Archives: Quiz

Use this information to answer the following question. What is the present value of receiving $800 at the end of each year for three years, assuming an APR of 7 percent? A. $652.80 B. $1,952.40 C. $2,099.20 D. $2,244.00 Which […]

Use this information to answer the following question. These facts concern the long-term stock investments of DeBord Corporation: The entry to record the sale of 1,000 shares of Vanhook Corporation common stock is: A. Long-Term Investments 38,000 Cash 38,000 B. […]

The following information pertains to Patterson Corporation. Assume that all balance sheet amounts represent both average and ending figures. Patterson Corporation had 6,000 shares of common stock issued and outstanding. The market price of Patterson common stock on December 31, […]

The personal assets and liabilities of an owner are not shown on the business’s financial statements because of the A. separate entity concept. B. sole proprietorship concept. C. financial position concept. D. objectivity concept. Use the following information regarding Larson […]

The sale of treasury stock cannot result in A. an increase in Retained Earnings. B. the crediting of Paid-in Capital, Treasury Stock. C. the debiting of Paid-in Capital, Treasury Stock. D. an increase in total stockholders’ equity. An important purpose […]

Which of the following partnership characteristics is an advantage? A. Mutual agency B. Ease of dissolution C. Unlimited liability D. Limited life Which of the following is the most useful aid to the accountant in preparing closing entries? A. Journal […]

The collection of a $2,000 account beyond the 2 percent discount period would result in a(n) A. increase to Cash for $1,960. B. decrease to Accounts Receivable for $2,000. C. decrease to Cash for $2,000. D. increase to Sales Discounts […]

Winters Corporation purchased 15,000 shares of Poores Corporation common stock for $60 per share on January 2, 2014. Poores Corporation reported net income of $1,500,000 for 2014 and paid dividends of $300,000 during 2014. Poores has a total of 50,000 […]

If an asset costs $41,000, has a residual value of $3,000, and has a useful life of five years, the entry to record depreciation in the second year, using the double-declining-balance method, is A. debit to Depreciation Expense, 9,430; credit […]

A bond with a face value of $1,000 has a current price quote of 89.00. This bond is selling for A. $1090.00. B. $1040.00. C. $990.00. D. $890.00. Improperly classifying large expenditures as assets rather than expenses A. could constitute […]

One of the benefits of forming a partnership is limited liability. Dividend yield is a liquidity ratio. FALSE Compound interest is computed quarterly on $700 for seven years at 12 percent annual interest. The future value table is used by […]

Lines of credit from the bank need not be disclosed in the financial statements or in the notes. The information needed to record the adjusting entries can be copied from the work sheet. TRUE An ordinary annuity is a series […]

If a corporation issues par value common stock and the proceeds are less than par value, the Common Stock account is credited for the par value. A capital expenditure will result in an immediate increase in long-term assets. TRUE Noncompete […]

In general, in times of rising prices, using FIFO has a favorable effect on cash flows. The accrual basis of accounting results in a more accurate measurement of net income for the period than does the cash basis of accounting. […]

Ending merchandise inventory for LIFO will be the same dollar amount under a periodic inventory system as under a perpetual inventory system. Mineral deposits are subject to a process called depletion. TRUE Trading securities are valued on the balance sheet […]

The relevance of accounting information means that the information has a direct bearing on a decision. Vertical analysis will reveal the percentage of net sales consumed by salaries expense. TRUE The day-by-day accumulation of interest is considered a transaction involving […]

Product warranties are an expense of the period in which the product is sold. A company that factors its receivables will have a less favorable receivable turnover than a company that does not factor. FALSE Revenue is equal to the […]

The receiving department must compare goods received with goods purchased, as indicated on the purchase order. A partnership agreement need not be in writing. TRUE Unearned revenue arises from the acceptance of payment in advance for a service to be […]

The recognition of an expense does not depend on the payment of cash. A corporation’s bondholders are the primary recipients of financial leverage. FALSE A temporary account is also known as a nominal account. TRUE Inventory turnover is a measure […]

When the periodic inventory system is used, a physical inventory should be taken at the end of the fiscal year. A capital lease is a lease of property, plant, or equipment that is in effect an installment purchase. TRUE The […]

An estimated liability is not a definite obligation of the firm because the amount cannot be definitely determined. Held-to-maturity securities are always debt securities, and never equity securities. TRUE Based on past experience, it should be possible to estimate the […]

Recording an account with a debit balance as a credit, or vice versa, will cause the trial balance to be out of balance by an amount that is evenly divisible by two. Dividend yield is the most important ratio associated […]

Under the perpetual inventory system, the Cost of Goods Sold and Merchandise Inventory accounts are updated with each sale. Inventory is classified as a long-term asset. FALSE The work sheet is prepared after the formal adjusting and closing entries. FALSE […]

It is possible to allocate income or loss to partners based solely on interest. A different set of financial statements usually is prepared for each user. FALSE Corporate earnings are subject to double taxation. TRUE A limited partnership normally has […]

If the market interest rate at the date of issuance of a bond exceeds the face interest rate, the bond will probably be sold at a discount. Social Security and Medicare taxes are borne entirely by the employee. FALSE On […]

Investments with a maturity of less than ninety days are generally classified as cash equivalents. Callable preferred stock is preferred stock that may be redeemed or retired at the option of the issuing corporation. TRUE Under the perpetual inventory system, […]

Issuing bonds between interest payment dates will have the effect of decreasing a bond issuance discount or increasing a bond issuance premium. Once an owner of convertible preferred stock has converted to common, he or she cannot convert back to […]

Trading securities are always short-term investments. The lower-of-cost-or-market rule implies that it is a violation of the conservatism concept to carry inventory at a cost that is in excess of its market value. TRUE Intangible assets are also called wasting […]

The purchases journal is used to record only purchases made on credit. When compound interest is used, interest accumulates less quickly than when simple interest is used. FALSE When a partner invests a noncash asset into the partnership, the partner’s […]

The statement of owner’s equity relates the income statement to the balance sheet by showing how the owner’s capital account changed during the accounting period. The Retained Earnings portion of a corporation represents the initial contribution of capital to the […]

It is possible to invest no tangible assets into a partnership, yet be given a positive opening capital balance. The post-closing trial balance will typically have more accounts than the adjusted trial balance. FALSE A building not currently used because […]

The matching rule is most closely related to the cash basis of accounting. The entry to record the retirement of treasury stock will include a debit to Common Stock for the par value of the retired shares. TRUE A decrease […]

Responsibility for ethical financial reporting rests solely with the accountant. A bond sells at the face value when the face interest rate of the bond is identical to the market interest rate for similar bonds on the date of the […]

A company with a low debt to equity ratio is in a more vulnerable position during poor economic times than a company with a high debt to equity ratio. When the equity method is used to account for an investment […]

If the market interest rate at the date of issuance of a bond exceeds the face interest rate, the present value of the face value plus the present value of all the future interest payments will equal an amount less […]

In the calculation of free cash flow, dividends and sales of plant assets are both deducted. The term salaries refers to the compensation of employees who are paid at an hourly rate. FALSE The quick ratio and the current ratio […]

The purchasing department prepares a purchase requisition addressed to the vendor (seller) containing instructions related to the items ordered. There is no limit to the amount of income subject to the FUTA tax. FALSE Contributed capital is shown on a […]

The amount recorded for Payroll Taxes and Benefits Expense is borne entirely by the employee. If a bond has a face interest rate of 6 percent, a face value of $40,000, and pays interest semiannually, each interest payment will amount […]

If the present value of the net cash flows expected from a machine is less than its purchase price, the investment should not be made. Intangible assets are subject to a process called depreciation. FALSE Freight-in is treated as an […]

Land held for speculative purposes should be classified as a short-term investment. The degree of separation of duties varies with the size of the business. TRUE Generally accepted accounting principles state that all business transactions should be valued at fair […]

During the closing process, expenses are transferred to the debit side of the Income Summary account. The Sarbanes-Oxley Act requires a company to guarantee that its financial statements are 100 percent accurate. FALSE Partner A purchases partner B’s $3,000 interest […]

The costs that result when a company runs out of a particular item for which there is a customer demand are ________. A) shrinkage costs B) shortage costs C) stockout costs D) EOQ estimation costs Spoilage, rework, scrap, and machine […]

Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client services for the business consulting division. ∙ Estate Planning, a new service, incurred $150,000 in development costs and employee training. ∙ The direct costs of providing […]

Real Wood Structures Company has invested $1,040,000 in a plant to build small tool sheds. The target operating income desired from the plant is $156,000 annually. The company plans annual sales of 1200 sheds at a selling price of $1100 […]

Which of the following statements is true of sell-or-process-further decisions in joint costing? A) Joint costs incurred before the split-off point are relevant in deciding whether to process the product further. B) All separable costs in joint-cost allocations are incremental […]

A locked-in cost is a(n) ________. A) opportunity cost that is fixed in the short run B) cost that can be changed in the short run C) cost that has not yet been incurred, but based on decisions that have […]

The breakeven point is the activity level where ________. A) revenues equal fixed costs B) revenues equal variable costs C) contribution margin equals total costs D) revenues equal the sum of variable and fixed costs Which of the following represents […]

Greentree Incorporated manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $120 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Greentree’s policy to add a 30% […]

If a company is planning to reduce the selling price, they must believe that ________. A) variable costs will decline as well B) the fixed costs will cover the lower sales price C) more units will be sold D) increased […]

Francis Kenney is paid $26 an hour for straight-time and $31 an hour for overtime. One week she worked 46 hours, which included 6 hours of overtime. What is the overtime premium incurred to the company? A) $186 B) $72 […]