Fundamentals Of Financial Accounting 5th Edition

All corporations acquire financing by issuing stock for sale on public stock exchanges. Answer: FalseFeedback: Most corporations start out as private companies and will apply to become public companies ("go public") if they need a lot of financing. Financing can also be acquired by borrowing from banks. Answer: FalseFeedback: Most corporations start

A contra account is added to the account it offsets. Answer: FalseFeedback: A contra-account is an account that is an offset to, or reduction of, another account. Answer: FalseFeedback: A contra-account is an account that is an offset to, or reduction of, another account. Answer: False Feedback: A contra-account is an account that is

On July 1, Darin Company sold inventory costing $4,500 to Dee Company for $6,000, terms 2/10, n/30. Both companies use a perpetual inventory system. What journal entry will be recorded by Dee Company on July 1? A) Debit Purchases and credit Accounts Payable for $6,000 B) Debit Inventory and credit Accounts Receivable

Flynn Company purchased a building for $400,000. At the end of the current year, the book value of the building is $220,000 and its fair value is $180,000. Assuming the building is rented to a tenant, the sum of future cash flows from the rental of the building is expected

Goods placed in inventory are initially recorded at: A) market value. B) the amount paid to acquire the asset. C) the amount paid to prepare the asset for sale to customers. D) the amount paid to acquire the asset and prepare it for sale. Answer: DFeedback: Goods placed in inventory are initially recorded at cost,

Which of the following will occur when inventory costs are decreasing? A) FIFO will result in a lower net income but a higher ending inventory than will LIFO. B) FIFO will result in a higher net income but a lower ending inventory than will LIFO. C) FIFO will result in a lower net

On December 31, 2015, a company had assets of $16 billion and stockholders' equity of $8 billion. That same company had assets of $20 billion and stockholders' equity of $9 billion as of December 31, 2016. During 2016, the company reported total sales revenue of $9 billion and total expenses of

Use the information above to answer the following question. What is the amount of retained earnings on the Balance Sheet at the end of Year 4? A) $7,725. B) $6,725. C) $4,800. D) $4,725. Answer: DFeedback:Total revenues = Service Revenue + Other Revenue= $10,000 + $300 = $10,300 Answer: DFeedback:Total revenues = Service Revenue + Other

Use the information above to answer the following question. Assuming that the company uses cash basis accounting, what is net income for May? Melody's Piano School operations for the month of May were limited to the following transactions: - Provided $400 of piano lessons to students who paid in cash. - Provided $100

The gross earnings for all employees is credited to Salaries and Salaries and Wages Payable. Answer: FalseFeedback: Gross earnings is debited to Salaries and Salaries and Wages Expense; net pay is debited to Salaries and Wages Payable. Answer: FalseFeedback: Gross earnings is debited to Salaries and Salaries and Wages Expense; net pay

Inventory is reported on the balance sheet as a current asset. Answer: TrueFeedback: Because inventory will be used or converted into cash within one year, it is reported on the balance sheet as a current asset. Answer: TrueFeedback: Because inventory will be used or converted into cash within one year, it is

Which of the following statements best describes a contingent liability? A) The amount of a contingent liability is known and will definitely have to be paid in the future. B) A contingent liability is a potential liability that has arisen because of a past transaction or event, but its ultimate outcome will

The useful life of an asset is always measured in units of time, such as years or months. Answer: FalseFeedback: Although the useful life of an asset is often measured in years, it can also be measured in units of output, hours of operation, etc. Answer: FalseFeedback: Although the useful life of

Use the information above to answer the following question. What adjusting entry should Brickyard make on June 30 before preparing its annual financial statements? A) Debit Interest Expense and credit Interest Payable for $4,000 B) Debit Interest Expense and credit Interest Payable for $4,000 C) Debit Interest Payable and credit Interest Expense for

Use the information above to answer the following question. What is the ending balance of the Cash account? Cash Beg. Bal. 123,900 (a) 14,700 6,000 (c) (b) 38,300 5,800 (d) 7,400 (e) 12,000 (f) 11,200 (g) A) $219,300 B) $113,300 C) $28,500 D) $134,500 Answer: DFeedback:Beginning debit balance of $123,900 + $14,700+ $38,300 - $6,000 - $5,800 - $7,400 - $12,000 - $11,200

Assets reported on the balance sheet include: A) Accounts Receivable, Sales Revenue, and Cash. B) Equipment, Supplies Expense, and Cash. C) Accounts Payable, Retained Earnings, and Cash. D) Accounts Receivable, Equipment, and Cash. Answer: DFeedback: Accounts Receivable, Equipment, and Cash are assets reported on the balance sheet. Accounts Payable is a liability, while Retained Earnings

Assume the periodic inventory method is used. When LIFO is used, costs are assigned to cost of goods sold using the most recent purchase at the time of the sale. Answer: FalseFeedback: Last-in, first-out (LIFO) assumes that the newest goods (the last in to inventory)are the first ones sold (the first

A dance studio accepts $1,500 to provide a series of dance lessons to a youth group during the month of July. The studio decides to record the revenue in July. The studio incurs rent, utilities, and salaries expenses in July. The studio decides to record those expenses in August, when

If the Retained Earnings account is debited for $4,000 in the closing process, the company had a net income of $4,000. Answer: FalseFeedback: The closing entries include a debit to each revenue account for the amount of itscredit balance, a credit to each expense account for the amount of its debit

A creditor might look at a company's financial statements to determine if the: A) company is likely to have the resources to repay its debts. B) company's stock price is likely to fall, signaling a good time to sell. C) company's stock price is likely to rise, signaling a good time to buy. D)

Which of the following statements about stock dividends is correct? A) Stock dividends are reported on the income statement. B) Stock dividends are reported on the Statement of Stockholders' Equity. C) Stock dividends increase total stockholders' equity. D) Stock dividends decrease total stockholders' equity. Answer: BFeedback: Stock dividends are recorded by a debit to Retained

Which is the first financial statement that should prepared after the adjusted trial balance has been prepared? A) Balance Sheet B) Income Statement C) Statement of Cash Flows D) Statement of Retained Earnings Answer: BFeedback: The first financial statement prepared is the income statement. The amount of net income from that statement is then transferred

A company has positive cash flow from investing and financing activities, but negative cash flow from operating activities. The likely result is: A) investors may not buy the company's stock because the receipt of dividends is unlikely. B) investors will continue to buy stock since the company's growth prospects are good. C) Creditors

T. Powers Company's financial statements on December 31, 2015, showed the following: Net Sales $275,000 Fixed Assets, January 1 $ 73,000 Fixed Assets, December 31 $ 67,000 Total Assets, January 1 $ 97,000 Total Assets, December 31 $100,000 What is the fixed asset turnover for 2015 (rounded to two decimal places)? A) 3.93 B) 2.60 C) 4.10 D) 2.79 Answer: AFeedback:

Gross profit is not a ledger account name. Answer: TrueFeedback: Gross profit is a subtotal on the multistep income statement. It is not the name of an account. Answer: TrueFeedback: Gross profit is a subtotal on the multistep income statement. It is not the name of an account. Answer: True Feedback: Gross profit is

A company purchases a $300,000 building, paying $200,000 in cash and signing a $100,000 promissory note. What will be reported on the statement of cash flows as a result of this transaction? A) A $300,000 cash outflow from investing activities B) A $200,000 cash outflow from investing activities and a $100,000 cash

The receipt of cash is one of the operating activities of: A) companies that sell goods but not companies that sell services. B) companies that sell to consumers but do not sell to other companies. C) merchandising, manufacturing, and service companies. D) companies that sell goods they bought from others but not of companies

Cash that is legally or contractually required to be set aside for a specific purpose cannot be reported with Cash and Cash Equivalents on the balance sheet. Answer: TrueFeedback: Companies are sometimes legally or contractually required to set aside cash for a specific purpose and are not allowed to use it

On December 31, 2015, Hoosier Inc. paid $10,000 to rent a storage facility from July 1, 2016 to July 1, 2017. Which of the following statements about the effect of this transaction on Hoosier' financial statements is correct? A) Prepaid Rent in the amount of $10,000 will be reported as a liability

LIFO and weighted average results will be the same using either a perpetual or periodic system. Answer: FalseFeedback: The LIFO and weighted average calculations differ between periodic and perpetual inventory systems. FIFO and specific identification results will be the same using either a perpetual or periodic system. Answer: FalseFeedback: The LIFO and

Which of the following is the equation for cost of goods sold? A) Beginning inventory + Purchases - Ending inventory B) Beginning inventory + Purchases + Ending inventory C) Net purchases - Ending inventory D) Ending inventory + Purchases - Beginning inventory Answer: AFeedback: Cost of goods sold = Beginning inventory + Purchases - Ending

When originally purchased, a vehicle had an estimated useful life of 8 years. The vehicle cost $25,000 and its estimated residual value is $3,000. After 3 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 5 years and there was no change in the

The purpose of adjusting entries is to transfer net income and dividends to Retained Earnings. Answer: FalseFeedback: Adjustments need to be made at the end of an accounting period to: (1) update amounts already recorded in the accounting records and (2) include events that occurred but had not yet been recorded. Answer:

A company makes a deferral adjustment that decreased a liability. This must mean that a(n): A) expense account was decreased by the same amount. B) expense account was increased by the same amount. C) revenue account was increased by the same amount. D) revenue account was decreased by the same amount. Answer: CFeedback: Previously deferred

When the lower of cost or market rule requires an inventory adjustment, the: A) adjustment usually, but not always, reduces the book value of inventory. B) write-down is usually reported as a part of cost of goods sold. C) inventory adjustment is recorded in a contra-account called Inventory Allowances. D) write-down does not affect

Dividends in arrears are reported as current liabilities on the balance sheet. Answer: FalseFeedback: Dividends are not liabilities until they are declared by the board of directors. Answer: FalseFeedback: Dividends are not liabilities until they are declared by the board of directors. Answer: False Feedback: Dividends are not liabilities until they are declared by

Your company buys a computer server that it expects to use for eight years and then sell when it upgrades to a more powerful model. The server would probably be used by the business that buys it at that time for another three years. The useful life of the server for your

Income tax expense would be found on the income statement of a corporation, but not on the income statement of a sole proprietorship. Answer: TrueFeedback: Corporations are taxed on their net income, whereas the profits of a sole proprietorship are taxed to the owner.[/cpmembership] Answer: TrueFeedback: Corporations are taxed on their net

Current liabilities could include all of the following except: A) an accounts payable due in 30 days. B) a notes payable due in 9 months. C) a bank loan due in 18 months. D) any part of long-term debt due during the current period. Answer: CFeedback: Current liabilities are defined as short-term obligations that will

GE buys back 300,000 shares of its stock from investors at $45 a share. Two years later it reissues this stock for $65 a share. The stock reissue would be recorded with a debit to Cash for: A) $19.5 million and a credit to Treasury Stock for $19.5 million. B) $13.5 million,

Investors are often interested in the amount of net income distributed as dividends. Where would investors look for this information in the company's annual report? A) Statement of retained earnings B) Balance sheet C) Notes to the financial statements D) Income statement Answer: AFeedback: The statement of retained earnings reports the amount of cash dividends

Which of the following would be included in cash flows from operating activities? A) Cash received from customers B) Cash received from an issuance of bonds C) Cash dividends paid to stockholders D) Cash used for purchases of equipment Answer: AFeedback: Operating activities are cash inflows and outflows related directly to the revenues and expenses

On October 1, Angelica Inc. signs a note for $200,000 to provide the funds needed to build a new facility. The note is due in 10 years, includes an annual interest rate at 7%, and requires semiannual interest payments each April and October. The journal entry to record the issuance

A company's trial balance included the following account balances at year-end: The amount of net sales reported on the income statement would be: A) $114,400. B) $128,400. C) $112,000. D) $111,400. Answer: CFeedback:Net sales = Sales revenue - Sales returns & allowances - Sales discounts= $115,400 - $1,000 - $1,400 = $112,000 Answer: CFeedback:Net sales = Sales

Langley Company uses the allowance method. During January 2016, Langley writes off a $500 customer account balance when it becomes clear that the customer will never pay. The entry to record the write-off will: A) decrease total assets by $500. B) decrease net income for 2016 by $500. C) decrease net accounts receivable by

The following information was summarized from the adjusted trial balance of Reliance Yacht Repair, Inc. as of September 30, 2015, the end of the company's fiscal year. Required: Part a. Prepare the closing entry for the company for the year ended September 30, 2015. Part b. Draw a T-account for the Retained Earnings

The closing process includes a transfer of the Dividends account balance to the Retained Earnings account. Answer: TrueFeedback: At the end of each year, after all the year's transactions and adjustments are recorded, the Dividends account is closed by transferring its balance to its permanent homein Retained Earnings. Answer: TrueFeedback: At the

Which of the following statements about financing activities is not correct? A) Cash dividends paid to a company's stockholders are reported as cash outflows from financing activities. B) When a company issues stock for cash, it reports a cash inflow from financing activities. C) When a company repurchases stock with cash, it reports

Which of the following is calculated by dividing net sales revenue by average net receivables? A) Days to sell ratio B) Current ratio C) Profit margin D) Receivables turnover ratio Answer: DFeedback: Receivables turnover ratio = Net sales revenue / Average net receivables Answer: DFeedback: Receivables turnover ratio = Net sales revenue / Average net receivables Answer:

On June 12, because management knew with near certainty that it had no chance of collection, Sheave Company wrote off a customer's account balance in the amount of $350. On November 3, the customer mailed a payment for $350 to Sheave. To record the receipt of this payment from the

Your company issues $500,000 in bonds at a price of 98. The journal entry used to record the issuance will include a debit to: A) Cash for $490,000, a debit to Discount on Bonds Payable for $10,000, and a credit to Bonds Payable for $500,000. B) Cash for $490,000, a debit to

The asset, liability, and stockholders' equity accounts are referred to as permanent accounts. Answer: TrueFeedback: The permanent accounts are the accounts that track financial results from year to year by carrying their ending balances into the next year. The permanent accounts include all asset, liability, and stockholders' equity accounts. Answer: TrueFeedback: The

Segregation of duties means that a company assigns responsibilities so that: A) sufficient workers are available to cover all necessary jobs. B) responsibilities for related activities are assigned to two or more people. C) employees are restricted to jobs for which they have adequate training. D) workers are divided into those who do the

A decrease in receivables turnover ratio is indicative of: A) an increase in sales revenue. B) slower-selling inventory. C) an increase in accounts receivable. D) a decline in cost of goods sold. Answer: CFeedback:Receivable turnover = Net sales / Average net receivablesIf the receivables turnover decreases, this may be the result of a decrease in

Use the information above to answer the following question. Which line items would be classified as noncurrent on a classified balance sheet? A) Cash; Supplies; Accounts Payable B) Equipment; Other Assets; Notes Payable C) Supplies; Equipment; Notes Payable D) Accounts Receivable; Equipment; Other Assets Answer: BFeedback: Current assets are assets that will be used up or

When preparing this month's bank reconciliation, you find that you failed to record a $95 deposit for a payment you received from a customer. You immediately prepare a journal entry to record the deposit. Which of the following describes the actions to be taken when preparing next month's bank reconciliation? A)

If a company receives $20,000 cash from its customers on account and uses the cash to pay $20,000 to its suppliers on accounts, the net result is that: A) assets would increase by $20,000 while liabilities would decrease by $20,000. B) liabilities would decrease by $20,000 while stockholders' equity would increase by

Langston Company updates its inventory periodically. The company's cost of goods sold was $2,700 and purchases were $5,600 during the year. The company's ending inventory count was $5,000. What was the amount of beginning inventory? A) $3,300 B) $13,300 C) $7,900 D) $2,100 Answer: DFeedback:Cost of goods sold = Beginning inventory + Purchases - Ending

If total liabilities decreased by $25,000 and stockholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during the same time period? A) $20,000 increase B) $20,000 decrease C) $30,000 increase D) $30,000 decrease Answer: BFeedback:Change in assets = Change in liabilities + Change in

Chino Company reported net income of $20,000 for the current year. During the year, Inventory decreased by $7,000, Accounts Payable decreased by $8,000, Depreciation Expense was $10,000, and Accounts Receivable increased by $6,500. If the indirect method is used, what is the net cash provided by operating activities? A) $10,500 B) $22,500 C)

The assignment of costs to cost of goods sold and to inventory using the weighted average method usually yields different results depending on whether a perpetual or a periodic system is used. Answer: TrueFeedback: When the perpetual inventory system is used, cost of goods sold is determined at each point of

Cary Inc. reported net credit sales of $300,000 for the current year. The unadjusted credit balance in its Allowance for Doubtful Accounts is $500. The company has experienced bad debt losses of 1% of credit sales in prior periods. Using the percentage of credit sales method, what amount should the

Suppose a company generally records revenues and expenses before receiving or making cash payments. Which of the following statements is not correct? A) If revenues are falling, a net loss could result even though the company reports a net cash inflow from operating activities. B) If revenues are rising, net income could

A company purchased equipment by issuing a $200,000, one-year, 8% note payable. The transaction would be recorded in the accounting records with a credit to Notes Payable for: A) $200,000. B) $216,000. C) $184,000. D) $208,000. Answer: AFeedback: Initially, the company records each liability at the amount of cash a creditor would accept to settle

Use the information above to answer the following question. Which of the following would be shown on B. Darin's horizontal analysis when calculating percentage changes from the prior year to the current year? A) An increase in sales revenue of 23% B) An increase in gross profit of 41.5% C) An increase in

Corporate income taxes cannot be calculated until all other adjustments are made. Answer: TrueFeedback: Income tax is calculated by multiplying the company's adjusted income (before income tax expense) by the company's tax rate. Answer: TrueFeedback: Income tax is calculated by multiplying the company's adjusted income (before income tax expense) by the company's

Which of the following statements about the par value of common stock is not correct? A) The par value is not the same as the market value of the stock. B) The par value is a nominal amount identified in the corporate charter. C) The par value is the amount credited to the

A one-time error in the application of the lower of cost or market (LCM) rule in the current period distorts financial results for the current accounting period: A) only. B) and the period before. C) and the period after. D) and all periods after. Answer: CFeedback: The ending inventory for the current period becomes the

Match the term with its definition. (There are more definitions than terms.) TERM _____ (1) Duality Of Effects _____ (2) Journal Entry _____ (3) Posting _____ (4) Debit _____ (5) Chart Of Accounts _____ (6) T-Account _____ (7) Credit _____ (8) Cost Principle DEFINTION A. A journal entry that lowers the balance of the account. B. When journal entries are recorded in

To determine whether generally accepted accounting principles (GAAP) were followed in the preparation of financial statements, an examination of: A) tax documents would be performed by the IRS. B) the company's accounting records would be performed by the SEC. C) the financial statements and related documents would be performed by an independent auditor. D)

Which of the following statements about equity and debt financing is correct? A) Equity financing is always better than debt financing. B) Equity financing requires dividends to be paid. C) Dividends are tax deductible. D) Equity financing can change stockholder control. Answer: DFeedback: Debt does not change stockholder control. In contrast, a stock issue gives

Which of the following are used to determine cash flows from financing activities? A) Short-term debt, Accrued Liabilities, Common Stock, and Notes Payable B) Long-term debt, Common Stock, and Retained Earnings C) Short-term debt, Accrued Liabilities, Retained Earnings, and Bonds Payable D) Long-term debt, Notes Payable, Interest Expense, and Bonds Payable Answer: BFeedback: The financing

Which of the following statements regarding periodic and perpetual inventory systems is correct? A) Perpetual inventory systems are inferior for determining optimal times to reorder inventory. B) Periodic inventory systems require a greater investment in technology. C) Perpetual inventory systems may assist in determining inventory lost due to shrinkage. D) Periodic inventory systems allow

Which of the following statements about an auto manufacturer's inventory is not correct? A) Tires, batteries, glass, paint, headlamp bulbs, and electric wiring would be included in raw materials inventory. B) Incomplete cars that are still being processed would be included in work in process inventory. C) Finished cars ready to be shipped

Benchmarks are required to evaluate a company's performance. Answer: TrueFeedback: Benchmarks are necessary when interpreting a company's financial ratios. These benchmarks may be the company's own results for prior years, the results of competitors, or an average for the industry. Answer: TrueFeedback: Benchmarks are necessary when interpreting a company's financial ratios. These

A toy store with a calendar year-end is likely to have: A) unpredictable fluctuations in cash flow from quarter to quarter. B) the largest cash inflow from operating activities in the second and third quarters (April - September). C) a fairly stable cash flow across all four quarters. D) the largest cash inflow from

A corporation does not have a legal obligation to pay dividends. Answer: TrueFeedback: Dividends are not an obligation of the corporation and become a liability only when the board of directors formally declares a dividend. Answer: TrueFeedback: Dividends are not an obligation of the corporation and become a liability only when the

The normal balance of an account is on the same side that increases the account. Answer: TrueFeedback: The balance in an account is determined by the excess of increases over decreases. It is normal to have more increases in an account than decreases. Answer: TrueFeedback: The balance in an account is determined

On December 16, 2015, B. Darin Company received $3,600 from S. Dee Company for rent of an office owned by B. Darin Company. The payment covers the period from December 16, 2015 through February 15, 2016. B. Darin Company recorded this as Unearned Rent when it was received on December

Wiggly Pet Store had $6,000 of supplies at the end of October. During November, the company bought $2,000 of supplies. At the end of November, the company had $1,000 of supplies remaining. Which of the following statements is not correct? A) During November, the company used $7,000 of supplies. B) Supplies should

An increase in revenue always: A) increases stockholders' equity. B) increases assets. C) decreases stockholders' equity. D) decreases assets. Answer: AFeedback: Revenue is a subcategory of Retained Earnings, which is a stockholders' equity account. Net income increases Retained Earnings. Since net income equals the excess of revenues over expenses, eventually, revenues increase Retained Earnings. Answer: AFeedback:

In the U.S., Generally Accepted Accounting Principles (GAAP) are established by the: A) International Accounting Standards Board (IASB). B) Public Company Accounting Oversight Board (PCAOB). C) Financial Accounting Standards Board (FASB). D) American Institute of Certified Public Accountants (AICPA). Answer: CFeedback: Currently, the Financial Accounting Standards Board (FASB) has the primary responsibility for setting the

Company A uses an accelerated depreciation method while Company B uses the straight-line method for an asset of the same cost and useful life. Which of the following statements is correct? A) Company A will have higher depreciation expense in the early years, but Company B will have the higher expense

Which of the following is a financing activity? A) The business receives land and gives a check for $1,000. B) The business receives $1,000 cash and in exchange gives a promissory note. C) The business promises to hire an employee on the 15th of the month. D) The business orders supplies and promises to

The combined effect of the declaration and payment of a cash dividend on a company's financial statements is to: A) increase total liabilities and decrease stockholders' equity. B) increase total expenses and decrease assets. C) increase total assets and increase stockholders' equity. D) decrease total assets and decrease stockholders' equity. Answer: DFeedback: When the dividend

Tyler Corporation was organized in 2015. Its corporate charter authorized the issuance of 50,000 shares of common stock, par value $5 per share, and 10,000 shares of 8% preferred stock, par value $25 per share. The following transactions took place during 2015: Required: Part a. Prepare journal entries for each of the

Which of the following factors would cause the least amount of concern about a company's ability to continue as a going-concern? A) Excessive reliance on debt financing B) Loss of key personnel without comparable replacement C) Inadequate maintenance of long-lived assets D) Declining profit margins Answer: DFeedback: The going-concern (also called the continuity) assumption means

When the amount of a contingent liability can be reasonably estimated and its likelihood is possible but not probable, the company should: A) include a description in the notes to the financial statements. B) record the amount of the liability times the probability of its occurrence. C) accrue the amount of the liability

Stock dividends and stock splits are similar in all of the following ways except: A) they both involve a pro rata distribution of shares to existing stockholders. B) they both reduce the stock price. C) they both decrease Retained Earnings. D) have no effect on cash. Answer: CFeedback: Both stock dividends and stock splits increase

Which of the following statements about transaction analysis is correct? A) Transactions are analyzed from the standpoint of the owners. B) All business activities are considered to be accounting transactions. C) The transaction amount is determined for each exchange based on the cost of the items given and received. D) A business needs journal

Interest revenue from notes receivable is typically reported on a multiple step income statement as a part of Income from Operations. Answer: FalseFeedback: Except for banks, interest is considered a peripheral source of revenue; as such, it is reported on the income statement immediately following (rather than being part of) theIncome

Use the information above to answer the following question. What journal entry will Brickyard make when paying the note at maturity? A) Debit Cash and credit Notes Payable for $200,000 B) Debit Cash and credit Notes Payable for $206,000 C) Debit Notes Payable and credit Cash for $206,000 D) Debit Notes Payable and credit

Cost of goods sold = Beginning inventory + Purchases - Ending inventory Answer: TrueFeedback: Cost of goods sold = Beginning inventory + Purchases - Ending inventory Answer: TrueFeedback: Cost of goods sold = Beginning inventory + Purchases - Ending inventory Answer: True Feedback: Cost of goods sold = Beginning inventory + Purchases - Ending

A company had been selling its product for $20 per unit, but recently lowered the selling price to $15 per unit. The company's current inventory consists of 200 units purchased at $16 per unit. The market value of this inventory is currently $13 per unit. At what amount should the

Which number is potentially the largest? A) The number of shares authorized. B) The number of shares issued. C) The number of shares outstanding. D) The number of shares certified. Answer: AFeedback: Authorized shares are the maximum number of shares of capital stock of a corporation that can be issued, as specified in the charter.

Which of the following statements about the income statement of a company that was formed 10 years ago is correct? A) Reports a Net Loss for the year if expenses are more than revenues. B) Reports the financial effects of activities that have occurred since the company's inception. C) Reports the amount of

Which of the following is not an amount that is needed to calculate straight-line depreciation? A) The cost of the asset B) An estimate of the asset's useful economic life to the company C) The estimated amount that the company will receive when it disposes of the asset D) The cost the company will

Assume that accrual basis accounting is used. Which of the following errors would most likely lead to an overstatement of net income in the current year? A) Recording revenue when the cash is collected next year although it is earned in the current year. B) Recording an expense when paid next year

Stockholders' equity is: A) a liability of the business. B) an economic resource controlled by the business. C) the owners' claims on the business. D) the profit generated by the business. Answer: CFeedback: Stockholders' equity represents the owners' claims on the business. These claims arise for two reasons. First, the owners have a claim on

Which of the following statements about cash flows from investing activities is correct? A) The proceeds from sales of investments are reported as cash inflows from investing activities. B) Cash flows from investing activities are calculated by making adjustments to net income. C) Cash paid to acquire long-lived assets is reported as a

The use of internal controls guarantees protection against losses due to fraud, errors, and inefficiencies. Answer: FalseAIC PA FN: Risk analysisFeedback: An adequate internal control system does not guarantee that losses will not occur. Answer: FalseAIC PA FN: Risk analysisFeedback: An adequate internal control system does not guarantee that losses will not