Under current accounting principles, how is net income on the income statement
measured?
a. Net change in owners’ equity during the period
b. Excess of revenues over expenses during the period
c. Net change in the cash balance during the period
d. Excess of revenues over expenses less any dividends paid during the period
From the following list, select the proper section from the statement of cashflows in whi
ch it would beclassified.
a. Operating Activities
b. Investing Activities
c. Financing Activities
Paid suppliers cash for inventory purchased
Revenue is always earned continuously over time.
a. True
b. False
A mortgage incurred in exchange for an office building would be reported in the
statement of cash flows in
a. the cash flows from financing activities section
b. the cash flows from investing activities section
c. a separate schedule
d. the cash flows from operating activities section
International accounting standards require companies to revalue their property, plant,
and equipment to reflect fair market values.
a. True
b. False
Refer to the data for Benton Corporation. If the aging approach is used to estimate bad
debts, what amount should be recorded as bad debt expense for 2015?
a. $ 2,900
b. $11,500
c. $23,500
d. $26,900
Border Company’s cash account had a balance of $962 on August 31. This included a
bank deposit of $87 that was in transit on the 31st. The August 31 bank statement
contained the following information:
Border also had checks outstanding of $169. What is Border’s adjusted cash balance at
August 31?
a. $ 920
b. $ 940
c. $1,007
d. $1,089
Paint Company Following are selected data from Paint Company’s financial statements.
Refer to the Paint Company data. The company’s times interest earned ratio for 2016
a. shows an increase in the company’s ability to pay its current debt when it comes due.
b. indicates the company cannot meet its current year interest payments out of current
year earnings.
c. increased, which indicates the company’s lenders will be pleased.
d. decreased, which indicates the company has more cash to pay interest on its debt.
The balance in the account, Rent Collected in Advance, is reported as an asset on the
balance sheet of the landlord.
a. True
b. False
Each account has a normal balance. For the following list of accounts, indicate whether
the normal balance of each is a debit or a credit.
a. Debit
b. Credit
Wages and Salaries Payable
For each of the following items, indicate whether it would appear on a statement of
cash flows prepared using the Direct method (a) or the Indirect method (b).
a. Direct
b. Indirect
Net income
Which one of the following is not an external user of financial statements?
a. Suppliers
b. Creditors
c. Investors
d. The company’s controller
What are the two subtotals that distinguish the multi-step income statement from the
single-step income statement?
a. Income before taxes and income taxes
b. Total operating revenues and total operating expenses
c. Income from operations and income before taxes
d. Total revenues and total expenses
Which of the following is least useful in evaluating a company’s financial statements?
a. Comparison with government economic data for the economy as a whole
b. Comparison with other companies in the same industry
c. Comparison of the company’s current period data with accounting data from 5 years
ago
d. Comparison of the company’s current period data with that of the last year
The amount in the Dividends account should be carried over from the adjusted trial
balance of the 10-column work sheet to which of the following columns?
a. Income statement as a debit
b. Income statement as a credit
c. Balance sheet as a debit
d. Balance sheet as a credit
Sunshine Farm Supply Following are selected data from the financial statements of
Sunshine Farm Supply:
Refer to the data for Sunshine Farm Supply. Which of the following would not result
from a vertical analysis of its balance sheet?
a. Accounts receivable increased $22,000 or 36.7% during 2016.
b. Accounts receivable is five times larger than Merchandise inventory in 2016.
c. Accounts receivable is 13.3% of total assets for 2016.
d. Merchandise inventory is 2.7% of total assets for 2016.
Hawk Store counted some of its inventory twice. As a result, its operating expenses will
be
a. Correct only if Hawk Store calculates it cost of goods sold correctly
b. Correct since operating expenses are not affected by inventory costs
c. Overstated
d. Understated
Port, Inc. paid a cash dividend on January 2 that had been declared prior to the end of
its fiscal year. The entry to pay the dividend will
a. increase Cash and increase Cash Dividend Payable.
b. decrease Cash Dividend Payable and decrease Cash.
c. decrease Retained Earnings and increase Cash Dividend Payable.
d. decrease Cash Dividend Payable and increase Retained Earnings.