Final Exam 101 -- MyAccountingLab Test 1

Question 1

The accounting equation is

Answer 1

Assets = Liabilities + stockholders’ equity

Question 2

What is NOT an objective of an internal control system

Answer 2

Risk minimization

Question 3

To compute ending retained earnings on the statement of retained earnings

Answer 3

net income is added to the beginning retained earnings and dividends are subtracted from the beginning retained earnings

Question 4

A petty cash fund

Answer 4

is established to pay on-the-spot purchases

Question 5

Notes payable, accounts payable, taxes payable, and salaries payable are all examples of

Answer 5

liabilities

Question 6

The revenue principle requires that a business record revenue when the business

Answer 6

delivers goods or services to a customer

Question 7

To be useful, accounting information must have the fundamental qualitative characteristic of

Answer 7

relevance and faithful representation

Question 8

A doctor performed surgery in March and did not receive cash from the patient until July. Under accrual accounting, when does the doctor recognizes revenue?

Answer 8

in March

Question 9

Net income is computed as

Answer 9

Revenues - Expenses

Question 10

If a bookkeeper mistakenly records a disbursement as $36 instead of the correct amount of $63, the error should be shown on the bank reconciliation as a

Answer 10

$27 deduction from the books

Question 11

When services are performed on account

Answer 11

accounts receivable is increased

Question 12

The left side of a T-account is always the

Answer 12

Debit Side

Question 13

Goods purchased on account for future use in the business, such as store supplies, are called

Answer 13

Prepaid Expenses

Question 14

Which accounts will be closed?

Which account will NOT be closed?

Answer 14

Dividends – will be closed
Service Revenue – will be closed
Utilities Expense – will be closed

Cash – will NOT be closed

Question 15

What increases retained earnings?

Answer 15

Net Income

Question 16

Any event that has a financial impact on the business and can be measured reliable is a(n)

Answer 16

transaction

Question 17

the accounting period that ends on a date other than December 31 is called a

Answer 17

fiscal year

Question 18

Adjusting entries are

Answer 18

prepared at the end of the accounting period to update certain accounts

Question 19

When a company borrows cash from the bank

Answer 19

liabilities are increased

Question 20

The rules for recording accounting transactions include all of the following - bad question

Answer 20

bad question

Question 21

when preparing the financial statements

Answer 21

assets, liabilities, and stockholders’ equity are reported on the balance sheet

Question 22

What appears on the balance sheet

Answer 22

Assets, Liaiblities, Stockholders’ equity

Question 23

The correct data flow from one financial statement tot he next is

Answer 23

Income Statement
Statement of Retained Earnings
Balance Sheet
Statement of Cash Flows

Question 24

At the end of the current accounting period, account balances weer as follows:
Cash $15,000
Accounts Receivable $20,000
Common Stock $8,000
Retained Earnings $14,000
Liabilities for the period were...

Answer 24

$13,000

Assets = Liabilities + Stockholders’ Equity

or
Assets - Liabilities = Stockhodlers’ Equity
or
Assets - Stockholders’ Equity = Liabilities

Question 25

Verifiabilitiy means that the information

Answer 25

must be capable of being checked for accuracy

Question 26

The 3 main components of the fraud triangle are

Answer 26

Motive (pressure)
Opportunity and
Rationalization

Question 27

A system of handling cash receipts by mail whereby customers remit payments directly to the bank, rather than through the company’s mail is a(n)

Answer 27

lock-box system

Question 28

When preparing a bank reconciliation, which of the following items should be added to the book balance

Answer 28

EFT receipts

Collection Items

Question 29

The primary way that fraud is prevented and detected is through a proper system of

Answer 29

internal control

Question 30

What is a correct statement about GAAP and IFRS?

Answer 30

The FASB and the IASB are working toward convergence of standards

Question 31

What is a correct statement about the methods of accounting?

Answer 31

GAAP requires accrual accounting

Question 32

A company received cash in exchange for issuing stock. This transaction increased assets and

Answer 32

Increased equity

Question 33

The Financial Accounting Standards Board is responsible for establishing

Answer 33

generally accepted accounting principles (GAAP)

Question 34

Under accrual accounting, revenue is recorded

Answer 34

when the services are performed, regardless of when the cash is received

Question 35

The acronym GAAP stands for

Answer 35

generally accepted accounting principles (GAAP)

Question 36

Regarding financial statement elements

Answer 36

revenues are inflows of resources that increase retained earings

Question 37

A construction company paid $80,000 cash for equipment used in the business. At the time of purchase, the equipment had a list price of $90,000. When the balance sheet was prepared, the value of the equipment was $83,000. At what amount should the equipment be recorded in the records of the company?

Answer 37

$80,000 – historical principal

Question 38

What is the allocation of cost of an asset over the asset’s useful life?

Answer 38

Depreciaion

Question 39

What are the two most common types of fraud impactnig financial statements ?

Answer 39

fraudulent financial reporting

misappropriation of assets

Question 40

If a company fails to record a sale on account

Answer 40

assets on the balance sheet will be understated