149. Financial accounting information is:
Designed to assist investors and creditors.
Submitted to the IRS in lieu of a tax form.
Called "special-purpose" accounting information.
Not applicable to individuals.
None of listed.
150. The field of accounting may best be described as:
The art of interpreting, measuring, and describing economic activity.
Developing information in conformity with company rules.
Recording the financial transactions of an economic entity.
Developing the information required for the preparation of income tax returns.
None of the listed.
151. The basic purpose of bookkeeping is to:
Record the financial transactions of an economic entity.
Develop the types of information best-suited to specific managerial decisions.
Provide financial information about an economic entity.
Determine the taxable income of individuals and business entities.
None of the listed.
152. Which of the following events is not a transaction that would be recorded in a company's accounting records?
The death of a key executive.
The purchase of tools on account.
The investment of additional cash in the business by the owner.
The purchase of equipment for cash.
Sale of products.
153. Which of the following is considered a return "on" investment?
Dividends.
The purchase of tools on account.
The investment of additional cash in the business by the owner.
The purchase of equipment for cash.
Sale of products.
154. Which of the following are not considered "external" users of financial statements?
Managers.
Creditors
Labor unions.
Owners.
Banks
155. Which financial statement is prepared as of a specific date?
The balance sheet
The income statement
The statement of cash flows
The balance sheet, income statement, and statement of cash flows are all for a period of time rather than at a specific date.
None of the listed.
156. Which of the following decision makers is least likely to be among the users of management accounting reports developed by Sears Roebuck and Co.?
Investor considering investing in Sears' common stock.
The manager of the Automotive Department in a Sears' store.
The chief executive officer of Sears.
Internal auditors within the Sears organization.
None of the listed.
157. Which financial statement is primarily concerned with reporting the financial position of a business at a particular time?
The balance sheet.
The income statement.
The statement of cash flows.
Consolidated statement of stockholders' equity.
None of the listed.
158. Financial statements are prepared:
Primarily for the benefit of persons outside of the business organization
For corporations, but not for sole proprietorships or partnerships.
Only for publicly owned business organizations.
In either monetary or nonmonetary terms, depending upon the need of the decision maker.
For managers of departments.
159. Financial statements may be prepared for which time period?
Any time period.
Less than one year.
More than one year.
One year.
More than two years.
160. Which of the following is generally not considered an external user of accounting information?
Factory managers.
Bank lending officers.
Financial analysts.
Stockholders of a corporation.
Investors.
161. Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed toward the informational needs of:
Investors and creditors.
Government agencies such as the Internal Revenue Service.
Customers.
Trade associations and labor unions.
Suppliers.
162. Financial accounting information is characterized by all of the following except:
It is factual, so it does not require judgment to prepare.
It results from inexact and approximate measures.
It is historical in nature.
It is enhanced by management's explanation.
It is prepared and reported in objective way.
163. Internal users of financial accounting information include all of the following except:
Investors.
Managers.
Chief Financial Officer.
Chief Executive Officer.
Directors.
164. The basic purpose of an audit is to:
Assure outsiders that financial statements are prepared in conformity with GAAP.
Provide as much useful information to decision makers as possible, regardless of cost.
Record changes in the financial position of an organization by applying the concepts of double entry accounting.
Meet an organization's need for accounting information as efficiently as possible.
None of the listed.
165. Generally accepted accounting principles are the "ground rules" used in the preparation of:
Financial statements.
All accounting reports.
Reports to federal and state regulatory agencies.
Income tax returns.
All of the listed.
166. Which of the following is the primary objective of an income statement?
Providing users outside the business organization with information about the company's operating results for a period of time.
Providing managers with detailed information about where the enterprise stands at a specific date.
Reporting to the Internal Revenue Service the company's taxable income.
Indicating to investors in a particular company the current market values of theirinvestments.
None of listed.
167. Which of the following describes the proper form of a balance sheet?
Liabilities are listed before owners' equity
Owners' equity is always the first section listed because it is the most important to external users.
Cash is always the first asset listed, followed by permanent assets (such as land and buildings), and finally by assets such as receivables and supplies.
A subtotal for total assets plus total liabilities is shown.
None of listed.
168. A balance sheet is designed to show:
The assets, liabilities, and owners' equity of a business as of a particular date.
How much a business is worth.
The profit ability of the business during the current year.
The cost of replacing the assets and of paying off the liabilities at December31.
None of listed.
169. Blue Wholesale Shirt Co. Sold shirts to Pink Retail Shoppe. The owner of Pink Retail said she would pay Blue at a later date, which Blue Wholesale agreed to.Blue Wholesale Shirt Co.is considered to be a:
Creditor
Borrower
Liability
Debtor
None of listed.
170. Which of the following best defines an asset?
An economic resource owned by a business and expected to benefit future operations.
Something with physical form that is valued at cost in the accounting records.
An economic resource representing cash or the right to receive cash in the near future.
Something owned by a business that has a ready market value.
None of listed.
171. The accounting principle that assumes that a company will operate in the for eseeable future is:
Goingconcern.
Objectivity
Liquidity
Disclosure
None of listed.
172. The valuation of assets in the balance sheet is based primarily upon:
Cost,because cost is usually factual and verifiable.
What it would cost to replace the assets.
Current fair market value as established by independent appraisers.
Cost, because in the event of liquidation, the assets would be sold at an amount equal to their original cost.
All of the listed.
173. Which of the following is not a generally accepted accounting principle relating to the valuation of assets?
The safety principle – assets are valued at no more than the value for which they are insured.
The cost principle - in general, assets are valued at cost, rather than at estimated market values.
The objectivity principle - accountants prefer to use objective, rather than subjective, information as the basis for accounting information.
The going-concern assumption - one reason for valuing assets such as buildings and equipment at cost rather than at their current market values is the assumption that the business will use these assets rather than sell them.
All of the listed.
174. Each year, the accountant for Southern Real Estate Company adjusts the recorded value of each asset to its market value. Using these market value figures on the balance sheet violates:
The cost principle.
The accounting equation.
The stable-dollar assumption.
The business entity concept.
Nothing.
175. Which of the following will not cause a change in the owners' equity of a business?
Purchase of land with cash.
Withdrawal of cash by the owner.
Sale of land at a profit.
Losses from unprofitable operations.
All of the listed.
176. Which of the following is correct when a corporation uses cash to pay for an expense?
Total assets will decrease.
Retained earnings will increase.
Owners'equity will increase.
Liabilities will increase.
All of the listed.
177. Deerpark Corporation recently borrowed $70,000 cash from its bank. Which of the following was unaffected by this transaction?
Owners'equity.
Assets.
Liabilities.
Cash.
All of the listed.
178. Which of the following transactions would cause an increase in both assets and owners` equity?
Investment of cash in the business by the owner.
Sale of land for a priceless than its cost.
Borrowing money from a bank.
Sale of land for cash at a price equal to its cost.
All of the listed.
179. A transaction caused an increase in both assets and owners' equity. This transaction could have been resulted from the:
Sale of services to a customer.
Sale of land for a price less than its cost.
Borrowing money from a bank.
Sale of land for cash at a price equal to its cost.
All of the listed.
180. The amount of owners' equity in a business is not affected by:
The percentage of total assets held in cash.
The investments made in the business by the owner.
The profitability of the business.
The amount of dividends paid to stockholders.
All of the listed.
181. Decreases in owners' equity are caused by:
Distributions of assets to the owners and un profitable operations.
Purchases of assets and payment of liabilities.
Purchases of assets and incurrence of liabilities.
Payment of liabilities and unprofitable operations.
All of the listed.
182. Which of the following transactions would cause a change in owners' equity?
Sale of land on credit for a price above cost.
Repayment of the principal on a bank loan.
Purchase of a delivery truck on credit.
Borrowing money from a bank.
All of the listed.
183. On the statement of financial position, how are assets and liabilities normally presented?
Assets are presented in their order of liquidity; liabilities are presented in the order in which they become due.
Assets are presented in the order in which they become due; liabilities are presented in their order of permanence.
Assets are presented in order of profitability; liabilities are presented in order of liquidity.
Assets are presented in order of liquidity; liabilities are presented in order of profitability.
All of the listed is correct.
184. A payment of a business debt not including interest:
Decreases total assets.
Increases total liabilities.
Increases the owners' equity in the business.
Decreases the owners' equity in the business.
All of the listed.
185. If total assets equal $270,000 and total liabilities equal $202,500, the total owners' equity must equal:
$67,500.
$472,500.
$270,000.
$25,000.
Cannot be determined from the information given.
186. If total assets equal $345,000 and total owners' equity equal $120,000, then total liabilities must equal:
$225,000.
$465,000.
$120,000.
345,000.
Cannot be determined from the information given.
187. Owners' equity in a business in creases as a result of which of the following?
Earnings from profitable operation of the business.
Payments of cash to the owners.
Losses from unprofitable operation of the business.
Borrowing from a commercial bank.
All of the listed.
188. Owners' equity in a business decreases as a result of which of the following?
Losses from unprofitable operation of the business
Investments of cash by the owners.
Profits from operating the business.
Repaying a loan to a commercial bank.
All of the listed.
189. If a company purchases equipment for $65,000 by issuing a not epayable:
Total assets will increase by $65,000.
Total assets will decrease by $65,000.
Total assets will remain the same.
Total owners' equity will decrease.
None of the above.
190. Steps in the accounting cycle include (1) prepare financial statements, (2) post each journal entry to the appropriate ledger account, and (3) journalize transactions. Which of the following reflects the correct order of these steps?
(3), (2), (1).
(1), (2), (3).
(2), (1), (3).
(3), (1), (2).
(2), (3), (1)
191. The accounting cycle begins with:
Initial recording of business transactions.
Formation of a business.
Posting of journal entries to ledger accounts.
Preparation of a trial balance.
Preparing financial statements.
192. The cash account of Grande Home Improvement Store shows the following: a debit on June 1 for $25,000; a credit on June 5 for $10,000, a debit on June 16 for $14,000, and a credit on June 27 for $8,000. What is the balance in the cash account at the end of June?
$21,000 debit.
$39,000 debit.
$18,000 credit.
$21,000 credit
$10,000 debit
193. The purchase of equipment on credit is recorded by a:
Debit to Equipment and a credit to Accounts Payable.
Debit to Accounts Payable and a credit to Equipment.
Debit to Equipment and a debit to Accounts Payable.
Credit to Equipment and a credit to Accounts Payable.
Debit to Equipment and a debit to Accounts Receivable.
194. The collection of accounts receivable is recorded by a:
Debit to Cash and a credit to Accounts Receivable.
Credit to Cash and a credit to Accounts Receivable.
Debit to Cash and a debit to Accounts Receivable
Credit to Cash and a debit to Accounts Receivable.
Debit to Cash and a credit to Accounts Payable.
195. In a ledger, debit entries cause:
Decreases in liabilities, increases in assets, and decreases in owners' equity.
Increases in owners' equity, decreases in liabilities, and increases in assets.
Decreases in assets, decreases in liabilities, and increases in owners' equity.
Decreases in assets, increases in liabilities, and increases in owners' equity.
Increases in owners' equity, increase in liabilities, and increases in assets.
196. Collection of an accounts receivable:
Does not change the total assets of a company.
Decreases the total assets of a company.
Increases the total assets of a company.
Reduces a company's total liabilities.
Increases a company’s total liabilities.
197. Eagle News has a $6,000 account receivable from one of its advertisers, Allwood Floors. When Eagle receives $3,600 from Allwood as partial payment:
Eagle should credit Accounts Receivable for $3,600.
Eagle should credit Cash for $3,600.
Eagle should debit Accounts Receivable for $3,600.
Eagle makes no journal entry until the total of $6,000 is received from Allwood.
Eagle should credit Accounts Payable for $3,600.
198. Bruno's Pizza Restaurant makes full payment of $8,300 on an account payable to Stella's Cheese Co. Stella's would record this transaction with a:
Credit to Accounts Receivable for $8,300.
Credit to Cash for $8,300.
Debit to Accounts Payable for $8,300.
Credit to Accounts Payable for $8,300.
Credit to Inventory for $8,300.
199. Which of the following accounts normally has a credit balance?
Service revenue
Cash
Accounts receivable
Utilities expense
Inventory
200. Which of the following accounts normally contain a debit balance?
Asset
Liability
Owners' equity
Revenue
All of the listed
201. Sue Costa, owner of A-1 Cleaning Services, invested an additional $75,000 in the company. Which of the following would be a part of the correct journal entry to record this transaction?
A debit to the Cash account.
A debit to the Equity account.
A debit to the Capital Stock account.
A debit to the Revenue account.
A debit to the Expense account.
202. If a company purchases equipment on account:
Assets will increase and owners' equity will remain unchanged.
Assets will increase and owners' equity will decrease.
Assets will increase and owners' equity will also increase.
Assets will increase and liabilities will decrease.
Assets will decrease and owner’s equity will increase.
203. If a company purchases equipment for cash:
Total assets and owners' equity will remain unchanged.
Assets will increase and owners' equity will decrease.
Assets will increase and owners' equity will remain unchanged.
Assets will increase and owners' equity will also increase.
Assets will decrease and owners’ equity will also decrease.
204. Land is purchased by making a cash down payment of $40,000 and signing a note payable for the balance of $130,000. The journal entry to record this transaction in the accounting records of the purchaser includes:
A debit to Land for $170,000.
A debit to Cash for $40,000.
A credit to Land for $40,000.
A debit to Note Payable for $130,000.
A debit to Accounts Payable for $170,000.
205. Which of the following accounts normally has a debit balance?
Accounts receivable.
Retained earnings.
Accounts payable.
Service revenue.
Notes payable.
206. The price of the goods sold or services rendered during a given accounting period is called:
Revenue.
Profit
Net income.
Equity
Liabilities
207. Which of the following would not appear on an income statement?
Dividends.
Insurance expense.
Repair service revenue.
Net income.
Salary expense.
208. The matching principle is used in accounting to determine:
The proper period in which to recognize revenue.
Situations in which a cash receipt occurs before revenue is recognized.
Situations in which a cash payment occurs before an expense is recognized.
The proper period for recognition of expenses.
All of the listed.
209. A journal entry that records revenue must include:
A credit to a revenue account.
A debit to Cash.
A credit to the owners' equity account.
A debit to the owners' equity account.
A debit to Inventory
210. A journal entry to record revenue could include each of the following, except:
A credit to the Capital Stock account.
A credit to a revenue account.
A debit to Cash.
A debit to Accounts Receivable.
A debit to Notes Receivable.
211. A journal entry to recognize an expense could include each of the following, except:
A debit to a liability account.
A credit to Accounts Payable.
A debit to an expense account.
A credit to Cash.
A credit to Tax Payable.
212. If the trial balance has a higher debit balance than credit balance, it signifies:
An error has been made.
A profit.
A loss.
Assets are more than liabilities.
Liabilities are more than assets.
213. Adjusting entries are prepared:
Before financial statements and after a trial balance has been prepared.
After a trial balance has been prepared and after financial statements are prepared.
After posting but before a trial balance is prepared.
Anytime an accountant sees fit to prepare the entries.
Before a trial balance has been prepared and after financial statements are prepared.
214. Adjusting entries:
Are needed whenever revenue transactions affect more than one period.
Assign revenues to the period in which they are received.
Generally fall into one of two categories.
Are generally made daily.
Are generally made monthly.
215. Which of the following is considered an adjusting entry?
The entry to record depreciation.
The entry to pay salaries.
The entry to pay outstanding bills.
The entry to declare a dividend distribution.
The entry to pay utility expenses.
216. The normal balance of the Accumulated Depreciation account is:
A credit balance.
A debit balance.
Either a debit balance or a credit balance.
There is no normal balance for this account.
Neither a debit balance nor a credit balance.
217. If Hot Bagel Co. Estimates depreciation on an automobile to be $578 for the year, the company should make the following adjusting entry:
Debit Depreciation Expense $578 and credit Accumulated Depreciation $578.
Debit Depreciation Expense $578 and credit Automobile $578.
Debit Accumulated Depreciation $578 and credit Depreciation Expense $578.
Debit Automobile $578 and credit Depreciation Expense $578.
Debit Automobile $578 and credit Accumulated Depreciation $578.
218. Accumulated Depreciation is:
A contra-asset account.
A revenue account.
An asset account.
An expense account.
A liability account.
220. An example of a contra-asset account is:
Accumulated Depreciation
Depreciation Expense
Prepaid expenses.
Unearned revenue.
Operating expenses.
221. Which of the following entries causes an immediate decrease in assets and in net income?
The entry to record depreciation expense.
The entry to record revenue earned but not yet received.
The entry to record the earned portion of rent received in advance.
The entry to record accrued wages payable.
The entry to record accrued trade payables.
222. Prepaid expenses appear:
As an asset on the balance sheet.
As an expense on the income statement.
As a liability on the balance sheet.
As a reduction to retained earnings.
As an increase in retained earnings.
223. An adjusting entry to convert an asset to expense consists of:
A debit to an expense and a credit to an asset account.
) A debit to an expense and a credit to cash.
A debit to a liability and a credit to cash.
A debit to an asset account and a credit to an expense account.
A debit to a revenue and a credit to liability.
224. The cost of insurance is considered an expense:
Evenly over the term of the policy.
Only when the policy is purchased.
Only when the premium is paid.
Only when the entire policy period has passed.
All of the listed.
226. Accumulated depreciation is:
The depreciation expense recorded on an asset to date.
The remaining book value of an asset.
The depreciation expense taken on an asset during the current period.
An expense on the income statement.
A revenue on the income statement.
Gourmet Shop purchased cash registers on April 1 for $12,000. If this asset has an estimated useful life of four years, what is the book value of the cash registers on May 31?
$11,500.
$ 3,000.
$ 9,000.
$ 250.
$ 4,000.
228. An asset purchased on January 1, 2015 for $60,000 that has an estimated life of 10 years will have a book value on December 31, 2018 of:
$36,000.
$24,000.
$60,000.
$42,000.
$25,000.
229. If an asset was purchased on January 1, 2015 for $140,000 with an estimated life of 5 years, what is the accumulated depreciation at December 31, 2018?
$112,000.
$28,000.
$56,000.
$84,000.
$140,000
231. The balance of an unearned revenue account:
Appears in the liability section of the balance sheet.
Appears in the income statement along with other revenue accounts.
Appears in a separate section of the income statement for revenue not yet earned.
Appears in the balance sheet as a component of owners' equity.
Appears in the income statement as an expense.
232. Unearned revenue appears:
As a liability on the balance sheet.
As an asset on the balance sheet.
As income on the income statement.
As a part of the retained earnings.
As an expense on the income statement.
233. Interest that has accrued during the accounting period on a note payable requires an adjusting entry consisting of:
A debit to Interest Expense and a credit to Interest Payable.
A debit to Notes Payable and a credit to Interest Payable.
A debit to an asset and a credit to a liability.
A debit to Interest Expense and a credit to Cash.
A debit to Interest Payable and a credit to Interest Expense.
234. The adjusting entry to record interest that has accrued on a note payable to the bank will cause an immediate:
Increase in liabilities and reduction in net income.
Decrease in liabilities and reduction in net income.
Decrease in assets and reduction in net income.
Increase in assets and increase in net income.
Decrease in liabilities and increase in net income.
235. Under accrual accounting, salaries earned by employees but not yet paid should be expensed
In the period in which they are earned.
In the period in which they are paid.
In the period with the higher earnings.
In the period with the lower earnings.
All of the listed.
236. Which of the following is the accounting principle that governs the timing of revenue recognition?
Realization principle
Materiality
Matching
Depreciation
Conservatism
237. Which of the following financial statements is usually prepared first?
Income statement.
Statement of retained earnings.
Income tax return.
Balance sheet.
Cash flow statement.
238. The normal order in which the financial statements are prepared is:
Income statement, statement of retained earnings, balance sheet.
Balance sheet, income statement, statement of retained earnings.
Income tax return, income statement, balance sheet.
Income statement, annual report, balance sheet.
Cash flow statement, balance sheet, income statement.
239. The statement of retained earnings is based upon which of the following relationships?
Retained Earnings + Net Income – Dividends.
Retained Earnings – Net Income + Dividends.
Retained Earnings + Net Income + Dividends.
Retained Earnings – Net Income – Dividends.
Retained Earnings – Dividends.
240. Dividends declared:
Reduce retained earnings.
Increase retained earnings.
Reduce net income.
Increase net income.
Increase assets.
241. Declaring a dividend will:
Not change net income.
Decrease net income.
Increase net income.
Increase the net worth of a company.
Will increase assets.
242. Dividends will have what effect upon retained earnings?
Decrease
Increase
No effect.
Depends upon if there is income or loss.
None of the listed.
243. Assets are considered current assets if they are cash or will usually be converted into cash:
Within a year or less.
Within 3 months.
Within a month or less.
Within 6 months or less.
Within a day.
244. The closing entry for an expense account would consist of a:
Debit to Income Summary and a credit to the expense account.
Debit to the expense account and a credit to Income Summary.
Credit to Retained Earnings and a debit to the expense account.
Credit to Revenue and a debit to the expense account.
Debit to Revenue and a credit to Retained earnings.
245. The Income Summary account has debits of $85,000 and credits of $75,000. The company had which of the following:
Net loss of $10,000.
Net income of $160,000.
Net income of $10,000.
Net loss of $160,000
Net loss of $85,000.
246. During the closing temporary accounts process:
All revenue accounts are debited and expense accounts are credited.
All income statement accounts are debited to income summary.
) All revenue accounts are credited and expense accounts are debited.
All income statement accounts are credited to income summary.
All balance sheet accounts are credit to income summary.
247. The purpose of making closing entries is to:
Prepare revenue and expense accounts for the recording of the next period's revenue and expenses.
Enable the accountant to transfer the balances from all permanent accounts to the Income Summary account.
Establish new balances in the balance sheet accounts.
Reduce the number of expense accounts.
Increase the number of expense accounts.
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