Reference no: EM131786898

Q1. Including all relevant data a reader needs to understand the financial condition and performance of a business refers to which concept?
a. Adequate disclosure concept
b. Going concern concept
c. Objectivity concept
d. Business entity concept

Q2. When a product is sold, this cost is often called
a. cost of goods sold.
b. revenue.
c. products.
d. retained earnings.

Q3. Companies using a low-cost emphasis provide products and services that compete on features other than price.
a. true
b. false

Q4. Which principle determines the amount initially entered into the records for purchases?
a. Cost principle
b. Going concern concept
c. Business entity concept
d. Objectivity concept

Q5. Large corporations such as ExxonMobil and Walmart are organized as limited liability companies.
a. true
b. false

Q6. Due to various fraudulent business practices and accounting coverups in the early 2000s, Congress enacted the Sarbanes-Oxley Act of 2002. The act was responsible for establishing a new oversight board for public accountants called the
a. Generally Accepted Accounting Practices for Public Accountants Board.
b. Public Company Accounting Oversight Board.
c. Congressional Accounting Oversight Board.
d. None are correct.

Q7. Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $30,000 during 2010. Which of the following statements is correct?
a. Net income for 2010 totaled $29,000.
b. Net income for 2010 totaled $59,000.
c. Total retained earnings increased by $59,000 during 2010.
d. Total retained earnings decreased by $30,000 during 2010.

Q8. Which of the following is TRUE in regards to a limited liability company?
a. It is organized as a corporation.
b. It can elect to be taxed as a partnership.
c. It provides tax and liability advantages to the owners.
d. All are correct.

Q9. Under a premium-price emphasis, a business designs products that possess _____ for which customers are willing to pay a premium price.
a. unique attributes
b. high costs
c. competitive efficiencies
d. longer warranties

Q10. Shares of ownership are evidenced by issuing
a. bonds payable.
b. commercial paper.
c. shares of stock.
d. notes payable.

Q11. By keeping a running total of the effects of transactions, the accounting equation provides a framework for summarizing the effects of a series of transactions.
a. true
b. false

Q12. Gibbs Company has $16,000 in Retained Earnings, $27,000 in Assets, and $5,000 in Liabilities. How much is in Common Stock?
a. $22,000
b. $16,000
c. $11,000
d. $6,000

Q13. A transaction can affect at most two elements of the accounting equation.
a. true
b. false

Q14. Fees earned and received in cash will increase operating activity cash flows as well as retained earnings.
a. true
b. false

Q15. Declaring and paying cash dividends affects which accounts?
a. Cash only
b. Capital stock only
c. Cash and retained earnings
d. Cash and capital stock

Q16. The accounting equation can be expressed: Assets - Liabilities = Revenues.
a. true
b. false

Q17. Johnson, Inc. receives $5,000 cash for fees earned. What is the effect of this transaction?
a. Total assets remain unchanged.
b. Cash flow from Financing Activities will increase.
c. Net income will increase.
d. Retained earnings will remain unchanged.

Q18. Dividends are an example of an expense.
a. true
b. false

Q19. When capital stock is issued by a corporation for cash, both the income statement and the balance sheet are affected.
a. true
b. false

Q20. A to Z Corporation engaged in the following transaction 'Issued a $30,000 note payable to borrow cash from the bank.' On the Statement of Cash Flows, the transaction would be classified as
a. Cash Flows from Operating Activities.
b. Cash Flows from Investing Activities.
c. Cash Flows from Financing Activities.
d. Noncash transaction.

Q21. Depreciation Expense and Accumulated Depreciation are classified, respectively, as
a. expense and contra asset.
b. asset and contra liability.
c. revenue and asset.
d. contra asset and expense.

Q22. The _____ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis.
a. accounting equation
b. retained earnings statement
c. intangible asset section
d. classified balance sheet

Q23. On June 1, Green Pea, Inc. purchased $1,200 worth of supplies on account. Prior to the purchase, the balance in the supplies account was $0. On December 31, the fiscal year-end for Green Pea, it is determined that $500 of supplies have been used up. What is the balance in the supplies account after adjustment?
a. $0
b. $700
c. $500
d. $1,200

Q24. Land is an example of a current asset.
a. true
b. false

Q25. ABN Company sold goods, receiving $20,000 in cash and $25,000 on credit. How much revenue should it record under the accrual basis of accounting?
a. $5,000
b. $25,000
c. $20,000
d. $45,000

Q26. The balance in the office supplies account on June 1 was $5,200, supplies purchased during June were $2,500, and the supplies on hand at June 30 were $1,500. The amount to be used for the appropriate adjusting entry is
a. $6,700.
b. $2,500.
c. $9,200.
d. $6,200.

Q27. It is easy to objectively determine the physical decline in the ability of fixed assets to provide service.
a. true
b. false

Q28. On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be
a. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities.
b. added to net income in converting the net income reported on the income statement to cash flows from operating activities.
c. added to cash received from the sale to determine cash flows from investing activities.
d. deducted from cash received from the sale to determine cash flows from investing activities.

Q29. An adjusting entry would adjust an expense account so that the expense is reported when incurred.
a. true
b. false

Q30. If land costing $75,000 was sold for $135,000, the amount reported in the investing activities section of the statement of cash flows would be $135,000.
a. true
b. false

Q31. Under the indirect method for preparing the statement of cash flows, increases in current liabilities are _____ net income in the cash flows from operating activities section.
a. subtracted from
b. added to
c. not used when calculating
d. cannot tell from the information given

Q32. Cost of Merchandise Sold is used in accounting for transactions by sellers of merchandise.
a. true
b. false

Q33. On the income statement, sales discounts are normally deducted from sales to yield the cost of merchandise sold.
a. true
b. false

Q34. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $17,500. The seller issued a credit memorandum for $4,000 prior to payment. What is the amount of the cash discount allowable?
a. $215
b. $175
c. $135
d. $140

Q35. Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n):
a. decrease in Bank Credit Card Sales, increase in Credit Card Expense, and increase in Sales.
b. increase in Cash and increase in Sales.
c. increase in Cash, decrease in Credit Card Expense, and increase in Sales.
d. decrease in Sales, increase in Credit Card Expense, and decrease in Cash.

Q36. Revenue from sources other than the primary operating activity of a business is called other income.
a. true
b. false

Q37. Sales returns are granted by the seller to customers for damaged or defective merchandise.
a. true
b. false

Q38. If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a
a. sales invoice.
b. purchase invoice.
c. credit memorandum.
d. debit memorandum.

Q39. A sales invoice included the following information: merchandise price, $5,000; terms 1/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller?
a. $4,656
b. $4,400
c. $4,356
d. $4,950

Q40. The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.
a. true
b. false

Q41. The internal control environment is enhanced by the hiring and retention of competent, honest employees.
a. true
b. false

Q42. An element of internal control is
a. fidelity insurance.
b. prepaid insurance.
c. monitoring.
d. insurance expense.

Q43. A voucher is a written authorization to make a cash payment.
a. true
b. false

Q44. Accompanying the bank statement was a debit memorandum for an NSF check received from a customer. This item would require an adjusting entry including a
a. debit to Accounts Receivable.
b. debit to Cash.
c. debit to Accounts Payable.
d. credit to Accouts Payable.

Q45. Depositing all cash, checks, etc. in a bank and paying with checks is an internal control procedure over cash.
a. true
b. false

Q46. Separating the custody of assets from accounting for assets is a part of which element of internal control?
a. Information and communication
b. Monitoring
c. The control environment
d. Control procedures

Q47. A minimum cash balance maintained in a bank account is called a line of credit.
a. true
b. false

Q48. EFT
a. means Efficient Funds Transfer.
b. can process certain cash transactions at less cost than by using the mail.
c. makes it easier to document purchase and sale transactions.
d. means Effective Funds Transfer.

Q49. In a voucher system, paid vouchers are transferred to a paid voucher file.
a. true
b. false

Q50. Money orders are considered cash.
a. true
b. false