The Sarbanes-Oxley Act (SOX) does not:
A. require an internal control assessment by management.
B. protect whistleblowers.
C. require an internal control report by the independent auditor.
D. require an unqualified audit opinion.
Answer:
The combined effect of the declaration and payment of a cash dividend on a company’s
financial statements is to:
A. increase total liabilities and decrease stockholders’ equity.
B. increase total expenses and decrease assets.
C. increase total assets and increase stockholders’ equity.
D. decrease total assets and decrease stockholders’ equity.
Answer:
Contingent liabilities must be recorded if:
A. the future event is reasonably possible.
B. the amount owed cannot be reasonably estimated.
C. the future event is probable and the amount owed can be reasonably estimated.
D. the future event is remote.
Answer:
On December 16, 2013, B. Darin Company received $3,600 from S. Dee Company for
rent of an office owned by B. Darin Company. The $3,600 is for the period from
December 16, 2013 through February 15, 2014. B. Darin Company recorded this as
unearned rent when it was received on December 16. The adjusting entry on December
31 would include
A. A credit to Rent Revenue of $900.
B. A credit to Unearned Rent Revenue of $900.
C. A debit to Rent Revenue of $1,800.
D. A debit to Unearned Rent Revenue of $1,800.
Answer:
A company typically records the amount owed to suppliers for goods or services when:
A. they are ordered.
B. a verbal commitment to buy has first been made.
C. they are paid for.
D. the goods or services are received.
Answer:
A retail clothing company began operations in 2014 with assets of $42,000. The
following additional data have been taken from the records as of December 31, 2014:
All accounts have normal balances.
The debt-to-assets ratio at the end of 2014 is closest to:
A. 0.273
B. 0.376
C. 0.301
D. 0.330
Answer:
If a firm’s beginning inventory is $35,000, goods purchased during the period cost
$120,000, and the cost of goods sold for the period is $140,000, what is the amount of
the ending inventory?
A. $45,000
B. $20,000
C. $25,000
D. $15,000
Answer:
Your company sells $469,300 of goods during the year at a cost of goods sold of
$398,600. Inventory was $29,783 at the beginning of the year and $34,038 at the end of
the year.
Use the information above to answer the following question. The inventory turnover
ratio is closest to:
A. 12.5.
B. 13.4.
C. 14.7.
D. 2.2.
Answer:
Scandals involving Enron and WorldCom drew heightened attention to the possibility
that financial statements might be misreported to portray a favorable impression of a
company’s financial results. Which of the following false impressions could be
suggested by the ratio indicated?
A. Greater control of expenses might be suggested by the net profit margin ratio.
B. Greater efficiency in asset use might be suggested by the debt-to-assets ratio.
C. Greater control of expenses might be suggested by the debt-to-assets ratio.
D. Less financing risk might be suggested by the asset turnover ratio.
Answer:
The method for estimating bad debts under the allowance method that focuses on the
balance sheet rather than the income statement is based on
A. a direct write-off.
B. an aging of the receivables.
C. credit sales.
D. net sales.
Answer:
A company started the year with $430,000 of accounts receivable and a credit balance
in the allowance for doubtful accounts of $3,000. During the year the following events
were recorded:
At the end of the year the company has $375,000 of accounts receivable and has
determined, using the aging method, that the net realizable value of the accounts
receivable is $370,000.
Use the information above to answer the following question. What was the total amount
of cash collections from accounts receivable customers this year?
A. $846,950
B. $850,000
C. $849,800
D. $847,150
Answer:
Melody’s Piano School operations for the month of May are summarized in the
following three transactions:
– Provided $500 of instruction to students.
– Of the $500 of instruction provided in May, $400 is collected in cash, and an
additional $300 is collected for lessons provided in April.
– Paid April’s piano rental bill of $100. Received May’s bill of $150 but did not pay.
What is Melody’s Net Income for May using the cash basis of accounting?
A. $800
B. $300
C. $350
D. $600
Answer:
The balances for the accounts of Dudley Do-Right Repair Shop for the year ended
December 31, 2013, are shown below and each account has a normal balance:
What will be the trial balance total?
A. $439,200
B. $367,700
C. $608,400
D. $304,200
Answer:
Which of the following is not a professional certification for accountants?
A. CFO
B. CPA
C. CMA
D. CIA
Answer:
The straight-line depreciation method and the double-declining-balance depreciation
method
A. produce the same total depreciation over the asset’s useful life.
B. produce the same amount of depreciation expense each year.
C. produce the same book value each year.
D. are the only acceptable methods of depreciation for financial reporting.
Answer:
Once the depreciation expense for a long-lived asset is calculated:
A. it cannot be changed because of the cost principle.
B. it may be revised based on new information.
C. any changes are not recognized until the date the asset is sold.
D. it cannot be changed due to the consistency principle.
Answer:
Total doubtful accounts at the end of the year are estimated to be $25,000 based on an
aging of accounts receivable. If the balance in the Allowance for Doubtful Accounts is a
$7,000 debit before adjustment, what will be the amount of bad debt expense recorded
for the period?
A. $7,000.
B. $18,000.
C. $25,000.
D. $32,000.
Answer:
Passwords are an example of which internal control principle?
A. Segregate duties.
B. Restrict access.
C. Document procedures.
D. Independently verify.
Answer:
A company has the following paid-in capital:
Use the information above to answer the following question. If the company pays a
$100,000 dividend, and the preferred stock is cumulative and three years’ dividends are
in arrears, what is the amount the preferred stockholders will receive?
A. $18,000
B. $24,000
C. $6,000
D. $54,000
Answer:
Flynn Corporation had the following cash flows for the current year. The company uses
the direct method in preparing the statement of cash flows.
Use the information above to answer the following question. What is the net cash
provided by (used in) investing activities?
A. ($200,000)
B. $420,000
C. $410,000
D. ($190,000)
Answer:
No disclosure is required for contingent liabilities that are:
A. probable.
B. remote.
C. possible.
D. likely.
Answer:
The Don’t Tread on Me Tire Company had retained earnings at December 31, 2013 of
$200,000. During 2014, the company had revenues of $400,000 and expenses of
$350,000, and the company declared and paid dividends of $11,000. Retained earnings
on the balance sheet as of December 31, 2014 will be:
A. $39,000.
B. $239,000.
C. $250,000.
D. $289,000.
Answer:
A long-term liability is one that the company:
A. has owed for over one year.
B. has owed for over five years.
C. will not pay off for over one year.
D. will not pay off for over five years.
Answer:
At the end of the third year, the Treadwell Tire Company had accounts receivable of
$66,600, and at the end of the fourth year, the company had accounts receivable of
$72,600. If the company’s net sales revenue during the fourth year were $876,000, the
days to collect during year four was (Round all calculations to one decimal place.):
A. 12.6
B. 29.0
C. 8.0
D. 34.0
Answer:
The internal control principle related to separating employees’ duties so that the work of
one person can be used to check the work of another person is called:
A. duplication of responsibility.
B. mandatory vacations.
C. segregation of duties.
D. rotation of duties.
Answer:
The Treasury Bank Corporation had retained earnings at the end of December 31, 2013
of $450,000. During 2014, the company had net income of $170,000 and declared
dividends of $20,000. Retained earnings on the balance sheet as of December 31, 2014
will be:
A. $430,000.
B. $600,000.
C. $620,000.
D. $640,000.
Answer:
Flynn Corporation had the following cash flows for the current year. The company uses
the direct method in preparing the statement of cash flows.
Use the information above to answer the following question. What is the net cash flows
provided by (used in) financing activities?
A. $620,000
B. $410,000
C. $610,000
D. $490,000
Answer:
In a period of falling prices, the inventory costing method that will cause the company
to have the lowest cost of goods sold is
A. LIFO.
B. FIFO.
C. Weighted average.
D. Specific identification.
Answer:
The following information is taken from the financial statements of Lopez Company:
Which of the following is closest to the company’s Times Interest Earned ratio?
A. 19.2
B. 4.7
C. 15.0
D. 18.2
Answer:
A company was recently formed with $60,000 cash contributed to the company by its
owners. The company then borrowed $30,000 from a bank and bought $10,000 of
inventory and paid cash for it. The company also purchased $70,000 of equipment by
paying $10,000 in cash and issuing a note for the remainder.
What is the amount of the total assets to be reported on the balance sheet?
A. $150,000
B. $160,000
C. $90,000
D. $80,000
Answer:
On April 30, 2014, a three-year insurance policy was purchased with a cash payment of
$18,000. Coverage began immediately.
What is the amount of insurance expense that would be reported on the income
statement for the year ended December 31, 2014?
A. $4,000
B. $18,000
C. $6,000
D. $2,000
Answer:
Which of the following could explain why a company has a lower net profit margin
ratio but a higher EPS than one of its competitors?
A. The company sells a higher percentage of goods on credit.
B. The company has fewer shares of outstanding common stock relative to its net
income.
C. The company earns a higher percentage of net income from non-operating activities.
D. The company pays a higher dividend.
Answer:
How will a company’s current ratio be affected when the company receives $20,000
from owners and issues stock to them?
A. The current ratio will increase because current assets increase.
B. The current ratio will increase because current liabilities decrease.
C. There will be no change in the company’s current ratio.
D. The current ratio will decrease because current liabilities increase.
Answer: