Question 1
1.
The purpose of a balance sheet is to summarize the results of operations during an accounting period.
True
False
4 points
Question 2
1.
Gross sales less sales returns and allowances, less discounts is called net sales.
True
False
5 points
Question 3
1.
The current ratio is determined by subtracting current liabilities from assets.
True
False
Question 4
1.
The ability of a business to meet its current obligations may be determined by the
current ratio
inventory turnover
working ratio
accounts receivable turnover
Question 5
1.
Which of the following accounts is used only at the close of the accounting period to adjust the merchandise inventory account and summarize the temporary owner’s equity accounts?
Owner’s capital
Income Summary
Cost of Goods Sold
Sales
Question 6
1.
In aging the receivables, the estimate of uncollectible accounts is based on past experience and increases as the number of days past due increases.
True
False
Question 7
1.
The term “net receivables” refers to the difference between Accounts Receivable and Allowance for Bad Debts.
True
False
Question 8
1.
There are three methods of accounting for uncollectible accounts- the direct write-off method, the allowance method, and the reserve method.
True
False
Question 9
1.
The accounting concept that states expenses should be matched with the revenues they helped to produce is the
contra-account principle
allowance method
matching principle
uncollectible accounts technique
Question 10
1.
The allowance for bad debts account is contra to which of the following accounts?
Revenue
Cash
Accounts Receivable
Bad Debt Expense
Question 11
1.
When all of the cash for an account previously written off under the direct write-off method is unexpectedly collected, the correct entry is
debit Bad Debt Expense and credit Accounts Receivable
debit Accounts Receivable and credit Bad Debt Expense
debit Cash and credit Accounts Receivable
dependent on the period in which the cash was collected.
Question 12
1.
The cost of planting trees and shrubs, installing fences, and paving parking areas are normally charged to the land improvements account and are later depreciated over their expected useful lives.
True
False
5 points
Question 13
1.
An asset should not be depreciated below its estimated salvage value.
True
False
Question 14
1.
The depreciation method that estimates the number of units of service or output that can be provided by an asset and allocates the depreciable cost of the asset on the basis of the use or output during each period is called the units-of-output or units-of-production method.
True
False
Question 15
1.
Use the following data:
Asset cost $90,000
Expected Life 3 years
Estimated salvage value $15,000
Using the straight-line method, the amount of depreciation each year would be
$25,000
$30,000
$45,000
$15,000
Question 16
1.
Which of the following is NOT a way of calculating the amount of depreciation for each period?
straight-line method
declining-balance method
sum-of-the-years’-digit method
weighted-average method
Question 17
1.
If an asset is being sold or exchanged, the gain or loss is always computed by comparing the
market value and book value
market value and salvage value
book value and salvage value
market value and cost
Question 18
1.
The two major sources of capital for every type of business are capital that results from the investment of cash or other property by the owner or owners and capital that results from the receipt of dividends.
True
False
Question 19
1.
A credit balance in Income Summary represents net income; a debit balance represents a net loss.
True
False
Question 20
1.
A stock dividend will reduce the amount in the retained earnings section of stockholders’ equity, while increasing the amount in the paid-in capital section.
True
False
Question 21
1.
The journal entry made on the date of declaration of a cash dividend to common stockholders includes
a debit to Cash Dividends and a credit to Common Dividends Payable
a debit to Cash Dividends and a credit to Cash
a debit to Common Dividends Payable and a credit to Cash Dividends
a debit to Cash and a credit to Common Dividends Payable
Question 22
1.
An exchange of one share of an old issue of stock for a multiple number of shares of a new issue of stock with reduced par or stated value is known as a
property dividend
stock dividend
stock split
liquidating dividend
Question 23
1.
When a small stock dividend is declared and the market value exceeds the par or stated value of the shares, the excess of market value over par or stated value should be entered in which of the following accounts?
Stock Dividends
Stock Dividends Distributable
Paid-In Capital in Excess of Par
Capital Stock
Question 24
1.
A bond is an obligation of the corporation.
True
False
Question 25
1.
Bonds payable less the discount on bonds payable is called the carrying value of the bonds.
True
False
4 points
Question 26
1.
A $100,000 bond issue sold at 102 has a market price of $98,000.
True
False
Question 27
1.
The discount on bonds payable account would be classified as a(n)
current liability
adjunct-liability
contra-liability
noncurrent liability
Question 28
1.
If bonds were originally sold at face value and the corporation pays more than the face amount when the bonds are redeemed, there is a
loss
gain
premium
discount
Question 29
1.
If the interest rate on bonds is higher than the current market rate, they will sell at
a discount
a premium
face value
maturity value
Question 30
1.
Bond Interest Payable is reported as a(n)
current liability on the income statement
current liability on the balance sheet
adjunct-liability on the balance sheet
contra liability on the income statement
4 points
Question 31
1.
Achieving profitability will automatically assure sufficient amounts of cash.
True
False
Question 32
1.
Interest received on loans made to borrowers is an example of an investing activity.
True
False
Question 33
1.
Under the accrual basis of accounting, revenues are recognized when earned, regardless of the amount of cash actually received.
True
False
Question 34
1.
Financing activities include transactions with owners and creditors.
True
False
Question 35
1.
Those transactions dealing with the exchange of cash between the firm and its owners (stockholders) and creditors are called
investing activities
operating activities
financing activities
planning activities
Question 36
1.
An example of a cash inflow from operating activities is
cash received from the sale of merchandise
proceeds from the sale of productive assets
proceeds from discounting notes receivable
proceeds from additional investments by the owners
Question 37
1.
Quick assets include cash, temporary investments, inventory, and receivables.
True
False
Question 38
1.
From the standpoint of the individual stockholder, one of the most important measures of profitability of the firm is the earnings per share.
True
False
Question 39
1.
The debt-to-equity ratio is calculated by dividing the net income for the year by the average stockholders’ equity for the year.
True
False
Question 40
1.
Total liabilities divided by total stockholders’ equity is the calculation for the
current ratio
ratio of liabilities to stockholders’ equity
return on investment ratio
times interest earned ratio
Question 41
1.
Dividing cost of goods sold by the average of merchandise inventory is the calculation for the
accounts receivable turnover
working capital turnover
merchandise inventory turnover
plant and equipment turnover
Question 42
1.
Dividing the net income for the year by the average assets for the year is the calculation for the
return on total assets
earnings per share
book value per share
quick or acid-test ratio
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