accy 200 cqs 2,4,,5,6,7,8

A transaction that is likely to cause an increase in a current liability is: A accrual of interest expense. B accrual of bad debts expense. C payment of accrued wages. D depreciation of equipment.

A

A credit entry will: A increase an expense account. B decrease paid-in capital. C Increase a liability account. D increase an asset account.

C

When a firm purchases its own shares as treasury stock: A paid-in capital is decreased. B retained earnings is decreased. C total stockholders' equity is increased. D total stockholders' equity is decreased.

D

A working capital loan will generally: A not have an interest rate. B not affect working capital. C require that interest (if any) be paid monthly. D be classified as a noncurrent liability.

B

Goodwill is an asset that arises because the present value of an acquired company's estimated future earnings, discounted at the acquiring firm's ROI: A is more than the fair value of the net assets of the acquiring company. B is more than the fair value of the net assets of the acquired company. C is less than the fair value of the net assets of the acquiring company. D is less than the fair value of the net assets of the acquired company.

B

If a firm sells treasury stock for more than its cost: A a gain is recognized in the income statement. B additional paid-in capital is increased. C retained earnings is increased. D total stockholders' equity does not change.

B

One inventory cost flow assumption will result in different cost of goods sold from another inventory cost flow assumption only if: A inventory quantities change from the beginning to end of the year. B the cost of inventory items changes during the year. C price levels do not change during the year. D a new product is added to inventory during the year.

B

The balance sheet presentation of accounts receivable net of the allowance for bad debts has the effect of stating accounts receivable at: A lower of cost or market. B net realizable value. C original cost. D market value.

B

When a company issues a bond at a discount: A the company will pay more than the face amount of the bond at its maturity. B the company's interest expense will be more than the interest paid each year. C the company's interest expense will be less than the interest paid each year. D the company will pay less than the face amount of the bond at its maturity.

B

When a depreciable asset is sold: A a loss arises if the sales proceeds exceed the net book value. B a gain arises if the sales proceeds exceed the net book value. C any cash received results in a gain. D depreciation expense is adjusted so there is no gain or loss.

B

When a firm uses the LIFO inventory cost flow assumption: A net income will be greater than if FIFO were used. B better matching of revenue and expense is achieved than under FIFO. C cost of goods sold will be the same as if FIFO were used. D ending inventory will be greater than if FIFO were used.

B

When bonds are issued at a premium: A interest expense on the bonds will be more than the interest paid. B interest expense on the bonds will be less than the interest paid. C the bonds are sold for less than their face amount. D the coupon interest rate is less than the market interest rate.

B

A magazine publisher has an account called "Unearned Subscription Revenue." The transaction that causes the balance of this account to decrease is: A magazines are printed for the publisher. B subscriptions are sold to new subscribers. C magazines are mailed to subscribers. D cash is received from new subscribers.

C

An Accounts Payable normally results from which of the following transactions? A Purchasing accounts for cash B Purchasing land on credit C Purchasing goods and services from suppliers on credit D Purchasing buildings and equipment on credit

C

Current maturities of long-term debt: A are classified with long-term debt. B permit a more accurate determination of working capital. C represent cash that has been set aside for debt payments due within a year. D reflect overdue installments of bonds payable.

C

Expenses are: A decreases in net assets from dividends to stockholders. B cash disbursements. C decreases in net assets resulting from usual operating activities. D decreases in net assets from uninsured accidents.

C

Financial leverage refers to which of the following? A The difference between the rate of return earned on current assets and the rate of return earned on retained earnings. B Decreasing fixed costs per unit by increasing production. C The difference between the rate of return earned on assets (ROI) and the rate of return earned on stockholders' equity (ROE). D The leverage a firm obtains from increasing production.

C

If the market price of a bond exceeds its face amount: A the coupon rate is less than the market interest rate. B the company's ROI and working capital have been increasing over time. C the coupon rate is more than the market interest rate. D the maturity rate has been declining.

C

Many current liabilities are affected by accrual accounting entries. This happens because: A accrual accounting frequently involves recognizing liabilities before they are incurred. B liabilities are usually paid when they are incurred. C accrual accounting involves recognizing liabilities when expenses have been incurred but not yet paid. D the only way to reduce a liability account balance is with an adjusting entry.

C

The adjusting entry to accrue Interest Expense results in: A a decrease in Interest Expense. B a decrease in Interest Payable. C an increase in Interest Expense. D a decrease in Cash.

C

The effect of an adjustment on the financial statements is usually to: A increase net income. B make the balance sheet balance. C increase the accuracy of both the balance sheet and income statement. D match revenues and assets.

C

The entry to record depreciation expense: A decreases an asset and increases a contra asset. B decreases working capital and decreases net income. C increases a contra asset and decreases net income. D decreases a contra asset and decreases net income.

C

The principal challenge to calculating depletion is estimating: A the salvage value of the exploration equipment. B the cost of the asset. C the quantity of material to be recovered. D the demand for the product.

C

When a company issues a bond at a premium: A the company is more profitable than most companies in its industry. B investors perceive the bond to be a very safe investment. C the company's interest expense will be less than the interest paid each year. D the company's interest expense will be more than the interest paid each year.

C

When a firm purchases supplies for use in its business, and the cost of the supplies purchased is recorded as an asset, the following adjustment to recognize the cost of supplies used will probably be required: A DR Supplies CR accounts payable B DR Supplies CR supplies expense C DR suplies expense CR Supplies D No Adjustment will be required

C

Which of the following accounting methods accomplishes much of the matching of revenues and expenses? A Cash accounting. B Full disclosure accounting. C Accrual accounting. D Match accounting.

C

Which of the following is true regarding notes receivables? A A note is a less formal document than an account receivable. B A notes receivable is always a long-term asset. C A note is a more formal document than an account receivable. D A notes receivable is always a current asset.

C

Depreciation, in accounting, is a process that results in: A accumulating cash for the replacement of the asset. B an accurate measurement of the economic usefulness of an asset. C depreciable assets being reported in the balance sheet at their fair value. D spreading the cost of an asset over its useful life to the entity.

D

Interest on a Note Payable is most appropriately accrued: A when principal payments on the note are made. B when the interest is paid. C when the note is signed. D as of the end of each accounting period during which the note is a liability.

D

One of the most important reasons for having a system of internal control is to: A ensure no employees have ever been convicted of fraud or embezzlement. B eliminate any temptations that may be presented to employees that could lead to theft from the company. C prevent a salesperson from using a company car for personal transportation. D improve the effectiveness and efficiency of the operations of the organization.

D

The adjusting entry to accrue Interest Expense results in: A a decrease in Cash. B a decrease in Interest Payable. C a decrease in Interest Expense. D an increase in Interest Expense.

D

The current liability for Wages Payable (or Accrued Payroll) represents the: A employer's liability for various withholdings that taken out of the gross pay earned by employees. B gross pay earned by employees for which they have not yet been paid. C employer's federal and state payroll tax obligation. D net pay earned by employees for which they have not yet been paid.

D

The effect of an adjustment is: A to close the books. B to record cash receipts and payments not previously recorded. C to correct an entry that was not in balance. D to increase the accuracy of the financial statements.

D

The inventory cost flow assumption describes the flow of product cost: A from the asset (inventory) account and to the revenue (sales) account. B from the warehouse to the customer. C from the revenue (sales) account and to the expense (cost of goods sold) account. D from the asset (inventory) account and to the expense (cost of goods sold) account.

D

The liability for product warranty claims is an example of a liability that: A has been calculated using estimates. B has been recorded in the process of matching revenue and expense. C also resulted in a reduction of net income. D all of these answers are correct.

D

The purpose of the income statement is to show the: A change in the fair value of the assets from the prior income statement. B market value per share of stock at the date of the statement. C revenues collected during the period covered by the statement. D net income or net loss for the period covered by the statement.

D

When a firm buys land on which there is a building, and the building is torn down so that an appropriate new building can be constructed on the land: A any of the purchase cost allocated to the old building is reported as a loss. B any of the purchase cost allocated to the old building is capitalized as part of the cost of the new building. C the cost assigned to the land excludes the cost of the old building. D the total cost of the land and old building are capitalized as land cost.

D

When a firm purchases supplies for its business: A the supplies account should always be debited. B either the supplies account or the supplies expense account should be credited. C the supplies expense account should always be debited. D an adjustment will probably be required as supplies are used.

D

Which of the following is NOT an example of an inventory account a manufacturing firm might use? A Work in process inventory. B Raw materials inventory. C Finished goods inventory. D Merchandise inventory.

D

Which of the following statements best describes the process of accounting for depreciation? A A process that attempts to recognize loss in economic value over a period of time. B A process for setting aside cash so funds will be available to replace the asset. C A process for recognizing all of the cost associated with using an asset in a revenue generating activity. D A process for recognizing the cost of an asset that should be matched against revenue earned as a result of using the asset.

D

Factors that usually affect retained earnings directly include: A net income or net loss, and dividends. B restructuring charges and losses from discontinued operations. C net income or net loss, and the issuance of stock at an amount in excess of par value. D stock dividends and gains or losses from the sale of treasury stock.

A

If there is a loss on the disposal of a depreciable asset: A in retrospect, the depreciation expense recognized over the asset's life was too low. B the net book value of the asset was negative. C in retrospect, the life over which the asset was depreciated was too short. D no cash was received in the disposal transaction.

A

Interest on a Note Payable is most appropriately accrued: A as of the end of each accounting period during which the note is a liability. B when the interest is paid. C when principal payments on the note are made. D when the note is signed.

A

Many companies use accelerated depreciation for tax purposes because: A it results in lower taxable income than straight-line depreciation. B it reflects the amount of cash used in depreciation. C it is used for determining net income reported to stockholders. D it is easier to calculate than straight-line depreciation.

A

The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is: A matching revenue and expense. B objectivity. C original cost. D consistency.

A

The balance sheet might also be called: A Statement of Financial Position. B Statement of Assets. C Statement of Changes in Financial Position. D Statement of Equity.

A

The effect of an error resulting in an understatement of ending inventory is to: A overstate cost of goods sold of the current period. B overstate operating expenses of the current period. C overstate the next period's beginning inventory. D understate cost of goods sold of the current period.

A

The time frame associated with an income statement is: A a past period of time B a function of the information included in it C a future period of time D a point in time in the past

A

When an accelerated depreciation method is used to calculate depreciation expense: A the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used. B the accumulated depreciation account balance will increase by a larger amount in the last half of an asset's life than if straight-line depreciation is used. C the net book value of the asset at the end of its useful life will be less than if straight-line depreciation is used. D depreciation expense will be less in the early years of the asset's life than if straight-line depreciation is used.

A

When an uncollectible account receivable is written off against the Allowance for Bad Debts account: A total current assets are not affected. B total current assets decrease and expenses increase. C current assets decrease and D expenses are not affected. total current assets decrease and expenses decrease.

A