Accy 200 Exam 1Practice Questions

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

Dr. Supplies expense Cr. Supplies

Which is a true statement pertaining to bonds?

Bonds can be sold at a discount, part, or premium

Which of these is not a limitation of financial statements? A) Qualitative data are not reflected in financial statements B) Market values of assets are not generally reported C) Estimates are commonly used and are sometimes inaccurate D) May be difficult to compare firms in the same industry who use different accounting methods E) All are limitations

E) All are limitations

The Buildings account should be increased (debited) for the purchase/construction price of the building, plus: A) any ordinary and necessary costs incurred to get the building ready for use B) any interest costs incurred on amounts borrowed to finance the building during its construction C) any installation and inspection costs incurred to get the building ready for us D) any material, labor, and overhead costs incurred by an entity in the construction of its own building E) all of above

E) all of above

Common examples of "users" of the accounting information related to an organization include: A) management B) investors and creditors C) employees D) Securities and Exchange Commission E) all of the above

E) all of the above

The Discount on Short-term Debt account: A) is a contra liability account B) reduces the total amount of liabilities reported on the balance sheet C) is often netted against the liability account to which it relates for financial reporting purposes D) is amortized to interest expense over the life of the liability to which it relates E) All of the above

E) all of the above

The recognition of liabilities often results in: A) the recognition of expenses B) a more conservation representation of financial position C) a decrease in net income D) a decrease in ROI E) All of the above

E) all of the above

All of the following give rise to a liability except A) money borrowed from a bank B) interest costs resulting from the passage of time C) employees working before being paid D) products sold within warranties E) negotiations to make a purchase on credit

E) negotiations to make a purchase on credit

Which of the following accounts is not an asset: A) Cash B) Inventory C) Accounts Payable D) Equipment E) Land

C) Accounts payable

Which of the following is not typically classified as a current liability? A) Accounts Payable B) Notes Payable C) Bonds Payable D) Unearned Subscription Revenue E) Interest Payable

C) Bonds Payable

Normal account balances are: A) Cash, Accounts Receivable, and Service Revenues are debits B) Interest Expense, Wages Payable, and Retained Earnings are credits C) Merchandise Inventory, Cost of Goods Sold, and Equipment are debits D) Accumulated Depreciation, Cash, and Merchandise Inventory are debits E) None

C) Merchandise Inventory, Cost of Goods Sold, and Equipment are debits

Internal control systems involve a series of checks and balances that separate each of the functional duties involved in processing a transaction, and are normally designed to do all of the following except: A) Promote accuracy and reliability of the company's records and financial statements B) Safeguard and protect a company's assets against improper or unauthorized use C) Prevent groups of employees from committing collusive acts of fraud D) Encourage employees to adhere to the company's prescribed policies and procedures E) Provide an environment that is conducive to efficient operation of the organization

C) Prevent groups of employees from committing collusive acts of fraud

Similarities between preferred stock and long-term debt (bonds) include all except: A) each has a fixed claim to annual income (dividends and interest) B) each has a fixed claim on assets (liquidating value and principal amount) C) each allows the corporation a tax deduction (dividends and interest) D) each may be callable and/or convertible E) all are similarities

C) each allows the corporation a tax deduction (dividends and interest)

Which of the following is not true about a 10% stock dividend: A) retained earnings decrease B) paid-in capital increases C) par value decreases D) info concerning the market value of the stock is needed to record the stock dividend journal entry E) total stockholders' equity remains the same

C) par value decreases

All of the following are current assets except: A) Marketable Securities B) Accounts Receivable C) Cash D) Equipment E) Notes Receivable

D) Equipment

All of the following are examples of intangible assets except: A) leaseholds B) Goodwill C) Trademarks D) Oil reserves E) Patents

D) Oil reserves

Which of the following classifications would represent the largest number of shares of common stock? A) issued shares B) outstanding shares C) treasury shares D) authorized shares E) unissued shares

D) authorized shares

Which would not affect total retained earnings? A) cash dividends B) net income C) stock dividends D) stock splits E) all of the above

D) stock splits

The time frame associated with an income statement is:

A past period of time

Which of the following financial statement descriptions is inaccurate? A) Balance sheet - shows the organization's financial position for a period of time B) Income statement - shows what the organization's earnings were for a period of time C) Statement of Cash Flows - shows what the organization's receipts and disbursements were for a period of time D) Statement of Stockholders' Equity - shows the investments by and distributions to stockholders for a period of time E) All are accurate

A) Balance sheet - shows the organization's financial position for a period of time

Expenditures incurred on long-term assets after they have been placed in service are either capitalized or expensed. Which of the following statements is true? A) Capitalized amounts represent future economic benefits that extend beyond one year B) Expensed amounts benefit no more than three future years C) Capitalized amounts decrease net income for the entire amount in the year of the expenditure D) Expensed amounts are added to the net book value of the related asset E) immaterial amounts should always be capitalized

A) Capitalized amounts represent future economic benefits that extend beyond one year

Regarding bank reconciliations, which is true? A) Deposits in transit are added to the bank balance B) Service charges are subtracted from the bank balance C) Interest earned on notes collected by the bank is not a reconciling item (only the note itself ) D) NSF checks result in the recognition of bad debts expense on the books E) Outstanding checks are subtracted from the book balance

A) Deposits in transit are added to the bank balance

All of the following are examples of "accrued expense" types of liabilities except: A) short-term notes taken out at a bank during the year B) payroll taxes owed by the employer for the year C) property taxes owed to local governments for the year D) Salaries and wages owed to employees at the end of the year E) Estimated product warranty costs on products sold during the year

A) short-term notes taken out at a bank during the year

Which of the following accounting methods accomplishes much of the matching of revenues and expenses?

Accrual accounting

Which of the following is not a term that describes part of the accounting for noncurrent assets?

Accumulation

Total assets remain the same when:

An account receivable is reclassified as a note receivable

An expanded version of the accounting equation could be:

Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues - Expenses - Dividends

Which of the following groups of accounts all have debit balances: A) Land, Equipment, Paid-in capital B) Accounts Receivable, Merchandise Inventory, Salary Expense C) Notes Receivable, Dividends Payable, Interest Expense D) Accounts Receivable, Accumulated Depreciation, Buildings E) None

B) Accounts Receivable, Merchandise Inventory, Salary Expense

Which of the following does not appear in the stockholder's equity section of a balance sheet? A) Preferred Stock B) Bonds Payable C) Additional Paid-in capital D) Accumulated other comprehensive income E) Treasury stock

B) Bonds Payable

Which of the following is not a correct expression of the accounting equation? A) Assets - Liabilities = Stockholders' Equity B) Net assets = Liabilities + Stockholders' equity C) Assets = Liabilities + Stockholders' equity D) Net assets = Stockholders' equity

B) Net assets = Liabilities + Stockholders' equity

Bank reconciliations often result in adjusting entries affecting the cash account on the books of the company involved. Which would not cause an adjustment? A) Bank service charges B) Outstanding checks C) Notes collected on behalf of the company by the bank D) Errors made in recording amounts of checks written E) Not sufficient funds checks

B) Outstanding checks

Which of the following is normally a contra stockholder's equity account? A) Retained Earnings B) Treasury Stock C) Preferred Stock D) Additional Paid-in Capital E) none of above

B) Treasury stock

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

B) all of these

Assuming that ending inventory is counted correctly at the end of 2014, an error in the physical count of ending inventory at the end of 2013 will have had an effect on all of the following except: A) cost of goods sold in year of error (2013) B) total assets in the year of the error (2013) C) cost of goods sold in the year after the error (2014) D) total assets in the year after the error (2014)

D) total assets in the year after the error (2014)

Leasehold is an example of which of the following types of assets?

Intangible asset

The principle stating that all expenses incurred while earning revenues should be identified with the revenues when they are earned and reported for the same time period is the:

Matching principle

Which of the following is not associated with bonds?

Maturity rate

An Accounts Payable normally results from which of the following transactions

Purchasing goods and services from suppliers on credit

The balance sheet is also called:

Statement of financial position

Which depreciation method results in equal depreciation expense mounts for each year of an asset's useful life?

Straight-line

In reference to the Discount on Bonds Payable and Premium on Bonds Payable accounts, which statement is true?

The Discount on the Bonds Payable account is amortized by a credit entry each period

Financial leverage refers to which of the following?

The difference between the rate of return earned on assets (ROI) and the rate of return earned on stockholders' equity (ROE)

A lessee's entry to record a periodic cash lease payment on a capital lease results in:

a decrease in total liabilities and a decrease in net income

As it relates to financial reporting, which of the following is not required of an accounting entity:

a financial statement presenting the amount that the entity expects to earn next year

When a depreciable asset is sold:

a gain arises if the sales proceeds exceed the net book value

If a firm sells treasury stock for more than its cost:

additional paid-in capital is increased

Bad debt expense is recognized in the same accounting period as the revenue that is related to the receivable because:

all costs incurred in the current period should be subtracted from current period revenues

Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all subject to:

amortization

When a firm purchases supplies for its business:

an adjustment will probably be required as supplies are used

Inventories:

are recorded as debits to assets when purchased and debits to expenses when used

When a firm uses the LIFO inventory cost flow assumption:

better matching of revenue and expense is achieved than with FIFO

Retained earnings represents:

cumulative net income that has not been distributed to stockholders as dividends

Retained earnings is not:

decreased by gains and losses

The entry to record depreciation expense:

decreases an asset and increases a contra asset

Credits are used to record:

decreases to assets and expenses and increases to liabilities, revenues, and stockholders' equity

The entry to record depreciation on long-term assets:

decreases total assets and decreases earnings before taxes

Partnerships, as contrasted with corporations, can be characterized as being relatively:

easier to form, more risky to be an owner of, and harder to raise large amounts of capital for

An accounts receivable results from the sale of:

goods and services to customers on account

A credit entry will:

increase a liability account

The accrual of interest on short-term marketable securities results in:

increase in current assets and increase in net income

When comparing its effects to LIFO during an inflationary time, the effects of FIFO are to:

increase net income and increase total assets

The carrying value of a bond in the liability section of the balance sheet will:

increase over time as a bond issued at a discount reaches maturity

The effect of an adjustment on the financial statements is usually to:

increase the accuracy of both the balance sheet and income statement

Revenues are:

increases in net assets from selling a product

The distinction between a current asset and other assets:

is based on when the asset is expected to be converted to cash, or used to benefit the entity

Accrual accounting:

is designed to match revenues and expenses

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:

is more than the fair value of the net assets of the acquired company

LIFO

is required for financial reporting purposes by firms that use it for tax purposes

Depreciation on assets such as equipment and machinery is recorded because of:

matching principle

Another term frequently used to describe stockholders' equity is:

net assets

A concept/principle related to transactions is:

original cost

The effect of an error resulting in an understatement of ending inventory is to:

overstate cost of goods sold of the current period

The stockholders' equity section of a balance sheet contains two major components:

paid-in capital and retained earnings

Compared to the periodic inventory system, the perpetual system:

provides better information for management to control unauthorized use and theft of inventory

A stock dividend is similar to a cash dividend in that

retained earnings and the amount of potential future dividends is reduced by each

Interest on a Note Payable is most appropriately accrued:

the end of the accounting period during which the note is a liability

The going concern concept refers to the presumption that:

the entity will continue to operate in the forseeable future

If a common stock has no par value

there will not be any additional paid-in capital related to it, assuming that the common stock does not have a stated value either

The effect of an adjustment is:

to increase the accuracy of the financial statements

When an uncollectible account receivable is written off against the allowance for bad debts:

total current assets are not affected

When a firm purchases its own shares as treasury stock:

total stockholder's equity is decreased

A firm wishing to minimize the amount reported for taxable income and maximize the amount reported as net income in the year in which a new long-term asset is placed in service would:

use straight-line depreciation on the books and an accelerated method for tax purposes