Accounting 210 Midterm 2 Interterm

The term "receivables" refers to a. amounts due from individuals or companies. b. merchandise to be collected from individuals or companies. c. cash to be paid to creditors. d. cash to be paid to debtors.

A. Amounts due from individuals or companies

The historical cost principle requires that when assets are acquired, they be recorded at... a. appraisal value. b. cost. c. market price. d. book value.

B. Cost

Credits... a. decrease both assets and liabilities. b. decrease assets and increase liabilities. c. increase both assets and liabilities. d. increase assets and decrease liabilities.

B. Decrease assets and increase liabilities

Which of the following would not be considered an external user of accounting data for the LMN Company? a. Internal Revenue Service Agent. b. Management. c. Creditors. d. Customers.

B. Management

Owner's equity can be described as... a. creditorship claim on total assets. b. ownership claim on total assets. c. benefactor's claim on total assets. d. debitor claim on total assets.

B. Ownership claim on total assets

When goods or services are exchanged for cash or claims to cash (receivables), revenues are a. earned. b. realized. c. recognized. d. None of these.

B. Realized

Closing entries a. are prepared before the financial statements. b. reduce the number of permanent accounts. c. cause the revenue and expense accounts to have zero balances. d. summarize the activity in every account.

C. Cause the revenue and expense accounts to have zero balances

Sales taxes collected by a retailer are recorded by a. crediting Sales Tax Revenue. b. debiting Sales Tax Expense. c. crediting Sales Taxes Payable. d. debiting Sales Taxes Payable.

C. Crediting sales taxes payable

A net loss will result during a time period when... a. liabilities exceed assets. b. drawings exceed investments. c. expenses exceed revenues. d. revenues exceed expenses.

C. Expenses exceed revenues

A basic assumption of accounting assumes that the dollar is... a. unrelated to business transactions. b. a poor measure of economic activities. c. the common unit of measure for all business transactions. d. useless in measuring an economic event.

C. The common unit of measure for all business transactions

Present value is a. the value now of a future amount. b. the amount that must be invested now to produce a known future value. c. always smaller than the future value. d. all of these.

D. All of these

Which of the following would not be considered an internal user of accounting data for the LMN Inc.? a. President of the company. b. Production manager. c. Merchandise inventory clerk. d. President of the employees' labor union.

D. President of the employees' labor union

In a perpetual inventory system, cost of goods sold is recorded a. on a daily basis. b. on a monthly basis. c. on an annual basis. d. with each sale.

D. With each sale

Which one of the following is not a primary problem associated with accounts receivable? a. Depreciating accounts receivable b. Recognizing accounts receivable c. Valuing accounts receivable d. Disposing of accounts receivable

A. Depreciating accounts receivable

In periods of rising prices, the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the a. FIFO method. b. LIFO method. c. average-cost method. d. tax method.

A. FIFO method

Which of the following is an external user of accounting information of a publicly traded company? a. Labor unions. b. Board of directors. c. Company officers. d. Managers.

A. Labor unions

A metal shop's employees work overtime to finish an order that is sold on March 28. The office sends a statement to the customer in early April and payment is received by mid-April. The overtime wages should be expensed in... a. March. b. April. c. the period when the workers receive their checks. d. either in March or April depending on when the pay period ends.

A. March

Cost of goods sold is determined only at the end of the accounting period in a. a perpetual inventory system. b. a periodic inventory system. c. both a perpetual and a periodic inventory system. d. neither a perpetual nor a periodic inventory system.

B. A periodic inventory

Interest expense on an interest-bearing note is a. always equal to zero. b. accrued over the life of the note. c. only recorded at the time the note is issued. d. only recorded at maturity when the note is paid.

B. Accrued over the life of a note

Liabilities... a. are future economic benefits. b. are existing debts and obligations. c. possess service potential. d. are things of value used by the business in its operation.

B. Are existing debts and obligations

In which journal would a customer's partial payment on account be recorded? a. Sales journal b. Cash receipts journal c. General journal d. Cash payments journal

B. Cash receipts journal

The starting point of the accounting process is... a. communicating information to users. b. identifying economic events. c. recording economic events. d. None of these answers are correct.

B. Identifying economic events

A loss on disposal of a plant asset 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

Generally accepted accounting principles are... a. income tax regulations of the Internal Revenue Service. b. standards that indicate how to report economic events. c. theories that are based on physical laws of the universe. d. principles that have been proven correct by academic researchers.

B. Standards that indicate how to report economic events

The ledger accounts should be arranged in... a. chronological order. b. alphabetical order. c. financial statement order. d. order of appearance in the journal.

C. Financial statement order

The accounting process is correctly sequenced as... a. identification, communication, recording. b. recording, communication, identification. c. identification, recording, communication. d. communication, recording, identification.

C. Identification, recording, communication

Which of the following statements is true? a. The higher the discount rate, the higher the present value. b. The process of accumulating interest on interest is referred to as discounting. c. If money is worth 10% compounded annually, $1,100 due one year from today is equivalent to $1,000 today. d. If a single sum is due on December 31, 2010, the present value of that sum decreases as the date draws closer to December 31, 2010.

C. If money is worth 10% compounded annually, $1,100 due one year from today is equivalent to $1,000 today

All of the following are owner's equity accounts except a. the Capital account. b. Capital Stock. c. Investment in Stock. d. Retained Earnings.

C. Investment in stock

The origins of accounting are generally attributed to the work of... a. Christopher Columbus. b. Abner Doubleday. c. Luca Pacioli. d. Leonardo da Vinci.

C. Luca Pacioli

Bookkeeping differs from accounting in that bookkeeping primarily involves which part of the accounting process? a. Identification. b. Communication. c. Recording. d. Analysis.

C. Recording

The percentage-of-completion method must be used when certain conditions exist. Which of the following is not one of those necessary conditions? a. Estimates of progress toward completion, revenues, and costs are reasonably dependable. b. The contractor can be expected to perform the contractual obligation. c. The buyer can be expected to satisfy some of the obligations under the contract. d. The contract clearly specifies the enforceable rights of the parties, the consideration to be exchanged, and the manner and terms of settlement.

C. The buyer can be expected to satisfy some of the obligations under the contract

The most efficient way to accomplish closing entries is to a. credit the income summary account for each revenue account balance. b. debit the income summary account for each expense account balance. c. credit the owner's drawings balance directly to the income summary account. d. credit the income summary account for total revenues and debit the income summary account for total expenses

D. Credit the income summary account for total revenues and debit the income summary account for total expenses

What is the order in which assets are generally listed on a classified balance sheet? a. Current and long-term b. Current; property, plant, and equipment; long-term investments; intangible assets c. Current; property, plant, and equipment; intangible assets; long-term investments d. Current; long-term investments; property, plant, and equipment; intangible assets

D. Current; long-term investments; property, plant, and equipment; intangible assets

A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the... a. stand alone concept. b. monetary unit assumption. c. corporate form of ownership. d. economic entity assumption.

D. Economic entity assumption

Income from operations will be positive if a. the cost of goods sold exceeds operating expenses. b. revenues exceed cost of goods sold. c. revenues exceed operating expenses. d. gross profit exceeds operating expenses.

D. Gross profit exceeds operating expenses

The name given to entering transaction data in the journal is... a. chronicling. b. listing. c. posting. d. journalizing.

D. Journalizing

In order to close the owner's drawings account, the a. income summary account should be debited. b. income summary account should be credited. c. owner's capital account should be credited. d. owner's capital account should be debited.

D. Owner's capital account should be debited