acc 250 ex 1

Buying and selling products are examples of A. operating activities. B. investing activities. C. financing activities. D. delivering activities.

A

Which activities involve putting the resources of the business into action to generate a profit? A. Operating B. Investing C. Financing D. Delivering

A

Management could determine the amounts due from customers by examining which ledger account? A. Service Revenue B. Accounts Payable C. Accounts Receivable D. Supplies

C

Which activities involve acquiring the resources to run the business? A. Operating B. Investing C. Financing D. Delivering

B

. If as of December 31, 2022, rent of $150 for December had not been recorded or paid, the adjusting entry would include a: A. credit to Accumulated Rent for $150. B. credit to Cash for $150. C. debit to Rent Payable for $150 D. debit to Rent Expense for $150

D

Accumulated Depreciation is a(n): A. expense account and has a normal debit balance B. stockholders' equity account and has a normal credit balance C. liability account and has a normal credit balance D. contra asset account and has a normal credit balance.

D

Transactions in a journal are initially recorded in A. account number order. B. dollar amount order. C. alphabetical order. D. chronological order.

D

What organization issues U.S. accounting standards? A. Security Exchange Commission B. International Accounting Standards Committee C. International Auditing Standards Committee D. Financial Accounting Standards Board

D

Which one of the following is NOT a justification for adjusting entries? A. Adjusting entries are necessary because many transactions affect more than one accounting period. B. Adjusting entries are necessary to ensure that revenues are recorded in the period in which the performance obligation is satisfied. C. Adjusting entries are necessary to ensure that expenses are recognized in the period in which they are incurred. D. Adjusting entries are necessary to bring the general ledger accounts in line with the budget.

D

. Buying assets needed to operate a business is an example of a(n) A. delivering activity. B. financing activity. C. investing activity. D. operating activity.

C

Assets

Resources owned by a business.

Net income shown on the income statement is added to the beginning balance of retained earnings in the: A. income statement. B. retained earnings statement. C. balance sheet. D. statement of cash flows.

b

Why should the income statement be prepared first? A. The statement of cash flows should be prepared first because it determines the sources of cash. That information is then used in preparing the income statement. B. Net income from the income statement flows into the retained earnings statement. The ending retained earnings balance then flows into the balance sheet. C. The income statement does not have to be prepared first. Financial statements can be prepared in any order. D. None of these answer choices are correct.

b

Which of the following statements is true? A. Publicly traded U.S. companies must provide an annual report to their shareholders only when operating conditions change significantly. B. An unqualified independent auditor's report must be included in the annual report. C. Notes to the financial statements do not need to be included in the annual report because that information is only for internal users. D. None of these answer choices are correct.

d

Which statement is false? A. Accumulated Depreciation should always have a credit balance in the adjusted trial balance. B. Accumulated Depreciation is subtracted from the property, plant, and equipment on the balance sheet. C. Accumulated Depreciation - Equipment represents the total cost of equipment that has expired up to the date of the balance sheet. D. Accumulated Depreciation is used to reveal the fair value of the related asset on the date of the balance sheet.

D

Which type of corporate information is readily available to investors? A. Financial comparison of operating alternatives B. Marketing strategies for a product that will be introduced in eighteen months C. Forecasts of cash needs for the upcoming year D. Amount of net income retained in the business

D

The current ratio takes into account the composition of current assets. A. True B. False

False

Common Stock

Term used to describe the total amount paid in by stockholders for the shares they purchase.

The difference between the balance of a plant asset account and the related accumulated depreciation account is termed: A. market value. B. contra asset. C. book value. D. liability.

C

The double-entry system of debits and credits means that: A. Two pieces of information must be recorded for each transaction--the date and the dollar amount. B. Debits will be recorded twice as often as credits. C. At least two entries, a debit and a credit, must be made for each transaction. D. Each debit and credit will be recorded two times, once in the general ledger and once in the trial balance.

C

An adjusting entry: A. affects two balance sheet accounts. B. affects two income statement accounts. C. affects a balance sheet account and an income statement account. D. affects cash accounts.

C

Notes to the financial statements include all of the following except A. descriptions of significant accounting policies used. B. explanations of uncertainties. C. projected accounting information. D. statistics needed to understand the statements.

C

The purpose of the ledger is to A. record chronologically the day's transactions. B. keep a record of documentation to support each transaction. C. keep in one place all information about changes in specific account balances. D. make sure that all assets, liabilities, etc., have normal balances at all times.

C

The sale of an asset on credit for what it cost A. increases assets and liabilities. B. decreases assets and liabilities. C. leaves total assets unchanged. D. decreases assets and increases liabilities.

C

Under the accrual basis of accounting: A. cash must be received before revenue is recognized. B. net income is calculated by matching cash outflows against cash inflows. C. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. D. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

C

If expenses are paid in cash, then A. assets will increase and stockholders' equity will increase. B. liabilities will decrease and stockholders' equity will increase. C. liabilities will increase and stockholders' equity will increase. D. assets will decrease and stockholders' equity will decrease.

D

If total liabilities decreased by $50,000 and stockholders' equity increased by $10,000 during a period of time, then total assets must change by what amount and direction during that same period? A. $40,000 decrease B. $40,000 increase C. $50,000 increase D. $60,000 increase

a

The financial statement which presents a picture on a particular date of what a business owns and owes is a(n): A. income statement. B. retained earnings statement. C. balance sheet. D. statement of cash flows.

c

Expenses

The cost of assets consumed or services used in the process of generating revenues.

Accounting

The information system that identifies, records, and communicates the economic events of an organization to interested users.

stockholders Equity

The owners' claim to assets.

Closing entries result in the transfer of net income or net loss into the Income Summary account then to the Retained Earnings account. A. True B. False

True

Revenue

amounts earned from the sale of goods or the performance of services in the normal course of business.

A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid February. The overtime wages should be expensed in: A. January. B. February. C. the period when the workers receive their checks. D. either January or February depending on when the pay period ends.

A

Ace Company is a retail store. Due to competition, it is having trouble selling its products. Thus, inventory has been building up. Ace's current ratio has not changed for the past three years, in spite of the inventory buildup. Which of the following statements is true? A. The management of Ace should consider the effect of slow moving inventory on its liquidity. B. Since inventory is a current asset, any increases should automatically cause the current ratio to rise. C. As long as the current ratio remains constant, there is no need for concern. D. The composition of current assets and current liabilities does not matter.

A

Before adjusting entries, unearned revenues are: A. advance payment received and recorded as liabilities before they are recognized as revenue. B. recognized as revenue and recorded as liabilities before they are received. C. recognized as revenue but not yet received or recorded. D. recognized as revenue and already received and recorded.

A

Expenses are recognized when: A. they contribute to the production of revenue. B. they are paid. C. they are billed by the supplier. D. the invoice is received.

A

For 2022, Whispering Winds Corp. reported net income of $43900, had average share outstanding of 15500, paid preferred dividends of $10400 and common dividends were of $5200. What was 2022 earnings per share? A. $2.16 B. $0.24 C. $25.16 D. $0.54

A

Greenway Corporation Trial Balance December 31, 2022 Cash $ 300 Accounts Receivable 522 Prepaid Insurance 82 Supplies 180 Equipment 4,000 Accumulated Depreciation - Equipment $ 600 Accounts Payable 384 Common Stock 1,200 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $6,584 $6,584 . If the estimated depreciation for equipment were $600, the adjusting entry would contain a A. credit to Accumulated Depreciation, Equipment for $600. B. credit to Depreciation Expense, Equipment for $600. C. debit to Accumulated Depreciation, Equipment for $600. D. credit to Equipment for $600.

A

Prepaid expenses are: A. paid and recorded in an asset account before they are used or consumed. B. paid and recorded in an asset account after they are used or consumed. C. incurred but not yet paid or recorded. D. incurred and already paid or recorded.

A

Which of the following is an example of a financing activity? A. Issuing shares of common stock B. Selling goods on account C. Buying delivery equipment D. Buying inventory

A

Liabilities

Amounts owed to creditors in the form of debts and other obligations (the creditors' claim to assets).

As prepaid expenses expire with the passage of time, the correct adjusting entry will be a: A. debit to an asset account and a credit to an expense account. B. debit to an expense account and a credit to an asset account. C. debit to an asset account and a credit to an asset account. D. debit to an expense account and a credit to an expense account.

B

If a business has received cash in advance of services performed and credits a liability account, unearned service revenue, the adjusting entry needed after the services are performed will be: A. debit Unearned Service Revenue and credit Cash. B. debit Unearned Service Revenue and credit Service Revenue. C. debit Unearned Service Revenue and credit Prepaid Expense. D. debit Unearned Service Revenue and credit Accounts Receivable.

B

The management discussion and analysis (MD&A) section of the annual report covers all of the following aspects except the A. ability of the company to pay near-term obligations. B. certification criteria of the company's auditors. C. company's ability to fund operations and expansion. D. results of the company operations.

B

The principal purpose of posting is to A. help identify errors made in the journal. B. accumulate the effects of journalized transactions in the individual accounts. C. enter transactions directly into the ledger. D. help determine if the financial statements are ready to be prepared.

B

The process of deprecation is an example of A. The revenue recognition principle B. The expense recognition principle C. The historical cost principle D. The accounting principle

B

The usual sequence of steps in the transaction recording process is A. journalize, analyze, post to the ledger. B. analyze, journalize, post to the ledger. C. journalize, post to the ledger, analyze. D. post to the ledger, journalize, analyze.

B

Which of the following statements is true? A. Net income is not adjusted when computing earnings per share. B. By comparing earnings per share of a single corporation over time, a stockholder can evaluate the corporation's relative earnings performance. C. Earnings per share is an internal measure and is not used by stockholders. D. The denominator used in computing earnings per share represents the shares of common stock outstanding on the last day of the accounting period.

B

The Harris Company purchased equipment for $15,000 on December 1. It is estimated that annual depreciation on the computer will be $3,000. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: A. debit Depreciation Expense, $3,000; credit Accumulated Depreciation, $3,000. B. debit Depreciation Expense, $250; credit Accumulated Depreciation, $250. C. debit Depreciation Expense, $12,000; credit Accumulated Depreciation, $12,000. D. debit Equipment, $15,000; credit Accumulated Depreciation, $15,000.

B Solution: $3,000 ¸ 12 = $250 (Ann. depr. ¸ 12)

L Inc. began the year with retained earnings of $670,000. During the year, the company recorded revenues of $600,000, expenses of $380,000, and paid dividends of $140,000. What was L Inc.'s retained earnings at the end of the year? A. $1,030,000 B. $750,000 C. $1,130,000 D. $600,000

B Solution: $670,000 + ($600,000 - $380,000) - $140,000 = $750,000 Beg. R/E + (rev.- exp.) - div.)

. If the beginning Cash account balance of Rainbow, Inc. was $36,800, the ending balance was $20,400, and total cash received during the period was $88,000, what amount of cash was paid out during the period? A. $ 3,600 B. $ 84,800 C. $104,400 D. $ 71,600

C

. In recording an accounting transaction in a double-entry system A. the number of debit accounts must equal the number of credit accounts. B. there must always be entries made on both sides of the accounting equation. C. the amount of the debits must equal the amount of the credits. D. there must only be two accounts affected by any transaction.

C

. Which of the following would NOT be an application of the revenue recognition or expense recognition principle? A. Recording accrued salaries and wages expense. B. Recording accrued interest revenue. C. Recording the collection of an advance customer payment as revenue. D. Recording prepaid expense adjustments.

C

A flower shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The flower shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be recognized? A. December 5 B. December 10 C. November 30 D. December 1

C

A trial balance is a listing of A. transactions in a journal. B. the chart of accounts. C. general ledger accounts and balances. D. the totals from the journal pages.

C

Accrued expenses are: A. paid and recorded in an asset account before they are used or consumed. B. paid and recorded in an asset account after they are used or consumed. C. incurred but not yet paid or recorded. D. incurred and already paid or recorded.

C

Accrued revenues are: A. received and recorded as liabilities before they are recognized. B. recognized and recorded as liabilities before they are received. C. performed but not yet received or recorded. D. recognized and already received and recorded.

C

Greenway Corporation Trial Balance December 31, 2022 Cash $ 300 Accounts Receivable 522 Prepaid Insurance 82 Supplies 180 Equipment 4,000 Accumulated Depreciation - Equipment $ 600 Accounts Payable 384 Common Stock 1,200 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $6,584 $6,584 If, on December 31, 2022, the insurance expired amounted to $20, the adjusting entry would contain a: A. debit to Prepaid Insurance for $20. B. credit to Prepaid Insurance for $62. C. debit to Insurance Expense for $20. D. debit to Insurance Expense for $62.

C

If service for $175 had been performed but not billed, the adjusting entry to record this would include a: A. debit to Service Revenue for $175. B. credit to Unearned Service Revenue for $175. C. credit to Service Revenue for $175. D. debit to Unearned Revenue for $175.

C

The Pharoah Company has five plants nationwide that cost $370 million. The current fair value of the plants is $620 million. The plants will be reported as assets at A. $250 million. B. $990 million. C. $370 million. D. $620 million.

C

The agency of the United States Government that oversees the U.S. financial markets is the A. International Auditing Standards Committee. B. Internal Revenue Service. C. Security Exchange Commission. D. Financial Accounting Standards Board.

C

The normal balance of any account is the A. left side. B. right side. C. side which increases that account. D. side which decreases that account.

C

The primary purpose of the statement of cash flows is to report A. a company's investing transactions. B. a company's financing transactions. C. information about cash receipts and cash payments of a company. D. the net increase or decrease in cash.

C

Which of the following activities involves collecting the necessary funds to support the business? A. Operating B. Investing C. Financing D. Delivering

C

Which of the following is NOT true regarding the Sarbanes-Oxley Act (SOX)? A. The Act applies to public traded U.S. corporations. B. The Act requires firms to maintain a system of internal control. C. The Act does not require independent outside auditors to attest to the adequacy of firms' internal control system. D. The Act requires corporate executives and boards of directors to ensure that internal controls are reliable and effective.

C

Which statement is incorrect concerning the adjusted trial balance? A. 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. B. The adjusted trial balance provides the primary basis for the preparation of financial statements. C. The adjusted trial balance lists the account balances in order of their magnitude. D. The adjusted trial balance is prepared after the adjusting entries have been journalized and posted.

C

On January 1, 2021, Leardon Inc. purchased equipment for $25,000. The company is depreciating the equipment at the rate of $1,000 per month. At March 31, 2021, the balance in Accumulated Depreciation is: A. $1,000 debit. B. $2,000 credit. C. $3,000 credit. D. $1,000 credit.

C Solution: $1,000 ´ 3 mon. = $3,000 (Depr./mon. ´ 3)

W Co. began the year by issuing $120,000 of common stock for cash. The company recorded revenues of $1,100,000, expenses of $960,000, and paid dividends of $60,000. What was W Co.'s net income for the year? A. $80,000 B. $200,000 C. $140,000 D. $260,000

C Solution: $1,100,000 - $960,000 = $140,000 (Rev. - exp.)

Greenway Corporation Trial Balance December 31, 2022 Cash $ 300 Accounts Receivable 522 Prepaid Insurance 82 Supplies 180 Equipment 4,000 Accumulated Depreciation - Equipment $ 600 Accounts Payable 384 Common Stock 1,200 Retained Earnings 1,400 Service Revenue 3,000 Salaries and Wages Expense 1,000 Rent Expense 500 $6,584 $6,584 15. If, on December 31, 2022, supplies on hand were $40, the adjusting entry would contain a: A. debit to Supplies for $40. B. credit to Supplies for $40. C. debit to Supplies Expense for $140. D. credit to Supplies Expense for $140.

C Solution: $180 - $40 = $140 (Sup. bal. - Sup. on hand)

On July 1 the Fisher Shoe Store paid $24,000 to Acme Realty for 6 months rent beginning July 1. Prepaid Rent was debited for the full amount. If financial statements are prepared on July 31, the adjusting entry to be made by the Fisher Shoe Store is: A. debit Rent Expense, $24,000; credit Prepaid Rent, $4,000. B. debit Prepaid Rent, $4,000; credit Rent Expense, $4,000. C. debit Rent Expense, $4,000; credit Prepaid Rent, $4,000. D. debit Rent Expense, $24,000; credit Prepaid Rent, $20,000.

C Solution: $24,000 ´ 1/6 = $4,000 (Rent paid ´ 1/6)

All of the following are interrelationships that are important to understand when preparing financial statements except A. the net income from the income statement is used in the retained earnings statement. B. the ending retained earnings from the retained earnings statement is used in the stockholder's equity section of the balance sheet. C. the cash on the balance sheet should be equal to the cash at the end of the period on the statement of cash flows. D. all of the payments on the balance sheet should be equal to the cash payments for operating activities on the statement of cash flows.

D

Comstock Company provided consulting services and billed the client $2,500. As a result of this event A. assets remained unchanged. B. assets increased by $2,500. C. equity increased by $2,500 D. Both assets and stockholders' equity increased by $2,500.

D

Free cash flow represents A. cash provided by operations less adjustments for capital expenditures and dividends. B. a measurement of a company's cash generating ability. C. a measure of solvency. D. all of these answer choices are correct.

D

From an accounting standpoint, the acquisition of long-lived assets is essentially a(n): A. accrual of expense. B. accrual of revenue. C. accrual of unearned revenue. D. prepaid expense.

D

If a company fails to adjust for accrued revenues: A. liabilities will be understated and revenues will be understated. B. liabilities will be overstated and revenues will be understated. C. assets will be overstated and revenues will be understated. D. assets will be understated and revenues will be understated.

D

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. Notes to the financial statements B. Management discussion and analysis section C. Balance sheet D. Auditor's report

D

Retained earnings is A. the stockholders' claim on total assets. B. equal to cash. C. equal to revenues. D. the amount of net income kept in the corporation for future use.

D

Ratios that measure the income or operating success of a company for a given period of time are A. solvency ratios. B. trending ratios. C. liquidity ratios. D. profitability ratios

D

The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: A. contra asset. B. prepayment. C. asset. D. accrued.

D

The relationship between current assets and current liabilities is important in evaluating a company's A. solvency. B. market value. C. profitability. D. liquidity.

D

Which element of the annual report contains information about assumptions, estimates, measurement procedures, and details behind the summary numbers? A. Auditor's report B. Form 10-K C. Management Discussion and Analysis D. Notes to the Financial Statements

D

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not? A. Yes, they are treated as revenue at the time of receipt because the company has access to the cash. B. No, the amount of revenue cannot be adequately determined until the company completes the work. C. Yes, The intent of the company is to perform the work and the customer is confident that the services will be completed. D. No, revenue cannot be recognized until the work is performed.

D Rationale: receiving cash from customer in advance is treated as unearned revenue because products have not delivered or services have not performance at the time of receipt.

(O) operating activity, (I) investing activity, or (F) financing Issuance of common stock for cash.

F

(O) operating activity, (I) investing activity, or (F) financing Payment of cash dividends.

F

(O) operating activity, (I) investing activity, or (F) financing Cash purchase of equipment.

I

(O) operating activity, (I) investing activity, or (F) financing Sale of old machine for cash.

I

(O) operating activity, (I) investing activity, or (F) financing Cash payments to suppliers.

O

(O) operating activity, (I) investing activity, or (F) financing activity. Cash receipts from customers.

O

Dividends

Payments of cash from a corporation to its stockholders.

Net Loss

The amount by which expenses exceed revenues.

Net Income

The amount by which revenues exceed expenses.

retained Earnings

The amount of net income retained in the corporation.

Long-term creditors consider a high free cash flow amount an indication of solvency. A. True B. False

True

The debt to assets ratio measures the percentage of assets financed by creditors. A. True B. False

True

The elements of a corporation's annual report that describes the corporation's accounting methods is/are the: A. notes to the financial statements B. management discussion and analysis C. auditor's report D. income statement

a

The right to receive money in the future is called a(n) A. account receivable. B. revenue. C. liability. D. account payable.

a

To report the success or failure of the company's operations during the period is the purpose of the: A. income statement. B. retained earnings statement. C. balance sheet. D. statement of cash flows.

a

. Liabilities A. are future economic benefits. B. are debts and obligations. C. possess service potential. D. are things of value owned by a business.

b

Stockholders' equity can be described as claims of A. creditors on total assets. B. owners on total assets. C. customers on total assets. D. debtors on total assets.

b

The element of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the: A. income statement B. auditor's opinion C. balance sheet D. comparative statements

b

Which of the following is an example of an operating activity? A. Issuing shares of common stock B. Paying employees wages and salaries C. Buying delivery equipment D. Paying dividends

b

A corporation has which of the following set of characteristics? A. Shared control, tax advantages, increased skills and resources B. Simple to set up and maintains control with founder C. Easier to transfer ownership and raise funds, no personal liability D. Harder to raise funds and gives owner control

c

In a study session, a classmate makes this statement "Dividends are listed as expenses on the income statement." What is your best response to this statement? A. I've been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets. B. You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends? C. Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement. D. Dividends are deducted from retained earnings on the balance sheet.

c

The best definition of assets is the A. cash owned by the company. B. collections of resources belonging to the company and the claims on these resources. C. owners' investment in the business. D. resources belonging to a company that have future benefit to the company.

d

The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n) A. account receivable. B. revenue. C. liability. D. account payable.

d