ACCT 2010

The allowance method is required by ====

GAAP

Horizontal analysis examines trends in a company Between income statement accounts in the same year. Between balance sheet accounts in the same year. Between income statement and balance sheet accounts in the same year. Over time.

Over time

Clover Corporation uses the perpetual inventory system. When Clover purchases inventory on account, the entry will include which of the following? Debit Accounts Payable Debit Sales Revenue Debit Inventory Debit Purchases

debit inventory

When comparing the financial statements of two different companies, a financial analyst would use which two categories of ratios? risk ratios profitability ratios equity ratios asset ratios

risk ratios profitability ratios

In its first three years of operations, a company has net income of $2,000; $5,000; and $8,000. It also pays dividends of $1,000 in the second year, and $3,000 in the third year. What is the balance of Retained Earnings at the end of the third year? $5,000. $11,000. $15,000. $4,000.

11,000

The correct order from the largest number of shares to the smallest number of shares is: Issued, outstanding, and authorized. Outstanding, issued, and authorized. Authorized, issued, and outstanding. Issued, authorized, and outstanding.

Authorized, Issued, and outstanding

Which inventory cost flow assumption is commonly used internally by companies that externally report under the LIFO cost flow assumption? FIFO Weighted-average LIFO

FIFO

Amounts owed to creditors are reported as: Liabilities. Assets. Stockholders' equity. Revenues.

Liabilities

When using the direct method to prepare the Statement of Cash Flows, depreciation expense is shown as outflows in the operating section of the statement of cash flows. shown as inflows in the operating section of the statement of cash flows not reported on the statement of cash flows.

not reported on the statement of cash flows.

---- activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

operating

Which of the following are expenditures for assets subsequent to acquisition? Additions Freight charges Repairs and maintenance Improvements

Additions Repairs and maintenance Improvements

The process of transferring information from the journal to the ledger is referred to as posting. transaction analysis. preparing adjustments. preparing journal entries.

posting

On December 31, the Accounts Receivable ending balance is $80,000. Assume that the unadjusted balance of Allowance for Uncollectible Accounts is a debit of $500 and that the company estimates 7% of the accounts receivable will not be collected. The amount of bad debt expense recorded on December 31 will be: $5,000. $5,100. $5,600. $6,100.

6,100

When an account previously written off is collected in full, which is required to ensure the accounting for the complete payment history of the customer? An entry to record payment and an entry to record bad debt expense. An entry to reinstate the account receivable and an entry to adjust bad debt expense. An entry to adjust net sales and an entry to adjust bad debt expense. An entry to reinstate the account receivable and an entry to record payment.

An entry to reinstate the account receivable and an entry to record payment.

Which of the following equations correctly represents the fundamental accounting equation? Assets + Stockholders' Equity = Liabilities. Liabilities - Assets = Stockholders' Equity. Assets + Liabilities = Stockholders' Equity. Assets = Liabilities + Stockholders' Equity.

Assets = Liabilities + Stockholders' Equity.

Amend Inc. debited Accounts Receivable and credited Allowance for Uncollectible Accounts to reestablish an account previously written off. Amend Inc. should also debit _______ and credit _______. Cash; Accounts Receivable Cash; Allowance for Uncollectible Accounts Accounts Receivable; Cash Allowance for Uncollectible Accounts; Cash

Cash; Accounts Receivable

Cash dividends are based on the number of shares: Authorized. Issued. Outstanding. Authorized and issued.

Outstanding

Which of the following is/are common terms used for horizontal analysis? Common-size analysis Time-series analysis Trend analysis Probability analysis

Time-series analysis Trend analysis

The asset that is most easily stolen and susceptible to fraud is ====

cash

Depreciation is an allocation of the of ==== buildings, vehicles, and equipment to expense over time as they are used.

cost

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for (Select all that apply.) current assets. cost of goods sold. liabilities. inventory.

cost of goods sold. inventory.

The current ratio, acid-test ratio, and average collection period are ratios that provide information about a company's: profitability liquidity solvency

liquidity

Payroll withholdings are the payments submitted for both the employee and employer to the government for taxes. the items subtracted from an employee's gross pay to arrive at take-home pay. the employer's portion of taxes paid for social security and Medicare.

the items subtracted from an employee's gross pay to arrive at take-home pay.

The journal entry to record the issuing of 100 bonds at their $1,000 face value will include a debit to ______ and a credit to ______.

Cash; Bonds Payable

When a person intentionally deceives another person or company for personal gain, this is referred to as ====

fraud

Which of the following contains a list of transactions affecting each account and the account's balance? General ledger General journal Account

general ledger

The amount of money paid into a company by its owners is referred to as: investment in common stock retained earnings owners' surplus invested capital

invested capital

Cash transactions involving the purchase and sale of long-term assets and current investments are classified on the statement of cash flows as ---- activities.

investing

Long-term tangible assets include patents. land. equipment. buildings. goodwill.

land. equipment. buildings.

Trend or time-series analysis is another term used for ____ analysis Ratio Vertical Horizontal Diagonal

horizontal

When an asset has a significant decline in value and is written down, this is called ====

impairment

The types of expenditures that can occur subsequent to an asset's acquisition are improvements. additions. goodwill. repairs and maintenance.

improvements. additions. repairs and maintenance

A trade discount is a percentage reduction of the amount due for early payment. a percentage reduction from list price. an increase in the account receivable. a rebate from the manufacturer.

a percentage reduction from list price.

Reporting revenues only when cash is received and expenses only when cash is paid is called ---- the basis of accounting.

cash

A long-term asset is recorded at the: Cost of the asset. Additional costs to get the asset ready for use. Cost of the asset plus all costs necessary to the asset ready for use. Cost of the asset less all costs necessary to the asset ready for use.

Cost of the asset plus all costs necessary to the asset ready for use.

a(n) ==== payable is a short-term liability that occurs when a company purchases goods and does not immediately pay with cash

account

If a company records a transaction before the bank records the same transaction, this is called a/an ______ difference. timing reconciliation control internal

timing

A company issues 100,000 shares of $1 par value common stock for $17 per share. To record this transaction, the company would credit Additional Paid-in Capital for: $100,000. $1,600,000. $1,700,000. $1,800,000.

1,600,000

At the beginning of 20X1, a company issues 100,000 shares of 4%, $10 par value, cumulative preferred stock. All remaining shares outstanding are common stock. The company does not pay any dividends in 20X1, but pays dividends of $100,000 at the end of 20X2. How much of the dividend will be paid to common stockholders in 20X2? $100,000. $60,000. $80,000. $20,000.

20,000

At the beginning of the year, Johnson Supply has inventory of $5,200. During the year, the company purchases an additional $20,000 of inventory. An inventory count at the end of the year reveals remaining inventory of $3,000. What amount will Bennett report for cost of goods sold? $8,200 $17,800 $20,000 $22,200

22,200

What is the formula to compute the average days in inventory? 365 days/receivables turnover ratio Inventory turnover ratio/365 days 365 days/inventory turnover ratio

365 days/inventory turnover ratio

Which of the following best describes a company with a high price-earnings ratio? A company with poor future prospects. A company whose earnings are expected to grow. A company that pays large dividends. All of the other answers are typical characteristics of companies with high price-earnings ratios.

A company whose earnings are expected to grow

Totito Inc. issues $100,000 face amount bonds at $98,000. The journal entry to record the issuance should include: A debit to discount on bonds payable for $2,000 A debit to loss on bond issuance A credit to discount on bonds payable for $2,000 A credit to bonds payable for $100,000

A debit to discount on bonds payable for $2,000 A credit to bonds payable for $100,000

Which of the following statements is correct? Bonds for which the effective interest rate rises must be retired early. Bonds may be retired at maturity or retired early. Bonds can be retired only at maturity.

Bonds may be retired at maturity or retired early.

The term GAAP stands for: Generally Accepted Auditing Principles. General Accounting and Audit Principles. General Accounting Accountability Principles. Generally Accepted Accounting Principles.

Generally Accepted Accounting Principles

Growth stocks tend to have relatively High P/E ratios. Low P/E ratios. Constant P/E ratios. Negative P/E ratios.

High P/E ratios

Closing entries are: Optional. Made to transfer the balances of temporary accounts to retained earnings. Made to record events that occurred during the period but have not yet been recorded. Made to transfer the balances of permanent accounts to retained earnings.

Made to transfer the balances of temporary accounts to retained earnings.

If a company uses the allowance method of accounting for uncollectible accounts and writes off a specific account: Net accounts receivable increase. Net accounts receivable decrease. Net accounts receivable do not change. The effect on net account receivables depends on the relationship between the allowance account balance and the amount of the write off.

Net accounts receivable do not change

If a company uses the periodic inventory system, how many entries are made when a sale occurs? One Two Three Zero

One

Which of the following transactions increases total assets? Provide services to customers on account. Purchase supplies for cash. Collect cash from customer for services provided on account last month. Pay dividends to current stockholders.

Provide services to customers on account.

The balance in retained earnings represents: Income earned during the current period. Income earned during the current period minus dividends distributed to stockholders' during the current period. The amount of income earned by the company over its life. The amount of income earned over the company's life minus the dividends paid to shareholders over the company's life.

The amount of income earned over the company's life minus the dividends paid to shareholders over the company's life.

What is the primary purpose of a bank reconciliation? To ensure the bank balance per reconciliation is equal to the company balance per reconciliation To ensure that the cash receipts of the period were received To ensure that the cash disbursements of the period were properly authorized

To ensure the bank balance per reconciliation is equal to the company balance per reconciliation

Which of the following is a guarantee that protects a customer from product defects for a specified period of time? Warranty Sales allowance Promissory note Contingency

Warranty

Accumulated depreciation is: An expense account. An asset. A contra-asset. A liability.

a contra-asset

The entry to record the estimate for uncollectible accounts includes: A debit to Allowance for Uncollectible Accounts. A credit to Accounts Receivable. A debit to Sales Revenue. A debit to Bad Debt Expense.

a debit to bad debt expense

an ==== ==== is the legal right to receive cash from a credit sale and represents an asset of the company.

accounts receivable

The accounting basis that records revenues in the period that goods and services are provided to customers is referred to as cash-basis accounting. accrual-basis accounting. GAAP-basis accounting.

accrual-basis accounting

When a business incorporates, it must file its ______ with the state in which it incorporates. articles of incorporation federal tax return proxy statement initial public offering

articles of incorporation

A formal debt instrument that obligates the borrower to repay a stated amount (referred to as the principal or face amount) at a specified maturity date can be a note or a(n) bond. obligation payment. maturable asset. common stock.

bond

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold. net realizable book fair net present

book

The original cost of the asset less the accumulated depreciation is the ==== ==== of the asset

book value

Which of the following represents the first step in preparing a statement of cash flows in the correct order? determine the net cash flows from investing activities calculate the net cash flows from operating activities determine the net cash flows from financing activities combine operating, investing, and financing activities

calculate the net cash flows from operating activities

The purchase price and all costs to bring an asset to its desired condition and location for use should be ______. accrued expensed capitalized

capitalized

Cash disbursements that have been recorded in the company's accounting records but are not yet recorded by the bank are called checks outstanding. electronic funds transfers. NSF checks. deposits outstanding.

checks outstanding.

Which of the following are stockholder equity accounts? Common stock Notes payable Inventory Accounts receivable Retained earnings

common stock retained earnings

==== bonds are retired when the bondholder exchanges them for the issuing company's stock.

convertible

The formula for the inventory turnover ratio is cost of goods sold divided by average accounts receivable. cost of goods sold divided by average inventory. average accounts receivable divided by average inventory. sales divided by cost of goods sold.

cost of goods sold divided by average inventory.

When a business provides services to a customer, and the customer promises to pay later, this is referred to as operating sales. credit sales. current sale. cash sales.

credit sales

Accounts on the left side of the accounting equation (assets) are increased with a(n)---- to the account, whereas accounts on the right side of the accounting equation are increased with a(n) ----

debit, credit

An account should have an account title, account number, a place for the date of the transaction, and two columns for assets and liabilities. revenues and expenses. closing and post-closing. debits and credits.

debits and credits.

The two types of financing are debt financing. equity financing. operating financing. investing financing.

debt financing. equity financing.

Payroll withholdings ______. (Select all that apply.) are amounts added to employees' gross earnings to determine their net pay decrease the amount of cash an employee receives increase the amount of cash an employee receives are voluntary are amounts subtracted from employees' gross earnings to determine their net pay

decrease the amount of cash an employee receives are amounts subtracted from employees' gross earnings to determine their net pay

The process of allocating the cost of an asset to expense over the useful life of the asset is called depreciation. contra accounting. book value. asset valuation.

depreciation

A trade discount is a reduction from the list price, which is used to: (Select all that apply.) give quantity discounts to customers change prices without publishing a new catalog reduce the sale price for interest received encourage customers to pay quickly disguise real prices from competitors

give quantity discounts to customers change prices without publishing a new catalog disguise real prices from competitors

Bonds will be issued a premium if the stated interest rate is fluctuating on the day of issuance. equal to the market interest rate. less than the market interest rate. greater than the market interest rate.

greater than the market interest rate.

Obtaining a note payable for cash results in a(n) ______. decrease in assets and an increase in liabilities increase in liabilities and a decrease in stockholders' equity increase in assets and an increase in liabilities decrease in assets and a decrease liabilities

increase in assets and an increase in liabilities

Loans requiring periodic payments of interest and principle are referred to as ==== notes

installment

Items held for sale in the normal course of business are referred to as

inventory

A common reason for redeeming a bond prior to its maturity date is that market interest rates decreased. market interest rates increased. the market price of bonds decreased.

market interest rates decreased

In times of rising prices, cost of goods sold determined using the LIFO inventory assumption typically will be ==== than cost of goods sold determined using the FIFO inventory assumption.

more

After the adjusting entries have been completed, the adjusted balance in the Deferred Revenue account represents: the amount of revenues for which goods or services were provided during the current period. the amount of revenues for which goods or services were provided during the current period, but not collected during the period. the amount of the sales or services still owed to the customer.

the amount of the sales or services still owed to the customer.

In a statement of cash flows, the sum of cash inflows and outflows is equal to net income plus depreciation and amortization. cash flows from operating activities. the change in the cash balance.

the change in the cash balance

The average collection period is calculated as 365 divided by average accounts receivable. the receivable turnover ratio. net credit sales. average total assets.

the receivable turnover ratio.

Common-size analysis is another term used for ____ analysis Multiple Choice Ratio Vertical Horizontal Diagonal

vertical

Common-size analysis is another term used for a ____ analysis vertical horizontal

vertical

Shareholders' equity is another common term for ---- equity

stockholders

On April 1, 20X1, Nelsen Inc. accepts a $100,000, 8% note. The note receivable and interest are due on March 31, 20X2 (one year later). Assuming Nelson Inc. has a December 31 year-end, on March 31, 20X2, Nelson Inc. will record interest revenue of: $8,000. $6,000. $2,000. $0.

2,000

Cash dividends are initially recorded on which date? Date of declaration. Date of record. Date of payment. Balance sheet date.

Date of Declaration

Vertical analysis refers to: Expressing each item in a financial statement as a percentage of the same base amount. Expressing each item in a financial statement in order of highest importance to lowest importance. Expressing each item in a financial statement in order of highest amount to lowest amount. Expressing each item in a financial statement as its trend over time

Expressing each item in a financial statement as a percentage of the same base amount.

True or false: When presenting the operating activities section of the statement of cash flows, the direct method starts with net income and adjusts it by eliminating the effects of transactions that do not involve cash. The indirect method reports the total cash inflow or cash outflow from each main type of transaction.

False

When using vertical analysis, we express income statement accounts as a percentage of Net income. Sales. Gross profit. Total assets.

Sales

The formula for average collection period is 365 divided by net credit sales. 365 divided by average accounts receivable. net credit sales divided by average accounts receivable. 365 divided by the receivables turnover ratio.

365 divided by the receivables turnover ratio

Petite Fashions issued 500,000 of its 2 million shares of authorized common stock. At the end of the accounting period, 450,000 shares are outstanding. How many shares of treasury stock does Petite Fashions have? 1.5 million shares. 450,000 shares. 50,000 shares. 0 shares.

50,000

In a bank reconciliation, which of the following will require a journal entry by the company? Both the adjustments to the bank balance and adjustments to the cash balance in the accounting records Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books Adjustments to the bank balance for items recorded on the books but not yet on the bank statement

Adjustments to the balance per books for items discovered on the bank reconciliation that were not yet recorded on the books

The asset's cost less accumulated depreciation is called: Replacement cost. Book value. Net fair value. Residual value.

Book value

Which of the following is an example of vertical analysis? Comparing gross profit across companies. Comparing income statement items as a percentage of sales. Comparing debt with industry averages. Comparing the change in sales over time.

Comparing income statement items as a percentage of sales

A business that incorporates must file a document with the state, which includes a description of the business activities, the shares to be issued, and the composition of the board of directors. Which of the following terms are used to describe this document? Corporate tax return Corporate charter Articles of incorporation Corporate proxy

Corporate charter Articles of incorporation

Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries? Credit accumulated depreciation $70,000 Credit equipment $70,000 Credit equipment $90,000 Credit gain on exchange of asset $30,000 Debit accumulated depreciation $70,000 Debit equipment $45,000 Debit equipment $50,000

Credit equipment $90,000 Credit gain on exchange of asset $30,000 Debit accumulated depreciation $70,000 Debit equipment $50,000

Which of the following items are included in cash? Accounts receivable from customers Currency and coins Notes receivable from customers Checks from customers Balance in checking accounts

Currency and coins Checks from customers Balance in checking accounts

When treasury stock is purchased, what is the effect on total shareholders' equity? Increase. Decrease. No effect. Cannot be determined from the given information.

Decrease

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated? Accepting credit cards and accepting cash Depositing checks into the bank and recording receipts in the accounting records Opening the mail and deposit of checks in the bank Opening the mail and making a list of checks received

Depositing checks into the bank and recording receipts in the accounting records Opening the mail and deposit of checks in the bank

Depreciation expense is added to net income in the statement of cash flows under the indirect method because: Cash was received. Cash was paid. Depreciation expense reduced net income, but is a noncash item. Depreciation is tax deductible.

Depreciation expense reduced net income, but is a noncash item.

Identify the characteristics of an annuity. Varying time periods between payment dates Equal time periods between payment dates A series of amounts that are equal A series of amounts that vary from period to period

Equal time periods between payment dates A series of amounts that are equal

For internal record keeping, most companies carry their inventory using the _____ basis. LIFO specific identification average cost FIFO

FIFO

Adjustments to net income in calculating operating cash flows include: Noncash items Changes in current assets and current liabilities Changes in noncurrent assets and noncurrent liabilities Nonoperating items

Noncash items Changes in current assets and current liabilities Nonoperating items

Which financial statement would report all of the following information: beginning balances for common stock and retained earnings; current period net income or loss; current period dividends; common stock issued during the year; ending balances of common stock and retained earnings? Balance sheet Income statement Statement of stockholders' equity Retained earnings statement Comprehensive income statement

Statement of stockholders' equity

When using vertical analysis, we express balance sheet accounts as a percentage of Total assets. Total liabilities. Total stockholders' equity. Sales.

Total Assets

Which of the following represents the final step in preparing a statement of cash flows in the correct order? calculate the net cash flows from operating activities determine the net cash flows from financing activities combine operating, investing, and financing activities determine the net cash flows from investing activities

combine operating, investing, and financing activities

Vertical analysis is also commonly known as ==== size analysis

common

Limited liability and ease of raising outside capital are advantages of this business form: Corporation Partnership Sole Proprietorship

corporation

Major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for (Select all that apply.) cost of goods sold. liabilities. inventory. current assets.

cost of goods sold. inventory.

Preferred stock generally (has/does not have) ______ voting rights and (has/does not have) ______ preference as to dividends. does not have; does not have has; has has; does not have does not have; has

does not have; has

Which of the following best describes financial accounting? Artistic presentation. Information measurement/communication process. Mathematical procedure. Behavioral psychology.

information measurement/communcation

Two entries are required when a previously written off account is collected. These two entries include: record the adjustment to sales reinstate the account receivable record the collection on the account receivable record bad debt expense

reinstate the account receivable record the collection on the account receivable

A corporation is owned by its

stockholders

Airline Accessories obtains a $100,000, three year loan, at 6% interest, with monthly payments of $3,042. What amount would be recorded for interest expense for the first full month? $500. $6,000. $3,042. $2,542.

500

At the end of its first year of operations, a company establishes an allowance for future uncollectible accounts for $5,600. At what amount would bad debt expense be reported in the current year's income statement? $800. $4,800. $5,600. $6,400.

5600

Equipment was purchased for $50,000. At that time, the equipment was expected to be used eight years and have a residual value of $10,000. The company uses straight-line depreciation. At the beginning of the third year, the company changed its estimated useful life to a total of six years (four years remaining) and the residual value to $8,000. What is depreciation expense in the third year? $8,000. $5,000. $7,000. $5,500.

8,000

On January 1, year 1, Klondike issued 10-year bonds with a stated rate of 10% and a face amount of $100,000. The bonds pay interest annually. The market rate of interest was 12%. Calculate the issue price of the bonds. Round your answer to the nearest dollar. $100,000 $93,643 $95,056 $88,699

88,699

On March 4, Tonkawa Law asks Green Lawn Services for basic lawn maintenance totaling $200. Green Lawn provides maintenance on March 8, and Tonkawa pays for the lawn maintenance on March 12. Under accrual-basis accounting, on which date should Tonkawa record lawn maintenance expense? March 4 (date of request). March 8 (date of lawn maintenance service). March 12 (date of cash payment). Evenly over the three dates.

March 8 (date of lawn maintenance service).

Which of the following best describes the indirect method of preparing the operating activities section of the statement of cash flows? Net income reconciled from accrual basis to cash basis. A list of cash inflows and cash outflows from transactions involving the purchase and sale of long-term assets and current investments. A list of cash inflows and cash outflows from transactions related to revenue and expense activities. A list of cash inflows and cash outflows from transactions with lenders and stockholders.

Net income reconciled from accrual basis to cash basis.

Which of the following items will require a journal entry following a bank reconciliation? (Select all that apply.) Deposits outstanding Notes collected by the bank NSF checks Outstanding checks

Notes collected by the bank NSF checks

Which of the following transactions decreases stockholders' equity? Purchase supplies on account. Pay salaries for the current period. Repay amounts previously borrowed from the bank. Purchase office supplies on account.

Pay salaries for the current period.

On April 1, Katie Inc. collected $2,400 from a customer for a 12-month membership starting on that date. On December 31, Katie Inc. should credit: Deferred revenue for $1,800 Service revenue for $600 Deferred revenue for $600 Service revenue for $1,800

Service revenue for $1,800

Which of the following methods are not used for inventory costing? (Select all that apply.) Simple-average Weighted-average Specific identification NIFO FIFO LIFO

Simple-average NIFO

What is a direct purpose of internal controls? To improve the accuracy and reliability of accounting information. To help managers determine which projects are likely to be more profitable. To assist top executives in planning employment capacity. To minimize tax payments to the Internal Revenue Service (IRS).

To improve the accuracy and reliability of accounting information.

A company reports the following in its balance sheet: Total assets of $800,000 and total liabilities of $700,000. Which of the following is true? Net income equals $100,000. Total expenses equal $1,500,000. Total revenues equal $1,500,000. Total stockholders' equity equals $100,000.

Total stockholders' equity equals $100,000.

Which of these are the same as horizontal analysis? Vertical analysis Ratio analysis Trend analysis Time-series analysis

Trend analysis Time-series analysis

In an adjusting entry for expenses incurred but not yet paid ______. a liability is decreasing since cash is being paid for an expense incurred at the time of the adjustment a liability is increasing since cash will be paid in the future due to the expense incurred the liability recorded when cash was received is decreasing as the expense is incurred the liability recorded when cash was received is increasing as the expense is incurred

a liability is increasing since cash will be paid in the future due to the expense incurred

In accounting, the term impairment refers to an asset's significant decline in value. offsetting liabilities against the related assets. cost recovery of an asset for investment purposes. allocation of an asset over its service life.

an asset's significant decline in value.

Accounts receivable should be classified as a(n) expense. revenue. liability. asset.

asset

Which of the following represents a resource of the company? Expense. Dividend. Asset. Liability.

asset

A classified balance sheet shows subtotals for current ==== and current ====.

assets and liabilities

Shannon Corporation issues common stock for $25,000. Recording this transaction will include a debit to retained earnings. credit to revenues. credit to accounts receivable. credit to common stock.

credit to common stock.

The journal entry to retire old equipment that is not fully depreciated includes a: credit to loss credit to equipment debit to accumulated depreciation debit to loss debit to cash

credit to equipment debit to accumulated depreciation debit to loss

What are the two classifications for liabilities? Current Long-term Investing Recurring Operating

current long-term

The journal entry to retire old equipment that is not fully depreciated includes a: debit to accumulated depreciation debit to cash credit to equipment debit to loss credit to loss

debit to accumulated depreciation credit to equipment debit to loss

Supplies should be ______ and Supplies Expense should be ______ for the cost of supplies used up during the period. increased; increased decreased; increased increased; decreased decreased; decreased

decreased; increased

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission provided a framework for designing an internal control system. designing fraud-proof accounting system. preparing useful financial statements. auditing internal control systems.

designing an internal control system.

The statement of stockholders' equity includes these amounts: (Select all that apply.) cash dividends for the period net income ending balance retained earnings total revenues for the period

dividends for the period net income ending balance retained earnings

Which of the following describes the cost of selling to customers? Assets. Liabilities. Expenses. Dividends.

expenses

Identify the three components of retained earnings. Expenses Dividends Revenues Assets

expenses dividends revenues

Credits increase revenues, whereas debits increase expenses and dividends. assets and liabilities. liabilities and stockholders' equity. common stock and retained earnings.

expenses and dividends

Merkel Corporation issues $200,000 face amount bonds with a stated interest rate of 6%. If the market interest rate is 6%, the bonds will issue at a discount. face amount. a premium.

face amount

True or false: Accounts receivable not expected to be collected should be counted in the assets of the company until they are later written off.

false

A major difference between companies that provide services and companies that manufacture or sell goods is that those that manufacture or sell goods must account for: inventory operating expenses gains and losses revenue

inventory

---- capital is the amount of money paid into a company by its owners.

invested, or paid-in

a(n) ---- is a contractual arrangement in which an owner provides a user the right to use an asset for a specified period of time.

lease

Preferred stock is "preferred" over common stock by providing preferred stock holders with these rights: preference in distribution of assets during dissolution of corporation guaranteed dividends first right to specified amount of dividends consistently higher return than earned by common stockholders

preference in distribution of assets during dissolution of corporation first right to specified amount of dividends

Costs of assets acquired in one period that will be recorded as expense in a future period are referred to as ______ and are initially recorded as _____. prepaid expenses; expenses deferred revenue; assets prepaid expenses; assets deferred revenue; liabilities

prepaid expenses; assets

Otto Inc. retires old equipment with a book value of $2,400. Otto should debit cash for $2,400 recognize a gain of $2,400 recognize a loss of $2,400 not make a journal entry

recognize a loss of $2,400

Accounts receivable are typically classified as current assets because they accrue interest at a specified interest rate. they will be converted to cash within 1 year. they are a formal agreement to pay within a specific period of time. they are matched with accounts payable for the period.

they will be converted to cash within 1 year.

an ==== difference in cash occurs when a company records a transaction either before or after the bank records the same transaction

timing

Shares of stock that are repurchased are referred to as ---- stock.

treasury

A contingent liability is an existing ==== situation that might result in a loss depending on the outcome of a future event.

uncertain

Schmidt Company's Accounts Receivable balance is $100,000, its adjusted balance in Allowance for Uncollectible Accounts is $4,000, and its bad debt expense is $3,800. The net amount of accounts receivable is: $96,000. $96,200. $100,000. $104,000.

96,000

Equipment originally costing $100,000 has accumulated depreciation of $65,000. If it is sold for $40,000, the company should record: A loss of $5,000. A gain of $5,000. A loss of $70,000. A gain of $70,000.

A gain of $5,000

What will be the effect of paying off an accounts payable balance on the current and the acid-test ratios? Assume that both ratios are greater than 1. Acid-test ratio will decrease Current ratio will decrease Current ratio will increase Current ratio will remain unchanged Acid-test ratio will remain unchanged Acid-test ratio will increase

Current ratio will increase Acid-test ratio will increase

Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries? Debit loss on equipment $15,000 Debit loss on exchange $10,000 Credit accumulated depreciation $40,000 Debit equipment $35,000 Debit equipment $40,000 Credit equipment $90,000 Debit accumulated depreciation $40,000

Debit loss on exchange $10,000 Debit equipment $40,000 Credit equipment $90,000 Debit accumulated depreciation $40,000

Common current liabilities include: Deferred revenues The current portion of long-term debt Sales tax payable Notes payable due in two years Prepaid insurance

Deferred revenues The current portion of long-term debt Sales tax payable

Which of the following are not required to be deducted from an employee's paycheck? Medicare taxes Federal unemployment tax (FUTA) State unemployment tax (SUTA) Charitable contributions Social Security Federal income tax

Federal unemployment tax (FUTA) State unemployment tax (SUTA) Charitable contributions

Which of the following is a positive sign that a company can quickly turn its receivables into cash? I. A low receivables turnover ratio. II. A high receivables turnover ratio. III. A low average collection period.

II and III

The revenue recognition principle states that companies typically record revenue: In the period in which we provide goods and services to customers. In the period in which customers order goods and services. In the period in which we received cash from customers for goods and services. In the period in which goods and services are prepared to be sold to customers.

In the period in which we provide goods and services to customers.

Under accrual-basis accounting, companies typically report expenses: In the same period in which an asset is purchased. In the same period in which cash is paid. In the same period as the revenue they help to generate. In the same period in which a liability is paid.

In the same period as the revenue they help to generate.

Analyze the following postings. Which of the following is the transaction that required this posting? Record income for the period Issue common stock to investors Borrow from bank Perform services for customers for cash

Issue common stock to investors

The definition of inventory includes which of the following items? Items currently in production for future sale Materials used currently in the production of goods to be sold Items held for use or disposal Items held for resale

Items currently in production for future sale Materials used currently in the production of goods to be sold Items held for resale

A company's capital structure refers to: Its mixture of current versus long-term assets. Its mixture of current versus long-term liabilities. Its mixture of liabilities and stockholders' equity. Its mixture of paid-in capital versus retained earnings.

Its mixture of liabilities and stockholders' equity.

Identify a primary reason why financial statement users assess a company's liquidity. Lack of liquidity can lead to the bankruptcy of a company that otherwise may have been successful. Liquidity represents the most important indicator of profitability. Lack of liquidity leads to low asset turnover ratios.

Lack of liquidity can lead to the bankruptcy of a company that otherwise may have been successful.

On November 15, Meier Company received $3,000 cash from a customer for services that were performed on November 1. According to the Revenue Recognition Principle, on which date should the revenue be recorded? November 1. November 15. One-half on each date. Neither.

November 1

Effective internal control over cash requires segregation of duties. Which of the following duties should be segregated? Accepting credit cards and accepting cash Opening the mail and deposit of checks in the bank Opening the mail and making a list of checks received Depositing checks into the bank and recording receipts in the accounting records

Opening the mail and deposit of checks in the bank Depositing checks into the bank and recording receipts in the accounting records

Which of the following are external transactions? Purchasing inventory from suppliers Using supplies purchased last month Borrowing money from the bank Paying salaries to employees

Purchasing inventory from suppliers Borrowing money from the bank Paying salaries to employees

Which of these are liquidity ratios? Times interest earned Net profit margin Receivables turnover Average collection period Fixed asset turnover Current ratio

Receivables turnover Average collection period Current ratio

Which of the following steps are necessary to reconcile the bank balance and the cash account balance. Record items that reconcile the company's cash balance Adjust the company's cash balance Record items that reconcile the bank's cash balance Adjust bank's cash balance

Record items that reconcile the company's cash balance Adjust the company's cash balance Adjust bank's cash balance

Which of the following statements regarding the statement of cash flows are correct? Reports cash receipts The final financial statement that is typically prepared The financial statement that is typically prepared first Reports cash disbursements It is an optional financial statement

Reports cash receipts The final financial statement that is typically prepared Reports cash disbursements

The rights of common stockholders typically include which of the following? Right to vote for corporate directors. Right to distribution of assets in liquidation. Right to dividends when declared. Right to receive a percentage of net income each year.

Right to vote for corporate directors. Right to distribution of assets in liquidation. Right to dividends when declared.

Which of the following is included in the rights of common stockholders? Right to vote on certain matters. Right to dividend payment every year. Right to purchase assets of the corporation. Right to restrict preferred stock.

Right to vote on certain matters.

Which of the following would result in a cash inflow from investing activities? Sale of inventory in excess of cost. Sale of a machine for cash. Sale of the company's common stock for cash.

Sale of a machine for cash

Which of these payroll taxes are paid by the employer and the employee? (Check all that apply.) FUTA SUTA Social Security Medicare

Social Security Medicare

Which of the following methods are available for costing inventory? (Select all that apply.) Specific identification NIFO LIFO Simple-average FIFO Weighted-average

Specific identification LIFO FIFO Weighted-average

The current ratio measures The ability of a company to quickly collect cash from customers. The ability of a company to quickly sell its inventory to customers. The ability of a company to report profits in the current year. The ability of a company to pay its current obligations.

The ability of a company to pay its current obligations

The net cash flows from operating, investing, and financing activities will equal: Net income minus dividends for the year. The ending balance of cash this year. The change in cash reported in the balance sheet from this year versus last year. The change in stockholders' equity for the year.

The change in cash reported in the balance sheet from this year versus last year

Which of the following represents the balance of Cost of Goods Sold at the end of the year? The cost of inventory not yet sold by the end of the year. The cost of inventory purchased during the year. The cost of inventory at the beginning of the year. The cost of inventory sold during the year.

The cost of inventory sold during the year

Which of the following is an important criteria used to determine the reporting of a contingent liability? The likelihood of future payment or loss The classification of the related expense or loss The effect on key balance sheet ratios The potential effect on financial statement users

The likelihood of future payment or loss

If a company issues par-value stock, the amount credited to common stock will be: The total market value of all the shares issued. The par value per share times the number of shares issued. The difference between the market and the par value per share times the total number of shares issued. The amount the board of directors chooses to assign to the shares.

The par value per share times the number of shared issued

Effective internal control over cash includes the requirement that: Only checks are used for payment of purchases. The same person who makes deposits should also record the deposits. The person who makes deposits should NOT record the deposits. Only checks are used for payment of purchases and the same person who makes deposits should also record the deposits.

The person who makes deposits should NOT record the deposits.

An informal credit arrangement with a customer for payment to be received after the sale is classified as a(n) nontrade receivable. note payable. prepaid receivable. account receivable.

account receivable

The gain or loss on disposal of an asset is calculated as: the fair value of the asset less the accumulated depreciation consideration received less the fair value of the asset sold the cost of the asset less the accumulated depreciation amount received less the book value of asset sold

amount received less the book value of asset sold

The gain or loss on disposal of an asset is calculated as: the fair value of the asset less the accumulated depreciation the cost of the asset less the accumulated depreciation amount received less the book value of asset sold consideration received less the fair value of the asset sold

amount received less the book value of asset sold

True or false: The two functions of financial accounting are to measure business activities and prepare tax returns.

false

Repayments of formal, long-term debt contracts are classified as ______ activities. operating financing investing

financing

Under the allowance method, companies estimate _____ uncollectible amounts and report those estimates in the _____ year. current; future future; current current; current future; future

future; current

Preferred stock: must be issued before any common stock is issued. has preference as to dividends. generally does not have voting rights. is useful for raising capital without reducing common stockholders' control.

has preference as to dividends. generally does not have voting rights. is useful for raising capital without reducing common stockholders' control.

A primary purpose of adjusting entries is to record events that will occur at the beginning of the next period. have occurred but that have not yet been recorded. have been recorded incorrectly.

have occurred but that have not yet been recorded.

Preferred stockholders: have the right to receive dividends only in the years the board of directors declares dividends. must receive more dividends per share than the common stockholders. have the right to receive dividends only if there are enough dividends to pay the common stockholders too. must receive dividends every year.

have the right to receive dividends only in the years the board of directors declares dividends.

Which of the following are common controls over cash receipts? (Select all that apply.) having two different employees take custody of the checks and make the deposit reducing the amount of total sales to customers opening mail daily and making a detailed list of checks received placing one trusted employee in charge of all cash-related activities

having two different employees take custody of the checks and make the deposit opening mail daily and making a detailed list of checks received

Which statement regarding the amount of cash from operating activities is correct? It is higher under the direct than the indirect method It is lower under the direct than the indirect method It is identical under the direct and the indirect method

it is identical under the direct and the indirect method

Mark wants to determine whether a specific company has become more profitable over time. Mark should compare the company's performance to: its industry its prior years' performance its main competitor

its prior years' performance

A transaction is initially recorded in the journal, and then subsequently posted to the general ----

ledger

In times of rising prices, ending inventory determined using the LIFO inventory assumption will be ==== than ending inventory determined using the FIFO inventory assumption.

less

A probable future sacrifice of economic benefits arising from present obligations of an entity to transfer assets or provide services as a result of past transactions or events is a(n) asset. liability. loss. expense.

liability

---- refers to a company having enough cash or convertible assets to pay its current liabilities.

liquidity

Which term best describes a company having a suitable amount of cash or easily-convertible assets to pay incurred current liabilities? Risk-free Liquidity Solvency Profitability

liquidity

The flipside of a contingent gain is a contingent reserve. asset. loss.

loss

The two roles of financial accounting are to: measure business activities of the company. communicate information to external parties for decision making purposes. measure and report results to taxing authorities. report cost accounting information for internal decisions.

measure business activities of the company. communicate information to external parties for decision making purposes.

The type of income statement that reports a series of subtotals such as gross profit, operating income, and income before taxes is a ______ income statement. single-step current multiple-step classified

multiple-step

A corporate charter: names the board of directors. describes the business activities. is required only for publicly-traded corporations. specifies the shares of stock to be issued. specifies the number of shares outstanding.

names the board of directors. describes the business activities. specifies the shares of stock to be issued.

Which single piece of information best explains most companies' stock price performance? Total number of employees. Net income. Total sales to customers. Geographic location.

net income

The return on assets is calculated by dividing ____ by _______. net income; average total assets net income; ending balance of total assets ending balance of total assets; net income average total assets; net income

net income; avg total assets

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ==== ====

net; income

Receivables not expected to be collected should always be counted in assets of the company. not be counted in assets of the company. initially be included as assets and then be written off when the customer does not pay.

not be counted in assets of the company

A formal, signed credit agreement between a lender and a borrower is called a(n) _____ by the lender. note payable. account receivable. account payable. note receivable.

note receivable

When a sale occurs under the periodic inventory system, we record: both the sale and the related cost of goods sold only the sale, but not the related cost of goods sold only the cost of goods sold, but not the sale

only the sale, but not the related cost of goods sold

The statement of cash flows classifies items as operating and nonoperating. recurring and nonrecurring. operating, investing, and financing. current and noncurrent.

operating, investing, and financing

Adjusting entries for accrued expenses ensure that liabilities are reported for all amounts ______ at the end of the accounting period. used owed paid that represent probable future benefits

owed

Internal control consists of plans to (Select all that apply.) report misuse of company assets to investors. report management errors to the police. provide accurate and reliable accounting information. safeguard company assets.

provide accurate and reliable accounting information. safeguard company assets.

The purpose of a general ledger is to provide in a single location the list of transactions affecting each account and the account's balance. record a chronological listing of the accounts used by a particular company. record all transactions for a particular item.

provide in a single location the list of transactions affecting each account and the account's balance.

Which of the following is an example of a cash inflow from a financing activity? Receipt of cash from the issuance of common stock. Receipt of cash from the sale of equipment. Receipt of cash from the collection of a note receivable. Receipt of cash from the sale of inventory.

receipt of cash from the issuance of common stock

The purpose of a journal is to record a chronological listing of every -transaction for a company. maintain a balance for each account. record all transactions for a particular item.

record a chronological listing of every transaction for a company.

==== bonds are supported by a specific asset the issuer pledges as collateral.

secured

A company's ability to pay its long-term debt is referred to as: solvency liquidity profitability

solvency

The financial statement that provides information about cash receipts and cash disbursements for the period is the statement of retained earnings. statement of cash flows. balance sheet. income statement.

statement of cash flows

Bonds that require payment of the full principle amount of the bond at the end of the loan term are referred to as serial bonds term bonds convertible bonds

term bonds