practice final 1 accounting
In which of the following sequences are these three financial statements usually prepared? a. (i) Statement of stockholders' equity, (ii) income statement, and (iii) balance sheet b. (i) Balance sheet, (ii) statement of stockholders' equity, and (iii) income statement. c. (i) Balance sheet, (ii) income statement and (iii) statement of stockholders' equity. d. (i) Income statement, (ii) statement of stockholders' equity, and (iii) balance sheet. e. (i) Income statement, (ii) balance sheet, and (iii) statement of stockholders' equity.
(i) Income statement, (ii) statement of stockholders' equity, and (iii) balance sheet.
Which of the following best describes a chart of accounts a. A chart of accounts is the list of the accounts in a given firm's ledger. b. A chart of accounts is the list of accounts allowed by the Financial Accounting Standards Board. c. A chart of accounts is the list of a firm's accounts that have non-zero balances at a particular point in time. d. A chart of accounts is the list of a firm's accounts that have zero balances at a particular point in time. e. A chart of accounts is the list of accounts deemed suitable for firms belonging to a particular industry.
A chart of accounts is the list of the accounts in a given firm's ledger.
For which of the following errors should the appropriate amount be added to the cash balance per books on a company's bank reconciliation? a. A check written by the company for $95 was incorrectly recorded on the company's books as $59. b. A check written by the company for $35 was incorrectly recorded by the bank as $350. c. None of these d. A check written by the company for $200 was incorrectly recorded by the bank as $20. e. A check written by the company for $57 was incorrectly recorded on the company's books as $75.
A check written by the company for $57 was incorrectly recorded on the company's books as $75.
Which one of these statements about promissory notes is incorrect? a. Promissory notes are more liquid than accounts receivable. b. Notes receivable are formal agreements. c. A promissory note is not a negotiable instrument. d. The party to whom payment is to be made is called the payee. e. The party making the promise to pay is called the maker.
A promissory note is not a negotiable instrument.
When preparing a bank reconciliation, how are deposits in transit handled? a. Added to the book balance b. Deducted from the bank balance c. Added to the bank balance d. Deducted from the book balance e. They are not used when preparing a bank reconciliation.
Added to the bank. balance
Which one of the following is not a justification for adjusting entries? a. Adjusting entries are necessary to conform with the requirements of the cash basis of accounting. b. Adjusting entries are necessary to make sure that balance sheet accounts and income statement accounts are adjusted prior to preparing financial statements. c. Adjusting entries are necessary to ensure that the expense recognition principle is followed. d. Adjusting entries are necessary to ensure that the revenue recognition principle is followed. e. Adjusting entries are necessary to make sure financial statements are in accordance with generally accepted accounting principles.
Adjusting entries are necessary to conform with the requirements of the cash basis of accounting.
Which one of the following is not a control procedure used for over-the-counter receipts? a. Providing the customers with an itemized receipt b. None of these are control procedures used for over-the-counter receipts c. Use of a cash register where the amount rung up is clearly visible to the customer d. All of these are control procedures used for over-the-counter receipts e. A cash register's tape is locked in the register and only a supervisor can access it
All of these are control procedures used for over-the-counter receipts
Which of the following is correct concerning the adjusted trial balance? a. None of these statements are correct. b. The company prepares the adjusted trial balance after it has journalized and posted the adjusting entries. c. All of these statements are correct. d. An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjustments are made. e. The adjusted trial balance provides the primary basis for the preparation of financial statements.
All of these statements are correct.
Which of the following events is not recorded in a company's accounting records? a. The owner withdraws cash for personal use. b. An employee is terminated. c. Equipment is purchased on account. d. A cash investment is made into the business. e. A company provides services to a customer for cash.
An employee is terminated.
A trial balance would only help in detecting which one of the following errors? a. For a given transaction, the account that should have been debited was credited and the account that should have been credited was debited. b. A trial balance would help detect all of these errors. c. A journal entry that is posted twice. d. A transaction that is not journalized. e. An error when transferring the debit side of journal entry to the ledger occurred; it was recorded as a credit. The credit side of the transaction was recorded correctly.
An error when transferring the debit side of journal entry to the ledger occurred; it was recorded as a credit. The credit side of the transaction was recorded correctly.
Which factor would not affect the gross profit rate? a. An increase in the sale of luxury items b. An increase in the use of "discount pricing" to sell merchandise c. An increase in the cost of heating the store d. An increase in the price of inventory items e. None of these would affect the gross profit rate
An increase in the cost of heating the store
In the annual report, where would a financial statement reader find out if the company's financial statements give a fair depiction of its financial position and operating results? a. Auditor's report b. Management discussion and analysis c. Notes to the financial statements d. Cover page e. Balance sheet
Auditor's report
Which of the following is not one of the main factors that contributes to fraudulent activity and is also known as part of the fraud triangle? a. Rationalization b. Opportunity c. None of these d. Financial pressure e. Bonding
Bonding
Which one of the following is not a physical control? a. All of these are physical controls b. Alarms to prevent break-ins c. Television monitors to deter theft d. Bonding employees e. Time clocks for recording time worked
Bonding employees
Which of the following statements is true with regards to bonds? a. The face value of a bond changes as bond discount or premium is amortized. b. The market price of a bond equals its maturity value. c. Callable bonds can be redeemed by the issuing company at a stated dollar amount prior to maturity. d. The contractual interest rate of a bond is the rate the investors demand for loaning funds. e. Secured bonds can be redeemed by the bondholder prior to maturity.
Callable bonds can be redeemed by the issuing company at a stated dollar amount prior to maturity.
Which pair of accounts follows the rules of debits and credits in relation to increases and decreases in the same manner? a. Retained Earnings and Supplies b. Common Stock and Rent Expense c. Interest Expense and Accounts Payable d. Dividends and Accumulated Depreciation--Equipment e. Cash and Income Tax Expense
Cash and Income Tax Expense
If revenues are recognized only when a customer pays, what method of accounting is being used? a. Cash-basis b. Accrual-basis c. Periodicity d. Matching basis e. Recognition basis
Cash-basis
Which of the following is true regarding closing entries? a. Closing entries cause the revenue and expense accounts to have zero balances. b. Closing entries reduce the number of permanent accounts. c. Closing entries are prepared before preparing the financial statements. d. reduce the retained earnings account to zero. e. Closing entries summarize the company's financing activities.
Closing entries cause the revenue and expense accounts to have zero balances.
Which of the following statements is false with regards to internal controls? a. Publicly-traded companies must ensure that their internal controls are reliable and effective. b. Independent outside auditors of publicly-traded companies must attest to the internal control system. c. Company officers of publicly-traded companies can be imprisoned if their company's fail to comply with internal control rules. d. None of these is false. e. Companies must develop a system of internal control even if they are not publicly-traded.
Companies must develop a system of internal control even if they are not publicly-traded.
Which one of the following is not a physical control? a. Bank safety deposit boxes for important papers b. Locked warehouses for inventories c. Conduct thorough background checks on job applicants d. Safes and vaults to store cash e. All of these are physical controls
Conduct thorough background checks on job applicants
An accountant has debited an asset account for $1,000 and credited a stockholders' equity account for $500. There is one missing part of the transaction. Which of the following can be the missing part of the transaction that needs to be recorded? a. Debit another liability account for $1,000. b. Credit a different asset account for $500. c. Credit another asset account for $1,000. d. Nothing further must be done. e. Debit a different stockholders' equity account for $500.
Credit a different asset account for $500.
An accountant has debited an asset account for $800 and credited a liability account for $700. There is one missing part of the transaction. Which of the following cannot be a correct way to complete the recording of the transaction? a. All of these can be a correct way to complete the transaction. b. Credit a stockholders' equity account for $100. c. None of these can be a correct way to complete the transaction. d. Debit a stockholders' equity account for $100. e. Credit a different asset account for $100.
Debit a stockholders' equity account for $100.
A company operates a bed and breakfast. As customers make reservations they are required to pay cash in advance equal to one-half of the rate for their stay. How should the bed and breakfast account for $1,000 cash received from customers paying in advance of the reservation? a. Debit the Cash account and credit the Service Revenue account. b. Debit the Cash account and credit the Sales Revenue account. c. Debit the Unearned Revenue account and credit the Cash account. d. Debit the Unearned Revenue account and credit the Service Revenue account. e. Debit the Cash account and credit the Unearned Revenue account.
Debit the Cash account and credit the Unearned Revenue account.
On January 1, a corporation issues $1,000,000 of 10-year, 6% bonds at face value. Which one of the following is one effect of the entry to record the issuance of the bonds? a. Debit to Cash for $1,000,000 b. Debit to Premium on Bonds Payable for $60,000 c. Credit to Cash for $1,000,000 d. Credit to Cash for $60,000 e. Credit to Bond Interest Expense of $60,000
Debit to Cash for $1,000,000
Which of the following bank reconciliation items would not result in an adjusting entry being recorded by the company in its journal? a. All of these require an adjusting entry. b. Deposits in transit c. NSF check of customer d. Service charge e. Collection of a note by the bank
Deposits in transit
Which account and its balance is not reported on the balance sheet or income statement? a. Dividends b. Service Revenue c. Cash d. Accumulated Depreciation e. Notes Payable
Dividends
Internal controls are methods and measures adopted to do all of the following except: a. Enhance accuracy and reliability of accounting records. b. Safeguard assets. c. Increase efficiency of operations. d. Ensure compliance with laws and regulations e. Eliminate liabilities associated with product-related lawsuits.
Eliminate liabilities associated with product-related lawsuits.
Ownership passes to the buyer when the goods are received from the public carrier if the goods are shipped a. FOB shipping point. b. FOB destination. c. FOB buyer. d. FOB transit. e. FOB package.
FOB destination
Which one of the following is not one of the principles of internal control? a. Establishment of responsibility b. All of these are principles of internal control c. Documentation procedures d. Independent internal verification e. Financial performance measures
Financial performance measures
Publicly traded U.S. companies must provide shareholders with an annual report. Which of the following is not part of the annual report provided to shareholders? a. Income tax return b. Income statement c. Auditor's report d. Notes to the financial statements e. Management discussion and analysis
Income tax return
Which of these transactions would cause the days in inventory ratio to increase the most? a. Decreasing the amount of inventory on hand and decreasing sales b. Increasing the amount of inventory on hand and increasing sales c. Decreasing the amount of inventory on hand and increasing sales d. These affect the inventory ratio equally e. Increasing the amount of inventory on hand and decreasing sales
Increasing the amount of inventory on hand and decreasing sales
Publicly traded U.S. companies must provide shareholders with an annual report. Which of the following is not part of the annual report provided to shareholders? a. Statement of cash flows b. Management discussion and analysis c. Internal and external users report d. Auditor's report e. Notes to the financial statements
Internal and external users report
Which of the following is an asset? a. Inventory b. Dividends c. Interest expense d. Notes payable e. Retained earnings
Inventory
Which of the following correctly describes the closing process? a. Net income is transferred to the Cash account. b. Permanent accounts are closed to zero balances. c. All of these are correct. d. Each stockholders' equity account is closed to a zero balance. e. Net income is transferred to the Retained Earnings account.
Net income is transferred to the Retained Earnings account.
Which is true if the ending inventory is overstated? a. Net income will be understated and the stockholders' equity will be understated. b. Net income will be understated and the stockholders' equity will be overstated. c. Net income will be overstated and the stockholders' equity will be understated. d. None of these e. Net income will be overstated and the stockholders' equity will be overstated.
Net income will be overstated and the stockholders' equity will be overstated.
Which of the following does not affect the company's current ratio? a. Use excess cash to buy long-term investments. b. Paying the next month's rent one month in advance. c. Pay a dividend to shareholders. d. Issue a short-term note in exchange for cash. e. Sell services to customers in exchange for cash.
Paying the next month's rent one month in advance.
Which trial balance will likely list the smallest number of accounts? a. Post-closing trial balance b. All of these will contain the same number of accounts. c. Pre-adjusted trial balance d. Trial balance e. Adjusted trial balance
Post-closing trial balance
Which of the following is least likely to contribute to a company's internal control system? a. Bonding employees b. Conducting background check on job applicants c. Establishing a separation of duties d. Preparing an extensive marketing plan e. Using pre-numbered documents
Preparing an extensive marketing plan
Principles of internal control are an important part of a company's efforts to address risks it faces, such as fraud. Which of the following is not a principle of internal control? a. Documentation procedures b. Segregation of duties c. Establishment of responsibility d. Human resource controls e. Rationalization of risks
Rationalization of risks
Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? a. Harder to transfer ownership b. Reduced legal liability for owners c. Most common form of organization d. Simplest to establish e. Lower taxes
Reduced legal liability for owners
Which of the following is not an effective internal control over cash disbursements? a. Bonding of personnel who handle cash b. Requiring personnel who authorize cash disbursements to work continuously without vacations c. The person signing checks is not the person who records disbursements d. Only designated personnel are authorized to approve vendors e. All of these are effective internal controls over cash disbursements
Requiring personnel who authorize cash disbursements to work continuously without vacations
Which of the following accounts appears on the adjusted trial balance with its beginning balance but appears on the balance sheet with its ending balance? a. Unearned Revenue b. Cash c. Prepaid Insurance d. Accumulated Depreciation e. Retained Earnings
Retained Earnings
Which of the following would appear on a balance sheet? a. Retained earnings b. Dividends c. Net cash flows from operating activities d. Salaries and wages expense e. Service revenue
Retained earnings
Which one of the following is a primary component of an internal control system? a. Risk assessment b. Opportunity c. Fraud d. Bonding e. Physical controls
Risk assessment
At Emerson Company, one bookkeeper prepares the cash deposits while the other bookkeeper enters the collections in the journal and ledger. Which of the following is the best explanation of this type of internal control principle over cash receipts? a. Documentation procedures. b. Bonding of employees. c. Segregation of duties. d. Mechanical controls. e. Physical controls.
Segregation of duties.
Which of the following is evidence that a transaction has occurred that needs to be recording in a company's accounting records? a. Journal b. Chart of accounts c. Trial balance d. Source document e. Ledger
Source document
Companies prepare various types of trial balances. Which trial balance lists all of a company's permanent and temporary accounts? a. All of these list the same number of accounts. b. The trial balance prepared before recording adjusting entries c. The adjusted trial balance d. The pre-disclosure trial balance e. The post-closing trial balance
The adjusted trial balance
Which statement is incorrect concerning the adjusted trial balance? a. The adjusted trial balance is prepared after the adjusting entries have been journalized and posted. b. An adjusted trial balance proves the equality of the total debit balances and the total credit balances in the ledger after all adjusting entries have been recorded. c. The adjusted trial balance lists the account balances sorting them in order of their dollar magnitude. d. The adjusted trial balance is the primary basis for the preparation of the financial statements. e. All of these are correct statements.
The adjusted trial balance lists the account balances sorting them in order of their dollar magnitude.
A company's gross profit rate increased in the current year relative to the prior year. Which of the following would be a possible explanation for this change? a. The company increased its product markdowns and discounts offered to customers in the current year. b. The company's average margin between the selling price and the inventory cost decreased over this two-year period. c. The company's new profit lines with lower margins became a larger component of their sales. d. None of the above would explain Haverty's increase in gross profit rate. e. The company's global sourcing efforts at the beginning of the current year resulted in a lower cost of merchandise sold.
The company's global sourcing efforts at the beginning of the current year resulted in a lower cost of merchandise sold.
Which of the following are advantages of partnerships relative to corporations? a. Owners not being personally liable for the business' debts and the ease of creating the business. b. The ability of the business to raise funds and owners' not being personally liable for the business' debts. c. The ability of the business to raise funds and low taxes. d. The ease of creating the business and low taxes. e. The ability to transfer ownership easily and the ease of creating the business.
The ease of creating the business and low taxes.
Which of the following statements is correct regarding internal controls? a. Control is most effective when two or three people are given responsibility for the same task. b. The independent auditor is the party responsible for a company's internal control policies and procedures. c. All of these. d. Independent internal verification is unnecessary if a company has internal control procedures in place. e. The person who has custody of assets should not perform the record keeping for the assets.
The person who has custody of assets should not perform the record keeping for the assets.
Which of these statements about national credit card (e.g., Visa) sales is false? a. The retailer pays the credit card issuer a fee based on a percentage of the invoice price charged the customer. b. A retailer's acceptance of a national credit card is a form of factoring or selling of a receivable by a retailer. c. The card issuer bears the risk of the customer never paying for his or her purchases. d. The retailer conducts the credit investigation of the customer. e. Upon notification of a credit card charge from a retailer, the bank that issued the card adds the amount to the seller's bank balance.
The retailer conducts the credit investigation of the customer.
Which of the following is a stockholder's right? a. The right to vote in the election of the company president b. The right to share in the corporate earnings through receipt of dividends c. The right to declare a dividend d. None of these e. The right to participate in management decisions
The right to share in the corporate earnings through receipt of dividends
Which of the following is a stockholder's right? a. None of these b. The right to participate in management decisions c. The right to declare a dividend d. The right to vote in the election of the company president e. The right to vote in the election of the board of directors
The right to vote in the election of the board of directors
Which of the following controls would best help detect the removal of a blank check by an employee from the back of a company's checkbook for subsequent misappropriation of funds? a. Tracing any debit memorandums from the bank to the company's records. b. Checks marked NSF c. The use of prenumbered checks. d. A review of the cash budget. e. An accounting policies manual.
The use of prenumbered checks.
Internal control consists of all of the methods and measures adopted within an organization to do all of the following except a. To enhance the reliability of accounting records b. To deliver goods and services to customers more rapidly c. To ensure compliance with laws and regulations d. To safeguard assets e. To increase efficiency of operations
To deliver goods and services to customers more rapidly
Why should a bank reconciliation be prepared? a. To make sure the company has not paid the wrong vendor for inventory purchased b. To make sure the cash is being collected from customers at the point of sale c. To identify errors by either the bank or the company in recording transactions d. To explain any difference between the bank deposits and the checks written e. To make sure outstanding checks are deposited in a timely manner
To identify errors by either the bank or the company in recording transactions
Which of the following is not a typical example of a prepaid expense? a. Supplies b. Rent c. Wages d. Insurance e. All of these are examples of prepaid expenses
Wages
When is a receivable recorded by a service organization? a. When service is provided on account b. When the related expenses are incurred c. When the bill is sent to the customer d. When the year ends e. When the customer pays
When service is provided on account
Under the direct write-off method of accounting for uncollectible accounts a. the going concern assumption is emphasized. b. a specific account receivable is decreased for the actual amount of bad debt at the time of write-off. c. bad debt expense is always recorded in the period in which the revenue was recorded. d. the allowance account is increased for the actual amount of bad debt at the time of write-off. e. balance sheet relationships are emphasized.
a specific account receivable is decreased for the actual amount of bad debt at the time of write-off.
The obligation to pay for goods purchased from suppliers is called a(n) a. cost of goods sold. b. account payable. c. account receivable. d. expense. e. investing activity.
account payable.
The principal purpose of posting to the ledger is to a. transfer the balances of the temporary accounts to the retained earnings account. b. confirm that debits equal credits. c. accumulate the effects of journalized transactions in the individual accounts to track their balances. d. enter transactions directly into the adjusted trial balance. e. help identify errors recorded in the journal.
accumulate the effects of journalized transactions in the individual accounts to track their balances.
The cost of successfully defending a patent in an infringement suit should be a. added to the Patent account. b. deducted from the book value of the patent. c. recognized as a loss in the current period. d. recorded as an increase to stockholders' equity. e. charged to Legal Expenses.
added to the Patent account.
Financial statements can be prepared directly from the a. adjusted trial balance. b. post-closing trial balance. c. trial balance. d. All of these are correct. e. reversing trial balance.
adjusted trial balance.
The primary basis for the preparation of the financial statements is the a. general journal b. trial balance. c. adjusted trial balance. d. post-closing trial balance. e. general trial balance.
adjusted trial balance.
When the allowance method for uncollectible accounts is used, a company records Bad Debits Expense when a. a previously written-off account receivable is recorded. b. an accountant becomes uncollectible and it is written off. c. adjusting entries are recorded. d. a customer's account receivable becomes past due. e. a sale on account is recorded.
adjusting entries are recorded.
Under the accrual basis of accounting a. cash must be received before revenue can be recognized. b. net income is calculated by subtracting cash outflows from cash inflows. c. adjusting entries are used to change account balances before financial statements are prepared. d. net income equals cash flows from operations e. expenses are recognized only after they are both paid and incurred.
adjusting entries are used to change account balances before financial statements are prepared.
The cost of assets consumed or services used is also known as a. a liability. b. an expense. c. an equity. d. an asset. e. a revenue.
an expense.
Under the cash basis of accounting, an amount received from a customer in advance of providing the services would be reported as a (n): a. an increase to assets and an increase to liabilities. b. an increase to an asset and a decrease to a different asset. c. an increase to assets and an increase to expenses. d. none of these. e. an increase to assets and an increase to revenue.
an increase to assets and an increase to revenue.
A company uses the periodic inventory method. An understatement of ending inventory in one period results in a. no effect on net income of the next period. b. an overstatement of net income of the next period. c. an understatement of net income of the next period. d. an overstatement of the ending inventory of the next period. e. an overstatement of the beginning inventory of the next period.
an overstatement of net income of the next period.
A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000; the ending inventory for this period is correct. The amounts reflected in the current end of the period balance sheet are a. assets are correct and stockholders' equity is correct. b. None of these c. assets are overstated and stockholders' equity is correct. d. assets are understated and stockholders' equity is understated. e. assets are overstated and stockholders' equity is overstated.
assets are correct and stockholders' equity is correct.
Obtaining insurance protection against dishonest employees an example of a. documentation procedures b. bonding c. independent verification d. establishing responsibility e. segregation of duties
bonding
A gain or loss on disposal of a plant asset is determined by comparing the a. book value of the asset with the proceeds received from its sale. b. book value of the asset with the asset's original cost. c. original cost of the asset with its accumulated depreciation. d. replacement cost of the asset with the asset's original cost. e. original cost of the asset with the proceeds received from its sale.
book value of the asset with the proceeds received from its sale.
A company's system of internal control a. must be infallible. b. must be premised on the concept of absolute assurance. c. usually has costs exceeding their benefits. d. is optional after passage of the Sarbanes-Oxley Act. e. can be rendered ineffective by employee collusion.
can be rendered ineffective by employee collusion.
A company uses the allowance method for uncollectible accounts. Last year, a customer purchased $100 of services on account from the company. In the current year, the company is notified that the customer is bankrupt and will not pay the company the amount owed. What journal entry does the company record when it is notified that the customer will not pay? a. debit Bad Debt Expense and credit Accounts Receivable. b. debit Allowance for Doubtful Accounts and credit Accounts Receivable. c. debit Bad Debt Expense and credit Allowance for Doubtful Accounts. d. debit Allowance for Doubtful Accounts and credit Bad Debt Expense. e. debit Bad Debt Expense and credit Cash.
debit Allowance for Doubtful Accounts and credit Accounts Receivable.
An adjusting entry recording accrued interest on a note receivable collectible next year consists of a a. debit to Interest Receivable and a credit to Cash b. debit to Interest Expense and a credit to Interest Payable c. debit to Interest Expense and a credit to Notes Payable d. debit to Interest Receivable and a credit to Interest Revenue e. debit to Interest Expense and a credit to Cash
debit to Interest Receivable and a credit to Interest Revenue
A company that receives money in advance of performing a service a. debits Cash and credits Accounts Receivable. b. debits Unearned Service Revenue and credits Accounts Payable. c. debits Cash and credits Service Revenue. d. debits Cash and credits Unearned Service Revenue. e. debits Cash and credits Prepaid Insurance.
debits Cash and credits Unearned Service Revenue.
The net effect of declaring and paying a cash dividend on a company's financial statements is to a. decrease assets and decrease stockholders' equity. b. increase assets and increase stockholders' equity. c. decrease liabilities and increase stockholders' equity. d. decrease assets and decrease liabilities. e. increase expenses and decrease liabilities.
decrease assets and decrease stockholders' equity.
If a company collects from a customer after the customer's account has been written off as uncollectible, the company is said to recover the uncollectible account. When a company uses accrual basis accounting and it recovers an uncollectible accounts the recovery a. requires the company retroactively restate its prior period's income at a higher amount than originally reported. b. does not affect the company's total assets in the period it is collected. c. will decrease the company's total assets in the period it is collected. d. will increase the company's total assets in the period it is collected. e. requires the company retroactively restate its prior period's income at a lower amount than originally reported.
does not affect the company's total assets in the period it is collected.
If a company fails to record its estimated bad debts expense then its a. revenues are understated. b. cash is overstated. c. accounts receivable cash realizable value is understated. d. equity is overstated. e. expenses are overstated.
equity is overstated.
Allowing only the treasurer to sign checks is an example of a. resource controls. b. segregation of duties. c. poor internal controls. d. documentation procedures. e. establishment of responsibility.
establishment of responsibility.
A company performs services for cash. This transaction will immediately affect the a. balance sheet and retained earnings statement only. b. income statement, retained earnings statement, cash flows statement, and balance sheet. c. income statement and cash flows statement only. d. income statement only. e. income statement, balance sheet, and retained earnings statement only.
income statement, retained earnings statement, cash flows statement, and balance sheet.
The effects of stockholders investing cash in exchange for additional shares of stock on the basic accounting equation are to a. increase liabilities and increase stockholders' equity. b. decrease assets and decrease stockholders' equity. c. increase assets and increase stockholders' equity. d. increase assets and increase liabilities. e. decrease assets and decrease liabilities.
increase assets and increase stockholders' equity.
Issuing new shares of common stock will a. increase both retained earnings and common stock. b. decrease retained earnings. c. increase common stock. d. decrease common stock. e. increase retained earnings.
increase common stock.
The purchase of an asset, such as supplies, on account a. increases the purchaser's assets and stockholders' equity. b. decreases the purchaser's assets and increases liabilities. c. increases the purchaser's assets and decreases stockholders' equity d. leaves the purchaser's total assets unchanged. e. increases the purchaser's assets and liabilities.
increases the purchaser's assets and liabilities.
Accrued expenses, such as interest expense, are a. incurred after they are paid and recorded. b. paid and recorded in an asset account before they are used or consumed. c. paid and recorded in an asset account after they are used or consumed. d. incurred and recorded before they are paid. e. journalized only when cash is paid.
incurred and recorded before they are paid.
A ledger a. shows only accounts' balances and not changes in their balances. b. is a collection of all of the accounts used by a company with their balances and changes in balances. c. is the first place a company records its transactions. d. provides a chronological record of transactions with all of the effects of each transaction recorded in one place. e. contains only asset, liability, and equity accounts, but does not contain revenue or expense accounts.
is a collection of all of the accounts used by a company with their balances and changes in balances.
The balance of Allowance for Doubtful Accounts prior to recording the end of year adjusting entry to record Bad Debt Expense a. will never show a debit balance at this stage in the accounting cycle. b. is relevant when using the percentage-of-receivables basis. c. equals the Bad Debt Expense to be recorded on the income statement. d. is relevant when using the direct write-off method. e. equals the Bad Debt Expense to be recorded as a year-end adjusting entry.
is relevant when using the percentage-of-receivables basis.
Treasury Stock a. is a retained earnings account. b. cannot be held more than one year. c. has liquidation rights. d. is sometimes acquired in order to reissue it to company officers and employees. e. is a contra asset account.
is sometimes acquired in order to reissue it to company officers and employees.
The accounting cycle is a series of steps and their usual sequence is a. prepare a trial balance, post transactions to the ledger, and then journalize transactions. b. journalize transactions, post transactions to the ledger, and then prepare a trial balance. c. journalize transactions, prepare a trial balance, and then post transactions to the ledger. d. post transactions to the ledger, prepare a trial balance, and then journalize transactions. e. post transactions to the ledger, journalize transactions, and then prepare a trial balance.
journalize transactions, post transactions to the ledger, and then prepare a trial balance.
Claims of creditors are called a. income payable. b. liabilities. c. retained earnings. d. stockholders' equity. e. dividends.
liabilities.
Payments from customers received before performing services for the customers are recorded as a. dividends. b. expenses. c. revenues. d. liabilities. e. equity.
liabilities.
The statement "Bond prices vary inversely with changes in the market rate of interest" means that if the a. contractual interest rate increases, the market rate of interest will decrease. b. bonds must be convertible bonds. c. market rate of interest increases, the contractual interest rate will decrease. d. contractual interest rate increases, then bond prices will go down. e. market rate of interest decreases, then bond prices will go up.
market rate of interest decreases, then bond prices will go up.
The segment of a corporation's annual report that describes the corporation's accounting methods is the a. balance sheet. b. income statement. c. management discussion and analysis. d. auditor's report e. notes to the financial statements.
notes to the financial statements.
When terms are FOB shipping point a. ownership of the goods transfer to the seller when the buyer pays for them. b. ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller. c. ownership of the goods remains with the seller until the goods are sold by the buyer. d. ownership of the goods transfer to the seller at the end of the year. e. ownership of the goods remains with the seller until the goods reach the buyer.
ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller.
Under the cash basis of accounting, an amount received from a customer in advance of providing the services would be reported as a(n): A)liability B)expense C)prepaid expense D)revenue
revenue
Claims of owners are called a. income payable. b. liabilities. c. retained earnings. d. stockholders' equity. e. dividends.
stockholder's equity.
Which of the following is not a principle of internal control? a. Segregation of duties b. Documentation procedures c. All of these are principles of internal control. d. teamwork between employees e. Physical controls
teamwork between employees
The book value of equipment owned by a business and used in its operations is equal to a. the asset's salvage value. b. the asset's fair market value. c. the asset's cost. d. the asset's cost minus its accumulated depreciation. e. the asset's cost minus its outstanding mortgage.
the asset's cost minus its accumulated depreciation.
A low number of days in inventory may indicate a. there is a relatively low chance that sales opportunities may be lost because of inventory shortages. b. All of these c. the company has a relatively small amount of funds tied up in inventory. d. there is a relatively high chance of inventory becoming obsolete before it can be sold. e. None of these
the company has a relatively small amount of funds tied up in inventory.
Reasonable assurance rests on the premise that a. employees are basically honest people. b. a system of internal controls will prevent errors. c. guarantees are provided against errors. d. bonding will prevent employees from stealing. e. the costs of establishing controls should not exceed their expected benefit.
the costs of establishing controls should not exceed their expected benefit.
Under the allowance method of accounting for uncollectible accounts, a. all of these. b. the net realizable value of accounts receivable is greater before an account is written off than after it is written off. c. Bad Debt Expense is debited when a specific account is written off as uncollectible. d. Allowance for Doubtful Accounts is closed each year to Income Summary. e. the net realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
the net realizable value of accounts receivable in the balance sheet is the same before and after an account is written off.
If a company that uses the allowance method for uncollectible accounts collects an account receivable after having been previously written it off a. cash decreases. b. only the control account needs to be credited. c. there will be both a debit and a credit to accounts receivable. d. the allowance account should be debited. e. both income statement and balance sheet accounts will be affected.
there will be both a debit and a credit to accounts receivable.
Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is debited a. when a credit sale is past due. b. whenever a pre-determined amount of credit sales have been made. c. when an account is determined to be uncollectible. d. whenever sales revenue is recorded. e. at the end of each accounting period.
when an account is determined to be uncollectible.
Manufactured inventory that has begun the production process but is not yet completed is called a. all of these b. merchandise inventory. c. work in process. d. finished goods. e. raw materials.
work in process.