Archives: Quiz

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 […]

A company purchases software; it has an estimated useful life of three years. The adjustment to recognize amortization for the use of software would cause which of the following? A) An increase in liabilities, an increase in expenses, and a […]

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 […]

A company starts the period with 100 computers in inventory, purchases 30 more, returns 4 of them to suppliers, and has 83 in inventory at the end of the period. If there is no shrinkage, how many computers were sold? […]

On the last day of the month, a company receives $8,000 of cash from customers. Of that amount, $1,000 was for services performed and $7,000 represented payments on account. The journal entry to record the $8,000 cash receipt would include […]

Which of the following statements about the income statement is not correct? A) Amounts received from customers for services performed in the current month would be revenues on the income statement. B) Costs incurred in the current month but not […]

Which of the following ratios does not use net income in its calculation? A) Net profit margin B) Earnings per share C) Return on equity D) Fixed asset turnover Flynn Company ‘s monthly bank statement showed the ending balance of […]

Which of the following statements regarding posting and classification is correct? A) Posting journal entries involves copying the dollar amounts from the ledger into the journal. B) If a $100 debit is erroneously posted to an account as a $100 […]

Choose the appropriate letter to match the term and the definition. Not all definitions will be used. Term 1> _____ Cash Inflow 2> _____ Property, Plant, and Equipment 3> _____ Comparative Balance Sheet 4> _____ Free Cash Flow 5> _____ […]

E. Choudhury Company’s price/earnings ratio is 15.3. Its closest competitor, Bhatt, Inc. has a Price/Earnings ratio of 9.4. Which of the following would not be a valid conclusion to draw from a comparison of the two companies’ Price/Earnings ratios? A) […]

Your company is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15, 2022. If interest rates fall in the economy so that similar financial investments pay 5%, your company will: […]

Which of the following is not a reason that a business needs an effective internal control system? A) Ensure that work is completed efficiently and effectively B) Produce reliable and timely accounting information for use by people external to the […]

Which of the following ratios is used to evaluate a company’s liquidity? A) Debt-to-assets ratio B) Fixed asset turnover ratio C) Return on equity ratio D) Current ratio Your company sells $50,000 of bonds for an issue price of $48,000. […]

The purpose of internal controls includes all of the following except: A) improving efficiency. B) producing timely accounting information. C) minimizing errors. D) completely eliminating fraud. Blossom Inc. has an unadjusted debit balance of $3,500 in its Allowance for Doubtful […]

On December 31, 2016, Ditka Inc. had Retained Earnings of $267,800 before its closing entries were prepared and posted. During 2016, the company had service revenue of $168,100 and interest revenue of $81,300. The company used supplies in the amount […]

Which of the following ratios is a solvency ratio? A) Net profit margin ratio B) Current ratio C) Fixed asset turnover ratio D) Debt-to-assets ratio Which of the following statements about disposal of long-lived assets is not correct? A) The […]

On December 31, 2015, a company had assets of $16 billion and stockholders’ equity of $8 billion. That same company had assets of $20 billion and stockholders’ equity of $9 billion as of December 31, 2016. During 2016, the company […]

A company’s financial records at the end of the year including the following amounts: Use the information above to answer the following question. What is the amount of total assets to be reported on the balance sheet at the end […]

The Allowance for Doubtful Accounts: A) is a contra-revenue account. B) has a normal debit balance. C) is not listed on the chart of accounts of a company that uses the direct write-off method. D) is reported on the Income […]

Which of the following would be the best investment? A) A company that pays no dividends, but has substantial net income. B) A company that pays substantial dividends, but whose earnings per share has been declining over the past several […]

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements. This feature is known as a: A) bond certificate. B) loan covenant. C) renegotiation. D) contingent liability. A stock dividend: A) is […]

On February 16, a company declares a 34¢ dividend to be paid on April 5. There are 1,900,000 shares of common stock issued and outstanding. The entry recorded by the company on February 16 includes a debit to: A) Dividends […]

Which of the following statements would not explain why a company may want to repurchase its stock? A) To demonstrate to investors that it believes its own stock is worth purchasing. B) To obtain shares to reissue to employees as […]

A company loaned $1,000,000 with interest at 7% to another company. The interest revenue from this loan would be reported on the statement of cash flows as a: A) cash inflow from operating activities. B) cash inflow from investing activities. […]

Flynn Company ‘s monthly bank statement showed the ending balance of cash of $18,500. The bank reconciliation for the period showed an adjustment for a deposit in transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank […]

The records of Alberta Inc. included the following information: Use the information above to answer the following question. What is the inventory turnover ratio? A) 3.87 times B) 4.00 times C) 4.14 times D) 2.00 times A retail chain sells […]

A company pays $9,000 in interest on notes consisting of $6,000 of interest that was accrued during the last accounting period and $3,000 of interest that accumulated during the current accounting period but has not yet been accrued on the […]

The objectives of a company’s system of internal control include all of the following except: A) completing work efficiently and effectively and protecting assets by reducing the risk of fraud. B) producing reliable and timely accounting information for use by […]

Which one of the following is not a current asset? A) Cash B) Supplies C) Equipment D) Prepaid Insurance Assets reported on the balance sheet include: A) Accounts Receivable, Sales Revenue, and Cash. B) Equipment, Supplies Expense, and Cash. C) […]

A company pays its workforce on Fridays for a five-day workweek ending on that day. The payroll for a week is $100,000. If the accounting year-end falls on a Tuesday, the adjusting journal entry to record this will include a […]

Maxell Company uses the FIFO method to assign costs to inventory and cost of goods sold. The company uses a periodic inventory system. Consider the following information: What amounts would be reported as the cost of goods sold and ending […]

Which of the following statements about the adjusted and post-closing trial balances is correct? A) The adjusted trial balance is prepared after the financial statements to verify that the numbers are accurate. B) The primary purpose of the post-closing trial […]

The Publish or Perish Printing Company paid a dividend to stockholders. This will be reported on the: A) audit report. B) income statement. C) balance sheet. D) statement of retained earnings. Welles Company uses the direct write-off method of accounting […]

The Acme Corporation starts the year with a beginning inventory of 300 units at $5 per unit. The company purchases 500 units at $4 each in February and 200 units at $6 each in October. Acme sells 150 units during […]

When the direct write-off method is used: A) the estimated amount of bad debts is debited to Bad Debt Expense. B) the estimated amount of bad debts is debited to Allowance for Doubtful Accounts. C) the estimated amount of bad […]

Which of the following trial balances is used as a source for preparing the income statement? A) Unadjusted trial balance B) Pre-adjusted trial balance C) Adjusted trial balance D) Post-closing trial balance The following account balances appeared on the company’s […]

Which of the following statements about stock options is not correct? A) Stock options are intended to give upper management the same goals as stockholders. B) When stock options are exercised by upper management, existing stockholders lose voting power. C) […]

The return on equity ratio is calculated as: A) dividends paid divided by the average book value of stockholders’ equity. B) net income divided by the average number of outstanding common shares. C) dividends divided by the average number of […]

Which of the following will happen if the accrual adjustment entry is not made to record an expense incurred but not yet recorded? A) Both expenses and liabilities will be overstated. B) Both expenses and liabilities will be understated. C) […]

An error must have been made if which of the following accounts appears on the post-closing trial balance with a balance other than zero? A) Equipment B) Common Stock C) Accumulated Depreciation D) Depreciation Expense The Sarbanes-Oxley Act (SOX) requires […]

Sprinkler Blowout Company entered into the activities listed in the table below. The company’s chart of accounts appears below the list of activities. For each activity, decide whether a transaction has occurred, and, if so, indicate the account(s) that should […]

Choose the appropriate letter to match the term and the definition. Not all definitions will be used. Term 1> _____ Time-Series Analysis 2> _____ Common-Size Financial Statements 3> _____ Management Discussion and Analysis 4> _____ Price/Earnings Ratio 5> _____ Earnings […]

The classified balance sheet for a company reported current assets of $1,623,850, total liabilities of $799,540, Common Stock of $1,000,000, and Retained Earnings of $130,260. The current ratio was 2.5. Use the information above to answer the following question. What […]

Which of the following would be listed as a current liability? A) Cash B) Notes Payable (due in two years) C) Supplies D) Accounts Payable If Salaries and Wages Expense is $450,000 during the year and the beginning and ending […]

A voucher is an internal file that:A)is prepared after an invoice is received.B)is used as a substitute for an invoice.C)is a collection of documents prepared at each step in the voucher system.D)takes the place of a bank check.E)is prepared before […]

Faithful representation is a characteristic of external financial reporting that means: A) the financial reports of a business are assumed to include the results of only that business’s activities. B) financial information can be compared across businesses because similar accounting […]

Generally accepted accounting principles (GAAP) require that the inventory be reported at: A) market value. B) historical cost. C) lower of cost or market. D) retail value. A typical classified balance sheet provides no information about which of the following […]

Cairo Co. uses the allowance method of accounting for uncollectible accounts. Cairo Co. accepted a $5,000, 12%, 3-month note dated May 16, from Alexandria Co. in exchange for its past-due account receivable. Required: Part a. Prepare the journal entry for […]

Accrued revenues recorded at the end of the current year: A) often result in cash receipts from customers in the next period. B) often result in cash payments in the next period. C) are also called Unearned Revenues. D) are […]

Which of the following statements about the need for adjustments is not correct? A) Without adjustments, the financial statements present an incomplete and misleading picture of the company. B) Adjusting entries are intended to change the operating results to reflect […]