Financial Accounting Final (SBU-Wagner)

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Hall Company sells merchandise with a one-year warranty. In the current year, sales consisted of 4,500 units. It is estimated that warranty repairs will average $10 per unit sold, and 30% of the repairs will be made in the current year and 70% in the next year. In the current year's income statement, Hall should show warranty expense of a. $13,500 b. $31,500 c. $45,000 d. $0

$45,000

The entry to record the issuance of common stock at a price above par includes a debit to a. Cash b. Organizational Expenses c. Paid-In Capital in Excess of Par—Common Stock d. Common Stock

Cash

Which account would normally not require an adjusting entry? a. Accounts Receivable b. Accumulated Depreciation c. Wages Expense d. Cash

Cash

Which of the following asset accounts is increased when a receivable is collected? a. Cash b. Accounts Payable c. Supplies d. Accounts Receivable

Cash

Which of the following is the appropriate general journal entry to record the declaration of cash dividends? . Retained Earnings Cash b. Cash Dividends Cash Dividends Payable c. Cash Dividends Payable Cash d. Paid-In Capital Cash Dividends Payable

Cash Dividends Cash Dividends Payable

All of the following are normally found in a corporation's stockholders' equity section except a. Common Stock b. Retained Earnings c. Dividends in Arrears d. Excess of Issue Price Over Par

Dividends in Arrears

Which of the following is not true with a double-entry accounting system? a. The sum of all debits is always equal to the sum of all credits in each journal entry. b. The accounting equation remains in balance. c. Each business transaction will have two debits. d. Every transaction affects at least two accounts

Each business transaction will have two debits.

Which of the following taxes would be deducted in determining an employee's net pay? a. FUTA taxes b. SUTA taxes c. FICA taxes d. all are correct

FICA taxes

The formula for depreciable cost is a. Initial cost + Residual value b. Depreciable cost = Initial cost c. Initial cost - Accumulated depreciation d. Initial cost - Residual value

Initial cost - Residual value

Which of the following accounts usually has a debit balance? a. Inventory b. Sales c. Sales Tax Payable d. Accounts Payable

Inventory

A bond indenture is a. a contract between the corporation issuing the bonds and the bondholders b. a contract between the corporation issuing the bonds and the underwriters selling the bonds c. the amount for which the corporation can buy back the bonds prior to the maturity date d. the amount due at the maturity date of the bonds

a contract between the corporation issuing the bonds and the bondholders

Accompanying the bank statement was a debit memo for bank service charges. On the bank reconciliation, the item is a. a deduction from the balance per bank statement b. an addition to the balance per company's records c. an addition to the balance per bank statement d. a deduction from the balance per company's records

a deduction from the balance per company's records

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a. a discount b. their maturity value c. a premium d. their face value

a discount

Which one of the following reflects a weak internal control system? a. a single employee is responsible for comparing a receiving report to an invoice b. all employees are well supervised c. all employees must take their vacations d. a single employee is responsible for collecting and recording of cash

a single employee is responsible for collecting and recording of cash

Earnings per share a. is the earnings available to common shareholders b. must be reported by public company c. helps compare companies of different sizes d. all of the answers are correct

all of the answers are correct

How is treasury stock shown on the balance sheet? a. as an increase in stockholders' equity b. treasury stock is not shown on the balance sheet c. as an asset d. as a decrease in stockholders' equity

as a decrease in stockholders' equity

The current portion of long-term debt should a. be reclassified as a current liability b. not be separated from the long-term portion of debt c. be classified as a long-term liability d. be paid immediately

be reclassified as a current liability

When the corporation issuing the bonds has the right to redeem the bonds prior to the maturity, the bonds are a. debenture bonds b. callable bonds c. convertible bonds d. unsecured bonds

callable bonds

What is the type of account and normal balance of Allowance for Doubtful Accounts? a. contra asset, debit b. asset, debit c. asset, credit d. contra asset, credit

contra asset, credit

The interest rate specified in the bond indenture is called the a. effective rate b. contract rate c. discount rate d. market rate

contract rate

Merchandise with a sales price of $5,000 is sold on account with terms 2/10, n/30. The journal entry to record the sale would include a a. debit to Cash for $5,000 b. credit to Sales for $4,900 c. debit to Customer Refunds Payable for $100 d. debit to Accounts Receivable for $4,880

credit to Sales for $4,900

Inventory is classified on the balance sheet as a a. current liability b. long-term asset c. current asset d. long-term liability

current asset

The Lowery Co. uses the direct write-off method of accounting for uncollectible accounts receivable. Lowery has a customer whose accounts receivable balance has been determined to likely be uncollectible. The entry to write off this account would be which of the following? a. debit Bad Debt Expense; credit Accounts Receivable b. debit Bad Debt Expense; credit Allowance for Doubtful Accounts c. debit Sales; credit Accounts Receivable d. debit Allowance for Doubtful Accounts; credit Accounts Receivable

debit Bad Debt Expense; credit Accounts Receivable

The journal entry a company records for the issuance of bonds when the contract rate and the market rate are the same is to a. debit Cash, credit Premium on Bonds Payable and Bonds Payable b. debit Cash and Discount on Bonds Payable, credit Bonds Payable c. debit Cash, credit Bonds Payable d. debit Bonds Payable, credit Cash

debit Cash, credit Bonds Payable

The journal entry used to record the issuance of an interest-bearing note for the purpose of borrowing funds for the business is a. debit Cash; credit Notes Payable b. debit Notes Payable; credit Cash c. debit Accounts Payable; credit Notes Payable d. debit Cash and Interest Expense; credit Notes Payable

debit Cash; credit Notes Payable

The date on which a cash dividend becomes a binding legal obligation is on the a. ​date of record b. ​last day of fiscal year c. ​declaration date d. ​payment date

declaration date

Which of the following items that appeared on the bank reconciliation did not require a journal entry? a. a check for $630, recorded in the check register for $360 b. deposits in transit c. NSF checks d. bank service charges

deposits in transit

A trial balance is prepared to a. prove that no errors were made in posting to the ledger b. discover errors that affect the equality of debits and credits c. prove that there were no errors made in recording transactions into the journal d. prove that each account balance is correct

discover errors that affect the equality of debits and credits

One of the main disadvantages of the corporate form is the a. double taxation of dividends b. inability to raise large amounts of capital c. requirement to stock d. charter

double taxation of dividends

The depreciation method that does not use residual value in calculating the first year's depreciation expense is a. straight-line b. units-of-output c. double-declining-balance d. sum-of-the-digits

double-declining-balance

The market interest rate related to a bond is also called the a. stated interest rate b. effective interest rate c. straight-line rate d. contract interest rate

effective interest rate

If a company borrows money from a bank as an installment note, the interest portion of each annual payment will a. remain constant over the term of the note b. increase over the term of the note c. equal the interest rate on the note times the face amount d. equal the interest rate on the note times the carrying amount of the note at the beginning of the period

equal the interest rate on the note times the carrying amount of the note at the beginning of the period

Expected useful life is a. calculated when the asset is sold b. estimated at the time that the asset is placed in service c. determined each year that the depreciation calculation is made d. none of these

estimated at the time that the asset is placed in service

The total earnings of an employee for a payroll period is referred to as a. net pay b. pay net of taxes c. gross pay d. take-home pay

gross pay

The accounts receivable turnover measures a. the fair market value of accounts receivable b. the efficiency of the accounts payable function c. the number of days of accounts receivable outstanding d. how frequently during the year the accounts receivable are converted to cash

how frequently during the year the accounts receivable are converted to cash

Accounts are classified in the ledger a. chronologically b. in accordance with their appearance in the financial statements c. with the accounts used most often listed first d. alphabetically

in accordance with their appearance in the financial statements

Stockholders' equity a. includes paid-in capital and liabilities b. is shown on the income statement c. is usually equal to cash on hand d. includes retained earnings and paid-in capital

includes retained earnings and paid-in capital

Earning revenue a. decreases assets, increases liabilities b. increases assets, decreases stockholders' equity c. increases assets, increases stockholders' equity d. increases one asset, decreases another asset

increases assets, increases stockholders' equity

Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the a. purchase ledger b. inventory ledger c. creditor's ledger d. customer's ledger

inventory ledger

Accumulated Depreciation a. is the same as Depreciation Expense b. is used to show the amount of cost expiration of intangibles c. is used to show the amount of cost expiration of natural resources d. is a contra asset account

is a contra asset account

The direct write-off method of accounting for uncollectible accounts a. emphasizes cash realizable value b. is often used by small companies and companies with few receivables c. emphasizes the matching of expenses with revenues d. emphasizes balance sheet relationships

is often used by small companies and companies with few receivables

Par value a. is established for a share of stock after it is issued b. is the monetary value assigned per share in the corporate charter c. represents the original selling price for a share of stock d. represents what a share of stock is worth

is the monetary value assigned per share in the corporate charter

Treasury stock shares are a. shares held by the U.S. Treasury Department b. issued shares that have been reacquired by a corporation c. part of the total outstanding shares but not part of the total issued shares of a corporation d. unissued shares that are held by the treasurer of the corporation

issued shares that have been reacquired by a corporation

The amount of federal income taxes withheld from an employee's gross pay is recorded as a(n) a. asset b. liability c. payroll expense d. contra account

liability

On December 31, Strike Company sold one of its batting cages for $20,000. The equipment had an initial cost of $310,000 and had accumulated depreciation of $260,000. Depreciation has been recorded up to the end of the year. What is the amount of the gain or loss on this transaction? a. gain of $30,000 b. loss of $20,000 c. gain of $20,000 d. loss of $30,000

loss of $30,000

Estimating and recording product warranty expense in the period of the sale best follows the a. matching concept b. cost concept c. business entity concept d. materiality concept

matching concept

Current assets are usually listed in order a. of liquidity b. of the due date c. alphabetically d. of the size

of liquidity

Which intangible assets are amortized over their useful life? a. trademarks b. goodwill c. patents d. all of these

patents

The inventory system employing accounting records that continuously disclose the amount of inventory is called a. periodic b. perpetual c. physical d. retail

perpetual

The excess of issue price over par of common stock is termed a(n) a. dividend b. income c. premium d. discount

premium

FIFO reports higher gross profit and net income than the LIFO method when a. prices are increasing b. prices are reduced by 50% c. prices are decreasing d. prices remain stable

prices are increasing

The objectives of internal control are to a. prevent fraud, and promote the social interest of the company b. provide control over "internal-use only" reports and employee internal conduct c. provide reasonable assurance that assets are safeguarded and used for business purposes, business information is accurate, and laws and regulations are complied with d. control the internal organization of the accounting department personnel and equipment

provide reasonable assurance that assets are safeguarded and used for business purposes, business information is accurate, and laws and regulations are complied with

A fixed asset's estimated value at the time it is to be retired from service is called a. market value b. residual value c. carrying value d. book value

residual value

Which of the following describes the classification and normal balance of the fees earned account? a. stockholders' equity, debit b. revenue, credit c. asset, credit d. liability, credit

revenue, credit

The stockholders' equity will be reduced by all of the following except a. expenses b. dividends c. revenues d. all of these

revenues

Characteristics of a corporation include a. its inability to own property b. direct management by the shareholders (owners) c. a limited lifespan d. shareholders who have limited liability

shareholders who have limited liability

Taking a physical count of inventory a. has no internal control relevance b. is not necessary when a perpetual inventory system is used c. is not necessary when a periodic inventory system is used d. should be done near year-end

should be done near year-end

Credit memos from the bank a. show that a company has deposited a customer's NSF check b. decrease a bank customer's account c. show the bank has collected a note receivable for the customer d. are used to show a bank service charge

show the bank has collected a note receivable for the customer

A bank statement a. shows a company the financial position of the bank as of a certain date b. shows the activity that increased or decreased the company's account balance c. is a bill from the bank for services rendered d. is a credit reference letter written by the company's bank

shows the activity that increased or decreased the company's account balance

Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items? a. specific identification b. average c. FIFO d. LIFO

specific identification

In the normal operation of business, you receive a check from a customer and deposit it into your checking account. With your bank statement you are advised that this check for $775 is "NSF." The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will a. add both values to balance according to bank b. subtract both values from balance according to books c. subtract both values from balance according to bank d. add both values to balance according to books

subtract both values from balance according to books

When a corporation completes a 3-for-1 stock split a. the ownership interest of current stockholders is decreased b. the market price per share of the stock is decreased c. the par value per share is decreased d. the market price per share of the stock and the par value per share is decreased

the market price per share of the stock and the par value per share is decreased

Notes or accounts receivable that result from sales transactions are often called a. nontrade receivables b. sales receivables c. trade receivables d. merchandise receivables

trade receivables

Which of the following would most likely be classified as a current liability? a. mortgage payable b. two-year notes payable c. unearned rent d. bonds payable

unearned rent

A characteristic of a fixed asset is that it is a. intangible b. held for sale in the ordinary course of the business c. used in the operations of a business d. a short-term investment

used in the operations of a business

A summary of selected transactions in ledger accounts appears below for Alberto's Plumbing Services for the current calendar year-end. Common Stock ​ 1/1 6,500 Retained Earnings 12/31 3,500 12/31 15,000 Dividends 3/30 1,650 12/31 3,500 9/30 1,850 ​ Net income for the period is a. $25,000 b. $3,500 c. $15,000 d. $21,500

$15,000

Calculate the gross profit for Jefferson Company based on the following: Sales $764,000 Selling expenses 42,500 Cost of goods sold 538,000 a. $495,500 b. $183,500 c. $226,000 d. $721,500

$226,000

Dollar Co. sold merchandise to Pound Co. on account, $25,500, terms 2/15, net 45. Pound Co. paid the invoice within the discount period. What is the sales amount to be recorded in the above transactions? a. $26,010 b. $16,000 c. $24,990 d. $25,500

$24,990

What amount will be paid in full settlement of Invoice 22384, assuming that credit for returns and allowances was received prior to payment and that the invoice was paid within the discount period. Inv. No. Merchandise Freight Paid by SellerFreight Terms Returns and Allowances 22384 $4,500 $140 FOB Shipping Point,2/10, net 30 $1,200 a. $3,234 b. $3,374 c. $4,640 d. $3,440

$3,374

On October 1, Black Company receives a 9% interest-bearing note from Reese Company to settle a $20,000 account receivable. The note is due in six months. At December 31, Black should record interest revenue of a. $0 b. $450 c. $900 d. $1,800

$450

The inventory data for an item for November are: Nov. 1Inventory20 units at $19 4Sold10 units 10Purchased30 units at $20 17Sold20 units 30Purchased10 units at $21 Using a perpetual system, what is the cost of the goods sold for November if the company uses LIFO? a. $580 b. $600 c. $590 d. $610

$590

Which of the following is not a characteristic of a corporation? a. Ownership is divided into shares of stock. b. Corporations are organized as a separate legal taxable entity. c. Corporations experience an ease in obtaining large amounts of resources by issuing stock. d. A corporation's resources are limited to its individual owners' resources.

A corporation's resources are limited to its individual owners' resources.

Which of the following errors, each considered individually, would cause the trial balance totals to be unequal? a. Cash received from customers on account was posted as a debit of $720 to Cash and a credit of $720 to Accounts Payable. b. A transaction was not posted. c. A payment of $67 for insurance was posted as a debit of $76 to Prepaid Insurance and a credit of $76 to Cash. d. A payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts Payable and a credit of $450 to Cash.

A payment of $4,450 to a creditor was posted as a debit of $4,500 to Accounts Payable and a credit of $450 to Cash.

A client has a massage and asks the company bookkeeper to mail her the bill. The bookkeeper should make which entry to record the invoice? a. Fees Earned, debit; Accounts Receivable, credit b. No entry until the cash is received c. Cash, debit; Fees Earned, credit d. Accounts Receivable, debit; Fees Earned, credit

Accounts Receivable, debit; Fees Earned, credit

The accounting equation may be expressed as a. Assets = Liabilities + Stockholders' Equity b. Assets + Liabilities = Stockholders' Equity c. Assets = Expenses − Liabilities d. Assets = Revenues − Liabilities

Assets = Liabilities + Stockholders' Equity

When the perpetual inventory system is used, the inventory sold is debited to a. Cost of Goods Sold b. Sales c. Inventory d. Supplies Expense

Cost of Goods Sold

Which of the following accounts will be credited to close it? a. Accumulated Depreciation b. Fees Earned c. Depreciation Expense d. Rent Revenues

Depreciation Expense

Which one of the following is the authoritative body in the United States having the primary responsibility for developing accounting principles? a. FASB b. AICPA c. SEC d. IRS

FASB

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are a. consigned b. FOB shipping point c. n/30 d. FOB destination

FOB shipping point

The initials GAAP stand for a. Generally Accepted Accounting Principles b. Generally Accepted Plans c. General Accounting Procedures d. Generally Accepted Accounting Practices

Generally Accepted Accounting Principles

Which of the following companies would be more likely to use the specific identification inventory costing method? a. Lowe's b. Best Buy c. Gordon's Jewelers d. Walmart

Gordon's Jewelers

Four financial statements are usually prepared for a business. The statement of cash flows is usually prepared last. The statement of stockholders' equity (SSE), the balance sheet (B), and the income statement (I) are prepared in a certain order to obtain information needed for the next statement. In what order are these three statements prepared? a. SSE, I, B b. B, SSE, I c. I, SSE, B d. B, I, SSE

I, SSE, B

During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of goods sold is a. weighted average b. average cost c. FIFO d. LIFO

LIFO

The inventory method that assigns the most recent costs to cost of goods sold is a. weighted average b. LIFO c. FIFO d. specific identification

LIFO

Which one of the fixed asset accounts listed below will not have a related contra asset account? a. Building b. Office Equipment c. Land d. Delivery Equipment

Land

The following adjusting journal entry found in the journal is missing an explanation. Select the best explanation for the entry. Wages Expense 4,500 Wages Payable 4,500 ???????????????? a. Record wages paid in advance. b. Record wages expense incurred and to be paid next month. c. Record payment of wages. d. Record wages paid last month.

Record wages expense incurred and to be paid next month.

Which of the following account groups are temporary accounts? a. Cash, Dividends, Wages Payable b. Common Stock, Dividends, Retained Earnings c. Prepaid Insurance, Equipment, Fees Earned d. Rent Revenue, Fees Earned, Miscellaneous Expense

Rent Revenue, Fees Earned, Miscellaneous Expense

Which of the following statements is true? a. The balance in the revenue accounts after closing agrees with the revenue shown on the income statement. b. The balance in the dividends account after closing agrees with the amount of dividends reported on the statement of stockholders' equity. c. The balance of Retained Earnings after closing agrees with the amount reported on the statement of stockholders' equity and the balance sheet. d. The trial balance taken after closing can be used to prepare the statement of stockholders' equity and the balance sheet.

The balance of Retained Earnings after closing agrees with the amount reported on the statement of stockholders' equity and the balance sheet.

The classification and normal balance of the accounts payable account is a. revenue with a credit balance b. stockholders' equity with a credit balance c. a liability with a credit balance d. an asset with a credit balance

a liability with a credit balance

The balance of an account is determined by a. always subtracting the debits from the credits b. adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum c. adding all of the debits to all of the credits d. always subtracting the credits from the debits

adding all of the debits, adding all of the credits, and then subtracting the smaller sum from the larger sum

The amount of cash to be reported on the balance sheet at June 30 is the a. total of the cash column in the cash receipts journal as of June 30 b. adjusted balance appearing in the bank reconciliation for June 30 c. balance as of June 30 on the bank statement d. total of the cash column in the cash payments journal as of June 30

adjusted balance appearing in the bank reconciliation for June 30

When is the adjusted trial balance prepared? a. before the adjusting journal entries are journalized b. after adjusting journal entries are posted c. after the adjusting journal entries are journalized d. before adjusting journal entries are posted

after adjusting journal entries are posted

The statement of stockholders' equity should be prepared a. after the income statement and before the balance sheet b. before the income statement and after the balance sheet c. before the income statement and balance sheet d. after the income statement and balance sheet

after the income statement and before the balance sheet

Too much inventory on hand a. ties up funds that could be used to improve operations b. increases the cost to safeguard the assets c. increases the losses due to price declines d. all of these

all of these

A capital expenditure results in a debit to a. an asset account b. a capital account c. a liability account d. an expense account

an asset account

Balance sheet accounts a. represent amounts accumulated during a specific period of time b. have zero balances after the closing entries have been posted c. are not affected by adjustments d. are called real accounts

are called real accounts

Prepaid rent, representing rent for the next six months' occupancy, would be reported on the tenant's balance sheet as a(n) a. liability b. asset c. stockholders' equity account d. contra liability

asset

Which of the following groups of accounts have a normal debit balance? a. assets and expenses b. liabilities and stockholders' equity c. stockholders' equity and assets d. revenues, liabilities, and stockholders' equity

assets and expenses

Adjusting entries always include a. only income statement accounts b. the cash account c. at least one income statement account and one balance sheet account d. only balance sheet accounts

at least one income statement account and one balance sheet account

Liabilities are reported on the a. statement of stockholders' equity b. income statement c. balance sheet d. statement of cash flows

balance sheet

Unearned Fees appear on the a. balance sheet in the current assets section b. balance sheet in the stockholders' equity section c. income statement as revenue d. balance sheet as a current liability

balance sheet as a current liability

Prior to the adjusting process, accrued revenue has a. been earned and cash received b. not been recorded as revenue but cash has been received c. been earned and not recorded as revenue d. not been earned but recorded as revenue

been earned and not recorded as revenue

Prior to the adjusting process, accrued expenses have a. been incurred, not paid, but have been recorded b. been incurred, not paid, and not recorded c. not yet been incurred, paid, or recorded d. been paid but have not yet been incurred

been incurred, not paid, and not recorded

The difference between the balance of a fixed asset account and the related accumulated depreciation account is termed a. historical cost b. book value c. contra asset d. market value

book value

Multiple-step income statements show a. neither gross profit nor income from operations b. income from operations but not gross profit c. both gross profit and income from operations d. gross profit but not income from operations

both gross profit and income from operations

The ending balance of the retained earnings account appears in a. both the statement of stockholders' equity and the balance sheet b. both the statement of stockholders' equity and the income statement c. only the statement of stockholders' equity d. both the statement of stockholders' equity and the statement of cash flows

both the statement of stockholders' equity and the balance sheet

Accumulated Depreciation and Depreciation Expense are classified, respectively, as a. revenue, asset b. contra asset, expense c. asset, contra liability d. expense, contra asset

contra asset, expense

The classified balance sheet will show which liability subsections? a. present liabilities and tomorrow's liabilities b. current liabilities and other liabilities c. current liabilities and long-term liabilities d. other liabilities and long-term liabilities

current liabilities and long-term liabilities

In recording the cost of goods sold for cash, based on data available from perpetual inventory records, the journal entry is a. debit Accounts Receivable; credit Inventory b. debit Inventory; credit Cost of Goods Sold c. debit Cost of Goods Sold; credit Sales d. debit Cost of Goods Sold; credit Inventory

debit Cost of Goods Sold; credit Inventory

The adjusting entry to record the depreciation of a building for the fiscal period is a. debit Accumulated Depreciation; credit Depreciation Expense. b. debit Building; credit Depreciation Expense. c. debit Depreciation Expense; credit Building. d. debit Depreciation Expense; credit Accumulated Depreciation.

debit Depreciation Expense; credit Accumulated Depreciation.

The entry to record the return of merchandise from a customer would include a a. debit to Estimated Returns Inventory b. credit to Sales c. debit to Customer Refunds Payable d. debit to Sales

debit to Customer Refunds Payable

The journal entry to close the Fees Earned, $750, and Rent Revenue, $175, accounts during the year-end closing process would involve: a. a credit to a general revenue account b. a debit to a general revenue account c. debits to the two revenue accounts d. credits to the two revenue accounts

debits to the two revenue accounts

A business paid $7,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation was to a. decrease an asset, decrease a liability b. increase an asset, decrease another asset c. increase an asset, increase stockholders' equity d. increase an asset, increase a liability

decrease an asset, decrease a liability

What effect will the following adjusting journal entry have on the accounting records? Depreciation Expense 2,150 Accumulated Depreciation 2,150 a. increase net income b. decrease expenses c. increase revenues d. decrease net book value

decrease net book value

Cash dividends a. increase expenses b. increase cash c. decrease expenses d. decrease stockholders' equity

decrease stockholders' equity

Which of the following is not true regarding depreciation? a. depreciation expense does not measure changes in market value. b. depreciation expense reflects the decrease in market value each year. c. depreciation allocates the cost of a fixed asset over its estimated life. d. depreciation is an allocation not a valuation method.

depreciation expense reflects the decrease in market value each year.

When merchandise sold is assumed to be in the order in which the purchases were made, the company is using a. average cost b. first-in, last-out c. last-in, first-out d. first-in, first-out

first-in, first-out

What is the term applied to the excess of sales over the cost of goods sold? a. net income b. operations c. gross sales d. gross profit

gross profit

Inventory shrinkage is recorded when a. there is a difference between a physical count of inventory and inventory records b. merchandise is returned to a seller c. merchandise is returned by a buyer d. merchandise purchased from a seller is incomplete or short

here is a difference between a physical count of inventory and inventory records

Which of the following best describes accounting? a. records economic data but does not communicate the data to users according to any specific rules b. is an information system that provides reports to users regarding economic activities and condition of a business c. is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements d. is of no use by individuals outside of the business

is an information system that provides reports to users regarding economic activities and condition of a business

The bank reconciliation a. should be prepared by an employee who records cash transactions b. is part of the internal control system c. is for information purposes only d. is sent to the bank for verification

is part of the internal control system

The debit side of an account a. is the left side of the account b. depends on whether the account is an asset, liability, or stockholders' equity c. can be either side of the account depending on how the accountant set up the system d. is the right side of the account

is the left side of the account

The end-of-period spreadsheet a. is a working paper that is required b. is used to summarize account balances and adjustments for the financial statements c. is an integral part of the accounting cycle d. eliminates the need to rewrite the financial statements

is used to summarize account balances and adjustments for the financial statements

The ____ is where a transaction can first be found in the accounting records. a. chart of accounts b. balance sheet c. income statement d. journal

journal

Ending inventory is made up of the oldest purchases when a company uses a. first-in, first-out b. retail method c. last-in, first-out d. average cost

last-in, first-out

Debts owed by a business are referred to as a. stockholders' equity b. accounts receivables c. liabilities d. expenses

liabilities

In which of the following types of accounts are decreases recorded by debits? a. dividends b. liabilities c. expenses d. assets

liabilities

If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the a. manufacturer b. retailer c. consignee d. shipper

manufacturer

Closing entries a. are not needed if adjusting entries are prepared b. need not be posted if the financial statements are prepared from the end-of-period spreadsheet c. need not be journalized if adjusting entries are prepared d. must be journalized and posted

must be journalized and posted

Adjusting entries are a. the same as correcting entries b. needed to bring accounts up to date and match revenue and expense c. optional under generally accepted accounting principles d. rarely needed in large companies

needed to bring accounts up to date and match revenue and expense

Damaged merchandise that can be sold only at prices below cost should be valued at a. LIFO b. net realizable value c. FIFO d. average cost

net realizable value

Which of the following measures the length of time it takes to acquire, sell, and replace inventory? a. retail method of inventory costing b. inventory turnover c. gross profit method of inventory costing d. number of days' sales in inventory

number of days' sales in inventory

In credit terms of 3/15, n/45, the "3" represents the a. number of days in the discount period b. full amount of the invoice c. number of days when the entire amount is due d. percent of the cash discount

percent of the cash discount

The primary difference between the periodic and perpetual inventory systems is that a a. periodic system determines the inventory on hand only at the end of the accounting period b. periodic system keeps a record showing the inventory on hand at all times c. periodic system provides an easy means to determine inventory shrinkage d. periodic system records the cost of the sale on the date the sale is made

periodic system determines the inventory on hand only at the end of the accounting period

The process of transferring the debits and credits from the journal entries to the accounts is called a. journalizing b. transposing c. sliding d. posting

posting

Net income will result when a. revenues (credits) > expenses (debits) b. expenses (credits) = revenues (debits) c. revenues (credits) = expenses (debits) d. revenues (debits) > expenses (credits)

revenues (credits) > expenses (debits)

The primary objectives of control over inventory are a. safeguarding inventory from damage and reporting inventory in the financial statements b. reporting inventory in the financial statements c. maintaining constant observation of the inventory and reporting inventory in the financial statements d. safeguarding the inventory from damage and maintaining constant observation of the inventory

safeguarding inventory from damage and reporting inventory in the financial statements

Generally, the revenue account for a merchandising business is entitled a. Gross Profit b. Fees Earned c. Gross Sales d. Sales

sales

The matching principle a. addresses the relationship between the journal and the balance sheet b. determines whether the normal balance of an account is a debit or credit c. states that the revenues and related expenses should be reported in the same period d. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance

states that the revenues and related expenses should be reported in the same period

Transactions affecting stockholders' equity include a. stockholder investments, earning of revenues, incurrence of expenses, and collection of accounts receivable b. stockholder dividends, earning of revenues, incurrence of expenses, and purchase of supplies on account c. stockholder investments, dividends, earning of revenues, and incurrence of expenses d. stockholder investments and payment of liabilities

stockholder investments, dividends, earning of revenues, and incurrence of expenses

Profit is the difference between a. the assets purchased with cash contributed by the owner and the cash spent to operate the business b. the amounts received from customers for goods or services and the amounts paid for the inputs (expenses) used to provide the goods or services c. assets and liabilities d. the incoming cash and outgoing cash

the amounts received from customers for goods or services and the amounts paid for the inputs (expenses) used to provide the goods or services

What is the goal of the closing process? a. to make sure all temporary accounts have a zero balance b. to move all equity accounts to Retained Earnings c. to end the accounting period with a profit d. to verify that all adjustments have been made

to make sure all temporary accounts have a zero balance

A chart of accounts is a. used in place of a ledger b. usually a listing of accounts in alphabetical order c. the same as a balance sheet d. usually a listing of accounts in financial statement order

usually a listing of accounts in financial statement order

Using accrual accounting, revenues are recorded a. when cash is received at the time services are performed or products have been delivered to customers b. when cash is received without regard to when the services are performed or products have been delivered to customers c. only if cash is received after the services are performed or products have been delivered to customers d. when a service has been performed or products have been delivered to customers without regard to when cash is received

when a service has been performed or products have been delivered to customers without regard to when cash is received

Debts listed as current liabilities are those that a. will be paid in less than one year b. are owed to the stockholders and will never be paid c. are due to be paid in 5 to 10 years d. are due to be paid in more than one year

will be paid in less than one year


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