Accounting III

The securities and exchange commission oversees

U.S. stock exchange and accounting standards-setting bodies

True or False: Current assets are economic resources that are expected to be converted to cash or consumed within the next year or the normal operating cycle, whichever is longer

False

True or False: Intangible assets are not listed on the balance sheet because they do not have physical substance

False

To make information about changes in cash useful for analysis, which of the following should a company create? 1. chart of accounts 2. balance sheet 3. general ledger summary 4. statement of cash flows

4. statement of cash flows

Accounts are listed on the trial balance in... 1. the order in which they are posted 2. alphabetical order 3. chronological order 4. the order that they appear in the ledger

4. the order that they appear in the ledger

Equations: Free Cash Flow

Net Cash provided by operating activities-Capital expenditures-Cash dividends

Equation: Earnings per Share

Net Income-Preferred Dividends ______________________ Average common shares outstanding

An account is a part of the financial information system and is described by all except which one of the following: 1. an account is a source document 2. an account consists of three parts 3. an account of a title 4. an account has a debit and credit side

1. an account is a source document

Long-Term investments include which of the following? Select all that apply. 1. land that the company is not using in its current operations 2. stocks the company sells to its investors 3. stocks in other companies that a company buys 4. inventory

1. land that the company is not using in its current operations

Which of the following statements is correct? 1. profitability means that a business has revenue that are equal to its expenditures 2. profitability means that business has rising stock prices 3. profitability means that a business has assets that are greater than its liabilities 4. profitability means that a business has enough funds available to pay its debts

1. profitability means that business has revenue that are equal to its expenditures

Which of the following statements about an account is true? 1. it has two parts 2. it has four parts 3. the left side of the account is the debit side 4. the left side of the account is the credit side

3. the left side of the account is the debit side

Equation: Current Ratio

Current assets ___________ Current liabilities

Payment of a Dividend

Decreases cash and Decreases retained earnings

Where is the first place every transaction is recorded?

In the Journal

Which of the following statements about generally accepted accounting principles [GAAP] is true?

they have authoritative support that business must use in deciding the type of financial information they must disclose

For what purpose might a company use free cash flow? 1. all of the answer choices are correct 2. pay additional dividends 3. pay off debts 4. acquire property, plant, and equipment

1. all of the answer choices are correct

What happens when a portion of an accounts payable is paid? 1. there is no effect on stockholders' equity 2. liabilities increase 3. net income decreases 4. there is no effect on total assets

1. there is no effect on stockholders' equity

When it borrows money to expand, a company should set up 1. a new accounting equation showing the loan 2. a liability account for Notes Payable 3. a table summarizing the transactions involved 4. an asset account for Notes Payable

2. a liability account for Notes Payable

What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U.S.? 1. generally accepted accounting standards 2. generally accepted accounting principles 3. general accounting principles 4. generally accepted auditing principles

2. generally accepted accounting principles

When can an item be considered material? 1. if the size of an item is more than $5,000 2. if its size is likely to influence the decision of an investor 3. if it is a tangible good 4. if the cost of the reporting the item is greater than the benefits

2. if its size is likely to influence the decision of an investor

Free cash flow describes the net cash... 1. provided by operating activities only 2. provided by operating activities adjusted for capital expenditures and dividends 3. provided by operating activities adjusted for capital expenditures 4. provided by operating activities minus dividends

2. provided by operating activities adjusted for capital expenditures and dividends

Federal oversight of U.S. financial markets and accounting standards is given to which of the following agencies? 1. federal reserve board 2. securities and exchange commission [SEC] 3. public company accounting oversight board 4. internal revenue service

2. securities and exchange commission [SEC]

What happens when services are rendered on account? 1. liabilities decrease 2. stockholders' equity increases 3. assets decrease 4. liabilities increase

2. stockholders' equity increases

Which of the following results when a company purchases equipment for $1,800 cash? 1. Assets increase by $1,800 2. total assets remain unchanged 3. both assets and equity decrease by $1,800 4. equity decreases by $1,800

2. total assets remain unchanged

A company purchased a tract of land on which it expects to build a production plant on in approximately five years. During the five years before construction, the land will be idle. In what classification should the land be reported? 1. an intangible asset 2. property, plant, and equipment 3. a long-term investment 4. land expense

3. a long-term investment

According to the ________ a company can purchase an asset for $1,000 and despite an increase in value over time can continue to report the asset 1. materiality principle 2. cost constraint principle 3. historical cost principle 4. fair value principle

3. historical cost principle

The operating cycle of a company is... 1. less than one year 2. one year 3. the average time required to go from purchasing inventory to receiving cash from its sale 4. the average time required to produce goods for resale

3. the average time required to go from purchasing inventory to receiving cash from its sale

Which of the following are current liabilities? Select all that apply. 1. pension liabilities 2. mortgages payable 3. wages and salaries payable 4. income taxes payable

3. wages and salaries payable & 4. income taxes payable

The difference between current assets and current liabilities is... 1. stockholder's equity 2. retained earnings 3. working capital 4. profits

3. working capital

Which of the following is the correct sequence of events? 1. Record a transaction in the journal; analyze the transaction;post it to the ledger 2. None of the answer choices provides the correct sequence 3. Analyze a transaction; record it in the journal; post it to the ledger 4. Analyze a transaction' post it to the ledger; record it in the journal

4. Analyze a transaction; post it to the ledger; record it in the journal

A company can change to a new method of accounting if management can justify that the new method results in terms of... 1. a higher net income 2. less likelihood of clerical errors 3. more meaningful financial information 4. a lower net income for tax purposes

4. a lower net income for tax purposes

If a company is using the double-entry system, each transaction is required to be recorded 1. in a journal and in a ledger 2. in the earnings report and checkbook register 3. in two places under stockholders' equity 4. in at least two different accounts

4. in at least two different accounts

Trident Motors is using the formula below to find of the following? Total assets-Creditors' claims-Common stock 1. current liabilities 2. total investments 3. current assets 4. retained earnings

4. retained earnings

Which accounts normally have debit balances?

Assets, Dividends, Expenses

What type of account is unearned revenue?

Liability

Equation: Debt to Assets Ratio

Total liabilities ___________ Total assets

True or False: Expenses decrease retained earnings

True

True or False: The collection of money on an account receivable increases cash and decreases accounts receivable

True

True or False: declaring a cash dividend will decrease retained earnings

True