Finance 4B

Segregation of duties means that a company assigns responsibilites so that:

Responsibilities for related activities are assigned to two or more people.

Cash Outflow

Results from activities such as purchases of goods and assets, payment of debt, payment of cash dividends, and payment of taxes

Cash inflow

Results from activities such as sales of goods and assets, receipts of cash dividends and receipts of interest

All of the following are apart of contributed capital except?

Retained Earnings

Which of the following was passed by Congress in response to finacial statement frauds that occured in the early 2000s?

Sarbanes -Oxley Act

The internal control principle related to assigning responsibilities so one person can not commit a dishonest act without someone else discovering it is referred as:

Segredation of duties

Cash Equivalents

Short term, highly liquid investments purchase within three months of maturity

Which of the following business organizations has only one owner?

Sole propiertorship

For a manufacturer inventory turnover refers to how many times:

The company produces its good and delivers the inventory to customers

Days of Collect

The days of the year divided by the receivables turnover ratio

Which of the following is a charateristic of a sole properitership?

The owner is personally resposible for debts even if they exceed more than what the owner invested in the business

Net Accounts Receivable

The portion of accounts receivable that the company expects to collect

The financial reports of a business include only the results of that business's activities. This is:

The seperate entity assumption

Net income

The starting point for calculating operating cash flows with the indirect method

Maturity Date

The time at which a loan must be repaid

Accounts Receivable

Total money owed the company for sales made on credit

What is the minimum number of accounts that must be involved in any transaction?

Two

Antel is a tenant of Baber. On July 1, Antel paid Baber $1200 for 3 months of rent. On July 31, Babers adjusting entries will include a debit to:

Unearned revenue for $400

What is the inventory costing method that adds together the total cost of all goods available for sale during the period, and then divides that by the number of units avaible for sale to get a value to assign to all goods sold and all goods remaining in inventory?

Weighted average

Each account is assigned a number; this listing of all accounts is called a:

chart of accounts

A weak system of internal___ provides the ___ to commit fraud.

controls; oppurtunity

The principle that is used to measure the amount assets are to be recorded at when exchanged is called the ___ principle

cost

Your company has 100 units in inventory, purchased at $16 per unit. These units have current market value of $14. The entry to write-down the inventory will include a:

credit to inventory for $200

The adjusting entry to record the amount earned that previously had been collected in advance will

decrease liability and increase revenue

Supplies should be ___ and Supplies Expense should be ___ for supplies used up during the period

decreased; increased

Research has shown that 3 factors exist when fraud occurs. which of the following is not one of the 3 factors of the fraud triangle?

Lack of a code of ethics

A company bought land and a building for $128,000. Why should the company split the $128,000 cost between the land and the building

Land is not depreciate, while the building will be depreciated over it's 20 year useful life

Transactions are first entered in the:

Ledger

Generally excepted accounting principles require that the inventory be recorded at:

Lower if cost or market

Net income that has been paid out to the companys stockholders for thier own personal us is reffered to as:

dividends

Revenues are:

earned by selling goods or services to customers

At the start of the year of operations, retained earnings would be:

equal to zero

Advantages of equity financing over debt financing include that:

equity financing does not require repayment

Beginning inventory plus purchases equals:

goods avaible for sale

Sofa So Good signs a contract with a programmer for the development of software that will be developed, delivered and paid for in the next year. The signing of the contract:

has no effect on the account equation

A business purchased supplies for cash. The business will decrease its cash account and:

increase its supplies account

Dividing the long life of a company into shorter periods such as months, quarters, or years for reporting purposes is called the:

time period assumption

If supplies are purchased for cash:

total assets will increase

When a company has inventory which is subject to gradually increasing prices of the LIFO method of valuing inventory will result in the:

Lowest amount of assets and the lowest amount of net income

Considering current laws that deal with misstatements of finacial results, which of the following statements is correct

Managers can be senteced to max jail terms of up to 20 years for each violation

With respect to the audience targeted for financial accounting reports which of the parties below is not an external user?

Managers of the company issuing the reports

Which of the following is not one of the primary goals of inventory management

Minimize the quantity of ending inventory

Cash

Money or any instrument that banks well except for deposit and immediately credit to a company's account

Receivables Turnover

Net credit sales revenue divided by the average net receivables.

What is the effect on the balance sheet if a company purchases equipment using cash?

No effect on total assets; no effect on total liabilities; no effect on total stockholders equity.

Restricted Cash

Not available for general use but rather restricted for a specific purpose

When does a corparation record an increase in dividends payable?

On the declaration date

The primary difference between ordinary repairs and extraordinary repairs is

Ordinary repairs are expenditures for routine maintenance and upkeep where as extraordinary repairs increase an assets economic usefulness in the future through increase efficiency capacity or longer life

Which of the following is not an operating activity?

Paying off a loan to the bank

Fraud is best defined as:

Personal gain

The right of current stockholders to purchase additional shares of newly issued stock in order to maintain the same percentage ownership is called?

Preemptive rights

Property, Plant, and Equipment

Purchases and sales of this are classified as investing actvites.

Noncash Investing and Finacing Activities

Reported as supplemental disclosures or in the notes section to the financial statements rather then within the body of the statement of cash flow

Kata Company uses the allowance method. On May 1 Kata wrote off a $22,000 customer account balance when it becomes clear that the particular customer will never pay. The journal entry to record the write off on May 1 would include which of the following

Debit to Allowance for Doubtful Accounts and credit to Accounts Receivable

To recognize the use of and benifit recieved from long-lived assets such as equipment, during the accounting period, ____ expense should be recorded.

Depreciation

The stockholders equity section of the balance sheet includes all of the following except?

Dividends

Bad Debt Expense

In account that is debited for the amount of credit sales estimated as uncollectible

Promissory Note

In agreement by a borrower to repay the lending company with interest during a specific time period.

when the amount of a cogtingent liability can be reasonably estimated and its likelihood is possible but not probable, the company should?

Include a description in the notes to the financial statements

The balance of which of the following accounts appear in the credit colum of an adjusted trial balance?

Income tax payable

Which of the following is an advantage of debt financing?

Interest is tax deductable

Which line item would be found on a marchandisers balance sheet and not on a service firms?

Inventory

Goods in transit are

Inventory items being transported from the seller to a buyer

All other things being equal a company is better off when it's receivable turnover

Is high and its day to collect measure is low

If no errors have been made, when a company prepares its adjusted trial balance:

the debit colum and the credit colum will be equal

Recording a Lower of Cost or Market (LCM) adjustment involves which of the following genetic journal entries

Debit Cost of Goods Sold and credit Inventory

Which of the following items does not affect the calculation of depreciation expense?

Economic benefits generated by the asset

The principles of internal control include which of the following?

Establish responsibilities

Which of the following is not a reason that a business needs an effective internal control system?

Identitfy ways to circumvent appilicable laws and reugulations

Interest earned and recievable on a note recievable equals $50 for the month of March. What adjusted entry if any should be recorded as of March 31.

Debit interest recievble $50 and crfedit interest reveunue $50

Allsop Company has no beginning inventory. The company purchase 300 units of inventory in January at five dollars each 500 units at $4 each in August in 200 units at $6 each in November. The company sells 150 units during the year. Using a periodic inventory system and the LIFO inventory costing method. What is the cost of good sold?

$900

The issue price of each $1,000 bond that pays interest at 5% and has a bond price of 92.10 equals

$921

American Co. sold $100,000 of bonds for an issue price of 98. As a result of selling these bonds, its total assests increase by?

$98,000 and its total liabilites increase by $98,000

If the Allowance for Doubtful Accounts in January 1 equals $10,000 and during the year $9,000 of specific customers' accounts were written off, then its Allowance for Doubtful Accounts will have an unadjusted balance of:

$1,000 credit

Bijoux Company has sales of $40,000, beginning inventory of $5000, purchases of $25,000, and ending inventory of $7,000. The cost of goods sold is:

$23,000

Engstrom company makes a sale and collects a total of $378, which includes an 8% sales tax. What is the amount that will be creditied to the sales revenue account?

$350

A company buys equipment for $48,000, expects to use it for ten years, and then sell it for $6000. Using the straight-line method, the company should report annual depreciation for the eqipument of:

$4,200

Shenandoah Skies bought land to be used for a new ski resort. Which of the following cost should not be capitalized?

$7,500 paid for a party to celebrate the grand opening

NSF (Not Sufficient Funds) Check

Another name for bounced checks they arise when the check writer does not have sufficient funds to cover the amount of the check

Acme enterprises began the year owing its suppliers 3,000 for merchandised purcashed last year. Acme then sold half of this merchandise for 5,000 on account. Two weeks later, Acme 1,000 and bought 4,000 of merchandise on account. Acme now has an accounts payable balance of

6,000

What type of account is Accounts Recievable?

Asset

Which of the following is not correct?

Assets = liabilites - stockholders equity

Allowance for doubtful accounts

A contra asset account

Statement of Cash Flows

A financial statement that tracks the flow of cash into and out of a company according to the three types of activities that generate the float

Mia Hero Shop sold its table with a book value of $1000 for $800. Mia Hero w record:

A loss on sale

Cash flows from operating activities include all of the following except:

A purchase of land

Alpha sold $2000 of services to Beta on credit. Beta promised to pay for it next month. Beta will report a $2000:

Accounts Payable

Which account is affected by recording the buying of goods on credit?

Accounts Payable

Generally freight cost incurred when A long lived asset is purchased should be:

Added to the cost of asset

Accounts receivable net (or net accounts receivable) equals accounts receivable (gross) minus

Allowance for doubtful accounts

Bank Reconciliation

An internal report prepared to verify the accuracy of both the bank statement and the cash account of a business or individual.

Partnership

An unincorpated business owned by two or more indiviuals

Which of the following finacial statements does not cover a period of time but rather reports amounts at a specific point in time?

Balance sheet

Which of the following is included in finacing actitives on a statement of cash flows?

Cash dividends paid

Free Cash Flow

Cash flow from operations in excess of amount paid to replace property, planet and equipment and to pay cash dividends to stockholders

Which of the following would be classified as an operating activity on the statement of cash flows using the direct method?

Cash received from accounts receivable collections

Which of the following is included in cash flows from operating actitives?

Cash recieved from customers

Which of the following could be included in cash flows from investment activites?

Cash used to purchase euipment

Which of the following is not an asset?

Common stock

Reporting revenues when they are earned and expenses when they are incurred is called ___ basis accounting

accural

An economic resource that is owned by a company and will provide future benefits is referred to as:

an asset

Employer payroll taxes:

are an added payroll expense beyond the wages and salaries earned by employess

Advantages of the corporate form include all of the following except?

legal liability of its owners is unlimited

when cash is recieved in advance of being earned a __ called __ is recorded

liability; Unearned Revenue

All of the following are goals of internal control except:

minimizing the amount of income taxes that must be pad

Financial statements are most commonly prepared

monthly, quartly, and annually

If an expense has been incurred but will be paid later then:

nothing is recorded on the financial statements

Adjusting entries affect:

only balance sheet accounts

Every transactions involves a:

receiving and giving something of value

Physcally locking up assets and electronically locking up other assets is required by the internal prinicpal of:

restricting access

Adjustments to revenue accounts at the end of the accounting period are made to adhere to accrual accounting principles; specifically the ____ principle

revenue recognition prinicple

Profit is equal to?

revenues minus expenses

Typically, a profitable company that pays relatively high dividends

will reinvest more profit which will lead to a smaller growth potential