COMM 217 - FINAL MCQ Actual Questions and Answers Solved correctly 100%( complete version)

COMM 217 - FINAL MCQ Actual Questions and Answers Solved correctly 100%( complete version)   COMM 217 - FINAL MCQ Actual Questions and Answers Solved correctly 100%( complete version) 1. The Total Asset Turnover measures which of the following? a) the profit generated by efficient management of assets b) how quickly we liquidate our inventory c) the sales revenue generated by efficient management of assets d) the ability to earn profit for the shareholders 2. Parker Bank is deciding whether to make a loan to Davis Company. Why would the bank be interested in the amount of liabilities that Davis has on its statement of financial position? a) Liabilities represent resources that could be used to repay the loan. b) If Davis already has many other obligations, it might not be able to repay the loan. c) Existing liabilities give an indication of how profitable Davis has been in the past. d) Parker would be interested in the amount of Davis's assets but not the amount of liabilities. 3. The conceptual framework of accounting helps to ensure that a) users with no accounting or business knowledge will understand financial statements. b) a rule will be in place for every possible situation. c) there are consistent standards prescribing the nature, functions and limits of financial statements. d) all countries have their own unique accounting standards. 4. What is the primary purpose of hiring a public accounting firm to examine the financial statements of the company? a) To assure no fraud has been committed by the company's management. b) To provide credibility that the financial information conforms with international financial reporting standards in all material respects. c) To detect all accounting errors made by the accounting system and employees. d) To detect fraud committed by employees. 5. An understatement of the beginning inventory results in a) no effect on the period's earnings. b) an overstatement of earnings. c) an understatement of earnings. d) a need to adjust purchases. 6. The two qualitative characteristics that are defined in terms of what influences or makes a difference to a decision maker are a) faithful representation and materiality. b) comparability and verifiability. c) relevance and completeness. d) materiality and relevance. 7. On the statement of cash flows, how would a company report the purchase of machinery? a) As cash used in operating activities. b) As cash used in financing activities. c) As cash used in investing activities. d) It doesn’t matter how it is reported as long as it is shown as an outflow of cash. 8. Tabor Company had trade receivables of $450,000 and an allowance for doubtful accounts of $15,500 just prior to writing off as worthless a trade receivable from Fox Company of $5,000. What was the net realizable value of trade receivables as shown by the accounting record before and after the write-off? Before After a) $450,000 $450,000 b) $15,000 $439,500 c) $434,500 $429,500 d) $434,500 $434,500 9. An aging of a company's trade receivables indicates that $6,500 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $1,200 debit balance, the adjustment to record bad debts for the period will require a debit to a) Bad Debts Expense for $6,500. b) Bad Debts Expense for $5,300. c) Allowance for Doubtful Accounts for $6,500. d) Bad Debts Expense for $7,700. 10. Accounting information should be neutral to enhance: a) Faithful representation. b) Relevance. c) Comparability. d) Understandability. 11. Which of the financial statement(s) addresses the question: "What is the financial picture of the organization on a given day?" a) Statement of Retained Earnings. b) Statement of Cash Flows. c) Statement of Comprehensive Income. d) Statement of Financial Position. e) All of the above. 12. Outstanding cheques on a bank reconciliation report should be a) subtracted from the book balance. b) added to the bank statement balance. c) subtracted from the bank statement balance. d) excluded from the bank statement since there is no difference between the records of the company and those of the bank. 13. XYZ Company discovered that its ending inventory at December 31, 2015 was overstated by $10,000 after completing its financial statements. This error affects the 2015 financial statements as follows. a) Assets are understated and net earnings is overstated. b) Assets are overstated and net earnings is understated. c) Assets are understated and net earnings is understated. d) Assets are overstated and net earnings is overstated. 14. Which of the following statements is true for a business using a perpetual inventory system? a) The beginning inventory account is closed to the retained earnings account. b) The income summary account is used to close the inventory account. c) The cost of goods sold account is debited and the beginning inventory account is credited in the first closing entry. d) The closing process does not involve the inventory account. 15. If liabilities increase by $230,000 during a given period and shareholders' equity decreases by $50,000 during the same period, assets must a) increase by $280,000. b) decrease by $280,000. c) increase by $180,000. d) decrease by $180,000. e) increase by $230,000. 16. Which of the following transactions decreases earnings under the accrual basis but does not decrease earnings under the cash basis? a) Payment of rent for two months in advance. b) Expiration of prepaid rent. c) Return of defective inventory purchased on account, where full credit was given. d) Payment of the current period's telephone bill. 17. Which of the following statements best defines the matching process? a) The dollar amount of total assets should match the dollar amount of total liabilities and owners' equity. b) Expenses should be recorded in the same time period as the related revenues are recognized. c) The revenues earned will always match the revenues realized. d) The attempt to match the dollar amount of expenses to the dollar amount of revenues. 18. Which of the following is not a step toward effective internal control over cash? a) Require signatures from a manager and one financial officer on all cheques. b) Require only one person to sign cheques. c) Require that the person responsible for removing the cash from the cash register not have access. d) to the accounting records. e) Require that cash be deposited daily at the bank. 19. IMQ Limited gathered the following reconciling information in preparing its June bank reconciliation: Cash balance per books, September 30 $12,000 Electronic collection of account 6,000 Outstanding cheques 9,000 Deposits in transit 4,500 Bank service charge 75 NSF Cheque 1,200 The adjusted cash balance per books at September 30 is: a) $8,775 b) $12,000 c) $16,500 d) $16,725 20. When is revenue recognized under the percentage of completion method? a) When construction begins on the project. b) When the project is complete. c) Throughout the project, based upon the amount of work completed each year. d) Throughout the project, based upon the amount of cash received from the customer. 21. The relationship between current assets and current liabilities is important in evaluating a company's a) profitability. b) liquidity. c) fair value. d) comparability. 22. On January 1, 2016, VA Company had $22,000 of Retained Earnings. During 2016 VA earned profit of $40,000 and declared and paid dividends of $20,000. In addition, the company received cash of $15,000 as an additional investment by its owners. What is the ending balance in Retained Earnings at December 31, 2016? a) $32,000. b) $42,000. c) $57,000. d) $67,000. 23. In order for accounting information to be relevant, it must a) have very little cost. b) help predict future economic events or confirm prior expectations. c) be verifiable. d) be used by a lot of different organizations. 24. For a business organized as a general partnership, which statement is true? a) The owners and the business are separate legal entities. b) Each partner is potentially responsible for the debts of the business. c) Formation of a partnership requires getting a charter from the province of incorporation. d) A partnership is not considered to be separate from its creditors. 25. Which of the following situations would cause investors to overpay for the acquisition of a company from its current owners? a) Understated trade payables and overstated inventory. b) Understated revenues and overstated expenses. c) Understated assets and overstated expenses. d) Understated assets and overstated revenues. 26. Vida Corporation gathered the following reconciling information in preparing its July bank reconciliation: Cash balance per books, July 31 $3,500 Deposits in transit 150 Electronic collection of account receivable 850 Bank charge for cheque printing 20 Outstanding cheques 2,000 NSF cheque 170 The adjusted cash balance per books at July 31 is a) $4,160. b) $4,010. c) $2,460. d) $2,310. 27. In 2013, G CO. reported product sales of $717.8 million and trade receivables of $79.4 million. In 2012, product sales were $584.9 million and trade receivables were $71.4 million. What was its receivables turnover ratio for 2013? a) 8.19 b) 8.64 c) 9.04 d) 9.52 28. The WD Co. reported revenue of $23,402 million for 2013. Their trade receivables balance was $3,999 million in 2013 and $3,633 million in 2012. How much cash was collected from customers? a) $23,036 b) $23,306 c) $23,402 d) $23,768 29. Past collection experience has indicated that 1% of credit sales normally is not collected. Therefore, an adjusting entry for bad debt expense should be made in the amount of which of the following? The books of Tweed Company provided the following information: Beg. Bal. $30,000 Trade receivables Allowance for doubVul acc. (crd) 2,000 Transactions during the year: Sales revenue (1/3 on credit) 1,800,000 Collections of trade receivables 590,000 Accounts written off uncollectable 2,500 a) $500. b) $2,500. c) $6,000. d) $6,500. 30. In applying the revenue principle to a given transaction, the most important moment or period in time is when a) The related cash inflows occur. b) The related expenses are incurred. c) Ownership is transferred or services are rendered. d) The service contract is signed regarding service to be performed. 31. On January 1, 2015, Green Inc., started the year with a $22,000 credit balance in its retained earnings account. During 2015, the company earned profit of $40,000 and declared and paid dividends of $10,000. Also, the company received cash of $15,000 as an additional investment by its owners and $20,000 as a collection of receivables. Therefore, the balance in retained earnings on December 31, 2015, would equal a) $8,000. b) $52,000. c) $67,000. d) $87,000. 32. Which statement is false regarding the financial statements? a) Current assets reported in the statement of financial position are generally reported in order of their liquidity. b) Distributions to owners (dividends) are reported in the statement of earnings. c) Expenses on the statement of earnings are reported as incurred, not as paid. d) The statement of cash flows reports the sources and uses of cash during the accounting period. 33. In order for accounting information to be relevant, it must a) Have very little cost. b) Help predict future economic events or confirm prior expectations. c) Be verifiable. d) Be used by a lot of different organizations. 34. Which of the following would most likely increase net profit margin? a) Decreasing selling price b) Increasing sales volume c) Increasing expenses d) Decreasing sales volume 35. When the auditors give an unqualified opinion, it means the company's financial statements do not conform to international financial reporting standards. a) True b) False 36. The balance in Allowance for Doubtful Accounts would have a debit balance when a) The percentage of receivables basis is used. b) An uncollectible account is later recovered. c) Write-offs during the year have been less than previous estimates. d) Write-offs during the year have exceeded previous estimates. 37. If an account is collected after having been previously written off, a) The allowance account should be debited. b) Only the cash account needs to be credited. c) Both statement of earnings and balance sheet accounts will be affected. d) There will be both a debit and a credit to trade accounts receivable. 38. If a cheque is correctly written and paid by the bank for $521 is incorrectly recorded on the company's books for $251, the appropriate treatment on the bank reconciliation would be to a) Add $270 to the balance per bank. b) Add $270 to the balance per books. c) Deduct $270 from the balance per books. d) Deduct $270 from the balance per bank. 39. Preferred shares issued in exchange for land would be reported in a. The financing activities section in the statement of cash flows. b. The investing activities section in the statement of cash flows. c. Supplemental disclosure to the statement of cash flows. d. The operating activities section in the statement of cash flows. 40. For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and which of the following? a. It must be identified as a cash equivalent on the statement of earnings. b. It must mature within four months. c. The investment must have a predetermined foreign exchange rate. d. Must be sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes. 41. When using the indirect method in the statement of cash flows, a gain on sale of equipment is reported as: a. An increase to cash provided by investing activities. b. A decrease to net earnings. c. An increase to revenues. d. A decrease to equipment purchases. 42. Which of the following is NOT true of the direct method of preparing a statement of cash flows? a. It gives the user a sense of the magnitude of gross cash flowing in and out of the company. b. It has the same cash flows from investing and financing activities as the indirect method. c. It has a different net cash flow from operating activities than the indirect method. d. It reports the same net increase or decrease in cash as the indirect method. 43. Which of the following statements about the quality of earnings ratio is true? a. When sales are growing, liabilities normally increase faster than shareholders’ equity, so the ratio increases. b. Seasonal variations in sales have no impact on the quality of earnings ratio. c. Failure to accrue appropriate expenses will inflate net earnings and reduce the quality of earnings ratio. d. Failure to accrue appropriate expenses will inflate net earnings and increase the quality of earnings ratio. 44. Typical financing activities do NOT include the following: a) Proceeds from issuance of short- and long-term borrowings. b) Principal payments on short- and long-term borrowings. c) Purchase of short- or long-term investments for cash. d) Purchase of shares for retirement. 45. Which of the following most likely would be classified as a current liability? a. Dividends payable b. Bonds payable c. Three-year notes payable d. Mortgage payable 46. The federal government requires which of the following? a. Only the employer to pay CPP contributions. b. Only the employee to pay CPP contributions. c. Neither the employer nor the employee to pay CPP contributions. d. Both the employer and the employee to pay CPP contributions. 47. An example of a provision includes: a. Estimate of future sales b. Legal and tax disputes that arise in the ordinary course of business c. Depreciation of plant and equipment d. Interest payable 48. YYC Inc. sold 2,000 smart TVs for $650 each during 2017. YYC Inc. provides a one-year warranty on smart TVs. If YYC estimates that warranty costs would be $70 per each smart TV, YYC would record a journal entry that includes a debit to: 1. Cash, for $140,000 2. Warranty expense, for $140,000 3. Sales returns, for $140,000 4. Estimated warranty liability, for $140,000 49. YWF Corp. has a legal case in court. Its ex-employees are suing it in court for damages to loss of their jobs. The lawyer of YWF informed the accounting department that there is a probable outflow of resources in that case, but the amount cannot be estimated reliably. What should the accounting department do in this case? a) Ignore the case since the amount cannot be estimated. b) Do not recognize a provision but disclose the information in the notes to the financial statements. c) Record a provision since this is serious case. d) Recognize a provision without disclosing additional information in the notes to the financial statements. 50. YEG Inc.’s payroll for April 2017 is as follows: Salaries and wages earned $1,000,000 Employees’ income tax, withheld 35,000 CPP contributions, from employees 55,000 EI contributions, from employees 30,000 What is YEG Inc.’s total liabilities as of April 30, 2017? a. $125,000 b. $90,000 c. $235,000 d. $217,000 51. YXE Computers offers warranties on its laptops. The provision for product warranties at year-end amounted to $2,021 in 2016, and $1826 in 2015. YXE paid $557 in 2016 to repair products under warranty. What was the amount of warranty expense in 2016? a) $ 195 b) $ 1,269 c) $ 752 d) $ 557 52. YYZ Corporation had net earnings of $500,000 for 2016. It declared $125,000 in dividends to the preferred shareholders during the year. YYZ had a weighted average of 1,500,000 common shares and 250,000 preferred shares outstanding during the year. YYZ Corporation's earnings per share for 2016 was: a. $0.25 b. $0.33 c. $0.29 d. $0.21 53. A stock split results in a decrease in a. Current liabilities. b. Net earnings. c. Share capital. d. Market price per share. 54. Which of the following ratios is not a test of solvency? a. Debt to equity ratio. b. Times interest earned ratio. c. Cash coverage ratio. d. Earnings per share ratio. 55. Assume the following shares are outstanding for YVR Corporation: 1. Preferred shares, $3, cumulative, 1,000 shares. 2. Common shares, 2,000 shares. Total dividends declared in 2016 were $30,000. No dividends were declared in 2015, 2014 and 2013. What is the total amount of dividends to which common shareholders are entitled? a. $18,000 b. $21,000 c. $27,000 d. $30,000 56. Which of the following is true with regard to a stock dividend? a) It results in a transfer of retained earnings to contributed capital. b) It increases the number of shares outstanding and involves a pro rata reduction in the contributed capital account. c) It is accounted for in exactly the same manner as a stock split. d) It does not require a journal entry. 57. Which of the following is an important measure of the average movement of goods "on and off the shelf" of a company? a) Profit margin. b) Price/earnings ratio. c) Gross inventory ratio. d) Inventory turnover ratio. 58. A store that sells fresh fish would most likely have a) A high inventory turnover. b) A low current ratio. c) A high quick ratio. d) A low inventory turnover. 59. What is the primary purpose of hiring a public accounting firm to examine the financial statements of the company? a) To assure no fraud has been committed by the company's management. b) To provide credibility that the financial information conforms to international financial reporting standards in all material respects. c) To detect all accounting errors made by the accounting system and employees. d) To detect fraud committed by employees. 60. The Ontario Securities Commission (OSC) is not empowered to do which of the following? a) Set reporting standards for firms with publicly traded debt or equity securities. b) Bring non-enforcement actions against company executives and auditors for accounting related violations. c) File anti-trust suits against companies involved in restraint of trade. d) Conduct external audits for a fee. 61. What happens when the reported earnings per share exceed the analysts’ forecasts of earnings per share for a company? a) There is no share price reaction because analysts’ forecasts of earnings almost never reflect actual earnings. b) It causes an increase in the share price. c) It causes a decrease in the share price. d) It is impossible to predict whether the share price will increase or decrease. 62. Which one of the following is not a qualitative characteristic of useful accounting information? a) Relevance. b) Verifiability. c) Going concern. d) Comparability. 63. Liberward, Inc. sold and issued 1,000 additional shares for $15 per share. As a result, the carrying amount (average issuance price) of the shares became $13 per share. The journal entry to record the share issue would include: a. a debit to Cash for $13,000. b. a credit to Contributed capital for $13,000. c. a credit to Contributed surplus for $2,000. d. a credit to Contributed capital for $15,000. 64. Accounting information has confirmatory value if it a. has been confirmed by external audit. b. is prepared on an annual basis. c. confirms or corrects prior expectations. d. is neutral in its representations. 65. Airbury Company acquired manufacturing equipment at an invoice price of $80,000 and paid $750 to have it delivered to the factory. In addition, $400 was spent to repair a door that was damaged while installing the equipment. At what amount should this equipment be recorded on the company's books? a. $80,000 b. $80,400 c. $80,750 d. $81,150 66. Belmont Corporation made a basket purchase of land, a building and equipment, paying a total of $1,500,000. Market values for the assets were not available, but the appraised values were $300,000 for the land, $900,000 for the building, and $600,000 for equipment. What amounts should be recorded in the Land, Building, and Equipment accounts, respectively? a. $300,000, $900,000, and $600,000 b. $1,500,000, $-0-, and $-0- c. $250,000, $750,000, and $500,000 d. $500,000, $500,000, and $500,000 67. Newson's Courier Service recently purchased a new delivery van for $29,000. The van is estimated to have a useful life of 8 years or 250,000 kilometers. The van will have a residual value of $1,000. The company used the units-of-production method of depreciation in year 1 and at the beginning of year 2 Newson switched to the straight- line method. Assuming the van travelled 36,000 km during the first year and 35,000 km in the second year, what is the depreciation expense for the van in year 2? a. $3,424 b. $3,920 c. $4,032 d. $4,176 68. The amortization of bond premium by the issuer will a) decrease interest expense. b) increase interest expense. c) have no effect on interest expense. d) result in a loss when the bonds are redeemed. 69. The university spirit organization needs to buy a car to travel to football games. A dealership in Joliette has agreed to the following terms: $4,000 down plus 20 monthly payments of $750. A dealership in Kirkwood will agree to a $2,000 down payment plus 20 monthly payments of $850. The local bank is currently charging an annual interest rate of 12 percent for car loans. Which is the better deal, and why? a) Both offers are equivalent because they result in total payments that are equal to $19,000. b) The Joliette offer is better because the cash equivalent price (present value) is less than the cash equivalent price of the Kirkwood offer. c) The Joliette offer is better because the monthly payments are less. d) The Kirkwood offer is better because the cash equivalent price is less than the cash equivalent price of the Joliette offer. 70. Which of the following best describes accrued liabilities? a) Long-term liabilities. b) Current amounts owed to various parties excluding suppliers of inventory. c) Current liabilities to be recognized as revenue in a future period. d) Current amounts owed to suppliers of inventory. 71. Which of the following transactions would usually cause accounts payable turnover to increase? a) Payment of cash to a supplier for merchandise previously purchased on credit. b) Collection of cash from a customer. c) Purchase of merchandise on credit. d) None of the above. 72. What assets should be amortized using the straight-line method? a) Intangible assets with definite lives b) Intangible assets with indefinite lives c) Natural resources d) All of the above 73. How many of the following statements regarding goodwill are true? - Goodwill is not reported unless purchased in an acquisition transaction. - Goodwill must be reviewed annually for possible impairment. - Impairment of goodwill results in a decrease in net earnings. a. Three b. Two c. One d. None 74. Which of the following statements about stock dividends is true? a. Stock dividends are reported on the statement of cash flows. b. Stock dividends increase retained earnings. c. Stock dividends do not affect total shareholders’ equity. d. Stock dividends decrease total shareholders’ equity. 75. On June 1, 2014, Oakcrest Company signed a three-year $110,000 note payable with 9 percent interest. Interest is due on June 1 of each year beginning in 2015. What amount of interest expense should be reported on the statement of earnings for the Company’s fiscal year ending on December 31, 2016? a. $5,250 b. $5,775 c. $4,950 d. $9,900 76. If a company is successful in acquiring several large buildings at the end of the year, then the total asset turnover ratio will a. Increase. b. not change. c. decrease. d. definitely change 77. Does a stock dividend increase an investor’s personal wealth immediately? a. No, because the stock price falls when a stock dividend is issued. b. Yes, because the investor has more shares. c. Yes, because the investor acquired additional shares without paying a brokerage fee. d. Yes, because the investor will receive more in cash dividends by owning more shares. 78. Which of the following items would not appear in the financing section of the statement of cash flows? a. The repurchase of the company’s own shares. b. The receipt of dividends. c. The repayment of debt. d. The payment of dividends. 79. Which of the following statements is true about the price earnings (P/E) ratio? a) It is a ratio of importance to creditors. b) A high P/E ratio indicates investors have little confidence in the future earnings potential of the company. c) The P/E ratio could be used to approximate the value investors would be willing to pay for the company's acquisition from existing owners. d) The P/E ratio increases as net earnings increase.` 80. Which of the following statements is false? a) A company can change the method used for depreciating assets if the change can be justified because it provides a better measure of the company's net earnings. b) A change in estimate requires the company to recalculate and restate all the prior years' estimates of depreciation and adjust the impact on the statement of financial position and statement of earnings. c) A change in estimate is frequently necessary because the estimates of useful lives or residual values may change over time because conditions change. d) Either a change in estimate or a change in method can only be justified on the basis it provides a better measure of net earnings. 81. Company Ltd. uses the direct method for the operating section of the cash flow statement. Which of the following statements, if any, is true? a) Gains on sales of fixed assets are added in the operating section. b) Dividends paid to shareholders are deducted in the operating section. c) Depreciation expense is deducted in the operating section. d) None of the above statements is true. 82. Bison Corp. issues a 5 year 8%, $60,000 note payable on March 1. The terms of the note include monthly blended principal and interest payments of $1,217. The entry to record the second installment payment will show a: a) Debit to Notes Payable for $822. b) Debit to Cash for $1,217. c) Debit to Interest Expense for $400. d) Debit to Notes payable for $817. 83. Company Ltd. uses the direct method for the operating section of the cash flow statement. During 2015 rent expense was $40,000. During the same period prepaid rent decreased by $6,000 and rent payable increased by $2,000. Cash paid for rent in 2015 was: a) $32,000 b) $36,000 c) $44,000 d) $48,000 84. Company Ltd. uses the direct method for the operating section of the cash flow statement. During 2015 sales were $100,000 (70% on credit). During the same period Calculation: $100,000 - $2,000 = $98,000 OR: $100,000 x 30% + $100,000 * .70 - $2,000 = $98,000 accounts receivable increased by $2,000. Cash collections from customers in 2015 were: a) $98,000 b) $100,000 c) $102,000 d) $32,000 85. Angstrom Corporation purchased a truck at a cost of $60,000. It has an estimated useful life of five years and estimated residual value of $5,000. At the beginning of year three, Angstrom's managers concluded that the total useful life would be four years, rather than five. There was no change in the estimated residual value. What is the amount of depreciation that Angstrom should record for year 3 under the straight- line method? a) $8,250 b) $11,000 c) $15,500 d) $16,500 86. Which of the following statements is false? a) Depreciation expense is added to net earnings in the operating activities section of the statement of cash flows because it has no cash effect on net earnings under the indirect method. b) Depreciation expense is included in the investing activities section of the cash flow statement. c) The only cash effect for depreciation is the tax savings provided by its deduction to derive taxable income. d) Depreciation is a non-cash expense that reduces net earnings but involves no outflow of cash. 87. Jake Company is involved in a lawsuit. The liability that could arise as a result of this lawsuit should be recorded in the books if the probability of Jake owing money as a result of the lawsuit is: a) Remote and the amount can be reasonably estimated. b) Probable and the amount cannot be reasonably estimated. c) Reasonably possible and the amount can be reasonably estimated. d) Probable and the amount can be reasonably estimated. 88. Freeman Inc. reported a net earnings of $40,000 for 2015. The income tax return excluded a revenue item of $3,000 (reported on the statement of earnings) because under the tax laws the $3,000 would not be reported for tax purposes until 2016. Assuming a 30% income tax rate, this situation would cause a 2015 deferred income tax amount of a) $3,000 (debit) b) $3,000 (credit) c) $900 (debit) d) $900 (credit)