Study.com Financial Accounting Practice Test

Regulator

Identify the person that reviews the audit report of a company to see if the company is being compliant with the law? a. Auditor b. Adjustor c. Examiner d. Regulator

$480,000

If a company's net sales are $750,000 and its cost of sales is $270,000, what is the company's gross income? a. $1,020,000 b. $750,000 c. $480,000 d. $500,000

Banker's year

The 360-day year that is used by the majority of banks and other lending sources for simplicity in the calculation of interest is called which of the following? a. Banker's year b. Basic year c. Interest year d. Finance year e. Physical year

2

The double-entry accounting system states that for each and every transaction that a company has _____ or more accounts will be affected. a. 1 b. 2 c. 3 d. 4 e. 5

a. The time line of this activity can and will affect when revenue and expenses are recognized. ____________ Explanation: The first step an auditor takes in a financial audit involves examining the way that financial information is given to the accounting department from other departments. They look for timeliness in getting documents like receipts, invoices, and bank statements from each individual department to the accounting department in order to understand when revenue and expenses are recognized.

The first step in the audit process requires that an auditor look at the manner in which financial documents are transferred to the accounting department. Why is this necessary? a. The time line of this activity can and will affect when revenue and expenses are recognized. b. The time line of this activity can and will affect when employees are recognized. c. The time line of this activity can and will affect when ONLY expenses is recognized. d. The time line of this activity can and will affect when ONLY revenue is recognized.

financial statement

The goal of the _____ is to provide financial data that is so accurate and concise that it can paint a vivid picture of how well a company is doing at a specific point in time. a. accrual method b. financial statement c. matching principle d. revenue recognition concept e. Revenue Recognition Concept

c. Activities that impact the long-term liabilities (items that a company owes) and shareholders' equity

What are financing activities? a. The main source of cash for a company and arise out of regular business operations b. Sources and uses of cash as a result of three activities c. Activities that impact the long-term liabilities (items that a company owes) and shareholders' equity d. Activities that relate to increases and decreases in long-term assets which are used by the company over a period of time to generate revenue

2002

What year was the Sarbanes-Oxley Act enacted?

b. At the end of the accounting period _____________ Explanation: Temporary accounts are accounts whose balances are zeroed out at the end of each accounting period. When a new accounting period opens, these accounts are used again and will accrue balances until the accounting period comes to an end, at which time the accounts will be closed to permanent accounts and once again have a zero balance.

When are the balances in temporary accounts zeroed out? a. At the beginning of the period b. At the end of the accounting period c. Annually d. Monthly

$85,000

A company sold $100,000 in product that cost $25,000 to make and distribute, including all overhead and admin. It started with retained earnings of $10,000 and declared no dividends. What is the ending retained earnings? a. $85,000 b. $110,000 c. $75,000 d. $10,000

Investment income outweighing loan payments

A healthy use of investments and loans would involve: a. Investment income outweighing loan payments b. Loan payments outweighing investment income c. Investment income being equal to loan payments d. Loan income being equal to investment payments

Operating activities

An accountant is converting a cash flow statement from direct to indirect. What section(s) need to be converted? a. Operating activities b. Financial activities c. Investing activities d. All need to be converted

at least 1 __________ Explanation: Most of the time, potential creditors and investors want to see the quick ratio be at least 1, but a slightly lower figure that represents the amount of liquid assets that are available to cover liabilities is generally considered acceptable.

As a general rule, companies are able to meet their short-term liabilities if they have a quick ratio of _____. a. at least 1 b. lower than 0 c. at least 5 d. lower than 1

a reporting error

Ben, a company accountant, accidentally reported $5300 of earnings as $3500 on a company financial statement. Ben's mistake is an example of _____.

$18,000 in revenue. $1,350 in liabilities. ____________________ Explanation: Bob has 30 * $150 + 45 * $300 = $18,000 in revenue and $18,000 * 0.075 = $1,350 in liabilities.

Bob owns a bicycle shop. In 2016, Bob sold 75 bicycles. 30 of the bicycles were sold for $150, while 45 of the bicycles were sold for $300. All of the bicycles were subject to 7.5% sales tax. What are Bob's revenue and liabilities for 2016? a. $18,000 in revenue. $1,350 in liabilities. b. $19,350 in revenue. $0 in liabilities. c. $17,500 in revenue. $1,850 in liabilities. d. $19,000 in revenue. $350 in liabilities.

capitalizing

Delineating a purchase as an asset of the company is referred to as _____. a. capitalizing b. expensing c. returning d. taxing

Information User

Djokovic is the Chief Information Officer for InfoTech Inc. Murray is the Chief Lending Officer at the Bank where InfoTech has a large bank loan. Which statement is true for both Djokovic and Murray, in connection with InfoTech? a. External User b. Information User c. Internal User d. Supplier e. Investor

Expensing

Marking an item against the profits of a company at the time that it is purchased is known as which one of the following? a. Capitalizing b. Expensing c. Returning d. Taxing e. None of the answers are correct.

The credit, which is $1200.00, will go to the accounts receivable. _______________ Explanation: Since Fit Company Ltd uses a double-entry accounting system, it must have a credit that equals that debit. For this instance, the credit, which is $1200.00, will go to the accounts receivable.

Mary ordered a bicycle from Fit Company Ltd and was asked to make a deposit. One month later, when the bicycle was delivered to Mary, she paid an amount of $1200 which was due to Fit Company Ltd. Which of the following is correct if Fit Company Ltd uses a double-entry accounting system? a. Mary bought the bicycle for $1500. b. For this transaction, only one entry of $1200 was added to the account balance. c. The credit, which is $1200.00, will go to the accounts receivable. d. Since the amount was paid out of office, it cannot be recorded into the ledger.

Estimating doubtful expense and periodically writing them off as bad debt

How do companies generally handle uncollectible accounts? a. Estimating doubtful expense and periodically writing them off as bad debt b. Annually writing off bad debt c. Getting an attestation from the company that the debt will not be paid and removing it from the balance d. Annually removing uncollectible amounts from the balance owed e. Equity Accounts

Base line item / comparing line item

How do you calculate horizontal analysis? a. Comparing line item / base line item b. Comparing line item x base line item c. Base line item / comparing line item d. Base line item x comparing line item

c. Revenue

Rachel's Interior Design Firm has several different accounts used to track their finances, which is common in business. Rachel's Interior Design Firm receives a check from Susie Johnson for interior design work the company performed at Susie's home. In which of the accounts listed should this money be recorded? a. Asset b. Services Rendered c. Revenue d. Expense

Money a company is owed.

What are accounts receivable? a. Money a company owes to others. b. Cash on hand. c. Money a company is owed. d. Total revenues.

Items owned by the business

What are assets? a. Items loaned to the business b. Items owned by the business c. Obligations due d. The cost of doing business

Internal Controls

What are rules and regulations that are put into place to guard assets owned by a person or a company? a. Safeguards b. Internal Controls c. Compliance d. Auditors e. Managers

GAAP

What are the standards that all financial reports are created by? a. CAAP b. IRS c. GAAP d. IASB

Simplified it

What has technology done to the accounting process?

Paying the owner or owners of the company.

What is a dividend?

The amount of money that a company makes that it chooses to give back to its shareholders.

What is a dividend?

They can allow anyone to buy or sell shares of ownership.

What is an advantage of being a C corporations? a. They can allow anyone to buy or sell shares of ownership. b. They provide unlimited liability. c. It allows only one person to maintain control over the corporation. d. They allow for triple taxation

Accrued Revenue

What is money that is earned in one accounting period but not received until another? a. Accrued Revenue b. Accrued Expense c. Deferred Revenue d. Deferred Expense e. Equity

Cost

What is the acquisition price of inventory called?

A Statement of Cash Flows shows how much money went in and out of the company; an Income Statement explains if the company made money or not.

What is the difference between a Statement of Cash Flows and Income Statement?

Current assets/current liabilities

What is the formula for the current ratio?

The amount of time that balances accrue in the accounts.

What is the main difference between real accounts and nominal accounts?

Accrual

What is the most common accounting method used by businesses?

Cash

Whenever a payment is made on an Accounts Receivable account, what account balance increases? a. Accounts Receivable b. Revenue c. Sales d. Cash e. Inventory

The collectability of the receivables

The degree of discount a factor will demand for purchase of receivables is largely based upon which one of the following? a. The collectability of the receivables b. The prevailing interest rates c. The size of the receivables d. The value of the receivables as collateral

Cash Basis ________________ Explanation: The literal definition of cash-basis accounting is the accounting system that recognizes cash when it is received and bills when they are paid.

The method of accounting that recognizes revenue when money is received and expenses when bills are paid is called: a. Managerial Accounting b. Accrual Basis c. Forensic Accounting d. Cash Basis e. Income Basis

PCAOB _______ Explanation: Another organization that was formed by the SEC is the Public Company Accounting Oversight Board, which is also known as the PCAOB. The PCAOB oversees the audits of public companies.

The organization that oversees the audits of public companies is called the _____. a. FASB b. SEC c. PCAOB d. GAAP

Receivables

The periodic inventory system uses which account to record the acquisition of inventory related items? a. Receivables b. Purchases c. Sales d. Payables

Sales and purchases

Which two things are required for an Accounts Receivable?

Periodic

Which type of inventory system requires closing entries? a. Perpetual b. Periodic c. Rotating d. Sporadic

periodic

Which type of inventory system requires closing entries? a. Perpetual b. Periodic c. Rotating d.Sporadic

To produce revenue for a business

Why are operating assets acquired?

Debit

Which of the following is an entry made on the left side of an account that increases the balance in an asset account and decreases the balance in liability and equity accounts? a. Debit b. Credit c. Cash d. Accounts payable

Accidental

A loss that occurs from honest mistakes being made by individuals is called a(n) _____ loss.

trial balance

Before you can complete the adjusted trial balance, you first have to create the _____.

All answers are correct

GAAP sets the standards for the creation of what? a. Income Statement b. Statement of Retained Earnings c. Balance Sheet d. All answers are correct

Sales returns and allowances

Merchandise that has been returned by a customer would fall under which category? a. Sales returns and allowances b. Purchase returns and allowances c. Accounts receivables d. Cost of goods sold

dividends

Money that is paid to investors as a return on their investments is called _____.

It should be capitalized.

Rachel works for an electronics company. She purchases a device for testing the electronics. What should be done with this purchase? a. It can be capitalized or expensed. b. It should be capitalized. c. It should be carried over. d. It should be expensed.

It is the cost of borrowing money.

Sandra is a CEO of a small start-up who has to borrow money from a bank. Why will high interest rates likely mean that she will have to return more money? a. It is the amount of taxes she has to pay. b. It is the amount of money she has in the bank. c. It is the cost of borrowing money. d. It is an administrative cost incurred by the bank.

Closing the income summary account

Suzie is an accountant making a debit entry to the income summary account and a credit entry to the retained earnings account. What is she doing? a. Creating a permanent account b. Opening the income summary account c. Creating a REID account d. Closing the income summary account

Suzie pays her employees on a biweekly basis; this week, the pay period overlaps two financial quarters.

Suzie's accountant has recorded an accrued expense, what has likely happened? a. Suzie pays her employees on a biweekly basis; this week, the pay period overlaps two financial quarters. b. Suzie pays her employees with cash so she does not have to record the expense, but her accountant recorded it anyway. c. Suzie paid her insurance bill one year in advance. d. Suzie paid for her supplies 60 days after the bill was due.

journal (or original book of entry)

The book that contains every single transaction that has occurred in a business and is recorded in chronological order is called a _____. a. chart of accounts b. ledger c. journal d. listing

par value

Common stock is typically stated at _____. a. appraised value b. fair market value c. par value d. sale value

$5,600

Given that an asset cost $36,000 with a useful life of 9 years, calculate the depreciation expense in year 3, using the sum of years' digits depreciation method. a. $4,000 b. $2,400 c. $5,600 d. $7,200

10

How many basic accounting principles make up GAAP?

1931

In what year was the Securities and Exchange Commission created? a. 1929 b. 1934 c. 1931 d. 1932 e. 1912

adjusted _______________________ Explanation: Adjusting entries are journal entries made on the last day of the accounting period. These entries bring the balances of specific accounts up to date and make sure that all account balances conform to the principles of the accrual basis accounting method.

Some company accounts need to be _____ in order to meet the requirements of the accrual basis accounting method. a. moved b. hidden c. adjusted d. combined

They are owed money by customers

A company has high net income but low cash flow. What may be one reason for this? a. They are owed money by customers b. They have purchased a lot of real estate c. They have a lot of inventory d. All are possible reasons

0.32

Vandox Company Ltd is a company looking to secure a loan with a commercial bank. The following details are available: 1. Interest expense = $58,000 2. Earnings = $215,000 3. Total liabilities = $143,000 4. Total assets = $450,000 5. Total equity = $29,000 Calculate the debt ratio. a. 0.32 b. 0.67 c. 0.41 d. 12.9

Long term, safe, coupon interest payments

What are the characteristics of bonds? a. Long term, safe, coupon interest payments b. Short term, safe, coupon interest payments c. Risky, long term, voting rights d. Risky, short term, dividends

Profits

What does a silent partner (hopefully) receive from a business? a. Input b. Capital c. Profits d. Shares in the company to sell

A long term liability is an obligation owed for more than a year.

What is a long term liability? a. A long term liability is an obligation owed in less than a year. b. A long term liability is an obligation owed for more than a year. c. A long term liability is an expense owed for more than a year. d. A long term liability is an obligation owned.

Certificate of deposit

Which of the following is a cash equivalent? a. Certificate of deposit b. Cashier's check c. Personal check d. Real estate

Operating activities

Choosing to reinvest profits into new equipment for your company as opposed to paying out dividends to stockholders is an example of which management method? a. Operating activities b. Financial activities c. Reinvestment activities d. Long-term activities

Current ratio

Which ratio has a baseline for comparing ratios? a. Gross profit margin b. Current ratio c. Asset turnover ratio d. Debt ratio

85.71%

A company has $175,000 in total assets and $150,000 in total liabilities. What is the company's debt ratio? a. 85.71% b. 116.68% c. 83.2% d. 71.42%

debit and a credit

A complete journal entry will always have both a _____. a. asset and a liability b. debit and a credit c. revenue and a expense d. revenue and a liability

Asset turnover ratio

A department manager at a local supermarket realizes that a particular brand of cookies is being retained in inventory for hundreds of days, while a competitor market is able to sell the same brand in a fraction of the time. She wants to analyze the problem further, and determine how well her company is using its assets to generate sales revenue. What financial ratio would she use? a. Asset turnover ratio b. Inventory turnover ratio c. Days sales in inventory ratio d. None of these answer choices are correct

Note receivable

A formal promise in writing to pay a specific amount of money on a specified date or dates made between a borrower and a lender is called which of the following? a. Promise note b. Note receivable c. Loan d. Equity

gain

A tax refund for a company is a _____ contingency. a. cost benefit b. gain c. improved cost d. liability

Liability, because utility expenses are considered a liability in accounting.

ABC Piping Corporation has a warehouse where they store their pipes before they get sold and shipped. Susie is an accountant for ABC, and she recently received a bill from the utility company for the utility expenses of running the warehouse. In which type of account should Susie record this in and why? a. Liability, because utility expenses are considered a liability in accounting. b. Asset, because though there is a cost associated with it, the cost is tied to the warehouse, which is an asset. c. Owner's Equity, because the warehouse is part of the equity that the owner has in the company. d. Revenue, because the utility expense is related to the warehouse which is used to store items that generate revenue.

internal events

Account adjustments are a result of _____. a. external events b. internal events c. income statements d. liability statements e. Net Income

interest coverage

An alternative financial view of a company is provided by the _____ ratio, comparing earnings related to interest payments, or a company's ability to pay interest payments. a. interest coverage b. debt-to-equity c. debt d. loan amortization

Sum of years' digits depreciation

An asset has drastically decreasing production as it becomes older. Which depreciation method will be the most suitable one for such an asset? a. Sum of years' digits depreciation b. Straight - line depreciation c. Double - declining balance depreciation d. Units of production depreciation

2.61 __________ Explanation: The asset turnover ratio would be 2.61 ($750,000 / ($225,000 + $350,000) / 2), which means that the business generates $2.61 of sales for every $1.00 of property, plant, and equipment assets.

Calculate the asset turnover ratio if net sales = $750,000; last year's property, plant, and equipment assets = $225,000 and this year's property, plant, and equipment assets = $350,000. a. 2.14 b. 2.61 c. 3.33 d. 3.50

$90,000

Calculate the total cost of the plant asset given the following information: Cost = $75,000 Freight = $5,000 Installation Costs = $10,000 Annual Insurance = $3,000 a. $80,000 b. $83,000 c. $90,000 d. $93,000

Audit Report

GAAP standards require that a(n) _____ be included in the notes to the financial statements. a. Employee Report b. Audit Report c. Owner's Statement d. Manager's Report

a. Multiplying the historic warranty expense percentage by the total amount of sales of the lot in question

How do you find the historic warranty expense? a. Multiplying the historic warranty expense percentage by the total amount of sales of the lot in question b. Dividing the historic warranty expense percentage by total goods of the lot in question c. Subtracting the historic warranty expense percentage from total goods of the lot in question d. Multiplying the historic warranty expense percentage by total goods of the lot in question

Report the loss on the income statement as an extraordinary item

How do you report a loss at the early retirement of a bond? a. Report the loss on the income statement as an expense. b. Report the loss on the income statement as an extraordinary item c. Report the loss on the balance sheet as an expense. d. Report the loss on the balance sheet as an extraordinary item.

By breaking down the job into smaller parts, each performed by a different individual.

How has technology increased efficiency by using separation of duties? a. By the ability to scan, sort, compose, and save documents on a portable drive allowing for easier transfer. b. By breaking down the job into smaller parts, each performed by a different individual. c. By creating cash registers and computers. d. By computer programs designed to catch entry errors. e. All the answers are correct

As equipment.

How is the purchase of a computer normally recorded? a. As an expense. b. As mortgage payable. c. As cash. d. As equipment.

liquidity

How quickly something can be turned into cash refers to its _____. a. liquidity b. value c. worth d. trade In Value

Cash inflow __________ Explanation: Issuing stock represents a cash inflow as corporations are seeking financing.

How will a stock issuance be categorized on a statement of cash flow? a. Cash inflow b. Cash outflow c. Non-cash transaction d. Disclosure

With detailed job descriptions

How would a company implement internal controls focused on employee efficiency? a. With financial statements b. With payroll journals c. With top-down communication d. With detailed job descriptions

It would decrease retained earnings by the amount of the payment

How would a payment to shareholders affect retained earnings?

$3.85 dollars per share

If a business has a net profit of $2.5 million dollars and 650,000 shares of stock, what is its earning per share? a. $3.85 dollars per share b. $2.6 dollars per share c. $6.50 per share d. $0.26 dollars per share

$480,000 _________ Explanation: Gross income, which can also be referred to as gross margin or gross profit, is calculated by subtracting the cost of sales from the net sales. The company's gross income in this question is $750,000 minus $270,000, or $480,000.

If a company's net sales are $750,000 and its cost of sales is $270,000, what is the company's gross income? a. $1,020,000 b. $750,000 c. $480,000 d. $500,000

All of these are correct

If an error was made in counting inventory that leads to the amount of reported inventory being greater than what is actually there, it will lead to _____ a. overstated profits for the current period. b. no change in profits if the error is corrected in the current period. c. reduced profits in the future when the error is corrected. d. All of these are correct

Statement of Retained Earnings

If an investor wanted to see how much money was maintained and reinvested in the company, which financial statement would give that information? a. Income statement b. Statement of Retained Earnings c. Balance Sheet d. Statement of Cash Flow e. The Dow Jones Industrial Average

$2,000 ______ Explanation: The cash received would be $3,000 (1,000 shares x $3.00 per share) and the common shares account must be relieved at its average cost of $5,000 (1,000 shares x $5.00 per share). Therefore, $2,000 would be credited to the contributed surplus-repurchased shares account.

If the average cost of a share is $5.00 and the company decides to repurchase 1,000 shares at a cost of $3.00 per share, what would the entry to the contributed surplus-repurchased shares account be? a. $1,000 b. $2,000 c. $3,000 d. $5,000

Stockholder's Equity

In which account is equity that comes from the sale of stocks or bonds categorized? a. Asset b. Liability c. Owner's Equity d. Stockholder's Equity

Step 1 ------------ Explanation: Calculating the new cash balance is the first step in constructing a statement of cash flow. Finding the difference between annual beginning and ending cash, will provide the new cash balance for the next year.

In which step would you calculate a new cash balance for the statement of cash flow? a. Step 1 b. Step 2 c. Step 5 d. Step 4

Inventory

Josh makes an inventory purchase for his company. It is worth $2,000, and he pays in cash. Based on this purchase, which account should be debited? a. Cash b. Accounts payable c. Accounts receivable d. Inventory e. Equity

b. Discounts on other sale items to quickly make space for the bow ties ________________ Explanation: Shortage costs are the costs that a business incurs when they run out of stock. Discounting sale items to make space for a needed item, such as blue bow ties, would NOT result in a shortage cost.

Leno's Tux Boutique is in dire need of additional blue bow ties for the start of wedding season. He has to quickly order more for his inventory. Which of the following would NOT incur a shortage cost for the business? a. Additional employees to restock the large order of incoming bow ties b. Discounts on other sale items to quickly make space for the bow ties c. Next-day shipping on 30 dozen bow ties d. The wholesale cost to quickly replenish the inventory of bow ties e. None of the answers are correct

No, because of the economic entity assumption. ___________ Explanation: The economic entity assumption means that any activities of a business must be kept separate from the activities of the business owner.

Michael, the majority shareholder of a company, decided to produce the company's balance sheet whose cash balance included the cash in his own bank account. Would Michael be allowed to do this by GAAP? a. No, because of the revenue recognition principle. b. Yes, because of the full disclosure principle. c. Yes, because of the going concern principle. d. No, because of the economic entity assumption. e. No, because of the economic entity assumption.

deferred revenue

Money that a business has been paid in advance for a service that will be provided later is called _____. a. accrued revenue b. accrued expense c. deferred revenue d. deferred expense

revenue

Money that is brought in as payment for goods or services is called _____. a. revenue b. expense c. liabilities d. accounts payable

expenses

Money that is paid out of a company for items necessary for daily operations is called _____. a. revenue b. expenses c. assets d. accounts receivable

The income statement.

Monica reads in the newspaper that in the year ended December 31, 2015, Profit For Two Inc made $1 million profit. Monica wants to confirm for herself that this is really the case. What financial statement of Profit For Two Inc should Monica read to confirm the newspaper report? a. The income statement. b. The statement of retained earnings. c. The balance sheet. d. The statement of cash flows. e. How much the net assets of the company were at the end of a given period

b. Assets = $100,000, liabilities= $0, and equity=$100,000.

On January 1st, 2017, Catherine invested a cash amount of $100,000 to start her beauty parlor. Determine the asset, liability, and equity value of her beauty parlor as of January 1st, 2017. a. Assets = $0, liabilities= $100,000, and equity=$100,000. b. Assets = $100,000, liabilities= $0, and equity=$100,000. c. Assets = $0, liabilities= $0, and equity=$100,000. d. Assets = $100,000, liabilities= $100,000, and equity=$100,000.

The final step

Reviewing the tax records is what step in the auditing process? a. The final step b. The first step c. Auditors do not review the tax records d. The fifth step

Income tax

Robert received his payslip for the month of May 2017 and the following are mentioned: Salary: $2500 Production Bonus: $100 Sick days: $150 Income tax: $500 Which of the following is NOT a type of compensation? a. Salary b. Sick days c. Income tax d. Bonuses

property

Tax levied by the government, based on the value of real estate, is called ____ tax.

estimated

Taxes paid during the year that are an estimate of the total income tax bill for the year are called ____ taxes. a. estimated b. property c. income d. sales

FASB

The Securities and Exchange Commission created a special group called the _____ to set the guidelines that all accounting professionals must follow.

accrual

The _____ basis of accounting recognized revenue when it is earned and expenses when they are incurred, regardless of when cash is received or paid out. a. accrual b. cash c. distribution d. recognition e. Actual

Reduced processing time

The ability to process payroll in one hour instead of four hours is reflective of which of the following areas of internal control? a. Reduced errors b. Reduced processing time c. Separation of duties d. Reduced paperwork

Financial Statements

The balance sheet is a part of which of the following? a. Income Statement b. Statement of Cash Flows c. Statement of Retained Earnings d. Financial Statements e. All of the answers are correct

Loss on disposal of $5,000

The cost of a luxury car to Best Ltd. is $200,000. Accumulated depreciation for the vehicle amounted to $140,000. Best Ltd offered the car for sale and retained two possible deals: (a) sale to James at $75,000; (b) exchange with Flash Cars Ltd, for a new car costing $80,000, with a trade-in allowance of $55,000 on the luxury car. Determine whether exchanging results in a loss or gain on exchange. Calculate the loss / gain. a. Loss on disposal of $55,000 b. Loss on disposal of $5,000 c. Gain on disposal of $55,000 d. No impact

T-accounts

The visuals that are used to help accounting professionals see the effects of transactions on accounts are called _____. a. Debits b. Credits c. Journals d. T-accounts e. S-Accounts

$6,400 __________ Explanation: 10 year life, so 10 percent for basic depreciation and 20 percent per year for double declining balance method. Year 1 depreciation is $40,000*0.2 = $8,000. Year 2, the value drops to $40,000 - $8,000 = $32,000. The depreciation for year 2 is $32,000*0.2 = $6,400.

Use the double declining balance method to calculate the depreciation amount for year 2 of a printer purchased for $40,000 with a life of 10 years. a. $7,200 b. $8,000 c. $4,000 d. $6,400

17/210

Use the sum of the years' digits method to calculate the depreciation percentage for year 4 for a printing press purchased for $150,000 with a life of 20 years. a. 17/210 b. 17/200 c. 20/210 d. 20/190 e. 20/190

5 ----------- Explanation: The answer is Sales / Average inventory = 2000 * $1.50 / (500 + 700) /2 = 5.

Wayne Company Ltd. makes and sells block-notes. The previous year, Wayne Company Ltd. sold 2000 block-notes at $1.50. The inventory on Jan 1 was $500 and $700 at year end. Calculate the inventory turnover ratio. a. 0.20 b. 5 c. 4 d. 0.40

5 _________ Explanation: The answer is Sales / Average inventory = 2000 * $1.50 / (500 + 700) /2 = 5.

Wayne Company Ltd. makes and sells block-notes. The previous year, Wayne Company Ltd. sold 2000 block-notes at $1.50. The inventory on Jan 1 was $500 and $700 at year end. Calculate the inventory turnover ratio. a. 0.20 b. 5 c. 4 d. 0.40

It is the statement that explains any changes in the cash balance of a company during an accounting period.

What is the statement of cash flows? a. It is the financial statement that tells the net profit or loss of a company for a given time period. b. It is the statement that tells how much of the company's net profit was retained and reinvested in the company. c. It is the statements that lists all the assets, liabilities and owners equity of a company, and the balances in each account. d. It is the statement that explains any changes in the cash balance of a company during an accounting period.

External Audit

What is the term for an examination of a company's financial records by someone that is not an employee of the company? a. Internal Audit b. External Audit c. Auditor d. Financial Statements

Inventory Valuation

What is the total dollar amount that is attributed to the inventory on hand called? a. Cost b. Market c. Inventory Valuation d. Income

Company D, which has run out of cash and is now not able to pay its creditors. ___________ Explanation: The Going Concern Principle is one of the ten basic accounting principles. It refers to the intentions of a company to continue operating well beyond the dates on their financial statements. A company that has run out of cash and isn't able to pay its creditor is clearly out of operation.

Which company, listed on the New York Stock Exchange would definitely be in breach of the Going Concern Principle? a. Company A, which has decided to issue new shares to foreign nationals. b. Company B, which has made a net loss this financial year. c. Company C, which shows a net cash outflow in its statement of cash flows. d. Company D, which has run out of cash and is now not able to pay its creditors. e. Company E, which has run out of cash and is now not able to pay its creditors.

Cash flow statement

Which document is used to show how money moves through a company? a. W2 b. Incorporation statement c. Cash flow statement d. CEO expense report

Ownership limited to 100 people

Which is an aspect of an S corporation? a. Ownership limited to 100 people b. Double taxation c. Unlimited Liability d. Anyone can own shares

Loans can be used to make investments. _________ Explanation: Investments and loans are often used in conjunction with one another.

Which of the following BEST describes the relationship between investments and loans? a. Loans can be used to make investments. b. Investments should always be financed by loans. c. Loans are always used for investments. d. Investments and loans have no relationship.

Expense accounts

Which of the following accounts has balance increases when it is debited and balance decreases when it is credited? a. Expense accounts b. Revenue accounts c. Liability accounts d. Stockholder equity accounts e. Analysis

Control is not affected.

Which of the following describes the effect of bond financing on owner control? a. Control is not affected. b. Control is shared by the bond issuer and holder. c. Control is surrendered to the bond holder. d. Control is split 51/49 between bond issuer and holder. e. Control is given to a third party

Financial Accounting Standards Board

Which of the following entities established the time period principle? a. Financial Accounting Standards Board b. US General Accounting Office c. US Internal Revenue Service d. Fiscal Advisory Board

b. Dividends

Which of the following is NOT a component of stockholder equity? a. Common stock b. Dividends c. Paid-in-capital d. Retained earnings

Can be sued for all of the owner's assets

Which of the following is NOT a trait of a corporation? a. Limits liability b. Often subject to double taxation c. Can be owned by multiple people d. Can be sued for all of the owner's assets

A rated bonds have low risk.

Which of the following is TRUE regarding bond ratings? a. A rated bonds are speculative. b. D rated bonds have low risk. c. A rated bonds are called junk bonds. d. A rated bonds have low risk.

A motivational speaker that gives talks to businesses

Which of the following is a business that only sells intangible assets? a. A bakery that makes custom pies b. A farmer who rents out small pieces of land to individuals looking to start mini-farms c. A company that sells cell phones d. A motivational speaker that gives talks to businesses

a. Recognizing accounts payable immediately on the financial statements. _________ Explanation: Conservatism is the principle that calls for potential expenses and liabilities to be recognized immediately, so publicly-traded companies must recognize the accounts payable, or what they owe, immediately on their financial statements.

Which of the following is an example of how publicly-traded companies can apply the principle of conservatism with their financial statements? a. Recognizing accounts payable immediately on the financial statements. b. Recognizing the cost of goods sold after the company's inventory has been exhausted. c. Recognizing a potential gain from a lawsuit immediately. d. None are correct e. The Full Disclosure Principle requires accountants to include all numbers and words relating to a financial activity in the financial statements of each accounting period.

Utility bills

Which of the following is an example of something that would be under operations expenses? a. Price for inventory b. Taxes c. Interest d. Utility bills

Jobs that require long term contracts where payment is made throughout the job duration and not at the end.

Which of the following is an exception to the rule when it comes to revenue recognition? a. Jobs that require long term contracts where payment is made throughout the job duration and not at the end. b. Jobs that are completed but payment is not received until a later date. c. Jobs that are completed on the last day of the accounting period. d. Jobs that are completed in one day. e. Jobs that are completed in one week.

People who use financial statements need to know an organization's significant non-cash investing and financing activities.

Which of the following is one of the main reasons for proper disclosure of non-cash investing and financing activities? a. The business must have the information to reconcile bank statements. b. People who use financial statements need to know an organization's significant non-cash investing and financing activities. c. In order to prepare an organization's taxes, proper disclosure of non-cash investing and financing activities is required. d. The owners of the business must have the information of non-cash investing and financing activities properly disclosed so bonuses may be paid.

Divide the amount paid by the amount of natural resources available.

Which of the following is one of the steps to compute depletion? a. Divide the amount paid by the amount of natural resources available. b. The result of step one gives you the total price. c. Subtract the amount of depletion from year one by the amount from year two to determine the asset's current value. d. Multiply the total cost by the quantity removed.

The business received a loan from the bank.

Which of the following is the BEST description of cash provided by financing activities? a. The business is being efficient in collecting money from its customers. b. The business purchased some new long-term assets, such as machinery. c. The business paid off a bank loan. d. The business received a loan from the bank.

Money owed to a business or an individual that has yet to be paid

Which of the following is the best definition of a receivable? a. An amount billed by a business or an individual b. Money collected by a business or an individual c. Money owed to a business or an individual that has yet to be paid d. Money owed to a business or an individual that will never be repaid

Operating ----------- Explanation: Choosing between the direct and indirect method impacts the operations section of the cash flow statement.

Which section of the cash flow statement changes depending on whether the direct or indirect method is used to prepare the statement? a. Operating b. Accounting c. Financial d. Judiciary

a. A high ratio shows a company's capabilities to pay their current liabilities with their current assets. ________________________ Explanation: A high ratio shows a company's capabilities to pay their current liabilities with their current assets.

Which of the following statements explain the analysis of the current ratio? a. A high ratio shows a company's capabilities to pay their current liabilities with their current assets. b. A high ratio shows a company's capabilities to pay their current assets with their current liabilities. c. A low ratio shows a company's capabilities to pay their current liabilities with their current assets. d. A low ratio shows a company's capabilities to pay their current assets with their current liabilities.

It's somewhat easy to calculate financial statement ratios and difficult to complete a thorough analysis. _________________ Explanation: While the calculations, or ratios, may be somewhat simple to calculate, it's important to recognize some issues with financial statement analysis that can make it difficult to complete.

Which of the following statements is TRUE regarding financial statement analysis? a. Financial statement analysis should not take into account industry averages. b. It's somewhat easy to calculate financial statement ratios and difficult to complete a thorough analysis. c. Financial statement analysis should not take into account competitor's ratios. d. It's very difficult to calculate financial statement ratios and easy to complete an analysis.

Cost Benefit Principle

Which principle states that the cost of implementing a certain internal control procedure must not outweigh the benefit that the company receives from that procedure? a. Full Disclosure Principle b. Reporting Principle c. Revenue Principle d. Cost Benefit Principle

Bonds can increase return on equity.

Which of the following statements is true about bonds? a. Bonds can decrease return on equity. b. Bonds can increase return on equity. c. Bonds can increase return on interest. d. Bonds can decrease return on interest.

Investors expect annual coupon interest payments.

Which of the following statements is true regarding bond coupon interest payments? a. Investors expect annual coupon interest payments. b. Investors do not expect annual coupon interest payments. c. Bond issuers are not obligated to pay annual coupon interest payments. d. The annual coupon interest payments must total the future value.

Serial bond ___________ Explanation: Serial bonds are bonds in which a portion of the outstanding bonds mature or become due at several dates, which typically fall in a series. The serial bond is often used to finance a project while providing predictable and steady income streams.

Which of these bond types are bonds in which a portion of the outstanding bonds mature or become due at several dates which typically fall in a series? a. Serial bond b. Convertible bond c. Registered bond d. Unsecured bond

Accounts payable

Which of these is the best example of a current liability? a. Mortgage loan b. Car loan c. Accounts payable d. Truck loan

The cost of the oldest inventory purchased ___________ Explanation: The FIFO (first-in, first-out) costing method prices inventory according to the oldest purchase. Since this method doesn't take into account inflation, it can actually increase the profit shown on financial statements.

Which price for inventory is used with the FIFO costing method? a. The cost of the oldest inventory purchased b. The cost of the newest inventory purchased c. The average cost of inventory d. The highest cost of inventory

Matching principle

Which principle states that any costs associated with doing business should be recorded in the same period as the revenue that those costs help generate? a. Revenue recognition principle b. Matching principle c. Finance principle d. Accrual principle

c. Property taxes are considered estimated liabilities since the value of the property may change, and the taxing agency may impose changes to the tax rates.

Why are property taxes considered estimated liabilities? a. Property taxes are considered estimated liabilities because the true cost can never be calculated. b. Property taxes are considered estimated liabilities because property, such as commercial buildings, trucks and inventory, may be loaned to another business. c. Property taxes are considered estimated liabilities since the value of the property may change, and the taxing agency may impose changes to the tax rates. d. Property taxes are considered estimated liabilities because they are considered constant.

a. Inventory valuations may be different for every company and comparing ratios may result in an inaccurate analysis.

Why can inventory valuations cause a problem with financial statement analysis? a. Inventory valuations may be different for every company and comparing ratios may result in an inaccurate analysis. b. Inventory valuations are the same for every company and comparing ratios may result in an accurate analysis. c. Inventory valuations may be different for every company and comparing ratios may result in an accurate analysis. d. Inventory valuations are the same for every company and comparing ratios may result in an inaccurate analysis.

It tells them whether or not the company is operating efficiently.

Why do business owners depend on the income statement? a. It tells them whether or not the company is operating efficiently. b. It tells them all the accounts that the company has. c. It tells them how much money the company made was retained and reinvested in the company. d. It tells them what types of activities have an effect on the cash balance of the company. e. None of the answers are correct

It allows a company to provide a monetary value for items that they have in their inventory on their balance sheet.

Why is inventory valuation used? a. It allows a company to provide a monetary value for items that they have in their inventory on their balance sheet. b. To show transactions related to the sale and purchase of bonds. c. To evaluate inventory of a company prior to it being sold. d. To understand the average cost of doing business on a daily basis.

Because the company will choose to reinvest profits into the business.

Why is it MOST likely that a stock owner will NOT receive a dividend? a. Because he did not vote for the director who assumed control over the company. b. Because he did not invest enough money into the company. c. Because the company will choose to reinvest profits into the business. d. Because he only has preferred stock.

It affects employees' sense of job security.

Why would employees be interested in the company's financial status?

A large purchase may increase the business' earning potential.

Why would someone use non-cash methods to pay for a business transaction? a. A large purchase may increase the business' earning potential. b. Substantial tax breaks are available to businesses who opt to use non-cash methods to pay for large purchases. c. The itemized monthly statements from non-cash methods lessen the business' burden of paperwork. d. If the business closes or files bankruptcy, they will not have to pay back the debt from non-cash purchases.

anything that is man-made and makes a process easier to complete.

With accounting software, Bob is able to complete five times as many transactions as he can manually; this supports the explanation of technology as

FIFO __________ Explanation: XYZ Home Improvement should use the FIFO, or first-in, first-out costing method. This method prices inventory according to the oldest purchase and can increase the profit shown on the financial statement because it does not take inflation into account.

XYZ Home Improvement sells metal table legs among other things. They have a large inventory of metal table legs for sale. Some of their inventory was purchased from their metal table leg supplier last year for $35 per leg. The cost of these metal table legs has since increased to $40 per leg. XYZ Home Improvement likes their financial reports to show the greatest profit for their shareholders. Which costing method should they use? a. FIFO b. LIFO c. Weighted average d. Highest cost

4.75

XYZ Industry currently has $475,000 in assets, and their liabilities are $100,000. What is their current ratio? a. 4.75 b. 0.21 c. 3.5 d. 0.75

Fleet of computers

XYZ Technology Firm is looking to buy 10,000 newly developed graphics cards to include in some of their products. Yet, they are a little short on cash. In order to fund this purchase order, XYZ can sell an unused warehouse in a moderately saturated market, an 18-wheeler truck used to transport products, or a fleet of updated computers they no longer use for business purposes. Which of those items most likely has the greatest liquidity? a. Unused warehouse b. 18-wheeler truck c. Fleet of computers d. All of the options have equal liquidity.

$500

You are a professional food photographer. The camera you use for your work cost you $10,000. It has a life expectancy of 20 years. What is your annual depreciation? a. $500 b. $800 c. $200 d. $50

$125,000 / $50,000

You are the accountant for a local business and asked to prepare a horizontal analysis of the balance sheet. Year One assets for the company were $50,000 and Year Two assets were $125,000. Assuming Year One assets have a base index of 100, how would one calculate the index for Year Two? a. $125,000 / $50,000 b. $50,000 / $125,000 c. $50,000 x 2 d. $125,000 / 2

A factoring company

Zack wants to raise cash by selling his receivables. What type of company does he want to seek out? a. A bank b. A factoring company c. A receivables broker d. An arbitrage firm

A notation

_____ is usually made to address any inventory error found. a. A balance sheet b. A profit statement c. A notation d. An income statement

all of the above are correct.

A company's working capital ratio _____ a. is calculated by dividing current assets by current liabilities. b. is the amount of current assets the company has for each dollar of current liabilities. c. is greater than one if there are more current assets than current liabilities. d. all of the above are correct.

No, it is a gain contingency and should not be included.

ABC Electronics has two large warehouses, but they have realized that they do not need one of them. They have put that warehouse on the market, and are currently waiting for it to sell. The warehouse is listed for 2.5 million dollars which would be a significant influx of cash for the company. Should the accountant include this contingency in her statements? a. Yes, it is a cost-benefit contingency and should be included. b. No, it is an environmental contingency and should not be included. c. No, it is a gain contingency and should not be included. d. Yes, it is an improved cost contingency and should be included. Liability

a. Cash Inflow, Financing Activity _____________________________ Explanation: The money borrowed from the bank is considered a cash inflow. The money paid out to purchase the shop is a cash outflow which in this case is a financing activity. Financing activities are activities that involve cash receipts or cash payments that are a result of changes in long-term liabilities. .

ABC Ropes is interested in buying a retail store front to sell their ropes as they have previously only been selling online. ABC takes a loan from the bank in order to purchase a retail space outright. ABC receives a $250,000 loan from the bank to purchase their retail space. What is this $250,000 categorized as and what type of activity is it? a. Cash Inflow, Financing Activity b. Cash Outflow, Investing Activity c. Cash Inflow, Operating Activity d. Cash Outflow, Operating Activity

$800

Brandon has an older style bike in his inventory he needs to sell to make room for newer models. He paid $600 for it and it will need $200 worth of repairs, maintenance and cleaning to get it sold for $1,000. What is the net realizable value of the bike? a. $200 b. $600 c. $400 d. $800

The total depreciation expense will be the same with any method.

Depreciation expense may be calculated using three methods, namely, straight-line, double declining balance, and units of production depreciation. Choose a correct statement regarding the methods of depreciation. a. The highest total depreciation expense is obtained using the double declining balance method. b. The highest total depreciation expense is obtained using the unit of production method. c. The highest total depreciation expense is obtained using the straight line method. d. The total depreciation expense will be the same with any method.

$25,000

During YourCorp's first year in business, it had net earnings of $75,000. At the end of the year, $50,000 was distributed as dividends. What is the corporation's retained earnings? a. $25,000 b. $50,000 c. $75,000 d. There's not enough information to perform the calculations.

the discipline dealing with what is good and bad and with moral duty and obligation

Ethics are defined as _____. a. the discipline dealing with what is good and bad and with moral duty and obligation b. the discipline that deals with decision making c. the ability to define legal guidelines for your company d. established legal code for particular business practices e. None of the answers are correct

Total liabilities/total assets

How do you calculate the debt ratio? a. Total assets/total liabilities b. Total liabilities/total assets c. Total assets - total liabilities d. Total liabilities - total assets

Comparing line item / base line item

How do you calculate vertical analysis? a. Comparing line item / base line item b. Comparing line item x base line item c. Base line item / comparing line item d. Base line item x comparing line item

45,000 __________________ Explanation This is an example of a basket purchase. To calculate the allocated cost of the excavator for Company B, first add up all the appraised values to get the fair market value (FMV): 2($40,000) + $60,000 + $20,000 = $160,000 Now look at the allocated percentage for the excavator: $60,000 / $160,000 = 0.375 0r 37.5% Now we can caluculate the allocated cost by using the basket price paid: $120,000 x 0.375 = $45,000

In view of its forthcoming closure, Company A sells its vehicles and machinery (two trucks, one excavator and one dumper) to Company B for $120,000. If the trucks are appraised at $40,000 each, the excavator at $60,000 and the dumper at $20,000, what is the allocated cost of the excavator to company B? a. $60,000 b. $37,500 c. $30,000 d. $45,000

Financing

Issuing bonds are noted in which section of the statement of cash flow? a. Investing b. Operating c. Financing d. There is not enough information to determine the correct answer.

Big Bath __________________ Explanation: The Big Bath technique is often called a one-time event. The company belonging to Jane will report all of its expenses, but instead of attributing them to the correct accounts, they are all attributed to the one-time event, which is the closure of the two shops.

Jane owns a chain of flower shops, but due to bad business, she had to close down two of her shops. Jane knows that this loss has already caused a decrease in net earnings. She decides to charge a majority of the companies expenses to the shut down of the two shops. Identify the earnings management technique that Jane has decided to use. a. Big Bath b. Cookie Jar c. Operating Activities d. Materiality e. Revenue Recognition

0.1 _______________ Explanation: A high ratio means a business owes more on the assets than it owns. A 10% debt ratio means Jane only has 10% of her assets financed by loans.

Jane's company is currently doing very well and has cleared all financial reviews without any problems. Her company has a lot of assets. Which of the following is the MOST likely debt ratio of Jane's company? a. 0.5 b. 1.2 c. 0.1 d. 0.75

John, because he has preferred stock, while Rebecca and Jeremy have common stock.

John has 100 shares of preferred stock, Rebecca has 1,000 shares of common stock, while Jeremy has 1,500 shares of common stock. Rebecca was the first person to invest in the company, while John was last. They all have shares of Thomson Incorporated that is going bankrupt. Which of them is MOST likely to receive part of their investment back and why? a. John, because he has preferred stock, while Rebecca and Jeremy have common stock. b. Jeremy, because he has the largest number of shares. c. Rebecca, because from a chronological order, she was the first person to invest in the company. d. John, because he has the smallest number of shares.

$56.25 ______________ Explanation: The cost per barrel is found by dividing the cost of the land by the number of barrels of oil expected to be extracted from the land. In this case, it is $450,000 divided by the 8,000 barrels to give an answer of $56.25 per barrel.

Profits, Inc. purchases another piece of land that is 500 acres and is estimated to contain 8,000 barrels of crude oil. The company paid $450,000 for the land. The first year of extraction, the company is able to remove 2,000 barrels of oil. What is the cost per barrel that the company should use to compute depletion? a. $112,500 b. $4.00 c. $65.25 d. $56.25

Cash management

Separation of duties would be an important aspect of which internal control process? a. Cash management b. Departmental specialization c. Bookkeeping d. Audit reporting

Check register

There is a difference between your accounts and those on the bank statement. What document might you use to identify the error? a. Check register b. Balance sheet c. Income statement d. Trial balance

indirect ______________________ Explanation: In many companies, the pay of indirect employees is filed under overhead expenses, or those that keep the business running but are not directly related to the manufacture of the product.

The salaries or wages of _____ employees are often grouped under overhead expenses for a business. a. indirect b. direct c. long-term d. short-term e. none are correct

$23,900

The setting up of a tire centre by a company involved the following costs: -Purchase of plant and machinery : $ 20,000 -Upgrade of existing infrastructure to accommodate machinery : $ 3,000 -Transportation charges to have machinery on site: $ 400 -Staff training costs to acquire new skills to be able to operate machinery: $ 500 What would be the relevant historical cost to be recorded in the balance sheet of the company? a. $20,000 b. $23,400 c. $23,900 d. $20,400

Income tax

What is tax levied by the government on money earned in the previous year? a. Income tax b. Property tax c. Estimated tax d. Sales tax e. none are correct

Profit is what is left of revenue after all business expenses are paid and profitability is the ability to make a profit

What is the difference between profit and profitability? a. Nothing, they are synonymous b. Profit is a measure related to a product while profitability is a measure related to the entire business c. Profit is what is left of revenue after all business expenses are paid and profitability is the ability to make a profit d. Profit is a measure used internally by a business while profitability is a measure used by investors

Assets = Liabilities + Owner's Equity

What is the formula for the basic accounting equation? a. Liabilities = Assets + Owner's Equity b. Owners Equity = Assets + Liabilities c. Assets = Liabilities + Owner's Equity d. Assets = Liabilities - Owner's Equity

Sales tax

What is the term for tax levied by the government on things that are purchased? a. Sales tax b. Property tax c. Estimated tax d. Income tax

Contra-asset account _____________ Explanation: A contra-asset account typically has a credit balance and is attached to an asset to give its current value.

What is the term used to describe an account that has a credit balance and is used to offset an asset account to help determine its current value? a. Contra-asset account b. Anti-asset account c. Liability account d. Anti-equity account

Arthur Andersen

What was the accounting firm that made unethical choices in the Enron scandal? a. Arthur Andersen b. Sarbanes-Oxley c. Jeffrey Skillings d. Bob Lilli

When they are earned.

When should benefits, like sick days, be accounted for? a. When they are earned. b. When they are taken. c. At the end of every year. d. At the beginning of every year. e. none are correct

In the same time period as the revenue that generated the expense.

When should expenses be recorded according to the Matching Principle? a. In the same time period as the revenue that generated the expense. b. In the period after the revenue that generated the expense. c. In the period before the revenue that generated the expense. d. It doesn't matter when they are recorded.

When it has a negative cash flow.

When would a company be smart to focus solely on increasing cash flow? a. When it has a negative cash flow. b. When it has a small positive cash flow. c. When it has a large positive cash flow. d. All the time.

Balance sheet

Which financial statement utilizes the majority of the accounts on the adjusted trial balance but does not use expenses? a. Statement of retained earnings b. Balance sheet c. Income statement d. Post-adjusted trial balance

Accrual basis

Which method of accounting does an excellent job matching revenues and a poor job tracking cash flow because it recognizes income before it is received and expenses before they're paid? a. Cash basis b. Accrual basis c. Currency basis d. Credit basis

It focuses on amortization and depreciation. ___________ Explanation: The indirect method focuses more on amortization and depreciation, treating net income as a single line item. As a result, many larger companies prefer to use the indirect method.

Which of the following describes the indirect method of preparing the cash flow statement? a. It focuses on actual cash flow, with money collected from customers and going out through costs. b. It focuses on amortization and depreciation. c. It focuses on spending from the previous year only. d. It details the CEO's expenses.

Accounting cycle

Which of the following is NOT a financial statement? a. Income statement b. Statement of retained earnings c. Balance sheet d. Statement of cash flows e. Accounting cycle

Specific identification

Which of the following is a costing method that is used to track cost specific and identifiable inventory items that are either in or out of stock? a. Specific identification b. Weighted average c. FIFO d. LIFO e. Inventory valuation

To avoid a takeover by another company

Which of the following is a reason that a company may repurchase its shares? a. To satisfy management bonuses when there are too many authorized shares available b. To de-stabilize the market value of the share by removing supply from the market c. To decrease interest in the company's shares on the open market d. To avoid a takeover by another company

Profit/principal and interest payments

Which of the following is required in order to calculate the debt service coverage ratio? a. Profit/principal and interest payments b. Principal and interest payments/profit c. Interest payments/profit d. Principal payments/profit

Truck body modification cost

Which of the following items will not be classified as 'revenue expenditure' in the operation of a truck? a. Monthly fuel cost b. Vehicle insurance cost c. Truck body modification cost d. Regular maintenance and service cost

The General Accepted Accounting Principles do not require that non-cash investing and financing activities be recorded.

Which of the following statements is NOT true? a. Information about non-cash investing and financing activities is useful for determining how operationally healthy a business or other organization is. b. Transactions involving the generation or use of cash are recorded in the statement of equity. c. The General Accepted Accounting Principles do not require that non-cash investing and financing activities be recorded. d. Non-cash investing and financing activities involve the use of financial tools other than cash to make an investment or purchase.

A bond is a liability for the issuer. ___________ Explanation: Bonds are also long-term liabilities. Bonds are considered an IOU and are issued when corporations want to expand and grow.

Which of the following statements is TRUE regarding a bond? a. A bond is an asset for the issuer. b. A bond is a liability for the issuer. c. A bond is an expense for the issuer. d. A bond is considered revenue for the issuer.

b. Selling bonds at a premium means the purchase price is greater than the future value.

Which of the following statements is true about bonds selling at a premium? a. Selling bonds at a premium relates to the type and class of bond. b. Selling bonds at a premium means the purchase price is greater than the future value. c. Selling bonds at a premium means the purchase price is equal to the future value. d. Selling bonds at a premium means the purchase price is less than the future value.

Contingent liabilities are obligations that have a high probability of occurring and must be listed on the balance sheet.

Which of the following statements offers the BEST explanation of contingent liabilities? a. Contingent liabilities are obligations that have already occurred but do not need to be included on the balance sheet. b. Contingent liabilities are obligations that have a low probability of occurring and must be listed on the income statement. c. Contingent liabilities are obligations that are included on the income statement. d. Contingent liabilities are obligations that have a high probability of occurring and must be listed on the balance sheet.

Retain property, plant, and equipment assets that are underutilized

Which of the following would NOT represent a strategy to improve the asset turnover ratio? a. Review property, plant, and equipment assets for obsolescence b. Consider leasing property, plant, and equipment assets c. Retain property, plant, and equipment assets that are underutilized d. Sell property, plant, and equipment assets that are not generating sales

All of these answers are correct.

Which of these describes a real account? a. It shows the assets, liabilities, and owner's equity of the company. b. It includes cash, accounts receivable, accounts payable, notes payable, and owner's equity. c. It will always be a part of a company's books once opened. d. All of these answers are correct.

Government interference

Which of these is NOT a likely cause of an inventory error? a. Miscounting b. Double counting c. Unit conversion d. Government interference

In the same period

Which time frame BEST describes how revenue expenditures should be paid off the accounting ledger? a. In the same period b. During the next period c. In the next three periods d. At the end of the accounting year

A payment is made by the customer.

Why would the Accounts Receivable account balance decrease? a. A sale is completed by the business. b. A customer returns an item. c. A payment is made by the customer. d. A bill is paid by the business. Equity

Accrual _______________ Explanation: Revenue recognition only applies to the accrual basis of accounting. The accrual basis is the method of accounting that records revenue when it is earned and expenses when they are incurred regardless of when cash changes hands.

With which form of accounting is the revenue recognition principle used? a. Cash b. Check c. Accrual d. Single Entry

Long term asset : Vehicle 70000 Long term liability : Finance lease 70000

Youya Co. Ltd acquires a new Goods Vehicle under a finance lease (to be treated as a loan) for $ 70,000 and a term of 7 years. Youya's balance sheet reflects this transaction as _____. a. Long term asset : Vehicle 70000 Long term liability : Finance lease 70000 b. Long term asset : Vehicle 70000 Current liability : Finance lease 70000 c. Long term asset : Vehicle 10000 Long term liability : Finance lease 10000 d. Current asset : Vehicle 70000 Long term liability : Finance lease 70000