Acct 181 Final Review

Which of the following correctly describes the effects of initially recording prepaid insurance when cash is paid to purchase an insurance policy and the account "prepaid insurance" is part of the journal entry? a) total assets do not change b) net income decreases c) liabilities are decreased d) stockholders' equity increases

a)

Which of the following describes the reporting of interest expense on the income statement? a) it is deducted from operating income b) it is reported as an operating expense c) it is a component of operating income d) it is added to operating income

a)

Which of the following is not true regarding certain assets? a) a copyright provides the right to publish, use, and sell equipment b) a trademark provides the right to name, image, or slogan identified with equipment c) the cost to design a software program for manufacturing equipment will be expensed as research and development expense d) a patent on equipment enables the inventor to sell that equipment

a)

Negative financial leverage occurs when the a) avg. net interest rate on borrowed funds is less than the company's earnings rate on its assets b) returns on assets is more than return on equity c) return on equity is more than return on assets d) operating expenses exceed gross profit

b)

Which of the following is incorrect? a) ordinary repairs and maintenance decrease net income b) capital expenditures decrease assets c) ordinary repairs and maintenance are recurring in nature d) additions and improvements to a depreciable asset occur infrequently

b)

Which of the following statements is correct? a) ratio calculation is most relevant in isolation b) One of the advantages of ratio analysis is that it allows companies of different sizes to be compared c) Finding benchmarks for comparison is a straightforward task d) it is always preferable to compare a company's performance to industry-wide ratios rather than to use a competitor's ratio

b)

Which of the following statements is correct? a) when COGS as a percentage of sales increases, the gross profit percentage will increase b) it is possible that when cost of goods sold in dollars increases, COGS as a percentage of sales decreases c) if gross profit percentage is the same for the current and past year, then sales and COGS sold in dollars did not change d) if gross profit percentage increases from one year to the next, then net income percentage will also increase from one year to the next

b)

Which of the following best describes the balance sheet? a) it includes a list of assets at their market values b) it includes a listing of assets, liabilities, and stockholders' equity at their market values c) it provides information pertaining to a company's assets and the claims against sources of financing for those activities d) it provides information pertaining to a company's liabilities for a period of time

c

Under FIFO during a period of rising costs, which of the following is false a) income tax expense will be higher under FIFO than under LIFO b) net income will be higher under FIFO than LIFO c) ending inventory will be lower under FIFO than LIFO d) COGS will be lower under FIFO than LIFO

c)

Which of the following statements is correct? a) social security tax is paid only by employer b) the pay period always ends in conjunction with company's fiscal year-end c) employee benefits such as vacation and sick days should be recognized when employees earn the benefit and not when they take days off from work d) unemployment taxes are paid only by employee

c)

Which of the following statements is true? a) revenue is recognized at the time of shipment when goods are shipped FOB destination b) sales returns and allowances are reported as operating expenses on an income statement c) a seller records revenue when title and risks of ownership are transferred to the buyer d) sales discounts are reported as cost of sales on an income statement

c)

Which of the following statements regarding stockholders' equity is false? a) SE is the shareholders' residual interest in the company resulting from the difference in assets and liabilities b) SE accounts are increased with credits c) SE results only from contributions of the owners d) The purchase of land for cash has no effect on SE

c)

Which of the following best describes operating income? a) it includes the results of discontinued operations b) it is before operating expenses c) it is sales minus COGS and income tax expense d) it is net sales minus COGS and operating expenses

d)

Which of the following does not correctly describe an adjusting journal entry that debits rent expense and credits prepaid rent? a) The entry increases expenses and decreases stockholders' equity b) The entry decreases net income and decreases assets c) The entry increases expenses and decreases current assets d) The entry decreases net income and increases stockholders' equity

d)

Which of the following entries correctly records bad debt expense? a) DR. bad debt expense, CR. accts. receivable b) DR. allowance for doubtful accts. , CR. accts. receivable c) DR. allowance for doubtful accts. , CR. bad debt expense d) DR. bad debt expense, CR. allowance for doubtful accts

d)

Which of the following is a constraint in providing useful financial reporting information to decision makers? a) comparability b) timeliness c) understandability d) cost-benefit

d)

Which of the following statements is incorrect? a) ending inventory exceeds beginning inventory when purchases are greater than COGS b) COGS exceeds purchases when ending inventory is less than beginning inventory c) cost of goods available for sale will always be equal or greater than COGS d) ending inventory is greater than beginning inventory when purchases are less than COGS

d)

which of the following tasks does the FASB perform? a) Overseeing the work of the SEC b) Overseeing the work of the PCAOB c) The responsibility for protecting investors and maintaining integrity of the markets d) The development of GAAP

d)