A list of assets, liabilities, and owners' equity as of a specific date is a (n) (Points: 4)
statement of cash flows
retained earnings statement
2. Which principle determines the amount initially entered into the records for purchases (Points: 4)
Going concern concept
Business entity concept
3. The "rules" of accounting are called (Points: 4)
income tax regulations
Generally Accepted Accounting Principals
4. The portion of a corporation's net income retained in the business is called (Points: 4)
statement of cash flows
5. Brennan, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $40,000 during 2009. Which of the following statements is correct? (Points: 4)
Net income for 2009 totaled $19,000.
Net income for 2009 totaled $59,000.
Total retained earnings increased by $59,000 during 2009
Total retained earnings decreased by $40,000 during 2009
6. Which statement is normally prepared first? (Points: 4)
Statement of cash flows
Retained earnings statement
7. The resources a business owns are called (Points: 4)
8. Which of the following is not a characteristic of a corporation (Points: 4)
Corporations are organized as a seperate legal taxable entity.
Ownership is devided into shares of stock.
Corporations experience an ease in obtaining large amounts of resources by issuing stock.
A corporation's resources are limited to its individual owners' resources.
Corporations make up 20% of all businesses.
9. An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a (Points: 4)
10. Which of the following is NOT an element of the financial accounting system? (Points: 4)
A set of rules for determining the recording of economic events
A framework for preparing financial statements
A set of rules for the stock exchange
Controls to determine whether errors occur during recording
11. The basic financial statements do NOT include the (Points: 4)
statement of cash flows.
12. In October, cash is received in advance of rendering services. Assuming that half of the services have been performed by December 31, the year-end adjustment would (Points: 4)
decrease Unearned Service Revenue and decrease Cash.
increase Accounts Receivable and increase Service Revenue.
increase Cash and increase Service Revenue.
decrease Unearned Service Revenue and increase Service Revenue.
13. Fees receivable would appear on the balance sheet as a(n) (Points: 4)
14. A&M Co. purchased land for $50,000 with $10,000 paid in cash and $40,000 in a note payable due three years from now. What effect does this transaction have on the accounts under the accrual basis of accounting? (Points: 4)
Net increase in assets of $40,000 and a net increase in liabilities of $40,000
Net increase in assets and liabilities of $50,000
Net increase in assets of $50,000 and a net decrease in liabilities of $40,000
Net increase in assets of $60,000 and a net decrease in liabilities of $40,000
15. As time passes, fixed assets, other than land, lose their capacity to provide useful services. To account for this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a process called (Points: 4)
16. On April 1, Tule, Inc. paid $3,600 for an insurance premium on a three-year insurance policy. How does this transaction affect Tule’s accounts? (Points: 4)
Increase insurance expense and decrease cash by $3,600 each
Increase prepaid insurance and decrease cash by $3,600 each
Increase unearned insurance and decrease cash by $3,600 each
No effect at this time
17. Unearned revenue is what type of an account? (Points: 4)
18. If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as (Points: 4)
FOB shipping point.
19. The amount of the total cash paid to the seller for merchandise purchased would normally include (Points: 4)
only the list price.
only the sales tax.
the list price plus the sales tax.
the list price less the sales tax.
20. Using a perpetual inventory system, the purchase of $30,000 of merchandise on account would include a(n) (Points: 4)
increase in Sales.
increase in Merchandise Inventory.
decrease in Merchandise Inventory.
decrease in Sales.
21. Profit is equal to (Points: 4)
sales plus (sales discounts and sales returns and allowances) plus cost of merchandise sold.
sales plus sales returns and allowances less sales discounts less cost of merchandise sold.
sales plus sales discounts less sales returns and allowances less cost of merchandise sold.
sales less (sales discounts and sales returns and allowances) less cost of merchandise sold.
22. Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense? (Points: 4)
23. Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as (Points: 4)
24. ABC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $16,000 in operating expenses, and $2,000 in other income. What is ABC Company’s gross profit? (Points: 4)
25. Accompanying the bank statement was a debit memorandum for bank service charges. What adjustment is required in the depositor’s accounts? (Points: 4)
Increase Miscellaneous Expense; decrease Cash
Increase Cash; increase Other Income
Increase Cash; increase Accounts Payable
Decrease Accounts Payable; decrease Cash
26. Which of the following should NOT be considered cash by an accountant? (Points: 4)
Bank checking accounts
27. Which of the following would be deducted from the balance per books on a bank reconciliation? (Points: 4)
Deposits in transit
Notes collected by the bank
28. The bank reconciliation (Points: 4)
should be prepared by an employee who records cash transactions.
is part of the internal control system.
is for information purposes only.
is sent to the bank for verification.
29. Requiring employees to take annual vacations is part of which element of internal control? (Points: 4)
The control environment
30. An element of internal control is (Points: 4)
31. Which of the following reflects a weak internal control system? (Points: 4)
All employees are well supervised.
A single employee is responsible for comparing a receiving report to an invoice.
All employees must take their vacations.
A single employee is responsible for the collecting and recording of cash
32. If the cost of an item of inventory is $60 and the current replacement cost is $65, the amount included in inventory according to the lower of cost or market is (Points: 4)
33. If the cost of an item of inventory is $70, the current replacement cost is $65, and the sales price is $85, the amount included in inventory according to the lower of cost or market is (Points: 4)
34. The term “inventory” indicates (Points: 4)
merchandise held for sale in the normal course of business.
materials in the process of production or held for production.
both of these.
neither of these.
35. After the accounts are adjusted and closed at the end of the fiscal year, Accounts Receivable has a balance of $450,000 and Allowance for Doubtful Accounts has a balance of $25,000. What is the net realizable value of the accounts receivable? (Points: 4)
36. The process of a company selling its accounts receivable to another company is referred to as (Points: 4)
37. Receivables are usually a significant portion of (Points: 4)
total current liabilities.
total current assets.
38. Which of the following is NOT an intangible asset? (Points: 4)
39. If a fixed asset is sold and the book value is less than cash received, the company must (Points: 4)
recognize a loss on the income statement under other expenses.
recognize a loss on the income statement under operating expenses.
recognize a gain on the income statement under other revenues.
Gains and losses are not to be recognized upon the sell of fixed assets.
40. Salvage value has a similar meaning as (Points: 4)
both residual value and scrap value.
41. Book value is defined as (Points: 4)
current market value less residual value.
cost less residual value.
current market value less accumulated depreciation.
cost less accumulated depreciation.
42. Which of the following expenditures would NOT be included in the cost of an asset?< (Points: 4)
43. A capital expenditure would appear on the (Points: 4)
income statement under operating expenses.
balance sheet under fixed assets.
balance sheet under current assets.
income statement under other expenses.
44. A patent was purchased for $670,000 with a legal life of 20 years. Management estimates that the patent has an 8-year economic life. The entry to record amortization would include< (Points: 4)
an increase in amortization expense for $33,500.
an increase in research and development expense for $670,000.
a decrease in patent for $83,750.
an increase in accumulated amortization for $670,000.
45. Significant changes in stockholders’ equity are reported in the (Points: 4)
statement of stockholders’ equity.
retained earnings statement.
statement of cash flows.
46. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? (Points: 4)
47. Stockholders’ equity (Points: 4)
is usually equal to cash on hand.
includes paid-in capital and liabilities.
includes retained earnings and paid-in capital.
is shown on the income statement.
48. The market interest rate related to a bond is also called the (Points: 4)
stated interest rate.
effective interest rate.
contract interest rate.
49. Most employers are required to withhold from employees for (Points: 4)
both federal and state unemployment compensation.
only federal unemployment compensation tax.
only federal income tax.
only state unemployment compensation tax.
50. The total earnings of an employee for a payroll period are referred to as (Points: 4)
pay net of taxes.