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41 items

1
in Business
Matching revenues and expenses refers to:
A. having revenues equal expenses.
B. recording revenues when a product is sold or a service is rendered.
C. accurately reflecting the results of operations for a fiscal period.
D. recording revenues when cash is received.
Answer: C
2
in Business
The time frame associated with an income statement is:
A. a past period of time.
B. a function of the information included in it.
C. a future period of time.
D. a point in time in the past.
Answer: A
3
in Business
The balance sheet might also be called:
A. Statement of Financial Position.
B. Statement of Equity.
C. Statement of Changes in Financial Position.
D. Statement of Assets.
Answer: A
4
in Business
When a firm purchases supplies for its business:
A. the supplies account should always be debited.
B. either the supplies account or the supplies expense account should be credited.
C. the supplies expense account should always be debited.
D. an adjustment will probably be required as supplies are used.
Answer: D
5
in Business
The effect of an adjustment is:
A. to increase the accuracy of the financial statements.
B. to close the books.
C. to correct an entry that was not in balance.
D. to record cash receipts and payments not previously recorded.
Answer: A
6
in Business
A debit entry will:
A. always decrease the account balance.
B. increase the balance of a revenue account.
C. always increase the account balance.
D. increase the balance of an expense account.
Answer: D
7
in Business
An expanded version of the accounting equation could be:
A. Assets = Liabilities + Paid-in Capital + Beginning Retained Earnings + Revenues − Expenses − Dividends
B. Assets − Liabilities = Paid-in Capital − Revenues − Expenses
C. Assets + Revenues = Liabilities + Stockholders' Equity − Expenses
D. Assets = Liabilities + Paid-in Capital − Revenues + Expenses
Answer: A
8
in Business
A concept or principle that relates to transactions is:
A. materiality.
B. full disclosure.
C. consistency.
D. original cost.
Answer: D
9
in Business
The effect of an error resulting in an understatement of ending inventory is to:
A. overstate operating expenses of the current period.
B. overstate cost of goods sold of the current period.
C. overstate the next period's beginning inventory.
D. understate cost of goods sold of the current period.
Answer: B
10
in Business
The current assets of most companies are usually made up of:
A. cash and assets expected to be converted to cash within a year.
B. cash, marketable securities, and accounts and notes receivable.
C. a very small proportion (less than 10%) of the total assets of the entity.
D. assets that are currently used in the operations of the company.
Answer: A
11
in Business
An organization's system of internal control is designed primarily to:
A. ensure that the organization's balance sheet will always balance.
B. ensure that no employees steal the organization's property.
C. increase efficiency by letting one employee handle all aspects of a transaction from beginning to end.
D. provide an operating framework for all employees as they work to achieve the organization's goals.
Answer: D
12
in Business
The Allowance for Bad Debts account is a(n):
A. contra revenue.
B. current asset.
C. contra current asset.
D. expense.
Answer: C
13
in Business
A cash equivalent is a current asset that:
A. is readily convertible into cash with a minimal risk.
B. is readily convertible into cash with a substantial risk.
C. will be converted to cash within one year.
D. will be converted to cash within one month.
Answer: A
14
in Business
One inventory cost flow assumption will result in different cost of goods sold from another inventory cost flow assumption only if:
A. price levels do not change during the year.
B. inventory quantities change from the beginning to end of the year.
C. a new product is added to inventory during the year.
D. the cost of inventory items changes during the year.
Answer: D
15
in Business
When a firm uses the LIFO inventory cost flow assumption:
A. ending inventory will be greater than if FIFO were used.
B. net income will be greater than if FIFO were used.
C. better matching of revenue and expense is achieved than under FIFO.
D. cost of goods sold will be the same as if FIFO were used.
Answer: C
16
in Business
An accounts receivable results from the sale of:
A. the firm's common stock.
B. property, plant, and equipment for cash.
C. goods and services to customers for cash.
D. goods and services to customers on account.
Answer: D
17
in Business
When a manufacturer invests in short-term marketable securities:
A. the return on investment is more important than the risk involved.
B. the securities are likely to have a maturity date more than a year in the future.
C. risk avoidance is of great importance.
D. the market value of the securities is likely to fluctuate significantly.
Answer: C
18
in Business
Which of the following inventory accounting systems has been made much more feasible as a result of computer systems developments?
A. Periodic.
B. Perpetual.
C. Punctual.
D. Physical.
Answer: B
19
in Business
Which of the following is not an example of an inventory account a manufacturing firm might use?
A. Finished goods inventory.
B. Merchandise inventory.
C. Work in process inventory.
D. Raw materials inventory.
Answer: B
20
in Business
The balance sheet presentation of accounts receivable net of the allowance for bad debts has the effect of stating accounts receivable at:
A. net realizable value.
B. original cost.
C. market value.
D. lower of cost or market.
Answer: A
21
in Business
In an inflationary economic environment, the selling price set for a firm's products will:
A. be derived from the weighted average cost of inventory.
B. be higher if FIFO is used than if LIFO is used.
C. not be affected by the cost flow assumption used.
D. be higher if LIFO is used than if FIFO is used.
Answer: C
22
in Business
The accounting concept or principle applied when an allowance is provided for estimated uncollectible accounts receivable is:
A. matching revenue and expense.
B. consistency.
C. objectivity.
D. original cost.
Answer: A
23
in Business
Expenditures capitalized as long-lived assets generally include those expenditures that:
A. are made for normal repairs to maintain the usefulness of the asset over a number of years.
B. are material in amount and that have an economic benefit to the entity only in the current year.
C. are material in amount and that have an economic benefit to the entity that extends beyond the current year.
D. are for items that have a physical life of more than a year, regardless of their cost.
Answer: C
24
in Business
When an accelerated depreciation method is used to calculate depreciation expense:
A. the accumulated depreciation account balance will increase by a larger amount in the last half of an asset's life than if straight-line depreciation is used.
B. the net book value of the asset at the end of its useful life will be less than if straight-line depreciation is used.
C. the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used.
D. depreciation expense will be less in the early years of the asset's life than if straight-line depreciation is used.
Answer: C
25
in Business
The intangible asset goodwill:
A. is recorded on the parent company books at the time a subsidiary company is sold or otherwise disposed of
B. may arise when one company purchases another company.
C. arises because the fair value of a company's inventory is greater than its cost.
D. represents management's assessment of the value of the superior customer service provided by the company.
Answer: B
26
in Business
Depreciation, in accounting, is a process that results in:
A. an accurate measurement of the economic usefulness of an asset.
B. accumulating cash for the replacement of the asset.
C. spreading the cost of an asset over its useful life to the entity.
D. depreciable assets being reported in the balance sheet at their fair value.
Answer: C
27
in Business
Goodwill is an asset that arises because the present value of an acquired company's estimated future earnings, discounted at the acquiring firm's ROI:
A. is less than the fair value of the net assets of the acquired company.
B. is less than the fair value of the net assets of the acquiring company.
C. is more than the fair value of the net assets of the acquired company.
D. is more than the fair value of the net assets of the acquiring company.
Answer: C
28
in Business
The principal challenge to calculating depletion is estimating:
A. the cost of the asset.
B. the quantity of material to be recovered.
C. the salvage value of the exploration equipment.
D. the demand for the product.
Answer: B
29
in Business
If there is a loss on the disposal of a depreciable asset:
A. no cash was received in the disposal transaction.
B. in retrospect, the life over which the asset was depreciated was too short.
C. in retrospect, the depreciation expense recognized over the asset's life was too low.
D. the net book value of the asset was negative.
Answer: C
30
in Business
Which of the following statements best describes the process of accounting for depreciation?
A. A process for recognizing the cost of an asset that should be matched against revenue earned as a result of using the asset.
B. A process for recognizing all of the cost associated with using an asset in a revenue generating activity.
C. A process that attempts to recognize loss in economic value over a period of time.
D. A process for setting aside cash so funds will be available to replace the asset.
Answer: A
31
in Business
Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all subject to:
A. consolidation.
B. depreciation.
C. amortization.
D. depletion.
Answer: C
32
in Business
The entry to record depreciation expense:
A. decreases working capital and decreases net income.
B. decreases a contra asset and decreases net income.
C. decreases an asset and increases a contra asset.
D. increases a contra asset and decreases net income.
Answer: D
33
in Business
Many current liabilities are affected by accrual accounting entries. This happens because:
A. accrual accounting frequently involves recognizing liabilities before they are incurred.
B. liabilities are usually paid when they are incurred.
C. accrual accounting involves recognizing liabilities when expenses have been incurred but not yet paid.
D. the only way to reduce a liability account balance is with an adjusting entry.
Answer: C
34
in Business
The current liability for Wages Payable (or Accrued Payroll) represents the:
A. employer's liability for various withholdings that taken out of the gross pay earned by employees.
B. net pay earned by employees for which they have not yet been paid.
C. gross pay earned by employees for which they have not yet been paid.
D. employer's federal and state payroll tax obligation.
Answer: B
35
in Business
A magazine publisher has an account called "Unearned Subscription Revenue." The transaction that causes the balance of this account to decrease is:
A. magazines are printed for the publisher.
B. magazines are mailed to subscribers.
C. cash is received from new subscribers.
D. subscriptions are sold to new subscribers.
Answer: B
36
in Business
A working capital loan will generally:
A. require that interest (if any) be paid monthly.
B. not have an interest rate.
C. be classified as a noncurrent liability.
D. not affect working capital.
Answer: D
37
in Business
Current maturities of long-term debt:
A. permit a more accurate determination of working capital.
B. reflect overdue installments of bonds payable.
C. are classified with long-term debt.
D. represent cash that has been set aside for debt payments due within a year.
Answer: A
38
in Business
Interest on a Note Payable is most appropriately accrued:
A. when principal payments on the note are made.
B. as of the end of each accounting period during which the note is a liability.
C. when the interest is paid.
D. when the note is signed.
Answer: B
39
in Business
The liability for product warranty claims is an example of a liability that:
A. has been recorded in the process of matching revenue and expense.
B. also resulted in a reduction of net income.
C. has been calculated using estimates.
D. All of these answers are correct.
Answer: D
40
in Business
An Accounts Payable normally results from which of the following transactions?
A. Purchasing goods and services from suppliers on credit
B. Purchasing accounts for cash
C. Purchasing land on credit
D. Purchasing buildings and equipment on credit
Answer: A
41
in Business
A transaction that is likely to cause an increase in a current liability is:
A. depreciation of equipment.
B. accrual of interest expense.
C. accrual of bad debts expense.
D. payment of accrued wages.
Answer: B
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