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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.
When costs per unit are increasing, the inventory costing method that results in the
higher income tax expense is the FIFO method.
A petty cash fund is a separate checking account used to reimburse employees for
expenditures they have made on behalf of the organization.
The threshold for recording contingent liabilities under IFRS is higher than that under
GAAP.
Bonds that are backed by a company's assets are referred to as 'secured" bonds.
The receipts of dividends and interest are both reported as cash inflows from investing
activities on the statement of cash flows.
Building a new warehouse is an operating activity on the statement of cash flows.
A transaction is an exchange or event that directly affects the assets, liabilities, or
stockholders' equity of a company.
A company signed an agreement to rent store space from another company. This is an
example of a transaction that should be recorded.
Typical cash flows from investing activities include:
A) payments to purchase property and equipment.
B) repayment of loans.
C) proceeds from issuing notes payable.
D) receipts from cash sales.
Which of the following is an activity common to the operations of merchandising,
manufacturing, and service companies?
A) Producing the product
B) Incurring operating expenses
C) Buying goods or raw materials
D) Selling a physical product
Multistep income statements:
A) are required for merchandise companies.
B) contain more detail than just listing revenues and expenses.
C) are required when the perpetual inventory method is used.
D) classify Cost of Goods Sold as a selling expense.
Which of the following would cause a trial balance to be out of balance?
A) A transaction was recorded twice.
B) A transaction was not recorded.
C) A transaction was posted to the wrong accounts.
D) Only the credit of a transaction was recorded.
Use the information above to answer the following question. What is the balance of
Accounts Receivable at December 31, 2016?
The following account balances are taken from the December 31, 2015, financial
statements of ABZ Advertising Company. The company uses accrual basis accounting.
The following activities occurred in 2016:
1) Performed advertising services on account, $55,000.
2) Received cash payments on account, $10,400.
3) Received deposits from customers for advertising services to be performed in 2017,
$2,500.
4) Made payments to suppliers on account, $5,000.
5) Incurred $45,000 of operating expenses; $39,000 was paid in cash and $6,000 was on
account and unpaid as of the end of the year.
A) $51,896.
B) $55,000.
C) $44,600.
D) $54,396.
A company received a bill of $3,500 for utilities used in the current month. The journal
entry to record this event:
A) will include a debit to Accounts Receivable for $3,500.
B) will include a credit to Accounts Payable for $3,500.
C) will include a credit to Utilities Expense.
D) is not required; no journal entry should be prepared until the utilities bill is paid.
Which of the following statements about net income and net losses is not correct?
A) Net income implies that revenues are greater than expenses.
B) A net loss causes Retained Earnings to decrease.
C) Net income causes stockholders' equity to increase.
D) A net loss increases the balance in Retained Earnings.
Which of the following statements about classification choices is correct?
A) GAAP classifies cash dividends paid as a financing activity, but IFRS allows them to
be classified as either an operating or financing activity.
B) GAAP allows interest paid to be classified as either an operating or financing
activity, but IFRS requires that it be classified as a financing activity.
C) GAAP classifies cash dividends received as an investing activity, but IFRS allows
them to be classified as either an operating or investing activity.
D) GAAP classifies interest received as either an operating or investing activity, but
IFRS requires it to be classified as an investing activity.
Which of the following is calculated by dividing net revenue by average net fixed
assets?
A) Net profit margin
B) Fixed asset turnover
C) Total asset turnover
D) Current ratio
Jackson and O'Neill form a partnership that produces gates. Jackson provides $30,000
of capital while O'Neill contributes $90,000 of capital; they agree to split net income by
the same proportion. The partnership's net income is $80,000 for the first year. They did
not draw any income out of the business or add any additional capital during the first
year. At the end of the year, the partners' equity is:
A) $70,000 for Jackson and $130,000 for O'Neill for a total of $200,000.
B) $200,000 minus income tax expense for the partnership.
C) $200,000 minus the income tax paid by each partner.
D) $50,000 for Jackson and $150,000 for O'Neill for a total of $200,000.
The adjusting entry to record the estimated bad debts in the period credit sales occur
includes a debit to an:
A) asset account and a credit to a liability account.
B) expense account and a credit to an asset account.
C) expense account and a credit to a revenue account.
D) expense account and a credit to a contra-asset account.
During 2016, a company provided services for cash of $21,000 and services on credit of
$15,000. The company collected accounts receivable of $8,000 and incurred operating
expenses of $22,700, $14,000 of which were paid during the year. The amount of net
income (loss) for the year is:
A) $13,300
B) ($1,700)
C) $22,700
D) $6,300
Your company received payment from a customer last month for a service that you
provided this month. How will the business activity of the current month affect the
basic accounting equation?
A) Assets will not change; liabilities will decrease; and stockholders' equity will
increase.
B) Assets will increase, liabilities will increase, and stockholders' equity will not
change.
C) Assets will increase, liabilities will not change, and stockholders' equity will
increase.
D) Assets will decrease, liabilities will not change, and stockholders' equity will
increase.
Use the information above to answer the following question. What was the amount of
the change in total stockholders' equity during the year?
A company started the current year with assets of $700,000, liabilities of $350,000 and
common stock of $200,000. During the current year, assets increased by $400,000,
liabilities decreased by $50,000 and common stock increased by $275,000. There was
no payment of dividends to owners during the year.
A) $350,000 increase
B) $450,000 increase
C) $250,000 increase
D) $200,000 increase
Use the information above to answer the following question. As of September 30, Year
3, who provided more financing for Anonymous, Inc.?
A) Owners
B) Creditors
C) Both provided equal financing
D) Neither provided any financing
The primary difference between ordinary repairs and extraordinary repairs is:
A) ordinary repairs cost less.
B) ordinary repairs are expenditures for routine maintenance and upkeep, whereas
extraordinary repairs increase an assets economic usefulness in the future through
increased efficiency, capacity, or longer life.
C) extraordinary repairs only maintain the asset for a short time, whereas ordinary
repairs increase the usefulness of assets beyond their original condition.
D) extraordinary repairs are expenditures, not expenses.
On a common size balance sheet what is the percentage that would be shown next to the
dollar amount of current assets?
A) 100%
B) 44%
C) 30%
D) 33%
