Final

Question 1

Retained earnings represents:
A. Cash available for dividends
B. The amount initially invested in the business by stockholders
C. Cash available for expansion and growth
D. Income that has been reinvested in the business rather than distributed as dividends to stockholders

Answer 1

D

Question 2

Profitability may be defined as
A. The ability to pay the debts of the company as they fall due
B. The ability to increase the value of retained earnings
C distributing dividends
D having excess cash

Answer 2

B

Question 3

Liabilities that fall due within one year or within the operating cycle are classified as current liabilities
A true
B false

Answer 3

A

True

Question 4

Under accounting salaries earned by employees but not yet paid should be expensed
A in the period in which they are earned
B in the period in which they are paid
C in the period with higher earnings 
D in the period with lower earnings

Answer 4

A

Question 5

Financial statements are prepared:
A only for publicly owned business organizations
B for corporations but not for sole proprietorships or partnerships
C primarily for the benefit of persons outside of the business organization
D in either monetary or no monetary terms depending upon the need of the decision maker

Answer 5

C

Question 6

The basic purpose of an audit is
A assure financial statements are in conformity with GAAP
B provide as much useful information to decision makers as possible
C record changed in financial position of an organization by applying the concepts of double entry accounting
D meet an organizations need for accounting information as efficiently as possible

Answer 6

A

Question 7

Liquidity may be defined as
A the ability to increase the value of retained earnings
B the ability to pay the debts of the company as they fall due
C being able to buy everything the company requires for cash
D purchasing everything the company requires on credit

Answer 7

B

Question 8

Which of the following would usually be the greatest amount
A the number of shares authorized
B the number of shares issued
C the number of shares outstanding
D they must all be the same amount

Answer 8

A

Question 9

From an accounting viewpoint, when is a business considered an entity separate from its owners?
A only when organized as a sole proprietorship
B only when organized as a partnership
C only when organized as a corporation
D in each of the above situations the business is an accounting entity separate from the activities of the owners.

Answer 9

D

Question 10

Posting is the process of
A transferring debit and credit entries in the journal into the appropriate ledger
B determining that the dollar amount of debit entries recorded in the ledger is equal to the dollar amount of credit entries
C entering information into a computerized data base
D preparing journal entries to describe each business transaction

Answer 10

A

Question 11

In a periodic inventory system, the formula used in computing the cost of goods sold may be summarized as follows:
A beginning inventory + purchases - ending inventory
B beginning inventory + purchases - net sales
C ending inventory + purchases - net sales
D balance in the cost of goods sold account, less balance in the inventory shrinkage account

Answer 11

A

Question 12

A deficit appears in a corporations financial statements

A among the operating expenses
B among the liabilities
C as an element of total paid in capital
D as a deduction from total paid in capital

Answer 12

D

Question 13

In a periodic inventory system the cost of goods sold is

A recorded as sales transactions occur
B determined by computation which is performed at year end, after taking of a complete physical inventory
C equal to the beginning inventory, plus purchases made during the period, less sales revenue for the period
D determined by subtracting the balance in the gross profit account from the amount of net sales

Answer 13

B

Question 14

The bookkeeper prepared a check for $58 but accidentally recorded it as $85. When preparing the bank reconciliation, this should be corrected by:
A adding $27 to the bank balance 
B subtracting $27 from the bank balance 
C adding $27 to the book balance 
D subtracting $27 from the book balance

Answer 14

C

Question 15

The general purpose financial statements prepared annually by a corporation would not include the
A balance sheet 
B income tax return
C income statement 
D statement of cash flows

Answer 15

B

Question 16

An NSF check returned by the bank should be entered in the depositors accounting records by a debit to
A accounts receivable 
B an expense account 
C cash
D cash over and short

Answer 16

A

Question 17

Which of the following items on a bank reconciliation may not have been known to the depositor until the bank statement had arrived?

A bank service charges
B an NSF check
C a credit for interest earned
D all of the answers are correct

Answer 17

D all

Question 18

Unearned revenue

A appears on the income statement as income
B appears on the income statement as a reduction to income
C appears on the income statement as a liability
D appears on the balance sheet as a liability

Answer 18

D

Question 19

If the ending inventory is overstated in the current year
A net income will also be overstated
B next years beginning inventory will also be overstated
C next years income will be understated
D all three of the above statements are correct

Answer 19

D

Question 20

When treasury stock is reissued at a price above cost
A the corporation recognizes a gain to be recorded on the income statement
B total paid-in capital is increased
C the re-issuance is treated as an extraordinary item in the corporations income statement
D retained earnings is increased

Answer 20

B

Question 21

Clark company has used the same inventory method for many years. This is an example of which principle?
A matching
B realization
C cost
D consistency

Answer 21

D

Question 22

A trial balance consists of

A a two column schedule of all debit and credit entries posted to ledger accounts
B a two column financial statement intended for distribution to interested parties
C a two column schedule the totals of all debits and of all credits made in journal entries
D a two column schedule listing names and balances of all ledger accounts

Answer 22

D

Question 23

A balance sheet is designed to show

A how much a business is worth
B the profitability of the business during the current year
C the assets, liabilities, and owners equity in the business at the particular date.
D the cost of replacing the assets and of paying off the liabilities at December 31

Answer 23

C

Question 24

Which of the following is NOT a characteristic of accounting

A information used in financial statements is prepared in conformity with generally accepted accounting principles
B the information is confidential and is intended for the use only by company management
C the information is used in wide variety of business decisions
D the information is developed primarily by “private accountants “ that is, accountants employed by business organizations

Answer 24

B

Question 25

The basic purpose of bookkeeping is to:

A provide financial information about an economic entity
B develop the types of information best-suited to specific managerial decisions
C record the financial transactions of an economic entity
D determine the taxable income of individuals and business entities

Answer 25

C

Question 26

A bank reconciliation explains the differences between:
A cash receipts and cash disbursements for the period
B the balance of cash in the bank and the budgeted expenditures for the upcoming accounting period
C the balance per bank statement as the cash balance per the accounting records of the depositor
D the balance per bank statement and cash expected to be on hand according to the cash forecast

Answer 26

C

Question 27

The term accumulated depreciation as used in accounting is best defined as

A the portion of a plant asset recognized as expense since the asset was acquired
B funds (or cash) set aside to replace the asset being depreciated
C earnings retained in the business that will be used to purchase another asset when the present asset is depreciated
D an expense of doing business

Answer 27

A

Question 28

The entry to close depreciation expense account will
A produce a zero balance in that account when posted
B include a credit to income summary
C include a debit to depreciation expense
D include a credit to capital stock

Answer 28

A

Question 29

The entry to close service fees earned will:

A produce a zero balance in that account when posted
B include a debit to income summary
C include a credit to service fees earned
D include a debit to capital stock

Answer 29

A

Question 30

The amounts that a business withholds as taxes from an employees earnings:
A represent payroll taxes expense to the employer
B are deposited in an interest bearing account until the employee is terminated
C represent miscellaneous revenue to the employer
D represent current liabilities to the employer

Answer 30

D

Question 31

The adjusting entry to recognize an unrecorded expense is necessary:
A when an expense is paid in advance
B when an expense has been neither paid nor recorded as of the end of the accounting period
C whenever an expense remains unpaid at the end of an accounting period
D because the accountant is likely to forget to pay these unrecorded expenses.

Answer 31

B

Question 32

Of the following adjusting entries, which one results in an increase in liabilities and the recognition of an expense at the end of an accounting period?
A the entry to accrue salaries owed to employees at the end of the period
B the entry to record revenue earned but not yet collected or recorded
C the entry to record earned portion of rent previously received in advance from a tenant
D the entry to write off a portion of unexpired insurance

Answer 32

A

Question 33

The cpa firm auditing Bedford company found that net income had been overstated. Which of the following errors could be the cause,
A failure to record depreciation expense for the period
B no entry made to record purchase of land for cash on the last day of the year
C failure to record payment of an account payable on the last day of the year
D failure to make an adjusting entry to record revenue that had been earned but not yet billed to customers

Answer 33

A

Question 34

Employees are owed $1,200 for services since the last payday in January to be paid the first week of February. No adjustment was made for this item. As a result of this error;
A assets at January 31 are overstated
B January net income overstated
C liabilities at January 31 are overstated
D owners equity at January 31 is understated

Answer 34

B

Question 35

Gross profit

Answer 35

Sales - COGS

Question 36

Net income

Answer 36

Gross profit - expenses

Question 37

COGAS

Answer 37

Beg. Inventory+ purchases

Question 38

Net sales

Answer 38

Gross sales - sales returns and allowances - sales discounts