Q1. Including all relevant data a reader needs to understand thefinancial condition and performance of a business refers to whichconcept?
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 andservices that compete on features other than price.
a. true
b. false
Q4. Which principle determines the amount initially entered intothe 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 areorganized as limited liability companies.
a. true
b. false
Q6. Due to various fraudulent business practices and accountingcoverups in the early 2000s, Congress enacted the Sarbanes-OxleyAct of 2002. The act was responsible for establishing a newoversight board for public accountants called the
a. Generally Accepted Accounting Practicesfor Public Accountants Board.
b. Public Company Accounting OversightBoard.
c. Congressional Accounting OversightBoard.
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 thefollowing 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 limitedliability company?
a. It is organized as a corporation.
b. It can elect to be taxed as apartnership.
c. It provides tax and liability advantagesto the owners.
d. All are correct.
Q9. Under a premium-price emphasis, a business designs productsthat possess _____ for which customers are willing to pay a premiumprice.
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 theeffects of a series of transactions.
a. true
b. false
Q12. Gibbs Company has $16,000 in Retained Earnings, $27,000 inAssets, 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 theaccounting equation.
a. true
b. false
Q14. Fees earned and received in cash will increase operatingactivity cash flows as well as retained earnings.
a. true
b. false
Q15. Declaring and paying cash dividends affects whichaccounts?
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 isthe effect of this transaction?
a. Total assets remain unchanged.
b. Cash flow from Financing Activities willincrease.
c. Net income will increase.
d. Retained earnings will remainunchanged.
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.’ Onthe Statement of Cash Flows, the transaction would be classifiedas
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 areclassified, 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 ofsupplies on account. Prior to the purchase, the balance in thesupplies account was $0. On December 31, the fiscal year-end forGreen Pea, it is determined that $500 of supplies have been usedup. What is the balance in the supplies account afteradjustment?
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 theaccrual 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 thesupplies on hand at June 30 were $1,500. The amount to be used forthe 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 inthe ability of fixed assets to provide service.
a. true
b. false
Q28. On the statement of cash flows prepared by the indirectmethod, a $50,000 gain on the sale of investments would be
a. deducted from net income in converting thenet income reported on the income statement to cash flows fromoperating activities.
b. added to net income in converting the netincome reported on the income statement to cash flows fromoperating activities.
c. added to cash received from the sale todetermine cash flows from investing activities.
d. deducted from cash received from the saleto determine cash flows from investing activities.
Q29. An adjusting entry would adjust an expense account so thatthe expense is reported when incurred.
a. true
b. false
Q30. If land costing $75,000 was sold for $135,000, the amountreported in the investing activities section of the statement ofcash flows would be $135,000.
a. true
b. false
Q31. Under the indirect method for preparing the statement ofcash flows, increases in current liabilities are _____ net incomein 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 fortransactions by sellers of merchandise.
a. true
b. false
Q33. On the income statement, sales discounts are normallydeducted from sales to yield the cost of merchandise sold.
a. true
b. false
Q34. Merchandise subject to terms 1/10, n/30, FOB shippingpoint, is sold on account to a customer for $17,500. The sellerissued a credit memorandum for $4,000 prior to payment. What is theamount of the cash discount allowable?
a. $215
b. $175
c. $135
d. $140
Q35. Sales to customers who use bank credit cards such asMasterCard 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 inSales.
c. increase in Cash, decrease in Credit CardExpense, and increase in Sales.
d. decrease in Sales, increase in Credit CardExpense, and decrease in Cash.
Q36. Revenue from sources other than the primary operatingactivity of a business is called other income.
a. true
b. false
Q37. Sales returns are granted by the seller to customers fordamaged 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 acredit for merchandise returned of $600 is granted prior topayment, 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 cashflows reconciles net income with net cash flows from operatingactivities.
a. true
b. false
Q41. The internal control environment is enhanced by the hiringand 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 cashpayment.
a. true
b. false
Q44. Accompanying the bank statement was a debit memorandum foran NSF check received from a customer. This item would require anadjusting 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 withchecks is an internal control procedure over cash.
a. true
b. false
Q46. Separating the custody of assets from accounting for assetsis 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 iscalled a line of credit.
a. true
b. false
Q48. EFT
a. means Efficient Funds Transfer.
b. can process certain cash transactions atless cost than by using the mail.
c. makes it easier to document purchase andsale transactions.
d. means Effective Funds Transfer.
Q49. In a voucher system, paid vouchers are transferred to apaid voucher file.
a. true
b. false
Q50. Money orders are considered cash.
a. true
b. false
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