Accounting 1 Final Exam - Pollard

GTO Divison has $14,000 in current assets, $2,000 in accounts payable, and $2,000 in unearned sales revenue. What is the division's current ratio? a. 1.75 b. 2.25 c. 3.00 d. 3.50

d

A corporation issued $150,000 of 10-year bonds at the stated rate of 8%, with interest payable semiannually. How much cash will the bond investors receive at the end of the first interest period? a. $3,000 b. $6,000 c. $12,000 d. $24,000

b

Which of the following is not a generally recognized internal control activity? a. establishment of clear lines of authority to carry out specific tasks b. preparation of bank reconciliations on a monthly basis c. reducing the cost of hiring seasonal employees d. limiting access to computerized accounting records

c

Which of the following is the correct date format for the financial statement heading? a. balance sheet for the year ended June 30, 2013 b. income statement at December 31, 2013 c. income statement for the year ended December 31, 2013 d. statement of retained earnings at December 31, 2013

c

Which of the following statements is false? a. the inventory account is updated after every sale and after every merchandise purchase under the perpetual inventory system b. the inventory account is updated only at the end of the accounting period under the periodic inventory system c. a cost of goods sold account is updated after each sale of merchandise under the periodic inventory system d. a purchases account is used only under the periodic inventory system

c

On May 1st, a company borrowed $30,000 from the First National Bank on a 1 year, 6% note. Assuming the company keeps its records on a calendar year basis, an entry is needed on December 31st to increase a. interest expense by $600 b. interest expense by $1,800 c. interest payable by $900 d. interest payable by $1,200

d

The Allowance for Doubtful Accounts represents: a. bad debt losses incurred in the current period b. the amount of uncollected accounts written off to date c. the difference between total sales made on credit and the amount collected from those credit sales d. the difference between the recorded value of accounts receivable and the net realizable value of accounts receivable

d

All of the following accounts have normal credit balances except a. accounts payable b. unearned revenue c. common stock d. inventory

d

The discount on bonds payable account is shown on the balance sheet as a. an asset b. an expense c. a long-term liability d. a contra-liability account that reduces the bond to market value at the issue date

d

Which of the following statements is false regarding the choice between alternative inventory costing methods? a. each alternative method provides for the same amount of cost of goods available for sale to be allocated between ending inventory and cost of goods sold b. in terms of current costs, FIFO presents a more realistic balance sheet; whereas LIFO presents a more realistic income statement c. companies sometimes choose FIFO because it is easier and less expensive to implement; whereas LIFO is often chosen for the tax benefits d. companies sometimes choose FIFO because it presents a more realistic income statement in terms of current market values

d

Carnegie Jewelers accepted a 9-month, 9% note for $100,000 from a customer on July 1, 2013. The note is due on March 31, 2014. Assuming the company's accounting period ends on December 31, 2013, how much interest revenue should be recognized during 2013 and 2014. 2013 2014 a. $2,250 $4,500 b. $4,500 $2,250 c. $9,000 $0 d. $4,500. $4,500

b

What is the equation to find the balance of retained earnings?

RE (ending balance) = beginning balance + net income - dividends

Each of the following items is considered a cash equivalent EXCEPT: a. a 30-day certificate of deposit b. 60-day corporate commercial paper c. a 75-day US treasury bill d. a 180-day note issued by a local government

d

Bonds are a popular source of financing because a. the relative cost of issuing debt is often lower than the cost of issuing equity b. financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issues of stock c. a company having cash flow problems can postpone payment of interest to bondholders d. the bondholders can always convert their bonds into stock if they choose

a

Depreciation is: a. an effort to achieve proper matching of the cost of operating assets with related revenues b. an accumulation of funds to replace the related plant asset c. the difference between the original cost and salvage value of an asset d. the cash allocated each period to maintain a plant asset

a

Which of the following statements is true if a company's collection period for accounts receivable is unacceptably long? a. the collection cost would be reduced b. the company may offer sales discounts to shorten the collection period c. cash flows from operations may be higher than expected for the company's sales d. the company should expand operations with its excess cash

b

A graphics design company issued bonds in the amount of $1,000,000 with a stated interest rate of 8%. If the interest is paid semiannually and the bonds are due in 10 years, what would be the total amount of interest paid over the life of the bonds? a. $1,000,000 b. $400,000 c. $800,000 d. $80,000

c

Which of the following is an accurate description of the Allowance for Doubtful Accounts? a. contra account b. liability account c. revenue account d. expense account

a

The payment of accounts payable results in a(n) a. decrease in both liabilities and assets b. decrease in liabilities and increase in assets c. decrease in liabilities and increase in stockholders equity d. increase in liabilities and decrease in stockholders equity

a

Total stockholders equity includes $50,000 of common stock with a stated value of $0.50, and 5,000 shares of treasury stock with a total cost of $25,000. How many total shares are outstanding? a. 95,000 b. 100,000 c. 105,000 d. 150,000

a

Treasury shares represent the a. number of previously issued shares that have been repurchased by the corporation b. number of shares that the corporation has sold c. number of shares that are currently held by stockholders d. maximum number of shares that can be sold by the corporation

a

What is the impact on the accounting equation of recording the issuance of a short-term note payable? a. both assets and liabilities increase b. both assets and stockholders equity decrease c. both assets and stockholders equity increase d. liabilities increase and stockholders equity decreases

a

Which of the following are noncurrent assets? a. machinery and equipment b. accounts receivable c. inventories d. unearned revenues

a

Which of the following concepts is important to accrual accounting? a. time period, because accrual accounting divides earnings into time periods b. market basis, because inflation is a big factor in the environment c. cash basis, because if cash is not received, revenue is not accrued d. entity concept, because personal transactions must be separated from business transactions

a

Bihary company has a beginning balance in its inventory account of $2,250 and the ending balance is $1,500. Cost of goods sold is $9,750. According to the cost of goods sold model, what was the amount of inventory purchased during the year? a. $750 b. $9,000 c. $10,500 d. $105,500

b

Bonds sell at a premium when the a. issuing company has a better reputation than other companies in the same business b. market rate of interest is less than the stated interest rate at the time of issue c. yield rate of interest is more than the stated rate at the time of issue d. issuing company agrees to repay the maturity before the due date

b

Operating assets with no physical properties are called a. current assets b. intangible assets c. plant assets d. property, plant, and eqipment

b

The resources used to earn revenues during a period are called: a. net income b. expenses c. revenues d. dividends

b

When is a liability for dividends created? a. at the end of each fiscal year b. at the date of declaration c. at the date of record d. at the date of payment

b

Which of the following financial statements show the end of the year cash balance for a business entity? a. income statement and statement of retained earnings b. balance sheet and statement of cash flows c. statement of retained earnings and statement of cash flows d. balance sheet and statement of retained earnings

b

Which of the following is a reconciling item on the bank side of a bank reconciliation? a. canceled checks b. outstanding checks c. NSF checks d. both b and c

b

Which of the following is an example of a credit memo? a. notice of a bank service charge b. notice of interest earned on a checking account c. outstanding checks d. a company's transposition error in the recording of a customers check

b

Which of the following items is a classification on the classified balance sheet? a. operating accounts b. stockholders equity c. revenues and expenses d. net income and dividends

b

Which of the following would not appear on a bank statement for a checking account? a. service charges b. outstanding checks c. credit memos d. interest earned

b

If a corporation declares a 2-for-1 stock split, which of the following is true? a. a new class of stock must be authorized with twice the number of issued shares b. the number of outstanding shares is half the number that were previously outstanding before the split c. the number of outstanding shares is twice the number that were previously outstanding before the split d. the number of outstanding shares is doubled, while the number of issued shares is reduced to half of the amount before the split

c

On October 1st, a company borrowed $60,000 from Eighth National Bank on a 1-year, 7% note. If the company's fiscal year ends on December 31st, a year-end adjusting entry is required to increase a. interest expense by $4,200 b. notes payable by $1,050 c. interest payable by $1,050 d. prepaid interest by $3,150

c

Outstanding shares represent the a. number of previously issued shares that have been repurchased by the corporation b. number of shares that the corporation has sold c. number of shares that are currently held by stockholders d. maximum number of shares that can be sold by the corporation

c

The Securities Exchange Commission (SEC) is concerned with a. developing a new conceptual framework in order to reduce differences in financial reports for global companies b. setting accounting rules for all companies that are incorporated in the US c. setting accounting rules for pubically-traded companies in the US d. working to reduce differences in accounting reports issued by governmental units

c

The accounting life of intangible assets is determined by a. their legal lives b. their useful lives c. their legal lives or useful lives, whichever is shorter d. the tax life mandated by the IRS

c

Which inventory cost flow method assigns the cost of the most recent items purchased to ending inventory? a. specific identification b. weighted average cost c. FIFO d. LIFO

c

Accrued expenses originate from a. paying off liabilities b. paying for items such as insurance in advance c. collecting cash from customers d. incurring expenses without yet having paid cash for them

d

A company plans to distribute $134,000 in dividends. It has outstanding 200,000 shares of 7% $10 par preferred stock (non-cumulative and non-participating) and 60,000 shares of $2 par common stock. How much will be distributed per share on preferred and common stock? Preferred Stock Common Stock a. $0.52 $0.52 b. $0.67 $0.00 c. $0.00 $2.23 d. $0.60 $2.00

b

What is the formula for a company's adjusted cash balance?

cash balance from company's records + interest - NSF check

Capitalizing an expenditure rather than recording it as a revenue expenditure a. impacts the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period b. impacts the total book value of plant assets on the balance sheet, but has no effect on the amount of net income reported during an accounting period c. impacts the amount of net income reported during an accounting period, but has no effect on the total book value of plant assets on the balance sheet d. has no impact on the book value of plant assets on the balance sheet or the amount of income reported on the income statement

a

Research and development costs are: a. treated as an expense when incurred b. capitalized but not amortized c. capitalized and amortized over the periods that will probably benefit from the research and development d. included with the cost of the patent resulting from the research and development

a

Assets become expenses when? a. purchased for cash or on credit b. asset is delievered c. they are paid for in cash d. their economic benefits expire

d

Which of the following is an example of a debit memo? a. notice of a bank service charge b. notice of interest earned on a checking account c. outstanding checks d. a company's transposition error in the recording of a deposit

a

Which of the following statements is true regarding a corporation's purchase of treasury stock? a. the cost of treasury stock is a reduction in stockholders equity b. dividends must still be paid on treasury stock because it is still issued c. treasury stock is reported as an asset because it is considered an investment in the corporations own stock d. treasury stock is no longer considered issued once it is back in the hands of the issuer

a

A company that sells merchandise to customers should normally recognize a. revenue only after the cash is collected b. revenue and the related expenses in the period the revenue earned, whether payment is received or not c. both revenue and expenses in the period following sale d. expenses in the period the merchandise is sold and revenue in the following period

b

A particular company had $2,400 of supplies on hand at January 1. During the year, supplies with a cost of $4,000 were purchased. At December 31, the actual supplies on hand amounted to $2,000. After the adjustments are recorded and posted at December 31, what are the ending balances in the supplies and supplies expense accounts? Supplies Supplies Expense a. $4,400 $2,000 b. $2,000 $4,400 c. $2,400 $4,000 d. $4,000 $2,400

b

Carithers cleaning service received advance payments from customers during 2013 of $24,000. At December 31, 2013, $5,000 of the advance payments still had not been earned. After the adjustments are recorded and posted at December 31, 2013, the balances in the unearned service revenue and service revenue accounts will be: Unearned Service Revenue Service Revenue a. $0 $24,000 b. $5,000 $19,000 c. $5,000 $24,000 d. $24,000 $5,000

b

Generally accepted accounting principles (GAAP) require that research and development costs to develop a new product be a. capitalized in the patents account b. expensed in the period incurred c. capitalized in the research and development costs account d. amortized over the expected economic life of the new product

b

If a company has assets of $5,000,000, liabilities of $3,000,000, and retained earnings of $1,200,000, how much is total stockholders equity? a. $800,000 b. $2,000,000 c. $3,800,000 d. $1,800,000

b

If a company's bonds are callable, a. the bondholder has the right to sell an option on the bond b. the issuing company is likely to retire the bonds before maturity if the bonds are paying 8% interest while the market rate of interest is 4% c. the bonds are never allowed to remain outstanding until the maturity date d. the investor never knows what the redemption price will be until the bonds are actually called

b

Kiss Greetings planned to raise $500,000 by issuing bonds. The bond certificates were printed bearing a stated interest rate of 6%, which was equal to the yield rate of interest. However, before the bonds could be issued, economic conditions forced the yield rate up to 7%. If the life of the bonds is 10 years and interest is paid annually on December 31, how much will the company receive from the sale of the bonds? a. exactly $500,000 because the company would still pay interest at the stated rate b. less than $500,000 because the 7% yield rate of interest was higher than the stated rate c. more than $500,000 because the 6% stated rate of interest was less than the yield rate d. the 6% bonds will not be sold at all. The company will be required to have the certificates reprinted bearing the new yield rate of 7%.

b

The cost of goods sold is equal to: a. purchases less beginning inventory plus ending inventory b. the inventory account as reported on the balance sheet c. the cost of goods available for sale less ending inventory d. the amount of inventory on hand at the end of the accounting period

c

What will be the increase in the Paid-in capital in excess of par account if a corporation issues 20,000 shares of $1.00 par common stock for $6 per share? a. $140,000 b. $120,000 c. $100,000 d. $20,000

c

When bonds are issued by a company, the accounting entry shows an a. increase in liabilities and a decrease in stockholders equity b. increase in liabilities and an increase in stockholders equity c. increase in assets and an increase in liabilities d. increase in assets and an increase in stockholders equity

c

Which allowance method approach is considered to be an income statement approach to estimating bad debts? a. the percentage of accounts receivable approach b. the percentage of accounts written off approach c. the percentage of net credit sales approach d. the direct write off method

c

Which of the following statements is true concerning assets? a. assets are measured using a time-period approach b. assets are initially recorded at market value and then adjusted for inflation c. assets are initially recorded using the historical cost principal d. assets are initially recorded at market value, since historical cost tends to be too arbitrary

c

Authorized stock represents the a. number of previously issued shares that have been repurchased by the corporation b. number of shares that the corporation has sold c. number of shares that are currently held by stockholders d. maximum number of shares that can be issued for each class of stock

d

Cash collected and recorded by a company but not yet reflected in a bank statement are known as a. debit memos b. credit memos c. outstanding checks d. deposits in transit

d

Goodwill can be recorded as an asset when a(n) a. business has above normal profitability compared to other businesses in its industry b. businesses can determine that it has created customer goodwill and name recognition c. offer is received to purchase the business at a price in excess of the value of the assets d. business is purchased and payment is made in excess of the value of the net assets

d

In order for accounting information to be useful in making informed decisions, it must be a. internal b. relevant c. reliable d. both relevant and reliable

d

On January 1, 2012, a company reported assets of $1,000,000 and liabilities of $600,000. During 2012, assets decreased by $100,000 and stockholders equity decreased $200,000. What is the amount of liabilities at December 31, 2012? a. $200,000 b. $500,000 c. $600,000 d. $700,000

d

What is the primary objective of financial reporting? a. to help investors make credit decisions b. to help management assess cash flows c. to protect users from fraudulent financial information d. to provide useful information for decision making

d

Transportation-in is: a. an operating expense b. part of purchase returns and allowances c. added to transportation-out as part of the calculation of cost of goods sold d. part of the net cost of purchases

d

Which of the following sets of factors is needed to calculate depreciation on plant and equipment? a. the asset's acquisition cost, replacement cost, and its estimated residual value b. the estimated residual value of the asset, its replacement cost, and its market value c. the assets replacement cost, its estimated life, and its estimated residual value d. the estimated life of the asset, its acquisition cost, and its estimated residual value

d

A company had sales of $40,000, sales discounts of $800, sales returns of $1,600 and commissions owed to salespeople of $600. Compute net sales. a. $37,600 b. $37,000 c. $38,400 d. $39,000

a

A company issued $10,000,000 of bonds. Assuming the most common denomination of bonds, the number of bonds sold was a. 10,000 b. 100,000 c. 1,000,000 d. 10,000,000

a

A company should choose a depreciation method that a. best allocates the original cost of the asset to the periods benefited by the use of the asset b. saves the most taxes c. minimizes net income d. shows the highest amount of net income

a

A manufacturing company purchased equipment on January 1, 2004 for $450,000. As of January 1, 2013, depreciation of $202,500 had been recorded on this asset. Depreciation expense for 2013 is $22,500. After the adjustments are recorded and posted at December 31, 2013, what are the balances for the equipment and accumulated depreciation? Equipment. Accumulated Depreciation a. $450,000 $0 b. $450,000 $225,000 c. $225,000 $22,500 d. $225,000 $225,000

b

During December, Camp David Inc purchased $5,000 of supplies for use in its business. At the end of December, 20% of the supplies were still on hand, but only 70% had been paid. What amounts will appear on the company's balance sheet on December 31? Supplies on hand Accounts payable a. $5,000 $3,500 b. $1,000 $1,500 c. $4,000 $1,500 d. $1,000 $5,000

b

Issued shares represent the a. number of previously issued shares that have been repurchased by the corporation b. number of shares that the corporation has sold c. number of shares that are currently held by stockholders d. maximum number of shares that can be sold by the corporation

b

On January 1, 2013, Kaiser Permanent issued $2,000,000 of 8% bonds at par. These bonds are due in 10 years with interest payable semi-annually on June 30 and December 31. What is the amount of the interest expense in 2013 assuming the use of the effective interest amortization method? a. $16,000 b. $160,000 c. $1,600,000 d. $2,000,000

b

Which of the following organizations is primarily responsible for establishing GAAP in the US? a. Securities Exchange Commission (SEC) b. Financial Accounting Standards Board (FASB) c. International Accounting Standards Board (IASB) d. Internal Revenue Service (IRS)

b

A company has total assets of $350,000 consisting of current assets of $115,000, property, plant, and equipment of $200,000, and other assets of $35,000. The company has total liabilities of $100,000 consisting of current liabilities of $65,000 and other liabilities of $35,000. What is the current ratio? a. 3.50 b. 1.15 c. 1.77 d. 5.38

c

Depreciation is a process by which a. replacement funds are accumulated for plant and equipment b. the decline in market value of plant and equipment is determined and recorded c. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset d. the difference between current market value and historical cost of plant and equipment

c

Effective cash management and control for a company's operating cycle includes all of the following EXCEPT: a. the use of a petty cash fund b. the preparation of monthly bank reconciliations c. the practice of using surplus cash for the purchase of bonds or other long-term investments d. the practice of keeping inventory levels low

c

Expenses should be matched against revenue a. before the earnings process is complete b. only after cash is collected from the customer c. in the same period as the revenue that they helped generate d. after payment has been made for any costs related to the revenue

c

Which of these are assets? cash, property/plant/equipment, capital stock, retained earnings, accounts receivable, long term debt, accounts payable, inventory

cash, property/plant/equipment, accounts receivable, inventory

A company's accounts receivable balance after posting net collections from customers for 2012 is $150,000. Management feels that uncollected accounts should be based on the following aging of accounts receivable and uncollected percentages. There are $100,000 that are 1-30 past due at 2% and $50,000 that are 31 to 60 days past due at 10%. The net realizable value of the accounts receivable is a. $147,500 b. $148,000 c. $150,000 d. $143,000

d

After a corporation declares a cash dividend, what takes place on the date of record? a. cash decreases b. liabilities decrease c. stockholders equity decreases d. no entry is necessary

d

All of the following accounts have normal debit balances except a. accounts receivable b. dividends c. supplies expense d. service revenue

d

All of the following are acceptable for financial accounting purposes except: a. specific identification b. FIFO c. LIFO d. retail cost

d

The balance in the retained earnings account represents a. cash in the bank b. the amount of cash available for dividends c. accumulated revenues from all prior years of operations d. accumulated earnings that have not been distributed to stockholders

d

What is the impact on the accounting equation of recording the accrual of interest expense? a. both assets and liabilities decrease b. both assets and stockholders equity decrease c. liabilities decrease and stockholders equity increases d. liabilities increase and stockholders equity decreases

d

Which of the following statements regarding amortization is true? a. amortization of the premium causes the premium on bonds payable account to increase b. amortization of the premium causes the amount of interest expense to increase c. cash interest payments on bonds equals interest expense on the income statement when there is amortization of bond premium d. amortization of a premium continues over the life of the bond until the balance in the account is reduced to zero

d

How do you calculate the cost of land?

Add purchase price + excavation costs + razing old building + broker fees (NOT COST OF A PARKING LOT)

According to the Sarbanes-Oxley Act of 2002, who is primarily responsible for establishing and maintaining a system of internal control over the company's financial reporting? a. management of the company b. the company's auditors c. the company's internal auditors d. the audit committee of the company's board of directors

a

At the year-end inventory count, if goods in transit are shipped FOB destination, they should be included in the inventory count of: a. the seller b. the buyer c. the shipping company d. neither the buyer nor the seller

a

Beginning accounts receivable were $200,000 and ending accounts receivable were $300,000. Assuming cash collections totaled $1,100,000, what were credit sales? a. $1,200,000 b. $1,100,000 c. $1,300,000 d. $1,500,000

a

On January 1, 2012, a company issued 10,000 shares of 10%, $10 par value cumulative preferred stock. No dividends were declared in 2012 or 2013. In 2014, the company declared a dividend of $200,00. How much of the 2014 dividend should be paid to common stockholders? a. $170,000 b. $190,000 c. $197,000 d. $200,000

a

Par value represents the a. arbitrary amount that establishes a minimum price for the stock when it is first issued b. current market price of the stock c. amount for which any treasury shares have been acquired by the corporation d. amount for which treasury shares may be reissued

a

Which of the following statements is true? a. sound internal control practice dictates that disbursements should be made by check b. good cash management practice dictates that large cash balances should be maintained c. the person handling cash should also prepare the bank reconciliation d. petty cash can be substituted for a checking account to expedite the payment of all disbursements

a

Which of the following would describe a callable bond? a. borrower has the right to pay off the bonds prior to due date b. borrower has the right to issue more bonds prior to due date of existing bonds c. borrower has the right to call off the interest payments on the bonds d. Investor has the right to call off the interest payments on the bonds

a

While preparing a bank reconciliation, which of the following items would be subtracted from the balance per the bank statement? a. outstanding checks b. deposits in transit c. bank service charges d. interest earned on the bank account

a

Which of the following statements is true with regard to 7% cumulative, participating preferred stock? a. stockholders who hold this type of stock are guaranteed a dividend each year b. the issue price of this stock is reported in the preferred stock account on the balance sheet c. if the corporation pays a per share dividend in excess of 7% of the preferred stock's par value and there are no dividends in arrears, the preferred shares will receive a share of the amounts available for distribution as dividends to other classes of stock d. if dividends are not declared, they accumulate and a liability must be reported on the balance sheet for any amount in arrears that is owed to the preferred stockholders

c

What does the phrase, "revenue is recognized when earned" mean? a. revenue is recorded in the accounting records when the goods are received from a supplier, and reported on the income statement when sold to the customer b. revenue is recorded in the accounting records and reported on the income statement when the cash is received from the customer c. revenue is recorded in the accounting records when the goods are sold to a customer, and reported on the income statement when the cash payment is received from the customer d. revenue is recorded in the accounting records and reported on the income statement when goods are sold and delivered to a customer

d

What is the distinguishing characteristic between accounts receivable and notes receivable? a. accounts receivable are usually current assets while notes receivable are usually long-term assets b. accounts receivable require payment of interest while notes receivable does not have payment of interest c. notes receivable result from credit sale transactions for merchandising companies, while accounts receivable result from credit sale transactions for service companies d. notes receivable generally specify an interest rate and a maturity date at which any interest and principle must be repaid

d