1.
If a bond is sold at par
value for
$1,000, has a life
of 5 years, and a contract rate
of 8%, how much will have to
be
paid to redeem the bond
on its maturity date?
A. 
B. 
C. 
D. 
2.
The ratio that is computed by
taking total
liabilities and dividing
them
by total equity is called the:
A. 
B. 
C. 
D. 
3.
While the balance sheet is a "snapshot" of the
business, the income
statement has been compared to a "home video" because it
A. 
Shows the company's performance for a particular date in time
B. 
Shows the company's performance for a period of time
C. 
Depicts the operations of the company on a precise date
D. 
None of these answers is correct
4.
The relationship among the accounting
elements found on the income statement
can be represented by
the following equation:
A. 
Revenues - expenses = net loss
B. 
Revenues - expenses = net income
C. 
Answers A and B are both correct
D. 
Assets - liabilities = net income
5.
The excess of the rewards over the sacrifices
for a given time period
is the monetary reward
of doing
business, which is also
known as:
A. 
B. 
C. 
D. 
All of these answers are correct.
6.
Gross margin is
an important item shown on
the income statement
because:
A. 
Gross margin is not shown on a multiple-step income statement
B. 
Sales minus gross margin equals net income
C. 
Gross margin is the revenue generated from the sale of tangible products
D. 
It highlights the relationship between sales revenue and cost of goods sold
7.
The distributions to owners of proprietorships
and partnerships are also called:
A. 
B. 
C. 
D. 
8.
The main
accounting elements that make up the income statement are and .
A. 
B. 
C. 
D. 
9.
The following information is available for a
company:
Net sales, $750,950; Cost of goods sold, $330,418;
total expenses, $214,775; average total assets
for
the year, $459,785. What
is the
company's gross profit margin ratio(round
your answer to two decimal places)?
A. 
B. 
C. 
D. 
The ratio cannot be computed from the information given.
10.
During the month of May, $400 of services were performed by Belk & Rich, Inc. If Belk & Rich received $100 during
May and $300 during June and uses
the
cash basis of accounting,
when and how much revenue should
be recognized?
A. 
$100 in May; $300 in June
B. 
$300 in May; $100 in June
C. 
D. 
11.
If the JJ Company performs services for
a client
in the amount of
$770 during June and collects the
money from the client during July
under a cash basis accounting system, when and how much
revenue should JJ Company recognize in June and July?
A. 
$385 during June; $385 during July
B. 
$0 during June; $770 during July
C. 
$770 during June; $770 during July
D. 
$770 during June; $0 during July
12.
The Corner Dress shop buys $200 of
dresses during May. Corner
Dress pays $150 of that amount during May
and
the remainder in June. During
June, Corner Dress buys $300 of
dresses paying
for
$100 during June and the remainder in July. If the Corner
Dress Shop uses a cash basis accounting system, how much should
the
shop recognize as an expense during
May?
A. 
B. 
C. 
D. 
13.
Baaker Auto Body
Repair uses electricity
costing $200 during
February and pays for them in March. How much will Baaker recognize
under an accrual basis
system of accounting?
A. 
B. 
C. 
D. 
14.
Under accrual
accounting we recognize revenue
when it is:
A. 
Earned, as long as payment for it occurs in the same time period
B. 
Earned, no matter when payment for it is received
C. 
Received, no matter when it is earned
D. 
Received, as long as payment for it occurs in the same time period
15.
If Sanford
and
Son's Auto Repair acquires supplies costing $200
during February and
pays for the supplies in March, how much will Sanford and
Son recognize under
a cash basis system of accounting?
A. 
$200 revenue in March only
B. 
$200 expense in February only
C. 
$200 expense in March only
D. 
$200 revenue in February only
16.
The Corner Dress shop uses $200 in advertising during May. Corner Dress pays $150 of that amount
during May and the remainder in
June. During June, Corner Dress uses $300 in advertising paying for $100 during June and the remainder in July. If Corner
Dress uses an accrual basis
accounting system,
how much should the shop recognize as an advertising expense during
May?
A. 
B. 
C. 
D. 
17.
What is the relationship between
a company receiving
cash and recognizing revenue?
A. 
All of these answers are correct.
B. 
Cash is received after the revenue has been earned.
C. 
Cash is received before the revenue has been earned.
D. 
Cash is received at the time revenue is earned.
18.
Accrual accounting attempts to
establish a relationship between revenues and expenses. This
relationship is called:
A. 
B. 
C. 
D. 
19.
The Ladybug Dress shop
uses $200 in
advertising during May. Ladybug pays $150 of that
amount during May
and
the remainder in
June. During June, Ladybug uses
$300 in advertising
paying
for $200 during June and the remainder in July.
If Ladybug uses an
accrual basis accounting system, how much should the shop recognize as an advertising expense during
June?
A. 
B. 
C. 
D. 
20.
A company
can adopt a policy in which it
resolves to pay a set amount as a
dividend each year as long as it has:
A. 
Both sufficient retained earnings and sufficient cash each year to pay the amount
B. 
Sufficient net income for the current year to cover the amount of the dividend payment
C. 
The approval of the stockholders
D. 
None of these answers is correct
21.
Adam's Chili
Bowl and Space Burgers purchases
a grill for $5,000. The company expects to use it for four years. If the company
thinks that it can sell the
grill at the end of the fourth year for $500, how much is the residual value of the grill?
A. 
B. 
C. 
D. 
22.
The first
step in the accrual matching
process is:
A. 
To determine in which income statement period a company should recognize a particular revenue
B. 
To determine which expenses helped to generate specific revenue
C. 
To match those expenses paid in the same period with the revenues received in cash during the same period
D. 
To recognize only those expenses actually paid in the same period as the revenue they helped to generate
23.
In accounting, an
asset's depreciable base
is calculated as:
A. 
Asset cost - residual value
B. 
Asset cost + residual value
C. 
Asset cost × residual value
D. 
Asset cost ÷ residual value
24.
An inflow of
resources that comes to the business when
it delivers services to a customer
is a(n):
A. 
B. 
C. 
D. 
25.
The basic formula used by a company to compute its income tax is:
A. 
Taxable income × tax rate
B. 
C. 
Cost of goods sold × tax rate
D.