ACC 201 Practice Final SG

Depreciation

A cost allocation process

Liabilities

Creditor claims against the assets of the business

Current ratio

Current assets divided by current liabilities

Economic entity assumption

Economic events can be identified with a particular unit of accountability

Expense Recognition Principle

Efforts are related to accomplishments

Cash basis

Events recorded only in periods the company receives or pays cash

Source document

Evidence that a transaction has taken place

Accrued expenses

Expenses incurred but not yet paid

Prepaid expenses

Expenses paid before they are incurred

Comparability

Different companies using the same accounting principles

Dividends

Distributions of cash from a corporation to its stock holders

Compound interest

Return on principal plus interest for two or more periods

Revenue Recognition Principle

Revenue is recognized when the performance obligation is satisfied

Accrued revenues

Revenues earned but not yet received

Consistency

Same accounting principles and methods used from year to year within a company

Periodicity assumption

The economic life of a business can be divided into artificial time periods

Ledger

The entire group of accounts maintained by a company

Working capital

The excess of current assets over current liabilities

Which of the following would be deducted from the balance per bank on a bank reconciliation? a. Outstanding checks. b. Deposits in transit. c. Notes collected by the bank. d. Service charges.

a. Outstanding checks.

Which depreciation method is most frequently used in businesses today? a. Straight-line. b. Declining-balance. c. Units-of-activity. d. Double-declining-balance.

a. Straight-line.

Posting

Transferring journal entries to ledger accounts

An internal Control system is important to a business because it a. All of the above b. Helps ensure that accurate and reliable accounting records are produced c. Involves procedures adopted by a business to encourage adherence to prescribed managerial policies and safeguard assets d. Is a system which promotes operational efficiencies and protects the business assets from waste, fraud, and theft

a. All of the above

Which of the following terms fit this definition: "The area of accounting principally concerned with reporting to external users." a. Financial accounting b. Managerial accounting c. Matching principle d. Double-entry concept

a. Financial accounting

A credit sale of $1,400 is made on July 15, terms 2/10, net/30, on which a return of $100 is granted on July 18. What amount is received as payment in full on July 24? a. $1,400 b. $1,274 c. $1,350 d. $1,372

b. $1,274

In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure? a. Average cost method b. LIFO method c. FIFO method d. Need more information to answer

b. LIFO method

Which of the following would be unethical? a. Recording accrued salaries and wages expense. b. Recording backdated revenue. c. Recording accrued interest revenue. d. Recording prepaid expense adjustments.

b. Recording backdated revenue.

Which of the following is not a significant date with respect to dividends? a. The declaration date. b. The incorporation date. c. The record date. d. The payment date.

b. The incorporation date.

If the market interest rate for a bond is higher than the stated interest rate, the bond will sell at a. a premium. b. a discount. c. par. d. either a discount or premium.

b. a discount.

For Year 2 Daisy Corporation reported net income of $60; net sales $800; and average shares outstanding 6. There were no preferred stock dividends. What were the Year 2 earnings per share for Daisy? a. $0.40 b. $143.33 c. $133.33 d. $10.00

d. $10.00

If total assets are $100,000, liabilities are $60,000, and Common Stock is $25,000, the Retained Earnings of the firm is: a. $135,000 b. $160,000 c. $185,000 d. $15,000

d. $15,000

The interest on a $15,000, 6%, 60-day note receivable is a. $75. b. $900. c. $450. d. $150.

d. $150.

At January 1, 2017, Troyer Industries reported Retained Earnings of $350,000. During 2017, Troyer had a net loss of $75,000 and paid dividends to the stockholders of $50,000. At December 31, 2017, the balance in Retained Earnings is a. $350,000 debit. b. $300,000 credit. c. $275,000 debit. d. $225,000 credit.

d. $225,000 credit.

Which of the following companies would most likely have the highest inventory turnover? a. An art gallery. b. An automobile manufacturer. c. A piano manufacturer. d. A bakery.

d. A bakery.

Which of the following methods will result in the highest depreciation in the first year? a. Sum-of-year's-digits. b. Time valuation. c. Straight-line. d. Declining-balance.

d. Declining-balance.

Which one of the following relationships shows the proper structure of a corporation? a. Officers select board of directors, who select the stockholders. b. Officers select stockholders, who select the board of directors. c. Stockholders select officers, who select the board of directors. d. Stockholders select the board of directors, who select officers.

d. Stockholders select the board of directors, who select officers.

Adjusting entries are made to ensure that: a. expense are recognized in the period in which they are incurred. b. revenues are recorded in the period in which the performance obligation is satisfied. c. balance sheet and income statement accounts have correct balances at the end of an accounting period. d. all of these answer choices are correct.

d. all of these answer choices are correct.

Which of the following correctly identifies normal balances of accounts? a. assets - debit liabilities - credit common stock - credit revenues - debit expenses - credit b. assets - debit liabilities - credit common stock - credit revenues - credit expenses - credit c. assets - credit liabilities - debit common stock - debit revenues - credit expenses - debit d. assets - debit liabilities - credit common stock - credit revenues - credit expenses - debit

d. assets - debit liabilities - credit common stock - credit revenues - credit expenses - debit

Treasury Stock is a(n) a. contra asset account. b. retained earnings account. c. asset account. d. contra stockholders' equity account.

d. contra stockholders' equity account.

A company receives $348, of which $28 is for sales tax. The journal entry to record the sale would include a a. debit to Sales Taxes Expense for $28. b. debit to Sales Taxes Payable for $28. c. debit to Sales Revenue for $348. d. debit to Cash for $348.

d. debit to Cash for $348.

Dividends in arrears on cumulative preferred stock a. are considered to be a non-current liability. b. are considered to be a current liability. c. only occur when preferred dividends have been declared. d. should be disclosed in the notes to the financial statements.

d. should be disclosed in the notes to the financial statements.

The current portion of long-term debt should a. be paid immediately. b. be reclassified as a current liability. c. be classified as a long-term liability. d. not be separated from the long-term portion of debt.

b. be reclassified as a current liability

Madson Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 90,000 subscriptions in January at $10 each. What entry is made in January to record the sale of the subscriptions? a. subscriptions recievable 900,000 subscriptions revenue 900,000 b. cash 900,000 unearned subscription revenue 900,000 c. subscriptions receivable 150,000 unearned subscriptions revenue 150,000 d. prepaid subscriptions 900,000 cash 900,000

b. cash 900,000 unearned subscription revenue 900,000

Working capital is a. calculated by dividing current assets by current liabilities. b. used to evaluate a company's liquidity and short-term debt paying ability. c. used to evaluate a company's solvency and long-term debt paying ability. d. calculated by subtracting current assets from current liabilities.

b. used to evaluate a company's liquidity and short-term debt paying ability.

A plant asset with a cost of $600,000 and accumulated depreciation of $570,000 is sold for $70,000. What is the amount of the gain or loss on disposal of the plant asset? a. $70,000 loss. b. $40,000 loss. c. $40,000 gain. d. $70,000 gain.

c. $40,000 gain. $70000 - ($600000 - $570000) = ($40000)(sell. price - (cost - A/D))

Free Cash Flow

operating - investing - financing Cash from operating activities less capital expenditures and cash dividends.

Earnings per share

(Net income - preferred stock dividends) divided by average common shares outstanding

Trial Balance

A list of accounts and their balances at a given time

Chart of accounts

A list of all the accounts used by a company

Annual report

A report prepared by management that presents financial information

Management discussion and analysis

A section of the annual report that presents management's views

Corporation

A separate legal entity under state laws

Account

An accounting record of increases and decreases in specific assets, liabilities, and stockholders' equity items

Materiality

An item important enough to influence the decision of an investor or creditor

Expenses

Consumed assets or services

Book value

Cost less accumulated depreciation

Investing Activities

Future economic benefits

Normal account balance

Has a credit normal balance

Post-closing trial balance

Includes only permanent-balance sheet-accounts

Relevance

Information that has a bearing on a decision.

Assets

Involves acquiring the resources necessary to run the business

Debit

Left side of an account

Solvency ratios

Measures of the ability of the company to survive over a long period of time.

Liquidity ratios

Measures of the short-term ability of the enterprise to pay its maturing obligations.

Intangible assets

Noncurrent assets that do not have physical substance.

Internal users

Officers and others who manage the business

Sole proprietorship

Ownership is limited to one person

Journal

Shows the debit and credit effects of specific transactions

Revenue account

The side which increases an account

Future value of an annuity

The sum of all the payments or receipts plus the accumulated compound interest on them.

Future value of a single amount

The value at a future date of a given amount invested

Present value of a single amount

The value today of a future amount to be received or paid

Present value of an annuity

Value today of a series of future amounts to be received or paid.

ABC Company showed the following information at the end of the first year: Cash received from customers $600 Revenue earned $700 Expenses accrued, including depreciation 146 Proceeds from a bank loan to purchase computer 160 Cash paid for computer to be used for 4 years 200 Cash paid for expenses 340 What is the company's net income for the year based on the accrual basis of accounting? a. $554 b. $604 c. $864 d. $214

a. $554

The interest charged on a $400 note payable, at the rate of 6%, on a 90-day note would be a. $6 b. $2 c. $12 d. $24

a. $6

All of the following statements regarding retained earnings are true except a. retained earnings represents a claim on cash. b. a debit balance in Retained Earnings indicates a deficit. c. some companies may restrict availability of retained earnings for dividends. d. retained earnings is net income that a company retains in a business

a. retained earnings represents a claim on cash.

Which one of the following represents the expanded basic accounting equation? a. Assets = Liabilities + Common Stock + Dividends - Revenue - Expenses b. Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues c. Assets - Liabilities - Dividends = Common Stock + Revenues - Expenses d. Assets = Revenues + Expenses - Liabilities

b. Assets + Dividends + Expenses = Liabilities + Common Stock + Revenues

A business organized as a separate legal entity from its owners is a: a. Government unit b. Corporation c. Partnership d. Proprietor

b. Corporation

A corporation purchased a three-year insurance policy on December 1, Year A for $7,200. Assuming that the corporation debited the prepaid insurance account in recording the original transaction, the adjusting entry on December 31, Year A, the company's yearend, will include a: a. Debit to prepaid insurance for $200 b. Credit to prepaid insurance for $200 c. Debit to insurance expense for $7,000 d. Credit to insurance expense for $7,000

b. Credit to prepaid insurance for $200

Cash, Accounts Receivable and Prepaid Insurance will be classified on a balance sheet as a. Property, plant and equipment b. Current assets c. Intangible assets d. Long-term assets

b. Current assets

Retained Earnings is reduced by which of the following? a. Net Income b. Dividends c. Purchase of an asset d. Collection of an Account Receivable

b. Dividends

The revenue recognition principle dictates that revenue should be recognized in the accounting period in which it is: a. Collected b. Earned c. Most likely to be collected d. Earned and collected

b. Earned

If a company fails to adjust for accrued expenses, what effect will this have on that month's financial statements? a. Failure to make an adjustment does not affect the financial statements. b. Expenses will be understated and net income and stockholders' equity will be overstated. c. Assets will be overstated and net income and stockholders' equity will be under-stated. d. Assets will be overstated and net income and stockholders' equity will be overstated.

b. Expenses will be understated and net income and stockholders' equity will be overstated.

Which of the following principles dictates that expenses are recognized in the same accounting period as their related revenue? a. Cost (Measurement) b. Cash Basis c. Expense recognition (Matching) d. Time Period (Periodicity)

c. Expense recognition (Matching)

In a period of declining prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory? a. Average cost method b. LIFO method c. FIFO method d. Need more information to answer

c. FIFO method

Ending retained earnings for a period is equal to beginning a. Retained earnings + Net income + Dividends b. Retained earnings - Net income - Dividends c. Retained earnings + Net income - Dividends d. Retained earnings - Net income + Dividends

c. Retained earnings + Net income - Dividends

Net Income may be defined as follows a. The increase in assets arising from the sale of a product or service b. The excess of expenses over revenues for the time period c. The excess of revenues over expenses for the time period d. The cost of assets consumed or services used in the process of generating revenues

c. The excess of revenues over expenses for the time period

Hunter Company reported a net loss of $12,000 for the year ended December 31, 2017. During the year, accounts receivable decreased $28,000, inventory increased $20,000, accounts payable increased by $30,000, and depreciation expense of $24,000 was recorded. During 2017, operating activities a. used net cash of $14,000. b. used net cash of $50,000. c. provided net cash of $50,000. d. provided net cash of $74,000.

c. provided net cash of $50,000.