final exam

Question 1

what are the three forms of business organization?

Answer 1

Sole proprietorship - unlimited liability
Corporation - owned by stockholders. limited liability
Partnership - unlimited liability. more financial outlets

Question 2

What kind of classification is cost of goods sold?

Answer 2

expense

Question 3

Which financial statement reports assets, liabilities, and stockholders’ equity?

Answer 3

balance sheet

Question 4

when does the balance sheet reports the assets, liabilities, and stockholders’ equity?

Answer 4

at a specific date

Question 5

In a classified balance sheet, how are assets usually classified?

Answer 5

Current assets; long-term investments; property, plant, and equipment; and intangible assets

Question 6

The beginning balance of retained earnings

Answer 6

the ending balance minus net income plus dividends

Question 7

Issuing new shares of common stock will

Answer 7

increase common stock

Question 8

What are generally accepted accounting principles?

Answer 8

A set of accounting rules and practices that have authoritative support

Question 9

What are the accounting rules that have substantial authoritative support and are recognized as a general guide for financial reporting purposes in the U. S.?

Answer 9

Generally accepted accounting principles

Question 10

The effect on the basic accounting equation of performing services for cash are to

Answer 10

increase assets and increase stockholders’ equity.

Question 11

Retained earnings is decreased by

Answer 11

expenses

Question 12

If cash is received in advance from a customer

Answer 12

liabilities will increase.

Question 13

Receipt of an unearned revenue

Answer 13

increases an asset; increases a liability.

Question 14

Which statement about an account is true?

Answer 14

An account is an individual accounting record of increases and decreases in specific asset, liability, and stockholders’ equity items.

Question 15

What journal entry is recorded as a result of issuing stock to investors for cash?

Answer 15

A debit to Cash and a credit to Common Stock

Question 16

What type of account is unearned revenue?

Answer 16

liability

Question 17

On. Jan. 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this?

Answer 17

investing activity

Question 18

The generally accepted accounting principle which dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied is the

Answer 18

revenue recognition principle

Question 19

The use of the cash basis of accounting violates both

Answer 19

the revenue recognition and expense recognition principles

Question 20

Adjusting entries are made to ensure that: (3)

Answer 20

1. expenses are recognized in the period in which they are incurred.
2. balance sheet and income statement accounts have correct balances at the end of an accounting period.
3. revenues are recorded in the period in which the performance obligation is satisfied.

Question 21

What is not a typical example of a prepaid expense?

Answer 21

Wages

Question 22

The difference between an asset’s cost and its accumulated depreciation is called

Answer 22

book value

Question 23

what is not a typical example of an accrued expense?

Answer 23

depreciation

Question 24

Which types of accounts will appear in the post-closing trial balance?

Answer 24

permanent accounts

Question 25

what is a merchandiser that sells directly to consumers?

Answer 25

retailer

Question 26

Which inventory system will likely be used by a company with merchandise that has a high unit value?

Answer 26

Perpetual inventory system

Question 27

Under what system is cost of goods sold determined at the end of an accounting period?

Answer 27

Periodic inventory system

Question 28

When is a physical inventory usually taken?

Answer 28

At the end of the company’s fiscal year

Question 29

what is not an inventory account?

Answer 29

equiptment

Question 30

what are the inventory costing methods?

Answer 30

Last-in, first-out Average cost First-in, first-out

Question 31

Two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, The company using which method would..

Answer 31

The company using FIFO will have the highest ending inventory.

Question 32

What type of receivable is evidenced by a formal instrument and normally requires the payment of interest?

Answer 32

a note recievable

Question 33

When is a receivable recorded by a service organization?

Answer 33

When service is provided on account

Question 34

Bad Debts Expense

Answer 34

is a nominal account and is closed at the end of the fiscal period, while Allowance for Doubtful Accounts is a real account and remains open at the end of the fiscal period.

Question 35

Obama Company has identified that Bill Clinton’s receivable account of $100 is uncollectible. What is the journal entry needed to write off the account under the allowance method?

Answer 35

Allowance for Doubtful Accounts 100 | Accounts Receivable 100

Question 36

On the date a 90-day note is honored, how much cash will the payee receive?

Answer 36

Face value plus 90 days of interest

Question 37

when reporting receivables on the balance sheet..

Answer 37

Allowance for Doubtful Accounts is shown as a deduction from Accounts Receivable on the balance sheet.

Question 38

what is not a depreciable asset?

Answer 38

land

Question 39

Which depreciation method calculates annual depreciation expense based on book value at the beginning of each year?

Answer 39

Declining-balance

Question 40

The time period for classifying a liability as current is one year or the operating cycle, whichever is

Answer 40

longer

Question 41

Which one of the following is not a typical current liability?

Answer 41

bonds payable

Question 42

When a bond is sold at a premium, at what value is it reported on the balance sheet?

Answer 42

face value plus any premium

Question 43

What is not a major advantage of a corporation?

Answer 43

Government regulations

Question 44

what is not a stockholder’s right?

Answer 44

The right to participate in management decisions

Question 45

For what reason might a company acquire treasury stock?

Answer 45

To reissue the shares to officers and employees under bonus and stock compensation plans

Question 46

what features are associated only with preferred stock?

Answer 46

Preference to assets in the event of liquidation Dividend preference Cumulative dividends

Question 47

In the stockholders’ equity section of the balance sheet, from what is the cost of treasury stock deducted?

Answer 47

Total paid-in capital and retained earnings

Question 48

When a stock dividend is declared, which of the following accounts is debited?

Answer 48

Stock Dividends

Question 49

positive of fifo

Answer 49

highest potential profit

Question 50

positive of lifo

Answer 50

lower taxable income

Question 51

positive of weighted average

Answer 51

quick and easy

Question 52

specific identification

Answer 52

best option but not realistic for most companies. for high price, low volume. like a car dealership or a jewelry store

Question 53

what does value of ending inventory mean

Answer 53

it is what is left

Question 54

account recievable

Answer 54

verbal and informal

Question 55

note recievable

Answer 55

formal and has interest

Question 56

allowance for doubtful accounts

Answer 56

a contra asset account. on the balance sheet. set by the businesses choice

Question 57

accumulated depreciation

Answer 57

the using up of an asset. it is a contra asset. 1. straight line 2. activity 3. double declining

Question 58

only thing not an estimate in depreciation

Answer 58

cost

Question 59

current liability

Answer 59

a year or less. anything payable or unearned revenue

Question 60

long term liability

Answer 60

more than a year. a note payable or bonds

Question 61

bonds

Answer 61

long term liability. usually $1000 increments. worried about changing interests. (= par or face value) (>p= premium) (

Question 62

issued stock

Answer 62

introduced to market

Question 63

outstanding stock

Answer 63

active in the market - issue dividends

Question 64

authorized stock

Answer 64

can be sold

Question 65

treasury stock

Answer 65

co. buys back own stock. contra equity

Question 66

dividends (account, where)

Answer 66

retained earnings. statement of retained earnings.

Question 67

account receivable (account, where)

Answer 67

asset. balance sheet

Question 68

unearned revenue (account, where)

Answer 68

liability. balance sheet

Question 69

interest expense (where)

Answer 69

income statement

Question 70

required after you journalize

Answer 70

transfer to ledger | make a trial balance

Question 71

CR & DR

Answer 71

at least one CR for each DR transaction (and visa versa)

Question 72

original charter

Answer 72

how many shares of stock have been authorized (can be sold)

Question 73

intangible asset

Answer 73

amortization expense. straight line.

Question 74

natural resource

Answer 74

depletion expense. activity method

Question 75

income statement

Answer 75

revenues. expenses. net income

Question 76

balance sheet

Answer 76

assets. liabilities. SE