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Financial Accounting All Questions. Graded A

Financial Accounting – All Questions Question 1 Comparing actual outcomes with budget outcomes, then following up, is an example of a. a. planning activities b. operating activities c. controlling activities d. accounting activities e. staffing activities Question 2 Which of the following is typically a starting point for the budget process? a. a summary cash budget b. a sales budget c. a budget balance sheet d. a production budget e. a materials purchase budget Question 3 Tax accounting is generally most used by: a. Share holder b. Manager c. Creditors d. Internal revenue service e. Decision makers Question 4 Management accountant place more emphases on which of the following : a. certified financial statement b. future activities c. historial cost information d. cash flow e. annual tax returns Question 5 Which of the following organization would be most likely to accept a process costing system? a. customer homebuilder b. law office c. paper manufacture d. dental office e. TV sale and services organization Question 6 The discount rate for use in capital budgeting decision is also referred to as a. a cost of capital b. the cost of capital c. the hurdle rate d. the minimum required rate of return e. all none Question 7 What is breakeven point in units? Sale price $7.50 per unit Variable cost $2.25 per unit Fixed cost $10,000 Units sold 20,000 a. 1333 b. 1905 BP: Fixed Cost / (Price – VC) BP: 10,000 / (7.50 - 2.25) = 1905 c. 10000 d. 20000 e. some number other than these 4 Question 8 A balance sheet shows a. revenues, liabilities, and stockholders’ equity. b. expenses, dividends, and stockholders’ equity. c. revenues, expenses, and dividends. d. assets, liabilities, and stockholders’ equity. e. none of the options listed Question 9 The excess of expenses over revenues for a period is: a. Net assets. b. Equity. c. Net loss. d. Net income. e. A liability. Question 10 Liabilities a. are future economic benefits. b. are debts and obligations. c. possess service potential. d. are things of value owned by a business. Incorrect. Please review Top Ten Concept # 2. e. none of the options listed Question 11 The common characteristic possessed by all assets is a. long life. b. great monetary value. c. tangible nature. d. future economic benefit. e. None of the options listed. Question 12 Which of the following is not an accounting assumption? a. Integrity b. Going concern c. Time period d. Economic entity e. None of the options listed Question 13 Treasury stock is classified as: a. An asset account. b. A contra asset account. Incorrect. Please review Top Ten Concept # 4. c. A revenue account. d. A contra equity account. e. A liability account. Question 14 Olsen Company prepares its statement of cash flows using the indirect method. Indicate whether the item would be added to net income (increase), deducted from net income (decrease), or has no effect on net income to determine net cash flows from operating activities. A decrease in the value from the beginning of the year to the end of the year for Inventory, which is a current asset. a. Increase Incorrect. Please review Top Ten Concept # 5. b. Decrease c. No effect d. None of the options listed e. All of the options listed Question 8 An Accounts Receivable previously written off as uncollectable is finally collected. The amount collected was 500.Whichofthefollowingjournalentriesiscorrect (assuming the all owance method is used)? a. Cash 500 Accounts Receivable 500 b. Uncollectible Accounts (Bad Debt) Expense 500 Cash 500 c. Accounts Receivable 500 Uncollectible Accounts (Bad Debt) Expense 500 Cash 500 Accounts Receivable 500 Incorrect. Please review Top Ten Concept # 6. d. Accounts Receivable $500 Allowance for Uncollectible Accounts $500 Cash 500 Accounts Receivable 500 e. None of the options listed Question 9 A company ages its accounts receivables to determine its end of period adjustment for bad debts. At the end of the current year, management estimated that 15,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubt full Accounts had a debit balance of 175. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? a. Bad Debts Expense...................................................... 15,750 Allowance for Doubtful Accounts............................. 15,750 Incorrect. Please review Top Ten Concept # 6. b. Bad Debts Expense...................................................... 15,575 Allowance for Doubtful Accounts............................. 15,575 Incorrect. Please review Top Ten Concept # 6. c. Bad Debts Expense...................................................... 15,925 (15,750 175) Allowance for Doubtful Accounts............................. 15,925 d. Accounts Receivable.................................................... 15,750 Bad Debts Expense...................................................... 175 Sales........................................................................ 15,750 e. Accounts Receivable...................................................... 15,925 Allowance for Doubtful Accounts............................. 15,925 Question 10 In present value calculations, the process of determining the present value is called a. allocating. b. pricing. c. negotiating. Incorrect. Please review Top Ten Concept # 7. d. discounting the future amount e. none of the options listed Question 11 Present value is based on a. the dollar amount to be received. b. the length of time until the amount is received. Incorrect. Please review Top Ten Concept # 7. c. the interest rate. d. all of the options listed e. none of the options listed Question 12 Accrued revenue has: a. not been earned nor received b. been earned but not received c. not been earned but has been received Incorrect. Please review Top Ten Concept # 8. d. been earned and received e. none of the options listed Question 13 What is the formula to calculate the current ratio? a. Assets ÷ Liabilities b. Cash Accounts Receivables ÷ Current Liabilities c. Current Assets ÷ Current Liabilities d. Net Income ÷ Current Liabilities e. None of the options listed Question 14 For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is: a. Raises the current ratio. b. Lowers the current ratio. Incorrect. Please review Top Ten Concept # 9. c. Doesn’t affect the current ratio. d. Depends on the amount paid. Incorrect. Please review Top Ten Concept # 9. e. Not determinable based on the facts given. Question 15 Obsolescence: a. Occurs when an asset is at the end of its useful life. b. Refers to a condition where a plant asset is no longer useful in producing goods and services. c. Refers to a condition where the capacity of a company's plant assets is too small to meet the company's productive demands. Incorrect. Please review Top Ten Concept # 10. d. Occurs when an asset's salvage value is less than its replacement cost. e. Does not affect plant assets. Question 16 On January 1, 20X1, Williams Corporation acquired a machine costing 45,000. The estimated life is five years and the salvage value is 3,000. Determine the depreciation expense for the first two years using the straight-line method. a. 8,400; 8,400 Annual Dep. Exp: (Cost – Salvage Value) / Useful Life b. 9,000; 9,000 (45,000 - 3,000) / 5 = 8,400 c. 9,600; 9,600 d. 9,000; 8,500 e. None of the options listed Question 17 Which financial statement would best indicate the proportion of debt and equity that a company uses to finance its assets? a. Statement of Cash Flows b. Retained Earnings Statement c. Income Statement Incorrect. Please review Top Ten Concept # 1. d. Balance Sheet e. None of the options listed Question 18 If owner's equity is 30,000 and liabilities are 73,000, then assets equal: a. 30,000. b. 73,000. c. 103,000. A = L SE d. 43,000. e. 60,000. Question 19 The relevant measure of value of the assets of a company that is going out of business is their: a. current market value b. book value c. historical cost d. higher of historical cost or current market value e. none of the options listed Question 20 The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the: a. Recognition principle. Incorrect. Please review Top Ten Concept # 3. b. Cost principle. c. Cash basis of accounting. d. Matching principle. e. Time period principle. Question 21 Which of the following journal entries is correct for an issuance of 2,000 shares of 20 par value preferred stock in exchange for land valued at 45,000? a. Cash 45,000 Preferred Stock 40,000 Premium on Preferred Stock 5,000 Land 45,000 Cash 45,000 Incorrect. Please review Top Ten Concept # 4. b. Cash 45,000 Preferred Stock 45,000 Land 45,000 Cash 45,000 c. Land 45,000 Preferred Stock 40,000 Premium on Preferred Stock 5,000 d. Land 45,000 Preferred Stock 45,000 e. None of the options listed Question 22 The Village Laundry Company purchased 6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies in dictated only 3,000 on hand. The adjusting entry that should be made by the company on June 30 is a. Debit Laundry Supplies Expense, 3,000; Credit Laundry Supplies, 3,000. b. Debit Laundry Supplies Expense, 3,500;CreditLaundrySupplies,3,000. Incorrect. Please review Top Ten Concept # 6. c. Debit Laundry Supplies, 3,500; Credit Laundry Supplies Expense, 3,500. d. Debit Laundry Supplies Expense, 3,500; Credit Laundry Supplies, 3,500. 6,500 - 3,000 = 3,500 e. None of the options listed Question 23 Under the accrual basis of accounting a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles. e. none of the options listed Question 24 A company had a market price of 37.50 per share, earnings per share of 1.25, and dividends per share of 0.40. This implies its price- earnings ratio equals: a. 3.1. Incorrect. Please review Top Ten Concept # 9. b. 30.0. Price- Earnings Ratio: Stock Price per Share / Earnings per Share c. 93.8. 37.50 / 1.25 = 30 d. 32.0. e. 3.3. Question 25 Depreciation is the process of a. valuing an asset at its fair market value. b. increasing the value of an asset over its useful life in a rational and systematic manner. c. allocating the cost of an asset to expense over its useful life in a rational and systematic manner. d. writing down an asset to its real value each accounting period. e. none of the options listed Question 26 Intangible assets are the rights and privileges that result from ownership of long-lived assets that a. must be generated internally. b. are depreciated over their useful life. c. have been exchanged at a gain. Incorrect. Please review Top Ten Concept # 10. d. do not have physical substance. e. none of the options listed Question 27 Net income results when a. Assets > Liabilities b. Revenues = Expenses. c. Revenues > Expenses. d. Revenues Question 29 The accounting equation is: a. Assets = Liabilities Equity. b. Assets Liabilities = Equity. c. Assets = Liabilities - Equity. d. Assets - Liabilities = Equity. e. Both A and D. Question 30 The balance sheet a. summarizes the changes in retained earnings for a specific period of time. b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time. c. reports the assets, liabilities, and stockholders’ equity at a specific date. d. presents the revenues and expenses for a specific period of time. e. none of the options listed Question 31 An audit provides the following benefit(s) to users of financial statements: a. To help assure users that financial statements include relevant, reliable, and comparable information. Incorrect. Please review Top Ten Concept # 2. b. Insures that users can safely invest in, or loan money to, a business. c. It tells users that the statements are prepared using accepted accounting principles. d. All of the above. e. A and C only. Question 32 Revenue is properly recognized: a. When the customer's order is received. b. Only if the transaction creates an account receivable. c. At the end of the accounting period. Incorrect. Please review Top Ten Concept # 2. d. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price. e. When cash from a sale is received. Question 33 In order for accounting information to be relevant, it must a. have very little cost. b. help predict future events or confirm prior expectations. c. not be reported to the public. d. be used by a lot of different firms. e. none of the options listed Question 34 A $20,000 machine is purchased by paying $5,000 cash and signing a note payable for the remainder. The journal entry should include a a. credit to note payable. b. debit to cash. c. credit to notes receivable. d. credit to machinery. e. none of the options listed Question 35 What type of activity is the following - “Exchanged 10,000 shares of common stock for 15-year bonds?”. a. Operating Activity b. Financing Activity c. Investing Activity d. Noncash Transaction e. None of the options listed Question 36 The inventory of product Y at January 1 consisted of 15,000 units valued at a cost of $112,500. Purchases during the year were: (Mar 5) 20,500 units @ $7.75 per unit = $158,875 (May 12) 33,000 units @ $8.00 per unit = $264,000 (Sep 15) 23,000 units @ $8.30 per unit = $190,900 (Nov 28) 8,500 units @ $8.44 per unit = $71,740 On December 31, there were 30,000 units on hand. Compute the December 31 inventory using the first-in, first-out method. December 30,000 - 8,500 = 21,500 21,500 * $8.30 = 178,450 178,450 71,740 = 250,190 a. $250,190 b. $228,750 c. $235,150 d. $246,370 e. None of the options listed Question 37 Which statement is false regarding the lower of cost or market (LCM) method of inventory? a. Market is defined as current replacement cost, not selling price. b. LCM is an example of an accounting concept of conservatism. c. Inventory is written down to its market value in the period in which the price decline occurs. d. All of the options listed are true regarding LCM. e. None of the options listed are true regarding LCM. Question 38 In a service-type business, revenue is considered earned a. at the end of the month. b. at the end of the year. c. when the service is performed. d. when cash is received. e. none of the options listed Question 39 Based on the following data, what is the amount of working capital? Accounts payable……………………………………………………….. $31,000 Accounts receivable…………………………………………………… ....57,000 Cash…………………………………………………………………… …15,000 Intangible assets………………………………………………………… 50,000 Inventory……………………………………………………… ………….69,000 Long-term investments………………………………………………… ....80,000 Long-liabilities…………………………………… ………………………100,000 Marketable securities…………………………………………………… ...40,000 Notes payable (short-term)……………………………………………… ..28,000 Land, building, and equipment………………………………......... ..........670,000 Prepaid expenses………………………………………………………. .....1,000 a. $123,000 (Total Current Asset – Total Current Liability) CA: 57,000 15,000 69,000 40,000 1,000 = 182,000 b. $151,000 CL: 31,000 28,000 = 59,000 c. $203,000 182,000 - 59,000 = 123,000 d. $53,000 e. None of the options listed Question 40 Use the following information for Smart Company. Net Sales $300,000 Cost of Goods Sold 230,000 Gross Profit $ 70,000 Operating Expenses 25,000 Net Income $ 45,000 ======= What is the return on sales for Smart Company? a. 13% b. 15% (Net Income / Sales = 45,000 / 300,000 =15%) c. 64% d. 35% e. None of the options listed Question 41 Noncurrent, intangible assets such as leasehold improvements and patents are all subject to: a. depreciation b. amortization c. depletion d. consolidation e. recognition Question 42 The book value of a plant asset is the difference between the a. replacement cost of the asset and its historical cost. b. cost of the asset and the amount of depreciation expense for the year. c. cost of the asset and the accumulated depreciation to date. d. proceeds received from the sale of the asset and its original cost. e. none of the options listed Question 43 NiKe has beginning equity of $4,350 million, net income of $490 million, dividends (withdrawals) of $100 million, and an increase in equity due to other items of $50 million. Its ending equity is: a. $3,810 million. Incorrect. Please review Top Ten Concept # 1. b. $4,690 million. c. $4,790 million. 4,350 490 – 100 50 = 4,790 d. $4,990 million. e. $3,710 million Question 44 An income statement a. summarizes the changes in retained earnings for a specific period of time. b. reports the changes in assets, liabilities, and stockholders’ equity over a period of time. c. reports the assets, liabilities, and stockholders’ equity at a specific date. d. presents the revenues and expenses for a specific period of time. e. none of the options listed Question 45 Accounting information should be neutral in order to enhance a. reliability. b. consistency. c. comparability. d. relevance. Incorrect. Please review Top Ten Concept # 3. e. none of the options listed Question 46 Par value of a stock refers to the: a. Issue price of the stock. b. Value assigned to a share of stock by the corporate charter. c. Market value of the stock on the date of the financial statements. d. Maximum selling price of the stock. e. Dividend value of the stock. Question 47 Retained earnings is: a. decreased by net income b. increased by expenses c. decreased by revenues d. increased by dividends declared e. increased by gains Question 48 If you are able to earn an 8% rate of return, what amount would you need to invest to have $2,000 one year from now? (Round to the nearest dollar.) 8%, 1 year annually Factor Present value of $1 0.926 Future value of $1 1.080 Present value of an annuity 0.926 Future value of an annuity 1.000 a. $2160 b. $1,852 PV: FV / (1 r)^n PV: 2000 / (1 8%) = 1,852 c. $2000 d. $1,980 e. None of the options listed Question 49 An individual is planning to set-up an education fund for her children. She plans to invest $10,000 annually at the end of each year. She expects to withdraw money from the fund at the end of 10 years and expects to earn an annual return of 8%. What will be the total value of the fund at the end of 10 years? (Round to the nearest dollar) 8%, 10 years annually Factor Present value of $1 0.463 Future value of $1 2.159 Present value of an annuity 6.710 Future value of an annuity 14.487 a. $ 46,320. b. $ 67,107. c. $100,000. d. $144,870. 10,000 * (1 8%)^10 10,000 * 14.487 = 144,870 e. $215,890. Question 50 A law firm received $2,000 cash for legal services to be rendered in the future. The full amount was credited to the liability account Unearned Service Revenue. If the legal services have been rendered at the end of the accounting period and no adjusting entry is made, this would cause a. expenses to be overstated. b. net income to be overstated. Incorrect. Please review Top Ten Concept # 8. c. liabilities to be understated. d. revenues to be understated. e. none of the options listed Question 51 Charles Corporation reports the following information for 20X1. Accounts Receivable – 1/1 $100,000 Accounts Receivable – 12/31 150,000 Inventory – 1/1 40,000 Inventory – 12/31 55,000 Net Credit Sales 800,000 Cost of Goods Sold 450,000 Accumulated Depreciation 15,000 What is the average age of inventory for Charles Corporation? a. 32.4 days b. 39.9 days c. 44.6 days d. 38.5 days e. None of the options listed Question 52 A truck costing $12,000 and on which $9,000 of accumulated depreciation has been recorded was discarded as having no value. The entry to record this event would include a a. gain of $3,000. b. loss of $3,000. c. credit to accumulated depreciation for $9,000. d. credit to accumulated depreciation for $12,000. e. none of the options listed Question 53 Accountants do not attempt to measure the change in a plant asset's market value during ownership because a. of the historical cost assumption. b. plant assets cannot be sold. c. losses would have to be recognized. Incorrect. Please review Top Ten Concept # 10. d. it is management's responsibility to determine fair values. e. none of the options listed Question 54 Liabilities of a company are owed to a. debtors. b. owners. c. creditors. Correct. d. stockholders. e. none of the options listed Question 55 Stockholders’ equity can be described as claims of a. creditors on total assets. Incorrect. Please review Top Ten Concept # 1. b. owners on total assets. c. customers on total assets. d. debtors on total assets. e. none of the options listed Question 56 Retained earnings is a. the stockholders’ claim on total assets. b. equal to cash. Incorrect. Please review Top Ten Concept # 2. c. equal to revenues. d. the cumulative amount of net income kept in the corporation for future use. e. none of the options listed Question 57 The necessity of making adjusting entries relates mostly to the a. economic entity assumption. b. time period assumption. c. going concern assumption. d. monetary unit assumption. Incorrect. Please review Top Ten Concept # 3. e. none of the options listed Question 58 Johnny’s Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000. During the year the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of $10,000. Stockholders’ equity at the end of the year was ? a. $45,000 b. $65,000 c. $55,000 Correct. d. $35,000 e. None of the options listed Question 59 What type of activity is the following - “Sold 2,000 shares of a company’s own common stock for cash?” a. Operating Activity b. Financing Activity c. Investing Activity d. Noncash Transaction Incorrect. Please review Top Ten Concept # 5. e. None of the options listed Question 60 Based on the following data, what is the amount of current assets? Accounts payable………………………………………………………..$31,000 Accounts receivable…………………………………………………….. 57,000 Cash………………………………………………………………………. 15,000 Intangible assets………………………………………………………… 50,000 Inventory…………………………………………………………………. 69,000 Long-term investments…………………………………………………. 80,000 Long-liabilities…………………………………………………………….100,000 Marketable securities……………………………………………………. 40,000 Notes payable……………………………………………………………. 28,000 Plant assets………………………………………………………………670,000 Prepaid expenses (assets)…………………………………………........…..1,000 a. $142,000 b. 182,000 57,000 15,000 69,000 40,000 1,000 = 182,000 c. $113,000 Incorrect. d. $112,000 e. None of the options listed Question 61 If Susanna Metro invests $7,009.87 now and she will receive $20,000 at the end of 11 years, what annual rate of interest will she be earning on her investment? Future value of $1 Factor 7%, 11 years annually 2.105 8%, 11 years annually 2.332 9%, 11 years annually 2.580 10%, 11 years annually 2.853 20,000 / 2.105 = 9,501 20,000 / 2.332 = 8,576 20,000 / 2.580 = 7,752 20,000 / 2.853 = 7,010 this amount is close to 7,009.87 a. 8% b. 7% c. 9% d. 10% e. None of the options listed Question 62 If the single amount of $900 is to be received in 3 years and discounted at 6%, its present value is: (Round to the nearest dollar.) 6%, 3 years annually Factor Present value of $1 0.840 Future value of $1 1.191 Present value of an annuity 2.673 Future value of an annuity 3.184 a. $756. 900 * 0.840 = 756 Correct. b. $849. c. $780. d. $846. e. None of the options listed Question 63 At December 31, 2001, before any year-end adjustments, Brant Company's Prepaid Insurance account had a balance of $1,900. It was determined that $1,500 of the Prepaid Insurance had expired. The adjusted balance for Prepaid Insurance for the year would be a. $1,500. b. $400. 1,900 – 1,500 = 400 Correct. c. $2,225. d. $1,125. e. None of the options listed Question 66 Which financial statement is prepared first? a. Balance sheet b. Income statement c. Retained earnings statement d. Statement of cash flows e. None of the options listed Question 67 Resources owned by a business are referred to as a. stockholders’ equity. b. liabilities. c. assets. d. revenues. e. none of the options listed Question 68 Which of the following journal entries is correct for an issuance of 1,000 shares of 10 par value common stock for 25 per share? a. Cash 25,000 Common Stock 25,000 b. Common Stock 25,000 Cash 25,000 c. Cash 25,000 Common Stock 10,000 Premium on Common Stock 15,000 d. Common Stock 10,000 Premium on Common Stock 15,000 Cash 15,000 e. None of the options listed Question 69 Westec Corporation has the following accounts on their financial statement. Calculate net income. Professional Fee Income 31,000 RentExpense7,000 Advertising Expense 10,000 Insurance Expense 6,000 Accumulated Depreciation 1,000 Interest Expense 1,000 Commission Expense 4,000 Dividends 2,000 a. 9,000 b. 0 c. 1,000 d. 3,000 31,000 – (7,000 10,000 6,000 1,000 4,000) = 3,000 e. None of the options listed Question 71 Which of the following would not result in unearned revenue? a. Rent collected in advance from tenants Incorrect. Please review Top Ten Concept # 8. b. Services performed on account c. Sale of season tickets to football games d. Sale of two-year magazine subscriptions e. None of the options listed Question 72 What is the formula to calculate the profit margin? a. Gross Profit ÷ Sale b. Net Income ÷ Sales c. Gross Profit ÷ Net Income Incorrect. d. Net Income ÷ Gross Profit e. None of the options listed (Net Income / Revenue) or (Net Profit / Sales) Question 73 What is the formula to calculate earnings per share? a. Net Income ÷ Common Stock Outstanding b. Market Price ÷ Common Stock Outstanding c. Gross Profit ÷ Total Stock Outstanding d. Market Price ÷ Total Stock Outstanding Incorrect. Please review Top Ten Concept # 9. e. None of the options listed Question 74 Which of the following methods will result in the highest depreciation in the first year? a. Units-of-activity b. Time valuation c. Straight-line Incorrect. Please review Top Ten Concept # 10. d. Declining-balance e. None of the options listed Question 75 An obligation of a business that represents the claims of others against the assets of the business is called: a. An Asset. b. An Expense. c. A Revenue. d. An Equity. e. A Liability. According to the FASB, the primary objective of financial reporting is to provide information: a. to the Internal Revenue Service Incorrect. Please review Top Ten Concept # 1. b. to the Securities and Exchange Commission c. useful for making investing and lending decisions d. regarding the revenues and expenses of a business e. none of the options listed Question 76 An annual report includes all of the following except a. management discussion and analysis section. b. notes to the financial statements. c. an auditor’s report. d. salary information for the key executives. e. none of the options listed Question 77 The accounting equation may be expressed as: a. Assets = Stockholders’ Equity – Liabilities. b. Assets = Liabilities Stockholders’ Equity. c. Assets Liabilities = Stockholders’ Equity. d. Assets Stockholders’ Equity = Liabilities. e. None of the options listed Question 78 If throughout an accounting period the fees for legal services paid in advance by clients are recorded in an account called Unearned Legal Fees, the end-of-period adjusting entry to record the portion of those fees that has been earned is: a. Debit Cash and credit Legal Fees Earned. b. Debit Cash and credit Unearned Legal Fees. c. Debit Unearned Legal Fees and credit Legal Fees Earned. d. Debit Legal Fees Earned and credit Unearned Legal Fees. e. Debit Unearned Legal Fees and credit Accounts Receivable. Question 79 Paula Bonner invests $7,103.00 now for a series of $1,000 annual returns beginning one year from now. Paula will earn 10% on the initial investment. How many annual payments will Paula receive? Present value of an annuity 10% Factor 10 periods 6.145 12 periods 6.814 13 periods 7.103 14 periods 7.606 a. 10 b. 12 c. 13 d. 15 e. None of the options listed Incorrect. Please review Top Ten Concept # 7. Question 80 If the single amount of $400 is to be received in 2 years and discounted at 12%, its present value is: (Round to the nearest dollar.) 12%, 2 years annually Factor Present value of $1 0.797 Future value of $1 1.254 Present value of an annuity 1.690 Future value of an annuity 2.120 a. $502. b. $319. c. $676. d. $331. e. None of the options listed Question 81 Jim's Tune-Up Shop follows the revenue recognition principle. Jim services a car on July 31. The customer picks up the vehicle on August 1 and mails the payment to Jim on August 5. Jim receives the check in the mail on August 6. When should Jim show that the revenue was earned? a. July 31 Because he did the work. b. August 1 c. August 5 d. August 6 Incorrect. Please review Top Ten Concept # 8. e. None of the options listed Question 82 A truck was purchased for $15,000 and it was estimated to have a $3,000 salvage value (residual value) at the end of its useful life. The truck has a 4-year life. The annual depreciation expense using the straight-line method is a. $4,000 b. $4,500 c. $3,750 Incorrect. Please review Top Ten Concept # 10. d. $3,000 e. None of the options listed Question 84 Expenses are incurred A. Only one rare occasion (WA) B. To produce asset (WA) C. To produce liability (WA) D. To generate revenue E. None. Question 92 Company A current liability equal 500,000, working capital 120,000. Company B same amount of working capital, but total current liability of 30,000. The company with the better working capital position is? A. They both has exact the same working capital B. Company B (It is good when better working capital position decreases) C. Company A D. Don’t determined with the information given E. None Question 93 Company used Strait-Line depreciation for an item that cost 12,000 had a salvage value of 2,000 and a 5 year useful life After depreciating the assets for 3 complete years, the salvage value was reduced to 1,200 and its total useful life was increased from 5 years to 6 years. Determine the amount of depreciation to be changed against the machine during each of the remaining years of its useful life. A 1,000 B. 1,800 C. 1,467 (WA) D. 1,600 E. 2,160 Question 94 The accumulated depreciation account is a (an) A. Contra assets reduce B. Liability C. Assets (WA) D. Operating expanse E. none of the listed Question 95 Operating cycle of a company is the average time that is require to go from cash to A. Sales (WA) B. Cash in producing revenues C. Inventory D. Accounts Receivable E. None Question 97 In the annual report, where would a financial statement reader find out if the company’s financial statements give a fair depiction of its financial position and operating results? A. Management discussion and analysis section B. Notes to the financial statements C. An auditor report D. Survey information for the key executive E. None. Question 98 Y during accounting period the asset increases by 5,000 equity increased by 1,000. How did liability damage? A. Increase by 6,000 (WA) B. Increase by 4,000 C. Decrease by 4,000 D. Decrease by 6,000 E. Decrease by 1,000 Question 99 If ending inventory is over stead what effect will there be on cost of good and net income? A. CGS will overstated and Net income overstate B. CGS will overstated and Net income understated (WA) C. CGS will understated and Net income overstate D. CGS will understated and Net income understate E. None. Question 105 The rules adopted by the accounting profession as guides in measuring, recording, and reporting the financial affairs and activities of a business are: a. Both broad and specific principles. b. Known as geberally accepted accounting principles. c. Abbreviated as GAAP. d. Both b and c. e. All of the above. Question 106 The primary objective of financial accounting is: a. To help organizations keep track of financing activities b. To provide financial statements to help users analyze an organization's activities c. To help an organization define its ideas, goals, and actions. d. To help an organization keep track of its buying and selling of resources. Question 107 Which 1 of the following is not qualitative characteristic. =Relevance, reliability, comparability, consistency. Answer: chaptism Question 108 A 20,000 machine is purchased by paying 5000 cash and signing a note payable for the remainder Answer: the journal entry should involve a CREDIT on note payable Question 124 The cost principle requires that when assets are acquired, they be recorded at a. market value. b. the amount paid for them. Also called exchange price paid c. selling price. d. list price. Question 125 A $130 credit to Office Equipment was credited to Fees Earned by mistake. By what amounts are the accounts under or overstated as a result of this error? A. Office Equipment, understated $130; Fees Earned, overstated $130 B. Office Equipment, understated $260; Fees Earned, overstated $130 C. Office Equipment, overstated $130; Fees Earned, overstated $130 D. Office Equipment, overstated $130; Fees Earned, understated $130 E. Office Equipment, overstated $260; Fees Earned, understated $130 Question 132 Which of the following accounts is used in the calculate of working capital a. retained earnings—WRONG b. sales c. merchandize inventory d. common stock e. long term debt Question 137 On October 29. Company concluded a cost’s 4,400 account receivable was uncollectible and that a acet should be written off. What affect will this write off have on this company’s Net Income and Total Assets assuming the allowing method is used to account for bad debts. A. Decrease Net income, no effect on Total assets B. No effect on Net income, no effect on Total assets C. Decrease in Net income, decrease in Total assets. D. Increase in Net income, no effect on Total Assets. (WA) E. No effect on Net income, Decrease in Total Assets. Question 140 Prime object of a business is to increase equity Acquiring assets Question 143 A financial statement that reports accounting data a specific date is the Balance sheet Question 144 The principle entry business to be accounted for separating distinction from it owner or owners what principle would it be. Business entry principle Question 145 The going concern asset that the business Will remain in operation for the section future Question 147 A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the: a. Direct write-off method b. Aging of accounts receivable method c. Percentage of sales method d. Aging of investments method e. Percent of accounts receivable method Question 149 Net sales 300,000 COGS 230,000 Gross Profit 70,000 Owner’s equity 25,000 Net Income 450,000 What is the gross profit margin? 23% (Net income / net sales) * 100 Question 150 A non-current intangible asset such as leasehold improvements and patents are all subject to: a. Amortization b. depreciation c. depletion Question 152 A corporation is investing on a expected return 350,000 in 4 yrs. Interest is 12% 12 % 4 years Present value .636 Future value 1.574 Present value of annuity 3.037 Future value of annuity 4.780 265,764 (WA) 55,600 137,687 222,600 350,000 Question 153 85.20,000 semiannually 5 yrs. 12% 12% 5yrs 3.605 12% 10 yrs 5.650 6% 10yrs 7.360 6% 5 yrs 4.212 84,240 (WA) 72,100 113,000 147,200 200,000 Question 163 Define and articulate the three basic financial statements. a. The balance (or statement of financial position) describes the financial position of a firm at a particular point in time b. The income statement or a company compares its revenues to its expenses Revenues $20,000 Less Expenses $12,000 NET INCOME $ 8,000 c. The balance sheet and income statement are the traditional financial statements that have been parts of annual reports of companies for many years Question 164 Compute time value of money d. I will give you $1000 in 5 years. How much money should you give me now to make it fair to me. You think a good interest rate would be 6% e. FV= PV ( 1 i ) ^N f. $1000 = PV ( 1 .06) ^ 5 g. $1000 = PV (1.338) h. $1000 / 1.338 = PV i. $ 747.38 = PV Question 165 A dress shop makes a large sale for $1,000 on November 30. The customer is sent a statement on December 5 and a check is received on December 10. The dress shop follows GAAP and applies the revenue recognition principle. When is the $1,000 considered to be earned? a. December 5 b. December 10 c. November 30 d. December 1 Question 167 An accounts receivable previously written off as uncollectable is finally collect. The amount collected was $500. which of the following journal entries a. accounts receivable 500 b. allowance for uncollectible 500 c. cash 500 d. accumulated 500 Question 168 Inventory of product Y at January 1 consisted of 15000 units valued at a cost of $. purchases during the year were March 20 500 units at 7.74 per unit - $ November 28 8500 units at 8.44 per unit = $71740 Compute the December 31 inventory, using the last in, first out method a. (WRONG) b. c. d. e. none of the above Question 170 The revenue recognition principle dictates that revenue should be recognized in the accounting records e. when it is earned Question 171 In the present value calculators, the process of determining the PV is called f. discounting Question 176 If $2,500 is deposited in a savings account at the end of each year and the account pays interest of 5% compounded annually, what will be the balance of the account at the end of 10 years? (Round to the nearest dollar) 5%, 10 years annually Factor Present value of $1 0.614 Future value of $1 1.629 Present value of an annuity 7.722 Future value of an annuity 12.578 a. $4,073 b. $26,250 c. $31,445 d. $37,500 Incorrect. Please review Top Ten Concept # 7. e. None of the options listed Question 177 Tricorp Company is considering an investment that is expected to return $320,000 after four years. If Tricorp demands a 15% return, what is the most that it will be willing to pay for this investment? 15%, 4 years annually Factor Present value of a $1 0.572 Future value of $1 1.749 Present value of an annuity 2.855 Future value of an annuity 4.993 a. $320,000 b. $177,696 c. $183,040 d. $45,216 e. $278,272 Question 178 The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional (proportionate) shares of common stock issued by the corporation is called: a. Preemptive right b. Proxy right Incorrect. Review concept # 4 c. Right to call Incorrect. Review concept # 4 d. Financial leverage e. Voting right Question 179 Which of the following statements is incorrect? a. The normal balance of the accounts receivable account is debit b. The normal balance of the accounts payable is a credit c. The normal balance of an unearned revenues account is credit d. The normal balance of an expense account is credit e. All of the above answers are correct Incorrect. Review concept # 6  Liquidity Ratios Quick Ratio = Total Quick Assets (q1-q2)/ Total Current Liabilities Current Ratio = Total Current Assets/ Total Current Liabilities Debt to Equity Ratio = Total Liabilities / Owners Equity Efficiency Ratios Best Possible DSO = Current Receivables/Total Credit Sales X Number of Days Inventory Turnover Ratio = Net Sales / Inventory Profitability Ratios Profit Margin = (Net Profit / Net Sales) x 100 Return on Assets = (Net Profit / Total Assets) x 100 Return on Equity = (Net Profit / Total Equity) x 100 Assets = Liabilities Owners' Equity

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