Accounting 330 Final

When expenses exceed revenues in a given period, a. Retained earnings are not impacted. b. Retained earnings are decreased. c. Retained earnings are increased. d. One cannot determine the impact on retained earnings without additional information.

Retained earnings are decreased.

Which of the following is false regarding the balance sheet? a. The accounts shown on a balance sheet represent the basic accounting equation for a particular business entity. b. The retained earnings balance shown on the balance sheet must agree with the ending retained earnings balance shown on the statement of stockholders' equity. c. The balance sheet reports the changes in specific account balances over a period of time. d. The balance sheet reports the amount of assets, liabilities, and stockholders' equity of an accounting entity at a point in time.

The balance sheet reports the changes in specific account

The Cash T-account has a beginning balance of $21,000. During the year, $100,000 was debited and $110,000 was credited to the account. What is the ending balance of Cash? a. $11,000 debit balance b. $11,000 credit balance c. $31,000 credit balance d. $31,000 debit balance

a. $11,000 debit balance

Total liabilities on a balance sheet at the end of the year are $150,000, retained earnings at the end of the year are $80,000, net income for the year is $60,000, common stock is $40,000, and additional paid-in capital is $20,000. What amount of total assets would be reported on the balance sheet at the end of the year? a. $290,000 b. $270,000 c. $205,000 d. $15,000

a. $290,000

Which of the following is not a typical note included in an annual report? a. A note describing the auditor's opinion of the management's past and future financial planning for the business. b. A note providing more detail about a specific item shown in the financial statements. c. A note describing the accounting rules applied in the financial statements. d. A note describing financial disclosures about items not appearing in the financial statements.

a. A note describing the auditor's opinion of the management's past and future financial planning for the business.

Which account is least likely to appear in an adjusting journal entry? a. Cash b. Interest Receivable c. Property Tax Expense d. Salaries Payable

a. Cash

Which of the following is not one of the criteria that normally must be met for revenue to be recognized according to the revenue recognition principle for accrual basis accounting? a. Cash has been collected. b. Services have been performed. c. Goods have been transferred. d. The amount the company expects to receive is determinable.

a. Cash has been collected.

According to GAAP, what ratio must be reported on the financial statements or in the notes to the statements? a. Earnings per share ratio. b. Return on equity ratio. c. Net profit margin ratio. d. Current ratio.

a. Earnings per share ratio.

Cash payments for salaries are reported in what section of the statement of cash flows? a. Operating. b. Investing. c. Financing. d. None of the above.

a. Operating.

Which of the following is not one of the four items required to be shown in the heading of a financial statement? a. The financial statement preparer's name. b. The title of the financial statement. c. The unit of measure in the financial statement. d. The name of the business entity.

a. The financial statement preparer's name.

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

a. The income statement is sometimes called the statement of operations.

If a company is successful in acquiring several large buildings at the end of the year, what is the effect on the total asset turnover ratio? a. The ratio will increase. b. The ratio will not change. c. The ratio will decrease. d. Either (a) or (c).

a. The ratio will increase

The dual-effects concept can best be described as follows: a. When one records a transaction in the accounting system, at least two effects on the basic 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 one records a transaction in the accounting system, at least two effects on the basic accounting equation will result.

Which of the following is not a financing activity on the statement of cash flows? a. When the company lends money. b. When the company borrows money. c. When the company pays dividends. d. When the company issues stock to shareholders.

a. When the company lends money.

You have observed that the net profit margin ratio for a retail chain has increased steadily over the last three years. The most likely explanation is which of the following? a. Salaries for upper management as a percentage of total expenses have decreased over the last three years. b. A successful advertising campaign increased sales companywide, but with no increases in operating expenses. c. New stores were added throughout the last three years, and sales increased as a result of the additional new locations. d. The company began construction of a new, larger main office location three years ago that was put into use at the end of the second year.

b. A successful advertising campaign increased sales companywide, but with no increases in operating expenses.

Failure to make an adjusting entry to recognize accrued salaries payable would cause which of the following? a. An understatement of expenses, liabilities, and stockholders' equity. b. An understatement of expenses and liabilities and an overstatement of stockholders' equity. c. An overstatement of assets and stockholders' equity. d. An overstatement of assets and liabilities.

b. An understatement of expenses and liabilities and an overstatement of stockholders' equity.

Which of the following is not one of the four basic financial statements? a. Balance sheet b. Audit report c. Income statement d. Statement of cash flows

b. Audit report

Which of the following regarding GAAP is true? a. U.S. GAAP is the body of accounting knowledge followed by all countries in the world. b. Changes in GAAP can affect the interests of managers and stockholders. c. GAAP is the abbreviation for generally accepted auditing procedures. d. Changes to GAAP must be approved by the Senate Finance Committee.

b. Changes in GAAP can affect the interests of managers and stockholders.

On October 1, 2017, the $12,000 premium on a one-year insurance policy for the building was paid and recorded as Prepaid Insurance. On December 31, 2017 (end of the accounting period), what adjusting entry is needed? a. Insurance Expense (+E) 2,000 Prepaid Insurance (−A) 2,000 b. Insurance Expense (+E) 3,000 Prepaid Insurance (−A) 3,000 c. Prepaid Insurance (+A) 3,000 Insurance Expense (−E) 3,000 d. Prepaid Insurance (+A) 9,000 Insurance Expense (−E) 9,000

b. Insurance Expense (+E) 3,000 Prepaid Insurance (−A) 3,000

This period a company collects $100 cash on an account receivable from a customer for a sale last period. How would the receipt of cash impact the following two financial statements this period? Income Statement Statement of Cash Flows a. Revenue + $100 Inflow from investing b. No impact Inflow from operations c. Revenue − $100 Inflow from operations d. No impact Inflow from financing

b. No impact Inflow from operations

At the end of a recent year, The Gap, Inc., reported total assets of $7,610 million, current assets of $4,315 million, total liabilities of $4,706 million, current liabilities of $2,453 million, and stockholders' equity of $2,904 million. What is its current ratio and what does this suggest about the company? a. The ratio of 1.62 suggests that The Gap has liquidity problems. b. The ratio of 1.76 suggests that The Gap has sufficient liquidity. c. The ratio of 1.62 suggests that The Gap has greater current assets than current liabilities. d. The ratio of 1.76 suggests that The Gap is not able to pay its short-term obligations with current assets.

b. The ratio of 1.76 suggests that The Gap has sufficient liquidity.

The expense recognition principle controls a. Where on the income statement expenses should be presented. b. When costs are recognized as expenses on the income statement. c. The ordering of current assets and current liabilities on the balance sheet. d. How costs are allocated between Cost of Sales (sometimes called Cost of Goods Sold) and general and administrative expenses.

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

On January 1, 2017, Anson Company started the year with a $300,000 credit balance in Retained Earnings, a $50,000 balance in Common Stock, and a $300,000 balance in Additional Paid-in Capital. During 2017, the company earned net income of $45,000, declared a dividend of $15,000, and issued 900 additional shares of stock (par value of $1 per share) for $10,000. What is total stockholders' equity on December 31, 2017? a. $692,500. b. $695,000. c. $690,000. d. None of the above.

c. $690,000.

At the beginning of the current year, Donna Company had $1,000 of supplies on hand. During the current year, the company purchased supplies amounting to $6,400 (paid for in cash and debited to Supplies). At the end of the current year, a count of supplies reflected $2,000. The adjusting entry Donna Company would record at the end of the current year to adjust the Supplies account would include a a. Debit to Supplies for $2,000. b. Credit to Supplies Expense for $5,400. c. Credit to Supplies for $5,400. d. Debit to Supplies Expense for $4,400.

c. Credit to Supplies for $5,400.

During 2016, CliffCo Inc. incurred operating expenses of $250,000, of which $150,000 was paid in cash; the balance will be paid in January 2017. Transaction analysis of operating expenses for 2016 should reflect only the following: a. Decrease stockholders' equity, $150,000; decrease assets, $150,000. b. Decrease assets, $250,000; decrease stockholders' equity, $250,000. c. Decrease stockholders' equity, $250,000; decrease assets, $150,000; increase liabilities, $100,000. d. Decrease assets, $250,000; increase liabilities, $100,000; decrease stockholders' equity, $150,000. e. None of the above is correct.

c. Decrease stockholders' equity, $250,000; decrease assets, $150,000; increase liabilities, $100,000.

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 highest value. c. From most liquid to least liquid. d. From least liquid to most liquid.

c. From most liquid to least liquid.

Which of the following is not a specific account in a company's chart of accounts? a. Gain on Sale of Assets b. Interest Revenue c. Net Income d. Unearned Revenue

c. Net Income

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

c. Retained earnings is an asset on the balance sheet.

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

c. Shows the ending account balances resulting from the adjusting journal entries in a "debit" and "credit" format.

On June 1, 2016, Oakcrest Company signed a three-year $110,000 note payable with 9 percent interest. Interest is due on June 1 of each year beginning in 2017. What amount of interest expense should be reported on the income statement for the year ended December 31, 2016? a. $5,250 b. $9,900 c. $4,950 d. $5,775

d. $5,775

Which of the following is not an asset? a. Investments b. Land c. Prepaid Expense d. Additional Paid-in Capital

d. Additional Paid-in Capital

The T-account is a tool commonly used for analyzing which of the following? a. Increases and decreases to a single account in the accounting system. b. Debits and credits to a single account in the accounting system. c. Changes in specific account balances over a time period. d. All of the above describe how T-accounts are used by accountants.

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

Which of the following statements are true regarding the balance sheet? 1. One cannot determine the true fair market value of a company by reviewing its balance sheet. 2. Certain internally generated assets, such as a trademark, are not reported on a company's balance sheet. 3. A balance sheet shows only the ending balances, in a summarized format, of all balance sheet accounts in the accounting system as of a particular date. a. None are true. b. Statements 1 and 2 only are true. c. Statements 2 and 3 only are true. d. All statements are true.

d. All statements are true.

JJ Company owns a building. Which of the following statements regarding depreciation as used by accountants is false? a. As depreciation is recorded, stockholders' equity is reduced. b. Depreciation is an estimated expense to be recorded over the building's estimated useful life. c. As depreciation is recorded, the net book value of the asset is reduced. d. As the value of the building decreases over time, it "depreciates."

d. As the value of the building decreases over time, it "depreciates."

Which of the following statements regarding the statement of cash flows is true? a. The statement of cash flows separates cash inflows and outflows into three major categories: operating, investing, and financing. b. The ending cash balance shown on the statement of cash flows must agree with the amount shown on the balance sheet for the same fiscal period. c. The total increase or decrease in cash shown on the statement of cash flows must agree with the "bottom line" (net income or net loss) reported on the income statement. d. Both (a) and (b) are true. e. All of the above.

d. Both (a) and (b) are true.

Which of the following is the entry to be recorded by a law firm when it receives a $2,000 retainer from a new client at the initial client meeting? a. Debit to Cash, $2,000; credit to Legal Fees Revenue, $2,000. b. Debit to Accounts Receivable, $2,000; credit to Legal Fees Revenue, $2,000. c. Debit to Unearned Revenue, $2,000; credit to Legal Fees Revenue, $2,000. d. Debit to Cash, $2,000; credit to Unearned Revenue, $2,000. e. Debit to Unearned Revenue, $2,000; credit to Cash, $2,000.

d. Debit to Cash, $2,000; credit to Unearned Revenue, $2,000.

Which of the following is true? a. FASB creates SEC. b. GAAP creates FASB. c. SEC creates AICPA. d. FASB creates U.S. GAAP.

d. FASB creates U.S. GAAP.

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 understate which of the following on its balance sheet? a. Assets b. Common Stock c. Retained Earnings d. Liabilities

d. Liabilities

As stated in the audit report, or Report of Independent Accountants, the primary responsibility for a company's financial statements lies with a. The owners of the company. b. Independent financial analysts. c. The auditors. d. The company's management.

d. The company's management.