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| 1 | |
Using the adjusted trial balance as the basis for preparing the financial statements, the information needed to prepare the income statement would start and end with the balances of the |
| | A) | Dividends account through the Income Taxes Expense account. |
| | B) | Retained Earnings account through the Income Taxes Expense account. |
| | C) | revenue accounts through the Income Taxes Expense account. |
| | D) | Capital Stock through the Interest Expense account. |
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| 2 | |
Which of the following is true about the financial statements? |
| | A) | The ending balance of Retained Earnings must appear in the Balance Sheet. |
| | B) | The ending balance of Retained Earnings must appear in the Income Statement. |
| | C) | Net income must appear in the Income Statement and the Statement of Retained Earnings. |
| | D) | Both statements (A) and (C). |
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| 3 | |
Alternative titles for the statement showing the results of operations over a specific time period include which of the following? |
| | A) | Earnings statement |
| | B) | Statement of operations |
| | C) | Profit and loss statement |
| | D) | All of the above |
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| 4 | |
In which order are the financial statements prepared? |
| | A) | Income Statement, Balance Sheet, Statement of Retained Earnings. |
| | B) | Income Statement, Statement of Retained Earnings, Balance Sheet. |
| | C) | Balance Sheet, Statement of Retained Earnings, Income Statement. |
| | D) | Statement of Retained Earnings, Income Statement, Balance Sheet. |
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| 5 | |
The beginning balance of Retained Earnings was $140,000. Dividends declared and paid were $18,000. The ending balance of Retained Earnings is $120,000. Which of the following is true? |
| | A) | Net income was $2,000. |
| | B) | Net loss was $4,000. |
| | C) | Net loss was $2,000. |
| | D) | Net income was $4.000. |
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| 6 | |
If the bookkeeper fails to record dividends, then which of the following will occur? |
| | A) | Net income will be overstated |
| | B) | Net income will be understated |
| | C) | Retained earnings will be overstated |
| | D) | Capital Stock will be overstated |
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| 7 | |
Consider the following accounts and their respective balances, shown in no particular order:
| Cash | $50,000 | | Buildings | $500,000 | | Tools and Equipment | $32,000 | | Accumulated Depreciation: Buildings | $120,000 | | Unexpired Insurance | $4,000 | | Accounts Receivable | $12,000 | | Shop Supplies | $3,000 |
What is the total of current assets? |
| | A) | $101,000 |
| | B) | $478,000 |
| | C) | $66,000 |
| | D) | $69,000 |
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| 8 | |
Consider the following accounts and their respective balances, shown in no particular order:
| Accounts Payable | $14,000 | | Unearned Rent Revenue | $25,000 | | Mortgage Note due in 5 years | $300,000 | | Wages Payable | $6,000 | | Income Taxes Payable | $3,000 | | Interest Payable | $2,000 |
What is the total of current liabilities? |
| | A) | $50,000 |
| | B) | $47,000 |
| | C) | $45,000 |
| | D) | $25,000 |
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| 9 | |
Which of the following will most likely not be disclosed in notes that accompany the financial statements? |
| | A) | Pending lawsuit |
| | B) | Significant events after the balance sheet date but before the financial statements are prepared. |
| | C) | Conflicts of interest between the company and its key officers |
| | D) | Firing, death, or resignation of a key executive |
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| 10 | |
Which of the following is always disclosed in notes to the financial statements? |
| | A) | Pending lawsuits |
| | B) | Depreciation policies |
| | C) | Resignation of the controller |
| | D) | Loss of shop equipment from theft. |
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| 11 | |
After closing entries are posted, which of these accounts will have a balance? |
| | A) | Salary Expense |
| | B) | Retained Earnings |
| | C) | Income Summary |
| | D) | Revenue |
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| 12 | |
Which of the following is not a normal closing entry? |
| | A) | A debit to Income Summary and a credit to Salary Expense. |
| | B) | A debit to Income Summary and a credit to Sales Revenue. |
| | C) | A debit to Interest Revenue and a credit to Income Summary. |
| | D) | A debit to Income Summary and a credit to Interest Expense. |
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| 13 | |
Dividends of $36,000 were distributed to stockholders during the year. The dividends account is closed at the end of the accounting period through which of the following entries? |
| | A) | A debit to Retained Earnings and a credit to Dividends. |
| | B) | A debit to Dividends and a credit to Retained Earnings. |
| | C) | A debit to Income Summary and a credit to Dividends. |
| | D) | A debit to Retained Earnings and a credit to Income Summary. |
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| 14 | |
Consider the following:
| A | Revenue accounts, Expense accounts, Income Summary account, Dividends account | | B | Expense accounts, Income Summary account, Revenue accounts, Dividends account | | C | Dividends account, Revenue accounts, Expense accounts, Income Summary account | | D | Revenue accounts, Expense accounts, Dividends account, Income Summary account |
Which line of the schedule above shows thecorrect order for closing accounts? |
| | A) | Line A |
| | B) | Line B |
| | C) | Line C |
| | D) | Line D |
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| 15 | |
After the first year of operations, the Retained Earnings account has a debit balance of $4,000. This most likely indicates which of the following occurred? |
| | A) | An error in the closing entries |
| | B) | A reported net loss for the period |
| | C) | All revenue accounts were not closed |
| | D) | A posting error |
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| 16 | |
When a journal entry involves closing more than two accounts, such as the journal entry to close the expense accounts, the journal entry is referred to as which of the following? |
| | A) | Combined journal entry |
| | B) | Complex journal entry |
| | C) | Combination journal entry |
| | D) | None of the above |
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| 17 | |
A company with owners' equity of $2,400,000 had after-tax net income of the $288,000, liabilities of $80,000 due in the near future, and an ending cash balance of $15,000. Which of the following is true? |
| | A) | The company has liquidity. |
| | B) | The company's rate of return on equity was 12%. |
| | C) | The company does not have liquidity. |
| | D) | Both (B) and (C) are true. |
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| 18 | |
Consider the following balances at the beginning of the month:
| Cash | $12,000 | | Accounts Receivable | $20,000 | | Shop Supplies | $3,000 | | Unexpired Insurance | $6,000 | | Accounts Payable | $19,000 | | Wages Payable | $8,000 |
Fifty percent (50%) of the receivables are expected to be collected in the current month. How much additional cash does the company need to meet its current obligations? |
| | A) | $27,000 |
| | B) | $5,000 |
| | C) | $2,000 |
| | D) | $22,000 |
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| 19 | |
Which of the following is significant as an indicator of management's ability to control costs? |
| | A) | Net Income Percentage |
| | B) | Return on Equity |
| | C) | Working capital |
| | D) | Current ratio |
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| 20 | |
Consider the following:
| Total revenues | $350,000 | | Total expenses | $300,000 | | Total current assets | $45,000 | | Total current liabilities | $22,000 | | Average stockholders' equity | $600,000 | | Total assets | $380,000 | | Total liabilities | $180,000 |
Calculate the net income percentage to the nearest tenth. |
| | A) | 12.9% |
| | B) | 8.3% |
| | C) | 14.3% |
| | D) | 204.5% |
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| 21 | |
Which of the following is significant as a measure of short-term debt paying ability expressed as a ratio? |
| | A) | Net Income Percentage |
| | B) | Return on Equity |
| | C) | Working capital |
| | D) | Current ratio |
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| 22 | |
Consider the following:
| Total revenues | $350,000 | | Total expenses | $300,000 | | Total current assets | $45,000 | | Total current liabilities | $22,000 | | Average stockholders' equity | $600,000 | | Total assets | $380,000 | | Total liabilities | $180,000 |
Calculate the current ratio to the nearest tenth. |
| | A) | 2.0 |
| | B) | 8.3 |
| | C) | 1.2 |
| | D) | 2.1 |
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| 23 | |
Which of the following is significant as a measure of short-term debt paying ability expressed in dollars? |
| | A) | Net Income Percentage |
| | B) | Return on Equity |
| | C) | Working capital |
| | D) | Current ratio |
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| 24 | |
Which of the following is significant as a measure of income generated per average dollar of stockholders' equity? |
| | A) | Net Income Percentage |
| | B) | Return on Equity |
| | C) | Working capital |
| | D) | Current ratio |
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| 25 | |
Consider the following:
| Total revenues | $350,000 | | Total expenses | $300,000 | | Total current assets | $45,000 | | Total current liabilities | $22,000 | | Average stockholders' equity | $600,000 | | Total assets | $380,000 | | Total liabilities | $180,000 |
Calculate the return on equity to the nearest tenth. |
| | A) | 12.9% |
| | B) | 8.3% |
| | C) | 14.3% |
| | D) | 2.1% |
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| 26 | |
In no particular order, the accounting cycle includes the following activities.
| A | Posting daily entries | | B | Journalizing and posting adjusting entries | | C | Preparing financial statements | | D | Journalizing daily entries | | E | Preparing a trial balance | | F | Journalizing and posting closing entries | | G | Preparing after-closing trial balance | | H | Preparing an adjusted trial balance |
What is the correct order of activities of the accounting cycle? |
| | A) | Activities B, C, D, A, E, F, G, and H |
| | B) | Activities D, A, E, B, H, C, F, and G |
| | C) | Activities D, A, E, B, C, H, F, and G |
| | D) | Activities D, A, E, B, F, G, H, and C |
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| 27 | |
When the totals in the debit and credit columns of the Adjusted Trial Balance section of a worksheet are moved to their correct corresponding columns in the Income Statement and Balance Sheet sections of the worksheet, which of the following will occur? |
| | A) | The debit column of the Income Statement section will equal the debit column of the Balance Sheet section. |
| | B) | The dollar amount difference between the debit and credit column totals of the Income Statement section should be equal to the dollar amount difference between the debit and credit column totals of the Balance Sheet section. |
| | C) | The difference between the credit column of the Income Statement section and the debit column of the Balance Sheet section is equal to the net income or net loss for the period. |
| | D) | The credit column total of the Income Statement section will be equal to the credit column total of the Trial Balance section plus the credit column total of the Adjustments section. |
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