ACCT Final Review

When preparing a bank reconciliation, outstanding checks are a. deducted from the bank statement balance. b. added to the bank statement balance. c. deducted from the company's book balance. d. added to the company's book balance.

deducted from the bank statement balance.

The record in which transactions are initially recorded in chronological order as they occur is a(n) a. chart of accounts. b. general journal. c. general Ledger. d. account of events.

general journal.

Greer Company purchased land for $256,000. Additional costs include a $15,300 fee to a broker, a survey fee of $2,400, $1,750 to construct a fence, and a legal fee of $8,500. What is the cost of the land? a. $282,200 b. $281,000 c. $284,600 d. $256,000

$282,200

What is the name of the branch of accounting concerned with providing managers and administrators with information to facilitate the planning and control of business operations? a. Management accounting b. Financial accounting c. Auditing d. Bookkeeping

Management accounting

Which of the following best describes the term "equity"? a. The economic resources of a business entity b. The amount of total profits earned by a business since it began operations c. The cumulative profits earned by a business less any dividends distributed d. The amount of interest or claim that the owners have in the business

The amount of interest or claim that the owners have in the business

Blenham, Inc. sells merchandise on credit. If a customer pays its balance due after the discount period has passed, what is the effect of the payment on Blenham's accounting equation? a. Assets and stockholders' equity decrease. b. Assets decrease and liabilities increase. c. Assets and stockholders' equity increase. d. There is no net effect.

There is no net effect.

The inflow of assets resulting from the sale of products and services is called a(n) a. revenue. b. expense. c. liability. d. asset.

revenue.

Which one of the following is an accurate description of Allowance for Doubtful Accounts? a. Expense account b. Revenue account c. Contra account d. Liability account

Contra account

Discount on Bonds Payable is a balance sheet item for Covington Products Company. How would it most likely be classified on the balance sheet? a. Current liability b. Long-term liability c. Current asset d. Contra-liability

Contra-liability

Planet & Co. reported net income for the current year. Which of the following business transactions would cause cash from operating activities to be higher than the amount of net income? a. Equipment was purchased for cash during the year. b. A bank loan was repaid during the year. c. Cash dividends were paid to stockholders during the year. d. Depreciation expense was recorded for the year.

Depreciation expense was recorded for the year.

Which of the following terms best describes a distribution of the net income of a business to its owners? a. Earnings b. Monetary unit c. Dividends d. Revenue

Dividends

Which of the following terms does not describe the interest rate printed on the bond certificate? a. Effective rate b. Coupon rate c. Stated rate d. Face rate

Effective rate

Which of the following would be internal users of accounting information? a. Employees and managers b. Government and banks c. Customers and vendors d. Employees and customers

Employees and managers

Under current accounting principles, how is net income on the income statement measured? a. Net change in owners' equity during the period b. Net change in the cash balance during the period c. Excess of revenues over expenses less any dividends paid during the period d. Excess of revenues over expenses during the period

Excess of revenues over expenses during the period

Which inventory costing method assigns the cost of the most recent items purchased to ending inventory? a. FIFO b. Weighted average cost c. Specific identification d. LIFO

FIFO

Which inventory costing method results in the highest inventory balance during a period of rising prices? a. LIFO b. Weighted average cost c. FIFO d. Both FIFO and LIFO result in the same inventory balance

FIFO

The account a manufacturer uses to record the cost of products completed and available for sale is called a. Raw Materials Inventory. b. Merchandise Inventory. c. Finished Goods Inventory. d. Work in Process Inventory

Finished Goods Inventory

For which of the following is the current ratio most useful? a. In evaluating a company's solvency b. In evaluating a company's profitability c. In evaluating a company's liquidity d. In evaluating a company's return on assets

In evaluating a company's liquidity

Venture Enterprises' accountant determined the following: Common stock, $0.01 par value $50,000 Where would this item be reported on Venture's financial statements? a. On the statement of retained earnings. b. In the Treasury Stock section of the balance sheet. c. On both the balance sheet and statement of retained earnings. d. In the Stockholders' Equity section of the balance sheet.

In the Stockholders' Equity section of the balance sheet.

Which of the following is a noncurrent asset? a. Accounts receivable b. Cash c. Land d. None of these choices are correct.

Land

Which one of the following types of inventory accounts would be used by a wholesaler or retailer? a. Merchandise Inventory b. Work-in-Process Inventory c. Raw Materials Inventory d. Finished Goods Inventory

Merchandise Inventory

Which of the following terms characterizes the time period between the investment of cash in merchandise and the collection of cash from the sale of that merchandise? a. Accounting period b. Fiscal period c. Operating cycle d. Natural business year

Operating cycle

Tavella Co. applies the consistency convention. What does this mean? a. Tavella Co. uses the same names for all its expenses as its competitors. b. Tavella Co. has selected certain accounting principles that can never be changed. c. Tavella Co. applies the same accounting principles as its competitors. d. Tavella Co. applies the same accounting principles each accounting period.

Tavella Co. applies the same accounting principles each accounting period.

Liquidity relates to a company's ability to do which of the following? a. The ability to pay dividends to its stockholders. b. The ability to collect the amount its customers owe the company. c. The ability to stay in business over the long run. d. The ability to pay its financial obligations as they become due.

The ability to pay its financial obligations as they become due.

Which of the following best describes the term "expenses"? a. The outflow of assets resulting from the sale of goods and services b. The amount of total profits earned by a business since it began operations c. The amount of interest or claim that the owners have in the business d. The future economic resources of a business entity

The outflow of assets resulting from the sale of goods and services

A mortgage incurred in exchange for an office building would be reported in the statement of cash flows in a. the cash flows from Operating Activities section. b. the cash flows from Financing Activities section. c. a separate schedule. d. the cash flows from Investing Activities section.

a separate schedule.

United Airlines is an example of a. producer. b. service company. c. supplier. d. retailer.

service company.

Which one of the following items is reported as a current asset on a classified balance sheet? a. Land b. Accounts receivable c. Common stock d. Trucks

Accounts receivable

Which financial statement reports information helpful in assessing working capital? a. Income statement b. Balance sheet c. Statement of retained earnings d. Statement of cash flows

Balance sheet

When determining the amount of interest to be paid on a bond, which of the following information is not necessary? a. The face rate of interest on the bonds b. The selling price of the bonds c. The length of the interest period, annually or semiannually d. The face amount of the bonds

The selling price of the bonds

Anthony's Shoe Company uses a perpetual inventory system. The beginning balance in its Inventory account is $1,500, and the ending balance is $1,000. Cost of goods sold is $6,500. What was the amount of inventory purchased during the year? a. $500 b. $7,500 c. $6,000 d. $7,000

$6,000

Which of the following is not a cash equivalent? a. 90-day U.S. Treasury bill b. 60-day commercial paper c. 30-day certificate of deposit d. 180-day note issued by a local or state government

180-day note issued by a local or state government

Dimension Lighting Corp. has the following data at its fiscal year-end: Net Sales $27,250 Cost of Goods Sold 19,600 Gross Profit $7,650 Determine Dimension Lighting's gross profit ratio. a. 39.0% b. 71.9% c. 28.1% d. None of these choices are correct.

28.1%

Which of the following items is not a cash equivalent? a. A corporate bond investment that has five years until maturity when it is purchased b. Commercial paper c. A three-year Treasury note purchased two months before its maturity d. Money market funds

A corporate bond investment that has five years until maturity when it is purchased

Which one of the following items appears on a balance sheet? a. Utilities expense b. Accounts payable c. Sales revenue d. Cost of goods sold

Accounts payable

Which of the following items should not appear in the Long-Term Liability section of the balance sheet? a. Accrued income taxes b. Capital lease with a ten-year term c. Bonds payable d. Pension obligations

Accrued income taxes

Which of the following statements is true concerning assets? a. Assets become expenses at the time they are paid in cash. b. Assets are expired costs. c. Assets become expenses when their economic benefits expire. d. Assets represent future economic sacrifices.

Assets become expenses when their economic benefits expire.

What happens to the accounting equation when the adjustment that recognizes accrued interest revenue is recorded? a. Assets increase and liabilities increase. b. Stockholders' equity increases and decreases by the same amount. c. Assets increase and stockholders' equity increases. d. Assets decrease and liabilities decrease.

Assets increase and stockholders' equity increases.

Which of the following statements is true if the amount assigned to ending inventory is incorrect? a. The income statement is affected, but the balance sheet is not. b. Neither the balance sheet nor the income statement are affected. c. Both the balance sheet and the income statement are affected. d. The balance sheet is affected, but the income statement is not.

Both the balance sheet and the income statement are affected.

Where can the amounts needed to compute the accounts receivable turnover ratio be found? a. The income statement b. The balance sheet c. The statement of cash flows d. Both the income statement and balance sheet

Both the income statement and balance sheet

Which of the following assets is considered the most liquid? a. Accounts receivable b. Cash c. Merchandise inventory d. Prepaid expenses

Cash

What is the correct method for calculating working capital? a. Total Assets - Total Liabilities b. Current Assets + Current Liabilities c. Current Assets - Current Liabilities d. Current Assets - Total Liabilities

Current Assets - Current Liabilities

Which inventory costing method assigns the cost of the most recent items purchased to cost of goods sold? a. LIFO b. FIFO c. Specific identification d. Weighted average cost

LIFO

Checks returned by a bank because customers did not have sufficient funds in their account are called a. outstanding checks. b. canceled checks. c. certified checks. d. NSF checks.

NSF checks.

The Dividend account is known as which of the following? a. Real account b. Investment account c. Closing account d. Nominal account

Nominal account

Which of the following would not be included in inventory costs? a. Shelving to hold the inventory. b. The cost of insurance taken out during the time that inventory is in transit. c. Freight costs incurred by the buyer in shipping inventory to its place of business. d. The cost of sales tax paid when purchasing the inventory.

Shelving to hold the inventory.

Which inventory costing method assigns the same cost to all units whether sold or left in ending inventory? a. Weighted average cost b. FIFO c. Specific identification d. LIFO

Weighted average cost

If bonds are issued at 101.25, this means that a. the bonds sold at a discount. b. the bond rate of interest is 10.13% of the market rate of interest. c. a $1,000 bond sold for $1,012.50. d. a $1,000 bond sold for $101.25.

a $1,000 bond sold for $1,012.50.

If a company borrows money from its bank and the bank deducts the interest in advance, the company would record the amount of the interest deduction as a. an expense. b. a loss. c. a discount. d. prepaid interest.

a discount.

All of the following are intangible assets except a. franchises. b. patents. c. goodwill. d. accounts receivable

accounts receivable.

In order to determine inventory for its balance sheet, it is best for a company to count the inventory at the end of its accounting period for a. the perpetual inventory system. b. the periodic inventory system. c. both the periodic and perpetual inventory systems. d. neither the periodic nor perpetual inventory systems.

both the periodic and perpetual inventory systems.

Transactions are recorded in the general journal in a. financial statement order. b. account number order. c. chronological order. d. alphabetical order.

chronological order.

Tropical Co. declared a cash dividend of $30,000. The entry includes a(n) a. decrease to Cash Dividend Payable of $30,000. b. decrease to Cash of $30,000. c. increase to Retained Earnings of $30,000. d. decrease to Retained Earnings of $30,000.

decrease to Retained Earnings of $30,000.

An outstanding check is a check that a. has been presented to the bank for payment but has not been reported on the bank statement. b. is guaranteed for payment by the bank. c. has been written by the account holder but has not been presented to the bank for payment. d. has been written for an amount that is greater than the balance in the account holder's bank account.

has been written by the account holder but has not been presented to the bank for payment.

When an inventory system updates the Inventory account after each sale or purchase of merchandise, this is known as a(n) a. inventory costing system. b. periodic system. c. accrual system. d. perpetual system.

perpetual system.

Which of the following is a current asset? a. Office Supplies b. Truck c. Land d. Building

Office Supplies

Which of the following accounts would not be found as an asset on the balance sheet of a manufacturer? a. Merchandise Inventory b. Work in Process Inventory c. Raw Materials Inventory d. Finished Goods Inventory

Merchandise Inventory

Waxman Company purchased a patent for $170,000 at the beginning of 2017 and estimated that its expected useful life was ten years. The patent has a legal life of 17 years. What amount should be recorded as amortization expense for the patent in 2017? a. $17,000 b. $7,000 c. $10,000 d. $0

$17,000

Which of the following is an organization that lends funds to a business entity and expects repayment of the funds? a. An owner b. A stockholder c. A partner d. A creditor

A creditor

Which one of the following is not an external user of financial statements? a. The company's controller b. Suppliers c. Creditors d. None of these choices are correct.

The company's controller

Fox Chapel Company wishes to issue $400,000 of five-year, 6% bonds, with interest paid annually at the end of the year. The market rate of interest is currently 5%. What information is needed in order to determine the selling price? a. The face amount of the bonds, the stated rate of interest, the market rate of interest, and the bond rating. b. The face amount of the bonds, the stated rate of interest, the market rate of interest, and the bond life. c. The face amount of the bonds, the market rate of interest, the purpose of the issue, and the bond life. d. The life of the bonds, the market rate of interest, the bond rating, and the face amount of the bonds.

The face amount of the bonds, the stated rate of interest, the market rate of interest, and the bond life.

The Premium on Bonds Payable account is shown on the balance sheet as a(n) a. reduction of an expense. b. subtraction from a long-term liability. c. addition to a long-term liability. d. contra asset.

addition to a long-term liability.

Moore Industries Moore Industries began operations on January 2, 2017, with an investment of $50,000 by each of its two stockholders. Net income for its first year of business was $240,000. Moore Industries paid a total of $100,000 in dividends to its stockholders during the year. Read the information about Moore Industries. The company's dividends for the year a. are reported on the statement of retained earnings. b. are an expense of Moore Industries. c. are part of Moore Industries' operating costs. d. reduce the amount of capital stock reported by the company.

are reported on the statement of retained earnings.

A company should choose a depreciation method that a. shows the highest amount of net income. b. minimizes net income. c. saves the most taxes. d. best allocates the original cost of the asset to the periods benefited by the use of the asset.

best allocates the original cost of the asset to the periods benefited by the use of the asset.

An example of a cash flow related to a liability that would not appear in the Financing Activities category of the statement of cash flows is a. a lease obligation. b. mortgage payable. c. deferred income taxes. d. bonds payable.

deferred income taxes.

Assets classified as property, plant, and equipment are reported at a. each asset's estimated market value at the balance sheet date. b. each asset's estimated salvage value at the balance sheet date. c. the estimated depreciable cost at the balance sheet date. d. each asset's original cost less depreciation since acquisition.

each asset's original cost less depreciation since acquisition.

The Retained Earnings account balance for a large corporation is $10,000,000. This amount represents a. cash in the bank. b. revenues for all past years of operations. c. earnings that have not been distributed to shareholders. d. the amount of cash available for dividends.

earnings that have not been distributed to shareholders.

The outflow of assets resulting from the sale of products and services is called a(n) a. revenue. b. expense. c. liability. d. asset.

expense.

Cash flows from issuing and repurchasing stock or issuing and repaying (retiring) debt are classified as a. investing activities. b. borrowing activities. c. financing activities. d. operating activities.

financing activities.

A file or book that contains a record for all accounts used by a company, including the account balance, is called a a. general journal. b. general ledger. c. chart of accounts. d. trial balance.

general ledger.

The statement of stockholders' equity a. includes accounts, such as the retained earnings and common stock accounts, but not changes to the retained earnings account, since those items are reported on the statement of retained earnings. b. is used only if a corporation frequently issues common stock. c. is one of the required financial statements for the annual report, when changes have occurred in the stockholders' equity accounts. d. shows only the changes in retained earnings for the period, which includes the increase or decrease as a result of net income or loss for the period, and dividends for the period.

is one of the required financial statements for the annual report, when changes have occurred in the stockholders' equity accounts.

When a company declares a 3-for-1 stock split, the number of outstanding shares a. stays the same, but, the number of issued shares triples. b. is tripled compared to the number of shares that were outstanding prior to the split. c. is reduced, and the number of issued shares is tripled. d. is tripled, while the number of issued shares is reduced to one-third of the original issued shares.

is tripled compared to the number of shares that were outstanding prior to the split.

A major advantage of the weighted average method of inventory costing is that a. recent costs are assigned to the ending inventory balance. b. cost flows correspond with the physical flow of merchandise. c. it is relatively easy to apply. d. it matches current costs with revenues.

it is relatively easy to apply.

The recognition of cost of goods sold as an expense in the same period that sales revenue is recognized from the sale of merchandise is a good example of the a. full disclosure principle. b. historical cost principle. c. revenue realization principle. d. matching principle.

matching principle.

There are some liabilities, such as income tax payable, for which the amounts must be estimated. Failure to estimate these amounts and record them would be a violation of the a. concept of historical cost. b. matching principle. c. practice of consistency. d. convention of conservation.

matching principle.

Authorized stock represents the a. number of shares that are currently held by stockholders. b. number of shares that have been sold. c. number of shares that have been repurchased by the corporation. d. maximum number of shares that can be issued.

maximum number of shares that can be issued.

Ending inventory is equal to the cost of merchandise on hand plus a. the cost of all inventory purchased during the period. b. merchandise in transit sold to customers FOB destination point. c. merchandise purchased in transit with terms FOB destination point. d. merchandise in transit sold to customers FOB shipping point.

merchandise in transit sold to customers FOB destination point.

On January 1, 2017, the Long-Term Liability section of Eden Company's balance sheet showed a balance of $35,000 in the Bonds Payable account. On December 31, 2017, the balance in that same account was $20,000. This change would appear on the statement of cash flows as an a. inflow of cash of $15,000 in the Financing Activities category. b. outflow of cash of $15,000 in the Financing Activities category. c. inflow of cash of $15,000 in the Investing Activities category. d. outflow of cash of $15,000 in the Investing Activities category

outflow of cash of $15,000 in the Financing Activities category.

Cost of goods sold is a. the cost of goods available for sale less ending inventory. b. purchases less beginning inventory plus ending inventory. c. equal to the amount of inventory on hand at the end of the accounting period. d. reported on the balance sheet in the Inventory account.

the cost of goods available for sale less ending inventory.

All of the following are considered to be long-term liabilities for Parsons Company except a. the current year portion of deferred taxes. b. bonds issued this year (due in ten years). c. the principal of a note payable signed this year but due in five years. d. the payment due in three years for a three-year lease signed this year.

the current year portion of deferred taxes.

Allowance for Doubtful Accounts represents a. the difference between total sales made on credit and the amount collected from those credit sales. b. cash set aside to make up for bad debts losses. c. the difference between the gross amount of accounts receivable and the net realizable value of accounts receivable. d. the amount of uncollectible accounts written off to date.

the difference between the gross amount of accounts receivable and the net realizable value of accounts receivable.

Bonds will sell at a discount when a. the face rate of interest is more than the market rate of interest at the time of issue. b. the issuing company will be able to retire the bonds at less than face at maturity. c. the credit standing of the issuing company is not as good as other companies in a similar line of business. d. the face rate of interest is less than the market rate of interest at the time of issue.

the face rate of interest is less than the market rate of interest at the time of issue.

When a company declares a 2-for-1 stock split, a. stockholders' equity is doubled. b. there is no effect on total stockholders' equity. c. the price of each share will be one-third of what it was before the stock split. d. a shareholder who previously held 100 shares will have 300 shares after the split.

there is no effect on total stockholders' equity.

The ending inventory balance represents a. unexpired costs and is reported on the balance sheet as an asset. b. expired costs and is reported on the balance sheet as an asset. c. the cost of goods sold during the current period and is reported on the balance sheet as an asset. d. expired costs and is reported on the income statement as an expense.

unexpired costs and is reported on the balance sheet as an asset.

Which of the following transactions has an effect on the statement of cash flows? a. The sale of preferred stock b. A large stock dividend c. The declaration of a cash dividend d. A small stock dividend

The sale of preferred stock

Floors, Inc. offers terms of 2/10, n/30 to credit customers. Tile Magic Corp. purchased 100 tile cutters with a list price of $20 each on August 5, 2017, on account. Tile Magic Corp. paid the invoice on August 31, 2017. How much sales discount will Floors recognize? a. $0 b. $200 c. $236 d. $40

$0

Bevco Company Bevco Company has provided the following information from its accounting records for the current year: Cash $ 55,000 Accounts receivable $ 45,000 Inventory 65,000 Land 75,000 Accounts payable 50,000 Notes payable (due 2021) 150,000 Retained earnings ? Capital stock 20,000 Read the information for Bevco Company. What are Bevco' current assets? a. $210,000 b. $165,000 c. $100,000 d. $240,000

$165,000

Genuine Parts received a promissory note from a customer on March 1, 2017. The face amount of the note is $8,000; the terms are 90 days and 9% interest. What amount of interest will Genuine Parts receive when the note is paid? a. $180 b. $90 c. $60 d. $720

$180

George's Department Store George's Department Store is a merchandising company that uses the periodic inventory system. Selected account balances are listed below: Sales $200,000 Purchases 90,000 Inventory (beginning) 23,000 Inventory (ending) 17,000 Purchase returns and allowances 3,000 Purchase discounts 7,000 Transportation-in 4,000 Sales discounts 8,000 Sales returns and allowances 5,000 Refer to the account information for George's Department Store. Calculate net sales. a. $192,000 b. $187,000 c. $200,000 d. $195,000

$187,000

The total amount of interest calculated annually on a $7,000 promissory note payable for three years at 12% that is not compounded is a. $8,260. b. $2,520. c. $840. d. $280.

$2,520.

Accumulated depreciation a. decreases assets. b. increases liabilities. c. decreases liabilities. d. increases assets.

decreases assets.

When preparing a bank reconciliation, NSF checks are a. deducted from the company's book balance. b. deducted from the bank statement balance. c. added to the bank statement balance. d. added to the company's book balance.

deducted from the company's book balance.

Deposits made by a company, but not yet reflected on a bank statement are called a. deposits in transit. b. debit memoranda. c. credit memoranda. d. None of these choices are correct.

deposits in transit.

A trial balance is a(n) a. list of accounts. b. optional financial statement used only by accountants. c. financial statement that can be used in place of a balance sheet. d. document used to prove the equality of debits and credits in the general ledger.

document used to prove the equality of debits and credits in the general ledger.

The system of accounting in which there are at least two accounts affected in every transaction so that the accounting equation stays in balance is a(n) a. debit. b. double-entry system. c. journalizing. d. credit.

double-entry system.

An invoice received from a supplier for $8,000 on January 1 with terms 1/15, n/30 means that the company should pay a. $8,000 between January 2 and January 16. b. either $7,920 before January 16 or $8,000 before the end of the month. c. $6,800 before January 16. d. $7,920 before the end of January.

either $7,920 before January 16 or $8,000 before the end of the month.

Land is not depreciated because it a. does not have an established depreciable life. b. has a useful life that is limited to the period of time a company is in business. c. appreciates in value. d. has an unlimited life.

has an unlimited life.

Cash flows from borrowing and paying off a 90-day bank loan are classified as a. financing activities. b. investing activities. c. operating activities. d. purchasing activities.

inancing activities.

An example of a current liability that must be accrued is a. accounts payable. b. income taxes payable. c. revenue received in advance. d. current maturity of long-term debt.

income taxes payable.

When bonds are issued by a company, the accounting entry shows an a. increase in assets and an increase in stockholders' equity. b. increase in assets and an increase in liabilities. c. increase in liabilities and a decrease in stockholders' equity. d. increase in liabilities and an increase in stockholders' equity.

increase in assets and an increase in liabilities.

Operating assets with no physical properties are called a. plant assets. b. intangible assets. c. current assets. d. property, plant, and equipment.

intangible assets.

Cash flows from acquiring and disposing of long-term assets are classified as a. investing activities. b. financing activities. c. operating activities. d. purchasing activities.

investing activities.

All of the following are included in the acquisition cost of property, plant, and equipment except a. maintenance costs. b. transportation costs. c. installation costs. d. taxes on the purchase.

maintenance costs.

Bonds are sold at a premium if the a. company will have to pay a premium to retire the bonds. b. market rate of interest was less than the face rate at the time of issue. c. issuing company has a better reputation than other companies in the same business. d. market rate of interest was more than the face rate at the time of issue.

market rate of interest was less than the face rate at the time of issue.

Mellon Corporation The data presented below are for Mellon Corporation for the year ended December 31, 2017: Sales (100% on credit) $1,500,000 Sales returns 60,000 Accounts receivable (December 31, 2017) 250,000 Allowance for doubtful accounts (credit balance) (before adjustment at December 31, 2017) 3,000 Estimated amount of uncollectible accounts based on an aging analysis 31,000 Refer to the data for Mellon Corporation. If Mellon estimates its bad debts at 2% of net credit sales, what amount will be reported as bad debts expense for 2017? a. $25,800 b. $30,000 c. $27,000 d. $28,800

$28,800

Using the following information, what is the amount of cost of goods sold? Purchases $32,000 Merchandise inventory, September 1 5,700 Merchandise inventory, September 30 6,370 Purchase returns and allowances 1,200 Purchase discounts 960 Transportation-in 1,040 Sales 63,000 Sales returns and allowances 910 a. $30,210 b. $20,530 c. $28,130 d. $26,900

$30,210

If a company issues $5 par value common stock, a. the shareholders will receive $5 in dividends. b. $5 per share is presented in the Common Stock account on the balance sheet. c. the minimum selling price is $5. d. liabilities are increased as a result of the transaction.

$5 per share is presented in the Common Stock account on the balance sheet.

On January 2, 2017, Roof Master Construction, Inc. issued $500,000, ten-year bonds for $574,540. The bonds pay interest on June 30 and December 31. The face rate is 8%, and the market rate is 6%. At the maturity date, besides an interest payment, Roof Master would repay the bondholders a. $574,540. b. only the last interest payment. c. $520,000. d. $500,000.

$500,000.

On the issuance date, the Bonds Payable account had a balance of $50,000,000 and Premium on Bonds Payable had a balance of $1,000,000. What was the issue price of the bonds in dollars? a. $49,000,000 b. $50,000,000 c. $51,000,000 d. Unable to determine from the information given

$51,000,000

Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. Refer to the information for Norwood, Inc. If Norwood uses the straight-line depreciation method, what is the book value at December 31, 2019? a. $67,500 b. $62,500 c. $51,875 d. $46,875

$51,875

Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. Refer to the information for Norwood, Inc. If Norwood uses the units-of-production method, what is the depreciation rate per hour for the equipment? a. $7.50 b. $6.00 c. $5.00 d. $4.00

$6.00

McLaren Corp. incurred the following costs to acquire and prepare land during 2017 for a new parking lot: purchase price for land, $800,000; cost of paving, $40,000; and lighting for the parking lot, $20,000. How much should McLaren record in the Land Improvements account? a. $40,000 b. $60,000 c. $90,000 d. $30,000

$60,000

Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. Refer to the information for Norwood, Inc. What amount will Norwood, Inc. report as depreciation expense over the eight-year life of the equipment? a. $80,000 b. $60,000 c. $72,000 d. $75,000

$75,000

The following information is given for Camino Company: Cash $ 50,000 Inventory $ 45,000 Land 75,000 Accumulated depreciation 40,000 Plant and equipment 150,000 Accounts payable 60,000 What are the company's current assets? a. $95,000 b. $130,000 c. $220,000 d. $155,000

$95,000

Some of the steps in the accounting cycle are listed below. Select the choice that places these steps in the correct order. 1. Close the accounts. 2. Post transactions to accounts in the ledger. 3. Journalize daily transactions. 4. Record and post adjustments. 5. Prepare financial statements. a. 3, 2, 4, 5, 1 b. 3, 2, 5, 4, 1 c. 2, 3, 4, 5, 1 d. 3, 2, 4, 1, 5

3, 2, 4, 5, 1

Which one of the following is least likely to be a user of financial information of a grocery store? a. The supplier of milk to the grocery store b. A customer at the grocery store c. A stockbroker looking for a possible investment d. The manager of the grocery store

A customer at the grocery store

Which of the following statements regarding the inclusion of liabilities on the statement of cash flows is true? a. A decrease in a current liability from the beginning to the end of the year is accompanied by an inflow of cash. b. A decrease in a current liability from the beginning to the end of the year is accompanied by a decrease in cash. c. Long-term liabilities generally affect the Investing Activities section. d. All current liabilities affect the Operating Activities section.

A decrease in a current liability from the beginning to the end of the year is accompanied by a decrease in cash

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called a. Accumulated Depreciation. b. Amortization Expense. c. Accumulated Amortization. d. Depreciation Expense.

Accumulated Depreciation.

All of the following are examples of manufacturers except a. Amazon.com. b. Whirlpool. c. Ford. d. Boeing.

Amazon.com.

Premium on Bonds Payable is a balance sheet item for Ohio Products Company. How would it most likely be classified on the balance sheet? a. Contra liability b. An increase to a long-term liability c. Revenue d. Long-term asset

An increase to a long-term liability

A company purchased machinery by issuing 2,000 shares of $3 par value common stock. Since the company is new, there is no established market price for its stock. How would the company record the transaction? a. In terms of the par value of the stock issued b. At the cost recorded by the previous owner of the machine c. Recording the transaction would be postponed until a market price for the stock could be determined. d. At the fair market value of the machine

At the fair market value of the machine

For what reason might retailers like Target select an accounting period that ends on or near the end of January? a. The company originally started business operations on that date so it is required to use the date as fiscal year-end. b. The company's CPAs are attempting to spread out the workload. c. Business activity is in a slow period that is suited to the preparation of its financial statements at the end of the year. d. The Internal Revenue Service requires merchandise companies to select such a date for their fiscal year.

Business activity is in a slow period that is suited to the preparation of its financial statements at the end of the year.

Which one of the following financial statements reports an entity's financial position at a specific date? a. Statement of retained earnings b. Income statement c. Balance sheet d. Both the Income statement and the Balance sheet

Balance sheet

You are a potential stockholder and are concerned that a particular company you are ready to invest in might have too much debt. Which financial statement would provide you with information needed in order to evaluate your concern? a. Statement of retained earnings b. Balance sheet c. Income statement d. Statement of cash flows

Balance sheet

To determine the source of a company's noncurrent assets, on which financial statement will you look? a. Income statement only b. Balance sheet only c. Both the balance sheet and the income statement d. Both the income statement and the statement of retained earnings

Balance sheet only

All of the following are examples of retailers except a. Best Buy. b. Home Depot. c. Sports Authority. d. Boeing.

Boeing.

Which one of the following is an example of a deferred revenue? a. Interest has been earned by a bank deposit, but it has not been recorded. b. Cash sales are made to customers. c. Sales are made to customers on credit. d. Cash is received prior to providing the services to customers.

Cash is received prior to providing the services to customers.

Which of the following is not an operating activity? a. Cash payments for operating expenses b. Cash collections from credit customers c. Cash payments for dividends to stockholders d. Cash receipts for interest earned

Cash payments for dividends to stockholders

Which of the following statements is true of liabilities? a. Current Liabilities are listed in order of decreasing amounts in the Current Liabilities section of the balance sheet. b. Accounts payable are listed in the Current Liabilities section in alphabetical order by vendor. c. Classification of Current Liabilities is important because of the liquidity concept. d. U.S. accounting principles differ from those of other countries; this is especially true for Current Liabilities.

Classification of Current Liabilities is important because of the liquidity concept.

Which one of the following is the last step in the accounting cycle? a. Journalizing business transactions b. Recording and posting adjustments c. Preparing financial statements d. Closing the accounts

Closing the accounts

Valor Company issued 5,000 shares of $1 par common stock for $30 per share, providing the company with $150,000 in cash. What effect, in addition to the increase in cash, does this transaction have on the accounting equation for Valor? a. Common Stock increases $5,000; Gain on Sale of Common Stock increases $145,000. b. Common Stock increases $5,000; Retained Earnings increases $145,000. c. Common Stock increases $5,000; Additional Paid-In Capital—Common increases $145,000. d. Common Stock increases $150,000.

Common Stock increases $5,000; Additional Paid-In Capital—Common increases $145,000.

Which one of the following is not an external user of financial information? a. Stockholders b. IRS c. Company management d. Creditors

Company management

One significant difference between a classified and a non-classified balance sheet is the distinction between which of the following items? a. Resources invested by the owners and amounts borrowed from creditors b. Assets and liabilities c. Liabilities and owners' equity d. Current and noncurrent (or long-term) items

Current and noncurrent (or long-term) items

Which balance sheet accounts are most affected by operating activities? a. Long-term liabilities b. Long-term assets c. Stockholders' equity d. Current assets and current liabilities

Current assets and current liabilities

Rent owed to the landlord is a balance sheet item for Generic Products Company. How would it most likely be classified on the balance sheet? a. Current asset b. Long-term liability c. Current liability d. Owners' equity

Current liability

The current portion of long-term debt is a balance sheet item for Flavorful Products Company. How would it most likely be classified on the balance sheet? a. Current asset b. Long-term liability c. Long-term asset d. Current liability

Current liability

Which of the following is not classified as a noncurrent liability? a. Current portion of long-term debt b. Bonds payable c. Mortgage payable d. Capital lease obligations

Current portion of long-term debt

For which type of inventory would a company most likely use the specific identification method? a. Gasoline in storage tanks at a gasoline station b. Custom-designed diamond rings c. Barbie dolls d. Cartons of milk

Custom-designed diamond rings

Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet? a. Land b. Accumulated Depreciation—Buildings c. Buildings d. Depreciation Expense—Buildings

Depreciation Expense—Buildings

Norwood, Inc. Norwood, Inc. purchased a crane at a cost of $80,000. The crane has an estimated residual value of $5,000 and an estimated life of eight years, or 12,500 hours of operation. The crane was purchased on January 1, 2017, and was used 2,700 hours in 2017 and 2,600 hours in 2018. Refer to the information for Norwood, Inc. Based on this information, what method of depreciation will produce the maximum depreciation expense in 2017? a. Double-declining-balance b. Straight-line c. Units-of-production d. All methods produce the same expense in 2017

Double-declining-balance

The statement of retained earnings accomplishes which of the following? a. It summarizes the capital stock accounts over the life of the business. b. It summarizes the balance sheet accounts. c. It accumulates all revenues for the year. d. It summarizes income earned and dividends paid over a single period of the business.

It summarizes income earned and dividends paid over a single period of the business.

Why is the time period assumption required? a. Inflation exists b. External users of financial statements want statements that accurately reflect net income or earnings for a specific time period c. The federal government requires it d. The dollar is the monetary unit in the United States

External users of financial statements want statements that accurately reflect net income or earnings for a specific time period

Which of the following statements is true concerning external users of financial information? a. External users rely on the financial statements to help make informed decisions. b. External users need detailed records of the business to make informed decisions. c. External users rely on management to tell them whether the company is a good investment. d. External users are primarily responsible for the preparation of financial statements.

External users rely on the financial statements to help make informed decisions.

Which one of the following groups is considered an internal user of financial statements? a. The labor union representing employees of a company that is involved in labor negotiations b. Factory managers who supervise production line workers c. The financial analysts for a brokerage firm who are preparing recommendations for the firm's brokers on companies in a certain industry d. A bank reviewing a loan application from a corporation

Factory managers who supervise production line workers

Which of the following represents the proper order of the financial decision framework? a. Formulate the question, analyze the information, gather information from financial statements, monitor your decision, make the decision. b. Formulate the question, gather information from financial statements, analyze the information, make the decision, monitor your decision. c. Analyze the information, monitor your decision, make the decision, formulate the question, gather information from financial statements. d. Analyze the information, formulate the question, gather information from financial statements, monitor your decision, make the decision.

Formulate the question, gather information from financial statements, analyze the information, make the decision, monitor your decision.

Assume that you want to determine the profit margin for a company. Which one of the following financial statements is the best source of this information? a. Statement of cash flows b. Income statement c. Statement of retained earnings d. Statement of stockholders' equity

Income statement

Which one of the following is not an accurate description of Allowance for Doubtful Accounts? a. Income statement account b. Balance sheet account c. Current asset account d. Contra account

Income statement account

Forman, Inc. earned $600,000 profit during 2017. On which financial statement(s) will you find the dollar amount of the profit earned by the company? a. Statement of retained earnings only b. Income statement only c. Income statement and statement of retained earnings d. Balance sheet and income statement

Income statement and statement of retained earnings

Based on its income for the month, Reel Company estimates that federal income taxes for the month of May will be $11,000. What is the effect of the adjustment on the financial statements? a. Increase income taxes expense b. Decrease income taxes payable c. Increase net income d. Increase retained earnings

Increase income taxes expense

Which of the following statements is true concerning intangible assets? a. Intangible assets lack physical existence. b. Intangible assets have no economic substance. c. Intangible assets appear in the Current Assets section of the balance sheet. d. Intangible assets are listed in the Stockholders' Equity section of the balance sheet.

Intangible assets lack physical existence.

Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2017. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2017. Park paid the amount due on June 13, 2017. When did title to the merchandise transfer from Jay Zee Music Company to Park? a. June 5, 2017 b. June 13, 2017 c. June 10, 2017 d. Cannot be determined from the information provided.

June 5, 2017

When a company declares a cash dividend, which of the following is true? a. Assets are increased. b. Assets are decreased. c. Liabilities are increased. d. Stockholders' equity is increased.

Liabilities are increased.

Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet? a. Liability b. Expense c. Owners' equity d. Contra liability

Liability

Which balance sheet accounts are most affected by investing activities? a. Current assets and current liabilities b. Stockholders' equity c. Long-term assets d. Long-term liabilities

Long-term assets

Which balance sheet accounts are most affected by financing activities? a. Long-term assets b. Current assets c. Long-term liabilities and stockholders' equity d. Current liabilities

Long-term liabilities and stockholders' equity

Which of the following statements is true with respect to long-term liabilities? a. They are obligations that will be satisfied within one year. b. Long-term liabilities include bonds, other long-term liabilities, and deferred income taxes. c. An account payable is a good example of a long-term liability because it is interest-bearing. d. Accrued expenses are considered to be long-term liabilities.

Long-term liabilities include bonds, other long-term liabilities, and deferred income taxes.

When the market value of inventory items has declined below its cost, which method would be the most appropriate in complying with GAAP? a. Lower of cost or market b. Gross profit c. LIFO d. Retail

Lower of cost or market

Utah Co. sold merchandise to Big Sky Corp. on December 1, 2017, for $9,000 and accepted a promissory note for payment in the same amount. The note has a term of 90 days and a stated interest rate of 8%. Utah's accounting period ends on December 31. What is the actual maturity date of the note? a. January 29, 2018 b. February 28, 2018 c. December 31, 2017 d. March 1, 2018

March 1, 2018

Which of the following items is treated as a cash equivalent? a. Commercial paper with a six-month maturity when purchased and four months until maturity at the balance sheet date b. Investments in corporate bonds that have five years until maturity when they are purchased c. Money market funds that can be obtained overnight from a bank or brokerage firm d. Investment in corporate stocks that management intends to sell within three months after the balance sheet date

Money market funds that can be obtained overnight from a bank or brokerage firm

Which of the following statements regarding bonds payable is true? a. When an issuing company's bonds are traded in the "secondary" market, the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser. b. Generally, bonds are issued in denominations of $100. c. A debenture bond is backed by specific assets of the issuing company. d. Most bonds are term bonds, meaning that the entire principal amount will mature on a single date

Most bonds are term bonds, meaning that the entire principal amount will mature on a single date.

Income statement accounts are also known as which of the following? a. Closing accounts b. Real accounts c. Final accounts d. Nominal accounts

Nominal accounts

Which of the following accounts is not classified as a current liability? a. Salaries payable b. Accounts payable c. Taxes payable d. Note payable, due in three years

Note payable, due in three years

What is the distinguishing characteristic between accounts receivable and notes receivable? a. Notes receivable result from credit sale transactions for merchandising companies, while accounts receivable result from credit sale transactions for service companies. b. Accounts receivable require payment of interest if not paid within the usual credit terms. c. Notes receivable result from a written promise to pay within a specified amount of time. d. Accounts receivable are usually current assets, while notes receivable are usually long-term assets.

Notes receivable result from a written promise to pay within a specified amount of time.

Harvest Catering is a local catering service. Conceptually, when should Harvest recognize revenue from its catering service? a. On the date the invoice is mailed to the customer b. On the date the customer places the order c. On the date the customer's payment is received d. On the date the meals are catered

On the date the meals are catered

Which of the following represents the correct sequence of the three business activities on the statements of cash flows? a. Investing, Operating, Financing b. Operating, Investing, Financing c. Financing, Operating,Investing d. Financing, Investing, Operating

Operating, Investing, Financing

Although businesses engage in a wide variety of activities, all of these activities can be categorized into three types. Which of the following choices best reflects these three types of business activities? a. Operating, financing, investing b. Investing, reporting, operating c. Operating, financing, reporting d. Investing, reporting, financing

Operating, financing, investing

Park, Inc. purchased merchandise from Jay Zee Music Company on June 5, 2017. The goods were shipped the same day. The merchandise's selling price was $15,000. The credit terms were 1/10, n/30. The shipping terms were FOB shipping point. Park received the merchandise on June 10, 2017. Park paid the amount due on June 13, 2017. Who is responsible for payment of the transportation costs on the merchandise sold by Jay Zee Music to Park? a. Split equally between the two companies b. Jay Zee Music Company c. Park, Inc. d. Cannot be determined from the information provided.

Park, Inc.

Which of the following is reported as a financing activity on the statement of cash flows? a. Declaration of cash dividends b. Stock dividend c. Stock split d. Payment of cash dividends

Payment of cash dividends

An accountant describes the effects of an economic event on an entity by recording the transaction and reporting the amount on the financial statements. What is this called? a. Measurement b. Recognition c. Matching d. Disclosure

Recognition

Which method of inventory costing is not acceptable for financial accounting purposes? a. LIFO b. Specific Identification c. FIFO d. Replacement Cost

Replacement Cost

Which of the following is an example of a capital expenditure? a. Replacing an engine in a company car b. Replacing burned-out light bulbs in the factory c. Cleaning the carpet in the front room d. Tune-up for a company truck

Replacing an engine in a company car

Which of the following is an account in stockholders' equity? a. Loss on Sale of Equipment b. Net Income c. Retained Earnings d. Dividends Payable

Retained Earnings

In preparing the financial statements for December 31, 2017, an accountant improperly classified the payment of prepaid rent as rent expense. Which of the following amounts would not be affected by this improper classification? a. Total assets b. Retained earnings, January 1, 2017 c. Retained earnings, December 31, 2017 d. Net income

Retained earnings, January 1, 2017

Which of the following is not an investing activity? a. Sale of land for cash b. Purchase of investments for cash c. Purchase of equipment for cash d. Sale of merchandise for cash

Sale of merchandise for cash

Nordic Exports Inc. reported net income of $150,000 for 2017, but its cash balance decreased $40,000. Which financial statement should Nordic Exports' management refer to for an explanation of this situation? a. Statement of retained earnings b. Balance sheet c. Income statement d. Statement of cash flows

Statement of cash flows

Which financial statement reports the sources and uses of an entity's cash resources? a. Income statement b. Statement of cash flows c. Statement of retained earnings d. Balance sheet

Statement of cash flows

Zack Co. reported a net loss of $50,000 for 2017, yet its cash balance increased during the year. Which financial statement should Zack's management refer to for an explanation of this situation? a. Income statement b. Balance sheet c. Statement of cash flows d. Statement of retained earnings

Statement of cash flows

Which statement summarizes the income earned and the dividends paid? a. Balance sheet b. Statement of retained earnings c. Income statement d. Statement of cash flows

Statement of retained earnings

An abbreviated version of an account that is useful for analyzing the effects of business transactions is the a. chart of accounts. b. trial balance. c. T account. d. double-entry system.

T account.

If a company erroneously records a $500 deposit as $400 in its books, which of the following must occur when reconciling the bank statement? a. The company will have to increase the balance per the books by $100. b. The company will have to decrease the balance per the books by $100. c. The company will have to decrease the balance per bank statement by $100. d. The company will have to increase the balance per the bank statement by $100.

The company will have to increase the balance per the books by $100.

When a company purchases treasury stock, which of the following statements is true? a. Dividends continue to be paid on the treasury stock because it is still issued. b. The cost of the treasury stock reduces stockholders' equity. c. Treasury stock is considered to be an asset because cash is paid for the stock. d. Since treasury stock is held by the original issuer, it is no longer considered to be issued.

The cost of the treasury stock reduces stockholders' equity.

Which of the following would be classified as external users of financial statements? a. The controller of the company and a company's stockholders b. The creditors and stockholders of the company c. The company's marketing managers d. Stockholders and management of the company

The creditors and stockholders of the company

Vern Corp. sold merchandise to a customer on credit. The invoice amount was $2,000; the invoice date was June 10; credit terms were 1/20, n/30. Which one of the following statements is true? a. The customer must pay $2,020 if payment is made after June 20. b. The customer must pay a $20 penalty if payment is made after July 9. c. The customer should pay $2,000 if the invoice is paid on July 9. d. The customer can take a $20 discount if the invoice is paid on July 10.

The customer should pay $2,000 if the invoice is paid on July 9.

Which of the following best describes the term "assets"? a. The cumulative profits earned by a business less any dividends distributed b. The amount of total profits earned by a business since it began operations c. The economic resources of a business entity d. The amount of interest or claim that the owners have in the business

The economic resources of a business entity

Which of the following statements regarding the gross profit ratio is not true? a. The gross profit ratio alone is sufficient to determine a company's profitability. b. The gross profit ratio explains how many cents on every dollar are available to cover operating expenses and earn a profit. c. If a company's net sales were $200,000 and cost of goods sold were $120,000, its gross profit ratio would be 40%. d. Managers, investors, and creditors use the gross profit ratio to measure one aspect of profitability.

The gross profit ratio alone is sufficient to determine a company's profitability.

Relevant information can be quantitative or qualitative. In deciding whether to go to college part time or full time, which of the following is a qualitative factor for a student? a. The cost of tuition b. "Good Student" discounts on auto insurance rates c. The opportunity to make friends d. The price of football tickets

The opportunity to make friends

Which of the following statements is true with regard to contributed capital? a. It is very unlikely corporations may have more than one class of stock outstanding. b. The outstanding number of shares is the maximum number of shares that can be issued by a corporation. c. Preferred stock is stock that has been retired. d. The shares that are in the hands of the stockholders are said to be outstanding.

The shares that are in the hands of the stockholders are said to be outstanding.

Which of the following is the best description of the purpose of financial reporting? a. To provide users with an assessment of how long the company will continue as a going concern b. To allow users access to a list of all the individuals who owe the company money c. To help the users reach their decisions in an informed manner d. To allow users to access the daily detailed records of a business

To help the users reach their decisions in an informed manner

What is the primary objective of financial reporting? a. To protect users from fraudulent financial information. b. To help management assess cash flows. c. To provide useful information for decision making. d. To help investors make credit decisions.

To provide useful information for decision making.

Which one of the following items does not accurately describe stockholders' equity? a. Stockholders' equity is created when a company issues stock to an investor. b. Total stockholders' equity should be equal to assets in a publicly held entity. c. Stockholders' equity represents amounts contributed by the owners to the company. d. As owners of shares in a corporation, stockholders have claims on the assets of a business when it is profitable.

Total stockholders' equity should be equal to assets in a publicly held entity.

Which of the following items would be considered a cash equivalent if it was held at the balance sheet date? a. Commercial paper with a six-month maturity that was purchased at the issue date b. The common stock of a company traded on the New York Stock Exchange that was purchased 30 days before the balance sheet date c. U.S. Treasury bill purchased when there were 90 days until maturity d. U.S. Treasury note that matures two years after it is issued and that was purchased four months before the balance sheet date

U.S. Treasury bill purchased when there were 90 days until maturity

Which one of the following is an example of an accrued liability? a. Wages have been earned by employees, but have not been paid at the end of the period. b. Equipment that will benefit several periods has been purchased. c. An insurance policy that expires in a future period has been acquired. d. Supplies are purchased and used over several months.

Wages have been earned by employees, but have not been paid at the end of the period.

Which one of the following steps in the accounting cycle is optional rather than required? a. The accounts are closed b. Work sheets are prepared c. Adjustments are recorded d. Business transactions are recorded

Work sheets are prepared

You are interested in accumulating $10,000 so that you can take a cruise in three years. If you try to solve for the amount that you need to invest each year, earning 6% interest compounded annually, the $10,000 represents a. a present value. b. an annuity. c. a future value. d. the amount to invest.

a future value.

The record used to accumulate monetary information for each individual asset, liability, stockholders' equity, revenue, and expense item is a(n) a. account. b. chart of accounts. c. general journal. d. general ledger.

account.

Oakland Corp. purchased land and a building for a combined cost of $500,000. Oakland must a. record the $500,000 acquisition cost in an account called Land and Buildings. b. record all of the cost in the Land account because part of the purchase involved land. c. depreciate the $500,000 acquisition cost, less any residual value, over the expected useful life of the building. d. allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values.

allocate the $500,000 acquisition cost to separate Land and Buildings accounts based on their respective fair market values.

With regard to a corporation's stock, par value is a. the amount at which the stock has been repurchased. b. the amount at which treasury stock can be sold. c. an arbitrary amount that exists to fulfill legal requirements. d. the current market price of the stock.

an arbitrary amount that exists to fulfill legal requirements.

A list of all asset, liability, stockholders' equity, revenue, and expense accounts, along with their assigned account numbers, that are used by a company, is a(n) a. chart of accounts. b. account. c. general journal. d. general ledger.

chart of accounts.

The Discount on Bonds Payable account is shown on the balance sheet as a(n) a. asset. b. expense. c. contra long-term liability. d. long-term liability.

contra long-term liability

When an individual wishes to form a sole proprietorship, he or she does so by a. filing corporate paperwork with the state. b. purchasing stock in the proprietorship. c. contributing cash or other assets. d. filing a petition with the IRS.

contributing cash or other assets.

Cost of goods sold is equal to the a. cost of goods purchased plus transportation-in costs less ending inventory. b. cost of goods purchased plus transportation-in costs plus beginning inventory minus purchase returns and allowances and purchase discounts minus ending inventory. c. total amount of merchandise purchased during the year. d. cost of goods purchased plus transportation-in costs plus beginning inventory minus purchase returns and allowances and purchase discounts.

cost of goods purchased plus transportation-in costs plus beginning inventory minus purchase returns and allowances and purchase discounts minus ending inventory.

A liability for dividends is created at the a. end of each fiscal year. b. date of declaration. c. date of record. d. date of payment.

date of declaration.

The payment of accounts payable results in a(n) a. increase in liabilities and a decrease in owners' equity. b. decrease in liabilities and a decrease in assets. c. decrease in liabilities and an increase in assets. d. decrease in liabilities and an increase in owners' equity.

decrease in liabilities and a decrease in assets.

Current accounting standards indicate that the costs of intangible assets with an indefinite life, such as goodwill, should a. increase an expense account entirely in the year in which acquired. b. be amortized over a reasonable period of time not to exceed 40 years. c. not be amortized. d. be reported on the statement of retained earnings in the year in which acquired.

not be amortized.

Cash flows from acquiring and selling products are classified as a. financing activities. b. distribution activities. c. operating activities. d. investing activities.

operating activities.

Business entities generally carry on a. operating activities, but only corporations engage in financing and investing activities. b. operating, investing, and financing activities. c. investing and operating activities, but only corporations engage in financing activities. d. either investing or financing activities, but not both.

operating, investing, and financing activities.

The bond issue price is determined by calculating the a. future value of the stream of interest payments and the present value of the maturity amount. b. present value of the stream of interest payments and the present value of the maturity amount. c. present value of the stream of interest payments and the future value of the maturity amount. d. future value of the stream of interest payments and the future value of the maturity amount.

present value of the stream of interest payments and the present value of the maturity amount.

The three forms of business entities are a. wholesalers, manufacturers, and retailers. b. financing, investing, and operating. c. government, cooperatives, and philanthropic organizations. d. sole proprietorships, partnerships, and corporations.

sole proprietorships, partnerships, and corporations.

Plant assets are depreciated because a. some plant assets last longer than others. b. the accrual basis of accounting requires matching of costs to revenues. c. useful lives cannot be reasonably estimated. d. the replacement cost of plant assets may fluctuate over time.

the accrual basis of accounting requires matching of costs to revenues.

Depreciation is a process by which a. the difference between current market value and historical cost of plant and equipment is determined. b. the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset. c. replacement funds are accumulated for plant and equipment. d. the decline in market value of plant and equipment is determined and recorded.

the cost of plant and equipment is allocated to expense over the time periods which benefit from the use of the asset.

In preparing financial statements, accountants should consider all of the following except a. the characteristics that make accounting information useful. b. the presentation of the value of a company. c. the most useful way to display the information found on the financial statements. d. the objectives of financial reporting.

the presentation of the value of a company.

If the balance on the bank statement does not equal the balance in the Cash account, then it can be assumed that a. there will be items reconciling the difference. b. the bank has made errors in preparing the statement. c. the company has made errors in its records concerning the Cash account. d. the company has no errors in its records concerning the Cash account.

there will be items reconciling the difference.

All of the following are reasons for a company to repurchase its previously issued stock, except a. to support the market price of the stock. b. to resell to employees. c. for bonuses to employees. d. to increase the shares outstanding.

to increase the shares outstanding.

Research and development costs are a. capitalized and amortized over the periods that will probably benefit from the research and development. b. treated as an expense when incurred. c. capitalized but not amortized. d. included with the cost of the patent resulting from the research and development.

treated as an expense when incurred.

A list of all accounts and their balances that is used to prove the equality of debits and credits as of a specific date is a(n) a. trial balance. b. account. c. chart of accounts. d. general journal.

trial balance.