Archives: Quiz

The net liability of bonds will decrease each interest period if the bonds were issued at a premium. Cutoff errors are failures to record transactions in the correct time period. Answer: TRUE Managerial accounting serves external users while financial accounting […]

When bad debts recoveries occur, the write-off should be reversed and the collection handled as a normal receipt on account. The accounts receivable turnover ratio indicates how rapidly customers pay their bills. Answer: TRUE Entries for the accrual of unrecorded […]

A privilege granted by a manufacturer or distributor to sell a product or service in accordance with specified conditions is termed a franchise. The accountant uses adjusting entries to record implicit transactions at the end of each reporting period. Answer: […]

Accounting for changes in residual value must be prospective and retrospective. A comparison of a company’s financial ratios with its own historical ratios is referred to as a cross-sectional comparison. Answer: FALSE Net sales is always equal to total sales […]

The balance sheet equation is assets = liabilities – owner’s equity. Revenue is recorded when accounts receivable are collected under the cash basis of accounting. Answer: TRUE Corporations are the most important form of business ownership because they conduct the […]

Posting is the transferring of amounts from the journal to the appropriate accounts in the ledger. The market interest rate is affected by general economic conditions. Answer: TRUE Outstanding checks should be added to the balance per bank when preparing […]

Stake, Inc., records the payment of $200 cash for a previously accrued expense and the accrual of $625 for another expense. The impact of these two entries is to decrease net income by $825. Purchases of inventory minus the increase […]

ERP is a means of organizing computer accounting information. Gains on disposal of plant assets are generally shown as “other income” on the income statement. Answer: TRUE The rate of return on investment is equal to invested capital divided by […]

Interest expense that is not explicitly recognized in a loan agreement is referred to as coupon or nominal interest. Financial management is concerned with where a company gets cash and how it uses that cash to its benefit. Answer: TRUE […]

Under the periodic inventory system, freight-in is an additional part of cost of goods sold. Under the market method, the investor recognizes revenue when dividends are received. Answer: TRUE The purchase of an intangible asset such as a trademark would […]

There are two types of leases: capital leases and financial leases. With respect to dividends, the record date comes first and is always followed by the declaration date, which is then always followed by the payment date. Answer: FALSE A […]

Under the cash method, revenue is recorded when cash is collected. The adjusting entry to record $675 of earned revenue received in advance would include a debit to Unearned Revenue. Answer: TRUE An affiliated company is one that has 20% […]

The accounts used in the journal entry for the estimation of bad debts is the same whether a firm uses the percentage of sales, percentage of accounts receivable, or the aging method to estimate bad debts expense. The allowance method […]

Depreciation is not intended to track the decreasing current market value of a tangible asset. Top management does not need to own a significant number of shares in order to have the authority to exert great influence on the actions […]

The American Institute of Certified Public Accountants is responsible for establishing GAAP in the United States A compound entry is when two or more journal entries are made. Answer: FALSE The operating cycle is the time it takes for a […]

The sale of a plant asset may result in a gain but not a loss. A compensating balance is the required minimum cash balance on deposit when money is borrowed from the bank. Answer: TRUE A lease is a contract […]

Restrictions of retained earnings are also called appropriated retained earnings or reserves. Companies should always take advantage of cash discounts even if they have to borrow money from the bank to do so. Answer: FALSE If warranty obligations are material, […]

A recoverability test is necessary to determine if an asset is impaired. Over time, the cost of processing accounting information has increased. Answer: FALSE The percentage of taxable income paid to the government by corporations is known as the tax […]

Revenue is generally recognized at the point of sale. The interest coverage ratio measures the firm’s ability to meet its interest obligation. Answer: TRUE According to accounting rules, fiscal years are required to be established over calendar years. Answer: FALSE […]

Trend analysis involves comparing data on one financial statement with other data on the same financial statement. Franchises and licenses are legal contracts that grant the buyer the right to sell a product or service. Answer: TRUE Accountants generally do […]

The credit terms 2/4, n/30 means that the customers may take a 4% cash discount if they pay within 30 days. Some explicit transactions (e.g., the loss of assets due to fire) do not involve actual exchanges of goods and […]

Adjusting entries are journalized after the financial statements are prepared. Corporations are perpetual entities created in accordance with federal laws. Answer: FALSE Comprehensive income includes both net income and the change in market value of available-for-sale securities. Answer: TRUE The […]

A decrease in accounts receivable is added to the financing activities when preparing a statement of cash flows using the indirect method. Recorded goodwill is considered to exist unless impaired. Answer: TRUE Journalizing is the analysis of the effects of […]

Debt security investments include short-term obligations of banks and short-term notes payable issued by large corporations with top credit ratings. Liabilities are known as contra assets. Answer: FALSE If land was acquired many years ago, and inflation has occurred over […]

Net cash provided by operating activities is always equal to net income. Dividends received from a subsidiary would be classified as an investing activity on a statement of cash flows. Answer: FALSE A T-account is an analysis of an account. […]

Preferred stock is like common stock in that dividends are not a legal obligation until the board of directors declares them. A trial balance proves the equality of the total debits and total credits of the accounts listed. Answer: TRUE […]

Costs that are linked with revenues and are charged as expenses when the related revenue is recognized are known as product costs. The MACRS of depreciation is used for income tax purposes and financial reporting purposes. Answer: FALSE The normal […]

Oxhaven Company has determined that 2% of $50,000 credit sales are uncollectible. The Allowance for Uncollectible Accounts currently has a credit balance of $250. The adjusting entry amount for bad debts should be $1,000. Module Accounting Services receives $8,000 cash […]

The most important element of internal control is reliable personnel with clear responsibilities. A disadvantage of debt for long-term financing is that the interest expense incurred on debt reduces net income. Answer: TRUE Closing entries deal primarily with balance sheet […]

Under the market method, the investment in another company’s stock is recorded at acquisition cost and is adjusted for the investor’s share of dividends and for any earnings or losses experienced by the investee after the date of investment. Depreciation […]

If ending inventory is overstated by $3,000 in 20X3, retained earnings at the end of 20X4 will be correctly stated. Long-lived assets include accounts receivable and inventory. Answer: FALSE Common-size statements aid in comparing companies of different sizes. Answer: TRUE […]

A leasehold is the right to use a fixed asset for a specified period of time beyond one year. The accrual basis of accounting provides a better measure of economic performance than the cash basis. Answer: TRUE Goodwill occurs when […]

When shareholders are entitled to stock dividends in amounts equal to fractional units, corporations issue additional shares for whole units plus cash equal to the market value of the fractional units. A line of credit is a written promise to […]

Implicit transactions are events such as cash receipts and disbursements that trigger nearly all day-to-day routine entries. A cross-sectional evaluation of financial ratios involves comparing a company’s financial ratios with the ratios of other companies. Answer: TRUE The dividend-yield ratio […]

The date the board of directors declares a dividend is known as the record date. Investors purchase capital stock expecting to receive dividends and an increase in the value of the stock. Answer: TRUE An income statement without any intermediate […]

Revenue is recognized when a customer’s promise to pay exists, even if the company is not relatively certain that they will receive payment. An aging schedule reveals $6,500 of uncollectible accounts. The Allowance for Uncollectible Accounts currently has a credit […]

The cost of merchandise acquired is the invoice price of the goods plus directly identifiable inbound transportation costs less any cash or quantity discounts and less any returns or allowances. The denominator in the basic earnings per share ratio is […]

Debits are always journalized after credits. Public accountants are those whose services are offered to the general public on a fee basis. Answer: TRUE Both the direct and indirect methods yield the same net cash flow from operations. Answer: TRUE […]

Increases in the market value of available-for-sale securities increase total stockholders’ equity, but increases in the market value of trading securities do not increase total stockholders’ equity. The auditor’s opinion is included with the annual report issued by the corporation. […]

Expenses, such as utilities, whose benefit is consumed by the passage of time rather than by the level of sales, are known as period costs. The purchaser bears the transportation cost when the terms are FOB destination. Answer: FALSE When […]

Greek letters are used for sample statistics and Roman letters are used for parameters. It is useful for a researcher to offer the “don’t know” option with the type of questions that require mental effort to reduce item omissions. Answer: […]

Ethics may be defined as a field of inquiry into determining what behaviors are deemed appropriate under certain circumstances as prescribed by codes of behavior that are set by the government. Packaged services firms use a proprietary process to conduct […]

When a researcher uses gender as a dummy variable in a study for a client, it is important not to distort the findings by highlighting this fact in the final report and presentation. An in-depth interview has the advantages of […]

Regardless of the size of the correlation value, if it is not significant, it is meaningless. Respondents can misunderstand, guess, lose attention, suffer distractions, and suffer respondent fatigue, which are all examples of intentional respondent error and they all contribute […]

Titles should be very brief because the main purpose of titles is to identify one report from another. One of the greatest pluses of online panels is high response rate. Answer: TRUE The standard deviation indicates the degree of variation […]

The SKOPOS service RepliKator¢ measures consumer reaction to radio messages. Plus-one dialing procedure is a popular variation of random digit dialing that increases the number of calls to additional sample members (hence “plus”) who may participate in the survey. Answer: […]

Incidence rate is the percentage of the population that possesses some characteristic necessary to be included in the survey. With the 99% level of confidence, the corresponding z value is 2.58. Answer: TRUE Presence refers to the strength of a […]

World revenues for the marketing research industry are about $300 billion annually. Scale development is a process used by marketing researchers to adapt rating scale formats which facilitate consistent translation of unobservable constructs. Answer: TRUE It has yet to be […]

Familiarity with a client can change the researcher’s recommendations. Some marketing research studies are designed to find out what consumers’ problems are and to assess the suitability of different proposed methods of resolving those problems. Answer: TRUE Using the confidence […]

Unlike syndicated data, the data from a packaged service will differ for each client. In a table it would be wise to report survey data as accurately as possible; using three to four decimal places is desirable. Answer: FALSE Stepwise […]