1. The primary objective of financial accounting is:

1. The primary objective of financial accounting is:

1. The primary objective of financial accounting is:To serve the decision-making needs of internal usersTo provide financial statements to help external users analyze and interpret an organizations activitiesTo monitor and control company activitiesTo provide information on both the costs and benefits of managing products and servicesTo know what, when and how much to produce2. Apatha Company has assets of $600,000, liabilities of $250,000 and equity of $350,000. It buys office equipment on credit for $75,000. The effects of this transaction include: Assets increase by $75,000 and expenses increase by $75,000Assets increase by $75,000 and expenses decrease by $75,000Liabilities increase by $75,000 and expenses decrease by $75,000Assets decrease by $75,000 and expenses decrease by $75,000Assets increase by $75,000 and liabilities increase by $75,0003. Source documents include all of the following except: Sales ticketsLedgersChecksPurchase ordersBank statements4. Ethical behavior requires: That an auditors pay not depend on the figures in the clients reportsAuditors to invest in businesses they auditAnalysts to report information favorable to their companiesManagers to use accounting information to benefit themselvesThat an auditor provides a favorable opinion5. A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth $140,000 and purchased for $137,000. The land should be recorded in the purchasers books at: $95,000$137,000$138,500$140,000$150,0006. An asset created by prepayment of an expense is:Recorded as a debit to an unearned revenue accountRecorded as a debit to a prepaid expense accountRecorded as a credit to an unearned revenue accountRecorded as a credit to a prepaid expense accountNot recorded in the accounting records until the earnings process is complete7. Which of the following accounting principles dictates when expenses are recognized? Revenue recognition principleMonetary unit principleBusiness entity principleMatching principleFull disclosure principle8. Risk is: Net income divided by average total assetsThe reward for investmentThe uncertainty about the expected return that will be earned from an investmentUnrelated to expected return9. Fast-Forward had cash inflows from operations of $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was: $40,500 increase $40,500 decrease$134,500 decrease$134,000 increase10. If the liabilities of a business increased $75,000 during a period of time and the equity in the business decreased $30,000 during the same period, the assets of the business must have: Decreased $105,000Decreased $45,000Increased $30,000Increased $45,00011. Net Income: Decreases equityRepresents the amount of assets owners put into a businessEquals assets minus liabilitiesIs the excess of revenues over expensesRepresents the owners claims against assets12. Assets created by selling goods and services on credit are: Accounts payableAccounts receivableLiabilitiesExpenses13. Of the following accounts, the one that normally has a credit balance is: CashOffice EquipmentSales Salaries PayableDividendsSales Salaries Expense14. Prepaid expenses are: Payments made for products and services that do not ever expireClassified as liabilities on the balance sheetDecreases in retained earningsAssets that represent prepayments of future expenses15. Generally Accepted Accounting Principles: Focus on the review of a situationDoes not require financial statementsNever changeIntend to make information on the financial statements relevant, reliable and comparableOversees Security and Exchange Commission16. A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011? $3,250 $3,500$4,000$6,500$7,00017. On January 1, Able Company purchased equipment costing $135,000 with an estimated salvage value of $10,500, and an estimated useful life of five years. What is the amount that should be recorded as depreciation on December 31? $27,000$24,900 $29,100$135,00018. The Retained Earnings account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800 and dividends are $9,000, what is the ending balance in the Retained Earnings account after all closing entries are made? $8,000$15,400$23,400 $17,000$32,40019. The length of time covered by a set of periodic financial statements is referred to as the:Fiscal cycleNatural business yearAccounting periodBusiness cycleOperating cycle20. A classified balance sheet:Measures a companys ability to pay its bills on timeOrganizes assets and liabilities into important subgroupsPresents revenues, expenses and net incomeReports operating, investing and financing activities21. The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:Cash basis accountingThe matching principleThe time period principleAccrual basis accountingRevenue basis accounting22. The adjusted trial balance contains information pertaining to:Asset accounts onlyBalance sheet accounts onlyIncome statement accounts onlyAll general ledger accountsRevenue accounts only23. A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is: 2%20%200%500%$8,00024. A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year? $75$125$175$250$32525. Unearned revenue is reported on the financial statements as: A revenue on the balance sheetA liability on the balance sheetAn unearned revenue on the income statementAn asset on the balance sheetAn operating activity on the statement of cash flows26. An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n): Accrued expenseContra accountAccrued revenueIntangible assetAdjunct account27. On April 30, 2011, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the companys income statement for the year ended December 31, 2011? $500$4,000 $6,000$14,000$18,00028. On June 30, 2011, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2011 for Apricot would include: A debit to an expense for $1,250 A debit to a prepaid expense for $1,250A credit to an expense for $3,750A debit to a prepaid expense for $3,75029. On April 1, 2011, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2011? $1,350$450$1,012.50$337.50 $37.5030. A trial balance prepared after adjustments have been recorded is called a(n): Balance sheetAdjusted trial balanceUnadjusted trial balanceClassified balance sheetUnclassified balance sheet31. The conservatism principle: Requires that when there are more than one equally likely estimate of amounts expected to be received or paid in the future, then the less optimistic amount should be usedRequires that a company use the same accounting methods period after periodRequires that revenues and expenses be reported in the period in which they are earned or incurredRequires that all items of a material nature be included in financial statementsRequires that all inventory items be reported at full cost32. Merchandise inventory includes: All goods owned by a company and held for saleAll goods in transitAll goods on consignmentOnly damaged goodsOnly items that are on the shelf33. A merchandising company: Earns net income by buying and selling merchandiseReceives fees only in exchange for servicesEarns profit from commissions onlyEarns profit from fares onlyBuys products from consumers34. A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000,net income totaled $263,500, and cost of goods sold of $420,000. What is the net sales amount for the period? $1,500,000$1,275,000 $1,725,000$1,521,000$1,479,00035. During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is: Specific identification methodAverage cost methodWeighted-average methodFIFO methodLIFO method36. A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold? $120$124 $128$130$14037. Which of the following is the most serious limitation of internal controls? Computer errorHuman fraud or human errorCost-benefit principleCybercrimeManagement fraud38. The inventory valuation method that tends to smooth out erratic changes in costs is: FIFOWeighted averageLIFOSpecific identificationWIFO39. A company had sales of $375,000 and its gross profit was $157,500. Its cost of goods sold equal: $(217,000)$375,000$157,500$217,500 40. The quick assets are defined as: Cash, short-term investments and inventoryCash, short-term investments and current receivablesCash, inventory and current receivablesCash, noncurrent receivables and prepaid expensesAccounts receivable, inventory and prepaid expenses41. Cost of goods sold: Is another term for merchandise salesIs the term used for the cost of buying and preparing merchandise for saleIs another term for revenueIs also called gross marginIs a term only used by service firms42. A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is: $3,725.00$3,925.00$3,995.00$4,000.50$4,075.0043. Which of the following procedures would weaken the control over cash receipts that arrive through the mail? After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the senders name, the amount and an explanation of why the money is sentThe bank reconciliation is prepared by a person who does not handle cash or record cash receiptsFor safety, only one person should open the mail and that person should immediately deposit the cash received in the bankThe cashier should not also be the record keeper who records the amounts received in the accounting recordsAll of the above are good internal control procedures over cash receipts that arrive through the mail44. The full disclosure principle: Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made and its effect on net incomeRequires that companies use the same accounting method for inventory valuation period after periodIs not subject to the materiality principleIs only applied to retailersIs also called the consistency principle45. J.C. Penny had net sales of $28,496 million, its cost of goods sold was $19,092 million and its net income was $997 million. Its gross margin ratio equals: 3.5%5.2%33% 67%149.3%46. A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This companys current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this companys inventory at the lower of cost or market. $2,550$2,600 $2,700$3,000$3,20047. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for Novembers rent was correctly written and drawn for $7,390, but was erroneously entered in the accounting records as $3,790. When preparing the November bank statement, the company should:Deduct $3,600 from the book balance of cash Add $3,600 to the bank statement balanceAdd $7,390 to the book balance of cashDeduct $3,600 from the bank statement balanceAdd $3,600 to the book balance of cash48. Cash equivalents: Are short-term, highly liquid investmentsInclude 6-month CDsInclude checking accountsAre recorded in petty cashInclude money orders49. A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12 they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at August 15 after the sale? $140$160$210 $380$59050. Given the following information:Petty cash balance $ 450.00 Courier receipt $ 82.50Postage receipt $ 48.00 Office Supplies receipt $ 56.22Business Meal receipt $ 102.34 Cash on hand at the end of the month $ 76.21What is the amount of cash over and short?debit $84.73credit $84.73debit $160.94credit $160.94no cash over or short would be recorded


Comments are closed.