An accounting information system collects, records, stores, and processes accounting
data to produce information that is useful for decision makers.
Benchmarking often compares a company against a key competitor or the industry
average.
The income statement also is called the statement of financial position.
In a limited-liability company (LLC), the members are personally liable for the debts of
the business.
The current ratio is calculated using the values from the income statement.
The operating and financing activities of the statement of cash flows are presented
differently between the indirect and direct methods.
When using the FIFO inventory costing method, ending merchandise inventory will be
the highest, as compared to LIFO and weighted-average inventory costing methods,
when costs are decreasing.
Land and land improvements are one and the same and therefore must be recorded in
single account.
If the bank reconciliation includes a deposit in transit, a journal entry is required that
includes a debit to cash.
A petty cash fund was established with a $150 balance. It currently has cash of $25 and
petty cash tickets as follows: Office expense $120 and Entertainment Expense $20.
Which of the following would be included in the journal entry to replenish the Petty
Cash fund?
A) debit to Cash Short & Over for $10
B) credit to Cash Short & Over for $15
C) credit to Cash Short & Over for $10
D) debit to Cash Short & Over for $15
A company purchased a computer on July 1, 2017 for $50,000. Estimated useful life of
the computer was five years, and it has no residual value. Which of the following
methods should be used to best match its expense against the revenue it produces?
A) the units-of-production method
B) the straight-line method
C) the double-declining-balance method
D) the first-in, first-out method
Which of the following is a weak internal control over cash collections from
receivables?
A) The credit department should have no access to cash.
B) A credit department should evaluate customers’ credit applications to determine
whether they meet the company’s approval standards.
C) A company should have written approval standards for processing customers’ credit
applications.
D) In order to avoid losing sales, all customers’ credit applications should be approved.
Which of the following statements is true if a bond’s stated interest rate is the same as
the market rate?
A) The bond will be issued at a premium.
B) The bond will be issued at par.
C) The bond will be issued at a discount.
D) The bond will be issued for an amount lower than the maturity value.
Sonesta Farm Equipment Company sold equipment for cash. The income statement
shows a loss on the sale of $7,000. The net book value of the asset was $28,900. Which
of the following statements describes the cash effect of the transaction?
A) positive cash flow of $35,900 from financing activities
B) negative cash flow of $21,900 for operating activities
C) negative cash flow of $21,900 for financing activities
D) positive cash flow of $21,900 from investing activities
The following are the current month’s balances for Global Enterprises.
What is the total amount of debits for the trial balance?
A) $26,000
B) $27,300
C) $31,000
D) $32,300
When 1,000 shares of $3 stated value common stock is issued at $18 per share,
________.
A) Common Stock – $3 Stated is credited for $18,000
B) the account titled Paid-In Capital in Excess of Stated is used to record the issue price
of the stock
C) the difference between the issue price and the stated value is credited to Paid-In
Capital in Excess of Stated
D) the accounting is exactly the same as the accounting for par value stock
For Retained Earnings, the category of account and its normal balance is ________.
A) equity and a credit balance
B) assets and a debit balance
C) equity and a debit balance
D) assets and a credit balance
Which of the following is a cash inflow from an operating activity on a statement of
cash flows prepared using the direct method?
A) sold treasury stock for cash
B) issued common stock
C) received interest revenue in cash
D) borrowed money on a long-term note
The vertical analysis statement of Peterson, Inc. is as shown below:Peterson, Inc.
Comparative Income Statement
Years Ended December 31, 2017 and 2016
The 20% shown for net income in 2017 signifies that net income ________.
A) is 20% of net sales revenues
B) increased by 20% over the previous year
C) is 20% of gross profit
D) equals 20 times of the income before income tax
Merchandise Inventory and Cost of Goods Sold appear ________.
A) on the balance sheet and statement of retained earnings, respectively
B) on the statement of retained earnings and income statement, respectively
C) on the balance sheet and income statement, respectively
D) on the income statement and statement of cash flows, respectively
An effective accounting information system that provides relevant information
________.
A) increases the likelihood of fraud and errors
B) reduces the cost of employing an accounting information system
C) improves decision making and reduces uncertainty
D) improves the accuracy of data entry when manual
On August 14, First Avenue Bank lent $240,000 to City Cafe on a 75 day, 6% note.
What is the maturity date of the note? (Use a 360-day year and round answers to the
nearest dollar.)
A) $242,959
B) $243,000
C) $240,000
D) $254,400
If there is no cash involved in a business transaction, the transaction should be recorded
in ________.
A) either the cash receipts journal or general journal
B) either the sales journal or purchases journal
C) the general journal only
D) sales journal, purchases journal, or general journal
Accrued revenue is revenue that ________.
A) has been collected and earned
B) the business has collected in cash, but not yet earned
C) the business has earned, but not yet collected in cash
D) will be collected and earned in the future
The process by which companies produce their financial statements for a specific
period is called the ________.
A) operating cycle
B) closing process
C) opening process
D) accounting cycle