ACG 2021 Final Exam Study Questions

If a company incorrectly records a payment as an asset, rather than as an expense, how will this error affect net income in the current period? a. Net income will be too high b. Net income will be too low c. Net income would not be affected by this error d. Nobody really knows

a. Net income will be too high

The duality of effects can best be described as follows: a. when a transaction is recorded in the accounting system, at least two effects on the accounting equation will result b. When an exchange takes place between two parties, both parties must record the transaction c. When a transaction is recorded, both the balance sheet and the income statement must be impacted d. When a transaction is recorded, one account will always increase and one account will always decrease

a. When a transaction is recorded in the accounting system, at least to effects on the accounting equation will result

which account is least likely to be debited when revenue is recorded? a. accounts payable b. accounts receivable c. cash d. deferred revenue

a. accounts payable

which account is least likely to appear in an adjusting journal entry? a. cash b. interest receivable c. income tax expense d. salaries and wages expense

a. cash

which of the following is not an example of internal control? a. environmental assessment b. control activities c. information and communication d. monitoring activities

a. environmental assessment

which of the following statements describes transactions that would be recorded in the accounting system? a. exchange of an asset for a promise to pay b. exchange of a promise for another promise c. both a and b d. neither a nor b

a. exchange of an Asset for a promise to pay

which of the following is not a SOX act requirement? a. increase fines and jail sentences for fraud perpetrators b. all public companies establish an audit committee of independent directors c. management of all public companies evaluates and reports on the effectiveness of internal control over financial reporting d. external auditors of large public companies evaluate and report on the effectiveness of internal control over financial reporting

a. increase fines and jail sentences for fraud perpetrators

which of the following is false regarding a perpetual inventory system? a. physical counts are never needed because records are maintained on a transaction-by-transaction basis b. the inventory records are updated with each inventory purchase, sale, or return transaction c. CGS is increased as sales are recorded d. a perpetual inventory system can be used to detect shrinkage

a. physical counts are never needed because records are maintained on a transaction-by-transaction basis

which feature is not applicable to common stock ownership? a. right to receive dividends before preferred stockholders b. right to vote on appointment of external auditor c. right to receive residual assets of the company should it cease operations d. all of the above are applicable to common stock ownership

a. right to receive dividends before preferred stockholders

which of the following is true regarding the income statement? a. sometimes called the statement of operations b. reports revenues, expenses, and liabilities c. only reports revenue for sales in which cash was received at point of sale d. reports financial statements of a business at a specific point in time

a. sometimes called the statement of operations

which of the following is not one of the items requires to be shown in the heading of the financial statement a. the financial statement preparer's name b. the title of the financial statement c. the financial reporting date or period d. the name of the business entity

a. the financial statement preparer's name

which of the following correctly expresses the CGS equation as used in the periodic system? a. BI + CGS - P = EI b. BI + P - EI = CGS c. BI + P - CGS = EI d. BI + EI - P = CGS

b. BI + P - EI = CGS

If a publicly traded company is trying to maximize its perceived value to decision makers external to the corporation, the company is most likely to report too small a value for which of the following on its balance sheet? a. Assets b. Liabilities c. Retained earnings d. Common stock

b. Liabilities

which would not appear in a closing journal entry? a. interest revenue b. accumulated depreciation c. retained earnings d. salaries and wages expense

b. accumulated depreciation

which of the following would not be a goal of external users reading a company's financial statements? a. understanding the current financial state of the company b. assessing the company's distribution to social and environmental policies c. predicting the company's future financial performance d. evaluating the company's ability to generate cash from sales

b. assessing the company's distribution to social and environmental policies

each period, cost of goods available for sale is allocated between: a. assets and liabilities b. assets and expenses c. assets and revenues d. expenses and liabilities

b. assets and expenses

which of the following correctly describes how to report cash? a. restricted cash is always reported as a current asset b. cash can be combined with cash equivalents c. cash can be combined with restricted cash d. cash equivalents can be combined with restricted cash

b. cash can be combined with cash equivalents

which of the following is not an element of the fraud triangle? a. opportunity b. control environment c. incentive d. rationalization

b. control environment

a journal entry for dividends is not recorded on what date? a. date of declaration b. date of record c. date of payment d. a journal entry is recorded on all of the above dates

b. date of record

which of the following is false when a bond is issued at a premium? a. the bond will issue for an amount above its face value b. interest expense will exceed the cash interest payments c. the market interest rate is lower than the stated interest rate d. the issue price will be quoted at a number greater than 100

b. interest expense will exceed the cash interest payments

Which of the following items is not a specific account in a company's accounting records? a. Accounts receivable b. Net income c. Sales revenue d. Deferred revenue

b. net income

Which of the following accounts normally has a debit balance? a. Deferred revenue b. Rent expense c. Retained earnings d. Sales revenue

b. rent expense

Mountain Gear Inc. buys tents and climbing supplies from Rugged Rock Corp. for sale to consumers. what type of company is Mountain Gear Inc.? a. service b. retail merchandiser c. wholesale merchandiser d. manufacturer

b. retail merchandiser

which is not one of the four basic financial statements? a. the balance sheet b. the audit report c. the income statement d. the statement of cashflows

b. the audit report

which of the following does not effect net sales? a. sales returns and allowances b. sales discounts c. CGS d. sales revenue

c. CGS

which of the following regarding GAAP is true? a. GAAP is an abbreviation for generally applied accounting principles b. changes in GAAP always affect the amount of income reported by the company c. GAAP is an abbreviation for generally accepted accounting principles d. changes to GAAP must be approved by the Senate Finance Committee

c. GAAP is an abbreviation for generally accepted accounting principles

Which of the following describes how assets are listed on the balance sheet? a. In alphabetical order b. In order of magnitude, lowest value to the highest value c. In order they will be used up or turned into cash d. From least current to most current

c. In the order they will be used up or turned into cash

which inventory costing system provides a better matching of current costs with sales revenue on the income statement but also results in older values being reported for inventory on the balance sheet? a. FIFO b. weighted average c. LIFO d. specific identification

c. LIFO

a bond is issued at a price of 103 and retired early at a price of 97. which of the following is true? a. a gain will be reported on the income statement when the bond is issued b. a loss will be reported on the income statement when the bond is issued c. a gain will be reported on the income statement when the bond is retired d. a loss will be reported on the income statement when the bond is retired

c. a gain will be reported on the income statement when the bond is retired

which of the following trial balances is used as a source for preparing the income statement? a. unadjusted trial balance b. pre-adjusted trial balance c. adjusted trial balance d. post-closing trial balance

c. adjusted trial balance

which of the following statements about the relative advantages of equity and debt financing is false? a. an advantage of equity financing is that it does not have to be repaid b. an advantage of equity financing is that dividends are optional c. an advantage of equity financing is that new stockholders get to vote and share in the earnings of the company d. an advantage of debt financing is that interest is tax deductible

c. an advantage of equity financing is that new stockholders get to vote and share in the earnings of the company

which of the following is the entry to be recorded by a law firm when it receives payment from a new client that will be earned when services are provided in the future? a. accounts receivable service revenue b. deferred revenue service revenue c. cash deferred revenue d. deferred revenue cash

c. cash deferred revenue

assume the balance in prepaid insurance is $2,500, but it should be $1,500. the adjusting journal entry should include which of the following? a. debit to prepaid insurance for $1,000 b. credit to insurance expense for $1,000 c. debit to insurance expense for $1,000 d. debit to insurance expense for $1,500

c. debit to insurance expense for $1,000

under what depreciation method is an asset's book value used to calculate depreciation each year? a. straight-line b. units-of-production c. declining-balance d. weighted-average-cost

c. declining-balance

which of the following best describes accrued liabilities? a. long-term liabilities b. current amounts owed to suppliers of inventory c. expenses incurred but not paid at the end of the accounting period d. revenues that have been collected but not earned

c. expenses incurred but not paid at the end of the accounting period

an increasing inventory turnover ratio: a. indicates a longer time span between the ordering and receiving of inventory b. indicates a shorter time span between the ordering and receiving of inventory c. indicates a shorter time span between purchase and sale of inventory d. indicated a longer time span between the purchase and sale of inventory

c. indicates a shorter time span between purchase and sale of inventory

if a 5% note receivable for $100,000 is created on Jan 1, 2018, and it matures on Dec 31, 2021, a. no interest revenue will be recorded in 2018 b. the note receivable will be classified as a current asset c. interest revenue of $5,000 will be recorded in 2018 d. none of the above

c. interest revenue of $5,000 will be recorded in 2018

which of the following does not impact the calculation of the cash interest payments to be made to shareholders? a. face value of the bond b. stated interest rate c. market interest rate d. the length of time between payments

c. market interest rate

which is the following regarding retained earnings is false? a. retained earnings is increased by net income b. is a component of stockholders' equity on the balance sheet c. is an asset on the balance sheet d. retained earnings represents earnings not yet distributed to stockholders in the form of dividends

c. retained earnings is an asset on the balance sheet

When expenses exceed revenues in a given period: a. stockholders' equity will not be impacted b. stockholders' equity will be increased c. stockholders' equity will be decreased d. cannot be determined

c. stockholders' equity will be decreased

which is false regarding the balance sheet? a. accounts shown on balance sheet represent the basic accounting equation for a particular business b. retained earnings shown in the balance sheet must match that on the statement of retained earnings c. the balance sheet summarizes the net changes in specific account balances over a period of time d. balance sheet reports the amount of assets, liabilities, and stockholders' equity of a business at a specific point in time

c. the balance sheet summarizes the net changes in specific account balances over a period of time

When should a company report the cost of an insurance policy as an expense? a. When the company first signs the policy b. When the company pays for the policy c. When a company receives the benefits from the policy over its period of coverage d. when the company receives payments from the insurance company for its insurance claims

c. when a company receives the benefits from the policy over its period of coverage

Which of the following statements would be considered true regarding debits and credits? a. In any given transaction, the total dollar amount of the deficits and entitled dollar amount of the credits must be equal b. debits decrease certain accounts and credits decrease certain accounts c. Liabilities and stockholders' equity accounts usually end in credit balances, while assets usually end and debit balances d. All the above are true

d. All of the above are true

Which of the following statements would be considered true regarding the balance sheet? a. One cannot determine the true current value of the company by reviewing justice balance sheet b. The balance sheet reports assets only if they have been acquired through identifiable transactions c. A balance sheet shows only the ending balances, and summarize format, of balance sheet accounts and accounting system as of a particular date d. All of the above are true

d. All of the above are true

the T-account is used to summarize which of the following? a. Increases and decreases to a single account in the accounting system b. Debits and credits to a single account and the accounting system c. Changes in a specific account balance overtime d. All of the above described how T-accounts are used by accountants

d. All of the above described how T-accounts are used by accountants

Which of the following statements is true? a. FASB creates SEC b. GAAP creates FASB c. SEC creates CPA d. FASB creates GAAP

d. FASB creates GAAP

The expense recognition principle controls a. Where on the income statement expenses should be presented b. When revenues are recognized on the income statement c. The ordering of current assets and current liabilities on the balance sheet d. When costs are recognized as expenses on the income statement

d. When costs are recognized as expenses on the income statement

the inventory costing method selected by a company can affect: a. the balance sheet b. the income statement c. the statement of retained earnings d. all of the above

d. all of the above

which of the following enhances internal control? a. assigning different duties to different employees b. ensuring adequate documentation is maintained c. allowing access only when required to complete tasks d. all of the above

d. all of the above

which of the following should be capitalized when a piece of production equipment is acquired for a factory? a. sales tax b. transportation costs c. installation costs d. all of the above

d. all of the above

when costs are rising, which of the following will be true? a. the CGS will be greater is LIFO is used rather than weighted average b. the cost of ending inventory will be greater if FIFO is used rather than LIFO c. the gross profit will be greater is FIFO is used rather than LIFO d. all of the above are true

d. all of the above are true

an adjusting entry to recognize accrued salaries payable would cause which of the following? a. a decrease in assets and stockholders' equity b. a decrease in assets and liabilities c. an increase in expenses, liabilities, and stockholders' equity d. an increase in expenses and liabilities and a decrease in stockholders' equity

d. an increase in expenses and liabilities and a decrease in stockholders' equity

which of the following is not an asset account? a. cash b. land c. equipment d. common stock

d. common stock

when a concert venue collects cash for ticket sales two months prior to the show date, which account is effected? a. A/P b. A/R c. prepaid expense d. deferred revenue

d. deferred revenue

which of the following internal control principles underlies the requirement that all customers be given a sales receipt? a. segregate duties b. establish responsibility c. restrict access d. document procedures

d. document procedures

when recording depreciation, which of the following statements is true? a. total assets increase and stockholders' equity increases b. total assets decrease total liabilities increase c. total assets decrease and stockholders' equity increases d. none of the above

d. none of the above

which statement regarding treasury stock is false? a. treasury stock is considered to be issued but not outstanding b. treasury stock has no voting, dividend, or liquidation rights c. treasury stock reduces total stockholders' equity on the balance sheet d. none of the above are false

d. none of the above are false

an adjusted trial balance: a. shows the ending balances in a debit and credit format before posting adjusting journal entries b. prepared after closing entries have been posted c. a tool used by financial analysts to review the performance of publicly traded companies d. shows the ending balances resulting from the adjusting journal entries in a debit-and-credit format

d. shows the ending balances resulting from the adjusting journal entries in a debit-and-credit format

a New York bridal dress designer makes custom wedding dresses and needs to know the exact cost of each dress. they most likely use which inventory costing method? a. FIFO b. LIFO c. weighted average d. specific identification

d. specific identification

Total assets on a balance sheet prepared on any date must agree with which of the following? a. sum of total liabilities and net income as shown on the income statement b. sum of total liabilities and common stock c. sum of total liabilities and retained earnings d. sum of total liabilities and common stock and retained earnings

d. sum of total liabilities and common stock and retained earnings