Financial Accounting (BUS 302L)
The accumulated depreciation account is a (an) A. Contra assets reduce B. Liability C. Assets D. Operating expanse E. none of the listed
A. Contra assets reduce
Operating cycle of a company is the average time that is require to go from cash to A. Sales B. Cash in producing revenues C. Inventory D. Accounts Receivable E. None
B. Cash in producing revenues
Company A current liability equal 500,000, working capital 120,000. Company B same amount of working capital, but total current liability of 30,000. The company with the better working capital position is? A. They both has exact the same working capital B. Company B C. Company A D. Can't be determined with given information E. None
B. Company B (It is good when better working capital position decreases)
Y during accounting period the asset increases by 5,000 equity increased by 1,000. How did liability damage? A. Increase by 6,000 B. Increase by 4,000 C. Decrease by 4,000 D. Decrease by 6,000 E. Decrease by 1,000
B. Increase by 4,000
In the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results? A. Management discussion and analysis section B. Notes to the financial statements C. An auditor report D. Survey information for the key executive E. None.
C. An auditor report
If ending inventory is overstated what effect will there be on cost of good and net income? A. CGS will overstated and Net income overstate B. CGS will overstated and Net income understated C. CGS will understated and Net income overstate D. CGS will understated and Net income understate E. None.
C. CGS will understated and Net income overstate
On October 29. Company concluded a cost's 4,400 accounts receivable was uncollected and the assets should be written off. What affect would this write off have on the company's net income and total assets assuming the allowing method is used to account for bad debts. A. Decrease Net income, no effect on Total assets B. No effect on Net income, no effect on Total assets C. Decrease in Net income, decrease in Total assets D. Increase in Net income, no effect on Total Assets E. No effect on Net income, Decrease in Total Assets
C. Decrease in Net income, decrease in Total assets
A $130 credit to Office Equipment was credited to Fees Earned by mistake. By what amounts are the accounts under or overstated as a result of this error? A. Office Equipment, understated $130; Fees Earned, overstated $130 B. Office Equipment, understated $260; Fees Earned, overstated $130 C. Office Equipment, overstated $130; Fees Earned, overstated $130 D. Office Equipment, overstated $130; Fees Earned, understated $130 E. Office Equipment, overstated $260; Fees Earned, understated $130
C. Office Equipment, overstated $130; Fees Earned, overstated $130
Company used Strait-Line depreciation for an item that cost 12,000 had a salvage value of 2,000 and a 5 year useful life After depreciating the assets for 3 complete years, the salvage value was reduced to 1,200 and its total useful life was increased from 5 years to 6 years. Determine the amount of depreciation to be changed against the machine during each of the remaining years of its useful life. A 1,000 B. 1,800 C. 1,467 D. 1,600 E. 2,160
D. 1,600 Work: (12,000-2000) ÷ 5 = 2,000 2,000 x 3 = 6,000 (6,000-1,200) ÷ 3 = 1,600
Expenses are incurred A. Only one rare occasion B. To produce asset C. To produce liability D. To generate revenue E. None.
D. To generate revenue
At December 31, 2001, before any year-end adjustments, Brant Company's Prepaid Insurance account had a balance of $1,900. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Prepaid Insurance for the year would be a. $1,500. b. $400 c. $2,225 d. $1,125 e. None of the options listed
a. $1,500. 1900 - 1500 = 400 1900 - 400 = 1500
Based on the following data, what is the amount of working capital? Accounts payable :$31,000 Accounts receivable : 57,000 Cash : 15,000 Intangible assets : 50,000 Inventory : 69,000 Long-term investments. : 80,000 Long-liabilities : 100,000 Marketable securities : 40,000 Notes payable (short-term): 28,000 Land, building and equipment: 670,000 Prepaid expenses : 1,000 a. $123,000 b. $151,000 c. $203,000 d. $53,000 e. None of the options listed
a. $123,000 (Total Current Asset + Total Current Liability) CA:57,000+15,000+69,000+40,000+1,000 = 182,000 CL: 31,000+28,000 = 59,000 182,000 - 59,000 = 123,000
The inventory of product Y at January 1 consisted of 15,000 units valued at a cost of $112,500. Purchases during the year were: (Mar 5) 20,500 units @ $7.75 per unit = $158,875 (May 12) 33,000 units @ $8.00 per unit = $264,000 (Sep 15) 23,000 units @ $8.30 per unit = $190,900 (Nov 28) 8,500 units @ $8.44 per unit = $71,740 On December 31, there were 30,000 units on hand. Compute the December 31 inventory using the first-in, first-out method. a. $250,190 b. $228,750 c. $235,150 d. $246,370 e. None of the options listed
a. $250,190 December 30,000 - 8,500 = 21,500 21,500 * $8.30 = 178,450 178,450 + 71,740 = 250,190
If the single amount of $900 is to be received in 3 years and discounted at 6%, its present value is: (Round to the nearest dollar.) 6%, 3 years annually Factor Present value of $1 : 0.840 Future value of $1 : 1.191 Present value of an annuity : 2.673 Future value of an annuity : 3:184 a. $756 b. $849 c. $780 d. $846 e. None of the options listed
a. $756 PV: FV / (1 + r)^n PV: 900 / (1+ 6%) = 756
On January 1, 20X1, Williams Corporation acquired a machine costing 45,000. The estimated life is five years and the salvage value is 3,000. Determine the depreciation expense for the first two years using the straight-line method. a. 8,400; 8,400 b. 9,000; 9,000 c. 9,600; 9,600 d. 9,000; 8,500 e. None of the options listed
a. 8,400; 8,400 Annual Dep. Exp: (Cost - Salvage Value) / Useful Life (45,000 - 3,000) / 5 = 8,400
Olsen Company prepares its statement of cash flows using the indirect method. Indicate whether the item would be added to net income (increase), deducted from net income (decrease), or has no effect on net income to determine net cash flows from operating activities. A decrease in the value from the beginning of the year to the end of the year for Inventory, which is a current asset. a. Increase b. Decrease c. No effect d. None of the options listed e. All of the options listed
a. Increase
Which of the following is not an accounting assumption? a. Integrity b. Going concern c. Time period d. Economic entity e. None of the options listed
a. Integrity
Jim's Tune-Up Shop follows the revenue recognition principle. Jim services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Jim on August 5. Jim receives the check in the mail on August 6. When should Jim show that the revenue was earned? a. July 31 b. August 1 c. August 5 d. August 6 e. None of the options listed
a. July 31 Because he did the work.
What is the formula to calculate earnings per share? a. Net Income ÷ Common Stock Outstanding b. Market Price ÷ Common Stock Outstanding c. Gross Profit ÷ Total Stock Outstanding d. Market Price ÷ Total Stock Outstanding e. None of the options listed
a. Net Income ÷ Common Stock Outstanding
For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is: a. Raises the current ratio b. Lowers the current ratio c. Doesn't affect the current ratio d. Depends on the amount paid e. Not determinable based on the facts given
a. Raises the current ratio
A $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a a. credit to note payable b. debit to cash. c. credit to notes receivable d. credit to machinery e. none of the options listed
a. credit to note payable
The relevant measure of value of the assets of a company that is going out of business is their: a. current market value b. book value c. historical cost d. higher of historical cost or current market value e. none of the options listed
a. current market value
Accountants do not attempt to measure the change in a plant asset's market value during ownership because a. of the historical cost assumption b. plant assets cannot be sold c. losses would have to be recognized d. it is management's responsibility to determine fair values e. none of the options listed
a. of the historical cost assumption
Accounting information should be neutral in order to enhance a. reliability b. consistency c. comparability d. relevance. e. none of the options listed
a. reliability
If you are able to earn an 8% rate of return, what amount would you need to invest to have $2,000 one year from now? (Round to the nearest dollar.) 8%, 1 year annually factor Present value of 10.926 Future value of 11.080 Present value of an annuity : 0.926 Future value of an annuity : 1.000 a. $2,160 b. $1,852 c. $2,000 d. $1,980 e. None of the options listed
b. $1,852 PV: FV / (1 + r)^n PV: 2000 / (1+ 8%) = 1,852
If the single amount of $400 is to be received in 2 years and discounted at 12%, its present value is: (Round to the nearest dollar.) 12%, 2 years annually Factor Present value of $1 : 0.797 Future value of $1 : 1.254 Present value of an annuity : 1.690 Future value of an annuity : 2.120 a. $502 b. $319 c. $676 d. $331 e. None of the options listed
b. $319
Use the following information for Smart Company. Net Sales $300,000 Cost of Goods Sold 230,000 Gross Profit $ 70,000 Operating Expenses 25,000 Net Income $ 45,000 ======= What is the return on sales for Smart Company? a. 13% b. 15% c. 64% d. 35% e. None of the options listed
b. 15% (Net Income / Sales = 45,000 / 300,000 =15%)
Based on the following data, what is the amount of current assets? Accounts payable : $31,000 Accounts receivable : 57,000 Cash : 15,000 Intangible assets : 50,000 Inventory : 69,000 Long-term investments. : 80,000 Long-liabilities : 100,000 Marketable securities : 40,000 Notes payable : 28,000 Plant assets : 670,000 Prepaid expenses (assets) : 1,000 a. $142,000 b. 182,000 c. $113,000 d. $112,000 e. None of the options listed
b. 182,000 Accounts receivable: $57,000 Cash: $15,000 Inventory: $69,000 Marketable securities: $40,000 Prepaid expenses: $1,000 57,000+15,000+69,000+40,000+1,000 = 182,000
What is breakeven point in units? Sale price : $7.50 per unit Variable cost : $2.25 per unit Fixed cost : $10,000 Units sold : 20,000 a. 1333 b. 1905 c. 10000 d. 20000 e. some number other than these 4
b. 1905 BP: Fixed Cost / (Price - VC) BP: 10,000 / (7.50 - 2.25) = 1905
A company had a market price of 37.50 per share, earnings per share of 1.25, and dividends per share of 0.40. This implies its price- earnings ratio equals: a. 3.1 b. 30.0 c. 93.8 d. 32.0 e. 3.3
b. 30.0 Price- Earnings Ratio: Stock Price per Share / Earnings per Share 37.50 / 1.25 = 30
The accounting equation may be expressed as: a. Assets = Stockholders' equity - Liabilities b. Assets = Liabilities + Stockholders' equity c. Assets + Liabilities = Stockholders' equity d. Assets + Stockholders' equity = Liabilities e. None of the options listed
b. Assets = Liabilities + Stockholders' equity
What type of activity is the following - "Sold 2,000 shares of a company's own common stock for cash?" a. Operating Activity b. Financing Activity c. Investing Activity d. Non-cash Transaction e. None of the options listed
b. Financing Activity
Which financial statement is prepared first? a. Balance sheet b. Income statement c. Retained earnings statement d. Statement of cash flows e. None of the options listed
b. Income statement
Obsolescence: a. Occurs when an asset is at the end of its useful life b. Refers to a condition where a plant asset is no longer useful in producing goods and services c. Refers to a condition where the capacity of a company's plant assets is too small to meet the company's productive demands. d. Occurs when an asset's salvage value is less than its replacement cost e. Does not affect plant assets.
b. Refers to a condition where a plant asset is no longer useful in producing goods and services
Which of the following would not result in unearned revenue? a. Rent collected in advance from tenants b. Services performed on account c. Sale of season tickets to football games d. Sale of two-year magazine subscriptions e. None of the options listed
b. Services performed on account
The primary objective of financial accounting is: a. To help organizations keep track of financing activities b. To provide financial statements to help users analyze an organization's activities c. To help an organization define its ideas, goals, and actions. d. To help an organization keep track of its buying and selling of resources.
b. To provide financial statements to help users analyze an organization's activities
Par value of a stock refers to the: a. Issue price of the stock b. Value assigned to a share of stock by the corporate charter c. Market value of the stock on the date of the financial statements d. Maximum selling price of the stock e. Dividend value of the stock.
b. Value assigned to a share of stock by the corporate charter
Which of the following is typically a starting point for the budget process? a. a summary cash budget b. a sales budget c. a budget balance sheet d. a production budget e. a materials purchase budget
b. a sales budget
Noncurrent, intangible assets such as leasehold improvements and patents are all subject to: a. depreciation b. amortization c. depletion d. consolidation e. recognition
b. amortization
Liabilities a. are future economic benefits b. are debts and obligations c. possess service potential d. are things of value owned by a business e. none of the options listed
b. are debts and obligations
Accrued revenue has: a. not been earned nor received b. been earned but not received c. not been earned but has been received d. been earned and received e. none of the options listed
b. been earned but not received
Management accountant place more emphases on which of the following: a. certified financial statement b. future activities c. historial cost information d. cash flow e. annual tax returns
b. future activities
In order for accounting information to be relevant, it must a. have very little cost b. help predict future events or confirm prior expectations c. not be reported to the public d. be used by a lot of different firms e. none of the options listed
b. help predict future events or confirm prior expectations
A truck costing $12,000 and on which $9,000 of accumulated depreciation has been recorded was discarded as having no value. The entry to record this event would include a a. gain of $3,000 b. loss of $3,000 c. credit to accumulated depreciation for $9,000 d. credit to accumulated depreciation for $12,000 e. none of the options listed
b. loss of $3,000
Stockholders' equity can be described as claims of a. creditors on total assets b. owners on total assets c. customers on total assets d. debtors on total assets e. none of the options listed
b. owners on total assets
The cost principle requires that when assets are acquired, 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 AKA exchange price paid
The necessity of making adjusting entries relates mostly to the a. economic entity assumption b. time period assumption c. going concern assumption. d. monetary unit assumption e. none of the options listed
b. time period assumption
According to the FASB, the primary objective of financial reporting is to provide information: a. to the Internal Revenue Service b. to the Securities and Exchange Commission c. useful for making investing and lending decisions d. regarding the revenues and expenses of a business e. none of the options listed
b. to the Securities and Exchange Commission
Nike has beginning equity of $4,350 million, net income of $490 million, dividends (withdrawals) of $100 million, and an increase in equity due to other items of $50 million. Its ending equity is: a. $3,810 million b. $4,690 million c. $4,790 million d. $4,990 million e. $3,710 million
c. $4,790 million 4,350 + 490 100 + 50 = 4,790
Johnny's Car Repair shop started with total assets of $60,000 and total liabilities of $40,000. During the year the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of $10,000. Stockholders' equity at the end of the year was: a. $45,000 b. $65,000 c. $55,000 d. $35,000 e. None of the options listed
c. $55,000 60,000 - 40,000 = 20,000 20,000 + 100,000 - 55,000 - 10,000 = 55,000
If owner's equity is 30,000 and liabilities are 73,000, then assets equal: a. 30,000 b. 73,000 c. 103,000 d. 43,000 e. 60,000
c. 103,000 A = L + SE
Paula Bonner invests $7,103.00 now for a series of $1,000 annual returns beginning one year from now. Paula will earn 10% on the initial investment. How many annual payments will Paula receive? Present value of an annuity 10% Factor 10 periods : 6.145 12 periods : 6.814 13 periods : 7.103 14 periods : 7.606 a. 10 b. 12 c. 13 d. 15 e. None of the options listed
c. 13
A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that 15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubt full Accounts had a debit balance of 175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? a. Bad Debts Expense...................................................... 15,750 Allowance for Doubtful Accounts............................. 15,750 b. Bad Debts Expense...................................................... 15,575 Allowance for Doubtful Accounts............................. 15,575 c. Bad Debts Expense...................................................... 15,925 Allowance for Doubtful Accounts............................. 15,925 d. Accounts Receivable.................................................... 15,750 Bad Debts Expense...................................................... 175 Sales........................................................................ 15,750 e. Accounts Receivable...................................................... 15,925 Allowance for Doubtful Accounts............................. 15,925
c. Bad Debts Expense...................................................... 15,925 (15,750 + 175) Allowance for Doubtful Accounts............................. 15,925
Which of the following journal entries is correct for an issuance of 1,000 shares of 10 par value common stock for 25 per share? a. Cash 25,000 Common Stock 25,000 b. Common Stock 25,000 Cash 25,000 c. Cash 25,000 Common Stock 10,000 Premium on Common Stock 15,000 d. Common Stock 10,000 Premium on Common Stock 15,000 Cash 15,000 e. None of the options listed
c. Cash 25,000 Common Stock 10,000 Premium on Common Stock 15,000
What is the formula to calculate the current ratio? a. Assets ÷ Liabilities b. Cash + Accounts Receivables ÷ Current Liabilities c. Current Assets ÷ Current Liabilities d. Net Income ÷ Current Liabilities e. None of the options listed
c. Current Assets ÷ Current Liabilities
If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is: a. Debit Cash and credit Legal Fees Earned b. Debit Cash and credit Unearned Legal Fees c. Debit Unearned Legal Fees and credit Legal Fees Earned d. Debit Legal Fees Earned and credit Unearned Legal Fees e. Debit Unearned Legal Fees and credit Accounts Receivable
c. Debit Unearned Legal Fees and credit Legal Fees Earned.
Which of the following journal entries is correct for an issuance of 2,000 shares of 20 par value preferred stock in exchange for land valued at 45,000? a. Cash 45,000 Preferred Stock 40,000 Premium on Preferred Stock 5,000 Land 45,000 Cash 45,000 b. Cash 45,000 Preferred Stock 45,000 Land 45,000 Cash 45,000 c. Land 45,000 Preferred Stock 40,000 Premium on Preferred Stock 5,000 d. Land 45,000 Preferred Stock 45,000 e. None of the options listed
c. Land 45,000 Preferred Stock 40,000 Premium on Preferred Stock 5,000
The excess of expenses over revenues for a period is: a. Net assets b. Equity c. Net loss d. Net income e. A liability.
c. Net loss
Net income results when a. Assets > Liabilities b. Revenues = Expenses c. Revenues > Expenses d. Revenues
c. Revenues > Expenses
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 e. none of the options listed
c. allocating the cost of an asset to expense over its useful life in a rational and systematic manner
Resources owned by a business are referred to as a. stockholders' equity b. liabilities c. assets d. revenues e. none of the options listed
c. assets
Comparing actual outcomes with budget outcomes, then following up, is an example of a a. planning activities b. operating activities c. controlling activities d. accounting activities e. staffing activities
c. controlling activities
The book value of a plant asset is the difference between the a. replacement cost of the asset and its historical cost b. cost of the asset and the amount of depreciation expense for the year c. cost of the asset and the accumulated depreciation to date d. proceeds received from the sale of the asset and its original cost e. none of the options listed
c. cost of the asset and the accumulated depreciation to date
Liabilities of a company are owed to a. debtors b. owners c. creditors d. stockholders e. none of the options listed
c. creditors
Under the accrual basis of accounting a. cash must be received before revenue is recognized b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles e. none of the options listed
c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received
Which of the following accounts is used in the calculate of working capital a. retained earnings b. sales c. merchandize inventory d. common stock e. long term debt
c. merchandize inventory
Which of the following organization would be most likely to accept a process costing system? a. customer homebuilder b. law office c. paper manufacture d. dental office e. TV sale and services organization
c. paper manufacture
The balance sheet a. summarizes the changes in retained earnings for a specific period of time b. reports the changes in assets, liabilities, and stockholders' equity over a period of time c. reports the changes in assets, liabilities, and stockholders' equity at a specific date d. presents the revenues and expenses for a specific period of time e. none of the options listed
c. reports the changes in assets, liabilities, and stockholders' equity at a specific date
In a service-type business, revenue is considered earned a. at the end of the month b. at the end of the year c. when the service is performed d. when cash is received e. none of the options listed
c. when the service is performed
An individual is planning to set-up an education fund for her children. She plans to invest $10,000 annually at the end of each year. She expects to withdraw money from the fund at the end of 10 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 10 years? (Round to the nearest dollar) 8%, 10 years annually factor Present value of 10.463 Future value of 12.159 Present value of an annuity : 6.710 Future value of an annuity : 14.487 a. $ 46,320 b. $ 67,107 c. $100,000 d. $144,870 e. $215,890
d. $144,870 10,000 * 14.487 = 144,870
A truck was purchased for $15,000 and it was estimated to have a $3,000 salvage value (residual value) at the end of its useful life. The truck has a 4-year life. The annual depreciation expense using the straight-line method is a. $4,000 b. $4,500 c. $3,750 d. $3,000 e. None of the options listed
d. $3,000
If Susanna Metro invests $7,009.87 now and she will receive $20,000 at the end of 11 years, what annual rate of interest will she be earning on her investment? Future value of $1 Factor 7%, 11 years annually : 2.105 8%, 11 years annually : 2.332 9%, 11 years annually : 2.580 10%, 11 years annually : 2.853 a. 8% b. 7% c. 9% d. 10% e. None of the options listed
d. 10%
Westec Corporation has the following accounts on their financial statement. Calculate net income. Professional Fee Income 31,000 Rent Expense 7,000 Advertising Expense 10,000 Insurance Expense 6,000 Accumulated Depreciation 1,000 Interest Expense 1,000 Commission Expense 4,000 Dividends 2,000 a. 9,000 b. 0 c. 1,000 d. 3,000 e. None of the options listed
d. 3,000 31,000 - (7,000+10,000+6,000+1,000+4,000) = 3,000
Charles Corporation reports the following information for 20X1. Accounts Receivable : 1/1 - $100,000 Accounts Receivable : 12/31 - 150,000 Inventory : 1/1 - 40,000 Inventory : 12/31 - 55,000 Net Credit Sales : 800,000 Cost of Goods Sold : 450,000 Accumulated Depreciation : 15,000 What is the average age of inventory for Charles Corporation? a. 32.4 days b. 39.9 days c. 44.6 days d. 38.5 days e. None of the options listed
d. 38.5 days Average inventory = (40000+55000)/2 = 47500 Inventory turnover ratio = Cost of goods sold/Average inventory = 450000/47500 = 9.47 Average age of inventory = Days in a year/Inventory turnover ratio = 365/9.47 = 38.5 days
Treasury stock is classified as: a. An asset account b. A contra asset account c. A revenue account d. A contra equity account e. A liability account
d. A contra equity account
An Accounts Receivable previously written off as uncollectable is finally collected. The amount collected was 500.Which of the following journal entries is correct (assuming the allowance method is used)? a. Cash 500 Accounts Receivable 500 b. Uncollectible Accounts (Bad Debt) Expense 500 Cash 500 c. Accounts Receivable 500 Uncollectible Accounts (Bad Debt) Expense 500 Cash 500 Accounts Receivable 500 d. Accounts Receivable $500 Allowance for Uncollectible Accounts $500 Cash 500 Accounts Receivable 500 e. None of the options listed
d. Accounts Receivable $500 Allowance for Uncollectible Accounts $500 Cash 500 Accounts Receivable 500
Which statement is false regarding the lower of cost or market (LCM) method of inventory? a. Market is defined as current replacement cost, not selling price b. LCM is an example of an accounting concept of conservatism c. Inventory is written down to its market value in the period in which the price decline occurs d. All of the options listed are true regarding LCM e. None of the options listed are true regarding LCM
d. All of the options listed are true regarding LCM.
Which financial statement would best indicate the proportion of debt and equity that a company uses to finance its assets? a. Statement of Cash Flows b. Retained Earnings Statement c. Income Statement d. Balance Sheet e. None of the options listed
d. Balance Sheet
The Village Laundry Company purchased 6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies in dictated only 3,000 on hand. The adjusting entry that should be made by the company on June 30 is a. Debit Laundry Supplies Expense, 3,000; Credit Laundry Supplies, 3,000. b. Debit Laundry Supplies Expense, 3,500; Credit Laundry Supplies,3,000. c. Debit Laundry Supplies, 3,500; Credit Laundry Supplies Expense, 3,500. d. Debit Laundry Supplies Expense, 3,500; Credit Laundry Supplies, 3,500. e. None of the options listed
d. Debit Laundry Supplies Expense, 3,500; Credit Laundry Supplies, 3,500. 6,500 - 3,000 = 3,500
Which of the following methods will result in the highest depreciation in the first year? a. Units-of-activity b. Time valuation c. Straight-line d. Declining-balance e. None of the options listed
d. Declining-balance
Tax accounting is generally most used by: a. Share holder b. Manager c. Creditors d. Internal revenue service e. Decision makers
d. Internal revenue service
The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the: a. Recognition principle b. Cost principle c. Cash basis of accounting d. Matching principle e. Time period principle
d. Matching principle
What type of activity is the following - "Exchange 10,000 shares of common stock for 15-year bond?". a. Operating Activity b. Financing Activity c. Investing Activity d. Non-cash Transaction e. None of the options listed
d. Non-cash Transaction
Revenue is properly recognized: a. When the customer's order is received b. Only if the transaction creates an account receivable c. At the end of the accounting period. d. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price. e. When cash from a sale is received.
d. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.
Present value is based on a. the dollar amount to be received b. the length of time until the amount is received c. the interest rate d. all of the options listed e. none of the options listed
d. all of the options listed
A balance sheet shows a. revenues, liabilities and stockholders' equity b. expenses, dividends, and stockholders' equity c. revenues, expenses, and dividends. d. assets, liabilities and stockholders' equity e. none of the options listed
d. assets, liabilities and stockholders' equity
In present value calculations, the process of determining the present value is called a. allocating b. pricing c. negotiating d. discounting the future amount e. none of the options listed
d. discounting the future amount
Intangible assets are the rights and privileges that result from ownership of long-lived assets that a. must be generated internally b. are depreciated over their useful life. c. have been exchanged at a gain. d. do not have physical substance. e. none of the options listed
d. do not have physical substance.
The common characteristic possessed by all assets is a. long life b. great monetary value c. tangible nature. d. future economic benefit. e. None of the options listed
d. future economic benefit.
An income statement a. summarizes the changes in retained earnings for a specific period of time b. reports changes in assets, liabilities and stockholders' equity over a period of time c. reports the assets, liabilities, and stockholders' equity at a specific date d. presents the revenues and expenses for a specific period of time e. none of the options listed
d. presents the revenues and expenses for a specific period of time
A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause a. expenses to be overstated b. net income to be overstated c. liabilities to be understated d. revenues to be understated e. none of the options listed
d. revenues to be understated
An annual report includes all of the following except a. management discussion and analysis section b. notes to the financial statements c. an auditor's report d. salary information for the key executives. e. none of the options listed
d. salary information for the key executives.
Retained earnings is a. the stockholders' claim on total assets b. equal to cash c. equal to revenues. d. the cumulative amount of net income kept in the corporation for future use e. none of the options listed
d. the cumulative amount of net income kept in the corporation for future use
The discount rate for use in capital budgeting decision is also referred to as a. a cost of capital b. the cost of capital c. the hurdle rate d. the minimum required rate of return e. all none
d. the minimum required rate of return
An obligation of a business that represents the claims of others against the assets of the business is called: a. An Asset. b. An Expense c. A Revenue d. An Equity e. A Liability
e. A Liability
An audit provides the following benefit(s) to users of financial statements: a. To help assure users that financial statements include relevant, reliable, and comparable information b. Insures that users can safely invest in, or loan money to, a business c. It tells users that the statements are prepared using accepted accounting principles d. All of the above e. A and C only
e. A and C only
The rules adopted by the accounting profession as guides in measuring, recording, and reporting the financial affairs and activities of a business are: a. Both broad and specific principles b. Known as geberally accepted accounting principles c. Abbreviated as GAAP. d. Both b and c e. All of the above
e. All of the above
The accounting equation is: a. Assets = Liabilities + Equity b. Assets + Liabilities = Equity c. Assets = Liabilities - Equity d. Assets - Liabilities = Equity e. Both A and D
e. Both A and D
Retained earnings is: a. decreased by net income b. increased by expenses c. decreased by revenues d. increased by dividends declared e. increased by gains
e. increased by gains
A 20,000 machine is purchased by paying 5000 cash and signing a note payable for the remainder
the journal entry should involve a CREDIT on note payable
