QUESTION 1Accumulated Depreciation is:A contra-asset account.An asset account.An expense account.A revenue account.
- If total assets equal $270,000 and total liabilities equal $202,500, the total owners' equity must equal:
- $67,500.$472,500.$270,000.Cannot be determined from the information given.
- Which financial statement is prepared as of a specific date?
- The balance sheetThe statement of cash flowsThe income statementThe balance sheet, income statement, and statement of cash flows are all for a period of time rather than at a specific date.
- Recognizing revenue when it is earned and not when cash is received and recognizing expenses when the related goods or services are used rather than when they are paid for is called:
- Conservatism.Accrual accounting.Matching.Revenue recognition.
- In which of these inventory approaches is it important to determine the actual cost of a particular inventory item being sold in order to determine cost of goods sold?
- FIFOSpecific identificationAverage costLIFO
- Which of the following is not an important factor in ensuring the integrity of accounting information?
- Professional organizations, such as the American Institute of CPAs.The cost of preparing the financial information.Competence, judgment, and ethical behavior of individual accountants.Institutional factors, such as standards for preparing information.
- Which of the following is correct when a corporation uses cash to pay for an expense?
- Total assets will decrease.Liabilities will increase.Owners' equity will increase.Retained earnings will increase.
- The basic purpose of bookkeeping is to:
- Determine the taxable income of individuals and business entities.Provide financial information about an economic entity.Record the financial transactions of an economic entity.Develop the types of information best-suited to specific managerial decisions.
- Dividends declared:
- Increase net income.Reduce retained earnings.Reduce net income.Increase retained earnings.
- The Sarbanes-Oxley Act of 2002 created
- The Public Company Accounting Oversight Board.The Security and Exchange Commission.The Income Tax Return Overview Board.The Financial Accounting Standards Board.
- If total assets equal $345,000 and total owners' equity equal $120,000, then total liabilities must equal:
- $120,000.$225,000.$465,000.Cannot be determined from the information given.
- The accounting cycle begins with:
- Formation of a business.Posting of journal entries to ledger accounts.Initial recording of business transactions.Preparation of a trial balance.
- Information is cost effective when:
- The value of the information exceeds the cost of producing it.The information is generated by a computer based accounting system.The information is based upon historical costs, rather than upon estimated market values.The information aids management in controlling costs.
- If a company purchases equipment for cash:
- Assets will increase and owners' equity will also increase.Assets will increase and owners' equity will remain unchanged.Assets will increase and owners' equity will decrease.Total assets and owners' equity will remain unchanged.
- The accounting principle that assumes that a company will operate in the foreseeable future is:
- Liquidity.Disclosure.Going concern.Objectivity.
- Harris Corporation's inventory of a particular product includes 200 units purchased at a per-unit cost of $50, and another 100 units purchased at a unit cost of $60. If Harris sells 10 units of this product, the cost of goods sold will be:
- $550.$500.$660.The answer will depend upon the inventory cost flow assumption in use.
- Which of the following results in the cost of goods sold being stated at the most current acquisition costs?
- LIFOSpecific identificationAverage costFIFO
- Closing entries should be made:
- Only when an entity goes out of business.Every year.Only if there is a loss.Only if there is a profit.
- Assets are considered current assets if they are cash or will usually be converted into cash:
- Within a month or less.Within 6 months or less.Within 3 months.Within a year or less.
- When the LIFO costing method is in use, the seller:
- Assumes that the oldest units in inventory are sold first.Assumes that the most recently acquired units are sold first.Must sell the oldest unit in inventory first.Must sell the most recently acquired units first.
- The owner of Westhampton Fish Eatery purchased a new car for his daughter who is away at college at a cost of $43,000 and reported this amount as Delivery Vehicle in the restaurant's balance sheet. The reporting of this item in this manner violated the:
- Going-concern assumption.Cost principle.Objectivity principle.Business entity concept.
- The primary advantage of a just-in-time inventory system is:
- The company is able to use the specific identification method of inventory pricing.The amount of money tied up in inventory is minimized.Customers are afforded a wider selection of merchandise available for immediate delivery.The risks of losing sales opportunities or of having to shut down manufacturing operations because of inventory shortages are minimized.
- The set of standards, assumptions, and concepts that form the "ground rules" for financial reporting in the United States is termed
- The conceptual framework.Statements of Financial Accounting Concepts.Generally accepted accounting principles.American standards for certified public accountants.
- Return on equity measures:
- Solvency.Leverage.Profitability.Both solvency and leverage.
- In a manufacturing company, the "just-in-time" concept of inventory management is best illustrated by:
- Selling finished products before they go out of style.Completing the manufacturing process just before the deadline established by the customer.An automated factory that reduces production time below that of other companies in the industry.Receiving deliveries of materials from suppliers just before the materials are used in the production process.
- Revenues increase owners' equity because:
- Revenues increase net income, which increases retained earnings.Of the matching principle.The conservatism principle requires revenues be recognized with an increase to owners' equity.Revenues are recorded by a debit.
- Publicly traded companies must file audited financial statements with the:
- Retained earnings appears on:
- The balance sheet.The income statement.The statement of cash flows.All three of the financial statements.
- Steps in the accounting cycle include (1) prepare financial statements, (2) post each journal entry to the appropriate ledger account, and (3) journalize transactions. Which of the following reflects the correct order of these steps?
- (3), (2), (1).(3), (1), (2).(1), (2), (3).(2), (1), (3).
- Which one of the following is not considered as one of the three primary financial statements?
- Income statement.Balance sheet.Statement of budgeting activities.Statement of cash flows.
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