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1 Financial Accounting, 4e (Kemp) Chapter 1 Business, Accounting, and You 1.1 Understand the nature of business and the role of accounting in business 1) By taking accounting classes, the student is learning the “language of business.” Answer: TRUE Diff: […]

11 7) According to the cost principle, if an appraised value is known – it should be used for recording purposes. Answer: FALSE Diff: 1 Question Type: Concept 8) Accountants should be highly ethical and must do everything they can […]

21 34) A company purchases supplies for cash. What is the net result on the accounting equation? A) Total Assets will increase and total Liabilities will decrease. B) Total Assets will increase and Stockholders’ Equity will increase. C) Total Assets […]

1 Financial Accounting, 4e (Kemp) Chapter 10 Corporations: Paid-In Capital and Retained Earnings 10.1 Review the characteristics of a corporation 1) Capital stock represents the number of shares of stock a corporation is authorized by a state to sell. Answer: […]

11 12) A company issues 15,000 shares of its $22 par common stock for $32 per share. The amount to be debited to Cash is: A) $330,000. B) $480,000. C) $150,000. D) $810,000. Answer: B Diff: 1 Question Type: Application […]

21 28) Evergreen Building, Inc. has declared a $43,000 cash dividend to shareholders. The company has 4,500 shares of $20-par, 5% preferred stock and 20,000 shares of $20–par common stock. The preferred stock is cumulative. How much will be distributed […]

29 16) HiTech Industries has 15,000 shares of treasury cost which it purchased for $63/share. It later resold 3,300 of those shares for $82/share. The amount to be credited to Paid–in Capital– Treasury Stock is: A) $270,600. B) $62,700. C) […]

1 Financial Accounting, 4e (Kemp) Chapter 11 The Statement of Cash Flows 11.1 Identify the purposes and importance of the statement of cash flows 1) The cash flow statement and Balance Sheet use accrual accounting. Answer: FALSE Diff: 1 Question […]

11 20) Changes in all current assets EXCEPT ________ are adjustments to net income in the operating section of an indirect cash flow statement. A) prepaid expenses B) inventory C) cash D) notes receivable Answer: C Diff: 1 Question Type: […]

20 6) Because depreciation is not cash-based, it is NOT reported in the direct method of the Statement of Cash Flows. Answer: TRUE Diff: 1 Question Type: Concept 7) Gains and losses on the sale of plant, property and equipment […]

1 Financial Accounting, 4e (Kemp) Chapter 12 Financial Statement Analysis 12.1 Understand the purpose and process of financial analysis 1) The economic environment of a business describes how a business is affected by competitors. Answer: FALSE Diff: 1 Question Type: […]

11 Copyright © 2017 Pearson Education, Inc. 36) Which section of the Income Statement is reported net of income taxes or net of income tax savings? A) All sections are reported net of taxes. B) Discontinued operations section C) Continuing […]

21 75) The following is a common-sized Income Statement for Sydney and Caesar Companies. (in thousands) Sydney % Caesar% Net Sales 100.0% 100.0% Cost of Goods Sold 64.6% 60.8% Gross Profit 35.4% 39.2% Operating Expenses Selling, General and Adm. 15.4% […]

30 105) Inventory and prepaid expenses are NOT included in the computation of the: A) quick ratio. B) current ratio. C) debt ratio. D) working capital ratio. Answer: A Diff: 1 Question Type: Concept 106) The formula “net income divided […]

1 Financial Accounting, 4e (Kemp) Chapter 2 Analyzing and Recording Business Transactions 2.1 Define accounts and understand how they are used in accounting 1) Account titles such as Salaries Expense and Rent Expense would be numbered starting with a 3. […]

11 17) A T-account has a $789 debit balance. This account is most likely NOT: A) Common Stock. B) Land. C) Advertising Expense. D) Dividends. Answer: A Diff: 2 Question Type: Application 18) A T-account has a $426 debit balance. […]

21 30) Sky Co. collected $600 from one of its customers for payment on their account. The journal entry would include a: A) debit to Accounts Receivable and a credit to Cash. B) debit to Cash and a credit to […]

1 Financial Accounting, 4e (Kemp) Chapter 3 Adjusting and Closing Entries 3.1 Understand the revenue recognition and matching principles 1) Under accrual accounting, the most important GAAP concepts to remember are the recognition principle for expenses and the matching principle […]

11 36) The difference between the cost of office equipment and accumulated depreciation–office equipment is called: A) market value. B) salvage value. C) book value. D) original value. Answer: C Diff: 1 Question Type: Concept 37) The total dollars in […]

21 28) The unadjusted trial balance for Prepaid Insurance shows a $1,850 balance. $600 of the balance was unexpired at year‘s end. On the adjusted trial balance, the balance for Prepaid Insurance is a: A) $600 debit. B) $600 credit. […]

27 17) Revenues are: A) additions to Retained Earnings. B) subtractions from Retained Earnings. C) additions to dividends. D) subtractions from net income. Answer: A Diff: 1 Question Type: Concept 18) Respectively, Cash, Rent Expense and Accounts Payable are: A) […]

1 Financial Accounting, 4e (Kemp) Chapter 4 Accounting for a Merchandising Business 4.1 Describe the relationships among manufactureres, wholesalers, retailers, and customers 1) Wholesalers purchase large quantities of product from manufacturers and then sell the product to retailers. Answer: TRUE […]

11 22) Discounts allowed for customers who pay their invoices early: A) reduce the cost of the purchased inventory. B) increase the cost of the purchased inventory. C) are called manufacturers’ discounts. D) are called allowances. Answer: A Diff: 2 […]

21 9) Which of the following indicates that the shipment is free on board and the buyer pays all of the shipping and freight costs? A) Cash on delivery B) FOB shipping point C) FOB destination D) 2/10, n/30 Answer: […]

27 23) Kramer and Associates has the following account balances listed in alphabetical order: Accumulated Depreciation, $23,000; Accounts Payable, $8,500, Accounts Receivable, $10,000; Cash, $3,000; Equipment, $41,000, Land, $22,000, Mortgage Payable, $42,000; Prepaid Insurance, $9,500; Supplies, $1,000; Unearned Revenue, $4,000; […]

1 Financial Accounting, 4e (Kemp) Chapter 5 Inventory 5.1 Describe the four different inventory costing methods 1) Merchandise inventory represents the goods that a merchandiser has available to sell to its customers. Answer: TRUE Diff: 1 Question Type: Concept 2) […]

11 18) Lionworks Enterprises had the following inventory data: Date Quantity Unit Cost July 1 Beginning inventory 5 $53 July 4 Purchase 10 $52 July 7 Sale 12 July 11 Purchase 9 $57 July 14 Sale 8 Assuming FIFO, what […]

21 10) The LCM rule must be applied to inventory: A) on an item–by-item basis. B) by categories of items. C) as a whole. D) as a company decides, for there is no requirement to apply LCM. Answer: D Diff: […]

29 16) If a misstatement of inventory occurs, the net income for ________ periods will be misstated. A) 0 B) 1 C) 2 D) 3 Answer: C Diff: 1 Question Type: Concept 17) Which of the following would NOT cause […]

1 Financial Accounting, 4e (Kemp) Chapter 6 The Challenges of Accounting: Standards, Internal Control, Audits, Fraud, and Ethics 6.1 Understand the importance of US GAAP and how it differs from accounting standards in other countries (IFRS) 1) For inventory costing […]

11 6.3 Define fraud and describe the different types of fraud in business 1) In a broad sense, fraud is the use of deception or trickery for personal gain. Answer: TRUE Diff: 1 Question Type: Concept 2) Fraud is always […]

20 47) Sydney just found out that her dog needs an expensive operation. Sydney is a trusted employee in a small firm, and she knows that nobody double checks her deposits. However, her moral beliefs do not allow her to […]

1 Financial Accounting, 4e (Kemp) Chapter 7 Cash and Receivables 7.1 Discuss internal controls for cash and prepare a bank reconciliation 1) Cash is one of the least vulnerable assets that a business has. Answer: FALSE Diff: 1 Question Type: […]

11 8) An example of good internal control over Accounts Receivable is: A) the employee who handles the daily cash receipts also records Accounts Receivable transactions. B) the employee who opens the mail is also in charge of recording Accounts […]

21 5) Allied Inc. has an Account Receivable balance of $27,500 and its Allowance for Uncollectible Accounts balance is $1,250. How will this be reported on the Balance Sheet? A) Accounts Receivable 27,500 Less: Allowance for Uncollectible Accounts 1,250 Accounts […]

28 7) The _____ is a more stringent measure of a business’s liquidity. A) current ratio B) turnover ratio C) quick ratio D) receivables collection ratio Answer: C Diff: 1 Question Type: Concept 8) Given the following data, which company […]

1 Financial Accounting, 4e (Kemp) Chapter 8 Long-Term and Other Assets 8.1 Describe the differences between fixed assets, intangible assets, and natural resources 1) Timber, coal, and other minerals are long-term assets called natural resources. Answer: TRUE Diff: 1 Question […]

11 11) New equipment was purchased on January 1 for $144,000. It has a salvage value of $28,000 and a useful life of 10 years. To the nearest dollar, how much will the depreciation expense for the equipment be for […]

21 7) A piece of equipment that was originally purchased for $33,000, had accumulated depreciation of $25,000, and was sold for $8,000 would recognize a gain of $1,000. Answer: FALSE Diff: 2 Question Type: Application 8) A truck costing $56,000 […]

30 11) If the amount harvested in a timber operation was different every year for four years, you would: A) recompute the depletion expense rate per unit each year. B) use the same depletion expense rate per unit each year. […]

1 Financial Accounting, 4e (Kemp) Chapter 9 Current Liabilities and Long-Term Debt 9.1 Distinguish between known, estimated, and contingent liabilities 1) The majority of a company’s liabilities are estimated liabilities. Answer: FALSE Diff: 1 Question Type: Concept 2) Notes payable […]

11 5) The disclosure of a contingent liability only in the footnotes designates that the possibility of an actual obligation occurring is: A) remote. B) possible. C) probable. D) certain. Answer: B Diff: 1 Question Type: Concept 6) If the […]

21 42) A $260,000 issue of bonds that sold for $255,000 matures on June 25, 2020. The journal entry to record the payment of the bond on the maturity date is to: A) debit Cash, $260,000; credit Bonds payable, $260,000. […]

28 13) Dante’s Designs has current assets of $57,000 long-term assets of $139,000 current liabilities of $49,000 long-term liabilities of $93,000. Dante’s debt ratio is: (Round your final answer to the nearest whole number.) A) 86%. B) 67%. C) 35%. […]