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Prelim_1__Spring_07 - David A Dittman Preliminary Exam 1...

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David A. Dittman Exam #______ Preliminary Exam 1 –Spring 2007 Question Sheet True/False Questions (1-15) 1. The debts of a corporation can be generally viewed as debts of its owners. 2. A balance sheet should be dated at a point in time (such as “December 31, 20A”), whereas an income statement should be dated for a period (such as “For the year ended December 31, 20A”). 3. When a company ships products to a customer and bills the customer, the company should recognize revenue as earned. 4. The amount of cash paid by a business for office rent would be reported on the statement of cash flows as a financing activity. 5. Under the continuity assumption, it is assumed that a business will continue to operate into the foreseeable future. 6. When a business pays a previously recorded bill, the liabilities of the business decrease. 7. Usually when a short-term, interest-bearing note payable is paid on its maturity date, an asset is credited and a liability is debited. 8. Accrual basis accounting recognizes revenues when cash is received from the customer. 9. A company that ships product to its customers in January 20B but records them as revenue in December 20A has not violated the revenue principle because they were manufactured and ready for sale before the accounting year end. 10. Revenues increase stockholders’ equity, so they are recorded with credits. 11. An increase in revenue represents an increase in stockholders’ equity. 12. An expense incurred, but not yet recorded nor paid, creates a liability until the payment is made. 13. During the accounting period, an expense paid in advance and debited to prepaid expense was $180; therefore, the adjusting entry for the expiration of this item should be to debit an expense account for $180 and credit a prepaid expense account for $180. 14. Depreciation expense is an example of the need for accountants to make estimates in order to record adjustments. 15. Financial analysts, using modern information technology to gather and analyze information about companies, competitors, the economy and even population trends, make predictions about future company earnings which form the basis of their buy, hold, or sell recommendations. 1
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David A. Dittman Exam #______ Preliminary Exam 1 –Spring 2007 Question Sheet Multiple Choice Questions (16-40) 16. What financial statement would you look at to determine the total assets of a business? A) income statement. B) statement of retained earnings. C) statement of cash flows. D) balance sheet. E) None of the above is correct. 17. During 20B, its second year in operation, Banner Company delivered goods to customers for which customers promised to pay $5,850,000. The amount of cash collected from customers was $5,960,000. Assume all sales were on account and the amount of accounts receivable at the beginning of 20B was $1,200,000. Based on this information, what is the amount of accounts receivable that Banner would report at the end of 20B? A) $1,090,000
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Prelim_1__Spring_07 - David A Dittman Preliminary Exam 1...

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