Financial Accouting Practice

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Financial Accounting Quizzes & Trivia

Financial Accouting Midterm Practice Chapter 1 questions are 1-41Test 2 questions 42-66Chapter 2 questions 67-


Questions and Answers
  • 1. 
    Assets are
    • A. 

      A probable future benefit arising from a transaction

    • B. 

      A right of claim in property

    • C. 

      A probable future sacrifice arising from an obligation

    • D. 

      The excess of revenue over expenses

  • 2. 
    Ruffen Co. had the following transactions take place during the month of January 2007:a. Received $5,000 cash from a bank loanb. Paid a cash dividend of $2,000 to stockholderdsc. Earned and received revenue of $4,500 cashd. Paid $2,500 worth of expensesRefer to the Ruffen Co. transactions above. At the beginning of January, 2007, stockholders' equity in Ruffen Co. was $60,000. Given the transactions that occured in january, what would stockholders' equity be at the end of the month?
    • A. 

      $69,500

    • B. 

      $62,000

    • C. 

      $60,000

    • D. 

      $64,000

  • 3. 
    The balance sheet of Brock Incorporated includes the following items:CashInventoryAccounts ReceivableCommon StockNotes PayableLandAccrued Expense PayableShort-Term InvestmentsRetained EarningsAccounts PayableThis list includes:
    • A. 

      One equity account and three liabilities

    • B. 

      Two equity accounts and four liabilities

    • C. 

      Three liabilities and two equity accounts

    • D. 

      Three liabilities and one equity account

  • 4. 
    Which financial statement reports the net change in a company's cash resources for a period of time classifying each transaction as an operating, investing or financing activity?
    • A. 

      Balance Sheet

    • B. 

      Statement of Changes in Equity

    • C. 

      Income Statement

    • D. 

      Cash Flow Statement

  • 5. 
    51Profit can be calculated by
    • A. 

      Subtracting revenue from costs

    • B. 

      Subtracting costs from revenue

    • C. 

      Adding revenue to costs

    • D. 

      Adding inventory to costs and subtracting it from revenue

  • 6. 
    Which of the following groups has primary responsibility for developing the GAAP?
    • A. 

      Government Accounting Board

    • B. 

      Securities and Exchange Commission

    • C. 

      International Accounting Standards Board

    • D. 

      Financial Accounting Standards Board

  • 7. 
    Ruffen Co. had the following transactions take place during the month of January 2007:A. Received $5,000 cash from a bank loanB. Paid a cash dividend of $2,000 to stockholdersC. Earned and received revenue of $4,000 cashD. Paid $2,500 worth of expensesRefer to the Ruffen Co. transactions above. For the month of January,2007, net cash flows from operating activities Ruffen were
    • A. 

      $4,500

    • B. 

      $9,500

    • C. 

      $2,000

    • D. 

      $7,000

  • 8. 
    Warren Inc. had the following transactions take place during the month of March 2006, in its first month of operationsA. Received $10,000 cash from the sale of common stockB. Earned and received revenue of $20,000 cashC. Paid one month rent on office space for $3,000 cashD. Purchased office equipment for $12,000 on creditBased on the transaction that ouccured during the month of March, what amount of assets will be reported on the balance sheet as of March 31, 2006?
    • A. 

      $17,500

    • B. 

      $15,500

    • C. 

      $20,500

    • D. 

      $27,500

  • 9. 
    Which of the following transactions would be considered a financing activity on the statement of cash flows?
    • A. 

      Cash received from cashing in a certificate of deposit.

    • B. 

      Cash paid to a bank from purchase of machinery and equipment.

    • C. 

      Cash received for the sale of common stock.

    • D. 

      Cash paid to a CPA for audit work.

  • 10. 
    Which of the following activities can only be performed by a certified public accountant (CPA)?
    • A. 

      Preparing financial statements for a business

    • B. 

      Providing an opinion on the fairness of financial statements

    • C. 

      Preparing tax returns for the public and corporations

    • D. 

      Providing a recommendation on an accounting software package

  • 11. 
    Corporations communicate their financial information to shareholders primarily through
    • A. 

      Financial statements

    • B. 

      Publications in trade magazines

    • C. 

      Information published by NYSE's financial analysts

    • D. 

      Information broadcasted nationally on CNN

  • 12. 
    An examination of a business's financial statements to ensure that they conform to generally accepted accounting procedures is called a(an)
    • A. 

      Certification

    • B. 

      Verification

    • C. 

      Audit

    • D. 

      Validation

  • 13. 
    Assets = Liabilities + Owners' Equity is known as
    • A. 

      A transaction

    • B. 

      The owner's equity equation

    • C. 

      The accounting equation

    • D. 

      The income statement equation

  • 14. 
    The organization that is primarily responsible for setting accounting standards is the
    • A. 

      SEC (Securities and Exchange Commission)

    • B. 

      FASB (Financial Accounting Standards Board)

    • C. 

      PCAOB (Public Companies Accounting Oversight Board)

    • D. 

      United States Congress

  • 15. 
    All of the following are balance sheet accounts except
    • A. 

      Cash

    • B. 

      Inventories

    • C. 

      Retained earnings

    • D. 

      Expenses

  • 16. 
    Cash investments by owners appear on which of the following financial statements?
    • A. 

      Balance sheet

    • B. 

      Both B and C

    • C. 

      Statement of cash flows

    • D. 

      Statement of changes in owners' equity

  • 17. 
    Which of the following is not a financial statement?
    • A. 

      Balance sheet

    • B. 

      Liability statement

    • C. 

      Income Statement

    • D. 

      Statement of changes in owner's equity

  • 18. 
    A Statement of Financial Position is another name for
    • A. 

      The statement of cash flows

    • B. 

      The balance sheet

    • C. 

      The statement of changes in equity

    • D. 

      The income statement

  • 19. 
    Which of the following equations represents the claims on a company's net assets?
    • A. 

      Common Stock + Retained Earnings

    • B. 

      Liabilities + Owner's Equity

    • C. 

      Assets - Liabilities

    • D. 

      Assets - Owner's Equity

  • 20. 
    During the year, the assets of Weber Consulting increased by $145,000 and the liabilites decreased by $35,000. If stockholders' equity is $395,000 at the end of the year, the stockholders' equity at the beginning of the year must have been
    • A. 

      $505,000

    • B. 

      $575,000

    • C. 

      $285,000

    • D. 

      $215,000

  • 21. 
    Which of the following transactions would not be recorded in a business's accounting records?
    • A. 

      The purchase of merchandise on account

    • B. 

      The purchase of merchandise for cash

    • C. 

      The sale of the business's common stock to an investor

    • D. 

      The bank reconciliation performed by the bookkeeper

  • 22. 
    Which accounts will normally appear on the income statement?
    • A. 

      Revenues

    • B. 

      Both A and B

    • C. 

      Expenses

    • D. 

      Dividends

  • 23. 
    The basic purpose of an accounting system is to
    • A. 

      Provide maximum useful information to decision makers regardless of cost

    • B. 

      Develop financial statements in accordance with GAAP

    • C. 

      Record, organize and transform business transactions into useful information as efficiently as possible

    • D. 

      Computerize information

  • 24. 
    Equity is
    • A. 

      A person who owns debt

    • B. 

      The residual interest in the assets after liabilities are deducted

    • C. 

      A business that is owned by two or more people

    • D. 

      Calculated by taking revenue minus expenses

  • 25. 
    An operating cycle for a business
    • A. 

      Is the same for all businesses

    • B. 

      Can only be for a period of twelve months

    • C. 

      Is represented by the time it takes to produce and sell a product and collect the cash from the customer

    • D. 

      Is represented by the time it takes to produce and sell a product

  • 26. 
    Another name for a stockholder is
    • A. 

      Partner

    • B. 

      Accountant

    • C. 

      Shareholder

    • D. 

      Sole proprietor

  • 27. 
    Which of the following transactions would be considered a financing activity on the statement of cash flows?
    • A. 

      Cash received from cashing in a certificate of deposit

    • B. 

      Cash paid to a CPA for audit work

    • C. 

      Cash received for the sale of common stock

    • D. 

      Cash paid to a bank for purchase of machinery and equipment

  • 28. 
    Cash investments by owners appear on which of the following financial statements?
    • A. 

      Both B and C

    • B. 

      Statement of changes in owners' equity

    • C. 

      Balance sheet

    • D. 

      Statement of cash flows

  • 29. 
    A company would report a net loss when
    • A. 

      Dividends are paid to the stockholders

    • B. 

      Expenses exceed revenues during an accounting period

    • C. 

      Liabilities increase during an accounting period

    • D. 

      Assets decrease during an accounting period

  • 30. 
    Financial statements are prepared in which of the following orders?
    • A. 

      Income statement, balance sheet, statement of changes in equity and statement of cash flows

    • B. 

      Income statement, statement of changes in shareholders' equity, balance sheet and cash flow statement

    • C. 

      Balance sheet, cash flow statement, income statement and statement in changes in equity

    • D. 

      Balance sheet, income statement, statement of changes in equity, cash flow statement

  • 31. 
    Warren Inc. had the following transactions take place during the month of March 2006, in its first month of operationsA. Received $10,000 cash from the sale of common stockB. Earned and received revenue of $20,500 cashC. Paid one month rent on office space for $3,000 cashD. Purchased office equipment for $12,000 on creditRefer to the Warren Inc. transactions above. Based on the transactions that occured during the month of March, what liabilities amount would be reported on the balance sheet as of March 31, 2006?
    • A. 

      None of the above

    • B. 

      $12,000

    • C. 

      $15,000

    • D. 

      $0

  • 32. 
    Which organization is responsible for regulating the stock market?
    • A. 

      FASB

    • B. 

      SEC

    • C. 

      APB

    • D. 

      GAAP

  • 33. 
    During the year, the assets of SJC, Inc., increased by $100,000 and the liabilities increased by $50,000. If the owners' equity in the business is $250,000 at the end of the year, the owners' equity at the beginning of the year must have been
    • A. 

      $200,000

    • B. 

      $25,000

    • C. 

      $50,000

    • D. 

      $125,000

  • 34. 
    The purpose of an audit is to
    • A. 

      Guarantee the annual and quarterly financial statements

    • B. 

      Provide reasonable assurance about whether financial statements are free of material misstatements

    • C. 

      Prove the accuracy of an entity's financial statements

    • D. 

      Establish that investing in the entity's stock is a sound investment

  • 35. 
    Financial accounting
    • A. 

      Is required for corporations but not for other types of businesses

    • B. 

      Is exclusively created for internal users of an organization

    • C. 

      Provides information primarily for external decision makers

    • D. 

      Provides information primarily for managers of a company

  • 36. 
    Which of the following would be considered an operating activity on the statement of cash flows?
    • A. 

      Cash received for the sale of common stock

    • B. 

      Cash received for the sale of property

    • C. 

      Cash paid for goods received

    • D. 

      Cash dividends paid to investors

  • 37. 
    The Statement of Cash Flows is divided into three sections based on the type of cash flow. Which of the following represents the correct sequence?
    • A. 

      Investing, financing, operating

    • B. 

      Operating, investing, financing

    • C. 

      Financing, operating, investing

    • D. 

      Investing, operating, financing

  • 38. 
    How does the balance sheet differ from the income statement?
    • A. 

      The income statement reads as of a date and the balance sheet reads for a period ending.

    • B. 

      The income statement covers a period of time and the balance sheet is for a specific moment in time.

    • C. 

      The income statement and the balance sheet do not differ.

    • D. 

      The income statement is for a specific moment in time and the balances sheet covers a period of time

  • 39. 
    Liabilities are
    • A. 

      The excess of revenue over expenses

    • B. 

      An income statement account

    • C. 

      The debts of the company

    • D. 

      The excess of expenses over revenues

  • 40. 
    Hollister Corp reported the following for 2006: total assets, $72,000; total liabilities, $27,000; total common stock, $37,000. Based on this information, retained earnings were
    • A. 

      $62,000

    • B. 

      $8,000

    • C. 

      $82,000

    • D. 

      $27,000

  • 41. 
    Queeg Company billed a client for navigation services provided in July. The payment was received in September. Under the accrual method, when should Queeg recognize the revenue for the navigation services?
    • A. 

      August

    • B. 

      July

    • C. 

      September

    • D. 

      Part in July and part in Septmeber

  • 42. 
    Which of the following does not represent proper segregation of duties?
    • A. 

      A deposits the funds, B records the deposits, C signs the checks and D prepares the bank reconciliations.

    • B. 

      A deposits the funds, B records the deposits and signs the checks, and C prepares the bank reconciliations.

    • C. 

      A deposits the funds, B records the deposits and prepares the bank reconciliations, and C signs the checks.

    • D. 

      A deposits the funds and records the deposits, B signs the checks and C prepares the bank reconciliations.

  • 43. 
    When Karlton Properties, Inc., purchases a one-year insurance policy for $2,400, the appropriate journal entry to record this transaction is
    • A. 

      Cash 2,400 Prepaid Insurance 2,400

    • B. 

      Cash 2,400 Insurance Expense 2,400

    • C. 

      Insurance Expense 2,400 Cash 2,400

    • D. 

      Prepaid Insurance 2,400 Cash 2,400

  • 44. 
    The post-closing trial balance is helpful because it
    • A. 

      Ensures that the permanent account balances are all correct

    • B. 

      Guarantees that the balance sheet will be correct

    • C. 

      Guarantees that the income statement will be correct

    • D. 

      Provides a final check of the equality of debits and credits in the general ledger

  • 45. 
    If a note payable with a principal amount of $250,000 has an interest rate of 7% for four months, what is the amount of interest that will accrue over the four-month period?
    • A. 

      $ 5,760

    • B. 

      $17,500

    • C. 

      $ 1,458

    • D. 

      $ 5,833

  • 46. 
    All of the following might be examples of internal controls designed to ensure all cash transactions are recorded except
    • A. 

      Requiring every employee who handles cash to periodically take a vacation

    • B. 

      Required dual signatures on checks

    • C. 

      Requiring multiple banks be used for separate bank accounts

    • D. 

      Separating the physical custody of cash from the record-keeping

  • 47. 
    5Collection of a $1,500 Accounts Receivable
    • A. 

      Decreases a liability $1,500; increases owners' equity $1,500

    • B. 

      Increases an asset $1,500; decreases a liability $1,500

    • C. 

      Decreases an asset $1,500; decreases a liability $1,500

    • D. 

      Increases an asset $1,500; decreases an asset $1,500

  • 48. 
    An adjusted trial balance
    • A. 

      Is a required financial statement for all annual reports

    • B. 

      Cannot be used to prepare financial statements

    • C. 

      Is prepared after the financial statements are completed

    • D. 

      Verifies that debit and credit totals of the ledger accounts are equal after all of the adjusting entries have been made

  • 49. 
    After preparing an adjusted trial balance, what is the next step in the accounting cycle?
    • A. 

      Prepare the financial statements

    • B. 

      Analyze transactions

    • C. 

      Post adjusting entries

    • D. 

      Prepare the closing entries

  • 50. 
    An adjusting entry is required to reflect which of the following?
    • A. 

      The change in accounting records as time passes

    • B. 

      The adjustment of an account because of theft

    • C. 

      An actual accounting transaction

    • D. 

      A revenue earned but not yet billed

  • 51. 
    Deferred revenues are considered to be
    • A. 

      Owners' equity

    • B. 

      Current or long-term liabilities

    • C. 

      Current assets

    • D. 

      Earned revenue

  • 52. 
    Kos Company bought a vehicle for $50,000. It plans to depreciate the vehicle by $10,000 per year. What entry would Kos record to show depreciation expense for Year 2?
    • A. 

      Depreciation Expense 10,000 Accumulated Deprecation-Vehicles 10,000

    • B. 

      Depreciation on Vehicles 10,000 Vehicle Expense 10,000

    • C. 

      Accumulated Depreciation-Vehicles 10,000 Depreciation Expense 10,000

    • D. 

      Vehicle Expense 10,000 Depreciation 10,000

  • 53. 
    The final step in the accounting cycle is to prepare
    • A. 

      Financial statements

    • B. 

      Adjusting entries

    • C. 

      A post-closing trial balance

    • D. 

      Closing entries

  • 54. 
    A receipt of a portion of an accounts receivable will
    • A. 

      Not affect total assets

    • B. 

      Increase owners' equity

    • C. 

      Increase net income

    • D. 

      Increase assets

  • 55. 
    Generally, all of the following financial statements can be prepared with information from the trial balance except
    • A. 

      Statement of cash flows

    • B. 

      Balance sheet

    • C. 

      Income statement

    • D. 

      Statement of retained earnings

  • 56. 
    The primary difference between deferred expenses and accrued expenses is that deferred expenses have
    • A. 

      Not been recorded and accrued expenses have been

    • B. 

      Been incurred and accrued expenses have not

    • C. 

      Not been paid and accrued expenses have been

    • D. 

      Been recorded and accrued expenses have not

  • 57. 
    If an accountant has credited an asset account for $500 and debited an asset account for $1,000, what would be the appropriate third part of this entry?
    • A. 

      A credit to an expense account

    • B. 

      A debit to a liability account

    • C. 

      A debit to a revenue account

    • D. 

      A credit to a liability account

  • 58. 
    The original cost of a fixed asset less its total accumulated depreciation is equal to its
    • A. 

      Modified value

    • B. 

      Fair market value

    • C. 

      Book value

    • D. 

      Contingent value

  • 59. 
    When accountants analyze transactions as part of the accounting cycle, they do so to make entries in the company's
    • A. 

      General ledger

    • B. 

      Journal

    • C. 

      Accounting equation

    • D. 

      Trial balance

  • 60. 
    Closing entries are generally made into which account?
    • A. 

      Retained Earnings

    • B. 

      Owners' Equity

    • C. 

      Accounts Payable

    • D. 

      Cash

  • 61. 
    Which of the following accounts is least likely to need adjustment at the end of the year?
    • A. 

      Prepaid Insurance

    • B. 

      Supplies

    • C. 

      Land

    • D. 

      Unearned Revenue

  • 62. 
    Which entry shows the receipt of income?
    • A. 

      Cash XXX Accounts Receivable XXX

    • B. 

      Cash XXX Accounts Payable XXX

    • C. 

      Cash XXX Service Revenue XXX

    • D. 

      Service Revenue XXX Cash XXX

  • 63. 
    Which journal entry shows a payment to creditors?
    • A. 

      Accounts Payable XXX Cash XXX

    • B. 

      Salaries Expense XXX Salaries Payable XXX

    • C. 

      Cash XXX Salaries Payable XXX

    • D. 

      Cash XXX Accounts Payable XXX

  • 64. 
    If the Hannon Corporation buys a new machine for its factory for $6,000 cash, what journal entry will be used to record this purchase?
    • A. 

      Machinery 6,000 Machinery Expense 6,000

    • B. 

      Accounts Payable 6,000 Machinery Expense 6,000

    • C. 

      Machinery 6,000 Cash 6,000

    • D. 

      Machinery Expense 6,000 Cash 6,000

  • 65. 
    The assumption that a business can continue to remain in operation in the future is the
    • A. 

      Historical cost assumption

    • B. 

      Time period assumption

    • C. 

      Continuing-concern assumption

    • D. 

      Going-concern assumption

  • 66. 
    A classified balance sheet
    • A. 

      Categorizes the assets and liabilities as current or non-current

    • B. 

      Categorizes liabilities and stockholder's equity as current or non-current

    • C. 

      Records assets at market value and liabilities and stockholder's equity at historical cost

    • D. 

      Records assets at historical cost and liabilities and stockholder's equity at market value

  • 67. 
    Information that is important and timely, with the potential to influence decisions is called
    • A. 

      Relevant

    • B. 

      Reliable

    • C. 

      Comparable

    • D. 

      Consistent

  • 68. 
    Which of the following is not properly classified as a current asset?
    • A. 

      Supplies

    • B. 

      Cash

    • C. 

      Land

    • D. 

      Accounts receivable

  • 69. 
    The time period assumption is the basis for
    • A. 

      Keeping the company's business transactions separate from the owner's transactions

    • B. 

      Dividing the activities of a business into a series of time periods that are meaningful for accounting and reporting purposes

    • C. 

      Recording the company's assets at its historical cost

    • D. 

      Dividing the transactions of a business into twelve equal months following the calendar year

  • 70. 
    Accounting information that is has been developed primarily for use by external users is referred to as
    • A. 

      Cost accounting

    • B. 

      Managerial accounting

    • C. 

      Financial accounting

    • D. 

      Not-for-profit accounting

  • 71. 
    The operating section of the cash flow statement is often believed to be the most important part of the cash flow statement because it shows an investor how much
    • A. 

      Outside financing was needed to keep the operations of the business going

    • B. 

      Net cash increased or decreased during the period

    • C. 

      Cash was generated from the company's primary operations and how that cash was used to pay operating expenses

    • D. 

      Dividends were paid to the stockholders

  • 72. 
    At the beginning of the accounting period, Parker Corporation had assets of $820,000 and liabilities of $340,000. During the year, assets increased by $40,000 and liabilities decreased by $8,000. Based on the information provided, the total amount of stockholder's equity at the end of the accounting period was
    • A. 

      $480,000

    • B. 

      $536,000

    • C. 

      $528,000

    • D. 

      $1,102,000

  • 73. 
    Use the following information to answer the question(s) below:Wange Consulting reports the following account balances as of July 31, 2006:Accounts Payable $ 18,000                                Accounts Receivable $ 14,000Plant Equipment 180,000                                  Common Stock 340,000Cash 130,000                                                      Office Equipment 54,000Land 360,000                                                       Mortgages Payable due 5 yrs 285,000Retained Earnings 80,000                                Salaries Payable 15,000Based on the account detail provided by Wange Consulting, what were the company's total current liabilities on July 31, 2006?
    • A. 

      $18.000

    • B. 

      $33,000

    • C. 

      $303,000

    • D. 

      $365,000

  • 74. 
    Holland Company paid dividends to its stockholders in the amount of $3,000. As a result of this transaction
    • A. 

      Equity increased, liabilities decreased and net income increased

    • B. 

      Assets decreased, liabilities decreased and net income decreased

    • C. 

      Equity decreased, liabilities increased and net income decreased

    • D. 

      Assets decreased, equity decreased and net income is unaffected

  • 75. 
    Which of the following would not be considered a transaction that requires recording in the accounting records of a business?
    • A. 

      The purchase of merchandise on account

    • B. 

      The bank reconciliation performed by the bookkeeper

    • C. 

      The sale of the business's common stock to an investor

    • D. 

      The purchase of merchandise for cash

  • 76. 
    All of the following are steps in the accounting cycle except
    • A. 

      Preparing of the financial statements

    • B. 

      Posting the journal entries to the general ledger

    • C. 

      Analyzing and recording transactions in the journal

    • D. 

      Preparing of the tax return

  • 77. 
    What are the only accounts on the equity side of the accounting equation that are increased with debits?
    • A. 

      Expenses and liabilities

    • B. 

      Revenues and dividends

    • C. 

      Revenues and liabilities

    • D. 

      Expenses and dividends

  • 78. 
    The process of making journal entries occurs
    • A. 

      Once a year

    • B. 

      Repeatedly during the accounting period

    • C. 

      Once a week

    • D. 

      Once a month

  • 79. 
    Which of the following describes the classification and normal balance of the retained earnings account?
    • A. 

      Revenue, credit

    • B. 

      Asset, debit

    • C. 

      Owners' equity, credit

    • D. 

      Expense, debit

  • 80. 
    N accountant for O'Leary Company enters a transaction in which he debits Accounts Receivable and credits Service Revenue. What type of transaction occurred that results in this entry?
    • A. 

      O'Leary performed a service for a client and sent a bill for services rendered.

    • B. 

      O'Leary collected an Account Receivable.

    • C. 

      O'Leary wrote off an Account Receivable that it expects not to collect.

    • D. 

      O'Leary performed a service in exchange for cash.

  • 81. 
    The purchase of an asset on credit results in
    • A. 

      A debit to assets and a debit to liabilities

    • B. 

      A credit to assets and a credit to liabilities

    • C. 

      A debit to assets and a debit to expense

    • D. 

      A debit to assets and a credit to liabilities

  • 82. 
    Working capital provides a measure of
    • A. 

      Solvency

    • B. 

      Stability

    • C. 

      Profitability

    • D. 

      Liquidity

  • 83. 
    Collection of a $1,500 Accounts Receivable
    • A. 

      Decreases a liability $1,500; increases owners' equity $1,500

    • B. 

      Increases an asset $1,500; decreases a liability $1,500

    • C. 

      Decreases an asset $1,500; decreases a liability $1,500

    • D. 

      Increases an asset $1,500; decreases an asset $1,500

  • 84. 
    A complete journal entry does not show
    • A. 

      The account(s) debited listed first

    • B. 

      The date of the transaction

    • C. 

      The account(s) credited listed after the debited account(s)

    • D. 

      The new balance of the accounts affected by the journal entry

  • 85. 
    An account will have a debit balance if the
    • A. 

      Debits exceed the credits

    • B. 

      Credits exceed the debits

    • C. 

      First transaction entered was a debit

    • D. 

      Last transaction entered was a debit

  • 86. 
    Which of the following journal entries properly records the adjusting entry for depreciation expense?
    • A. 

      Depreciation Expense XXX Equipment Expense XXX

    • B. 

      Depreciation Expense XXX Accumulated Depreciation XXX

    • C. 

      Depreciation Expense XXX Cash XXX

    • D. 

      Accumulated Depreciation XXX Depreciation Expense XXX

  • 87. 
    The time period assumption asserts that
    • A. 

      Accountants can evaluate business activities in discrete periods of time

    • B. 

      If an accounting transaction affects more than one time period, then estimates must always be made to determine the effects on other time periods

    • C. 

      If an accounting transaction affects more than one time period, then it is illegal

    • D. 

      An accounting transaction can only affect one period of time

  • 88. 
    The McBain Company performs services for the Buchanan Company. Once McBain finishes its work, McBain sends Buchanan a bill and records revenue on its books, despite having received no cash from Buchanan. For the Buchanan Company, this is an example of
    • A. 

      An accrued expense

    • B. 

      A cash expenditure

    • C. 

      A deferred expense

    • D. 

      A cash sale

  • 89. 
    Roberts Company has total assets of $367,000 and total liabilities of $162,000, what is the company's debt-to-total assets ratio?
    • A. 

      44%

    • B. 

      2.27%

    • C. 

      $205,000

    • D. 

      $529,000

  • 90. 
    When a company closes its books, it also need to do all of the following except
    • A. 

      Have auditors complete their work and sign off on the numbers

    • B. 

      Get preliminary results to management

    • C. 

      Change independent auditors annually

    • D. 

      Issue necessary press releases

  • 91. 
    A company usually determines the amount of supplies used during the period by
    • A. 

      Adding all of the amounts of supplies purchased during the period

    • B. 

      Examining the balance of the supplies account

    • C. 

      Taking the difference between the supplies purchased and the supplies actually paid for during the period

    • D. 

      Taking the difference between the balance in the supplies account and the supplies on hand

  • 92. 
    Buying a one-year insurance policy is an example of a(n)
    • A. 

      Accrual

    • B. 

      Deferral

    • C. 

      Contingent liability

    • D. 

      Unearned revenue

  • 93. 
    Debt-to-total-assets ratio is computed by
    • A. 

      Adding total debt to total assets

    • B. 

      Dividing total assets by total liabilities

    • C. 

      Dividing total liabilities by total assets

    • D. 

      Subtracting total liabilities from total assets

  • 94. 
    Accounting is the process of identifying, measuring and communicating financial business information to various users. These users include all of the following except
    • A. 

      Potential investors

    • B. 

      Creditors

    • C. 

      The FASB (Financial Accounting Standards Board)

    • D. 

      The Securities and Exchange Commission

  • 95. 
    Which of the following is not a way to create equity in a company?
    • A. 

      A corporation records a large profit for the year.

    • B. 

      An investor purchases stock in a large corporation.

    • C. 

      An investor borrows money from a bank.

    • D. 

      An owner of a company deposits money into the business checking account.

  • 96. 
    The ending retained earnings balance in Parker Real Estate increased by $430,000 from the beginning of the year. During the year, Parker Corporation paid a dividend of $150,000. Based on the information provided, what was Parker's net income for the year?
    • A. 

      $580,000

    • B. 

      $300,000

    • C. 

      $280,000

    • D. 

      There is not enough information given to determine net income.

  • 97. 
    Wange Consulting reports the following account balances as of July 31, 2006:Accounts Payable $ 18,000                             Accounts Receivable $ 14,000Plant Equipment 180,000                               Common Stock 340,000Cash 130,000                                                   Office Equipment 54,000Land 360,000                                                    Mortgages Payable due 5 yrs 285,000Retained Earnings 80,000                             Salaries Payable 15,000Based on the account detail provided by Wange Consulting, what were the company's total current assets on July 31, 2006?
    • A. 

      $144,000

    • B. 

      $198,000

    • C. 

      $738,000

    • D. 

      $130,000

  • 98. 
    The time period assumption states that the economic life of a business can be divided into
    • A. 

      Equal time periods for financial reporting

    • B. 

      Meaningful time periods for financial reporting

    • C. 

      A twelve-month period for financial reporting

    • D. 

      Cyclical time periods for financial reporting

  • 99. 
    An item is considered to be material if the
    • A. 

      Item was purchased for a large sum of money

    • B. 

      Cost associated with reporting the item is greater than its benefits

    • C. 

      Item has a life longer than one year

    • D. 

      Item is large enough to influence an investor's decision