ACCT FINAL EXAM

13. Financial accounting a. records all transactions and reports a summary of transactions b. records and reports only large transactions c. provides reports to only managers in the company d. provides financial statements that project income in the future

A

14, Who is responsible for the financial statements provided by the company? a. management b. loan officers c. auditors d. shareholders

A

3. Rent expense reported on the income statement represents a. the service that was provided to the company b. the service that was provided to the customer c. the amount that was paid for rent d. the amount that was collected for rent

A

3. Which of the following would be an appropriate heading for a balance sheet? a. as of December 31, 2XXX b. for the period ended December 31, 2XXX c. for the year ended December 31, 2XXX d. any of the following would be appropriate

A

4. An investor looking to determine the financial strength of a company as of a certain date would use which financial statement? a. balance sheet b. income statement c. statement of detail expenses d. statement of stockholder's equity

A

7. The difference in revenues and expenses during a specific period of time is a. net income b. net liabilities c. net assets d. net sales

A

8. A company provided services and will be paid next period. The transaction results in a. total assets increased b. total equity decreased c. total liabilities decreased d. total expenses increased

A

8. The financial statement that reports the financial position of a business on a certain date is the a. balance sheet b. income statement c. statement of cash flows d. statement of stockholder's equity

A

9. Which of the following items is a revenue? a. interest earned b. interest paid c. collections from customers d. paying for an expense before it is provided

A

According to Chapter Six: Cash and Highly-Liquid Investments, what is a "cash equivalent"? A. A cash equivalent is defined as short-term, highly-liquid investment with original maturities of 90 days or less. B. It's when the amount of cash reported in a company's accounting records is equal to amount of cash reported by the bank C. It's something that is "equal" to cash, like the amount of cash remaining on your debit card. D. It's the same as the amount in "accounts receivable," this the amount to be collected on account in "equivalent" to cash

A.

How do you calculate accounts receivable turnover? A. Credit sales divided by average accounts receivable B. Credit sales divided by end of period accounts receivable C. Credit sales divided by beginning of period accounts receivable Cash sales divided by average accounts receivable

A.

How is inventory shown on the balance sheet? A. Current asset B. Noncurrent asset C. Current liability D. Noncurrent liability

A.

In a period of rising prices, which inventory method shows ending inventory on the balance sheet at its most recent cost? A. FIFO B. LIFO C. Average Cost D. Specific ID

A.

The book value of an asset is defined as: A. Cost minus accumulated depreciation. B. cost minus salvage value. C. current sales value minus historical cost. D. cost minus annual maintenance expense.

A.

What does "A-F-S" mean? A. Available for Sale B. Assets for Sale C. All Financial Statements D. Any F%^^*+)(! Subject

A.

When a company makes a sale of inventory on account, and it uses the perpetual method, what happens in the accounting records? A. Two entries are made: one to record the sale and one to remove the inventory B. One entry is made: to record the sale C. Two entries are made: one to record the sale and one to collect the cash D. One entry is made: to move the inventory

A.

When writing off a bad debt using the allowance method, what journal entry is made in the accounting records? A. accounts receivable is credited (e.g., decreased) and allowance for bad debts is credited B. accounts receivable is credited (e.g., decreased) and bad debts expense is debited C. accounts receivable is debited (e.g., increased) and bad debts expense is credited D. accounts receivable is debited (e.g., increased) and bad debts expense is debited

A.

Which statement best describes the DIRECT method when talking about the Statement of Cash Flows? A. The direct method refers to how cash flow from operating activities are presented B. The direct method refers to how cash flow from financing activities are presented C. The direct method refers to how cash flow from investing activities are presented D. The direct method refers to how cash flow from operating, financing and investing activities are presented

A.

Contra Asset Account

An account that is deducted from another account. An example is like accumulated depreciation.

1. Revenue reported on the income statement would be the same as a. the amount of cash collected during the period b. the value of services provided during the period c. the amount of cash collected less what the customer returns d. the amount of cash collected less what is owed

B

10. The reason a company has an audit is a. to prove that financial information is 100% accurate b. to lend credibility to the financial information c. to state that the company is a good investment d. to tell the shareholder about future performance

B

10. What account is used to record cash collected in the period after goods are provided? a. accounts payable b. accounts receivable c. accrued liabilities d. expenses

B

11. Taxes payable is reported on the balance sheet as a. expense b. liability c. asset d. revenue

B

11. The Financial Accounting Standards Board (FASB) a. enforces the application of GAAP b. provides general guidance on accounting c. develops laws that all companies must follow d. is a government entity

B

12. A balance sheet reports cash of $3,000, accrued expenses of $1,300, equipment of $10,000 and common stock of $2,500. Retained earnings must be: a. $7,500 b. $9,200 c. $12,500 d. $11,200

B

12. An expense is a. all things the company has to pay for b. the cost of providing goods and services c. paying for an asset d. only an expense if it will be paid for in the future

B

13. The company received bills for services provided to them during this month totaling $11,800 and paid bills this month totaling $13,600. What will be reported as expenses for this month? a. $13,600 b. $11,800 c. $25,400 d. $ 1,800

B

14. The company provided goods to customers totaling $34,800 and collected payments from customers this month in the amount of $39,200. What will be reported as revenues for this month? a. $39,200 b. $34,800 c. $74,000 d. $ 4,400

B

15. Which of the following is not considered an expense? a. cost of goods sold b. prepaid expenses c. rent incurred d. utilities used during the period

B

5. A company reports $200,000 total assets, $60,000 total equity and $180,000 total revenues. What are total liabilities? a. $180,000 b. $140,000 c. $260,000 d. $ 20,000

B

5. Determine expenses for the period given the company had the following: Retained earnings, beginning $2,000 Retained earnings, ending $5,000 Revenues this period $8,000 Dividends paid this period $1,000 a. $9,000 b. $4,000 c. $7,000 d. $3,000

B

5. Which of the following are categories that are reported on an income statement? a. current assets and current liabilities b. revenues and expenses c. sales and assets d. expenses and liabilities

B

6. A business records revenues when a. it collects cash from customers b. it provides goods and services to customers c. it pays expenses related to collecting cash d. its revenues are greater than expenses

B

6. When total assets decrease and liabilities and common stock do not change and there are no dividends paid a. retained earnings remains the same b. revenues are less than expenses c. revenues are greater than assets d. the company had to purchase assets with cash

B

7. The most common way that a business communicates the results of operations is a. new releases b. financial statements c. board of director meetings d. letters to potential investors and lenders

B

Customer Bobby Badcheck wrote a check, payable to company XYZ, in the amount of $450 on March 25. When the bank statement arrived on March 31, the check was marked "NSF" (i.e., non sufficient funds). What should company XYZ do on its bank reconciliation for this bad boy? A. $450 should be added to the company cash account B. $450 should be subtracted from the company cash account C. $450 should be added to the bank balance D. $450 should be subtracted from the bank balance

B.

If a particular line of inventory's current market value falls below its cost, what should the accountant do? A. Nothing B. Subtract the difference between the cost and current market value from Inventory, and subtract the same amount from Retained Earnings C. Add the difference between the cost and current market value from Inventory, and subtract the same amount from Retained Earnings D. Add the difference between the cost and current market value from Inventory, and add the same amount from Retained Earnings

B.

In a period of rising prices, which inventory method results in the lowest net income for an accounting period? A. FIFO B. LIFO C. Weighted average D. Specific ID

B.

The depreciable cost of an asset is defined as: A. cost minus accumulated depreciation. B. cost minus salvage value. C. current sales value minus historical cost. D. cost minus annual maintenance expense.

B.

What does the acronym "EFT" mean? A. Early funds transfer B. Electronic funds transfer C. Efficient funds transfer D. Erroneous funds transfer

B.

When inventory falls to a market value below its cost, what should a company do? A. Fire its purchasing manager B. Write the inventory down to market value C. Nothing D. Buy more inventory

B.

Which inventory method results in the lowest net income, assuming a period of rising prices? A. FIFO B. LIFO C. JALO D. Average Cost

B.

Which of the following is true? A. When using the direct write off method, bad debts expense is recognized only at the end of the accounting period. B. When using the aging method, bad debts expense is recognized only at the end of the accounting period. C. When using the % of sales method, bad debts expense is recognized each time a credit sale is made D. Like a good old wine, companies like good old accounts receivable

B.

Which of the following statements is true? A. The periodic inventory method yields higher net income than the perpetual method B. Two adjusting entries are required at the end of the period under the periodic method C. One adjusting entry required at the end of the period under the periodic method D. Three adjusting entries are required at the end of the period under the periodic method

B.

XYZ Co bought IBM Stock at a cost of $50 a share on December 15. Management plans to hold these until March of next year. At December 31, IBM stock price is $53 per share. How should XYZ account for this? A. They should leave the asset account alone but add $3 per share to Retained Earnings. B. They should add $3 per share to the asset account and add $3 per share to Retained Earnings. C. They should add $3 per share to the asset account alone and add $3 per share to OCI D. They should not adjust the asset account or Retained Earnings or OCI.

B.

1. The balance sheet reports a. goods and services provided to the customer b. resale value of assets currently held c. economic resources and claims to those resources d. probable resources in the future

C

10. A company earned $5,000 in revenues, collected $7,500 from customers and paid $3,000 for expenses incurred this period. What will be reported on the financial statements for this period? a. assets are decreased b. liabilities are increased c. equity is increased d. liabilities are decreased

C

11. Which of the following would not be a statement that reports services provided and the cost of providing services? a. statement of income b. statement of earnings c. statement of financial position d. statement of operations

C

12. A company had assets of $230,000 and liabilities of $145,000 at the beginning of the year. During the year the company earned $45,000 and reduced what it owed by $22,000. What is total assets at the end of the year? a. $185,000 b. $275,000 c. $253,000 d. $297,000

C

15. Cash transactions related to common stock are reported in which section of the cash flow statement? a. operating b. investing c. financing d. stockholder's equity

C

2. What categories are reported on the cash flow statement? a. operating, borrowing, repayments b. investing, financing, selling c. operating, investing, financing d. operating, buying, selling

C

4. An audit report is issued by a. management b. internal auditors c. a certified public accountant d. the government

C

4. The notes to the financial statements provide a. a detail list of all assets the company owns b. a detail list of all the debts the company owns c. the financial accounting principles followed by the company d. all of the above

C

9. Total owner's equity is increased when a. services provided are less than the cost of providing services b. dividends are paid to shareholders c. services provided is more than the cost of providing services d. interest is paid

C

9. Which cash flow is an operating activity? a. purchase of long term assets b. repayment of long term debt c. collecting cash from customers d. paying a dividend to shareholders

C

ABC Co bought Microsoft stock at a cost of $55 a share on December 15. Management plans to hold this stock for at least two years. At December 31, Microsoft's stock price is $51 per share. How should ABC account for this? A. It should write subtract $ per share from the asset and also subtract the same amount from Retained Earnings. B. It should leave the asset amount at $55, but subtract $4 per share from OCI. C. It should subtract $4 per share from the asset account, and subtract $4 per share from OCI. D. It should do nothing.

C.

Cash paid by a business to the owners of a company for the owners' personal use is classified as a(n) A. investing activity B. operating activity c C. financing activity D. None of the above; however, the outflow is shown in the schedule of noncash investing and financing activities

C.

The process of allocating a plant asset's cost to expense over the period in which the asset is used is called: A. amortization. B. allocation. C. depreciation. D. depletion.

C.

Using the indirect method of preparing the statement of cash flows from operating activities, which of the following is FALSE? A. net income is reconciled to cash flow from operating activities B. cash flows from investing and financing activities are reported the same way, no matter which method is used to report cash flow from operations C. depreciation expense is subtracted from net income to compute cash flow from operating activities D. an increase in accounts receivable is subtracted from net income to compute cash flow from operating activities

C.

What are the two types of "allowance" methods acceptable under generally accepted accounting principles? A. direct write off and aging methods B. direct write off and % of sales methods C. aging method and % of sales method D. direct write off and indirect methods

C.

What kind of an account is the "Allowance for Doubtful Accounts"? (Note: this account is also known as the "Allowance for Bad Debts") A. asset B. liability C. contra-asset D. contra-liability

C.

Which of the following is true? A. The Statement of Cash Flows summarizes an entity's revenues less expenses during a period. B. The Statement of Cash Flows provides a summary of how cash changed during a period, and sorts these activities into buying, selling, and advertising activities C. The Statement of Cash Flows provides a summary of how cash changed during a period, and sorts these activities into operating, investing, and financing activities D. The Statement of Cash Flows is not one of the main financial statements that publicly-traded companies must file with the SEC

C.

Which of the following statements is false? A. Depreciation is a process that involves estimating a long-term asset's useful life and salvage value. B. Depreciation expense is a non-cash expense. C. Accumulated depreciation represents a growing amount of cash to be used to replace the existing asset. D. Accumulated depreciation is that portion of a plant asset's cost that has been recorded previously as an expense.

C.

Which of the following statements is false? A. Under accrual accounting, revenues are recognized when earned, which may not be the same period as when cash is collected B. Under accrual accounting, expenses are recognized when incurred, which may not be the same period as when cash is paid C. Under cash basis accounting, cash flow from operations reflects depreciation expense as a cash outflow D. So far in this class, adjusting journal entries do not affect cash

C.

1. Which of the following statements related to generally accepted accounting principles is true? a. it is government law that must be followed b. it is a never changing set of principles and rules c. it is determined by government regulators d. it is a set of principles and guidelines at a given point in time

D

2. External users of financial statement do not include a. stockholders b. lenders c. investors d. board of directors

D

2. Which of the following is not true? a. assets = liabilities + equity b. liabilities = assets - equity c. equity = assets - liabilities d. assets + liabilities = equity

D

3. An accounting system is used to provide information for which of the following a. internal management b. external shareholders c. government regulators d. all of the above

D

6. Which of the following statements is not true relative to the statement of cash flows? a. it does not show the financial resources a company owns b. it does not show the amount of services a company provided c. it does not show the amounts owed by a company d. it does not show the amount spent for long term assets

D

7. A company spent cash to purchase equipment. This transaction results in a. total liabilities increased b. total equity increased c. total assets increased d. none of the above

D

8. The price of goods or services provided in exchange for an asset is called a. expense b. liability c. asset d. revenue

D

Check #1237 was written on March 28 for $630, but it didn't "clear" the bank statement by March 31. How would this appear on the March 31 bank reconciliation? A. $630 should be added to the company cash account B. $630 should be subtracted from the company cash account C. $630 should be added to the bank balance D. $630 should be subtracted from the bank balance

D.

Repairs made to equipment as part of a yearly maintenance project would be recorded in the journal by debiting: A. Accumulated Depreciation. B. Depreciation Expense (under Retained Earnings) C. Equipment. D. Repairs Expense (under Retained Earnings)

D.

There are two main ways to keep track of inventory in the accounting records. What are they? A. FIFO and LIFO B. Average Cost and FIFO C. Specific ID and LIFO D. Perpetual and periodic

D.

What kind of an account is OCI? A. Asset B. Liability C. Revenue D. Equity

D.

Why is it important to "reconcile" the business cash account balance with the amount reported in the bank statement? A. To reduce conflict between the business owner and the bank B. To reduce conflict between the bookkeeper and the owner of a business C. To create more work for the bookkeeper D. To identify errors, irregularities, and adjustments to the amount reported by the company as "Cash"

D.

Wyatt Earp Company received a dividend check in the mail for $500 based on an investment of 250 shares of Common Stock of Kevin Co. How should he account for this. A. Credit Cash, debit Dividend Income B. Credit Cash, debit OCI C. Debit Cash, credit OCI D. Debit Cash, credit Dividend Income

D.

XYZ Company had two units of inventory on hand to begin the period. Each item cost $3. It purchased five more units during the period costing $4 each. During the period, it sold six units. Using FIFO, how much is cost of goods sold expense? A. $16 B. $18 C. $20 D. $22

D.

Cash basis of accounting

a method which recognizes revenue when cash is collected and expenses when cash is disbursed

Depreciable Cost

the historical cost of a fixed asset minus the salvage value of the asset

Under Accrual Basis Accounting when are revenues and expenses recognized?

when earned or incurred without regard to when cash is received or paid