accounting test #2

A credit entry will:

always decrease the account balance. always increase the account balance. + increase the balance of a revenue account. increase the balance of an expense account.

A debit entry will:

always decrease the account balance. always increase the account balance. increase the balance of a revenue account. + increase the balance of an expense account.

Wisdom Co. has a note payable to its bank. An adjustment is likely to be required on Wisdom's books at the end of every month that the loan is outstanding to record the:

amount of interest paid during the month. amount of total interest to be paid when the note is paid off. amount of principal payable at the maturity date of the note. + accrued interest expense for the month.

Which of the following accounts is part of working capital?

Retained Earnings. Sales. + Merchandise Inventory. Common Stock.

Another term for return on investment is:

Return on equity. + Return on assets. Return on retained earnings. Return to sender.

A debit entry will:

decrease an asset account. increase a liability account. increase paid-in capital. + increase an expense account.

In an advertiser's records, a newspaper ad submitted and published this week with the agreement to pay for it next week would:

decrease assets and decrease expenses. + increase liabilities and increase expenses. decrease assets and increase revenue. increase assets and decrease liabilities.

The return on investment measure of performance:

is never as important a measure of management effectiveness as the amount of net income. relates dividends paid to the entity's assets. + is calculated using net income as the amount of return. is calculated by dividing average assets for a period by the amount of net income for the period.

The return on investment measure of performance:

is relevant only to business enterprises. + is used by individuals to compare investment performance. is calculated using sales as the amount of return. is calculated using total assets at the beginning of the period as the amount of investment.

When comparing entity financial ratios with industry ratios:

it should be assumed that the data result from the consistent application of alternative accounting methods. + relative values at a point in time may not be significant. the trend of entity ratios should be compared to the current year's industry ratio. entity ratios should not be compared with industry ratios.

A debit entry will:

make the balance sheet balance. increase net income. + increase the accuracy of both the balance sheet and income statement. match revenues and assets.

A firm's net income is $315,000 on sales of $31.5 million. Average assets for the period were $7 million. For the year:

margin was 5%, turnover was 1.2, and ROI was 6%. margin was 6%, turnover was 1.5, and ROI was 6%. margin was 4%, turnover was 1.2, and ROI was 4.8%. + margin was 1%, turnover was 4.5, and ROI was 4.5%.

A current ratio of 6.0 is usually an indication that the firm:

has a low degree of liquidity. has a reasonable degree of liquidity. + has not made the most productive use of its assets. has made the most productive use of its assets.

A credit entry will:

increase an asset account. + increase a liability account. decrease paid-in capital. increase an expense account.

In the buyer's records, the purchase of merchandise on account would:

increase assets and increase expenses. + increase assets and increase liabilities. increase liabilities and increase paid-in capital. have no effect on total assets.

When a firm purchases supplies for its business:

the supplies account should always be debited. the supplies expense account should always be debited. either the supplies account or the supplies expense account should be credited. + an adjustment will probably be required as supplies are used.

Another term for return on equity is:

return on investment. return on assets. return on retained earnings. + none of these.

The effect of an adjustment is:

to correct an entry that was not in balance. + to increase the accuracy of the financial statements. to record transactions not previously recorded. to close the books.

Financial statement ratios support informed judgments and decision making most effectively:

when viewed for a single year. when viewed as a trend of entity data. when compared to an industry average for the most recent year. + when the trend of entity data is compared to the trend of industry data.

Return on equity:

will be the same as return on investment. relates dividends and turnover. relates dividends and stockholders' equity. + relates net income and stockholders' equity.

An expanded version of the accounting equation could be:

Assets + Revenues = Liabilities + Stockholders' Equity - Expenses Assets - Liabilities = Paid-in Capital - Revenues - Expenses + Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues - Expenses - Dividends Assets = Liabilities + Paid-in Capital - Revenues + Expenses

Which of the following is not one of the 5 questions of transaction analysis?

What's going on? Which accounts are affected? + Is this an accrual? Does the balance sheet balance? Does my analysis make sense?

A firm has an ROI of 15%, turnover of 3, and sales of $6 million. The firm's margin is:

$900,00. + 5%. 30%. $300,000.

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. How much should be in the firm's interest payable account at December 31, 2013?

+ $300 $400 $0 $333

Martin & Associates borrowed $5,000 on April 1, 2013 at 8% interest with both principal and interest due on March 31, 2014. How much should be in the firm's interest payable account at December 31, 2013?

+ $300 $400 $0 $333

Which of the following is a universally accepted measure of profitability?

+ Return on investment. Return on retained earnings. Return on liabilities. All of these.

The balance in the Wages Payable account increased from $12,200 at the beginning of the month to $15,000 at the end of the month. Wages accrued during the month totaled $61,000.

+ Wages paid during the month totaled $58,200. Wages paid during the month totaled $64,800. Wages expense for the month totaled $58,200. Wages expense for the month totaled $76,000.

In the seller's records, the sale of merchandise on account would:

+ increase assets and increase expenses. increase assets and decrease liabilities. increase assets and increase paid-in capital. increase assets and decrease revenues.

A newspaper ad submitted and published this week, with the agreement to get paid for it next week would, in the newspaper's records:

+ increase assets and increase revenues. increase assets and decrease liabilities. increase assets and increase expenses. have no effect on total assets.

An advantage of the DuPont model for calculating ROI is that:

+ it focuses on asset utilization as well as net income. it is easier to use than the straightforward ROI formula. it uses average assets and the straightforward ROI formula does not. it uses stockholders' equity.

The accounting concept/principle being applied when an adjustment is made is usually:

+ matching revenue and expense. consistency. original cost. materiality.

For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is that it:

+ raises the current ratio. lowers the current ratio. doesn't affect the current ratio. depends on the amount paid.

A journal entry recording an accrual:

+ results in a better matching of revenues and expenses. will involve a debit or credit to cash. will affect balance sheet accounts only. will most likely include a debit to a liability account.

A firm's net income for the year was $200,000. Average assets totaled $1.5 million, and average liabilities totaled $0.3 million. Return on equity was:

13.3%. + 16.7%. 10%. 20%.

Which of the following is not usually considered a measure of an entity's liquidity?

Current ratio. Acid-test ratio. + Cash ratio. Working capital.

If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan, relative to its working capital just prior to the loan, would be:

Higher. Lower. + The same. Would depend on the amount borrowed.

The Interest Receivable account for February showed transactions totaling $8,500 and an adjustment of $11,200.

The transactions probably resulted from accruing interest income earned. + The transactions were probably entered on the credit side of the account. The adjustment was probably for cash receipts of interest receivable accrued in prior months. The balance in the interest receivable account decreased $2,700.