Accounting final MC

A corporation declares a dividend of $0.50 per share on 18,000 shares of common stock. Which of the following is included in the entry to record the declaration? A) Cash Dividends (Retained Earnings) is debited for $9000. B) Paid-In Capital in Excess of Par—Common is credited for $9000. C) Cash Dividends (Retained Earnings) is credited for $9000. D) Dividends Payable—Common is debited for $9000.

A

A higher inventory turnover for Samson Company, when compared to other companies, indicates that it is ________. A) selling its inventory more quickly B) spending more on inventory storage C) incurring higher insurance costs D) holding excess obsolete inventory

A

An increase in contribution margin per unit can be created by an ________ in sales price per unit and a ________ in variable costs per unit. A) increase, decrease B) decrease, increase C) increase, increase D) decrease, decrease

A

At what point during the accounting cycle should the accounting equation be in balance? A) Always B) Before the adjusting process C) After the adjusting process D) After the closing process

A

Merchandise Inventory and Cost of Goods Sold appear ________. A) on the balance sheet and the income statement, respectively B) on the income statement and the balance sheet, respectively C) both on the balance sheet D) both on the income statement

A

Preferred stockholders ________. A) receive a dividend preference over common stockholders B) are guaranteed that they will not have a loss on their investment C) generally have voting rights D) have more investment risk compared to common stockholders

A

Sales of Treasury Stock: A) Affect the number of outstanding shares but not the number of issued shares B) Affect the number of issued shares but not the number of outstanding shares C) Affect the number of issued shares and the number of outstanding shares D) Do not affect the number of issued shares nor the number of outstanding shares

A

The asset account, Office Supplies, had a beginning balance of $2,000. During the accounting period, office supplies were purchased, on account, for $3,000. Supplies Expense for the accounting period is $4,000. What is the ending balance of Office Supplies? A) $1,000 B) $2,000 C) $4,000 D) $5,000

A

The goal of reporting realistic figures and never overstating assets or net income applies to the ________. A) conservatism principle B) materiality concept C) disclosure principle D) consistency principle

A

Under which of the following methods depreciation is a function of how much an asset is used A) the units-of-production method B) the straight-line method C) the double-declining-balance method D) the specific-identification method

A

Which of the following best describes horizontal analysis? A) comparing figures from year to year for the same company B) expressing each figure as a percentage of a budgeted figure C) comparing a company's financial statements with other companies D) calculating key ratios to evaluate performance

A

Which of the following is NOT one of the steps in the managerial decision-making process? A) basing decisions on sunk costs B) defining business goals C) identifying alternative courses of action D) gathering and analyzing relevant information

A

Which of the following is a period cost for a manufacturing company? A) office rent B) wages of factory janitor C) insurance cost of production equipment D) raw materials

A

Which of the following is an assumption of cost-volume-profit (CVP) analysis? A) the price per unit does not change as volume changes B) mangers classify all costs as mixed C) total fixed costs change in the relevant range D) the number of products produced exceeds the number of products sold

A

Which of the following is classified as an asset account? A) Prepaid Insurance B) Notes Payable C) Owner, Withdrawals D) Unearned Revenue

A

Which of the following organizations is responsible for the creation and governance of accounting standards in the United States? A) Financial Accounting Standards Board B) Institute of Management Accountants C) American Institute of Certified Public Accountants D) Securities and Exchange Commission

A

Which of the following statements is TRUE of revenues? A) Revenues increase equity, so a revenue account's normal balance is a credit balance. B) Revenues decrease equity, so a revenue account's normal balance is a credit balance. C) Revenues increase equity, so a revenue account's normal balance is a debit balance. D) Revenues decrease equity, so a revenue account's normal balance is a debit balance.

A

15) Which of the following accounts belongs to the income statement? A) Accounts Payable B) Depreciation Expense C) Accumulated Depreciation D) Prepaid Rent

B

A journal entry for a $5000 cash payment for prepaid rent was posted as a debit to Rent Expense and a credit to Cash. Which of the following statements correctly states the effect of the error at the time the transaction was recorded? A) Total assets are overstated, net income is understated B) Total assets are understated, net income is understated C) Total assets are understated, net income is overstated D) Total assets are not affected, net income is understated

B

A liability created when a business receives cash from customers in advance of providing services or delivering goods is called a(n) ________. A) notes receivable B) unearned revenue C) accrued liability D) service revenue

B

Dynamic Production Services started the year with total assets of $130,000 and total liabilities of $50,000. The company is a sole proprietorship. The revenues and the expenses for the year amounted to $100,000 and $60,000, respectively. During the year, there were no new capital contributions and the owner withdrew $30,000. Calculate Dynamic's net income for the year. A) $10,000 B) $40,000 C) $50,000 D) $80,000

B

How will an increase in Accounts Receivable be shown on the statement of cash flows? A) addition to net income under the operating activities section B) subtraction from net income under the operating activities section C) positive cash flow under the financing activities section D) negative cash flow under the investing activities section

B

Jason Ford has been the sole owner of a bicycle sales and repair shop for several years. Which of the following business types would limit Jason's personal liability exposure to the entity's debts? A) partnership B) limited-liability company C) sole proprietorship D) Any of the above

B

Regarding the Cost of Goods Sold account, which of the following statements is FALSE? A) In a perpetual inventory system, the Cost of Goods Sold account keeps a current balance throughout the period. B) Cost of Goods sold is a contra revenue account. C) Cost of Goods Sold is based on the company's cost, not the retail price. D) Cost of Goods Sold represents the cost of inventory that has been sold to customers

B

The highest value of total cost was $800,000 in June for Horchata Beverages, Inc. Its lowest value of total cost was $500,000 in December. The company makes a single product. The production volume in June and December were 7000 and 4000 units, respectively. What is the fixed cost per month? A) $500,000 B) $100,000 C) $100 D) $0

B

Under the perpetual inventory system, when a wholesaler returns the goods purchased on account, the ________ account is credited. A) Accounts Receivable B) Merchandise Inventory C) Cash D) Accounts Payable

B

Under which of the following categories would bonds held as an investment for less than a year appear? A) Long-term assets B) Current assets C) Long-term liabilities D) Current liabilities

B

When using the indirect method, which of the following requires an addition to Net Income in order to calculate net cash flow from operating activities? A) Payment of cash dividends B) Decrease in Merchandize Inventory C) Decrease in Accounts Payable D) Receipt of cash from sale of equipment at book value

B

Which of the following describes working capital? A) Current assets minus merchandise inventory B) Current assets minus current liabilities C) Total debt minus stockholders' equity D) Cost of goods sold divided by average merchandise inventory

B

Which of the following is NOT an inventory costing method? A) specific identification B) lower of cost or market C) last-in, first-out D) first-in, first-out

B

Which of the following is an account that is shown on the balance sheet for a merchandiser but not on the balance sheet of a service business? A) Unearned Revenue B) Sales Discounts Forfeited C) Estimated Returns Inventory D) Cost of Goods Sold

B

Which of the following is an asset account? A) Supplies Expense B) Prepaid Salaries C) Owner, Capital D) Unearned Revenue

B

Which of the following statements about Facebook's intangible assets is true: A) The useful life of all its patents is 20 years B) Goodwill must be tested for impairments every year C) No intangible assets are included in its balance sheet D) All of its intangible assets have indefinite useful lives

B

Which of the following statements about the closing process is true? A) All accounts are closed B) Income Summary is closed into Owner's Capital C) Equity accounts are not closed D) Unearned Revenue is closed into Owner's Capital

B

Which of the following statements accurately describes the statement of cash flows? A) It shows the relative proportion of debt and assets. B) It is the link between the accrual-based income statement and the cash reported on the balance sheet. C) It indicates when long-term debt will mature. D) It is the link between net income and earnings per share.

B

Which of the following statements is TRUE? A) Companies are price-takers when their products are unique. B) Companies are price-setters when there is little or no competition in the market for the product they sell. C) Price-setters for a product emphasize a target pricing approach to managing costs and profits D) Companies are price-takers when they have control over the prices of their products or services.

B

Which of these statements is true? A) Retained earnings decrease stockholder's equity B) Retained earnings increase stockholder's equity C) Retained earnings decrease dividends D) Retained earnings increase dividends

B

A declaration of cash dividends A) Increases Stockholder's Equity B) Decreases the number of shares outstanding C) Decreases Retained Earnings D) Increases Net Income

C

Elephant, Inc.'s sales returns and allowances for the year is $12,000, cost of goods sold for the year is $1,950,000, average receivables for the year is $195,000, and the average merchandise inventory for the year is $135,000. Calculate the inventory turnover ratio of the company. (Round your answer to two decimal places.) A) 16.25 times B) 10.00 times C) 14.44 times D) 11.25 times

C

In accounting, depreciation is an example of: A) Accrued expenses B) Accrued revenues C) Deferred expenses D) Deferred revenues

C

In the perpetual inventory system, the Merchandise Inventory account is updated ___________. A) only when inventory is purchased B) only when inventory is sold C) both when inventory is purchased and sold D) only in the adjusting process at the end of the accounting cycle

C

Merchandise Inventory and Cost of Goods Sold appear ________. A) on the balance sheet and statement of owner's equity, respectively B) on the statement of owner's equity and income statement, respectively C) on the balance sheet and income statement, respectively D) on the income statement and statement of cash flows, respectively

C

Motor Sales sold its old office furniture for $6000. The original cost was $16,000, and at the time of sale, accumulated depreciation was $14,000. What is the effect of this transaction? A) loss of $10,000 B) loss of $4000 C) gain of $4000 D) gain of $6000

C

O'Malley, Inc. issued 60,000 shares of common stock in exchange for manufacturing equipment. The equipment has a fair value of $1,420,000. The stock has a par value of $0.05 per share. The journal entry to record this transaction includes a ________. A) debit to Cash for $1,420,000 B) credit to Gain on Sale of Common Stock for $1,417,000 C) credit to Paid-In Capital in Excess of Par—Common for $1,417,000 D) credit to Common Stock—$0.05 Par Value for $1,420,000

C

The accountant of Residential Architectural Services failed to make an adjusting entry to record $7,000 of depreciation expense. Which of the following statements is TRUE? A) The total liabilities will be understated. B) The equity will be understated. C) The total assets will be overstated. D) The total assets will not be affected.

C

The ending balance in Merchandise Inventory: A) is the same under every inventory costing method B) is always higher under LIFO than FIFO C) is the lowest under LIFO in a period of increasing inventory costs D) is the highest under FIFO in a period of declining inventory cost

C

Which financial statement reports the balance in assets, liabilities and owner's equity, as of a specific date? A) The income statement B) The statement of owner's equity C) The balance sheet D) The statement of cash flows

C

Which of the following equations to compute the ending balance in Owner's Capital is correct? A) Ending Capital = Total Assets - Total Liabilities B) Ending Capital = Beginning Capital + Total Assets - Total Liabilities C) Ending Capital = Beginning Capital + Revenue - Expenses + Contributions - Withdrawals D) Ending Capital = Beginning Capital + Revenue - Expenses + Contributions - Withdrawals - Total Liabilities

C

Which of the following inventory costing methods yields the lowest net income during a period of rising inventory costs? A) specific identification B) weighted-average C) last-in, first-out D) first-in, first-out

C

Which of the following is a cash outflow for a financing activity on the statement of cash flows? A) purchase of long-term investments, such as the stock of another company B) loans made to another party C) purchase of treasury stock D) purchase of land

C

Which of the following items should be amortized? A) natural resources B) goodwill C) patents, copyrights, trademarks D) tangible property, plant, and equipment, other than land

C

Which of the following statements about the Securities and Exchange Commission is FALSE: A) The SEC requires public companies to disclose meaningful financial information to the public B) The SEC oversees the US financial markets C) The SEC requires companies in the US to follow the international financial reporting standards (IFRS) D) The SEC is one of the organizations that governs accounting in the US

C

Which of these is not useful for evaluating the ability to pay current liabilities? A) Cash Ratio B) Working Capital C) Gross Profit Percentage D) Current Ratio

C

Which section of the statement of cash flows reports cash receipts and payments related to increases and decreases in long-term liabilities and equity? A) The operating activities section B) The investing activities section C) The financing activities section D) The non-cash investing and financing activities section

C

A business renders services to a client and issues a sales invoice. The amount will be collected from the customer at a later time. Which of the following is TRUE at the time the invoice is issued? A) Equity will decrease. B) Total liabilities will increase. C) Total assets are not affected. D) Net income will increase.

D

A company is planning to replace an old machine with a new one. Which of the following is a sunk cost in this decision? A) cost of the new machine B) selling price of the old machine C) future maintenance costs of the old machine D) original cost of the old machine

D

After closing entries have been posted, ________. A) The ending balance of Owner, Capital has been properly updated. B) Only permanent accounts carry balances. C) Owner, Withdrawals has been closed into Owner, Capital. D) All of the above statements are correct.

D

At the time the transaction occurred, which of the following would result in an increase in net income under cash basis of accounting, but would not result in an increase in net income under accrual basis accounting? A) receipt of cash for sale of goods B) performance of services on account C) performance of services previously paid for D) receipt of cash for services that were performed earlier on account

D

Goods that are produced by a manufacturing company and are ready to sell are recorded in the: A) Materials Inventory account. B) Work-in-Process Inventory account. C) Manufacturing Overhead account. D) Finished Goods Inventory account.

D

Motor Sales sold its old office furniture for $2000. The original cost was $10,000, and at the time of sale, accumulated depreciation was $8,000. What is the effect of this transaction on Net Income? A) increase of $10000 B) increase of $2000 C) decrease of $2000 D) There is no effect

D

Rounding figures to the nearest million in the financial statements is an application of: A) the Consistency Principle B) the Monetary Unit Assumption C) the Disclosure Principle D) the Materiality Concept

D

The cost of an asset is $1,000,000, and its residual value is $200,000. Estimated useful life of the asset is ten years. Calculate depreciation for the first year using the double-declining-balance method of depreciation. A) $80,000 B) $100,000 C) $160,000 D) $200,000

D

The owner(s) of a ________ are NOT personally liable for the business's debt: A) Sole proprietorship B) Partnership C) Company D) Corporation

D

What is the net result if the amount of net income for the year is less than the amount of the owner's withdrawals? A) Owner, Capital increases B) Cash balance decreases C) Cash balance increases D) Owner, Capital decreases

D

Which of the following correctly describes the accounting for factory depreciation? A) Factory depreciation is a product cost and is expensed as incurred B) Factory depreciation is a period cost and is expensed as incurred C) Factory depreciation is a period cost and is expensed when the manufactured product is sold D) Factory depreciation is a product cost and is expensed when the manufactured product is sold

D

Which of the following entries is necessary to close the appropriate depreciation account at the end of the year? A) debit Accumulated Depreciation and credit Income Summary B) debit Depreciation Expense and credit Income Summary C) debit Income Summary and credit Accumulated Depreciation D) debit Income Summary and credit Depreciation Expense

D

Which of the following inventory costing methods uses the cost of the oldest purchases to compute the cost of goods sold? A) specific identification B) weighted-average C) last-in, first-out D) first-in, first-out

D

Which of the following is a liability account? A) Supplies Expense B) Prepaid Salaries C) Owner, Capital D) Unearned Revenue

D

Which of the following statements is NOT used to prepare the Statement of Cash Flows for the year ended December 31, 2019, using the indirect method. A) The Balance Sheet as of Dec. 31, 2019. B) The Balance Sheet as of Dec. 31, 2018. C) The Income Statement for the year ended Dec. 31, 2019 D) The Income Statement for the year ended Dec. 31, 2018

D

Which of the following will be listed in the operating section of the statement of cash flows that is prepared using the indirect method? A) collections from customers B) payments to suppliers C) interest received D) increases/decreases in current liabilities

D

Which of the following would result in an increase in income under the accrual method of accounting, but would not result in an increase in income under the cash basis accounting? A) Purchase of supplies for cash B) Performance of services on account C) Use of supplies purchased earlier D) Receipt of cash for services that were performed earlier on account

D

Wisconsin Farm Equipment Company sold equipment for cash. The income statement shows a loss on the sale of $10,000. The net book value of the asset was $30,000. Which of the following statements describes the cash effect of the transaction? A) positive cash flow of $30,000 from financing activities B) negative cash flow of $10,000 for operating activities C) negative cash flow of $10,000 for financing activities D) positive cash flow of $20,000 from investing activities

D

According to the revenue recognition principle, revenue is recorded when (or as) cash from sales is collected. TRUE/FALSE

FALSE

Companies should not replace an asset if its market price is lower than the cost they paid to acquire it. TRUE/FALSE

FALSE

Every journal entry involves at least one account on each side of the accounting equation. TRUE/FALSE

FALSE

Generally Accepted Accounting Principles (GAAP) require that transactions are recorded only when cash is paid or collected. TRUE/FALSE

FALSE

If a company fails to make an adjusting entry to record accrued expenses, the liabilities and net income will be overstated. TRUE / FALSE

FALSE

In a vertical analysis, all line items in the balance sheet and the income statement are shown as a percentage of total assets. TRUE/FALSE

FALSE

Paid-in capital and retained earnings are internally generated equity. TRUE / FALSE

FALSE

The cost of direct materials cannot easily be traced to the manufactured product, and therefore, it is a component of manufacturing overhead. TRUE / FALSE

FALSE

The cost of goods manufactured includes selling expenses, administrative expenses, and manufacturing overhead. TRUE / FALSE

FALSE

The fundamental assumption of cost-volume-profit (CVP) analysis is that, in the long run, fixed costs become variable costs. TRUE / FALSE

False

Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers. TRUE / FALSE

TRUE

If variable costs increase, and all other factors remain the same, the margin of safety will become smaller. TRUE / FALSE

TRUE

Sales are recorded at the amount of the sale less any sales discounts. TRUE / FALSE

TRUE

The degree of operating leverage measures the change on operating income when sales volume changes TRUE/FALSE

TRUE

The units-of-production method is used to compute depletion expense. TRUE / FALSE

TRUE