Intermediate Accounting Exam 1 (Chapter 1-4)

Which accounting assumption or principle is being violated if a company provides financial reports only when it introduces a new product?

Periodicity

During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept?

Periodicity assumption

Which of the following is a characteristic describing the fundamental quality of relevance?

Predictive value

Which of the following accounts would not be closed to Income Summary during the year-end closing process?

Prepaid Rent

Which of the following is an example of an accrued expense?

Property taxes incurred during the year, to be paid in the first quarter of the subsequent year

Which of the following is a temporary account?

Purchases Returns and Allowances

What is the quality of information that is capable of making a difference in a decision?

Relevance

Which of the following is a fundamental quality of useful accounting information?

Relevance

Which of the following is not a component of shareholders' equity?

Residual capital

Which type of account is always debited during the closing process?

Revenue

What is the correct presentation of the income statement?

Revenues - expenses + gains - losses = Net Income

The body that has the power to prescribe the accounting practices and standards to be employed by companies that fall under its jurisdiction is the

SEC.

Which of the following is a nominal (temporary) account?

Salaries and Wages Expense

Which is not a required characteristic for a liability to be recognized?

Service potential

Which of the following financial statements reports changes in financial position of the company during the accounting period?

Statement of cash flows

Which item below is not a current liability?

Stock dividends distributable

When converting from cash-basis to accrual-basis accounting, which of the following adjustments should be made to cash paid for operating expenses to determine accrual-basis operating expenses?

Subtract ending prepaid expense.

Which of the following serves as the justification for the periodic recording of depreciation expense?

Systematic and rational allocation of cost over the periods benefited

Accounting standards, which have economic and political consequences, are often the result of compromise.

TRUE

Which of the following errors is not identified by using the trial balance?

an unposted transaction

Balance sheet information is NOT useful for

analyze cash inflows and outflows for the period.

Which of the following errors will be detected by a trial balance?

incorrectly computing the balance of the cash account

The basic purpose of a trial balance is to

verify that the total credits equal the total debits.

Which of the following is a measure of operating efficiency?

​Asset turnover ratio

​Which of the following is not an intangible asset?

​Deferred tax asset

​Which of the following statements about fair value is true?

​Fair value accounting is also known as "mark-to-market" accounting.

A company's operating cycle might be measured as

​Inventory turnover in days plus accounts receivable turnover in days minus accounts payable turnover in days.

On the balance sheet, treasury stock is presented as a

​contra shareholders' equity account.

A deficit occurs when a company's

​dividends and cumulative losses are greater than cumulative net income.

​GAAP requires that all derivative financial instruments be reported at their

​fair value.

Most long-term liabilities are reported on the balance sheet at their

​present value.

Additional paid-in capital represents

​the difference between par value and market value .

Which of the following accounts is not classified as a current asset?

Patent

Which of the following is a recordable event or item?

Payment of monthly payroll

The following information is available for Ace Company for 2020: Disbursements for purchases$1,560,000 Increase in trade accounts payable100,000 Decrease in merchandise inventory40,000 Cost of goods sold for 2020 was

$1,560,000 + $100,000 + $40,000 = $1,700,000.

The income statement of Dolan Corporation for 2020 included the following items: Interest revenue $141,000 Salaries and wages expense 210,000 Insurance expense 21,200 The following balances have been excerpted from Dolan Corporation's balance sheets: December 31, 2020 December 31, 2019 Interest receivable $18,200 $15,000 Salaries and wages payable 17,800 8,400 Prepaid insurance 2,200 3,000 The cash received for interest during 2020 was

$15,000 + $141,000 - $18,200 = $137,800.

Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2020 are as follows:Last payroll was paid on 12/26/20, for the 2-week period ended 12/26/20.Overtime pay earned in the 2-week period ended 12/26/20 was $25,000.Remaining work days in 2020 were December 29, 30, 31, on which days there was no overtime.The recurring biweekly salaries total $450,000.Assuming a five-day workweek, Colaw should record a liability at December 31, 2020 for accrued salaries of

$160,000. $25,000 + ($450,000 ÷ 10 × 3) = $160,000.

The income statement of Dolan Corporation for 2020 included the following items: Interest revenue $141,000 Salaries and wages expense 210,000 Insurance expense 21,200 The following balances have been excerpted from Dolan Corporation's balance sheets: December 31, 2020 December 31, 2019 Interest receivable $18,200 $15,000 Salaries and wages payable 17,800 8,400 Prepaid insurance 2,200 3,000 The cash paid for insurance premiums during 2020 was

$20,400. $21,200 - $3,000 + $2,200 = $20,400.

The income statement of Dolan Corporation for 2020 included the following items: Interest revenue$141,000 Salaries and wages expense210,000 Insurance expense21,200 The following balances have been excerpted from Dolan Corporation's balance sheets: December 31, 2020December 31, 2019 Interest receivable$18,200$15,000 Salaries and wages payable17,8008,400 Prepaid insurance2,2003,000 The cash paid for insurance premiums during 2020 was

$20,400. $21,200 - $3,000 + $2,200 = $20,400.

The income statement of Dolan Corporation for 2020 included the following items: Interest revenue$141,000 Salaries and wages expense210,000 Insurance expense21,200 The following balances have been excerpted from Dolan Corporation's balance sheets: December 31, 2020December 31, 2019 Interest receivable$18,200$15,000 Salaries and wages payable17,8008,400 Prepaid insurance2,2003,000 The cash paid for salaries and wages during 2020 was

$200,600. $8,400 + $210,000 - $17,800 = $200,600.

The Nathan's Company rents numerous properties throughout the year. Nathan's pays rents in advance in some cases, and in other cases rents are paid after the rental period expires. The following data are included in Nathan's December 31 balance sheets: Year 1 Year 2 Prepaid Rents $70,000 $30,000 Rent Payable $50,000 $35,000 During Year 2, Nathan paid $200,000 in rentals. In its accrual basis income statement for the year ended December 31, Year 2, Nathan should report rent expense of:

$225,000

Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data relating to salaries earned in December 2020 are as follows: Last payroll was paid on 12/26/20, for the 2-week period ended 12/26/20. Overtime pay earned in the 2-week period ended 12/26/20 was $25,000. Remaining work days in 2020 were December 29, 30, 31, on which days there was no overtime. The recurring biweekly salaries total $450,000. Assuming a five-day workweek, Colaw should record a liability at December 31, 2020 for accrued salaries of

$25,000 + ($450,000 ÷ 10 × 3) = $160,000.

Olsen Company paid or collected during 2020 the following items: Insurance premiums paid$30,800 Interest collected69,800 Salaries paid280,400 The following balances have been excerpted from Olsen's balance sheets: December 31, 2020December 31, 2019 Prepaid insurance$2,400$3,000 Interest receivable7,4005,800 Salaries and wages payable24,60021,200 The insurance expense on the income statement for 2020 was

$30,800 + $600 = $31,400.

Stine Corp.'s trial balance reflected the following account balances at December 31, 2020: Accounts receivable (net)$38,000 Trading securities12,000 Accumulated depreciation on equipment and furniture30,000 Cash32,000 Inventory60,000 Equipment50,000 Patent8,000 Prepaid expenses4,000 Land held for future business site36,000 In Stine's December 31, 2020 balance sheet, the current assets total is

$38,000 + $12,000 + $32,000 + $60,000 + $4,000 = $146,000.

Brown Company's account balances at December 31, 2020 for Accounts Receivable and the related Allowance for Doubtful Accounts are $920,000 debit and $2,100 credit, respectively. From an aging of accounts receivable, it is estimated that $39,000 of the December 31 receivables will be uncollectible. The necessary adjusting entry would include a credit to the allowance account for

$39,000 - $2,100 = $36,900.

Eaton Co. sells major household appliance service contracts for cash. The service contracts are for a one-year, two-year, or three-year period. Cash receipts from contracts are credited to Unearned Service Revenue. This account had a balance of $5,700,000 at December 31, 2020 before year-end adjustment. Service contract costs are charged as incurred to the Service Contract Expense account, which had a balance of $1,350,000 at December 31, 2020.Service contracts still outstanding at December 31, 2020 expire as follows: During 2021$1,440,000 During 20221,710,000 During 20231,050,000 What amount should be reported as Unearned Service Revenue in Eaton's December 31, 2020 balance sheet?

$4,200,000 $1,440,000 + $1,710,000 + $1,050,000 = $4,200,000.

Jim Yount, M.D., keeps his accounting records on the cash basis. During 2021, Dr. Yount collected $390,000 from his patients. At December 31, 2020, Dr. Yount had accounts receivable of $40,000. At December 31, 2021, Dr. Yount had accounts receivable of $70,000 and unearned revenue of $10,000. On the accrual basis, how much was Dr. Yount's patient service revenue for 2021?

$410,000 $390,000 - $40,000 + $70,000 - $10,000 = $410,000.

Olsen Company paid or collected during 2020 the following items: Insurance premiums paid$30,800 Interest collected69,800 Salaries paid280,400 The following balances have been excerpted from Olsen's balance sheets: December 31, 2020December 31, 2019 Prepaid insurance$2,400$3,000 Interest receivable7,4005,800 Salaries and wages payable24,60021,200 The interest revenue on the income statement for 2020 was

$69,800 - $5,800 + $7,400 = $71,400.

Slater Company uses the cash basis of accounting. Slater Company collected $950,000 from its customers during 2015. Customers owed Slater $150,000 of accounts receivable at the beginning of 2015, and $190,000 of accounts receivable at the end of 2015. What is Slater's sales revenue for 2015 under the accrual basis of accounting?

$950,000 + (190,000 - 140,000) Under accrual accounting revenue is recorded when earned so A/R would be included in revenue.

On September 1, 2020, Lowe Co. issued a note payable to National Bank in the amount of $1,500,000, bearing interest at 9%, and payable in three equal annual principal payments of $500,000. On this date, the bank's prime rate was 8%. The first payment for interest and principal was made on September 1, 2021. At December 31, 2021, Lowe should record accrued interest payable of

($1,500,000 - $500,000) × 9% × 4/12 = $30,000

Presented below are data for Bandkok Corp. 20202021 Assets, January 1$8,850$9,720 Liabilities, January 14,860? Stockholders' Equity, Jan. 1?? Dividends1,6201,215 Common Stock1,4581,296 Stockholders' Equity, Dec. 31?? Net Income1,9201,296 Stockholders' Equity at January 1, 2021 is

($8,850 - $4,860) + $1,920 - $1,620 = $4,290.

A trial balance may prove that debits and credits are equal, but

-a transaction could have been entered twice. -an amount could be entered in the wrong account. -a transaction could have been omitted.

Adjusting entries that should be reversed include

-all accrued expenses. -those that debit an asset or credit a liability. -all accrued revenues.

Factors that shape an accounting information system include the

-nature of the business. -volume of data to be handled. -size of the firm.

A trial balance

-supplies a listing of open accounts and their balances that are used in preparing financial statements. -is normally prepared three times in the accounting cycle. -proves that debits and credits are equal in the ledger.

Adjusting entries are made

-to match the consumption of prepaid assets against current revenues. -to record accrued expenses. -to record estimated items, such as depreciation.

Which of the following is a reason why companies use special journals?

-to reduce the time needed to complete the various -accounting activities -to provide for a chronological listing of similar transactions -to divide the accounting task

At December 31, 2020, Sue's Boutique had 1,500 gift certificates outstanding, which had been sold to customers during 2020 for $60 each. Sue's operates on a gross profit of 60% of its sales. What amount of revenue pertaining to the 1,500 outstanding gift certificates should be deferred at December 31, 2020?

1,500 × $60 = $90,000.

What is meant by liquidity? Rank the following items according to their liquidity (from most to least): Goodwill Inventory Short-term investment Building Accounts receivable

1. Short-term investment 2. Accounts receivable 3. Inventory 4. Building 5. Goodwill

Packard Corporation reports the following information: Net cash provided by operating activities$335,000 Average current liabilities150,000 Average long-term liabilities100,000 Dividends declared60,000 Capital expenditures110,000 Payments of debt35,000 Packard's cash debt coverage is

1.34. $335,000 ÷ ($150,000 + $100,000) = 1.34.

Adjustments are often prepared

after the balance sheet date, but dated as of the balance sheet date.

Tate Company purchased equipment on November 1, 2020 and gave a 3-month, 9% note with a face value of $80,000. The December 31, 2020 adjusting entry is

2/12 × 9% × $80,000 = $1,200.

Which of the following would not be a correct form for an adjusting entry?

A debit to an asset and a credit to a liability

Which of the following is not a part of generally accepted accounting principles?

AICPA Research Analysis

Which of the following is not a major challenge facing the accounting profession?

Accounting for hard assets

Which of the following assets is reported at net realizable value on the balance sheet?

Accounts receivable

​Which of the following is a measurement method that reflects historical value?

Acquisition cost

________ ratios measure how effectively a company uses its assets.

Activity

When converting from cash-basis to accrual-basis accounting, which of the following adjustments should be made to cash receipts from customers to determine accrual-basis service revenue?

Add ending accounts receivable.

Which of the following is a permanent account?

Allowance for Doubtful Accounts

Which of the following organizations has not published accounting standards?

American Institute of Certified Private Accountants

According to the FASB's conceptual framework, which of the following is an essential characteristic of an asset?

An asset provides future benefits.

Which of the following is a requirement for an accounting principle to be called "generally accepted"?

An authoritative accounting rule-making body has established it and it has been accepted because of its universal application.

Which of the following is not considered a component of generally accepted accounting principles?

Articles published in CPA journals

Which accounts are increased by using debits?

Assets, Cost of Goods Sold, Expenses

Which of the following is not a basic element of financial statements?

Balance sheet

Which of the following is a real (permanent) account?

Both Goodwill and Accounts Receivable

Which of the following would typically be recorded as an intangible asset with a finite useful life?

Franchises

The stockholders' equity section is usually divided into what three parts?

Capital stock, additional paid-in capital, retained earnings

What would be an advantage of having all countries adopt and follow the same accounting standards?

Comparability and lower preparation costs

According to the FASB's conceptual framework, which of the following enhances information that is relevant and faithfully represented?

Comparability.

Mune Company recorded journal entries for the declaration of $250,000 of dividends, the $160,000 increase in accounts receivable for services rendered, and the purchase of equipment for $105,000. What net effect do these entries have on stockholders' equity?

Decrease of $90,000 $250,000 - $160,000 = $90,000.

Which of the following is not an acceptable major asset classification?

Deferred charges

Year-end net assets would be overstated and current expenses would be understated as a result of failure to record which of the following adjusting entries?

Depreciation of fixed assets Use of supplies Expiration of prepaid insurance

Which of the following is an ethical concern of accountants?

Earnings manipulation

Which of the following is not a user of financial reports?

Employees

At the end of 2020, Drew Company made four adjusting entries for the following items: 1. Depreciation expense, $25,000. 2. Expired insurance, $2,200 (originally recorded as prepaid insurance.) 3. Interest payable, $6,000. 4. Rent receivable, $10,000. In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is (are)

Entry No. 3 and No. 4.

Which of the following basic elements of financial statements is more associated with the balance sheet than the income statement?

Equity

Level 3 of fair value hierarchy measures are based on

Estimates

Which of the following elements is not recognized on the balance sheet?

Expense

Recognition of amortization of an intangible asset illustrates which principle of accounting?

Expense recognition

Which of the following is commonly referred to as the matching principle?

Expense recognition principle

The most significant current source of generally accepted accounting principles is the

FASB.

An asset is valued by the price that would be received by selling it in an orderly transaction between market participants on the date of measurement. Which measurement method is being used in this case?

Fair value

According to the FASB's conceptual framework, neutrality is an ingredient of the fundamental quality(ies) of:

Faithful Representation

Neutrality is an ingredient of which fundamental quality of information?

Faithful representation

Which accounting assumption or principle is being violated if a company is a party to major litigation that it may lose and decides not to include the information in the financial statements because it may have a negative impact on the company's stock price?

Full disclosure

Which of the following is not true of generally accepted accounting principles?

GAAP does not have substantial authoritative support.

Which of the following is a general limitation of "general purpose financial statements"?

General purpose financial statements may not be the most informative for a specific enterprise.

Which accounting assumption or principle is being violated if a company reports its corporate headquarter building at its fair value on the balance sheet?

Historical cost

Which of the following statements concerning the cost-benefit relationship is not true?

If needed by financial statement users, management should gather information not included in the financial statements that would not otherwise be gathered for internal use.

According to the FASB's conceptual framework, the calculation of comprehensive income includes which of the following?

Income from Continuing Operations

Which of the following is amortized over its useful life and reported at adjusted historical cost?

Intangible asset with finite useful lives

Which of the following is true regarding the general journal?

It helps prevent errors.

Which of the following is not a principal purpose of an unadjusted trial balance?

It proves that debits and credits were properly entered in the ledger accounts.

Which of the following is not true concerning a conceptual framework in accounting?

It should be based on fundamental truths that are derived from the laws of nature.

An accounting record into which the essential facts and figures in connection with all transactions are first recorded is called the

Journal

Which of the following is a probable future sacrifice of economic benefits arising from present obligations as a result of past events?

Liability

A decrease in net assets arising from peripheral or incidental transactions is called a(n)

Loss

Which of the following is true regarding the comparison of managerial and financial accounting?

Managerial accounting need not follow generally accepted accountingprinciples (GAAP), while financial accounting must follow them.

A balance sheet account that is usually reported at fair value is

Marketable Securities.

Which of the following is not a general category of shareholders' equity?

Net income

According to the FASB's conceptual framework, what does the concept of faithful representation include?

Neutrality

Which of the following is an ingredient of faithful representation?

Neutrality

In the conceptual framework for financial reporting, what provides "the why"--the purpose of accounting?

Objective of financial reporting

The stated principles of the AICPA Code of Professional Conduct do not include

Optimism.

Which of the following organizations have committed to develop high-quality, compatible accounting standards that could be used for domestic and cross-border financial reporting?

The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB)

What is the relationship between the Securities and Exchange Commission and accounting standard setting in the United States?

The SEC has a mandate to establish accounting standards for enterprises under its jurisdiction.

Which of the following organizations has legal authority to prescribe accounting principles and reporting practices for all corporations issuing publicly traded securities within the U.S. capital markets?

The Securities and Exchange Commission

Which financial statement is also called the statement of financial position?

The balance sheet

The Michael Company has an accounts receivable account in its general ledger, and it also maintains a subsidiary ledger that contains an individual account for each of its customers who buys merchandise on credit. Which of the following statements about the general ledger account is not true?

The general ledger account is also called a contra account.

What is a purpose of having a conceptual framework?

To enable the profession to more quickly solve emerging practical problems and to provide a foundation from which to build more useful standards

Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles?

To match the costs of production with revenues as recognized

Which of the following statements best describes the purpose of closing entries?

To reduce the balances of revenue and expense accounts to zero so that they may be used to accumulate the revenues and expenses of the next period

Which of the following is a current asset?

Trade installment receivables normally collectible in 18 months.

When should an expenditure be recorded as an asset rather than an expense?

When future benefit exists

A characteristic of generally accepted accounting principles includes

a common set of standards and principles.

Financial information exhibits the characteristic of consistency when

a company applies the same accounting treatment to similar events, from period to period.

In preparing a statement of changes in shareholders' equity, the company includes land given to a shareholder as a dividend. This transaction is included in the statement because it represents

a distribution to a shareholder that decreases equity.

Unearned revenue on the books of one company is likely to be

a prepaid expense on the books of the company that made the advance payment.

Recording the adjusting entry for depreciation has the same effect as recording the adjusting entry for

a prepaid expense.

A _______ would not appear on the balance sheet

a realized gain on the sale of a equipment

If the trial balance does not balance and the difference between debits and credits is evenly divisible by 9, there is a good chance that

a transposition or a slide has occurred.

Which of the following is considered a non-monetary assets?

accounts receivable.

When revenue or expense has been recognized or incurred but not yet collected or paid, it is normally called a(n) ________ revenue or expense.

accrued

The quality of information that means the numbers and descriptions match what really existed or happened is

faithful representation.

The debit and credit analysis of a transaction normally takes place

before an entry is recorded in a journal.

A subsequent event is an event that occurs

between the end of the accounting period and the date the annual report is issued.

Long-term investments do NOT include

bonds payable.

General-purpose financial statements are the product of

financial accounting.

Big-Mouth Frog Corporation had revenues of $330,000, expenses of $200,000, and dividends of $45,000. When Income Summary is closed to Retained Earnings, the amount of the debit or credit to Retained Earnings is a

credit of $130,000. $330,000 - $200,000 = $130,000.

The ability of a company to adapt its resources to create change and react to change is called

financial flexibility.

An example of an item which is not an element of working capital is

goodwill.

Cash equivalents are securities that

have maturity dates of three months or less.

Financial accounting standard-setting in the United States

can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.

If ending accounts receivable exceeds the beginning accounts receivable,

cash collections during the year are less than the amount of revenue recognized.

Stockholders' equity is not affected by all

cash receipts.

The measurement principle includes the

historical cost principle and the fair value principle.

Valuing assets at liquidation values rather than cost is inconsistent with the

historical cost principle.

The four major financial statements of a corporation consist of the

income statement, balance sheet, statement of cash flows, and statement of changes in shareholders' equity.

Lopez Company received $18,000 on April 1, 2020 for one year's rent in advance and recorded the transaction with a credit to a nominal account. The December 31, 2020 adjusting entry is

debit Rent Revenue and credit Unearned Rent Revenue, $4,500. debit Unearned Rent Revenue and credit Rent Revenue, $13,500. 3/12 × $18,000 = $4,500.

A negative balance for retained earnings due to cumulative net losses is called a(n)

deficit.

Generally accepted accounting principles

derive their credibility and authority from general recognition and acceptance by the accounting profession.

Notes to financial statements provide

discussions that further explain items shown in the financial statements.

​A deficit occurs when a company's

dividends and cumulative losses are greater than cumulative net income.

In terms of debits and credits, which types of accounts have the same (debit or credit) normal balances?

dividends, expenses, assets

Which of the following is not a characteristics of generally accepted accounting principles?

each principle is approved by the SEC.

Which of the following is an accrued expense?

employees' salaries

Primary users for general-purpose financial statements do NOT include

employees.

Which of the following is an economic resource that should be depreciated over the accounting periods estimated to be benefited?

equipment purchased for use in the business operations

The residual interest in a company's assets after deducting liabilities is

equity.

Receivables are valued based on their

estimated amount collectible.

An adjusting entry to record an accrued expense involves a debit to a(n)

expense account and a credit to a liability account.

During the first year of Wilkinson Co.'s operations, all purchases were recorded as assets. Supplies in the amount of $28,800 were purchased. Actual year-end supplies amounted to $6,600. The adjusting entry for store supplies will

increase expenses by $22,200. $28,800 - $6,600 = $22,200.

The information provided by financial reporting pertains to

individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers.

Property, plant, and equipment section of the balance sheet does NOT include

intangible assets

A comparison of a company's performance with that of its competitors is known as

intercompany comparison.

The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in

inventory back into cash, or 12 months, whichever is longer.

The current assets section of the balance sheet should include

inventory.

At the time a company prepays a cost,

it debits an asset account to show the service or benefit it will receive in the future.

Accrual accounting is used because

it provides a better indication of a company's ability to generate cash flows over time than the cash basis.

The process of identifying, measuring, analyzing, and communicating financial information needed by management to plan, evaluate, and control an organization's operations is called

managerial accounting.

Level 1 of fair value hierarchy measures are based on

market prices for identical assets.

The accounting principle of expense recognition is best demonstrated by

matching effort (expense) with accomplishment (revenue).

Intangible assets do NOT include

natural resources.

The worksheet for Sharko Co. consisted of five pairs of debit and credit columns. The dollar amount of one item appeared in both the credit column of the income statement section and the debit column of the balance sheet section. That item is

net loss for the period.

An accrued revenue can best be described as an amount

not collected and currently matched with expenses.

A prepaid expense can best be described as an amount

paid and not currently matched with revenues.

The measurement of an asset's value based on the discounted future cash flows relating to the asset is

present value.

An adjusted trial balance

proves the equality of the debit balances and credit balances of ledger accounts after all adjustments have been made.

The primary reason that financial accounting and managerial accounting have somewhat different objectives is because they

provide information for different decisions

The two fundamental qualities that make accounting information useful for decision making are

relevance and faithful representation.

The primary attribute of all assets is

service potential.

The accountant failed to make the adjusting entry to record the amount of interest owed on a note to the bank at the end of the year. This error would cause an overstatement of

shareholders' equity.

The financial statements most frequently provided do NOT include the

statement of retained earnings.

Which of the following is not a reason why a company first prepares a worksheet?

substitute for the trial balance

The difference between the accounting process and the accounting cycle is

the accounting cycle represents the steps taken to accomplish the accounting process.

What financial statement is considered the cornerstone of financial reporting?

the balance sheet

What are the different components of an accounting system?

the input source documents the framework for operation of the system the output reports

Which of the following is not an example of subsequent events that would be disclosed in the footnotes to the financial statements?

the write off of a significant uncollectible account.

When a corporation pays a note payable and interest,

they will debit notes payable and interest expense.

Allowing firms to estimate rather than physically count inventory at interim (quarterly) periods is an example of a trade-off between

timeliness and verifiability.

When a revenue is collected and recorded in advance, it is normally accounted for as a(n) ________ revenue.

unearned

Reversing entries are

useful in simplifying the recording of transactions in the next accounting period.