Acct 311 exam 1

What is the objective of financial reporting? a. Provide information that is useful to management in making decisions. b. Provide information that clearly portrays nonfinancial transactions. c. Provide information about the reporting entity that is useful to present and potential equity investors, lenders, and other creditors. d. Provide information that excludes claims to the resources.

C

A change in accounting principle requires that the cumulative effect of the change for prior periods be shown as an adjustment to: a. beginning retained earnings of the earliest period presented. b. net income of the period in which the change occurred. c. comprehensive income for the earliest period presented. d. stockholders' equity of the period in which the change occurred.

a

A common set of accounting standards and procedures is called a. financial accounting standards. b. generally accepted accounting principles. c. objectives of financial reporting. d. statements of financial accounting concepts.

a

AG Inc. made a $25,000 sale on account with the following terms: 2/10, n/30. If the company uses the net method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? a. Debit Accounts Receivable for $24,500. b. Debit Accounts Receivable for $24,500 and Sales Discounts for $500. c. Debit Accounts Receivable for $25,000. d. Debit Accounts Receivable for $25,000 and Sales Discounts for $500.

a

At Ruth Company, events and transactions during 2020 included the following. The tax rate for all items is 20%. (1) Depreciation for 2018 was found to be understated by $150,000. (2) A strike by the employees of a supplier resulted in a loss of $125,000. (3) The inventory at December 31, 2018 was overstated by $200,000. The effect of these events and transactions on 2020 income from continuing operations net of tax would be a. ($100,000). b. ($220,000). c. ($380,000). d. ($280,000).

a

For Grimmett Company, the following information is available: Capitalized leases. 600,000 Trademarks 275,000 Long-term receivables 225,000 In Grimmett's balance sheet, intangible assets should be reported at a. $275,000. b. $500,000. c. $825,000. d. $875,000.

a

In preparing a statement of cash flows, which of the following transactions would be considered an investing activity? a. Sale of equipment at book value b. Sale of merchandise on credit c. Declaration of a cash dividend d. Issuance of bonds payable at a discount

a

Lopez Company received $18,000 on April 1, 2020 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2020 adjusting entry is a. debit Rent Revenue and credit Unearned Rent Revenue, $4,500. b. debit Rent Revenue and credit Unearned Rent Revenue, $13,500. c. debit Unearned Rent Revenue and credit Rent Revenue, $4,500. d. debit Unearned Rent Revenue and credit Rent Revenue, $13,500.

a

Stockholders' equity is not affected by all a. cash receipts. b. dividends. c. revenues. d. expenses.

a

What is "recourse" as it relates to selling receivables? a. The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay. b. The obligation of the purchaser of the receivables to pay the seller in case the debtor fails to pay. c. The obligation of the seller of the receivables to pay the purchaser in case the debtor returns the product related to the sale. d. The obligation of the purchaser of the receivables to pay the seller if all of the receivables are collected.

a

When a company has cash available in another account in the same bank at which an overdraft has occurred, the company will: a. offset the overdraft against cash account. b. report the same in the notes to the financial statements. c. report the bank overdraft amount as account payable. d. classify the bank overdraft as compensating balance.

a

Which of the following is a characteristic describing the fundamental quality of relevance? a. Predictive value. b. Neutrality. c. Verifiability. d. Understandability.

a

A prepaid expense can best be described as an amount a. paid and currently matched with revenues. b. paid and not currently matched with revenues. c. not paid and currently matched with revenues. d. not paid and not currently matched with revenues.

b

AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the net method to record sales made on credit, how much should be recorded as revenue? a. $24,500. b. $24,750. c. $25,000. d. $25,250.

b

An unearned revenue can best be described as an amount a. collected and currently matched with expenses. b. collected and not currently matched with expenses. c. not collected and currently matched with expenses. d. not collected and not currently matched with expenses.

b

Balance sheet information is useful for all of the following except to a. compute rates of return b. analyze cash inflows and outflows for the period c. evaluate capital structure d. assess future cash flows

b

Before year-end adjusting entries, Dunn Company's account balances at December 31, 2020, for accounts receivable and the related allowance for uncollectible accounts were $1,500,000 and $90,000, respectively. An aging of accounts receivable indicated that $125,000 of the December 31 receivables are expected to be uncollectible. The accounts receivable amount expected to be collected after adjustment is a. $1,465,000. b. $1,375,000. c. $1,285,000. d. $1,410,000.

b

Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2020 are as follows: Last payroll was paid on 12/26/20, for the 2-week period ended 12/26/20.Overtime pay earned in the 2-week period ended 12/26/20 was $25,000.Remaining work days in 2020 were December 29, 30, 31, on which days there was no overtime. The recurring biweekly salaries total $450,000.Assuming a five-day workweek, Colaw should record a liability at December 31, 2020 for accrued salaries of a. $135,000. b. $160,000. c. $270,000. d. $295,000.

b

Garcia Corporation received cash of $60,000 on August 1, 2020 for one year's rent in advance and recorded the transaction with a credit to Rent Revenue. The December 31, 2020 adjusting entry is a. debit Rent Revenue and credit Unearned Rent Revenue, $25,000. b. debit Rent Revenue and credit Unearned Rent Revenue, $35,000. c. debit Unearned Rent Revenue and credit Rent Revenue, $25,000. d. debit Cash and credit Unearned Rent Revenue, $35,000.

b

Houghton Company has the following items: common stock, $1,600,000; treasury stock, $210,000; deferred income taxes, $250,000 and retained earnings, $780,000. What total amount should Houghton Company report as stockholders' equity? a. $1,390,000. b. $2,170,000. c. $2,420,000. d. $2,590,000.

b

Included in Allen Corp.'s balance sheet at June 30, 2021 is a 10%, $4,000,000 note payable. The note is dated October 1, 2019 and is payable in three equal annual payments of $2,000,000 plus interest. The first interest and principal payment was made on October 1, 2020. In Allen's June 30, 2021 balance sheet, what amount should be reported as accrued interest payable for this note? a. $450,000. b. $300,000. c. $150,500. d. $100,000.

b

Information about different companies and about different periods of the same company can be prepared and presented in a similar manner. Comparability and consistency are related to which of these objectives? comparability consistency a. companies companies b. companies periods c. periods companies d. periods periods

b

On February 1, 2020, Henson Company factored receivables with a carrying amount of $700,000 to Agee Company. Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Henson Company for February. Assume that Henson factors the receivables on a with recourse basis. The recourse obligation has a fair value of $3,500. The loss to be reported is a. $21,000 b. $24,500. c. $35,000. d. $59,500.

b

On February 1, 2020, Henson Company factored receivables with a carrying amount of $700,000 to Agee Company. Agee Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Henson Company for February. Assume that Henson factors the receivables on a without recourse basis. The loss to be reported is a. $0. b. $21,000. c. $35,000. d. $56,000.

b

The single-step income statement emphasizes a. the gross profit figure. b. total revenues and total expenses. c. operating and non-operating expenses. d. the various components of income from continuing operations.

b

Which of the following is included in comprehensive income? a. Investments by owners. b. Unrealized gains on available-for-sale debt securities. c. Distributions to owners. d. Changes in accounting principles.

b

AG Inc. made a $25,000 sale on account with the following terms: 1/15, n/30. If the company uses the gross method to record sales made on credit, what is/are the debit(s) in the journal entry to record the sale? a. Debit Accounts Receivable for $24,750. b. Debit Accounts Receivable for $24,750 and Sales Discounts for $250. c. Debit Accounts Receivable for $25,000. d. Debit Accounts Receivable for $25,000 and Sales Discounts for $250.

c

An accrued revenue can best be described as an amount a. collected and currently matched with expenses. b. collected and not currently matched with expenses. c. not collected and currently matched with expenses. d. not collected and not currently matched with expenses.

c

Comprehensive income includes all of the following except a. dividend revenue. b. losses on disposal of assets. c. investments by owners. d. unrealized holding gains.

c

Current assets are presented in the balance sheet in a. ascending order of their balances .b. descending order of their balances. c. order of their liquidity. d. reverse order of their liquidity.

c

In preparing a statement of cash flows, cash flows from operating activities a. are always equal to accrual accounting income. b. are calculated as the difference between revenues and expenses. c. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash. d. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do affect cash.

c

Maxwell Corporation factored, with recourse, $200,000 of accounts receivable with Huskie Financing. The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns, and sales allowances. Maxwell estimates the recourse obligation at $4,800. What amount should Maxwell report as a loss on sale of receivables? a. $ -0-. b. $6,000. c. $10,800. d. $20,800.

c

Moon Inc. factors $3,000,000 of its accounts receivables without recourse for a finance charge of 4%. The finance company retains an amount equal to 8% of the accounts receivable for possible adjustments. Moon estimates the fair value of the recourse liability at $300,000. What would be the debit to Cash in the journal entry to record this transaction? a. $3,000,000. b. $2,880,000. c. $2,640,000. d. $2,340,000.

c

On April 2, Kelvin sold $40,000 of inventory items on credit with the terms 1/10, net 30. Payment on $24,000 sales was received on April 8 and the remaining payment on $16,000 sales was received on April 27. Assuming Kelvin uses the net method of accounting for sales discounts, the entry recorded on April 27 would include a: a. debit to Cash and credit to Accounts Receivable for $15,840. b. debit to Accounts Receivable and credit to Sales Revenue for $40,000. c. debit to Cash for $15,840 and credit to Sales Discounts Forfeited for $160. d. debit to Cash and credit to Sales Discounts Forfeited for $400.

c

The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the a. FASB. b. AICPA. c. SEC. d. APB.

c

Which of the following is an ingredient of faithful representation? a. Predictive value b. Materiality c. Neutrality d. Confirmatory value

c

Which of the following is of interest to investors in decision-making? a. Assessing the company's ability to generate net cash inflows. b. Assessing management's ability to protect and enhance the capital providers' investments. c. Both assessing the company's ability to generate net cash inflows and assessing management's ability to protect and enhance the capital provider's investments. d. Assessing the company's ability to collect debts.

c

Which of the following is true of accounting for changes in estimates? a. A company recognizes a change in estimate by making a retrospective adjustment to the financial statements. b. A company accounts for changes in estimates only in the period of change, even though it affects the future periods. c. Changes in estimates are not carried back to adjust prior years. d. Changes in estimates are considered as errors.

c

Which of the following organizations has not been instrumental in the development of financial accounting standards in the United States? a. AICPA b.FASB c. IASB d. SEC

c

A limitation of the balance sheet that is not also a limitation of the income statement is a. the use of judgments and estimates b. omitted items c. the numbers are affected by the accounting methods employed d. valuation of items at historical cost

d

A trial balance a. proves that debits and credits are equal in the ledger b. supplies a listing of open accounts and their balances that are used in preparing financial statements c. is normally prepared three times in the accounting cycle d. all of the answer choices are correct

d

An accounting record into which the essential facts and figures in connection with all transactions are first recorded is called the a. ledger. b. account c. trial balance d. none of these answers choices are correct

d

Balance sheet information is useful for all of the following except a. assessing a company's risk b. evaluating a company's liquidity c. evaluating a company's financial flexibility d. determining free cash flows.

d

Companies that are listed on a stock exchange are required to submit their financial statements to the a. AICPA. b. APB c. FASB. d. SEC.

d

Debit always means a. the right side of an account. b. an increase. c. a decrease. d. None of these answer choices are correct.

d

Gibson Company paid $24,000 on June 1, 2020 for a two-year insurance policy and recorded the entire amount as Insurance Expense. The December 31, 2020 adjusting entry is a. debit Insurance Expense and credit Prepaid Insurance, $7,000. b. debit Insurance Expense and credit Prepaid Insurance, $17,000. c. debit Prepaid Insurance and credit Insurance Expense, $7,000 d. debit Prepaid Insurance and credit Insurance Expense, $17,000.

d

In 2020, Linz Corporation reported a discontinued operations loss of $1,200,000, net of tax. It declared and paid preferred stock dividends of $120,000 and common stock dividends of $360,000. During 2020, Linz had a weighted average of 500,000 common shares outstanding. As a result of the discontinued operations loss, net of tax, the earnings per share would decrease by a. $1.44 b. $1.68 c. $2.16 d. $2.40

d

The objective of general-purpose financial reporting is to provide financial information about a reporting entity to each of the following except a. potential equity investors. b. potential lenders. c. present investors. d. All of these answers are correct.

d

What is a purpose of having a conceptual framework? a. To make sure that economic activity can be identified with a particular legal entity. b. To segregate activities among different companies. c. To provide comparable information for different companies. d. To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards.

d

Which of the following is a contra account? a. Premium on bonds payable b. Unearned revenue c. Patents d. Accumulated depreciation

d

Which of the following is a current asset? a. Cash surrender value of a life insurance policy of which the company is the beneficiary. b. Investment in equity securities for the purpose of controlling the issuing company. c. Cash designated for the purchase of tangible fixed assets. d. Trade installment receivables normally collectible in 18 months.

d

Which of the following is an advantage of the single-step income statement over the multiple-step income statement? a. It reports gross profit for the year. b. Expenses are classified by function. c. It matches costs and expenses with related revenues. d. It does not imply that one type of revenue or expense has priority over another.

d

Which of the following is an ingredient of relevance? a. Completeness b. Neutrality c. Timeliness d. Materiality

d

Which of the following would represent the least likely use of an income statement prepared for a business enterprise? a. Use by customers to determine a company's ability to provide needed goods and services. b. Use by labor unions to examine earnings closely as a basis for salary discussions. c. Use by government agencies to formulate tax and economic policy. d. Use by investors interested in the financial position of the entity.

d