Accounting Final

Which of the following is inventory?

Goods held for sale in the normal course of business.

A company owes rent at a rate of $6,000 per month. The company pays the rent owed on the tenth of each month for the previous month. At the end of each month, what kind of adjustment is required:

an accrual adjustment.

Investors in stock of a company increase their wealth by receiving dividends and by:

an increase in the market value of their stock.

The LIFO inventory cost flow assumes that the cost of the newest goods purchased are:

assumed to be the first ones sold.

Cash flows from investing activities include all of the following except a(n):

issuance of bonds.

Fixed assets are ___________ and are found on the _________?

long-lived tangible assets; balance sheet

The primary source of revenues and expenses comes from:

operating activities

Repayments of loans will be reported as a:

Repayments of loans will be reported as a:

Your company purchases $50,000 of inventory from a wholesaler who allows you 45 days to pay. In addition, the wholesaler offers a 3% discount if payment is made within 12 days. These payment terms would be expressed as:

3/12, n/45.

Which account is affected by recording the buying of goods on credit?

Accounts Payable.

Which of the following account does NOT belong to an Income Statement

Accounts Receivable.

Which of the following is NOT a characteristic of tangible long-lived assets?

Amortized over their useful lives

Which does a business typically receive when it issues stock to owners?

Cash

If a company capitalizes costs that should be expensed, how is its income statement for the current period impacted?

Expenses are understated.

When interest is accrued on a note payable, but not paid, the

Interest Expense account is increased; the Interest Payable account is increased.

If an analyst wants to examine a company's current ability to generate income, which of the following would be best be considered?

Profitability

Which of the following statements is NOT correct about sales returns and allowances?

Sales returns and allowances are always disclosed in external financial statements.

A company's cash receipts procedures include the following. Cashiers collect cash and issue a receipt at the point of sale. Supervisors take custody of the cash at the end of each cashier's shift and deposit it in the bank. Accounting staff then ensure the receipts from cash sales are properly recorded in the accounting system. Which internal control principle is most evident with these procedures:

Segregate duties.

How do stock splits and stock dividends impact Retained Earnings?

Stock splits have no effect on Retained Earnings and stock dividends decrease Retained Earnings

A company issued 8% preferred stock with a $100 par value. This means:

The potential dividend to preferred stockholders is $8 per share per year.

The separate entity assumption means:

a company's financial statements reflect only the business activities of that company.

Adjusting entries affect:

both income statement and balance sheet accounts.

If a company's gross salaries and wages are $12,000, and it withholds $1,800 for income taxes and $800 for FICA taxes, the journal entry to record the employees' pay should include a:

credit to Salaries and Wages Payable for $9,400.

Assume that a company uses a perpetual inventory system and records the return of inventory previously purchased on account a debit to Accounts Payable and a credit to Inventory. This entry is:

correct

Extending credit to customers will introduce all of the following additional costs except:

decreased gross profit from reduced sales.

One of the major advantages of making adjustments in order to improve the quality of financial statements is that they:

ensure that revenues and expenses are recognized during the period they are earned and incurred.

Recording the estimate of bad debt expense:

follows the expense recognition ("matching") principle.

Notes Receivable differ from Accounts Receivable in that Notes Receivable:

generally charge interest from the day they are signed to the day they are collected.

The operating cycle involves:

generating revenues and collecting from customers.

The fraud triangle contains three elements that must exist for accounting fraud to occur. The elements are:

incentive, opportunity, and rationalization.