Financial Accounting FINAL

Regarding dividends, a journal entry is not recorded on what date? a. Date of Declaration b. Date of record C. Date of payment D. A journal entry is recorded on all of the above dates

D. A journal entry is recorded on all of the above dates

T/F: The use of internal controls gives guaranteed protection against losses due to operating activities

False

Which feature is not applicable to common stock ownership? a. Right to receive dividends before preferred stock shareholders b. Right to vote on appointment of external auditor c. Right to receive residual assets of the company should it cease operations d. All of the above are applicable to common stock ownership

a. Right to receive dividends before preferred stock shareholders

In what situation does not total stockholders' equity decrease? a. when cash dividend is declared b. when a stock dividend is declared c. when a stock split is announced d. None of the above

a. when cash dividend is declared

Which of the following is not a component of internal control? a.Environmental assessment b.Control activities c.Information and communication d.Monitoring activities

a.Environmental assessment

Which of the following would not appear in the investing section of the statement of cash flows? a.Purchase of inventory. b.Sale of investments. c.Purchase of land. d.All of the above would appear in the investing section of the statement of cash flows.

a.Purchase of inventory.

Which feature is not applicable to common stock ownership? a.Right to receive dividends before preferred stock shareholders. b.Right to vote on appointment of external auditor. c.Right to receive residual assets of the company should it cease operations. d.all of the above are applicable to common stock ownership.

a.Right to receive dividends before preferred stock shareholders.

Which of the following is ordered from the largest number of shares to the smallest number of shares? a.Shares authorized, shares issued, shares outstanding. b.Shares issued, shares outstanding, shares authorized. c.Shares outstanding, shares issued, shares authorized. d.Shares in treasury, shares outstanding, shares issued.

a.Shares authorized, shares issued, shares outstanding.

If the balance in Prepaid Expenses increased during the year, what action should be taken on the statement of cash flows when following the indirect method, and why? a.The change in the account balance should be subtracted from net income because the net increase in Prepaid Expenses did not impact net income but did reduce the cash balance. b.The change in the account balance should be added to net income because the net increase in Prepaid Expenses did not impact net income but did increase the cash balance. c.The net change in Prepaid Expenses should be subtracted from net income to reverse the income statement effect that had no impact on cash. d.The net change in Prepaid Expenses should be added to net income to reverse the income statement effect that had no impact on cash.

a.The change in the account balance should be subtracted from net income because the net increase in Prepaid Expenses did not impact net income but did reduce the cash balance.

If a company engages in a material non cash transaction, which of the following is required? a.The company must include an explanatory narrative or schedule accompanying the statement of cash flows. b.No disclosure is necessary. c.The company must include an explanatory narrative or schedule accompanying the balance sheet. d.It must be reported in the investing and financing sections of the statement of cash flows.

a.The company must include an explanatory narrative or schedule accompanying the statement of cash flows.

In what situation does total stockholders' equity decrease? a.When a cash dividend is declared. b.When a stock dividend is declared. c.When a stock split is announced. d.None of the above.

a.When a cash dividend is declared.

Treasury stock: a. does not appear on the balance sheet b. is a contra-equity account c. is an asset account d. is recorded as additional paid-in capital

b. is a contra-equity account

Which of the following correctly describes how to report cash? Restricted cash is always reported as a current asset. a.Cash can be combined with cash equivalents. b.Cash can be combined with restricted cash. c.Cash equivalents can be combined with restricted cash.

b.Cash can be combined with restricted cash.

If a company's current assets (such as accounts receivable and inventories) are allowed to grow out of control, which of the following would occur? a.Cash flows from investing activities would be reduced. b.Cash flows from operating activities would be reduced. c.Cash flows from financing activities would increase. d.None of the above.

b.Cash flows from operating activities would be reduced.

A journal entry is not recorded on what date? a.Date of declaration. b.Date of record. c.Date of payment. d. A journal entry is recorded on all of the above dates.

b.Date of record.

Which statement regarding dividends is false? a. Dividends represent a sharing or corporate profits with owners b. Both stock and cash dividends reduce retained earnings c. Cash dividends paid to stockholders reduce net income d. None of the above statements are false

c. Cash dividends paid to stockholders reduce net income

a company sells 1 million shares of common stock with a par value of $0.02 for $15 a share. To record the transaction, the company would: a. debit cash for $20,000 and credit Common stock for $20,000 b. debit cash for $15 million and credit common stock for $15 million c. debit cash for $15 million and credit common stock $20,000 and credit additional paid-in capital for $14,980,000 d. debit cash for $20,000, debit Capital receivable for $14,980,000, credit Common stock for $20,000 and credit Additional Paid-in Capital for $14,980,000

c. debit cash for $15 million and credit common stock $20,000 and credit additional paid-in capital for $14,980,000

Which of the following statements about the relative advantages of equity and debt financing is false? a.An advantage of equity financing is that it does not have to be repaid. b.An advantage of equity financing is that dividends are optional. c.An advantage of equity financing is that new stockholders get to vote and share in the earnings of the company. d.An advantage of debt financing is that interest is tax deductible.

c.An advantage of equity financing is that new stockholders get to vote and share in the earnings of the company.

Which statement regarding dividends is false? a.Dividends represent a sharing of corporate profits with owners. b.Both stock and cash dividends reduce retained earnings. c.Cash dividends paid to stockholders reduce net income. d.None of the above statements are false.

c.Cash dividends paid to stockholders reduce net income.

Where is the overall change in cash shown in the statement of cash flows? a.In the top part, before the operating activities section. b.In one of the operating, investing, or financing activities sections. c.In the bottom part, following the financing activities section. d.None of the above.

c.In the bottom part, following the financing activities section.

Upon review of the most recent bank statement, you discover that a check was made out to your supplier for $76 but was recorded in your Cash and Accounts Payable accounts as $67. Which of the following describes the actions to be taken when preparing your bank reconciliation? Balance per Bank / Balance per Book a.Decrease / No change b.Increase / Decrease c.No change / Decrease d.Decrease / Increase

c.No change / Decrease

Upon review of your company's bank statement, you discover that you recently deposited a check from a customer that was rejected by your bank as NSF. Which of the following describes the actions to be taken when preparing your company's bank reconciliation? Balance per Bank / Balance per Book a.Decrease / No change b.Increase / Decrease c.No change / Decrease d.Decrease / Increase

c.No change / Decrease

A company indicates the condition of goods obtained on which of the following documents? a.Purchase requisition b.Purchase order c.Receiving report d.Supplier invoice

c.Receiving report

What document signals that a company should record the purchase of goods on account? a.Purchase requisition b.Purchase order c.Receiving report d.Supplier invoice

c.Receiving report

Which of the following transactions will increase the return on equity? a.Declare and issue a stock dividend. b.Split the stock 2-for-1. c.Repurchase the company's stock. d.None of the above.

c.Repurchase the company's stock.

The total change in cash as shown near the bottom of the statement of cash flows for the year should agree with which of the following? a.The difference in Retained Earnings when reviewing the comparative balance sheet. b.Net income or net loss as found on the income statement. c.The difference in cash when reviewing the comparative balance sheet. d.None of the above.

c.The difference in cash when reviewing the comparative balance sheet.

Which of the following are valid control procedures? a. Segregation of Duties b. Adequate documents and records c. Independent checks on performance d. All of the above

d. All of the above

Which of the following statements about stock dividends is true? a. Stock dividends are reported on the income statement b. Stock dividends increase total stockholders' equity c. Stock dividends decrease total stockholders' equity d. None of the above

d. None of the above

Which of the following items would not appear in the financing section of the statement of cash flows? a.The issuance of the company's own stock. b.The repayment of debt. c.The payment of dividends. d.All of the above would appear in the financing section of the statement of cash flows.

d.All of the above would appear in the financing section of the statement of cash flows.

Total cash inflow in the operating section of the statement of cash flows should include which of the following? a.Cash received from customers at the point of sale. b.Cash collections from customer accounts receivable. c.Cash received in advance of revenue recognition (unearned revenue). d.All of the above.

d.All of the above.

When stock is purchased with cash and held in treasury, what is the impact on the balance sheet equation? a.No change—the reduction of the asset Cash is offset with the addition of the asset Treasury Stock. b.Assets decrease and stockholders' equity increases. c.Assets increase and stockholders' equity decreases. d.Assets decrease and stockholders' equity decreases.

d.Assets decrease and stockholders' equity decreases.

Which of the following internal control principles underlies the requirement that all customers be given a sales receipt? a.Segregate duties b.Establish responsibility c.Restrict access d.Document procedures

d.Document procedures

Which statement regarding treasury stock is false? a.Treasury stock is considered to be issued but not outstanding. b.Treasury stock has no voting, dividend, or liquidation rights. c.Treasury stock reduces total stockholders' equity on the balance sheet. d.None of the above are false.

d.None of the above are false.

Which of the following statements about stock dividends is true? a.Stock dividends are reported on the income statement. b.tock dividends increase total stockholders' equity. c.Stock dividends decrease total stockholders' equity. d.None of the above.

d.None of the above.

Which of the following does not enhance internal control? a.Assigning different duties to different employees. b.Ensuring adequate documentation is maintained. c.Allowing access only when required to complete assigned duties. d.None of the above—all enhance internal control.

d.None of the above—all enhance internal control.

In what order do the three sections of the statement of cash flows appear when reading from top to bottom? a.Financing, investing, operating. b.Investing, operating, financing. c.Operating, financing, investing. d.Operating, investing, financing.

d.Operating, investing, financing.