Adv Accounting CLEP

Stephanie Company reported net income of $52,000 for the year. The net income includes depreciation expense of $3,800 and a gain on sale of equipment of $6,900. On the statement of cash flows, how much cash will Stephanie Company report from operating activities? (A) $48,900 (B) $52,000 (C) $55,100 (D) $55,800 (E) $58,900

(A) $48,900

A company had net sales of $27,900 in April. Beginning inventory was $5,000. Net inventory purchases were $15,000. Ending inventory was $7,000. Total operating expenses were $6,500. How much net income did the company earn in April? (A) $8,400 (B) $12,400 (C) $13,000 (D) $14,900 (E) $21,400

(A) $8,400

(1) Adjusted trial balance is prepared. (2) Transactions are posted to ledgers. (3) Transactions are recorded in a journal. (4) Closing entries are made. (5) Adjusting journal entries are made. (6) Trial balance is prepared. (7) Financial statements are prepared. Each of the principal steps in the accounting cycle is identified above by a number. Which response lists the correct sequence of events in the accounting cycle? (A) 3, 2, 6, 5, 1, 7, 4 (B) 3, 2, 1, 4, 5, 6, 7 (C) 5, 1, 3, 4, 2, 7, 6 (D) 5, 3, 2, 1, 4, 6, 7 (E) 2, 3, 1, 6, 5, 4, 7

(A) 3, 2, 6, 5, 1, 7, 4

The Income Statement always shows the results of business operations over a specific period of time including: (A) A Month, a Quarter, or a Year (B) A Quarter, a Year, or 3 Years (C) A Month, a Year, or 5 Years (D) A Week, a Month, or a Year

(A) A Month, a Quarter, or a Year

Which of the following will be credited when recording an accrued expense? (A) A liability account (B) A revenue account (C) A prepaid expense account (D) An unearned revenue account (E) A contra owner's equity account

(A) A liability account

"Owner's equity—End of period" always appears in which financial statement simultaneously to the Income Statement during a financial period ending? (A) Balance Sheet (B) Expense Report (C) Statement of Cash Flows (D) Debt Ledger

(A) Balance Sheet

Cost of goods sold is determined by which of the following? (A) Beginning inventory plus net purchases minus ending inventory (B) Beginning inventory plus purchases plus purchase returns minus ending inventory (C) Beginning inventory minus net purchases plus ending inventory (D) Purchases minus transportation-in plus beginning inventory minus ending inventory (E) Net sales minus ending inventory

(A) Beginning inventory plus net purchases minus ending inventory

The balance sheet of Harold Company shows current assets of $200,000 and current liabilities of $100,000. The company uses cash to acquire merchandise inventory. As a result of this transaction, which of the following is true of working capital and the current ratio? (A) Both are unchanged (B) Working capital is unchanged; the current ratio increases. (C) Both decrease. (D) Working capital decreases; the current ratio increases. (E) Working capital decreases; the current ratio is unchanged.

(A) Both are unchanged

Deferred Revenues are liabilities that always result from receiving _____ prior to earning the income (A) Cash (B) Assets (C) Property (D) Cars

(A) Cash

In a statement of cash flows prepared using the indirect method, which of the following is deducted from net income to determine cash provided by operating activities? (A) Gain on sale of land (B) Payment of dividends (C) Depreciation expense (D) Purchase of equipment (E) Issue of common stock

(A) Gain on sale of land

__________ analysis is used when a company compares its current results to a previous year. (A) Horizontal (B) Ratio (C) Vertical (D) Diagonal

(A) Horizontal

A Contingent Liability is a potential, yet unknown cost, which usually assumes that: (A) It may, or may not incur (B) It will incur (C) It cannot possibly incur due to depreciation (D) Inventory valuation will offset the costs incurred

(A) It may, or may not incur

An example of a contingent liability may be a: (A) Lawsuit filed against a company (B) A horse owned by the CEO which contracts a horrible disease (C) An injury in the workplace (D) Crashing a company car because a taxi cab cut the driver off

(A) Lawsuit filed against a company

Low Probability, as applied to contingent liabilities, always exhibits a "no reporting requirement", due to the: (A) Low likelihood of cost being triggered (B) High risk of a cost being triggered (C) Medium risk of a cost being triggered (D) Zero chance a cost will be triggered

(A) Low likelihood of cost being triggered

The Going-Concern Principle demonstrates that financial statements are to assume that businesses will last indefinitely, and exhibit the efforts to always fulfill: (A) Obligations, Commitments, and Objectives (B) Assets, Liabilities, and Owner's Equity (C) Checks, Balances, and Credits (D) Commitments, Specific Debts only, and Long-term Liabilities

(A) Obligations, Commitments, and Objectives

Return on assets helps users of financial statements evaluate which of the following? (A) Profitability (B) Liquidity (C) Solvency (D) Cash flow (E) Reliability

(A) Profitability

Gross Profit Formula always derives from the equation: (A) Sales - Costs of Goods Sold = Gross Profit (GP) (B) Costs of Goods Sold - Gross Profit (GP) = Sales (C) Gross Profit (GP) - Sales = Costs of Goods Sold

(A) Sales - Costs of Goods Sold = Gross Profit (GP)

Which of the following investing activities appears on the statement of cash flows? (A) Selling a building (B) Buying Treasury stock (C) Selling Treasury stock (D) Paying dividends (E) Receiving interest income on a Note Receivable

(A) Selling a building

In a limited partnership, limited partners are at risk for (A) The amount of their investment in the partnership (B) Their share of nonrecourse debt (C) The total debts of the partnership (D) Their percentage of debts (E) No amount

(A) The amount of their investment in the partnership

What is the purpose of closing entries? (A) To reduce revenues, expenses, and dividends to zero for the next accounting period (B) To correct errors (C) To remove liabilities from the accounting records (D) To verify that the accounting equation is balanced (E) To accrue revenues and expenses

(A) To reduce revenues, expenses, and dividends to zero for the next accounting period

GAAP Principles always enforce transactions to get recorded more than once, and is usually done: (A) Two times (B) Three times (C) Four times (D) Six times

(A) Two times

On the Income Statement, the term which describes when you take the number that appears in the Statement of Owner's Equity, and combined it into the Final number for Income and Expenses, is always called: (A) "Net Income—Equity Shown" (B) "Owner's Equity—End of Period" (C) "Final Equity—Owner's Revenue" (D) "Expense Shown—Revenue Accounted For"

(B) "Owner's Equity—End of Period"

Net purchases for the year amounted to $80,000. The merchandise inventory at the beginning of the year was $19,000. On sales of $120,000, a 30 percent gross profit on the selling price was realized. The inventory at the end of the year was (A) $13,000 (B) $15,000 (C) $17,000 (D) $25,000 (E) $63,000

(B) $15,000

Belford Brothers, Inc., has 10 percent noncumulative, nonparticipating preferred stock outstanding with a par value of $200,000. The company also has common stock outstanding with a par value of $800,000. In Belford's first year of operation, no dividends were paid, but during the second year, Belford declared dividends of $60,000. How should the dividends be distributed that year between the two classes of stock? Preferred Stock, Common Stock (A) $0, $60,000 (B) $20,000, $40,000 (C) $25,000, $35,000 (D) $30,000, $30,000 (E) $40,000, $20,000

(B) $20,000, $40,000

A company's beginning inventory is $20,000, purchases for a period are $240,000, and ending inventory is $30,000. How much is cost of goods sold? (A) $220,000 (B) $230,000 (C) $240,000 (D) $250,000 (E) $290,000

(B) $230,000

A machine that cost $25,000 three years ago is sold in the current year for $6,000. The accumulated depreciation taken on the machine was $20,000. This sale would be reported in the current year's statement of cash flows as (A) $25,000 outflow in the cash from investing activities section (B) $6,000 inflow in the cash from investing activities section (C) $1,000 inflow in the cash from investing activities section (D) $1,000 inflow in the cash from operations section (E) $1,000 inflow in the cash from financing activities section

(B) $6,000 inflow in the cash from investing activities section

Newman Corporation uses the allowance method of accounting for its accounts receivable. The company currently has a $100,000 balance in accounts receivable and a $5,000 balance in its allowance for uncollectible accounts. The company decides to write off $4,000 of its accounts receivable. What would be the balance in its net accounts receivable before and after the write-off? Before, After (A) $95,000, $91,000 (B) $95,000, $95,000 (C) $100,000, $96,000 (D) $105,000, $101,000 (E) $105,000, $105,000

(B) $95,000, $95,000

There are _____ types of Profitability Analysis: (A) 2 (B) 3 (C) 4 (D) 6

(B) 3

The lower of cost or market (LCM) is an application of (A) Materiality (B) Conservatism (C) The Matching Concept (D) Full Disclosure (E) The Going-Concern Assumption

(B) Conservatism

Profitability analysis always permits an anticipation of sales potential specific to such elements as: (A) Urban, Suburban, and Rural Sales (B) Customer Age, Geography, and Product Types (C) Products, People, and Problematic Occurrences (D) Customer Age, Geography, and Investments

(B) Customer Age, Geography, and Product Types

As it pertains to GAAP Standardization, the governing body that always enforces GAAP in the United States is called: (A) SEC (B) FASB (C) AICPA (D) IRS

(B) FASB

ONECO gives a one-year warranty on all of its equipment. In January, a customer placed an order for a piece of equipment. The equipment was delivered and billed in February. The customer remitted half of the cash due in March and the other half in April. According to the matching principle of accounting, in which month should ONECO report estimated warranty expense related to the sale? (A) January (B) February (C) March (D) April (E) December

(B) February

In a period of rising prices, which of the following inventory methods results in the highest cost of goods sold? (A) FIFO (B) LIFO (C) Average cost (D) Periodic inventory (E) Perpetual inventory

(B) LIFO

Falcon, Inc., a manufacturer and supplier of kitchen appliances, provides a two-year warranty on component parts at no cost. Which accounting principle requires Falcon to recognize as an expense the estimated cost of fulfilling a warranty in the year the equipment is sold? (A) Cost principle (B) Matching principle (C) Going-concern principle (D) Entity principle (E) greed

(B) Matching principle

A company bought a patent at a cost of $180,000. The patent had an original legal life of 17 years. The remaining legal life is 10 years, but the company expects its useful life will only be 6 years. When should the cost of the patent be charged to expenses? (A) Immediately (B) Over the next 6 years (C) Over the next 10 years (D) Over the next 17 years (E) Over the next 40 years

(B) Over the next 6 years

The Objectivity Principle allows for business transactions to be recorded using the best objective evidence in order to always: (A) Present information to be altered at a later time (B) Prevent any accounting department of a business from documenting slanted information, based on bias (C) Prevent a supervisor from noticing a mistake (D) Present information on a balance sheet that exhibits mostly accurate data

(B) Prevent any accounting department of a business from documenting slanted information, based on bias

An example of a High Probability Contingent Liability may be an incident such as: (A) A car accident (B) Property damaged due to a catastrophe (C) A heart attack in the workplace (D) Running out of gas for the tractors on a farm owned by a CEO

(B) Property damaged due to a catastrophe

The purpose of documenting information presented in notes relevant to the financial statements is to always: (A) Maintain a relationship with the SEC (B) Provide disclosure required by generally accepted accounting principles (C) Hope for the IRS to cut a tax break (D) Allow for the balance sheet to display accurate assets and liabilities

(B) Provide disclosure required by generally accepted accounting principles

Assets are classified as intangible under which of the following conditions? (A) They are converted into cash within one year. (B) They have no physical substance. (C) They are acquired in a merger. (D) They are held for resale. (E) They are short term and used in operations.

(B) They have no physical substance.

If net sales are $2,000,000, operating expenses are $300,000, and gross profit is $360,000, how much is the cost of goods sold? (A) $340,000 (B) $660,000 (C) $1,640,000 (D) $1,700,000 (E) $2,660,000

(C) $1,640,000

During the current year, accounts receivable increased from $27,000 to $41,000, and sales were $225,000. Based on this information, how much cash did the company collect from its customers during the year? (A) $225,000 (B) $239,000 (C) $211,000 (D) $252,000 (E) $266,000

(C) $211,000

Longshore Group bought a piece of equipment for use in its operations under the following terms: 5 annual payments of $64,000 for the equipment, including interest. Although the list price of the equipment was $315,000, Longshore Group could have bought it for $300,000 cash. Salvage value is $20,000. Which amount should Longshore Group use to record the purchase of the machine on its books? (A) $280,000 (B) $295,000 $295,000 (C) $300,000 (D) $315,000 (E) $320,000

(C) $300,000

New World, Inc., purchased $30,000 in goods on account that in turn were sold on account for $35,000. If New World uses accrual accounting, how much should they record in expenses and revenue? (A) $35,000 in revenue but no expenses (B) $30,000 in expenses but no revenue (C) $35,000 in revenue and $30,000 in expenses (D) $30,000 in revenue and $30,000 in expenses (E) $5,000 in revenue but no expenses

(C) $35,000 in revenue and $30,000 in expenses

High Probability, as applied to contingent liabilities, assumes that costs can be estimated, and losses must always: (A) Be disclosed when the dollar amount is over $10,000 (B) Be disclosed, yet not described in financial statements (C) Be disclosed and described in financial statements (D) Be described as quid pro quo

(C) Be disclosed and described in financial statements

An inventory valuation method such as FIFO or LIFO affects (A) The cost of goods sold but not the balance sheet (B) The balance sheet but not the cost of goods sold (C) Both the income statement and the balance sheet (D) Neither the income statement nor the balance sheet (E) The cost of goods sold but not the income statement

(C) Both the income statement and the balance sheet

Accounts receivable turnover helps determine (A) The balance of accounts payable (B) The customers who have recently paid their bills (C) How quickly a firm collects cash on its credit sales (D) When to write off delinquent accounts (E) Credit sales

(C) How quickly a firm collects cash on its credit sales

Which of the following correctly indicates how retained earnings can be affected? (A) Increased by net income, increased by dividends, and unaffected by realized losses (B) Increased by net income, increased by dividends, and increased by realized gains (C) Increased by net income, decreased by dividends, and decreased by realized losses (D) Decreased by net income, decreased by dividends, and decreased by realized losses (E) Decreased by net income, increased by dividends, and unaffected by realized gains

(C) Increased by net income, decreased by dividends, and decreased by realized losses

Which of the following is true of annual depreciation expense? (A) It represents the amount required for annual maintenance of a long-term asset. (B) It represents the annual revenue earned by an asset. (C) It allocates the cost of use of a long-term asset to the revenue that it generates. (D) It is required to fulfill the economic entity assumption. (E) It reduces cash.

(C) It allocates the cost of use of a long-term asset to the revenue that it generates.

GAAP Principles always enforce debts to be paid in one year, or one business cycle, whichever is always: (A) More beneficial for the accounting department (B) More lucrative long-term asset purchases (C) Longer (D) Shorter

(C) Longer

A customer ordered merchandise from Van Lieshaut, Inc., on March 3. Van Lieshaut processed the order on March 5 and emailed the customer verifying that the order was ready. On March 8 the customer picked up the merchandise and signed the billing invoice. On March 12 the customer sent a check in payment for the merchandise, which was received by Van Lieshaut on March 15. On which day should Van Lieshaut recognize revenue from the sale? (A) March 3 (B) March 5 (C) March 8 (D) March 12 (E) March 15

(C) March 8

The Conservative Principle attempts to resolve financial statement uncertainty in the least favorable way by anticipating future losses, not gains, where understating net assets and net income always allows companies to: (A) Risk losing only short-term assets (B) Assume an ultra-conservative financial position (C) Play it safe (D) Formulate risk

(C) Play it safe

Dividends paid is shown on which of the following financial statements? (A) Balance sheet (B) Income statement (C) Statement of cash flows (D) Statement of cost of goods manufactured (E) Statement of comprehensive income

(C) Statement of cash flows

To avoid formatting issues, accountants often use a traditional diagram, or chart, called a: (A) A-Account (B) B-Account (C) T-Account (D) Z-Account

(C) T-Account

On December 31, before making year-end adjusting entries, Accounts Receivable had a debit balance of $80,000, and the Allowance for Uncollectible Accounts had a credit balance of $3,500. Credit sales for the year were $600,000. If credit losses are estimated at 1/2 percent of credit sales, which of the following is true? (A) The balance of the Allowance for Uncollectible Accounts will be $500 after adjustment. (B) The balance of the Allowance for Uncollectible Accounts will be $3,500 after adjustment. (C) The balance of the Allowance for Uncollectible Accounts will be $6,500 after adjustment. (D) The Uncollectible Accounts Expense for the year will be $500. (E) The Uncollectible Accounts Expense for the year will be $6,500.

(C) The balance of the Allowance for Uncollectible Accounts will be $6,500 after adjustment

GAAP issues protocol essential to industry regulations which are also attributable to characteristics to accounting principles, and include: (A) Financial statement creation and banking procedures (B) Auditing and analytical tools (C) The identification, measurement, and communication of financial information for businesses (D) Book-keeping and court testimony

(C) The identification, measurement, and communication of financial information for businesses

At the end of Dugan Retail Corporation's first year of operation, it was determined that the company had overstated its ending inventory. Indicate the effect that the overstatement will have on the first year's cost of goods sold and net income. Cost of goods sold, Net income (A) Overstated, No effect (B) Overstated, Understated (C) Understated, Overstated (D) No effect, Understated (E) No effect, No effect

(C) Understated, Overstated

Extraordinary gains and losses are events that are both considered: (A) Desired yet Unexpected (B) Normal and Expected (C) Unusual and Infrequent (D) Usual and Often Occurring

(C) Unusual and Infrequent

If a company issues $10,000,000 of 6 percent bonds at 105 1∕2, the amount of cash received from the sale is (A) $10,000,000 (B) $10,105,500 (C) $10,512,000 (D) $10,550,000 (E) $10,600,000

(D) $10,550,000

Brock Company purchased a patent for $72,000 from Carter Company. The patent has a remaining legal life of 6 years, with an expected useful life of 4 years. The first year's amortization is (A) $0 (B) $6,000 (C) $12,000 (D) $18,000 (E) $24,000

(D) $18,000

On January 1 of the current year, beginning inventory for a furniture company was $35,000. During the year, the company purchased $242,000 inventory. On December 31 of the current year, the company had inventory of $26,000. What was cost of goods sold for the year? (A) $207,000 (B) $233,000 (C) $242,000 (D) $251,000 (E) $277,000

(D) $251,000

Cash $40,000 Accounts receivable $120,000 Inventory $300,000 Prepaid rent $2,000 Accounts payable $150,000 Salaries payable $7,000 Long-term bonds payable $200,000 The selected accounts above are from TJ Supply's balance sheet. What is TJ Supply's working capital? (A) $40,000 (B) $105,000 (C) $160,000 (D) $305,000 (E) $462,000

(D) $305,000

The L Company purchased new machinery and incurred the following costs: Invoice price $30,000 Freight (F.O.B. shipping point) $2,000 Foundation for machinery $1,000 Installation costs $900 Annual maintenance of machinery $600 The recorded cost of the machinery is (A) $30,000 (B) $31,900 (C) $32,000 (D) $33,900 (E) $34,500

(D) $33,900

Before the football season begins, a college football team receives $12,000,000 from season-ticket holders for one year's home games. The team will play three home games in September, one in October, and two in November. How much revenue is recognized in September? (A) $0 (B) $2,000,000 (C) $4,000,000 (D) $6,000,000 (E) $12,000,000

(D) $6,000,000

If a corporation has total assets of $1,568,000, current liabilities of $60,000, and long-term liabilities of $388,000, what is its approximate debt-to-equity ratio? (A) 0.15 (B) 0.25 (C) 0.29 (D) 0.40 (E) 0.43

(D) 0.40

Which of the following affects both the balance sheet and the income statement? (A) Purchase of inventory (B) Retirement of a fully depreciated machine (C) Collection of accounts receivable (D) Amortization of prepaid insurance (E) Declaration of a cash dividend

(D) Amortization of prepaid insurance

Match each of the following terms with the corresponding asset category. Intangible assets, Tangible assets, Natural resources (A) Depletion, Amortization, Depreciation (B) Depreciation, Depletion, Amortization (C) Amortization, Depletion, Depreciation (D) Amortization, Depreciation, Depletion (E) Depletion, Depreciation, Amortization

(D) Amortization, Depreciation, Depletion

A mortgage of $420,000 has principal payments totaling $120,000 that are due within the next year. The remaining $300,000 is not due until after one year. How is the mortgage shown on the balance sheet? (A) As a current liability of $420,000 (B) As a long-term liability of $420,000 (C) As another liability of $420,000 with a footnote breaking out current and long-term portions (D) As a current liability of $120,000 and a long-term liability of $300,000 (E) As a disclosure item only

(D) As a current liability of $120,000 and a long-term liability of $300,000

The owner's equity in a business increases from which of the following? I. Excess of revenue over expenses II. Investments by the owner III. Decrease in accounts payable (A) I only (B) II only (C) III only (D) I and II only (E) I, II, and III

(D) I and II only

Which of the following appears separately, net of income tax, on an income statement? (A) Gross profit (B) Gain on sale of a truck (C) Interest expense (D) Loss on discontinued operations (E) Sales discount

(D) Loss on discontinued operations

Which of the following identifies the income statement items in their proper order as found in a correctly prepared income statement? (A) Gross profit, net income, cost of goods sold, operating expenses, sales (B) Sales, operating expenses, cost of goods sold, gross profit, net income (C) Sales, cost of goods sold, operating expenses, gross profit, net income (D) Sales, cost of goods sold, gross profit, operating expenses, net income (E) Gross profit, cost of goods sold, sales, operating expenses, net income

(D) Sales, cost of goods sold, gross profit, operating expenses, net income

The owner of a small business paid the property taxes on her personal residence from the business checking account. The payment should be charged to which of the following? (A) Wages (B) Property taxes (C) Rent (D) Withdrawals (E) Building

(D) Withdrawals

During the past year, a company reported net income of $230,000. Depreciation expense was $22,000. In December the company received $7,000 representing rent for the next year on a vacant warehouse. What is the amount of cash provided by operating activities that should appear on a statement of cash flows? (A) $215,000 (B) $237,000 (C) $245,000 (D) $252,000 (E) $259,000

(E) $259,000

The inventory data for an item for July are as follows July 1 Inventory 10 units at $15 July 3 Sold 5 units July 10 Purchased 12 units at $16 July 18 Sold 8 units July 27 Purchased 15 units at $17 Using the perpetual system, costing by the first-in, first-out (FIFO) method, what is the cost of the ending inventory on July 31? (A) $255 (B) $360 (C) $376 (D) $384 (E) $399

(E) $399

Assume there are 365 days in a year. What is the number of days' inventory on hand for a firm with cost of goods sold of $750,000 and average inventory of $150,000 ? (A) 5 (B) 8 (C) 20 (D) 43 (E) 73

(E) 73

The Accumulated Depreciation account should be shown in the financial statements as (A) An operating expense (B) An extraordinary loss (C) A liability (D) Stockholders' equity (E) A contra (deduction) to an asset account

(E) A contra (deduction) to an asset account

Which of the following businesses is most likely to use specific identification in recording inventory purchases and cost of goods sold? (A) A supermarket (B) A clothing store (C) An auto parts store (D) A bookstore (E) An art dealer

(E) An art dealer

How is treasury stock reported on the balance sheet? (A) As an increase in liabilities (B) As an increase in assets (C) As a decrease in assets (D) As an increase in stockholders' equity (E) As a decrease in stockholders' equity

(E) As a decrease in stockholders' equity

Which of the following will always increase when net income increases? (A) Liabilities (B) Cash (C) Merchandise (D) Sales (E) Equity

(E) Equity

Ling is an accountant at a publicly traded corporation. She recently discovered in the accounting records a material error that affected last year's financial statements and will affect this year's statements. If the error is not corrected, it will reverse itself this year and probably no one else will discover it. Which of the following is the best action that Ling should take? (A) Do nothing, since no one will be harmed because of the offset (B) Immediately inform the local law enforcement agency (C) Place a phone call to the local newspaper to inform the public about the error (D) Immediately contact the Securities and Exchange Commission, since she is not sure what action her supervisor will take (E) Inform her immediate supervisor and help correct last year's statements

(E) Inform her immediate supervisor and help correct last year's statements

In which section(s) of the cash flow statement do interest paid and dividends paid appear? Interest Paid, Dividends Paid (A) Financing, Financing (B) Financing, Investing (C) Financing, Operating (D) Investing, Investing (E) Operating, Financing

(E) Operating, Financing

Intangible assets include which of the following? (A) Unearned revenues (B) Works of art (C) Treasury bills (D) Land improvements (E) Patents

(E) Patents

Gross profit margin is useful for evaluating (A) Solvency (B) Liquidity (C) Turnover (D) Leverage (E) Profitability

(E) Profitability

All of the following expenditures should be charged to an asset account rather than to an expense account of the current period EXCEPT the cost of (A) Overhauling a delivery truck, which extends its useful life by two years (B) Purchasing a new component for a machine, which serves to increase the productive capacity of the machine (C) Constructing a parking lot for a leased building (D) Installing a new assembly line (E) Replacing worn-out tires on a delivery truck

(E) Replacing worn-out tires on a delivery truck

The financial statement that includes classifications for operating, financing, and investing activities of a business entity for a period of time is called the (A) Income Statement (B) Statement of Retained Earnings (C) Balance Sheet (D) Statement of Changes in Owners' Equity (E) Statement of Cash Flows

(E) Statement of Cash Flows

Which of the following equals the net assets of a company? (A) Current assets minus current liabilities (B) Total assets minus current liabilities (C) Retained earnings (D) Long-term assets minus accumulated depreciation (E) Stockholders' equity

(E) Stockholders' equity

ABC Company issued $5,000,000 of bonds on January 1 receiving cash of $5,300,000. Which of the following is true about the bonds? (A) The bonds were issued at a discount. (B) The bonds are not interest bearing. (C) The market value of the bonds on the date of issue was $5,100,000. (D) The market quote for the bonds was 108. (E) The amount of annual interest expense will be less than the amount of interest paid annually in cash.

(E) The amount of annual interest expense will be less than the amount of interest paid annually in cash.

The income statement is designed to measure (A) Whether a firm is able to pay its bills (B) How solvent a company has been (C) How much cash flow a firm is likely to generate (D) The financial position of a firm (E) The results of business operations

(E) The results of business operations

Cash is reported (A) in net sales on the income statement (B) as cost of goods sold on the income statement (C) as a liability on the balance sheet (D) in the stockholders' equity section of the balance sheet (E) as a current asset

(E) as a current asset