Depreciation Expense is $20,000 and the beginning and ending Accumulated
Depreciation balances are $150,000 and $155,000, respectively. What is the cash paid
for depreciation?
A) $20,000
B) $5,000
C) $0
D) $25,000
An understatement of the beginning inventory balance causes cost of goods sold to be:
A) understated and net income to be understated.
B) understated and net income to be overstated.
C) overstated and net income to be understated.
D) overstated and net income to be correct.
Your company owned equipment with a book value of $120,000 that was sold during
this accounting period for $30,500 in cash, and purchased new equipment for cash of
$148,000. Your company would record a debit of:
A) $148,000 and a credit of $30,500 to the cash account for a net cash inflow of
$117,500.
B) $148,000 and a credit of $89,500 to the cash account for a net cash inflow of
$58,500.
C) $30,500 and a credit of $148,000 to the cash account for a net cash outflow of
$117,500.
D) $89,500 and a credit of $148,000 to the cash account for a net cash outflow of
$58,500.
Many companies use accelerated depreciation in computing taxable income because:
A) it reports higher net income in the early years as compared to other methods.
B) it is required by IFRS.
C) it is easier than straight-line deprecation.
D) it postpones tax payments until later years because it lowers taxable income in the
early years.
Which of the following statements about the debit/credit framework is correct?
A) All asset accounts have a normal debit balance with the exception of cash which has
a normal credit balance.
B) The Common Stock account is increased by debits.
C) When payment is made on a liability such as accounts payable, the liability account
is decreased with a debit.
D) The total amount of asset accounts must equal the total amount of liability accounts
minus the total amount of stockholders ‘ equity accounts.
According to Generally Accepted Accounting Principles, which of the following is not a
characteristic of useful financial information?
A) comparable
B) verifiable
C) timely
D) ethical
A company issued 10-year, 8% bonds with a face value of $200,000. Interest is paid
annually. The market rate on the issue date was 7.5% and the company received
$206,948 in cash proceeds. Which of the following statements is correct?
A) The company must pay $184,000 at maturity plus $16,000 in interest each year for
10 years.
B) The company must pay $206,948 at maturity plus $15,000 in interest each year for
10 years.
C) The company must pay $200,000 at maturity plus $16,000 in interest each year for
10 years.
D) The company must pay $200,000 at maturity plus $15,000 in interest each year for
10 years.
One difference between the double-declining-balance method and the straight-line
method is that the double-declining-balance method:
A) reduces book value below residual value.
B) does not consider the useful life of the asset in the calculation of depreciation.
C) cannot be used for tax purposes.
D) uses book value instead of depreciable cost in the calculation of depreciation.
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.
Which of the following statements about accrual basis accounting is not correct?
A) It uses the revenue recognition principle.
B) It uses the expense recognition principle.
C) It is required for external accounting reports.
D) It requires the timing of cash receipts be in the same period as revenues are
recognized.
Urban Outsiders has a building that originally cost $375,000. The company expects to
be able to sell the facility for $107,000 at the end of its useful life. The balance of the
related Accumulated Depreciation account is $258,000. The residual value of the
facility is:
A) $117,000.
B) $151,000.
C) $268,000.
D) $107,000.
Which of the following is not an internal control procedure relating to cash payments?
A) Using an voucher system
B) Using an imprest system
C) Preparing a bank reconciliation
D) The use of cash count sheets
During January 2015, the first month of operations, a consulting firm had following
transactions:
1> Issued common stock to owners in exchange for $20,000 cash.
2> Purchased $5,000 of equipment, paying $1,000 cash and signing a promissory note
for $4,000.
3> Received $9,000 in cash for consulting services performed in January.
4> Purchased $1,500 of supplies on account; all of the supplies were used in January.
5> Provided consulting services on account in the amount of $16,000.
6> Paid $750 on account.
7> Paid $3,000 to employees for work performed during January.
8> Received a bill for utilities for January of $3,400; the bill remains unpaid.
Use the information above to answer the following question. What is subtotal of
expenses that will be reported on the income statement for the month ended January
31?
A) $3,750.
B) $7,900.
C) $8,150.
D) $4,500.
Before the closing entries are prepared, the Retained Earnings balance in the adjusted
trial balance is equal to the balance of that account:
A) at the beginning of the period.
B) after adding revenues and subtracting expenses but before subtracting dividends.
C) at the end of the period.
D) at the beginning of the next period.