Financial Accounting Final
Net income that has been paid out to the company's stockholders for their own personal use is referred to as: A. dividends. B. equities. C. revenues. D. retained earnings.
A
Seasoned new issues are: A. the selling of additional new shares. B. the repurchase of previously issued shares. C. the shares issued in an IPO. D. required before a corporation goes public.
A
Disco World began its business on November 1 and sold contracts to twelve students for dance lessons that day. The lessons cost $375 per person for a three-month period and the students are required to pay in advance. The journal entry to record this transaction would include the receipt of cash on November 1 a credit to: A. Cash. B. Deferred Revenue. C. Dance Lessons Revenue. D. Dance Lessons Payable.
B
Employees' gross earnings differ from their net pay because of: A. unemployment taxes. B. payroll deductions. C. accounts payable. D. corporate income taxes.
B
Which of the following is the best measure of a company's profitability? A. Cash-based net income B. Accrual-based net income C. Accounts Receivable D. Sales Revenue
B
A corporation's board of directors could prefer a stock split to a stock dividend because a stock split: A. increases the market price of the stock. B. reduces Retained Earnings, so the company pays less taxes. does not reduce Retained Earnings, so it does not reduce the C. ability to declare a cash dividend in the future. D. increases total stockholders' equity and allows the corporation more flexibility.
C
How do temporary accounts differ from permanent accounts? A. Only temporary accounts are used in the adjustments at the end of the accounting period. B. Only permanent accounts are found on the financial statements. C. Only temporary accounts are closed at the end of the accounting period. D. Only permanent accounts are transferred to Retained Earnings during the closing process.
C
When the indirect method is used, details from which of the following balance sheet accounts are used in calculating both operating and financing cash flows? A. Bonds Payable B. Taxes Payable C. Retained Earnings D. Common Stock
C
Which line item would be found on a merchandiser's balance sheet and not on a service firm's? A. Supplies B. Cost of Goods Sold C. Inventory D. Sales Revenue
C
Which of the following is a merchandising company? A. General Motors B. H&R Block C. The Gap D. Proctor & Gamble
C
Which of the following is an asset? A. Common Stock B. Retained Earnings C. Notes Receivable D. Notes Payable
C
Which of the following statements about Retained Earnings is correct? A. Retained Earnings represents cash available to pay dividends to stockholders. B. Retained Earnings cannot be restricted by loan covenants. C. Retained Earnings generally consists of cumulative net income less any net losses and dividends since inception. D. Retained Earnings is reduced by the par value of the common stock that is issued.
C
Which of the following is not a reason a company would repurchase stock? A. To reduce the number of outstanding shares. B. To give the impression that the stock is worth buying. C. To have shares of stock to issue when stock options are exercised. D. To increase the total stockholders' equity balance and improve the ROE.
D
Which of the following requires a credit? A. Decreases in liabilities B. Decreases in stockholders' equity C. Increases to assets D. Increases to liabilities
D
The number of shares outstanding equals the number of shares: A. issued minus the number of shares in treasury. B. authorized minus the number of shares issued. C. issued plus the number of shares in treasury. D. authorized plus the number of shares issued.
A
Accrued liabilities could include all of the following except: A. Wages and Salaries Payable. B. Current Portion of Long-Term Debt. C. Income Tax Payable. D. Interest Payable.
B
Cash flows from operating activities include: A. changes in accounts receivable. B. paying principal to lenders. C. purchases of equipment. D. proceeds from stock issuance.
A
Before dividends can be paid to common stockholders, if the preferred stock is ________, any ________ must be paid to the preferred stockholders. A. cumulative; dividends in arrears B. current; interest owed C. cumulative; interest owed D. managing; dividends
A
A net loss results when: A. assets are greater than liabilities. B. revenues are less than expenses. C. revenues are greater than expenses. D. cash paid is less than cash received.
B
A truck costing $12,000, which has Accumulated Depreciation of $9,000, was sold for $2,000 cash. The entry to record this event would include a: A. gain of $1,000. B. loss of $1,000. C. credit to the Vehicles account for $3,000. D. credit to Accumulated Depreciation for $9,000.
B
Free cash flow is a positive cash flow from operating activities: A. beyond what is needed to replace current property, plant, and equipment and pay cash dividends. B. across all three activity components of the statement of cash flows. C. beyond what has been allotted for future property, plant, and equipment replacement and expansion. D. across both financing and investing activities.
A
Cash provided by issuing stock to owners should be reported as cash: A. inflows from financing activities. B. outflows from financing activities. C. inflows from investing activities. D. outflows from investing activities.
A
Depreciation is added back to net income in a statement of cash flows prepared using the indirect method because it: A. reduces net income but not cash. B. is a cash inflow. C. is a revenue. D. is a valuation concept.
A
What is the starting point for calculating cash flows from operations when the indirect method is used? A. Net income from the income statement. B. Calculate the net change in the cash account. C. Add the change in accounts receivable to sales revenue. D. Identify the balance sheet accounts that relate to operating activities.
A
Which of the following would be classified as a financing activity on the statement of cash flows? A. Cash receipts from accounts receivable collections. B. Cash receipts from sale of equipment. C. Cash paid to purchase treasury stock. D. Cash paid for interest on notes payable.
C
Which of the following statements about the statement of cash flows is not correct? A. It does not replace the income statement. B. It provides details as to how cash changed during a period. C. It provides information about cash receipts and cash payments over a period of time. D. It measures profitability.
D
Which of the following would be included in cash flows from investing activities? A. Cash collected from customers. B. Cash received from an issuance of bonds. C. Cash dividends paid. D. Cash used to purchase equipment.
D
Which of the following statements about the Dividends account is correct? A. It has a credit balance. B. It is an expense. C. It reduces Retained Earnings. D. It is an account that is reported only on the income statement.
C
A ____________ is a list of account titles with corresponding reference numbers used by companies so that transaction items are consistently named. A. chart of accounts B. trial balance C. classified balance sheet D. ledger
A
A difference between debt financing and equity financing is that: A. debt financing must be repaid, while repayment of equity financing is not required. B. equity financing must be repaid, while repayment of debt financing is not required. C. only debt financing can be used to purchase assets. D. only equity financing can be used to purchase assets.
A
Glenrosa Company bought inventory FOB shipping point from Monterosa Company for $8,200 cash, including shipping charges. On December 31, the last day of the accounting year, the goods were on a truck owned by Common Carrier, Inc., and not expected to arrive until January 3. Which company should include these goods in its December 31 inventory? A. Glenrosa should include the $8,200 in its inventory. B. Glenrosa owns the inventory, but Common Carrier has possession of it. Each of them should include half of the inventory, $4,100 each. C. Common Carrier should include the $8,200 in its inventory, since the inventory is on its truck. D. Glenrosa owns the inventory, but Common Carrier has possession of it. Neither of them can include the $8,200 in its December 31 inventory.
A
Gross profit equals: A. Net sales minus cost of goods sold. B. Revenues minus expenses. C. Revenues minus inventory. D. Beginning inventory plus purchases minus ending inventory.
A
If a bank reconciliation included a deposit in transit of $680, the company's journal entry for this reconciling item would include: A. nothing, because the deposit has already been recorded. B. a debit to cash of $680. C. a credit to cash of $680. D. a credit to accounts receivable for $680.
A
If a company incorrectly records cash received for services to be provided in the future with a debit to Cash and credit to Sales Revenue, how will this error affect net income for the current period? A. Net income will be too high. B. Net income will be too low. C. Net income will not be affected by this error. D. Net income will be too high in the following period.
A
If the company's accountant mistakenly recorded an $71 deposit as $111, the error would be shown on the bank reconciliation as a(n): A. $40 deduction from the book balance. B. $40 addition to the book balance. C. $111 deduction from the book balance. D. $111 addition to the book balance.
A
Income Tax Expense appears on the _________, while Income Tax Payable is a(n): A. income statement; liability on the balance sheet. B. balance sheet; liability on the income statement. C. income statement; expense on the income statement. D. balance sheet; expense on the balance sheet.
A
Liabilities are classified as current if they: A. will be paid within the company's operating cycle or within 1 year, whichever is longer. B. will be paid using current assets. C. are less than the current assets. D. are greater than the current assets.
A
Nordic Industries uses a periodic inventory system. During its first month of operations, Nordic Industries purchased inventory as follows: Units Unit CostTotal CostJanuary 3150 $15 $2,250 January 12200 20 4,000 January 20250 20 5,000 January 25300 30 9,000 900 $20,250 There were 100 units in ending inventory on January 31. Under the weighted average cost method, what is the cost of goods sold for January? A. $18,000 B. $20,250 C. $3,150 D. $2,250
A
Oasis Company received $391,800 for bonds having a total face value of $400,000. What journal entry would be made to record this bond issuance? A. Debit Cash for $391,800, debit Discount on Bonds Payable for $8,200, and credit Bonds Payable for $400,000 B. Debit Cash for $400,000, credit Discount on Bonds Payable for $8,200, and credit Bonds Payable for $391,800 C. Debit Cash for $400,000 and credit Bonds Payable for $400,000 D. Debit Cash for $400,000, credit Bonds Payable for $391,800, and credit Interest Payable for $8,200
A
Of the four companies listed below, which company is more likely to use specific identification to value their inventory and cost of goods sold? A. Wedding cake baker B. Dog biscuit manufacturer C. Grocery store D. Bulk candy merchandiser
A
Permanent accounts are found on: A. the balance sheet. B. the income statement. C. both the balance sheet and the income statement. D. none of the financial statements.
A
Sierra Blanca Co. is required to match $82,620 for its portion of FICA and $8,460 for federal and state unemployment taxes. The entry to record Sierra Blanca's payroll taxes includes: A. debit to Payroll Tax Expense for $91,080. B. credit to Payroll Tax Expense for $91,080. C. debit to FICA Payable for $82,620. D. debit to Unemployment Tax Payable of $8,460.
A
Sun Concepts sells and installs solar energy products. Information from the financial statements for the last two years revealed the following: Beginning InventoryEnding InventoryCost of Goods SoldYear 1$90,000 $130,000 $605,000 Year 2 130,000 110,000 720,000 Compared with Year 1, Sun Concept's number of days to sell in Year 2 was: A. shorter. B. longer. C. unchanged. D. unable to be determined.
A
The fixed asset turnover ratio is used to evaluate: A. how well management uses long-lived tangible assets to generate revenues. B. whether there are enough fixed assets to pay its current liabilities. C. the frequency in which fixed assets are sold. D. the proportion of fixed assets relative to total assets.
A
The following information is available: Net accounts receivable, December 31, 2018$394,200 Net accounts receivable, December 31, 2019 435,900 Net credit sales for 2018 3,521,400 Net credit sales for 2019 3,795,300 The days to collect for 2019 is closest to: A. 40 days. B. 41 days. C. 43 days. D. 42 days.
A
The journal entry to record a large stock dividend includes a: A. debit to Retained Earnings. B. credit to Cash. C. debit to Common Stock. D. credit to Additional Paid-in Capital.
A
The straight-line depreciation method: A. reports an equal amount of depreciation expense each year. B. reports a higher amount of depreciation expense in the early years of an asset's use. C. reports more depreciation expense in a year when an asset is heavily used and less in a year when the asset is hardly used at all. D. can be used only by small companies.
A
Transactions are entered into a(n) ____________ each day they occur. A. journal B. ledger C. trial balance D. classified balance sheet
A
What is the main difference between accrual and deferral adjustments? A. Deferral adjustments are required to update previously recorded items whereas accrual adjustments are required to include items not previously recorded. B. Deferral adjustments are required under the cash basis of accounting whereas accrual adjustments are required under the accrual basis of accounting. C. Deferral adjustments are required to include items not previously recorded whereas accrual adjustments are required to update previously recorded items. D. Deferral adjustments are used for expenses whereas accrual adjustments are used for revenues.
A
When a company has earned interest in the current period but has not yet recorded the interest, what type of adjustment is the company required to make? A. Make an adjusting entry at the end of the current period to accrue the interest earned. B. Make no adjusting entry at the end of the period because interest has not been earned yet. C. Make an adjusting entry at the end of the next period to accrue interest earned. D. No adjustment is necessary until the cash is collected.
A
When bonds are issued at a premium, the bond issuer receives more cash on the issue date than it repays at maturity. The difference, a premium, is a reduction in the cost of borrowing, which has to be: A. amortized. B. depreciated. C. ignored. D. capitalized.
A
When interest is accrued on a note payable, but not paid, the A. Interest Expense account is increased; the Interest Payable account is increased. B. Interest Expense account is decreased; the Interest Payable account is increased. C. Notes Payable account is increased; the Interest Payable account is increased. D. Interest Expense account is increased; the Interest Payable account is decreased.
A
When should a corporation record a liability for dividends in arrears on its cumulative preferred stock? A. When the dividends have been declared. B. When the corporation knows it will not be paying dividends. C. When recording year-end adjusting entries. D. Never.
A
Which method requires first estimating the desired amount for the Allowance for Doubtful Accounts and then determining the amount of the expense required to get to this desired balance given the amount of the unadjusted balance? A. Aging of accounts receivable method B. Percentage of credit sales method C. Direct write-off method D. Percentage of bad debts method
A
Which of the following is not a primary goal of inventory management? A. Obtaining the lowest cost of inventory. B. Ensuring sufficient quantities of inventory are available to meet customers' needs. C. Ensuring inventory quality meets customers' expectations and company standards. D. Minimizing the costs of acquiring and carrying inventory.
A
Which of the following statements is correct? A. Depreciation allocates the cost of tangible assets over their useful lives. B. Depreciation allocates the cost of intangible assets over their useful lives. C. Amortization allocates the cost of tangible assets over their useful lives. D. The term "depreciation" relates to all long-lived assets whereas "amortization" relates only to intangible assets.
A
Which of the following would not cause the bank balance to differ from the cash balance in the accounting records? A. The company wrote checks that have cleared the bank. B. Deposits outstanding that have been recorded on the company's records, but not on the bank's. C. The company made an error in recording a deposit. D. The bank made an error in recording a deposit made by the company.
A
Which one of the following statements about earnings per share (EPS) is correct? A. The EPS ratio is important because it signals the ability of the company to pay future dividends, which investors factor into the stock price. B. Earnings per share (EPS) is generally reported in the balance sheet under stockholders' equity. C. Earnings per share (EPS) is the best way to compare the performance of different companies. D. EPS, in its basic form, is calculated by dividing net income by the average number of preferred shares issued.
A
Accounting systems: A. are summarized in publicly published reports. B. analyze, record, and summarize the activities affecting its financial condition and performance. C. monitor business activities only in financial terms. D. capture only the information that is needed by the owners of the company.
B
Adjusting entries are typically prepared: A. at the beginning of the accounting period. B. at the end of the accounting period. C. on a daily basis. D. on a weekly basis.
B
All costs to get an asset in place and ready for use should be: A. expensed. B. capitalized. C. recorded as construction in progress. D. recorded only when they are paid in cash.
B
An economic resource that is owned by a company and will provide future benefits is referred to as: A. revenue. B. an asset. C. retained earnings. D. net income.
B
Bolster Soda had an accounts receivable turnover ratio of 9.9 this year and 11.0 last year. Castor Soda had a turnover ratio of 9.3 this year and 9.3 last year. This implies: A. Castor's receivables turnover ratios were better than Bolster's for both years. B. Bolster's receivables turnover ratios were better than Castor's for both years. C. Castor has credit policies that need to be tightened. D. Castor collected receivables more quickly than Bolster in both years.
B
Every transaction: A. increases one account and decreases another account. B. has at least two effects on the basic accounting equation. C. affects only balance sheet accounts or only income statement accounts. D. is analyzed from the standpoint of the business owners.
B
Operating activities, investing activities, and financing activities are presented on the: A. balance sheet. B. statement of cash flows. C. statement of retained earnings. D. income statement.
B
The cost principle is used: A. to refer to the two sources of financing available to businesses. B. to measure the amount used to record assets on the date of the transaction. C. by small businesses, but not by large businesses. D. to measure internal events, but not external exchanges.
B
The gross profit percentage is an indication of how: A. well management is controlling expenses. B. measures the percentage of profit earned on each dollar of sales. C. much cash is generated per dollar of sales. D. efficient management is in utilizing assets.
B
When it paid its insurance in advance, a company recorded Prepaid Insurance. As of the end of the accounting year, the prepayment had expired. If no adjustment is made to record this expiration, which of the following will occur? A. Assets will be understated and expenses will be overstated. B. Assets will be overstated and expenses will be understated. C. Assets and expenses will be overstated. D. Assets and expenses will be understated.
B
Which inventory costing method assumes that inventory costs flow out in the opposite order from which the goods were purchased? A. FIFO B. LIFO C. Weighted average D. Specific identification
B
Which of the following September transactions would impact the September income statement? A. Collecting cash related to an account receivable B. Providing services to new customers C. Purchasing supplies D. Issuing stock to new shareholders
B
Which of the following is an example of restricting access? A. Using prenumbered checks. B. Using passcodes. C. Giving a separate cash register to each cashier. D. Comparing the company's cash balance to the balance per the bank.
B
A retail store that increases all of its product prices by 25% will experience a(n) ______ in its overall gross profit percentage but may experience a(n) ______ in sales volume. A. increase, increase B. decrease, decrease C. decrease, increase D. increase, decrease
D
Which of the following statements about accrual basis accounting is correct? A. If a company uses accrual basis accounting, the company should not record revenue until payments are actually received. B. If a company uses accrual basis accounting, the company should record expenses in the same period as the revenues they generate. C. IFRS does not allow accrual basis accounting for external reporting of income. D. The items reported on the income statement continue to have an impact beyond the current period, whereas the items reported on the balance sheet impact just the current period.
B
Which of the following will result in the recording of goodwill? A. Company A purchases Company B and pays less than the net assets of Company B. B. Company A purchases Company B and pays more than the fair value of Company B's assets and liabilities. C. Company A discovers a new product or production process. D. Company A sells its patents at a gain.
B
Which of the following would not be recorded as an accounting transaction? A. Issuing stock to owners in exchange for cash B. Ordering supplies to be delivered next month C. Selling inventory to customers in exchange for cash to be received next month D. Paying the bank for a portion of a note payable
B
Why don't all companies use the same depreciation method? A. US income tax regulations require that a company use the same depreciation method for both financial reporting and income taxes. B. Different depreciation methods might better reflect the pattern in which assets' economic benefits are used. C. All companies do use the same depreciation method. D. Only large companies are allowed to use some of the more complicated depreciation methods.
B
Wool Co. makes a sale and collects a total of $756, which includes an 8% sales tax. What is the amount that will be credited to the Sales Revenue account? A. $756 B. $700 C. $812 D. $696
B
A decreasing inventory turnover ratio indicates: A. a longer time span between the ordering and receiving of inventory. B. a shorter time span between the ordering and receiving of inventory. C. a longer time span between the purchase and sale of inventory. D. a shorter time span between the purchase and sale of inventory.
C
All of the following will likely be incurred by a company that extends credit except: A. increased revenues. B. increased wage costs. C. increased advertising expenses. D. a delay in the receipt of cash.
C
Employee fraud includes which of the following categories? A. Covenants B. Incentive C. Corruption D. Rationalization
C
If land is purchased for cash: A. total assets will increase. B. total assets will decrease. C. total assets will remain the same. D. stockholders' equity will increase.
C
Managerial accounting reports prepared for internal use are used by the company's: A. suppliers. B. bank. C. employees. D. stockholders.
C
Star Enterprises uses the aging of accounts receivable method. The following information comes from its accounting records: Cash sales$400,000 Credit sales 1,600,000 Total sales 2,000,000 Credit balance in the Allowance for Doubtful Accounts 10,000 Estimated uncollectible accounts receivables 38,000 What is the estimate of bad debt expense? A. $10,000 B. $18,000 C. $28,000 D. $38,000
C
The account Cash Overage is which type of account? A. An asset account B. A liability account C. A miscellaneous revenue account D. A miscellaneous expense account
C
The internal control principle related to assigning responsibilities so that one employee cannot make a mistake or commit a dishonest act without someone else discovering it is referred to as: A. duplication of responsibility. B. mandatory vacations. C. segregation of duties. D. rotation of duties.
C
The objectives of a company's system of internal control include which of the following? A. Providing innovative products. B. Retaining position as market leader. C. Adhering to laws and regulations. D. Ensuring the company's stock price provides a reasonable return to investors.
C
The return on equity ratio measures the: A. return stockholders receive in dividends for each dollar of their investment. B. return stockholders receive in dividends and stock price growth for each dollar of their investment. C. amount of income earned for each dollar of common stockholders' equity. D. amount earned by the company on each dollar obtained from equity and debt financing.
C
Which of the following statements about revenue and expense accounts is correct? A. Revenue accounts are a subset of assets, and expense accounts are subcategories of liabilities. B. Both revenue accounts and expense accounts are subcategories of assets. C. Both revenue accounts and expense accounts are subcategories of Retained Earnings. D. Revenue accounts are a subcategory of Cash and expense accounts are a subcategory of Accounts Payable.
C
Which of the following statements about the need to make accrual adjustments at the end of the accounting period is not correct? A. Certain events occur over time that would be too tedious and time-consuming to record on a daily basis. B. Since financial statements are prepared at the end of the period, the asset and liability account balances should be brought up to date. C. The Cash account should be adjusted for the effects of accrued revenues and expenses during the accounting period. D. Revenues and expenses should be recorded in the period in which they occur, even though the cash will be paid or received in a future period.
C
Which of the following statements is prepared as of a point in time? A. Income Statement B. Statement of Retained Earnings C. Balance Sheet D. Statement of Cash Flows
C
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
Which type of contingent liability would most likely be reported on a balance sheet prepared in accordance with GAAP? A. Remote contingent liability B. Reasonably possible contingent liability C. Probable contingent liability that can be estimated D. Quite likely contingent liability
C
Assume that a perpetual inventory system is in use. Which of the following statements regarding the journal entries prepared is correct? A. "Freight-out" or delivery costs associated with sales should be included in Cost of Goods Sold. B. When a company receives payment from a customer for a sale, Cash is debited and Accounts Payable is credited. C. When a company grants an allowance to a customer, Inventory is credited when using a perpetual inventory system. D. When a customer returns inventory, the seller debits Sales Revenue (or Sales Returns & Allowances) under a perpetual inventory system.
D
At the end of a depreciable asset's useful life, its book value equals its: A. accumulated depreciation. B. depreciation expense. C. depreciable cost. D. residual value.
D
At the end of the year, accrual adjustments could include a: A. debit to an expense and a credit to an asset. B. credit to revenue and a debit to an expense. C. debit to cash and a credit to Common Stock. D. debit to an asset and a credit to a revenue.
D
During the year, Sand, Inc. had $120,000 in revenues, $48,000 in expenses, and paid $3,600 in dividends. Net income equals: A. $75,600. B. $68,400. C. $120,000. D. $72,000.
D
Katy Company uses the allowance method. Katy writes off a customer account balance when it becomes clear that the particular customer will never pay. How will this write-off affect the company's net income and accounts receivable turnover ratio? A. Net income and the account receivable turnover ratio will both decrease. B. Net income will decrease; the account receivable turnover ratio will not change. Incorrect C. Net income will not change; the account receivable turnover ratio will decrease. D. Net income will not change; the account receivable turnover ratio will not change.
D
Madison Manufacturing's ending inventory count was $65,000, cost of goods sold was $35,100, and purchases were $72,800, its beginning inventory must have been: A. $42,900. B. $172,900. C. $102,700. D. $27,300.
D
Nevada Wolf, Inc. determined at the end of the year that estimated uncollectible accounts was $50,000. If the Allowance for Doubtful Accounts currently has an unadjusted debit balance of $10,000, what is the amount of bad debts to be recorded at the end of the year? A. $55,000 B. $50,000 C. $40,000 D. $60,000
D
Phantom Inc. has an unadjusted debit balance of $5,250 in its Allowance for Doubtful Accounts. The company has experienced bad debt losses of 2% of credit sales in prior periods. Phantom reported net credit sales of $2,250,000 for the current period. To record the potential bad debts, Phantom would debit: A. Allowance for Doubtful Accounts for $45,000. B. Allowance for Doubtful Accounts for $50,250. C. Bad Debt Expense for $50,250. D. Bad Debt Expense for $45,000.
D
Sun Concepts sells and installs solar energy products. Information from the financial statements for the last two years revealed the following: Beginning InventoryEnding InventoryCost of Goods SoldYear 1$90,000 $130,000 $605,000 Year 2 130,000 110,000 720,000 The inventory turnover ratio in Year 1 was: A. 0.18 times B. 6.37 times C. 4.84 times D. 5.50 times
D
The income statement reports: A. the assets, liabilities, and stockholders' equity of a company. B. cumulative earnings that have not been distributed to stockholders. C. the amount of profit distributed to owners during the period. D. the amount of revenues earned and expenses incurred during the period.
D
The main purposes of internal controls include all of the following except: A. prevention of error, theft, and fraud. B. promotion of operational efficiency. C. ensuring compliance with laws and regulations. D. providing more favorable financial information.
D
Which account is affected by recording the buying of goods on credit? A. Cash B. Retained Earnings C. Common Stock D. Accounts Payable
D
Which of McGraw-Hill's intangible assets gives it the legal right to prevent you from borrowing a textbook from a friend and photocopying several chapters from the book? A. Patent B. Trademark C. Franchise agreement D. Copyright
D
Which of the following accounts would be classified as a current asset on a classified balance sheet? A. Accumulated Depreciation B. Equipment C. Dividends D. Supplies
D
Which of the following does not lead to a revision of an estimate of a company's depreciation expense? A. A change in the estimated useful life. B. A change in the estimated residual value. C. Extraordinary repairs that significantly extend the asset's usefulness. D. A change in the estimated maintenance costs.
D
Which of the following expressions of the accounting equation is correct? A. Liabilities + Assets = Stockholders' Equity B. Stockholders' Equity + Assets = Liabilities C. Assets = Liabilities - Stockholders' Equity D. Stockholders' Equity = Assets - Liabilities
D
Which of the following is an operating activity? A. Repaying a bank loan B. Paying a dividend to owners C. Purchasing a new building D. Purchasing goods to be offered for sale
D
Which of the following is typically considered a disadvantage of sole proprietorships? A. Income taxes are paid by both the business and its owner. B. The business is considered a separate legal entity from its owner. C. Establishing the business usually requires legal assistance. D. Owner is personally liable for all debts of the business.
D
Which of the following statements about the calculations used for the weighted average inventory costing method is correct? A. Under the weighted average cost method, if the goods in inventory were purchased at three different prices, the three different prices would be added and then divided by three to find the weighted average cost per unit. B. When the weighted average inventory costing method is used, ending inventory and cost of goods sold are calculated using different costs per unit. C. There is no difference in the calculations under the weighted average method whether a perpetual or periodic inventory system is used. D. The weighted-average method will produce an inventory cost which is between the results of FIFO and LIFO inventory costing methods.
D
Which of the following will result in an increase in revenue? A. Borrowing $10,000 from a bank B. Stockholders investing $10,000 in a company C. Selling concert tickets for $10,000 four months before the performance D. Selling $10,000 of groceries to customers
D
Which of the following would not be reported on the income statement? A. Utilities expense in the amount of a bill received for utilities used during the current period but unpaid as of the end of the period. B. Rent expense in the amount of rent paid during the period for use of a storage facility in the current period. C. Revenue for services provided to customers who promise to pay in the next period. D. Cost of land purchased with cash for future use.
D
Lansing Company has a gross profit percentage of 61%, while Arbor Company has a gross profit percentage of 37%. Which of the following statements is correct? A. Lansing Company will report a higher net income than Arbor Company. B. Arbor Company must have a greater sales volume than Lansing Company. C.Lansing Company is more efficient at controlling selling, general, and administrative expenses than Arbor Company. D. Lansing Company and Arbor Company both earn enough on each sale to make a contribution to their operating costs.
D.
The financial reports of a business include only the results of that business's activities. This is: A. required only for large corporations. B. the cost principle. C. the accounting equation. D. true only for financial statements prepared under IFRS. E. the separate entity assumption.
E