F.A. (Feb 19)

Cash dividends

should not be deducted from revenues because they are not directly linked to the generation of revenues or the costs of operating activities.

Book value is defined as

Cost less accumulated depreciation

Repairs made to equipment as part of yearly maintenance would be recorded in the journal by

Debiting repair expense

Which of the following equations represents the balance sheet equation? A) Net income = revenues - expenses B) Assets = liabilities + revenues - expenses C) Assets + owners' equity = liabilities D) Assets + liabilities = owners' equity E) Assets = liabilities + owners' equity

E) Assets = liabilities + owners' equity

Which of the following is a distinguishing feature of a contra account?

If a contra account has a credit balance, then its companion account will usually have a debit balance.

Alfano Industries sold inventory costing $300 for $500 on account. If Alfano Industries operates under the accrual basis, what effect will this transaction have on the owners' equity side of the balance sheet?

Increase owners' equity by $200

Gasper, Inc., borrowed $4,000 from Skyler Bank on November 1, 20X9. At that time, the company made the appropriate journal entry; however, no other journal entry pertaining to the note has been made. Given that the bank is charging interest at a rate of 12%, what adjusting entry, if any, is necessary as of Gasper, Inc.'s year-end date of December 31, 20X9?

Interest expense 80 Interestpayable 80

Boing, Inc., has a negative free cash flow. What is Boing, Inc., most likely going to do assuming they are not able to obtain financing?

Sell its assets

Which of the following is true regarding correcting errors? A) Only the income statement of the second period is effected. B) Only the balance sheet of the first period is effected. C) Errors in the current period may be offset by errors in the next accounting period. D) Only auditors can change them. E) Because they reverse, it is not necessary to do anything after the fact.

C) Errors in the current period may be offset by errors in the next accounting period.

Which of the following describes a liability? A) Future economic benefit B) Economic obligations to creditors C) Paid-in capital D) Investment by owners E) Present value of customer future payments

Economic obligations to creditors

Why is the timing of revenue recognition important?

Net income depends on proper timing.

What is the purpose of closing the books?

To reset the revenue and expense accounts to zero so that they are ready to record the next period's transactions

Expenses are

decreases in retained earnings resulting from operating activities

Which of the following transactions decrease cash? 1. Purchase inventory from cash 2. Pay trade accounts payable 3. Accruing operating expenses 4. Purchase stock in R&D partner 5. Charging depreciation

1, 2, and 4

Which of the following would appear in the financing activities section of a statement of cash flows? A) Cash payments to employees B) Cash payment of dividends C) Cash purchase of equipment D) Cash paid for income taxes E) Cash purchase of land

B) Cash payment of dividends

Which of the following items will not appear in the cash flow from operations section when using the direct method? A) Collections from customers B) Depreciation expense C) Cash paid for income taxes D) Payments to employees E) Payments to suppliers

B) Depreciation expense

Which of the following statements is false? A) If you increase an asset account, you may increase a liability account. B) If you increase an asset account, you may decrease an asset account. C) If you decrease an asset account, you may increase an owners' equity account. D) If you decrease an asset account, you may decrease owners' equity account. E) One asset on the balance sheet may be replaced by another asset

C) If you decrease an asset account, you may increase an owners' equity account.

A transaction

Maintains the equality of the balance sheet equation

Tanner Inc., acquired some office equipment, including a desk costing $900. The owner of the business next door said that he had been searching for a desk just like that one, so Tanner, Inc., sold the desk to its business neighbor at cost, receiving $400 in cash, with the remainder to be paid in 30 days. The effect of this transaction on Tanner, Inc., would be to

increase the cash account by $400, increase the accounts receivable account by $500, and decrease the equipment account by $900.

An example of an explicit transaction is

purchasing inventory on account.