An expense:
A) will decrease the amount of net income on the income statement.
B) will decrease the amount of Common Stock on the balance sheet.
C) will be increased with a credit to the account.
D) normally has a credit balance.
Match the acronym with the description that best reflects it. (There are more
descriptions than acronyms.)
ACRONYM
1>_____ SEC
2> _____ GAAP
3>_____ PCAOB
4> _____ FASB
5> _____ IASB
6>_____ SOX
7>_____ AICPA
DESCRIPTION
A. The Board that establishes international accounting standards.
B. This organization regulates activities associated with the stock market such as the
reporting of financial data by publicly owned companies.
C. The U.S. agency that must approve mergers between very large publicly owned
corporations.
D. The national professional organization of accountants.
E. A set of laws established to strengthen corporate reporting in the United States.
F. The U.S. Board that approves the rules for auditing publicly owned companies.
G. Rules of financial accounting created by the FASB for use in the United States.
H. The organization that establishes business laws in the U.S.
I. The U.S. agency that certifies foreign accounting firms to practice in the U.S.
J. The Board that establishes the accounting rules that govern American publicly owned
corporations.
Which of the following statements is correct?
A) Valuing inventory under LIFO may produce different results depending on whether a
perpetual or periodic inventory system is used.
B) Valuing inventory under the weighted average cost method always produces the
same results using either a perpetual or periodic inventory system.
C) Valuing inventory under FIFO may produce different results depending on whether a
perpetual or periodic inventory system is used.
D) Using the specific identification method will produce different results depending on
whether perpetual or periodic inventory system is used.
The Flynn Company started business by obtaining financing through debt financing and
equity financing. Which of the following statements is not correct?
A) Equity financing refers to the money obtained through owners ‘ contributions and
reinvestments of profit.
B) Debt financing refers to the money obtained through loans.
C) The business is obligated to repay debt financing.
D) The business is obligated to repay equity financing.
Your company sells $50,000 of bonds for an issue price of $52,000. Which of the
following statements is correct?
A) The bond sold at a price of 52, implying a premium of $2,000.
B) The bond sold at a price of 104, implying a discount of $2,000.
C) The bond sold at a price of 52, implying a discount of $2,000.
D) The bond sold at a price of 104, implying a premium of $2,000.
Your company places an order with suppliers for inventory for delivery in two weeks.
A) This is an internal event and it does not affect the balance sheet.
B) This is an activity that does not affect the balance sheet.
C) This is an internal event that affects the balance sheet.
D) This is an external exchange and it affects the balance sheet.
Which of the following requires that its members adhere to a Code of Professional
Conduct?
A) SEC
B) FASB
C) PCAOB
D) AICPA
The following is a listing of all of the income statement accounts for Mulberry Street
Sportswear as they appear on the adjusted trial balance as of December 31.
Required:
Part a. Prepare a multistep income statement.
Part b. Compute the gross profit percentage.
Which of the following is not used to calculate the times interest earned ratio?
A) Net income.
B) Income tax expense.
C) Interest earned on investments.
D) Interest expense
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.
Baylor Service Corp. redeemed $1,000 of gift cards that customers used to pay for
services that were performed by the company. The related adjusting entry would
include a debit to:
A) Accounts Receivable and a credit to Service Revenue.
B) Unearned Revenue and a credit to Service Revenue.
C) Cash and a credit to Unearned Revenue.
D) Cash and a credit to Service Revenue.
The inventory turnover ratio is calculated as:
A) cost of goods sold divided by sales.
B) cost of goods sold divided by average inventory.
C) ending inventory divided by cost of goods sold.
D) average inventory divided by cost of goods sold.
Kata Company uses the allowance method. On May 1, Kata wrote off a $22,000
customer account balance when it becomes clear that the particular customer will never
pay. The journal entry to record the write-off on May 1 would include which of the
following?
A) Debit to Bad Debt Expense and credit to Allowance for Doubtful Accounts
B) Debit to Accounts Receivable and credit to Allowance for Doubtful Accounts
C) Debit to Allowance for Doubtful Accounts and credit to Bad Debt Expense
D) Debit to Allowance for Doubtful Accounts and credit to Accounts Receivable
Which of the following statements about a 10-year bond issued at a discount is not
correct?
A) At the end of ten years, the balance in the Discount on Bonds Payable account will
equal zero.
B) At the end of ten years, the carrying value will equal the face value.
C) At the end of ten years, the total interest expense will reflect the market rate of
interest.
D) At the end of ten years, the total interest expense will equal the total interest paid.
Which of the following statements about inventory measures is not correct?
A) If the inventory turnover ratio increases, the days to sell measure decreases.
B) The days to sell measure can help managers make ordering decisions for inventory.
C) A higher inventory turnover ratio indicates that inventory is moving more quickly
from purchase to sale.
D) It is rare for a company with a lower gross profit percentage to have a faster
inventory turnover.
A company incurred $5,000 in salaries and wages for employees for the year; $4,500 of
these salaries and wages had been paid by the end of the year. Which of the following
statements about this situation is correct?
A) Salaries and Wages Payable on the income statement will be $4,500.
B) Salaries and Wages Expense on the income statement will be $500.
C) Salaries and Wages Expense on the balance sheet will be $5,000.
D) Salaries and Wages Payable on the balance sheet will be $500.