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Multiple choice 1. Accounting a. is only useful for stockholders. helps users make informed decisions. is a type of organization authorized by the...

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I. Multiple choice 1. Accounting a. is only useful for stockholders. b. helps users make informed decisions. c. is a type of organization authorized by the federal government. d. all of the above. 2. Accrual accounting: a. is designed to match revenues and expenses. b. results in the balance sheet showing the fair market value of the entity’s assets. c. means that expenses are recorded when they are paid. d. cannot result in the entity having net income unless cash is received from customers. 3. Which of the following statements is true concerning assets? a. Assets are recorded at cost and adjusted for inflation. b. Assets are recorded at market value for financial reporting because historical cost is arbitrary. c. Accounting principles require that companies report assets on the income statement. d. Assets are measured using the cost concept. 4. Under which inventory system are cost of goods sold and the inventory balance determined only at the end of the accounting period? a. Periodic b. Perpetual c. Both the periodic and perpetual d. Neither the periodic nor perpetual 5. Accumulated depreciation a. increases with a credit. b. decreases with a credit. c. increases with a debit. d. is a temporary account. 6. Judgment a. must be used in deciding what to report on financial statements. b. is not necessary in accounting since the FASB creates accounting principles. c. allows accounting to be an exact science. d. is not routine in accounting since auditors verify all financial statement data. 7. How is the balance sheet linked to the other financial statements? a. the beginning retained earnings balance on the statement of retained earnings becomes the amount of retained earnings reported on the balance sheet. b. Retained earnings is added to total assets and reported on the balance sheet. c. Net income increases retained earnings on the statement of retained earnings, which ultimately increases retained earnings on the balance sheet. d. There is no link between the balance sheet and the other financial statements. 1
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8. What of the financial statements shows the amount of dividends distributed to the owners? a. Balance sheet b. Statement of retained earnings c. Income statement d. Income statement and statement of retained 9. Information that is material means that an error or alternative method of handling a transaction a. would possibly affect the judgment of someone relying on the financial statements. b. would not affect the decisions of users. c. might cause a company to understate its earnings for the accounting period. d. could increase the profitability of a company. 10. Intangible assets do not include a. Franchises. b. Copyrights. c. Goodwill d. Receivables 11. Debit entries are used to a. increase asset accounts. b. decrease expense accounts. c. increase liability accounts. d. increase revenue accounts. 12. Which of the following accounts is increased by a credit entry? a. Sales revenues b. Salary expense c. Accounts receivable d. Dividends 13. Liz’s Lunches operates a catering service. Conceptually, Liz should recognize revenue from its catering service at the date when a. customer places the order. b. customer’s payment is received. c. invoice is mailed to the customer. d. meal is served. 14. What does the phrase, “Revenue is recognized at the point of sale,” mean? a. Revenue is recorded in a journal entry when the goods are received from a supplier, and reported on the income statement when sold to the customer. b. Revenue is recorded in a journal entry and reported on the income statement when the cash is received from the customer. c. Revenue is recorded in a journal entry when the goods are sold to a customer, and reported on the income statement when the cash payment is received from the customer. d. Revenue is recorded in a journal entry and reported on the income statement when goods are sold and delivered to a customer. 15. Which concept is important to accrual accounting? a. Time period, because accrual accounting divides earnings into time periods. b. Monetary unit, because inflation is a big factor in the environment. c. Cash basis, because if cash is not received, revenue is not accrued. d. Entity concept, because personal transactions must be separated from business transactions. 2
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I. Multiple choice
1. Accounting
a. is only useful for stockholders.
b. helps users make informed decisions.
c. is a type of organization authorized by the federal government.
d. all of the above....

This question was asked on Dec 20, 2012 and answered on Dec 21, 2012.

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