Accounting 208: Chapter 1-4: Quiz

d. debits Cash and credits Unearned Service Revenue.

A company that receives money in advance of performing a service a. debits Cash and credits Accounts Receivable. b. debits Unearned Service Revenue and credits Accounts Payable c. debits Cash and credits Prepaid Insurance. d. debits Cash and credits Unearned Service Revenue.

d. expected to be converted to cash or used in the business within one year or one operating cycle, whichever is longer.

A current asset is a. the last asset purchased by a business. b. an asset which is currently being used to produce a product or service. c. usually found as a separate classification in the income statement. d. expected to be converted to cash or used in the business within one year or one operating cycle, whichever is longer.

c. earnings per share.

A measure of profitability is the a. current ratio. b. working capital. c. earnings per share. d. debt to assets ratio.

c. is increased with a credit.

A revenue account a. has a normal balance of a debit. b. is decreased with a credit. c. is increased with a credit. d. is increased with a debit.

a. accrued revenue adjusting entries.

A revenue-asset relationship exists with: a. accrued revenue adjusting entries. b. unearned revenue adjusting entries. c. accrued expense adjusting entries. d. prepaid expense adjusting entries.

d. ledger accounts.

After a business transaction has been analyzed and entered in the journal, the next step in the recording process is to transfer the information to a. financial statements. b. the company's bank. c. stockholders' equity. d. ledger accounts.

b. transfer of ownership is easily achieved through stock sales.

All of the following are advantages for choosing a proprietorship for a business except a. proprietorship receive more favorable tax treatment. b. transfer of ownership is easily achieved through stock sales. c. a proprietorship gives the owner control of the business. d. a proprietorship is a simple form of business to set up.

d. credit a different asset account for $280.

An accountant has debited an asset account for $830 and credited a liability account for $550. What can be done to complete the recording of the transaction? a. Debit a stockholders' equity account for $280. b. Debit another asset account for $280. c. Nothing further must be done. d. Credit a different asset account for $280.

b. a fiscal year.

An accounting time period that is one year in length is called: a. a reporting period. b. a fiscal year. c. an interim period. d. the time period assumption.

d. Will the company be able to afford employee pay raises this year?

External users want answers to all of the following questions except: a. Will the company be able to pay its debts as they come due? b. How does the company compare in profitability with competitors? c. Is the company earning satisfactory income? d. Will the company be able to afford employee pay raises this year?

b. net income is less than dividends.

If the retained earnings account decreases from the beginning of the year to the end of the year, then a. there was a net income and no dividends. b. net income is less than dividends. c. net income is greater than dividends. d. additional investments are less than net losses.

b. verifiable

Information is _________ if independent measures, using the same methods, obtain similar results. a. Consistent b. Verifiable c. Relevant d. Understandable

c. the time period following the one shown for the income statement.

The retained earnings statement shows all of the following except a. the amounts of changes in retained earnings during the period. b. beginning retained earnings on the first line of the statement. c. the time period following the one shown for the income statement. d. the causes of changes in retained earnings during the period.

true

True or False. A journal is an accounting record in which transactions are initially recorded.

true

True or False. The complete effect of a transaction on the accounts is disclosed in the journal.

true

True or False. An adjusting entry to a prepaid expense is required to recognize expired expenses.

false

True or False. Closing entries deal primarily with the balances of permanent accounts.

false

True or False. Collection on an account receivable will increase both cash and accounts receivable.

true

True or False. Creditors' rights to assets supersede owners' rights to the assets.

false

True or False. If prepaid costs are initially recorded as an asset, no adjusting entries will be required in the future.

true

True or False. Long-term creditors consider a high free cash flow amount an indication of solvency.

false

True or False. Long-term investments appear in the property, plant, and equipment section of the balance sheet.

a. historical cost principle.

Valuing assets at their fair value rather than at their cost is inconsistent with the a. historical cost principle. b. full disclosure principle. c. economic entity assumption. d.periodicity assumption.

b. debit Utilities Expense and credit Accounts Payable.

When a company receives a utility bill but will not pay it right away, it should a. debit Accounts Payable and credit Utilities Expense. b. debit Utilities Expense and credit Accounts Payable. c. debit Utilities Expense and credit Accounts Receivable. d. make no entry until the bill is paid.

b. notes to the financial statements.

Which of the following clarifies information presented in the financial statements, as well as expanding upon it where additional detail is needed? a. Auditor's report. b. Notes to the financial statements. c. President's state of the company report. d. Management discussion and analysis section.

a. Stockholders' equity, credit

Which of the following describes the classification and normal balance of the Retained Earnings account? a. Stockholders' equity, credit b. Asset, debit c. Expense, debit d. Revenues, credit

c. the statement of cash flows.

Which of the following financial statements is divided into major categories of operating, investing, and financing activities? a. The balance sheet. b. The income statement. c. The statement of cash flows. d. The retained earnings statement.

d. marketing managers

Which of the following groups uses accounting information to determine whether a marketing proposal will be cost effective? a. Investors in common stock b. Chief Financial Officer c. Creditors d. Marketing managers

b. delivering

Which of the following is not a principal type of business activity? a. Financing b. Delivering c. Operating d. Investing

a. dividends

Which of the following is not considered an asset? a. Dividends b. Accounts receivable c. Inventory d. Equipment

c. Adjusted trial balance

Which trial balance will consist of the greatest number of accounts? a. Post-closing trial balance b. Trial balance c. Adjusted trial balance d. All of these answer choices will contain the same number of accounts.

c. December 20

Beringer Company places an order for supplies with Picasso Company on December 17. Picasso delivers the supplies on December 20 and invoices Beringer on December 21. Beringer pays the invoice on December 29. On what date does Picasso satisfy its performance obligation? a. December 29 b. December 17 c. December 20 d. December 21

c. assets increased by $440.

Bonita Industries received a cash advance of $440 from a customer. As a result of this event, a. Both assets and equity increased by $440. b. equity increased by $440. c. assets increased by $440. d. liabilities decreased by $440.

c. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.

An adjusted trial balance: a. is a required financial statement under generally accepted accounting principles. b. is prepared after the financial statements are completed. c. proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made. d. cannot be used to prepare financial statements.

b. derives its value from the rights and privileges it provides the owner.

An intangible asset a. is worthless because it has no physical substance. b. derives its value from the rights and privileges it provides the owner. c. cannot be classified on the balance sheet because it lacks physical substance. d. is converted into a tangible asset during the operating cycle.

a. Liabilities at the end of the year are understated.

At the end of the fiscal year, the usual adjusting entry for accrued salaries owed to employees was omitted. Which of the following statements is true? a. Liabilities at the end of the year are understated. b. Salaries and Wages Expense for the year is overstated. c. Stockholders' equity at the end of the year is understated. d. Assets at the end of the year are understated.

a. retained earnings statement.

The company's policy toward dividends and growth could best be determined by examining the a. retained earnings statement. b. balance sheet. c. statement of cash flows. d. income statement.

c. relationship between current assets and current liabilities.

The information needed to determine if companies can pay their current obligations is the a. net income for this year. b. projected net income for next year. c. relationship between current assets and current liabilities. d. relationship between short-term and long-term liabilities.

b. cash in producing revenues.

The operating cycle of a company is the average time that is required to go from cash to a. sales in producing revenues. b. cash in producing revenues. c. inventory in producing revenues. d. accounts receivable in producing revenues.

c. Failure to apply the revenue recognition principle could lead to a misstatement of revenue.

Why do generally accepted accounting principles require the application of the revenue recognition principle? a. Recording revenue when cash is received is an objective application of the revenue recognition principle. b. It is easy to apply the revenue recognition principle because revenue issues are always easy to identify and resolve. c. Failure to apply the revenue recognition principle could lead to a misstatement of revenue. d. Accounting software has made the revenue recognition easy to apply.