ACCOUNTING FINAL REVIEW
A debt that a business owes is called __________. A) a liability B) an asset C) stockholder's equity D) revenue
A liability
Which of the following is true of assets? A) assets are something of value the business owns or controls B) assets can be recorded at the market value if acquired at a bargain C) assets include cash, merchandise inventory, and accounts payable D) assets do not need to provide future benefit to the business
A) assets are something of value the business owns or controls
Merchandise Inventory and Cost of Goods Sold appear ___________. A) on the balance sheet and income statement, respectively. B) on the balance sheet and statement of retained earnings, respectively C) on the statement of retained earnings and income statement, respectively D) on the income statement and statement of cash flows, respectively
A) on the balance sheet and income statement, respectively.
a debt security _____________. A) represents a credit relationship with another company or governmental entity, and typically pays interest for a fixed period B) represents stock ownership in another company and sometimes pays dividends C) is a cash market transaction in which the ownership of the underlying asset is deferred until a specific date D) is a standardized contract between two parties to buy or sell an underlying security at a predetermined price on a specific date
A) represents a credit relationship with another company or governmental entity, and typically pays interest for a fixed period
no journal entries are required for the reconciling items on the bank side because ___________. A) those transactions have already been recorded in the company's journal B) the adjusted balances on both sides are the same amounts C) those transactions are already included in the bank balance D) the amounts are immaterial
A) those transactions have already been recorded in the company's journal
which of the following is included in the cost of a plant asset? A) replacement of damaged parts of the asset B) amounts paid to make the asset ready for its intended use C) regular repair and maintenance costs D) wages of workers who use the asset in normal operations
B) amounts paid to make the asset ready for its intended use
which of the following will be categorized as an investing activity on the statement of cash flows? A) cash paid for purchase of office supplies B) cash paid for purchase of new machinery C) cash received from issuance of shares of common stock D) purchase of land with a mortgage
B) cash paid for purchase of new machinery
which of the following is true of the balance sheet presentation of the Allowance for Bad Debts? A) it is reported as a separate, independent line item under current assets B) it is shown as a contra account related to accounts receivable C) it is reported as an operating expense D) it is reported as a current liability
B) it is shown as a contra account related to accounts receivable
in a periodic inventory system, _________. A) quantities of merchandise inventory on hand are updated after each sale and each purchase B) the business is in violation of U.S. GAAP C) businesses must obtain a physical count of inventory to determine quantities on hand D) the cost to invest in the system is greater than the cost to invest in a perpetual inventory system
C) businesses must obtain a physical count of inventory to determine quantities on hand
which of the following statements is incorrect? A) plant assets not currently being used in business operations are classified as long-term investments B) plant assets are long-lived tangible assets used in the operations of a business C) depreciation is recorded on all plant assets D) the life cycle of a plant asset includes: acquisition, usage, and disposal
C) depreciation is recorded on all plant assets
which of the following statements about franchises is correct? A) the acquisition cost of a franchise is always amortized over its legal life B) franchises are privileges granted by a government to use public property in performing services C) franchises are privileges granted by a business to sell goods or services under specified conditions D) the acquisition cost of a franchise cannot be amortized because its useful life cannot be determined
C) franchises are privileges granted by a business to sell goods or services under specified conditions
liquidity is a measure of how ____________. A) quickly an asset appreciates in value B) long an asset can be used C) quickly an asset may be converted into cash D) easily an asset can be exchanged for another asset
C) quickly an asset may be converted into cash
which of the following statements is true of revenues? A) revenues increase equity, so a revenue account's normal balance is a debit balance B) revenues decrease equity, so a revenue account's normal balance is a debit balance C) revenues increase equity, so a revenue account's normal balance is a credit balance D) revenues decrease equity, so a revenue account's normal balance is a credit balance
C) revenues increase equity, so a revenue account's normal balance is a credit balance
which of the following will be categorized as an operating activity on the statement of cash flows? A) cash paid to employees B) cash received from issuance of shares of common stock C) cash paid for purchase of new machinery D) cash received by selling old equipment
Cash paid to employees
Which of the following statements best defines financial statements? A) Financial statements are the information systems that record monetary and nonmonetary business transactions B) financial statements are the verbal statements made to business news organizations by chief financial officers C) financial statements are plans and forecasts for future time periods based on information from past financial periods D) financial statements are business documents that report on a business in monetary terms, providing information to help users make informed business decisions
D) financial statements are business documents that report on a business in monetary terms, providing information to help users make informed business decisions
in a perpetual inventory system, multiple performance obligations ___________. A) result in revenue being recorded when the separate performance obligations are identified because there is a binding contract B) represent one distinct performance obligation C) may require the creation of an asset account, Unearned Revenue D) require the company to allocate the transaction price to each performance obligation
D) require the company to allocate the transaction price to each performance obligation
which of the following describes the environment in internal control? A) a company must identify its risks B) internal auditors monitor company controls to safeguard assets, and external auditors C) the environment is designed to ensure that the business earns profit D) the environment is the "tone at the top" of the business
D) the environment is the "tone at the top" of the business
which of the following statements is true of a corporation? A) although a corporation is a separate legal entity, it cannot be sued B) any stockholder of a corporation can commit the corporation to a binding contract C) corporations pay the same variety of taxes as partnerships D) the owners of a corporation are called stockholders
D) the owners of a corporation are called stockholders
which of the following statements regarding a periodic inventory system is incorrect? A) the only way to determine the ending merchandise inventory and cost of goods sold in a periodic inventory system is to take a physical inventory B) a periodic inventory system is simpler than a perpetual inventory system C) a periodic inventory system works well for small businesses in which inventory costs can be controlled by visual inspection D) the various inventory costing methods are not used in a periodic inventory system
D) the various inventory costing methods are not used in a periodic inventory system
restrictions on retained earnings are _________. A) reported on the statement of cash flows B) designed to maximize dividends paid to shareholders C) reported on the income statement D) usually reported in the notes to the financial statements
D) usually reported in the notes to the financial statements
Regarding liabilities, which of the following statements is incorrect? A) Liabilities are economic resources that are expected to benefit the business in the future B) Many, but not all, liabilities have the word payable in their titles C) a creditor who has loaned money to a business has a claim to some of the business's assets until the business pays the debt D) Liabilities represent one of the two claims to assets
Liabilities are economic resources that are expected to benefit the business in the future
the bank charged a service fee of $55. how would this information be included on the bank reconciliation? A) an addition on the bank side B) a deduction on the book side C) a deduction on the bank side D) an addition on the book side
a deduction on the book side
Green Lawns Corporation earned $500 for landscaping services rendered. The customer promised to pay at a later time. Which of the following accounts increased as a result of this transaction? A) accounts receivable B) cash C) accounts payable D) supplies
accounts receivable
after closing entries have been posted ____________. A) dividends have been closed into Retained Earnings B) only permanent accounts carry balances C) the ending balance of Retained Earnings has been properly updated D) all of the statements are correct
all are correct
in a perpetual inventory system, the physical count of inventory ____________. A) serves as a check of the perpetual records B) establishes the correct amount of ending inventory for the financial statements C) captures transactions that are not recorded by the electronic system D) all statements are correct
all are correct
which of the following account groups normally has a debit balance? A) revenues and expenses B) liabilities and revenues C) assets and liabilities D)assets and expenses
assets and expenses
an adjusting entry is completed ________. A) when accoutns need to be balanced in the ledger B) at the beginning of the accounting period C) after all performance obligations are satisfied D) at the end of the accounting period
at the end of the accounting period
Which of the following financial statements lists the entity's assets, liabilities, and stockholders' equity as of a specific date? A) statement of Retained earnings B) Balance sheet C) statement of cash flows D) income statement
balance sheet
a depreciable asset's cost minus accumulated depreciation is called __________. A) depreciable value B) book value C) accrued expense D) residual value
book value
what is the term used for the difference between the Equipment account and the Accumulated Depreciation-Equipment account A) historical cost B) book value C) contra asset D) market value
book value
a business makes a cash payment to a supplier on account for office supplies that were purchased earlier. which of the following accounts is credited? A) office supplies expense B) cash C) accounts payable D) office supplies
cash
a business purchases equipment for $8,000 cash. which of the following accounts is credited? A) common stock B) cash C) equipment D) accounts payable
cash
which of the following accounts decreases with a credit? A) accounts payable B) unearned revenue C) cash D) common stock
cash
changing the method of valuing inventory ignores the principle of _________. A) conservatism B) consistency C) materiality D) disclosure
consistency
which of the following accounting methods is used to account for controlling interest investments? A) discounted cash flow methods B) cost method c) consolidation method D) acquisition method
consolidation method
which of the following is an example of debt securities? A) corporate bonds B) preferred stocks C) real estate D) common stocks
corporate bonds
under which of the following categories would Accounts receivable appear? A) long-term assets B) current assets C) long-term liabilities D) current liabilities
current assets
the ability of a company to pay its debts can be evaluated by using the ________. A) earnings per share B) debt ratio C) fully diluted earnings per share D) return on assets ratio
debt ratio
advance cash payments of future expenses are called _________. A) deferred expenses B) deferred revenues C) accrued expenses D) accrued revenues
deferred expenses
the liability created when a business collects cash from its customers before completing a service or delivering a product is called _____. A) accrued revenue B) deferred revenue C) deferred expense D) accrued expense
deferred revenue
which of the following is a plant asset? A) patents B) trademark C) accounts receivable D) equipment
equipment
common stock is a separate account in the ________ category of the accounting equation. A) asset B) revenue C) liability D) equity
equity
A(n) ___________ represents stock ownership in another company and sometimes pays dividends A) treasury bill B) debt security C) corporate bond D) equity security
equity security
which of the following inventory costing methods results in the highest value of ending inventory during a period of rising inventory costs? A) first-in, first-out B) specific identification C) last-in, first-out D) weighted-average
first in first out
which of the following is the correct order of subtotals that appear on a multi-step income statement? A) gross profit, operating income, net income B) net income, operating income, net income C) operating income, gross profit, net income D) gross profit, net sales revenue, net income
gross profit, operating income, net income
which of the following is a characteristic of a plant asset, such as a building? A) it will have a negligible value at the end of its useful life B) it has a short useful life C) it is used in the operations of a business D) it is available for sale to customers in the ordinary course of business
it is used in the operations of a business
Accounts Payable is a(n) __________ account and has a normal ______ balance. A) asset; debit B) liability; credit C) liability; debit D) asset; credit
liability; credit
which of the following assets must be reported at the lower-of-cost-or-market value? A) merchandise inventory B) accounts receivable C) prepaid insurance D) notes receivable
merchandise inventory
A business purchases $1000 of office supplies on account. Which of the following accounts is debited? A) Office Supplies B) Prepaid Asset C) Accounts Payable D) Cash
office supplies
A _______ is an example of equity securities. A) municipal bond B) preferred stock C) corporate bond D) treasury bill
preferred stock
which of the following accounts would appear in the balance sheet debit column of the worksheet? A) accumulated depreciation B) service revenue C) prepaid insurance D) unearned revenue
prepaid insurance
the maturity value of a note is the _______. A) principal amount plus interest due at maturity B) principal amount times the interest rate C) principal amount minus interest due at maturity D) face amount of the note
principal amount plus interest due at maturity
a balance sheet that lists the assets above the liabilities and stockholders' equity sections is a(n) ________ balance sheet. A) audited form B) account form C) unclassified form D) report form
report form
The employees of Leichester Services, Inc. worked the last two weeks of December, 2016. They received their paychecks on January 2, 2017. which of the following accounts should appear on the income statement for the year ended December 31, 2016? A) unearned revenue B) salaries payable C) prepaid expense D) salaries expense
salaries expense
Jones Financial Services, Inc. performed accounting services for a client in December. A bill was mailed to the client on December 30. the company received the client's check by mail on January 5. Which of the following accounts should appear on the income statement for the year ended December 31 as related to the services performed? A) Unearned revenue B) accounts payable C) service revenue D) prepaid expense
service revenue
which of the following statements is true if a bond's stated interest rate is higher than the market rate? A) the bond will be issued at a premium B) the bond will be issued at a discount C) the bond will be issued for an amount lower than the maturity value D) the bond will be issued at par
the bond will be issued at a premium
which of the following liabilities is created when a company receives cash for services to be provided in the future? A) accounts payable B) unearned revenue C) accrued liability D) estimated warranty payable
unearned revenue
an internal document that helps summarize data for the preparation of financial statements is called a __________. A) chart of accounts B) journal C) worksheet D) ledger
worksheet
