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| 1 | |
The major objective of financial reporting is to provide |
| | A) | essential information to internal users of financial reports. |
| | B) | useful economic information about the business to help external parties make sound financial decisions. |
| | C) | information to internal users about the cash position of the business. |
| | D) | information to the IRS and the Securities Exchange Commission (SEC). |
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| 2 | |
German companies prepare their financial reports in terms of euros whereas Japanese companies report results in yen. This practice is an example of the: |
| | A) | Historical cost principle |
| | B) | Materiality constraint |
| | C) | Full disclosure principle |
| | D) | Unit-of-Measure Assumption |
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| 3 | |
If their physical assets increase in value, businesses cannot recognize the increase because of the: |
| | A) | Unit of measure assumption |
| | B) | Historical cost principle |
| | C) | Continuity assumption |
| | D) | Matching principle |
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| 4 | |
The notion that each business must be accounted for as an individual, separate and apart from its owners, all other persons, and other entities is an example of the: |
| | A) | separate entity assumption. |
| | B) | full disclosure principle. |
| | C) | conservatism constraint. |
| | D) | industry practices constraint. |
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| 5 | |
The assets and liabilities of the company would be shown at their estimated liquidation value if it were not for which accounting assumption? |
| | A) | separate entity |
| | B) | continuity |
| | C) | unit of measure |
| | D) | time period |
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| 6 | |
Regardless of how long it takes to produce and sell inventory, inventory is always considered to be a |
| | A) | current asset. |
| | B) | current liability. |
| | C) | long-term asset. |
| | D) | stockholders' equity. |
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| 7 | |
Assets are listed on the balance sheet in order of |
| | A) | purchase date. |
| | B) | maturity. |
| | C) | liquidity. |
| | D) | dollar amount. |
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| 8 | |
Consider the following condensed balance sheet:
| Current assets | $45,000 | | Other assets | 130,000 | | Total Assets | $175,000 | | Current liabilities | $15,000 | | Other liabilities | A | | Total liabilities | $75,000 | | Stockholders' equity | 100,000 | | Total Stockholders' Equity and Liabilities | B |
What are the dollar amounts of A and B?
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| | A) | $60,000 and $165,000, respectively |
| | B) | $60,000 and $15,000, respectively |
| | C) | $60,000 and $175,000, respectively |
| | D) | $55,000 and $175,000, respectively |
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| 9 | |
Consider the following condensed balance sheets:
| | Year 2005 | Year 2004 | | Current assets | $45,000 | $40,000 | | Other assets | 130,000 | 120,000 | | Total Assets | $175,000 | $160,000 | | Current liabilities | $15,000 | $12,000 | | Other liabilities | 60,000 | 40,000 | | Total liabilities | $75,000 | $52,000 | | Stockholders' equity | 100,000 | 98,000 | | Total Stockholders' Equity and Liabilities | $175,000 | $160,000 |
What is the financial leverage ratio for the year 2005?
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| | A) | 16.9 |
| | B) | 1.69 |
| | C) | 1.0 |
| | D) | 1.26 |
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| 10 | |
A company purchased a computer, office furniture, and office supplies by issuing a check for $5,000 and a note payable for $19,500. The market value of the items was $26,300. The total recorded value of the items is |
| | A) | $26,300 |
| | B) | $19,500 |
| | C) | $24,500 |
| | D) | $31,300 |
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| 11 | |
Unearned Revenue is classified as which type of account? |
| | A) | asset |
| | B) | liability |
| | C) | stockholders' equity |
| | D) | revenue |
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| 12 | |
Notes Receivable is classified as which type of account? |
| | A) | asset |
| | B) | liabiltity |
| | C) | stockholders' equity |
| | D) | revenue |
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| 13 | |
Prepaid Insurance is classified as which type of account? |
| | A) | asset |
| | B) | liabiltity |
| | C) | stockholders' equity |
| | D) | revenue |
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| 14 | |
Cost of Goods Sold is classified as which type of account? |
| | A) | asset |
| | B) | liability |
| | C) | revenue |
| | D) | expense |
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| 15 | |
Retained Earnings is classified as which type of account? |
| | A) | asset |
| | B) | liability |
| | C) | stockholders' equity |
| | D) | expense |
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| 16 | |
A company purchased office supplies on credit. What two accounts are affected by the transaction? |
| | A) | Supplies and Cash |
| | B) | Supplies and Accounts Payable |
| | C) | Equipment and Accounts Payable |
| | D) | Stockholders' Equity and Accounts Payable |
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| 17 | |
A company sold 10,000 shares of its common stock for a total of $45,000. What two accounts are affected by the transaction? |
| | A) | Cash and Retained Earnings |
| | B) | Cash and Revenue |
| | C) | Cash and Contributed Capital |
| | D) | Cash and Accounts Receivable |
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| 18 | |
A company purchased office equipment by issuing a short-term note payable. What two accounts were affected by the transaction? |
| | A) | Equipment and Cash |
| | B) | Equipment and Accounts Payable |
| | C) | Equipment and Notes Payable |
| | D) | Equipment and Stockholders' Equity |
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| 19 | |
Consider the following journal entry:
| Property and Equipment | 34,000 | | | Land | 62,000 | | | Mortgage Payable | | 96,000 |
This transaction may be referred to as a
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| | A) | transposed entry. |
| | B) | complex entry. |
| | C) | compound entry. |
| | D) | combination entry. |
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| 20 | |
Which account is increased with a debit and decreased with a credit? |
| | A) | Cash |
| | B) | Accounts Payable |
| | C) | Contributed Capital |
| | D) | Retained Earnings |
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| 21 | |
| | Assets | Liabilities | Stockholders'
Equity | | A. | Increase | Increase | No change | | B. | Increase | Decrease | No change | | C. | Decrease | Decrease | No change | | D. | Increase | No change | Increase |
Which line in the chart expresses the change in the accounting equation when a company issues common stock, receiving cash from investors?
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| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 22 | |
A company issues a check to pay an account payable. The effect of the transaction is to:
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| | A) | Increase assets and liabilities. |
| | B) | Increase assets and decrease liabilities. |
| | C) | Decrease assets and liabilities. |
| | D) | Increase assets and stockholders' equity. |
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| 23 | |
A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to: |
| | A) | Decrease assets and liabilities. |
| | B) | Increase assets and stockholders' equity. |
| | C) | Decrease assets and stockholders' equity. |
| | D) | Increase liabilities and decrease stockholders' equity. |
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| 24 | |
A company issues a check for a short-term investment in another company. The effect of the transaction is to: |
| | A) | Increase assets and liabilities. |
| | B) | Decrease assets and liabilities. |
| | C) | Decrease assets and stockholders' equity. |
| | D) | Have no change in assets, liabilities or stockholders' equity. |
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| 25 | |
Consider the following accounts and their balances, shown in no particular order:
| Cash | $10,000 | | Accounts Payable | 5,000 | | Notes Receivable | 3,000 | | Retained Earnings | 13,000 | | Contributed Capital | 50,000 | | Inventory | 6,000 | | Accounts Receivable | 8,000 | | Notes Payable | 12,000 | | Unearned Revenues | 4,000 | | Prepaid Expenses | 1,000 | | Equipment | 46,000 |
What is the total of the current assets that would be listed on a balance sheet?
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| | A) | $28,000 |
| | B) | $74,000 |
| | C) | $63,000 |
| | D) | $35,000 |
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| 26 | |
Consider the following accounts and their balances, shown in no particular order:
| Cash | $10,000 | | Accounts Payable | 5,000 | | Notes Receivable | 3,000 | | Retained Earnings | 13,000 | | Contributed Capital | 50,000 | | Inventory | 6,000 | | Accounts Receivable | 8,000 | | Notes Payable | 12,000 | | Unearned Revenues | 4,000 | | Prepaid Expenses | 1,000 | | Equipment | 46,000 |
What is the total of the liabilities that would be listed on a balance sheet?
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| | A) | $28,000 |
| | B) | $64,000 |
| | C) | $21,000 |
| | D) | $41,000 |
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| 27 | |
Consider the following transactions:
| Purchased equipment for cash | $25,000 | | Borrowed money from bank | $42,000 | | Paid cash dividends | $15,000 | | Sold long-term assets for cash | $32,000 | | Issued stock for cash | $30,000 |
What is the amount of the net cash provided or used by investing activities that would be shown on a statement of cash flows?
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| | A) | $7,000 provided |
| | B) | $32,000 provided |
| | C) | $67,000 provided |
| | D) | $25,000 used |
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| 28 | |
Consider the following transactions:
| Purchased equipment for cash | $25,000 | | Borrowed money from bank | $42,000 | | Paid cash dividends | $15,000 | | Sold long-term assets for cash | $32,000 | | Issued stock for cash | $30,000 |
What is the amount of the net cash provided or used by financing activities that would be shown on a statement of cash flows?
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| | A) | $72,000 provided |
| | B) | $15,000 used |
| | C) | $57,000 provided |
| | D) | $42,000 provided |
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