C213 Questions

1. Internal controls are designed to help and protect all of the following groups of people, EXCEPT

a. Tax collectors.

1. Which of the following financial statements reports a company's resources, obligations, and ownership?

Balance sheet

1. The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a year, is called a(n)

Income Statement.

1. Which of the following would be classified as a long-term asset?

Land

1. Which of the following is NOT typically true of accounting information?

a. The information relates to future time periods.

In completing an audit of a company's financial statements, external auditors

Provide some assurance that the financial statements are not misleading

1. Which of the following statements is TRUE regarding the Statement of Cash Flows prepared using the Direct Method?

a. A Statement of Cash Flows prepared under the Direct Method is typically easier for users to understand than a Statement of Cash Flows prepared under the Indirect Method.

1. Which of the following types of accounts are NOT found on the balance sheet?

a. Revenues.

1. Given the following information, compute net income. Cost of goods sold $2,000 Income taxes 350 Interest expense 200 Operating expenses 1,500 Sales 5,500

a. $1,450

1. Given the following information, compute operating income. Cost of goods sold $2,000 Income taxes 350 Interest expense 200 Operating expenses 1,500 Sales 5,500

a. $2,000

1. The following information was taken from the records of Thompson Corporation for the year ended December 31, 2013: Dividends paid $ 12,800 Service revenue 90,500 Accounts payable 139,750 Capital stock 378,750 Total expenses 67,000 Retained earnings (at 1/1/2013) 43,400 The net income at December 31, 2013 was

a. $23,500

1. Given the following information, compute gross profit. Cost of goods sold $2,000 Income taxes 350 Interest expense 200 Operating expenses 1,500 Sales 5,500

a. $3,500

1. Cooper Company purchased land for $90,000 in 2010. In 2013, the land is valued at $155,000. The land would appear on the company's December 31, 2013 balance sheet at

a. $90,000.

1. Increased federal oversight of the audit process resulted from the passage of the following act of Congress:

a. Sarbanes-Oxley Act.

1. Which of the following would be classified as a current liability?

a. Accounts payable

1. Which of the following is an asset?

a. Accounts receivable

1. Which of the following would be classified as a current asset?

a. Accounts receivable

1. Businesses use accounting systems to

a. Analyze transactions. b. Handle routine bookkeeping tasks. c. Evaluate the performance and financial health of the business

1. Which of the following does Sarbanes-Oxley NOT require management to do?

a. Approve all loans to executive officers and directors.

1. The basic accounting equation is

a. Assets = Liabilities + Owners' Equity

1. According to Sarbanes-Oxley, who are the external auditors required to report to and be retained by?

a. Audit Committee.

1. The internal audit manager reports directly to

a. Audit Committee.

1. Which of the following accounts is the most liquid?

a. Cash

1. Which of the following is NOT an acceptable basis for the recognition of expenses?

a. Cash disbursement.

Which of the following distinguishes between current and long-term assets?

a. Classified balance sheet

1. The Sarbanes-Oxley Act establishes

a. Constraints on company management. b. Constraints on external auditors. c. Independent oversight of external auditors.

1. Which of the following would be included on an income statement?

a. Cost of goods sold

1. The Public Company Accounting Oversight Board (PCAOB) is NOT required to

a. Enforce compliance with the Foreign Corrupt Practices Act.

1. Which of the following is an example of a physical control over assets and records?

a. Every evening, Shellie makes a back-up file of all transactions recorded on the computer that day, burns the back-up file onto a CD, and then locks the CD into a fire-proof vault.

1. Which of the following is NOT a function of accounting?

a. Executing sales transactions for organizations.

1. The current standard setting organization for financial accounting in the United States is the

a. Financial Accounting Standards Board (FASB).

1. William's actions in #49 and #50 above are examples of a(n)

a. Fraud.

1. Which of the following is NOT considered to be an owners' equity account?

a. Gain

1. Which of the following is an example of an adequate segregation of duties?

a. Greg is in charge of recording receipt of payments made to accounts receivable, while Susan is in charge of making deposits to the bank.

1. Expense and revenue accounts appear on the

a. Income statement.

1. Which of the following financial statements reports the excess of a company's revenues over its expenses?

a. Income statement.

Which of the following is considered a liability?

a. Interest payable

1. Which of the following is NOT a reason for problems occurring in the financial statements?

a. Internal controls

1. The emphasis in financial accounting is to provide financial information to which of the following user groups?

a. Investors and creditors.

1. Which of the following is NOT true about the Financial Accounting Standards Board (FASB)?

a. It is a government agency.

1. Which of the following organizations has specific legal authority to establish financial accounting standards for publicly held U.S. companies?

a. Security and Exchange Commission (SEC).

1. Which of the following is a revenue generating activity?

a. Service is provided.

1. Which of the following financial statements reports the amount of cash collected and paid out by a company?

a. Statement of cash flows.

1. Which of the following is NOT one of the three primary financial statements?

a. Statement of retained earnings.

1. Which of the following is NOT an objective of the accounting system?

a. Make sure a company only records profitable transactions.

1. The accuracy of the information contained in the financial statements is the responsibility of the

a. Management.

1. Which of the following is NOT an external user of accounting information?

a. Management.

1. As William is preparing the end of year financial statements, he realizes that the earnings are not quite up to par for the large loan application that is being currently processed. He decides to stretch the assumptions just enough to be able to meet the requirements for the loan application. This is an example of

a. Meeting external expectations.

1. As William is preparing the end of year financial statements, he notices that the numbers required for his personal bonus have not been met. He reviews the estimates that he has made and adjusts some accounting numbers to meet the requirements for his bonus. This is an example of

a. Meeting internal targets.

1. Which of the following is an overall measure of the economic performance of a business entity's activities?

a. Net income (or net loss)

1. According to Sarbanes-Oxley, which of the following services are external auditors permitted to provide to its audit client?

a. Opinions about the reliability of internal controls.

1. All of the following are likely to be methods that could be used to conduct fraud EXCEPT

a. Overstating liabilities.

1. Which of the following would be classified as a noncurrent liability?

a. Portion of mortgage payable not due within the next 12 months

1. Which of the following activities would internal auditors NOT typically perform in a large company?

a. Prepare the financial statements.

1. A wholesale bakery would normally recognize revenue when

a. goods are delivered to the customer.

1. When revenue and expense items are arranged to highlight important profit relationships, the resulting income statement format is called a

a. multiple-step income statement.