply Which of the following statements are true regarding owners' equity and ownership rights held in noncorporate entities? More than one answer may be correct. a) Distributions to owners during the year (sometimes referred to as withdrawals) are treated as expenses. b) No distinction is made between invested capital and retained earnings for a proprietorship or a partnership. c) Neither proprietorships nor partnerships issue stock. d) Owners' equity for proprietorships and partnerships is usually referred to as capital. e) Each partner ordinarily has a voice in the management of the firm that is proportionate to his or her capital account balance.

b) No distinction is made between invested capital and retained earnings for a proprietorship or a partnership. c) Neither proprietorships nor partnerships issue stock. d) Owners' equity for proprietorships and partnerships is usually referred to as capital.

Which of the following would not affect total Retained Earnings? (Assume it is the end of the fiscal year and that the books have been closed.) a) Cash dividends. b) Stock splits. c) Profits. d) All of the above would affect total Retained Earnings.

b) Stock splits.

In reference to the Discount on Bonds Payable and Premium on Bonds Payable accounts, which statement is true? a) The Discount on the Bonds Payable account reduces working capital. b) The Discount on the Bonds Payable account is a contra liability. c) The Premium on Bonds Payable account is a contra liability. c) As the Premium on Bonds Payable account is amortized each period, the Interest Expense account is increased to the amount it would have been, had the bonds been sold at par.

b) The DISCOUNT on the Bonds Payable account is a contra liability.

Identify the requirements that must be met for a corporation to pay a cash dividend. a) The corporation must agree not to issue a stock dividend within the same calendar year as the declaration of the cash dividend. b) The corporation must have enough cash to be able to pay the dividend. c) In most states, the dividend must not exceed the corporation's retained earnings. d) The dividend must equal the amount of the firm's bond indentures and other loan covenants.

b) The corporation must have enough cash to be able to pay the dividend. c) In most states, the dividend must not exceed the corporation's retained earnings.

The declaration of a cash dividend by the directors results in: a) a decrease in net income and a decrease in cash. b) a decrease in retained earnings and an increase in current liabilities. c) a decrease in net income and an increase in current liabilities. d) a decrease in cash and a decrease in retained earnings.

b) a decrease in retained earnings and an increase in current liabilities.

A transaction that is likely to cause an increase in a current liability is: a) payment of accrued wages. b) accrual of interest expense. c) depreciation of equipment. d) accrual of bad debts expense.

b) accrual of interest expense.

The entry to record the estimated warranty liability in the year in which the product is sold includes: a) a decrease to expenses. b) an increase to expenses. c) a decrease to cash (or repair parts inventory). d) a decrease to current liabilities.

b) an increase to expenses.

One of the key advantages of issuing debt as opposed to common stock to raise additional funds is that: a) capital investment projects are normally more successful when financed by debt as opposed to equity. b) interest expense is deductible in calculating taxable income, whereas dividends are not tax deductible. c) issuing common stock substantially increases a corporation's perceived risk. d) issuing debt reduces a corporation's financial leverage and thus allows ROI to become approximately equal to ROE.

b) interest expense is deductible in calculating taxable income, whereas dividends are not tax deductible.

Additional paid-in capital: a) is one of the items included within the "cumulative other comprehensive income (loss)" category of stockholders' equity. b) is sometimes referred to as capital in excess of par. c) is sometimes referred as additional stated value. d) is a component of stockholders' equity.

b) is sometimes referred to as capital in excess of par. d) is a component of stockholders' equity.

The current liability for Wages Payable (or Accrued Payroll) represents the: a) employer's liability for various withholdings that taken out of the gross pay earned by employees. b) net pay earned by employees for which they have not yet been paid. c) gross pay earned by employees for which they have not yet been paid. d) employer's federal and state payroll tax obligation.

b) net pay earned by employees for which they have not yet been paid.

A working capital loan will generally: a) be classified as a noncurrent liability. b) not affect working capital. c) not have an interest rate. d) require that interest (if any) be paid monthly.

b) not affect working capital.

When a company issues a bond at a premium: a) the company is more profitable than most companies in its industry. b) the company's interest expense will be less than the interest paid each year. c) investors perceive the bond to be a very safe investment. d) the company's interest expense will be more than the interest paid each year.

b) the company's interest expense will be less than the interest paid each year. * Got this wrong and I think this is the right answer but i don't know for sure*

If the market price of a bond exceeds its face amount: Multiple Choice a) the company's ROI and working capital have been increasing over time. b) the coupon rate is more than the market interest rate. c) the coupon rate is less than the market interest rate. d) the maturity rate has been declining.

b) the coupon rate is more than the market interest rate.

Accounts payable are normally shown: a) on the income statement as an expense, but not reduced by anticipated cash discounts b) on the balance sheet as a current liability, net of anticipated cash discounts c) on the balance sheet as a current liability, but not reduced by anticipated cash discounts d) on the balance sheet as a noncurrent liability, but not reduced by anticipated cash discounts

c) on the balance sheet as a current liability, but not reduced by anticipated cash discounts

The difference between the gross and net methods of recording the accounts payable relates to: a) both the timing of the recognition of cash discounts and the amount of cash discounts allowed. b) the amount of cash discounts allowed. c) the timing of the recognition of cash discounts. d) neither the timing of the recognition of cash discounts nor the amount of cash discounts allowed.

c) the timing of the recognition of cash discounts.

Not-for-profit and governmental organizations normally report to resource providers rather than investors because: a) total assets are not reported anywhere in the financial statements. with these types of organizations, operating funds must be b) accounted for separately from restricted funds. c) these types of organizations do not have owners who have direct financial interests in the entities. d) net income is not reported for most of these types of organizations because of their service orientation.

c) these types of organizations do not have owners who have direct financial interests in the entities.

The current assets of most companies are usually made up of:

cash and assets expected to be converted to cash within a year

Potential claims on a company's resources arising from such things as pending litigation, environmental hazards, casualty losses to property, and product warranties are referred to as ___ (callable/contingent/convertible) liabilities.

contingent

Accumulated depreciation is:

contra asset account

The Allowance for Bad Debts account is a(n):

contra current asset

Identify an item that is commonly included with noncurrent liabilities. a) Interest payables b) Contingent gains c) Accounts receivable d) Product warranties

d) Product warranties

The entry to record actual warranty costs in the year in which the warranty is honored includes: a) an increase to current liabilities. b) an increase to expenses. c) a decrease to expenses. d) a decrease to current liabilities.

d) a decrease to current liabilities.

Debt financing usually has _____. a) no economic cost to a firm b) a higher cost to a firm as compared to equity financing c) the same cost to a firm as equity financing d) a lower cost to a firm as compared to equity financing

d) a lower cost to a firm as compared to equity financing

Many current liabilities are affected by accrual accounting entries. This happens because: a) the only way to reduce a liability account balance is with an adjusting entry. b) liabilities are usually paid when they are incurred. c) accrual accounting frequently involves recognizing liabilities before they are incurred. d) accrual accounting involves recognizing liabilities when expenses have been incurred but not yet paid.

d) accrual accounting involves recognizing liabilities when expenses have been incurred but not yet paid.

The liability for product warranty claims is an example of a liability that: a) has been calculated using estimates. b) has been recorded in the process of matching revenue and expense. c) also resulted in a reduction of net income. d) all of the above.

d) all of the above.

Factors that usually affect retained earnings directly include: a) restructuring charges and losses from discontinued operations. b) net income or net loss, and the issuance of stock at an amount in excess of par value. c) stock dividends and gains or losses from the sale of treasury stock. d) net income or net loss, and dividends.

d) net income or net loss, and dividends.

The payment of a current liability will: a) decrease working capital. b) increase working capital. c) decrease net income. d) not affect working capital.

d) not affect working capital.

Current maturities of long-term debt: a) represent cash that has been set aside for debt payments due within a year. b) reflect overdue installments of bonds payable. c) are classified with long-term debt. d) permit a more accurate determination of working capital.

d) permit a more accurate determination of working capital.

The amortization of bond discount: a) reduces the carrying value of bonds payable on the balance sheet. b) increases the cash paid to bondholders for interest. c) results in bond interest expense being less than the interest paid to bondholders. d) results in bond interest expense being greater than the interest paid to bondholders.

d) results in bond interest expense being greater than the interest paid to bondholders.

Any salary paid to the proprietor of a firm is _____. a) treated as the firm's income b) treated as the firm's expenses c) treated as a grant given to the proprietor d) treated as reduction to the proprietor's capital

d) treated as reduction to the proprietor's capital

The net book value (carrying value) of a noncurrent asset:

is the difference between the cost of the asset and the accumulated depreciation on that asset

The employer's Wages Payable or Accrued Payroll for a payroll period represents employees' ___ pay (gross/net)

net pay

On the balance sheet, _________ would reflect charges on a billing statement received by your firm from a consulting firm.

Accounts Payable

On the balance sheet, ________ would reflect cash from customers received after income recognition

Accounts receivable

When a company purchases treasury stock, how are the financial statements affected? More than one answer may be correct. a) There will be no effect on its total liabilities. b) Its net income will increase. c) Its total assets will decrease. d) There will be no effect on its total stockholders' equity.

CONTRA S.E. ACCOUNT a) There will be no effect on its total liabilities. c) Its total assets will decrease.

How can "Cost of goods available for sale" be calculated?

- Beginning inventory + Purchases - Cost of goods sold + Ending inventory

Which of the following are correct statements about accounting for depletion of natural resources?

- Depletion expense allowed for federal income tax purposes frequently differs from that recognized for financial accounting purposes. - Depletion expense is recorded in the income statement for the related natural resources.

What are examples of inventory accounts a manufacturing firm might use?

- Finished goods inventory - Raw materials inventory - Work in process inventory

Which accounts on financial statements will increase when interest is accrued on short-term marketable debt securities?

- Net income - Revenues - Assets

Which of these statements regarding a bank reconciliation are true?

- Outstanding checks are subtracted from the bank balance - Deposits in transit are added to the bank balance

Which of the following is NOT an impact of allocation of unearned revenue to the fiscal year in which the product is delivered and the revenue is earned. a) Liabilities decrease. b) Working capital increases. c) Revenues increase. d) Current assets increase.

Current assets do NOT increase as revenues are earned

The employer's Wages Expense for a payroll period represents the employees' ___ (gross/net) pay.

Gross Pay

Taking on more liabilities ______ the risk of a company going bankrupt during a downturn in business.

Increases

Which of the following are impacted by the recording of cash received in advance from customers: 1. Unearned revenues are recorded and this increases net income. 2. Net income is not affected. 3. Working capital increases. 4. Current liabilities increase. 5. Cash increases.

Net income is not affected. Current liabilities increase. Cash increases.

What is financial leverage?

The difference between the rate of return earned on assets (ROI) and the rate of return earned on stockholders' equity (ROE)

Income Statement

The entity's earnings for a period

Balance Sheet

The entity's financial position at the end of a period

T/F: transactions are initially recorded in a journal and then posted to a ledger.

True

True or false: The determination of a contingent liability depends on one or more future events.

True

On the balance sheet, ________ would reflect cash from customers is received before income recognition.

Unearned revenue

In the context of determining the ending balance of retained earnings within the statement of changes in retained earnings, which statements are true? More than one answer may be correct. a) Net income needs to be added (positive amount) to retained earnings. b) The issuance of preferred stock needs to be added (positive amount) to retained earnings. c) Treasury stock purchases have no effect on retained earnings. d) Stock dividends have no effect on retained earnings. e) Stock splits have no effect on retained earnings.

a )Net income needs to be added (positive amount) to retained earnings. c) Treasury stock purchases have no effect on retained earnings. e) Stock splits have no effect on retained earnings.

When a depreciable asset is sold:

a gain arises if the sales proceeds exceed the net book value.

Which of these statements about common stockholders are true? More than one answer may be correct. a) ll profits accrue to common stockholders; there is no upper limit to the value of their ownership interests. b) They are the ultimate owners of the corporation; they have a residual ownership claim to the corporation's assets. c) They generally assume considerably less risk than do bondholders. d) They are entitled to a specific dividend amount each year.

a) All profits accrue to common stockholders; there is no upper limit to the value of their ownership interests. b) They are the ultimate owners of the corporation; they have a residual ownership claim to the corporation's assets.

Which of the following is a true statement pertaining to bonds? a) Bonds can be sold at a discount, par, or premium. b) Bonds can be sold at a discount, par, or payable. c) The issuing firm sets the price of a bond. d) The SEC sets the market price of a bond.

a) Bonds can be sold at a discount, par, or premium.

In the context of determining the ending balance of retained earnings within the statement of changes in retained earnings, which statements are true? More than one answer may be correct. a) Cash dividends for common and preferred stock need to be subtracted (negative amount). b) Stock dividends need to be subtracted (negative amount). c) Stock splits need to be added (negative amount). d) Treasury stock purchased needs to be subtracted (negative amount). e) The beginning balance of Retained Earnings account needs to be added (positive amount).

a) Cash dividends for common and preferred stock need to be subtracted (negative amount). b) Stock dividends need to be subtracted (negative amount). e) The beginning balance of Retained Earnings account needs to be added (positive amount). *Treasury stock and stock splits have no effect on retained earnings*

Which of the following does not appear in the stockholders' equity section of a balance sheet? a) Current maturities of long-term debt. b) Accumulated Other Comprehensive Income (Loss). c) Treasury Stock. d) Additional Paid-In Capital.

a) Current maturities of long-term debt.

A magazine publisher has an account called "Unearned Subscription Revenue." The transaction that causes the balance of this account to decrease is: a) subscriptions are sold to new subscribers. b) cash is received from new subscribers. c) magazines are mailed to subscribers. d) magazines are printed for the publisher.

c) magazines are mailed to subscribers.

What is the accounting entry to record the purchase of treasury stock? a) Dr. Common Stock Cr. Cash b) Dr. Treasury Stock Cr. Common Stock Cr. Additional Paid-in Capital c) Dr. Treasury Stock Cr. Cash d) Dr. Cash Cr. Treasury Stock Cr. Additional Paid-in Capital

c) Dr. Treasury Stock Cr. Cash Income Statement is never affected

Which of the following statements regarding net income (loss) and retained earnings are correct? a) Dividends declared during the period increase retained earnings. b) Dividends declared during the period decrease net income. c) Net income for the period increases retained earnings. d) Retained earnings represent the cumulative earnings the corporation has retained for use in the business.

c) Net income for the period increases retained earnings. d) Retained earnings represent the cumulative earnings the corporation has retained for use in the business.

An Accounts Payable normally results from which of the following transactions? a) Purchasing accounts for cash b) Purchasing land on credit c) Purchasing goods and services from suppliers on credit d) Purchasing buildings and equipment on credit

c) Purchasing goods and services from suppliers on credit

Select all that apply Accumulated other comprehensive income (loss) is a stockholders' equity category that may include which of the following components? More than one answer may be correct. a) Treasury stock b) Cumulative gains or losses from discontinued operations c) Unrealized gains or losses on available-for-sale investments d) Changes in certain pension or other postretirement benefit items

c) Unrealized gains or losses on available-for-sale investments d) Changes in certain pension or other postretirement benefit items

A transaction that is likely to cause an increase in a current liability is: a) payment of accrued wages. b) accrual of bad debts expense. c) accrual of interest expense. d) depreciation of equipment.

c) accrual of interest expense.

Towns Co. purchased Timber Inc. for $4,200,000 in cash. The fair value of the net acquired assets were as follows: Inventory = $700,000; Land = $1,000,000; Buildings = $2,000,000; and Notes Payable = $400,000 (Towns Co. assumed the note in full). As a result of this transaction, Towns Co. would:

debit Goodwill for $900,000. $4.2 million - ($0.7 + $1.0 + $2.0 - $0.4) million= $4.2 - $3.3 million = $900,000

A truck that cost $14,000 when new and had a net book value of $3,000 was sold for $4,400. The journal entry to record the sale of the truck would include a:

debit to Accumulated Depreciation for $11,000

Credits are used to record:

decreases to assets and expenses and increases to liabilities, revenues, and stockholders' equity.

The entry to record depreciation on long-term assets:

decreases total assets and decreases earnings.

The recognition of liabilities often results in: a) the recognition of expenses. b) a more conservative representation of financial position. c) a decrease in net income. d) a decrease in ROI. e) all of the above.

e

The cost of an inventory item is released to the income statement as an:

expense when the product is sold (or becomes worthless or is lost or stolen)

Matching concept

expenses incurred to generate revenues must be matched to revenues earned for any given period

Maintenance expenditures should be capitalized if they:

extend the useful life and/or increase the salvage value of an asset

An accounts receivable results from the sale of:

goods and services to customers on account.