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The normal balance of an account is on the same side that increases the account.
The effective-interest method of amortization is considered a conceptually superior
method of accounting for bonds.
If the debt-to-assets ratio is 0.63, it means that 37% of the company's financing has
been provided by stockholders' equity.
If the receivables turnover ratio rises significantly, the increase may be a signal that the
company is extending credit to high-risk borrowers or allowing an overly generous
repayment schedule.
Vertical analysis is the comparison of a company's financial information over time.
When the periodic inventory system is in use, the choice of an inventory costing
method usually has no impact on gross profit or cost of goods sold.
During the current accounting period, revenue from credit sales is $671,000. The
Accounts Receivable balance is $51,480 at the beginning of the period and $52,200 at
the end of the period. Which of the following statements is correct?
A) The receivables turnover ratio is 12.9.
B) On average, it takes 12.9 days to collect payment from credit customers.
C) The receivables turnover ratio is 28.3.
D) On average, the company sells its inventory every 28.3 days.
Within the debit/credit framework, the best interpretation of the word "credit" is:
A) left side of an account.
B) increase side of an account.
C) right side of an account.
D) decrease side of an account.
Use the information above to answer the following question. What is the amount of the
total liabilities to be reported on the balance sheet?
A) $60,000.
B) $0
C) $90,000.
D) $80,000.
When the petty cash fund is replenished:
A) Cash is debited.
B) Petty Cash is credited.
C) Petty Cash is debited.
D) Appropriate expense accounts are debited.
The adjusting entry used to record the estimated bad debts in the period credit sales
occur decreases:
A) both net income and net accounts receivable.
B) net income and increases liabilities.
C) assets and increases liabilities.
D) both selling expenses and net income.
The balance sheet category "Intangible Assets" includes:
A) patents, trademarks, and franchises.
B) equipment, land, and buildings.
C) investments, receivables, and cash.
D) goodwill, inventory, and vehicles.
The unadjusted trial balance:
A) is a preliminary financial statement for external and internal users.
B) generally lists account names in alphabetical order.
C) is created to determine that total debits equal total credits.
D) indicates whether or not errors were made in recording transactions.
If a truck's engine is overhauled for $8,000, the journal entry would normally include a
debit to:
A) Vehicles.
B) Accounts Payable.
C) Depreciation Expense.
D) Cash.
What is the starting point for calculating cash flows from operations when the indirect
method is used?
A) Find net income on the income statement.
B) Calculate the net change in the cash account.
C) Add the change in accounts receivable to sales revenue.
D) Identify the balance sheet accounts that relate to operating activities.
Current liabilities are expected to be:
A) converted to cash within one year.
B) settled within one year.
C) used in the business within one year.
D) acquired within one year.
When a company lends cash to a customer who signs a promissory note:
A) total assets decrease when the lending transaction occurs, but increase when the
amount borrowed by the customer is repaid.
B) total assets increase when the lending transaction occurs and revenues increase when
the amount borrowed by the customer is repaid.
C) total assets increase and liabilities increase when the lending transaction occurs.
D) total assets and net income do not change when the lending transaction occurs.
Countryside Corporation's receivables turnover ratio decreased from 14.1 last year to
11.8 this year. Which of the following statements is correct?
A) This indicates that the company is taking longer to collect credit payments.
B) This is an indication that the company is experiencing declining credit costs.
C) This could be an indication that the company is using more efficient collection
methods.
D) This is an indication that the company is buying and selling financial assets less
rapidly.
Cash flows from financing activities include all of the following except:
A) payment of long-term debt.
B) payment of interest.
C) proceeds from stock issuance.
D) cash dividends paid.
Your company pays back $2 million on a loan it had obtained earlier from a bank.
A) Assets decrease by $2 million; liabilities and stockholders' equity are both
unchanged.
B) Assets decrease by $2 million, liabilities decrease by $2 million, and stockholders'
equity is unchanged.
C) Assets decrease by $2 million and liabilities increase by $2 million.
D) Assets decrease by $2 million, liabilities are unchanged, and stockholders' equity
decreases by $2 million.
