Accounting Final
Fatima invested $10,000 in her business. How does this affect the accounting equation?
assets increase and owners' equity increases
Services are provided for customers and they are sent bills for the amount they owe. How does this affect the accounting equation?
assets increase and owners' equity increases
Revenues can be defined as
assets received from selling products or services
weighted average
avg: total cost/total # of units, cost of goods sold-units sold x avg., end inventory unsold units x avg.
depreciation - units of production
cost - residual value= depreciable amt, depreciable amt/ # units = depreciation expense per unit
In a bank reconciliation outstanding checks are
deducted from a bank statement balance
The system of accounting in which there are at least two accounts affected in every transaction so that the accounting equation stays in balance is called
double-entry system
The accrual basis of accounting recognizes revenues when __________, and expenses __________
earned; when the costs are incurred
Which ratio expresses the profits of a company on a per share basis?
earnings per share
The costs of doing business resulting from the sale of goods and services are called
expenses
Which of the following is NOT a benefit that will be provided by a single set of worldwide accounting standards (IFRS)?
international financial reporting standards require less disclosure in notes to the financial statements
When a company declares a 2-for-1 stock split, the number of outstanding shares
is doubled compared to the number of shares that were outstanding prior to the split
If the business has an _________ from a customer, then the customer has an ________ to the business
accounts receivable; accounts payable
When reconciling the ending cash balance per the bank statement to the correct adjusted cash balance, how would deposits in transit be handled?
added to the balance per bank statement
All of the following are forms of business entities except
agencies
Which of the following describe(s) the inventory cost-flow pattern?
beginning inventory+purchases-cost of goods sold=ending inventory, beg. inventory+purchases-ending inventory= cost of goods sold
The following information is available from the accounting records of Stratton Inc. for 2016. Credit sales during the year $500,000 Accounts Receivable (12/31/16) $45,000 Allowance for Doubtful Accounts (12/31/16) $3,200 Bad debt expense for the year $4,800 What amount will Stratton Inc. show on its year-end balance sheet for the Net Realizable Value of its accounts receivable?
$41800
Selected information for Freyman Company is provided below: 12/31/16 Unadjusted Balance Accounts Receivable 38,500 Allowance for Doubtful Accounts 185 Bad Debt Expense 0 Sales Revenue 103,000 Freyman estimates that 1% of sales will be uncollectible. The amount of the adjusting entry to account for bad debt expense will be
1030
Selected information for Peshti Company is provided below: 12/31/16 Unadjusted Balance Accounts Receivable 38,500 Allowance for Doubtful Accounts 185 Bad Debt Expense 0 Sales Revenue 103,000 Peshti estimates that 1% of accounts receivable will be uncollectible. The amount of the adjusting entry to account for bad debt expense will be
200
Edisaman Inc. began business on January 1, 2016. The corporate charter authorized issuance of 20,000 shares of $.50 par value common stock and 10,000 shares of $8 par value, 2% cumulative preferred stock. What is the maximum amount that can be reported on the balance sheet for Common Stock, and Preferred Stock, respectively, if all of the stock is issued?
Common Stock: $10,000 Preferred Stock: $80,000
Sherida is a personal fitness trainer. Some of her clients pay her in advance for 20 training sessions. During March Sherida received $700 of fitness fees in advance. By the end of March, Sherida had earned $250 of the fees received in advance. After the adjustments are recorded and posted for March 31, the balances in the Unearned Fitness Fees and the Fitness Fees Earned accounts will be
Unearned Fitness Fees, $450; Fitness Fees Earned, $250
With regard to a corporation's stock, par value is
an arbitrary amount that exists to fulfill legal requirements
Merchandise Inventory held by a business is a(n) __________ and when sold becomes a(n) _____
asset, expense
what is the accounting equation?
assets = liabilities + owners' equity
contingent liabilities should be recorded in the accounts when
both a and b: It is probable that the future event will occur and the amount of the liability can be reasonable estimated.
In order to calculate depreciation using the declining balance method, you need to compute the straight-line rate. Which of the following formulas will yield the straight-line rate?
both b and c: 1/years or 100%/years
In a bank reconciliation bank services charges are
deducted from company's cash balance
FASB recommends which of the following, with respect to the statement of cash flows:
direct method with a reconciliation of net income to cash flows from operating activities
The Retained Earnings account balance for a large corporation is $9,100,000. This amount represents
earnings that have not been distributed to shareholders
the organization primarily responsible for setting accounting principles (GAAP) is the
financial accounting standards board (FASB)
Larry's Lawncare mows lawns for clients. Larry should recognize revenue at the date on which
larry finishes mowing the lawn
When a company declares a cash dividend (the date of declaration), which of the following is true?
liabilities are increased
Financial statement ratio analysis may be undertaken to study liquidity, turnover, profitability, and other indicators. To which does the current ratio most relate?
liquidity
When the market value of inventory items has declined below its cost, many companies apply which of the following inventory methods?
lower of cost or market
The recognition of cost of goods sold expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the
matching principle
Although businesses engage in a wide variety of activities, all of these activities can be categorized into three types. These three types of business activities are
operating, financing, and investing
what group would be considered an internal user of financial statements?
plant managers supervising production line workers for GE
what is the primary objective of financial accounting?
provide information for decision making
Which of the following source documents would serve as evidence that supplies had been purchased on credit?
purchase invoice
Closing entries result in net income being transferred to the
retained earnings account
One of the purposes of the notes to financial statements is to
satisfy the need for full disclosure of all the facts relevant to a company's results and financial position.
Which of the following is an operating activity of a business?
selling a product for cash
Which of the following is a financing activity of a business?
selling stock to investors
If Quinton Inc. issues a ten-year $2,000,000 bond at 4% when the market rate of interest is 5%,
the bond would be issued at a discount
At the year end inventory count, if goods in transit are shipped FOB shipping point, they should be included in the inventory count of
the buyer
Which of the following should be considered when a company decides to declare a cash dividend on common stock?
the cash available and the retained earnings balance
a contingent liability may include all of the following except
the cost of a new mainframe computer
Depreciation is a process by which
the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset
Which of the following statements about inventory costing is true?
the inventory cost flow assumption used does not need to be the same as the physical flow of inventory
The preparation of financial statements require that the information be understandable
to those willing to spend the time to understand it
A multiple-step income statement is thought to be more beneficial to financial statement users because of the revelation of important relationships. Which of the following is not separately identified on a multiple-step income statement?
total expenses
Inventory Cost Methods - FIFO/LIFO
units sold x unit cost= add up #s for cost of goods sold, unsold units x last cost of goods sold= ending inventory
Inventory Cost Methods - Specific ID
units x unit price= add up all amounts for cost of goods sold, unsold extra units x unit price= add up for ending inventory
debenture bonds are bonds
which are not backed by specific collateral
If total assets were $65,000 and total liabilities were $45,000, then stockholders' equity would be
$20,000
If current assets amount to $30,000, total assets $110,000, current liabilities $26,000, and total liabilities $102,000, then the current ratio is
1.15 : 1
depreciation - double declining balance
1/yrs=straight line rate, straight line rate x 2= depreciation rate per year ex. 1/3=.3x2=.6 .6(book value)
Copies Quick purchased toner cartridges for $1,500 in 2015. At January 1, 2015, cartridges on hand had cost $400. At December 31, 2015, $700 of cartridges were on hand. Cartridges (Supplies) Expense for 2015 is
1200
Given below are several accounts from Santa Rosa Corporation's trial balance at July 31, 2016. Fees Earned $135,000 Accounts Receivable $7,400 Accounts Payable 800 Rent Expense 16,500 Dividends 600 Interest Revenue 200 Unearned Fees 12,000 Depreciation Expense 1,400 Prepaid Insurance 1,000 Supplies Expense 2,000 Cash 16,000 Prepaid Rent 3,300 Salaries Expense 94,000 Salaries Payable 1,800 Insurance Expense 300 Retained Earnings, Aug 1, 2015 7,900 What is the net income for the year ended July 31, 2016?
21000
If Sales equal $854,000, Cost of Goods Sold equals $523,000, and Operating Expenses equal $249,000, what is Gross Profit?
331000
Selected financial information for Talleigh Inc. is provided below. Talleigh's inventory turnover is Sales $450,000 Average cash $68,000 Cost of goods sold 325,000 Average accounts receivable 135,000 Gross profit 125,000 Average inventory 47,000 Net income 60,000 Average investments 112,000
6.9
Which of the following should not be included in the cost of land acquired by Shelten Inc. for the purpose of building a new factory on it
600 fine for failure to get permit for demolition
If a company has an inventory turnover of 4, approximately how long does it take to sell inventory?
90 days
Which ratio would a manager monitor to determine the effectiveness of collections from credit customers?
Accounts Receivable Turnover
Which of the following activities can be performed by certified public accountants (CPAs)?
Auditing to render an opinion on the fairness of financial statements
When Corporation ABC owns more than 50% of the common stock of Corporation XYZ
Corporation ABC is the parent and Corporation XYZ is the subsidiary
Jackson-Harding Inc. issued 14,000 shares of $.10 par common stock for $6 per share, providing the company with $84,000 in cash. What effect, in addition to the increase in cash, does this transaction have on the accounting equation for Jackson-Harding?
Common Stock increases $1,400; Additional Paid-in Capital - Common increases $82,600
Which of the following is not a principle of internal control?
Consolidate responsibility for related transactions
What does it mean when preferred stock has a cumulative feature?
If dividends were not paid to preferred stockholders in previous years, these dividends must be paid before any dividends are paid to the common stockholders.
Which of the following statements is true?
Liquidity deals with a company's ability to pay its debts as they come due
which of the following statements is true with respect to long term liabilities?
Long-term liabilities include bonds, post-retirement benefits, and deferred income taxes.
What is the distinguishing characteristic between accounts receivable and notes receivable?
Notes receivable result from a written promise to pay within a specified amount of time
Which of the following statements about a petty cash system is true?
Petty cash activities are part of an imprest system
When a company purchases treasury stock, which of the following statements is true?
The cost of the treasury stock reduces stockholders' equity.
An invoice dated March 5 showed an amount due of $1,000 and credit terms of 2/15, n/30. Which one of the following statements is true?
The customer can take a $20 discount if the invoice is paid by March 20
the allowance method of valuing accounts receivable is used in order to comply with which accounting principle or assumption?
The expense recognition (matching) principle
which of these statements is true regarding a capital lease?
The lessee records the leased asset on its balance sheet
What is the purpose of the statement of Cash Flows?
To summarize the cash inflows and cash outflows of a company over a period of time
Which of the following items would be considered to be a cash equivalent?
a CD for 2 months
The account Discount on Bonds Payable should be considered to be
a contra liability account
Which of the following statements about accounting for inventory is true?
a disadvantage of the perpetual inventory system is that it may effectively require part of sales software and scanning
a trial balance is
a list of accounts and their balances (used to prove the equality of debits and credits)
Which of the following items is reported as a current asset on a classified balance sheet?
accounts receivable
In 2014 FASB issued a new standard on revenue recognition. The objective of the new guidance is to establish the principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contracts with customers. The new standard does which of the following?
all of the above, improves comparability of revenue practices across entities/industries/jurisdictors/and capital markets, provides more useful info to user of financial statements through improved disclosure requirements, and simplifies the preparation of financial statements by reducing the number of requirements to refer to
Which of the following is an investing activity of a business?
building a manufacturing plant
Among the assets listed below, which is considered the most liquid?
cash
Adjustments are necessary only if
cash receipts and payments occur before or after the point in time when revenues and expenses should be recognized under the accrual basis of accounting.
Which one of the following accounts most likely would appear on the income statement of a merchandise company, but not on the income statement of a service company?
cost of goods sold
Depreciation - Straight line
cost-residual value= depreciable amt, depreciable amt / # of years = depreciation expense
an entry made to the right side of an account is called a
credit
Inventory accounts should be classified in which section of a balance sheet?
current assets
working capital is defined as
current assets minus current liabilities
To measure depreciation for a plant asset, all of the following must be known except
current market value
an entry made to the left side of an account is called a
debit
Which ratio is used to assess the capital structure and risk level of a company?
debt to equity
The financial statement that lists the revenues and expenses is referred to as the
income statement
Most companies use which of the following when reporting operating cash flows:
indirect method
The first line on the company's statement of cash flow is net income. Which method does the company use to prepare its statement of cash flow?
indirect method
inventory turnover indicates how
rapidly inventory is sold
A company would repurchase its own stock for all of the following reasons except
it wishes to increase the amount of outstanding stock
The Specific Identification method of inventory costing/valuation would most likely be used to identify
jet skis
The process of recording the economic effects of business transactions in a book of original entry is called
journalizing
All of the following are depreciated except
land
on a common-size income statement, all items are expressed as a percentage of
net sales
which of the following accounts is not classified as a current liability?
note payable due in 3 years
The original/historical cost is used to record asset purchases because it is __________ and __________.
objective, verifiable
You are a banker and a chemical company has given you its most recent annual report in an effort to get a sizeable loan. The company is very profitable and appears to have a sound financial position. Based on a report presented on prime-time television last night, you are aware the company is a defendant in several lawsuits alleging substantial damage from misinformation and misuse of chemical compounds manufactured, marketed and distributed by the chemical company. The information presented on television is an example of financial information that is
relevant
Readers of the financial pages of the daily newspaper noticed the following information with regard to the Zing Inc. stock: Daily high, 16.25; Daily low, 15.00; Last, 15.50; Change, -1.75. This tells readers that the
stock lost $1.75 in value from the previous day
what would be classified as external users of financial statements?
stockholders
The two methods of accounting for bad debts are the
the direct write off and allowance method
stockholders prefer to invest in preferred stock because
the dividends are paid on preferred stock before they are paid on common stock
if a company's bonds are callable
the issuing company has the right to retire the bonds
When the FIFO method is used, ending inventory is assumed to consist of
the most recently purchased units
When the LIFO method is used, ending inventory is assumed to consist of
the oldest units
All of the following are controls over cash received in a cash sale, except
there is no count of cash after the clerk's shift is over
What is the effect of a stock dividend on stockholders' equity?
total stockholders equity stays the same