Final review Question and Answer
181) ABC buys widgets for $5 cash and sells them on account for $8. At the point of sale, what is the effect on the cash flow of ABC? A) Increase $8 B) No effect C) Decrease $5 D) Increase $3
B) No effect
137) In a periodic inventory system, the entry at the time of a sale to record the cost of inventory sold includes a: A) Debit to Cost of Goods Sold. B) Not recorded at this time of the sale. C) Debit to Accounts Receivable. D) Credit to Cost of Goods Sold.
B) Not recorded at this time of the sale.
305) Which of the following never pay taxes (more than one possible correct answer)? A) C Corporation B) Partnership C) S Corporation
B) Partnership C) S Corporation
214) Both cash dividends and stock dividends: A) Reduce total liabilities. B) Reduce retained earnings. C) Reduce total stockholders' equity. D) Reduce total assets.
B) Reduce retained earnings.
100) If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true? A) Net income is overstated in year 2. B) Retained earnings is overstated in year 1. C) Cost of goods sold is overstated in year 1. D) Net income is understated in year 1
B) Retained earnings is overstated in year 1.
350) Warren Buffet is most interested in which one of the following ratios A) Working Capital B) Return on Assets C) Earnings per share D) Return on Equity
B) Return on Assets
223) Prior to year-end adjusting entries, what would explain the Allowance for Uncollectible Accounts having a debit balance? A) The amount of actual uncollectible accounts in the current year was less than the estimate of uncollectible accounts made at the end of the prior year. B) The amount of actual uncollectible accounts in the current year was greater than the estimate of uncollectible accounts made at the end of the prior year. C) The amount of credit sales in the current year was greater than the amount of credit sales made in the prior year. D) The amount of cash collections from customers in the current year was less the amount of cash collections from customers in the prior year.
B) The amount of actual uncollectible accounts in the current year was greater than the estimate of uncollectible accounts made at the end of the prior year.
217) A company in NY is buying goods from a Japanese company. The goods are sold FOB San Francisco port A) The freight from Japan to San Francisco is an asset, the freight from San Francisco to New York is an expense B) The freight from Japan to San Francisco is an expense, the freight from San Francisco to New York is an Asset C) Both the freight from Japan to San Francisco and from San Francisco to New York are assets D) Both the freight from Japan to San Francisco and from San Francisco to New York are expenses
B) The freight from Japan to San Francisco is an expense, the freight from San Francisco to New York is an Asset
34) Which of the following are made BEFORE a Trial Balance is prepared? A) Closing Entries B) Transaction Entries C) Adjusting Entries
B) Transaction Entries
12) Can a firm earn 36% risk free A) Yes, by paying after the sales discount period B) Yes, by paying within the sales discount period C) No D) Yes, by offering sales discounts
B) Yes, by paying within the sales discount period
122) In which plan does an employer often match what an employee pays to a pension fund A) neither plan B) a Defined Benefit Pension Plan C) a Defined Contribution Pension Plan D) both plans
B) a Defined Benefit Pension Plan
116) When prices are rising, a LIFO liquidation will A) always decrease income B) always increase income C) sometimes increase income and sometimes decrease income
B) always increase income
326) In the USA, Goodwill on a financial statement A) must be internally developed, not bought B) can be bought or internally developed c) must be bought, not internally developed
B) can be bought or internally developed
359) The account "Warranty Liability": A) is closed at the end of the year. B) is adjusted at the end of the year. C) is credited each time a warranty repair is made. has a year-end credit balance equal to the cost of warranty repairs made during the year
B) is adjusted at the end of the year.
299) When a firm gets riskier what will happen to its bonds A) the stated interest rate of the bonds will go down B) the stated interest rate of the bonds will not change C) there is no definite answer D) the stated interest rate of the bonds will go up
B) the stated interest rate of the bonds will not change
178) It is easier for a company to cheat on its taxes A) same for periodic inventory accounting and perpetual inventory accounting B) under periodic inventory accounting than under perpetual inventory accounting C) under perpetual inventory accounting than under periodic inventory accounting
B) under periodic inventory accounting than under perpetual inventory accounting
294) Depletion is the expense A) when using up an intangible asset B) when using up a natural resource C) when using up a building D) when goodwill dies
B) when using up a natural resource
70) Accounts Payable $55,000 Land 90,000 Inventory 10,500 Accounts Receivable 7,500 Equipment 8,000 Unearned Revenue 58,500 Short-term Investments 20,000 Notes Receivable (due in 8 months) 45,500 Interest Payable 2,000 Patents 75,000 What is the amount of long-term assets assuming the accounts above reflect normal activity? $342,500. $173,000. $273,500. $98,000.
$173,000.
Financing activities
1.borrowing 2.paying loans 3.dividends 4.re sale treasury stock 5.issuing stocks or bonds 6.repay long term debt 7.A company purchases its own common stock in the open market and immediately retires it. 8.Bonds payable
Operating Activities
1.cash receipts from customers 2.cash paid for inventory purchases 3.wage expense 4.interest 5.income tax 6.Accounts payable
Investing Activities
1.sale or purchase of property and equipment 2.sale or purchase of principal of loans 3.sale or purchase investment securities 4.buying stocks or bonds 5.buying a patent or copyright 6.purchase of another company
140
A
193) In a Balanced set of Accounting Records, EVERY Account must balance. A)False B) True
A)False
226
B
275) ABC has a $5 million liability at December 31, 2018, of which $1 million is payable in each of the next five years. ABC reports the liability on the balance sheet as a: A) $4 million current liability and a $1 million long-term liability. B) $1 million current liability and a $4 million long-term liability. C) $5 million long-term liability. D) $5 million current liability.
B) $1 million current liability and a $4 million long-term liability.
126) During the first two years, ABC drove the company truck 15,000 and 22,000 miles, respectively, to deliver merchandise to its customers. The company originally purchased the truck for $175,000. If the truck has an estimated life of 10 years or 300,000 miles, with an estimated residual value of $25,000, what amount of deprecation expense should ABC record in the second year using the activity-based method? A) $7,500. B) $11,000. C) $18,500. D) $16,000.
B) $11,000.
151) The balance sheet of Subsidiary Co. shows assets of $86,400 and liabilities of $15,000. The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000. Parent Co. paid Subsidiary $95,000 to acquire it. Parent should record goodwill on this purchase of: A) $23,600. B) $20,000. C) $3,600. D) $5,000.
B) $20,000.
118) Assets $1,200,000 Liabilities $800,000 Net income $100,000 Retained earnings $250,000 Stockholders' claims to the company's resources amount to: A) $1,200,000. B) $400,000. C) $250,000. D) $800,000.
B) $400,000.
234) ABC issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $18,000 in 2018. Assuming the preferred stock is noncumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2018? A) $9,000 to preferred stockholders and $9,000 to common stockholders. B) $6,000 to preferred stockholders and $12,000 to common stockholders. C) $12,000 to preferred stockholders and $6,000 to common stockholders. D) $18,000 to preferred stockholders and $0 to common stockholders.
B) $6,000 to preferred stockholders and $12,000 to common stockholders.
51) How many types of inventory are in the factory? A) 1 B) 2 C) 3 D) 0
B) 2
74) ABC retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million. The entry to record the retirement will include: A) A debit of $6 million to a loss account. B) A credit of $6 million to a gain account. C) No gain or loss on retirement. D) A credit to cash for $42 million.
B) A credit of $6 million to a gain account.
1) In a Financing Lease the Lessee records an Asset and a Liability A) False B) True
B. True
184) ABC buys widgets for $5 cash and sells them on account for $8. If ABC owns a widget, from a cash flow perspective the widget is valued at? A) $8 B) $3 C) $0 D) $5
C) $0
355) At the beginning of 2018, ABC began offering a 1-year warranty on its products. The warranty program was expected to cost ABC 4% of net sales. Net sales made under warranty in 2018 were $180 million. Five percent of the units sold were returned in 2018 and repaired or replaced at a cost of $5.3 million. The amount of warranty expense on ABC's 2018 income statement is: A) $27.0 million. B) $9.0 million. C) $7.2 million. D) $5.3 million.
C) $7.2 million
69) ABC reports income tax expense of $800,000. Income tax payable at the beginning and end of the year are $50,000 and $70,000, respectively. What is the amount of cash paid for income taxes? A) $800,000. B) $870,000. C) $780,000. D) $820,000.
C) $780,000.
113) ABC reports sales of $100 million. Accounts receivable at the beginning and end of the year are $6 million and $9 million, respectively. What is the amount of cash received from customers? A) $100 million. B) $109 million. C) $97 million. D) $103 million.
C) $97 million.
167) Which of the following is doubly taxed A) Partnership B) Sole proprietorship C) C Corporation D) S Corporation
C) C Corporation
340) The gross profit ratio will typically be higher for companies that: A) Purchase inventory more frequently during the year. B) Collect cash more quickly from customers. C) Sell products that are more highly specialized. D) Sell a greater number of units.
C) Sell products that are more highly specialized.
332) Which is the most popular form of business structure in the US? A) S Corporation B) C Corporation C) Sole Proprietorship D) Partnership
C) Sole Proprietorship
345) Collateral is useful A) when there is one creditor B) when there is one creditor or multiple creditors C) when there are multiple creditors
C) when there are multiple creditors
95) ABC issues 1,000 shares of 6%, $100 par value preferred stock at the beginning of 2017. All remaining shares are common stock. The company was not able to pay dividends in 2017, but plans to pay dividends of $18,000 in 2018. Assuming the preferred stock is cumulative, how much of the $18,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders in 2018? A) $18,000 to preferred stockholders and $0 to common stockholders. B) $6,000 to preferred stockholders and $12,000 to common stockholders. C) $9,000 to preferred stockholders and $9,000 to common stockholders. D) $12,000 to preferred stockholders and $6,000 to common stockholders.
D) $12,000 to preferred stockholders and $6,000 to common stockholders.
63) At the beginning of the period, Accounts Receivable equals $1,700. At the end of the period, Accounts Receivable equals $2,200. If Service Revenue for the period equals $15,400, what was the cash received from customers for the period? A) $13,200. B) $15,400. C) $14,900. D) $15,900.
D) $15,900.
78) The ending Retained Earnings balance of ABC increased by $3.2 million from the beginning of the year. The company declared a dividend of $1.3 million during the year. What was the net income earned during the year? $3.2 million. B) $1.3 million. C) $1.9 million. D) $4.5 million.
D) $4.5 million.
112) ABC purchased a piece of equipment by paying $5,000 cash. They also incurred a shipping cost of $400 to get the equipment to its factory. The fair value of this equipment is $7,000. For what amount should ABC record the equipment? A) $7,000. B) $7,400. C) $5,000. D) $5,400.
D) $5,400.
265) ABC sells soccer goals to customers over the Internet. History has shown that 2% of ABC's goals will need repair under the warranty program. For the year, ABC has sold 4,000 goals and 45 have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty liability at the end of the year? A) $16,000. B) $0. C) $9,000. D) $7,000
D) $7,000
272) If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be A) Neither disclosed nor reported as a liability. B) Disclosed and reported as a liability. C) Reported as a liability, but not disclosed. D) . Disclosed, but not reported as a liability.
D) . Disclosed, but not reported as a liability.
370) What is operating income?
Sales Revenue - COGS - operating expenses
273) ABC, sold inventory for $1,200 that was purchased for $700. ABC records which of the following when it sells inventory using a perpetual inventory system? A) Debit Cost of Goods Sold $700; credit Inventory $700. B) Debit Inventory $700; credit Cost of Goods Sold $700. C) Debit Cost of Goods Sold $1,200; credit Inventory $1,200. No entry is required for cost of goods sold and inventory
A) Debit Cost of Goods Sold $700; credit Inventory $700.
83) In January, 2018, ABC. sells a gift card for $50 and receives cash. In February, 2018, the customer comes back and spends $20 of their gift card on a water bottle. What would be the appropriate journal entry for the purchase of the water bottle? A) Debit Deferred Revenue, $20; credit Sales Revenue, $20. B) Debit Deferred Revenue, $50; credit Sales Revenue, $50. C) Debit Sales Revenue, $20; credit Deferred Revenue, $20. D) No journal entry is necessary.
A) Debit Deferred Revenue, $20; credit Sales Revenue, $20
220) Cost of goods sold $420,000 Sales revenue 800,000 Nonoperating expenses 10,000 Operating expenses 170,000 Income tax expense 80,000 What is operating income? A) $210,000. B) $200,000. C) $380,000. D) $120,000.
A) $210,000
24) During 2018, ABC had the following cash flows: (1) received cash of $5,000 billed to a customer in 2017; (2) earned $20,000 of net income; (3) paid interest of $6,000 on a corporate bond issued; (4) paid dividends of $8,000 to its stockholders; (5) borrowed $40,000 from a local bank; and (6) purchased its own shares of common stock for $10,000. What is ABC's net cash flows from financing activities for 2018? A) $22,000. B) $30,000. C) $16,000. D) $40,000.
A) $22,000.
91) ABC buys widgets for $5 cash and sells them on account for $8. What is the sacrifice value of a widget on the books of ABC? A) $5 B) $8 C) $3 D) . Impossible to determine from the given information
A) $5
203) ABC has net sales of $200,000, cost of goods sold of $120,000, selling expenses of $6,000, and nonoperating expenses of $2,000. What is the company's gross profit? A) $80,000. B) $74,000. C) $72,000. D) $76,000.
A) $80,000.
156) A company provides services on account. Indicate how this transaction would affect (1) assets, (2) stockholders' equity, and (3) revenues. A) (1) Increase, (2) Increase (3) Increase B) (1) Increase, (2) No effect (3) Increase C) (1) No effect, (2) No effect (3) No effect D) (1) No effect, (2) Increase (3) Increase
A) (1) Increase, (2) Increase (3) Increase
183) When we pay Sales tax we CR Cash and Debit A) A Liability B) An Asset C) Revenue D) An Expense
A) A Liability
96) When we collect Sales tax we DR Cash and Credit A) A Liability B) An Expense C) Revenue D) An Asset
A) A Liability
75) Which is easier to calculate A) A firm's Cash Flow B) A firm's Net Income
A) A firm's Cash Flow
79) Which of the following statements regarding liquidity ratios is true? A) A high working capital generally indicates the ability to pay current liabilities on a timely basis. B) A low acid-test ratio generally indicates the ability to pay current liabilities on a timely basis. C) All current assets are due within one year and therefore have essentially equal liquidity. D) A low current ratio generally indicates the ability to pay current liabilities on a timely basis.
A) A high working capital generally indicates the ability to pay current liabilities on a timely basis.
267) ABC sells a large number of common household items, while DEF sells a small number of expensive items. The two companies report the same dollar amount for ending inventory and gross profit for the year. Which of the following is most likely true? A) ABC has a higher inventory turnover ratio, and DEF has a higher gross profit ratio. B) DEF has a higher inventory turnover ratio and higher gross profit ratio. C) ABC has a higher inventory turnover ratio and higher gross profit ratio. D) ABC has a higher inventory turnover ratio, and DEF has a lower gross profit ratio.
A) ABC has a higher inventory turnover ratio, and DEF has a higher gross profit ratio.
291) When treasury stock is resold at a price above cost: A) Additional Paid-in Capital is increased. B) A loss is reported. C) A revenue account is credited. D) A gain account is credited.
A) Additional Paid-in Capital is increased. B) A loss is reported.
67) Which of the following are made ONLY at year end (more than one possible correct answer)? A) Adjusting Entries B) Transaction Entries C) Closing Entries
A) Adjusting Entries C) Closing Entries
225) Which of the following must Debits equal Credits (more than one possible correct answer) A) Adjusting Entries B) Transaction Entries C) Closing Entries
A) Adjusting Entries B) Transaction Entries C) Closing Entries
41) When intangible assets, like franchises or patents, die, it is called A) Amortization B) Depletion C) Depreciation D) Impairment
A) Amortization
369) The Finished Goods eventually turn into A) Cost of Goods Sold Expense B) Sales C) Freight In D) Overhead
A) Cost of Goods Sold Expense
248) On December 1, 2018, ABC signed a $300,000, 5%, six-month note payable with the amount borrowed plus accrued interest due six months later on June 1, 2019. ABC should record which of the following adjusting entries at December 31, 2018? A) Debit Interest Expense and credit Interest Payable, $1,250. B) Debit Interest Expense and credit Cash, $1,250. C) Debit Interest Expense and credit Interest Payable, $7,500. D) Debit Interest Expense and credit Cash, $7,500.
A) Debit Interest Expense and credit Interest Payable, $1,250.
191) On November 1, 2018, ABC signed a $100,000, 6%, six-month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on May 1, 2019, ABC would A) Debit Interest Expense, $2,000. B) Debit Interest Expense, $3,000. C) Debit Interest Payable, $2,000. D) Debit Interest Expense, $1,000
A) Debit Interest Expense, $2,000.
133) Treasury Stock: A) Decreases stockholders' equity. B) Is recorded as an investment. C) Increases stockholders' equity. D) Has a normal credit balance.
A) Decreases stockholders' equity.
317) If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is probable, a contingent liability should be A) Disclosed and reported as a liability. B) Reported as a liability, but not disclosed. C) Disclosed, but not reported as a liability. D) Neither disclosed nor reported as a liability.
A) Disclosed and reported as a liability.
153) The declaration and issuance of a stock dividend: A) Does not change total assets, liabilities, or total stockholders' equity. B) Decreases assets and decreases total stockholders' equity. C) Does not change retained earnings or paid-in capital. D) Decreases total stockholders' equity and increases common stock.
A) Does not change total assets, liabilities, or total stockholders' equity.
286) When a business pays dividends to its shareholders, the dividends are tax deductible A) False B) True
A) False
336) The assumption that a business will continue to operate into the future is the: A) Going concern assumption. B) Economic entity assumption. C) Periodicity assumption. D) Monetary unit assumption.
A) Going concern assumption. B) Economic entity assumption.
4) ABC spends $50,000 this year in research and development for a new drug to cure liver damage. By the end of the year, management feels confident that the new drug will gain FDA approval and lead to higher future sales. What impact will the $50,000 spending have on this year's financial statements? A) Increase Expenses. B) Decrease Revenues. C) Increase Revenues. D) Increase Assets.
A) Increase Expenses.
204) Which of the following would result in an increase in the current ratio, but not necessarily the acid-test ratio? A) Increase in current assets B) Increase in quick assets C) Decrease in current liabilities D) Decrease in current assets
A) Increase in current assets B) Increase in quick assets
258) Social Security A) Is a Defined Benefit Pension Plan B) Is a Defined Contribution Pension Plan C) Is offered by local governments D) Is an optional Pension Plan
A) Is a Defined Benefit Pension Plan B) Is a Defined Contribution Pension Plan
145) Window Dressing is A) Legal B) Illegal
A) Legal
339) Suppose Company A places an order with Company B on May 12. On May 14, Company B ships the ordered goods to Company A with terms FOB destination. The goods arrive at Company A on May 17. Company A begins selling the goods to customers on May 19 and pays Company B on May 20. When would Company B record the sale of goods to Company A? A) May 14. B) May 12. C) May 19. D) May 17.
A) May 14.(The time of delivery)
353) Allocation is primarily as issue in A) Measuring Income B) None of the other three C) Measuring Assets D) Both Measuring Assets and Income
A) Measuring Income
306) Assuming a current ratio of 1.0, how will the purchase of inventory with cash affect the ratio? A) No change to the current ratio. B) Increase the current ratio. C) Decrease the current ratio. Could either increase or decrease the current ratio
A) No change to the current ratio
99) Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will the purchase of inventory with cash affect each ratio? A) No change to the current ratio and decrease the acid-test ratio. B) Decrease the current ratio and decrease the acid-test ratio. C) Increase the current ratio and increase the acid-test ratio. D) Decrease the current ratio and increase the acid-test ratio.
A) No change to the current ratio and decrease the acid-test ratio.
39) ABC sold inventory for $1,200 that was purchased for $700. ABC records which of the following when it sells inventory using a periodic inventory system? A) No entry is required for cost of goods sold and inventory. B) Debit Inventory $700; credit Cost of Goods Sold $700. C) Debit Cost of Goods Sold $700; credit Inventory $700. D) Debit Cost of Goods Sold $1,200; credit Inventory $1,200.
A) No entry is required for cost of goods sold and inventory.
49) The abbreviation of the rules an accountant has to follow when doing financial statement analysis is: A) None of these B) FASB C) GAAP D) IFRS
A) None of these
59) Following are transactions of ABC, a new company, during the month of January: 1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. 6. Paid employees $10,000 for their first month's salaries. How many of these transactions decreased ABC's total assets? A) One. B) Two. C) Four. D) Three.
A) One.
154) ABC paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and $6,000 in dividends on its common stock. ABC would report cash outflows from activities, as follows: A) Operating, $12,000; Financing $6,000. B) Operating, $0; Financing $18,000. C) Operating, $18,000; Financing $0. D) Operating, $2,000; Financing $16,000.
A) Operating, $12,000; Financing $6,000
366) In the P/E ratio A) P is forward looking; E is backward looking. B) P is backward looking; E is backward looking. C) P is forward looking; E is forward looking. P is backward looking; E is forward looking.
A) P is forward looking; E is backward looking.
81) Choose one: A) Periodic Inventory Accounting is less expensive to maintain than Perpetual Inventory Accounting B) Periodic Inventory Accounting is more expensive to maintain than Perpetual Inventory Accounting C) There is no difference between the expense of using Periodic Inventory Accounting versus Perpetual Inventory Accounting
A) Periodic Inventory Accounting is less expensive to maintain than Perpetual Inventory Accounting
192) In a periodic inventory system, the purchase of inventory is debited to: A) Purchases. B) Cost of goods sold. C) Accounts payable. D) Inventory.
A) Purchases.
325) Which ratio is strongly influenced by the long term Debt of a company A) ROE B) Both ROI and ROE C) Neither ROI nor ROE D) ROI
A) ROE
88) Which of the following is NOT an example of aggressive accounting practices? A) Recording contingent losses that are probable. B) Increasing the useful life used in calculating depreciation. C) Recording research and development costs as assets. D) Using a lower estimate of bad debts.
A) Recording contingent losses that are probable.
304) Calculation of Ending Inventory has an effect on which satetments (ignore taxes) (more than one possible correct answer) A) Statement of Changes in Equity B) Income Statement C) Cash Flow Statement D) Balance Sheet
A) Statement of Changes in Equity B) Income Statement D) Balance Sheet
107) Aggressive Accounting practices produce A) The Same Cash Flow from Operations as Conservative Accounting B) A Higher Cash Flow from Operations than Conservative Accounting C) A Lower Cash Flow from Operations than Conservative Accounting
A) The Same Cash Flow from Operations as Conservative Accounting
249) Which statement is true A) The accounting for a Defined Benefit Pension Plan usually requires an actuary. B) The accounting for an Operating Lease usually requires an actuary C) The accounting for a Defined contribution pension Plan usually requires an actuary D) The accounting for a Capital (Financing) Lease usually requires an actuary
A) The accounting for a Defined Benefit Pension Plan usually requires an actuary.
268) Which of the following best explains the meaning of total stockholders' equity? A) The amount of capital invested by stockholders plus profits retained over the life of the company. B) The difference between total revenues and total expenses, less dividends for the year. C) All revenues, expenses, and dividends over the life of the company. D) The amount of common stock less dividends over the life of the company.
A) The amount of capital invested by stockholders plus profits retained over the life of the company.
307) What is the most likely reason for a company to have an increase in average collection period? A) The company has become more lenient in its credit policies and is extending credit terms to maintain customers. B) The company has incurred additional marketing expenses to attract customers C) The company has tightened its credit policies for its customers. D) Customers are paying in a timelier manner.
A) The company has become more lenient in its credit policies and is extending credit terms to maintain customers.
125) If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true? A) The company's assets exceed liabilities by $60,000. B) Total revenues during the year equal $60,000. C) Net income for the year equals $60,000. D) The company has issued $60,000 of common stock.
A) The company's assets exceed liabilities by $60,000.
42) Which of the following is true regarding the relationship between the current ratio and the acid-test ratio? A) The current ratio will always be equal to or larger than the acid-test ratio for a specific company. B) The acid-test ratio will always be equal to or larger than the current ratio for a specific company. C) One ratio will always exceed 1.0, while the other will always be less than 1.0. D) Either the current ratio or the acid-test ratio could be larger for a specific company.
A) The current ratio will always be equal to or larger than the acid-test ratio for a specific company.
346) Which of the following is not a solvency ratio? A) The current ratio. B) Time interest earned ratio. C) The debt to equity ratio. D) All of these.
A) The current ratio.
219) The lower of cost and net realizable value rule causes losses in the value of inventory to be recognized in the period when: A) The value of inventory declines below cost. B) The inventory is purchased. C) Cash collection from the customer fails to occur. D) The inventory is sold.
A) The value of inventory declines below cost.
144) Someone who sells milk can report their inventory using LIFO A) True B) False
A) True
106) In doing an allocation for a basket purchase A) Use the individual costs and the total market value B) Use the individual costs and the individual market values C) Use the total cost and the total market value D) Use the total cost and the individual market value.
A) Use the individual costs and the total market value
168) When applying Lower of Cost or Market (LCM,) the Net Income of a firm A) always goes down B) always goes up C) sometimes goes up and sometimes goes down D) doesn't change, since LCM only changes Cost of Goods Sold
A) always goes down
360) The year end adjusting entry for warranties Debits A) an expense B) an income account C) an asset D) a liability
A) an expense
120) The Direct Method and Indirect Method of Reporting Cash Flows A) apply only to Cash from Operations B) can apply to all parts of the cash flow statement
A) apply only to Cash from Operations
155) It is possible to calculate shrinkage A) in Perpetual Inventory Accounting but not in Periodic Inventory Accounting B) in neither Periodic Inventory Accounting nor Perpetual Inventory Accounting C) in Periodic Inventory Accounting but not in Perpetual Inventory Accounting D) in both Periodic Inventory Accounting and in Perpetual Inventory Accounting
A) in Perpetual Inventory Accounting but not in Periodic Inventory Accounting
251) When a company collects sales tax from a customer, the event is recorded with a(n) in Cash and a(n) in Sales Tax Payable: A) increase; decrease B) increase; increase C) decrease; decrease D) decrease; increase
A) increase; decrease
179) When a firm takes a big bath A) it increases cash flows B) it increases revenues C) it decreases cash flows D) it increases expenses
A) it increases cash flows
152) In accounting the word 'capitalize' means A) treat as an asset B) treat as capital C) take the chance to gain advantage from. D) provide a company with capital.
A) treat as an asset
274) Which accounting number has the single greatest impact on stock prices? A).Net income. B) Total revenues. C) Total assets. D) Total dividends.
A).Net income.
205) Investors and Creditors are interested in which of these entries (more than one possible correct answer)? A)Adjusting Entries B) Closing Entries C) Transaction Entries
A)Adjusting Entries C) Transaction Entries
138) Lowerr of Cost or Market is based on which accounting principle? A)Conservatism B) Timeliness C) Going Concern D) Consistency
A)Conservatism
310) When a company delivers a product or service for which a customer has previously paid, the company records the following: A) A debit to an asset account and a credit to a revenue account. B) A debit to a liability account and a credit to a revenue account. C) A debit to a revenue account and a credit to an asset account. D) A debit to a revenue account and a credit to a liability account.
B) A debit to a liability account and a credit to a revenue account.
31) The adjusting entry required when amounts previously recorded as deferred revenues are earned by providing goods or services to customers includes: A) A debit to an asset. B) A debit to a liability. C) A credit to a liability. D) A credit to an asset.
B) A debit to a liability.
329) The contra asset account associated with Building and Equipment is called A) Depreciation Expense B) Accumulated Depreciation
B) Accumulated Depreciation
36) Where do we put gains/losses on the sale of Treasury Stock (cost method)? A) there is no gain or loss on purchase of Treasury Stock B) Additional Paid in Capital / Retained Earnings C) Income Statement D) adjustments to total Equity
B) Additional Paid in Capital / Retained Earnings
73) Window Dressing causes which kind of entry Transaction B) Adjusting C) Closing
B) Adjusting
288) Which of the following are made BEFORE the financial statements are prepared (more than one possible correct answer)? A) Closing Entries B) Adjusting Entries C) Transaction Entries
B) Adjusting Entries C) Transaction Entries
3)ABC purchases inventory for $2,000 and incurs shipping costs of $100 for the goods to be delivered. To record this transaction, the company debits Inventory for $2,000, debits Selling Expenses for $100, and credits Cash for $2,100. Which of the following statements is correct? A) Net income is overstated. B) Assets are understated. C) Revenues are understated. D) All accounts are accurately stated.
B) Assets are understated.
240) On January 1, ABC sold $30,000 in products to a customer on account. Then on January 10, ABC collected the cash on that account. What is the impact on ABC's accounting equation from the collection of cash on January 10? A) No net effect on the accounting equation. B) Assets increase and stockholders' equity increases. C) Assets decrease and liabilities decrease. Assets increase and liabilities decrease
B) Assets increase and stockholders' equity increases.
221) The correct order from the smallest number of shares to the largest number of shares is: A) Issued, authorized, and outstanding. B) Authorized, issued, and outstanding. C) Issued, outstanding, and authorized. D) Outstanding, issued, and authorized.
B) Authorized, issued, and outstanding.
315) Which of the following statements is a snapshot A) Statement of Cash Flows B) Balance Sheet C) Income statement D) All 3 statements
B) Balance Sheet
279) Which is riskier when raising money for a business A) there is no general rule, it depends on the terms of the borrowing or issuing the shares B) Borrowing is always riskier than issuing shares C) Issuing shares is always riskier than borrowing
B) Borrowing is always riskier than issuing shares
227) Air conditioning cost in a company A) are always an Asset B) Can be an Asset or an Expense C) Are always an Expense
B) Can be an Asset or an Expense
86) Days in the Operating Cycle equals: A) Days in Inventory - Days in Receivables + Days in Payables B) Days in Inventory + Days in Receivables - Days in Payables C) Days in Inventory + Days in Receivables + Days in Payables Days in Inventory - Days in Receivables - Days in Payables
B) Days in Inventory + Days in Receivables - Days in Payables
103) In a perpetual inventory system, the entry at the time of a sale to record the cost of the inventory sold includes a: A) Not recorded at the time of the sale. B) Debit to Cost of Goods Sold. C) Credit to Cost of Goods Sold. D) Debit to Accounts Receivable.
B) Debit to Cost of Goods Sold.
35) If your employer declares bankruptcy, this can have a major effect on your pension if you are in a A) Either plan B) Defined Benefit Plan C) Neither Plan D) Defined Contribution Plan
B) Defined Benefit Plan
92) State and city politicians generally prefer giving their workers A) Defined Contribution Plans B) Defined Benefit Plans C) Social Security D) Either plan
B) Defined Benefit Plans
296) In a period of rising costs, which inventory valuation method would a company likely choose if they want to have the highest possible balance of inventory on the balance sheet? A) Weighted-average cost. B) FIFO. C) LIFO. D) Periodic.
B) FIFO.
115) A contingent gain can sometimes be disclosed in a footnote A) True B) False
B) False
170) Someone who sells gasoline must report their inventory using Weighted Average A) True B) False
B) False
185) In an Operating Lease the Lessee records an Asset and a Liability A) True B) False
B) False
361) When bonds are issued at a premium and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is: A) More than if the bonds had been sold at a discount. B) Greater than the interest expense. C) Less than the interest expense. Equal to the interest expense
B) Greater than the interest expense.
109) When Goodwill dies it is called A) Amortization B) Impairment C) Depreciation D) Depletion
B) Impairment
40) Which statement is true A) In both plans the Employee has all the investment risk B) In a Defined Benefit Plan the Employer has all the investment risk, in a Defined Contribution Plan the Employee has all the investment risk C) In a Defined Benefit Plan the Employee has all the investment risk, in a Defined Contribution Plan the Employer has all the investment risk D) In both plans the Employer has all the investment risk
B) In a Defined Benefit Plan the Employer has all the investment risk, in a Defined Contribution Plan the Employee has all the investment risk
85) ABC issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial statements? A) Increase only assets. B) Increase assets and liabilities. C) Increase only stockholders' equity. D) Increase only liabilities.
B) Increase assets and liabilities.
211) Which is true about the Cash Flow Statement? A) It shows all significant changes to the company, including noncash items B) It only shows items that are cash flows to the firm.
B) It only shows items that are cash flows to the firm.
180) When a company with a current ratio of 1.2 pays a current liability: A) Its current ratio remains unchanged. B) Its current ratio increases. C) Its debt to equity ratio increases. D) Its current ratio decreases
B) Its current ratio increases.
121) When a company sells land for cash and makes a $25,000 gain: A) Cannot determine from the given information. B) Its debt to equity ratio decreases. C) Its acid-test ratio decreases. D) Its current ratio decreases.
B) Its debt to equity ratio decreases.
200) Window Dressing is done by A) Financial Analysts B) Managers C) Accountants D) Auditors
B) Managers
58) A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 6%. These bonds will sell at a price that is: A) Less than $500,000. B) More than $500,000. C) The answer cannot be determined from the information provided. D) Equal to $500,000.
B) More than $500,000.
284) Can APIC have a Debit balance? A) Yes B) No
B) No
136) ABC developed a new horse transport device and incurred research and development costs of $250,000. Rather than continue with their own research, ABC decided to purchase a patent for a similar design from Vail, Inc. for $350,000. What are the total assets and expenses for these developments? A) Assets $600,000; Expenses $0. B) Assets $250,000; Expenses $350,000. C) Assets $350,000; Expenses $250,000. D) Assets $0; Expenses $600,000.
C) Assets $350,000; Expenses $250,000.
278) In a Stock Dividend A) Assets decrease, Liabilities increase. B) Assets decrease, Liabilities decrease. C) Assets don't change, Liabilities don't change. D) Assets increase, Liabilities decrease. E) Assets increase, Liabilities increase.
C) Assets don't change, Liabilities don't change.
174) When treasury stock is acquired, what is the effect on assets and stockholders' equity? A) Assets and stockholders' equity increase. B) Assets decrease and stockholders' equity increase. C) Assets increase and stockholders' equity decrease. Assets and stockholders' equity decrease
C) Assets increase and stockholders' equity decrease.
143) Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 7% interest. The current market rate of interest is 7%. Which of the following is correct? A) Both bonds will sell at a premium. B) Both bonds will sell for the same amount. C) Bond X will sell for more than Bond Y. D) Bond Y will sell for more than Bond X.
C) Bond X will sell for more than Bond Y.
236) Which of the following are made AFTER the financial statements are prepared? A) Transaction Entries B) Adjusting Entries C) Closing Entries
C) Closing Entries
282) What is the accounting principle that doesn't allow companies to switch between LIFO and FIFO every year A) Timeliness B) Going Concern C) Consistency D) Conservatism
C) Consistency
50) On February 22, ABC acquired 200 shares of its $5 par value common stock for $25 each. On March 15, the company reissued 70 shares for $30 each. What is true of the entry for reissuing the shares? A) Credit Cash $1,750. B) Credit Treasury Stock $2,100. C) Credit Additional Paid in Capital $350. D) Debit Treasury Stock $1,750.
C) Credit Additional Paid in Capital $350.
208) Which of the following is recorded upon receipt of a payment on April 7, 2018, by a customer who pays a $900 invoice dated March 3, 2018, with terms 2/10, n/60? A) Credit Purchase Discounts $18. B) Debit Sales Discounts $18. C) Debit Cash $900. D) Credit Accounts Receivable $882
C) Debit Cash $900.
344) On September 1, 2018, ABC signed a $100,000, 9%, six-month note payable with the amount borrowed plus accrued interest due six months later on March 1, 2019. ABC records the appropriate adjusting entry for the note on December 31, 2018. In recording the payment of the note plus accrued interest at maturity on March 1, 2019, ABC would A) Debit Interest Expense, $3,000. B) Debit Interest Expense, $4,500. C) Debit Interest Expense, $1,500. D) Debit Interest Payable, $1,500
C) Debit Interest Expense, $1,500.
65) Journal entries to record cash dividends are made on the: A) Declaration date, record date, and payment date. B) Record date and payment date. C) Declaration date and payment date. D) Declaration date and record date.
C) Declaration date and payment date.
130) Assuming an acid-test ratio of 1.0, how will the purchase of inventory with cash affect the ratio? A) Increase the acid-test ratio. B) No change to the acid-test ratio. C) Decrease the acid-test ratio. D) Could either increase or decrease the acid-test ratio.
C) Decrease the acid-test ratio.
313) What is expensed in a Sales Office A) Nothing B) Period Costs C) Everything D) Product Costs
C) Everything
164) ABC correct ending balance for the inventory account at the end of 2018 should be $5,000, but the company incorrectly stated it as $3,000. In 2019, ABC correctly recorded its ending balance of the inventory account. Which one of the following is true? A) Retained earnings are understated by $2,000 in 2019. B) Cost of goods sold is understated by $2,000 in 2018. C) Gross profit is overstated by $2,000 in 2018. D) Gross profit is overstated by $2,000 in 2019.
C) Gross profit is overstated by $2,000 in 2018.
108) Uncontrolled Liquidations (more than one possible correct answer) A) Increase Taxes for FIFO companies B) Increase Income for FIFO companies C) Increase Income for LIFO companies D) Increase Taxes for LIFO companies
C) Increase Income for LIFO companies D) Increase Taxes for LIFO companies
368) The entry to record a monthly payment on an installment note such as a car loan: A) Increases expense, increases liabilities, and decreases assets. B) Increases expense, increases liabilities, and increases assets. C) Increases expense, decreases liabilities, and decreases assets. D）Increases expense, decreases liabilities, and increases assets.
C) Increases expense, decreases liabilities, and decreases assets.
321) Leverage A) Increases maximum returns and decreases risk B) Increases maximum returns and decreases risk C) Increases maximum returns and increases risk Decreases maximum returns and increases risk
C) Increases maximum returns and increases risk Decreases maximum returns and increases risk
260) Which of the following is not a true statement? A) The mixture of liabilities and stockholders' equity a business uses is called its capital structure. B) As a company's level of debt increases, the risk of bankruptcy increases. C) Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax-deductible. Companies that are believed to have high bankruptcy risk generally receive low credit ratings and must pay a higher interest rate for borrowing.
C) Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax-deductible.
114) Earnings per share (EPS) A) Is useful in comparing earnings performance across companies. B) Is not useful in comparing earnings performance across companies or in comparing earnings performance for the same company over time. C) Is useful in comparing earnings performance for the same company over time. D) Is useful in both comparing earnings performance across companies and in comparing earnings performance for the same company over time.
C) Is useful in comparing earnings performance for the same company over time.
222) When I raise money for my business, I will be better off A) if I issue shares B) if I issue debt C) It depends how well the business does
C) It depends how well the business does
198) If over the year the selling price of inventory increases, but the cost of the inventory remains constant A) LIFO net income will be greater than FIFO net income B) LIFO net income will be less than FIFO net income C) LIFO net income will be identical to FIFO net income
C) LIFO net income will be identical to FIFO net income
132) A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is: A) The answer cannot be determined from the information provided. B) More than $500,000. C) Less than $500,000. D) Equal to $500,000.
C) Less than $500,000.
218) When bonds are issued at a discount and the effective interest method is used for amortization, at each subsequent interest payment date, the cash paid is: A) More than if the bonds had been sold at a premium. B) Equal to the interest expense. C) Less than the interest expense. D) Greater than the interest expense.
C) Less than the interest expense.
290) On January 1, 2018, ABC purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. Assume the truck was totaled in an accident on December 31, 2019. What amount of gain or loss should ABC record on December 31, 2019? A) Loss, $18,000. B) Loss, $3,000. C) Loss, $38,000. D) Gain, $5,000.
C) Loss, $38,000.
17) When we get a line of credit from the bank A) Expenses Increase B) Liabilities Increase C) No change to the Balance Sheet and no change to the Income Statement D) Assets increase
C) No change to the Balance Sheet and no change to the Income Statement
28) When we sign an Executory Contract, generally A) Expenses Increase B) Liabilities Increase C) No change to the Balance Sheet and no change to the Income Statement D) Assets increase
C) No change to the Balance Sheet and no change to the Income Statement
71) When a company pays cash for equipment, what is the effect on the accounting equation for that company? A) Increase assets and increase stockholders' equity. B) Decrease assets and decrease liabilities. C) No change. D) Increase assets and increase liabilities.
C) No change.
331) ABC buys widgets for $5 cash and sells them on account for $8. At collection, what is the effect on the net income of ABC? Increase $8 B) Increase $3 C) No effect D) Decrease $5
C) No effect
76) ABC accounts for bad debts using the allowance method. On 6/1, ABC wrote off DE's $2,500 account. What effect will this write-off have on ABC's balance sheet at the time of the write-off? A) A decrease to assets and a decrease to stockholders' equity. B) An increase to stockholders' equity and a decrease to liabilities. C) No effect. An increase to assets and an increase to stockholders' equity.
C) No effect
176) What would be the impact on the accounting equation when a company acquires treasury stock? A) Decrease assets and decrease stockholders' equity. B) Decrease assets and increase stockholders' equity. C) No effect on the accounting equation. D) Increase assets and increase stockholders' equity.
C) No effect on the accounting equation.
256) When we purchase a few shares of another corporation, what is the effect on our stockholders' equity? A) Increase. B) Cannot tell from the given information. C) No effect. D) Decrease
C) No effect.
64) ABC sold $500 in widgets to a customer on account on January 1. On January 11 ABC collected the cash from that customer. What is the impact on ABC's accounting equation from the collection of cash? A) Decrease assets and increase liabilities. B) Decrease assets and decrease liabilities. C) No net effect to the accounting equation. D) Increase assets and increase liabilities.
C) No net effect to the accounting equation.
165) Executory Contracts are generally A) Recorded with an adjusting entry B) Recorded with a closing entry C) Not recorded D) Recorded with a transaction entry
C) Not recorded
210) Temporary accounts are found A) On neither the Balance Sheet and Income Statements B) On the Balance Sheet C) On the Income statesmen D) On both the Balance Sheet and Income Statements
C) On the Income statesmen
119). Of the following inventories 1) Raw Materials Inventory, 2) Work in Process Inventory, 3) Finished Goods Inventory, how many would you find in a Sales Office? A) Three B) None C) One D) Two
C) One
362) Of the following inventories 1) Raw Materials Inventory, 2) Work in Process Inventory, 3) Finished Goods Inventory, how many turn into Cost of Goods Sold directly? Two B) None C) One D) Three
C) One
354) Usually we pick up Income at: A) Acquisition of Inventory B) Collection of a Receivable C) Point of Sale
C) Point of Sale
149) Using the Trueblood Criterion what is the ultimate goal of accounting? A) Predict future cash flows to the firm B) Predict income to the investor or creditor C) Predict future cash flows to the investor or creditor D) Predict income to the firm
C) Predict future cash flows to the investor or creditor
43) The market will generally react to dividends on which day? Declaration Date B) Payment Date C) Record Date
C) Record Date
245) When a company makes an end-of-period adjusting entry that includes a credit to Prepaid Rent, the debit is usually made to: A) Rent Receivable. B) Cash. C) Rent Expense. D) Rent Payable.
C) Rent Expense.
163) If a company understates its count of ending inventory in Year 1, which of the following is true? A) Profit is correct in Year 2. B) Costs of goods sold is understated at the end of Year 1. C) The balance of retained earnings is correct at the end of Year 2. D) The balance of retained earnings is overstated at the end of Year 1.
C) The balance of retained earnings is correct at the end of Year 2
128) Which of the following would increase the gross profit ratio? A) The cost of inventory increases. B) The company reduces operating expenses. C) The sales price of a product increases by a higher percentage than does its cost of goods sold. D) The number of units sold increases.
C) The sales price of a product increases by a higher percentage than does its cost of goods sold.
237) Truman Co. sells a large number of common household items, while Stapleton sells a small number of expensive items. The two companies report the same dollar amount for ending inventory and gross profit for the year. Which of the following is most likely true? A) Truman has a higher inventory turnover ratio and higher gross profit ratio. B) Truman has a higher inventory turnover ratio, and Stapleton has a lower gross profit ratio. C) Truman has a higher inventory turnover ratio, and Stapleton has a higher gross profit ratio. D) Stapleton has a higher inventory turnover ratio and higher gross profit ratio.
C) Truman has a higher inventory turnover ratio, and Stapleton has a higher gross profit ratio.
30) Suppose that ABC overstates its ending inventory for 2018. What effect will this have on the reported amount of cost of goods sold for 2018? A) Cannot be determined given the information provided. B) Have no effect on cost of goods sold. C) Understate cost of goods sold. D) Overstate cost of goods sold.
C) Understate cost of goods sold.
90) Par value of shares is A) an important number for common stock but a garbage number for preferred shares B) an important number for both common and preferred shares C) a garbage number for common stock but an important number for preferred shares D) a garbage number for both common and preferred shares
C) a garbage number for common stock but an important number for preferred shares
264) A physical inventory count is necessary to calculate Cost of Goods Sold A) in Perpetual Inventory Accounting but not in Periodic Inventory Accounting B) in neither Periodic Inventory Accounting nor Perpetual Inventory Accounting C) in Periodic Inventory Accounting but not in Perpetual Inventory Accounting D).in both Periodic Inventory Accounting and in Perpetual Inventory Accounting
C) in Periodic Inventory Accounting but not in Perpetual Inventory Accounting
224) In an installment loan A) later payments pay the same interest as earlier payments B) later payments pay more interest than earlier payments C) later payments pay less interest than earlier payments D) it depends on the interest rate
C) later payments pay less interest than earlier payments
212) In an installment loan A) later payments pay the same principal as earlier payments B) later payments pay less principal than earlier payments C) later payments pay more principal than earlier payments D) it depends on the interest rate
C) later payments pay more principal than earlier payments
48) When a firm gets riskier what will happen to its bonds A) the market interest rate of the bonds will go up and the price of the bonds will go up B) there is no definite answer C) the market interest rate of the bonds will go up and the price of the bonds will go down D) the market interest rate of the bonds will go down and the price of the bonds will go down E) the market interest rate of the bonds will go down and the price of the bonds will go up
C) the market interest rate of the bonds will go up and the price of the bonds will go down
229) Where do we put gains/losses on the purchase of Treasury Stock (cost method)? A) Additional Paid in Capital / Retained Earnings B) Income Statement C) there is no gain or loss on purchase of Treasury Stock D) adjustments to total Equity
C) there is no gain or loss on purchase of Treasury Stock
93) Periodic vs.Perpetual Inventory Accounting A) Periodic Inventory Accounting results in a higher Cost of Goods Sold than Perpetual Inventory Accounting B) Periodic Inventory Accounting results in a lower Cost of Goods Sold than Perpetual Inventory Accounting C) Sometimes Periodic Inventory Accounting results in a lower Cost of Goods Sold than Perpetual Inventory Accounting and sometimes Periodic Inventory Accounting results in a higher Cost of Goods Sold than Perpetual Inventory Accounting D) . Periodic and Perpetual Inventory Accounting result in the same Cost of Goods Sold
D) . Periodic and Perpetual Inventory Accounting result in the same Cost of Goods Sold
117) If a company's total assets decreased while liabilities and common stock were unchanged, and no dividends were paid, then A) cash flow from operating activities was greater than cash flow from investing activities B) retained earnings were less than net income during the period. C) the company must have purchased assets with cash. D) .revenues were less than expenses.
D) .revenues were less than expenses.
157) The balance sheet of ABC reports total assets of $1,500,000 and $1,700,000 at the beginning and end of the year, respectively. Net income and sales for the year are $240,000 and $2,000,000, respectively. What is ABC's asset turnover? 8.33 times. B) 1.33 times. C) 0.80 times. D) 1.25 times.
D) 1.25 times.
293) When a company issues 25,000 shares of $1 par value common stock for $10 per share, the journal entry for this issuance would include: A) A credit to Common Stock for $250,000. B) A debit to Cash for $25,000. C) A debit to Additional Paid-in Capital for $25,000. D) A credit to Additional Paid-in Capital for $225,000.
D) A credit to Additional Paid-in Capital for $225,000.
343) ABC purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the third year of use for $25,000 cash. ABC should record: A) A gain of $5,000. B) Neither a gain nor a loss since the computer was sold at its book value. C) Neither a gain nor a loss since the gain would not be recognized. D) A loss of $5,000.
D) A loss of $5,000
297) Which of the following is a negative sign that a company is not selling its inventory quickly? A) A high inventory turnover ratio. B) Both a high inventory turnover ratio and a low average days in inventory. C) A low average days in inventory. D) A low inventory turnover ratio.
D) A low inventory turnover ratio.
253) Define Liquidity A) Ability to generate free cash flow from operations B) Ability to pay both Current and Long Term Debt C) Ability to pay Long Term Debt D) Ability to pay Current Debt
D) Ability to pay Current Debt
44) Define Solvency A) Ability to pay Current Debt B) Ability to generate free cash flow from operations C) Ability to pay both Current and Long Term Debt D) Ability to pay Long Term Debt
D) Ability to pay Long Term Debt
333) A Balance sheet A) Provides a future distribution of the assets to creditors and owners B) Provides a snapshot of the present assets and liabilities C) Provides a history of the sources of the assets D) All of these answers
D) All of these answers
335) A company mistakenly recorded a cash purchase of land as an expense. As a result of this error A) Assets were overstated and equity was understated. B) Assets were understated and equity was overstated. C) Assets and equity were overstated. D) Assets and equity were understated.
D) Assets and equity were understated
161) ABC purchases inventory for $2,000 and incurs shipping costs of $100 for the goods to be delivered. To record this transaction, the company debits Inventory for $2,000, debits Selling Expenses for $100, and credits Cash for $2,100. Which of the following statements is correct? A) Revenues are understated. B) All accounts are accurately stated. C) Net income is overstated. D) Assets are understated.
D) Assets are understated.
61) Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 9% interest. The current market rate of interest is 8%. Which of the following is correct? A) Both bonds will sell for the same amount. B) Bond X will sell for more than Bond Y. C) Both bonds will sell at a discount. D) Bond Y will sell for more than Bond X.
D) Bond Y will sell for more than Bond X.
33) THIS year a company made an error in its ending inventory A) Neither this year's Balance Sheet nor Income Statement will be wrong B) This year's Balance Sheet will be correct but the Income Statement will be wrong C) This year's Balance Sheet will be wrong but the Income Statement will be correct D) Both this year's Balance Sheet and Income Statement will be wrong
D) Both this year's Balance Sheet and Income Statement will be wrong
244) The Trueblood Criterion is used: A) By managers to maximize reported income B) By managers to smooth reported income C) By managers to make decisions D) By accountants to make rules for financial reporting
D) By accountants to make rules for financial reporting
162) Specific Identification is used by: Starbucks B) Manufacturers C) Grocery Stores D) Car dealers
D) Car dealers
285) In a perpetual inventory system, the purchase of inventory is debited to: A) Inventory. B) Accounts Payable. C) Purchases. D) Cost of Goods Sold.
D) Cost of Goods Sold.
13) Under the principle of lower of cost and net realizable value, when a company has 10 units of inventory A with net realizable value of $50 and a cost of $60, what is the adjustment? A) Debit Cost of Goods Sold $500; credit Inventory $500. B) Debit Inventory $100; credit Cost of Goods Sold $100. C) Debit Inventory $500; credit Cost of Goods Sold $500. D) Debit Cost of Goods Sold $100; credit Inventory $100.
D) Debit Cost of Goods Sold $100; credit Inventory $100.
16) In January, 2018, ABC sells a gift card for $50 and receives cash. In February, 2018, the customer comes back and spends $20 of their gift card on a water bottle. What would be the appropriate journal entry for the purchase of the water bottle? A) Debit Deferred Revenue, $50; credit Sales Revenue, $50. B) No journal entry is necessary. C) Debit Sales Revenue, $20; credit Deferred Revenue, $20. D) Debit Deferred Revenue, $20; credit Sales Revenue, $20.
D) Debit Deferred Revenue, $20; credit Sales Revenue, $20
142) ABC estimates uncollectible accounts based on the percentage of accounts receivable. What effect will recording the estimate of uncollectible accounts have on the accounting equation? A) Increase assets and decrease stockholders' equity. B) Increase liabilities and decrease stockholders' equity. C) Decrease assets and decrease liabilities. D) Decrease assets and decrease stockholders' equity.
D) Decrease assets and decrease stockholders' equity.
150) For which step in the Operating cycle is there a difference between manufacturers and retailers? Fourth B) Third C) Second D) First
D) First
330) Opening Inventory Plus Purchases Equals A) Sales B) Cost of Goods Sold C) Ending Inventory D) Goods Available for Sale
D) Goods Available for Sale
216) Which of the following is true regarding LIFO and FIFO? A) The amount reported for COGS is based on net realizable value of inventory if LIFO is used. B) In a period of decreasing costs, LIFO results in lower net income than FIFO. C) In a period of decreasing costs, LIFO results in lower total assets than FIFO. D) In a period of rising costs, LIFO results in lower net income than FIFO.
D) In a period of rising costs, LIFO results in lower net income than FIFO
318) Assuming a current ratio of 1.2 and an acid-test ratio of 0.80, how will an increase in accounts receivable affect each ratio? A) Decrease the current ratio and increase the acid-test ratio. B) No change to the current ratio and decrease the acid-test ratio. C) Decrease the current ratio and decrease the acid-test ratio. D) Increase the current ratio and increase the acid-test ratio.
D) Increase the current ratio and increase the acid-test ratio.
46) When treasury stock is resold at a gain, the difference between its cost and the cash received when resold: A) Increases net income but decreases stockholders' equity. B) Has no effect on net income or stockholders' equity. C) Increases net income. D) Increases stockholders' equity.
D) Increases stockholders' equity.
173) Assume a company's current ratio and acid-test ratio are less than 1.0 before it purchases inventory on credit. When it makes the purchase: A) Its acid-test ratio decreases. B) Its acid-test ratio remains unchanged. C) Its current ratio decreases. D) Its current ratio remains unchanged.
D) Its current ratio remains unchanged.
352) Window dressing are A) Closing entries to prepare financial statements B) Adjusting entries to fix accounting errors C) Illegal entries by management at year end to improve financial ratios D) Legal transactions by management at year end to improve financial ratios
D) Legal transactions by management at year end to improve financial ratios
47) In accounting, goodwill A) Is amortized over its useful life. B) May be recorded whenever a company achieves a level of net income that exceeds the industry average. C) Must be expensed in the period it is recorded because benefits from goodwill are difficult to identify. D) May be recorded when a company purchases another business.
D) May be recorded when a company purchases another business.
45) Which of the following expenses would you find in a factory A) Electric expense B) Both C) Labor expense D) Neither
D) Neither
147) Assuming a current ratio of 1.0 and an acid-test ratio of 0.80, how will the borrowing of cash by issuing a six-month note payable affect each ratio? A) Decrease the current ratio and increase the acid-test ratio. B) Decrease the current ratio and decrease the acid-test ratio. C) Increase the current ratio and increase the acid-test ratio. D) No change to the current ratio and increase the acid-test ratio.
D) No change to the current ratio and increase the acid-test ratio
8) Research and development costs should be capitalized when the: A) Future benefit is probable and the amount cannot be reasonably estimated. B) Future benefit is reasonably possible and the amount can be reasonably estimated. C) Future benefit is probable and the amount can be reasonably estimated. D) None of these.
D) None of these.
52) What is expensed in a factory? A) Period Costs B) Everything C) Product Costs D) Nothing
D) Nothing
308) Permanent accounts are found A) On both the Balance Sheet and Income Statements B) On the Income Statement C) On neither the Balance Sheet and Income Statements D) On the Balance Sheet
D) On the Balance Sheet
6) Return on assets equals: A) Profit margin × Inventory turnover. B) Gross profit ratio × Asset turnover. C) Gross profit ratio × Inventory turnover. D) Profit margin × Asset turnover.
D) Profit margin × Asset turnover.
29) Which type of inventory is in a factory (more than one possible correct answer)? A) Finished Goods B) Direct Labor C) Overhead D) Raw Materials E) Work in Process
D) Raw Materials E) Work in Process
349) After evaluating the lower of cost and net realizable value of inventory, the accountant prepares a year-end adjustment. That adjustment would: A) Increase the company's total assets. B) Decrease the company's cost of goods sold. C) Increase the company's inventory. D) Reduce the company's stockholders' equity.
D) Reduce the company's stockholders' equity.
328) Which statement is true about Operating Cash Flows? A) The Indirect Method is simpler for an investor to understand and is used by most firms B) The Indirect Method is simpler for an investor to understand, the Direct Method is used by most firms C) The Direct Method is simpler for an investor to understand and is used by most firms D) The Direct Method is simpler for an investor to understand, the Indirect Method is used by most firms
D) The Direct Method is simpler for an investor to understand, the Indirect Method is used by most firms
338) Gain contingencies usually are recognized in a company's income statement when: A) The gain is reasonably possible and the amount is reasonably estimable. B) The amount is reasonably estimable. C) The gain is probable and the amount is reasonably estimable. D) The gain is certain.
D) The gain is certain
104) Goodwill is: A) Only recorded by the seller of a business. B) Recorded when created internally through advertising expense. C) Amortized over the greater of its estimated life or forty years. D) The value of a business as a whole, over and above the value of its net identifiable assets.
D) The value of a business as a whole, over and above the value of its net identifiable assets.
314) LAST year a company made an error in its ending inventory A) This year's Balance Sheet will be wrong but the Income Statement will be correct B) Neither this year's Balance Sheet nor Income Statement will be wrong C) Both this year's Balance Sheet and Income Statement will be wrong D) This year's Balance Sheet will be correct but the Income Statement will be wrong
D) This year's Balance Sheet will be correct but the Income Statement will be wrong
356) Of the following inventories 1) Raw Materials Inventory, 2) Work in Process Inventory, 3) Finished Goods Inventory, how many would you find in a factory? A) One B) None C) Three D) Two
D) Two
309) When a company spends money to fix an appliance under warranty, they Credit Cash and Debit: A) an asset B) an income account C) an expense D) a liability
D) a liability
80) The year end adjusting entry for warranties Credits A) an asset B) an income account C) an expense D) a liability
D) a liability
351) When a firm gets less risky what will happen to its bonds A) the market interest rate of the bonds will go down and the price of the bonds will go down B) there is no definite answer C) the market interest rate of the bonds will go up and the price of the bonds will go down D) the market interest rate of the bonds will go up and the price of the bonds will go up E）the market interest rate of the bonds will go down and the price of the bonds will go up
E）the market interest rate of the bonds will go down and the price of the bonds will go up