Financial Accounting test answers of 2016.

Find Complete and recently updated Correct Question and answers of Financial Accounting. All Answers updated regularly with new questions. Upwork Financial Accounting test answers of 2016.

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Question:* What is a deposit in transit?

Answer: • A deposit that was made at month end but is not reported on the bank statement until the following month.

Question:* Inventory falls under which category?

Answer: • Current Assets

Question:* Which is not a method to account for the loss of receivables?

Answer: • Factoring of Receivables Method

Question:* What does a business owe all of its assets to?

Answer: • creditors, owners

Question:* What is the best definition of Retained earnings?

Answer: • The remaining balance of Net Income after dividends have been subtracted.

Question:* Which of the following gives the correct sequence of accounting procedures?

Answer: • Journal, ledger, trial balance, and financial statements.

Question:* Which of the following is NOT an asset account?

Answer: • Accounts Payable

Question:* What is the definition of FIFO for inventory valuation purposes?

Answer: • It is assumed that items purchased first are sold first.

Question:* What is a journal?

Answer: • both of these

Question:* Which of the following sections would you find on a balance sheet?

Answer: • liabilities

Question:* If Assets = $25,000 and Liabilities = $15,000 what is the amount of equity?

Answer: • $10,000

Question:* Corporations whose stock is publicly traded must have their financial statements ________ by independent certified public accountants.

Answer: • audited

Question:* Financial accounting relies on which of the following concepts?

Answer: • all of these

Question:* Common stock is recorded where on the financial statements?

Answer: • In stockholders’ equity.

Question:* Trademarks are an example of:

Answer: • Intangible assets

Question:* What is an example of an item that would be included in calculating comprehensive income?

Answer: • All of these

Question:* Goodwill is an example of:

Answer: • An intangible asset

Question:* Accounting firms generally do many things including:

Answer: • All of these

Question:* What does LIFO stand for?

Answer: • Last in, first out

Question:* What is the FISH inventory method?

Answer: • first-in, still-here

Question:* Property is listed under which category?

Answer: • Asset

Question:* What is long-term debt considered?

Answer: • Liability

Question:* When a bond is sold at par, what price is it sold for?

Answer: • Face value

Question:* "EBIT" stands for____

Answer: • Earnings before tax, interest and dividends

Question:* What does CPA stand for?

Answer: • Certified Public Accountant

Question:* The terms 2/10, n/30 mean?

Answer: • 2% discount if paid within 10 days, net amount due within 30 days.

Question:* Which of the following is the correct format for the balance sheet in order of occurrence?

Answer: • assets, liabilities, stockholder’s equity.

Question:* Financial accounting serves the following purposes:

Answer: • All of the Above

Question:* A sole proprietorship is a business owned by:

Answer: • 1 person

Question:* What is an example of a current liability?

Answer: • Accounts Payable

Question:* You have received cash but have not provided a service, which account should be used to record this?

Answer: • Unearned Revenue

Question:* If Assets = $25,000 and Liabilities = $35,000 what is the amount of equity?

Answer: • -($10,000)

Question:* Standard costing typically includes which of the following costs?

Answer: • All of these

Question:* Large corporations must follow the ___________ basis of accounting.

Answer: • accrual

Question:* Under US GAAP, what constitutes an audit?

Answer: • An examination of the financial reports to ensure that they represent what they claim and conform with GAAP.

Question:* What is plant (facility) considered?

Answer: • Asset

Question:* Cash balance is found in which section of the financial statements?

Answer: • Current Assets

Question:* Publicly traded companies employ _____ to audit the financial statements for their inclusion in reports to the shareholders.

Answer: • CPAs

Question:* What is the definition of posting in the accounting cycle?

Answer: • Posting activity moves balances of journal entries to ledger accounts

Question:* By law, who is the only person qualified to sign an audit report?

Answer: • CPA licensed individual only

Question:* What does AICPA stand for?

Answer: • American Institute of Certified Public Accountants

Question:* How are Accounts Receivables classified on the Balance Sheet?

Answer: • As an Asset

Question:* What is a patent considered?

Answer: • Intangible Asset

Question:* What does FIFO stand for?

Answer: • First in, First out

Question:* Why are standard cost amounts not always equal to the actual cost amounts?

Answer: • Standard cost is expected cost, actuals can be different.

Question:* The acronym for the common rules and standards that companies must follow when preparing its external financial statements is ______.

Answer: • GAAP

Question:* What must one do to record transactions?

Answer: • all of these

Question:* Companies registered with the Securities and Exchange Commission are required to have their financial statements audited by an external auditor.

Answer: • True

Question:* To what account group does 'cash on hand' belong?

Answer: • Asset

Question:* A copyright is an example of:

Answer: • An intangible asset

Question:* On the cash flow statement, buying of a stock is found in the _________ section.

Answer: • Investing

Question:* What is Goodwill in financial reporting?

Answer: • Goodwill is an Asset account. When a company is purchased for more than the assets are worth the off setting account is called Goodwill.

Question:* Once a discontinued operation is disposed of, the gain or loss can be disclosed in the notes to the financial statements

Answer: • True

Question:* What is the bottom line of an income statement?

Answer: • Company's net earnings or losses

Question:* What is the definition of Current Liabilities?

Answer: • Liabilities that are expected to liquidate within a year or normal operating cycle, whichever is longer

Question:* As found on an income statement, revenue can best be defined as:

Answer: • Gross receipts earned by the company selling its goods or services

Question:* ______ consist of assets that a retail or wholesale company acquires for resale or goods that manufacturers produce for sale.

Answer: • inventories

Question:* What is preferred stock considered?

Answer: • Shareholder Equity

Question:* The end product for an income statement is:

Answer: • Net income or net loss

Question:* Which of the following is the Control Account?

Answer: • All of the listed accounts are Control Accounts

Question:* Tangible, long lived assets used in the operations of the business are classified as ____.

Answer: • property, plant, and equipment

Question:* Franchise Licenses are an example of:

Answer: • Intangible assets

Question:* Which types of entities are considered "flow through" entities?

Answer: • All of these

Question:* Payments made to the shareholders of a corporation for profit are called:

Answer: • Distributions or Dividends

Question:* If managers are granted the opportunity to buy additional firm shares at a predetermined price on or before a future date, they are said to be owners of:

Answer: • executive stock options.

Question:* An ordinary share dividend is:

Answer: • Part of the company profits used to reward the shareholders for their investment

Question:* Realized revenue means a transaction where goods and services are exchanged for cash or claims to cash.

Answer: • True

Question:* If the accountant forgets to record salary expense in the Statement of Income, what is the result?

Answer: • Net income is too high.

Question:* Under which category is Mortgage Payable?

Answer: • Long-term Liabilites

Question:* On the cash flow statement, buying of a bond is found in the _________ section.

Answer: • Investing

Question:* What is NOT one of the sections of the Cash Flow statement?

Answer: • Cash flows from shareholder contribution

Question:* What is one method for recording uncollectible receivables?

Answer: • Direct write-off

Question:* Which of the following is a category or element of the balance sheet?

Answer: • Liabilities

Question:* The listing of all of the accounts available for use in a company's accounting system is known as the ?

Answer: • Chart of accounts

Question:* Which reports allow the interested party to evaluate the profitability of a business?

Answer: • all of these

Question:* How frequently should the 10-Q be filed for a public company?

Answer: • Quarterly

Question:* Standard costing is usually associated with:

Answer: • Manufacturing cost of product

Question:* What is short-term debt considered?

Answer: • Liability

Question:* What is the best definition for Salvage value?

Answer: • The estimated value that an asset will realize upon its sale at the end of its useful life

Question:* What is taxes payable considered?

Answer: • Liability

Question:* What is NOT considered a current asset?

Answer: • Dividends payable

Question:* What is interest payable considered?

Answer: • Liability, Expense

Question:* What is the definition of LIFO for inventory valuation purposes?

Answer: • It is assumed that items purchased last are sold first.

Question:* The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the

Answer: • Balance Sheet

Question:* What type of account Is Rent Payable?

Answer: • Liability

Question:* What account group does 'accounts receivable' belong?

Answer: • Asset

Question:* what is IAS?

Answer: • International accounting standards

Question:* At January 1, 2010, the balance of equity was $200,000. During the year of 2010, revenue and expenses were as follows: Revenue = $300,000; Expenses = $240,000. What is the balance of equity at December 31, 2010?

Answer: • $260,000

Question:* What is the purpose of an adjusting journal entry?

Answer: • To adjust account balances to reflect correct amounts under accrual-based accounting

Question:* Which of the following is considered an internal user of financial information?

Answer: • Board of Directors

Question:* Which of these is NOT an intangible asset?

Answer: • Equipment

Question:* Generally Accepted Accounting Principles may be described as:

Answer: • The standards used in preparing financial statements.

Question:* What is the benefit of a limited liabilty corporation, LLC?

Answer: • Taxation as a partnership, without personal risks, financial and legal, like a corporation.

Question:* What is considered a current asset?

Answer: • Accounts Receivable

Question:* Net income =

Answer: • Revenues - Expenses

Question:* Which one of the following is NOT one of the four basic income statement components?

Answer: • Depreciation

Question:* Which is an example of a Current Asset?

Answer: • Cash or Bank Balance

Question:* What is bonds payable considered?

Answer: • Liability

Question:* Prepaid rent can be found on which part of the balance sheet

Answer: • Current assets

Question:* Which of these is NOT a tangible asset?

Answer: • Trademarks

Question:* GAAP generally uses one of two measurement principles. Which of the following IS one of these two principles?

Answer: • Fair value principal

Question:* Which of the following factors is likely to be an area of difficulty in a large multinational group of companies?

Answer: • All of the these

Question:* What does IFRS stand for?

Answer: • International Financial Reporting Standards

Question:* Mergers and acquisitions are covered under which accounting concept?

Answer: • Business Combinations

Question:* What is the best definition of Paid-in capital?

Answer: • The amount shareholders contributed to the company in exchange for the shares of common stock or preferred stock less stated par value of the securities

Question:* Which of the following is NOT a current asset?

Answer: • Land

Question:* What is not a component of interest computations?

Answer: • Expected inflation

Question:* What is the difference between the accounts 'rent receivable' and 'rent revenue'?

Answer: • 'Rent receivable' is a balance sheet asset account and 'Rent revenue' is an income statement account

Question:* What does the acronym EBITDA mean?

Answer: • Earnings Before Interest, Tax, Depreciation and Amortization

Question:* Rules governing financial accounting are for the benefit of:

Answer: • All outside stakeholders

Question:* What type of ratio is Return On Assets (ROA)?

Answer: • Profitability Ratio

Question:* Which side of a T-account is a debit recorded?

Answer: • Left

Question:* At the end of the accounting period, the revenue and expense accounts of the company are moved to what account?

Answer: • retained earnings

Question:* What type of account is Interest Receivable?

Answer: • Asset

Question:* What type of account is Prepaid Rent?

Answer: • Asset

Question:* Which cost are trading securities reported at?

Answer: • Fair value

Question:* Which of the following would not be a current asset?

Answer: • Land

Question:* The statement of cash flows contains certain components of both the income statement and the balance sheet.

Answer: • True

Question:* The following items are current assets except:

Answer: • goodwill

Question:* What is the normal balance of revenue accounts?

Answer: • Credit

Question:* For a material item to be classified as an extraordinary item on the income statement, it must be:

Answer: • unusual in nature and infrequent in occurrence.

Question:* What is goodwill considered?

Answer: • Asset

Question:* Which one of these is financial accounting based on?

Answer: • double entry bookkeeping

Question:* What is wages payable considered?

Answer: • Liability

Question:* The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline?

Answer: • Economic entity

Question:* Why is an increase in inventory shown as a negative amount in the statement of cash flows?

Answer: • An increase in inventory indicates that a company has purchased more goods than it has sold. Increasing inventory requires a cash outflow. Cash outflows have a negative effect on the company’s cash balance.

Question:* Which of the following is a cash expense?

Answer: • Interest

Question:* Which of the following is an asset account?

Answer: • Prepaid rent

Question:* Which of the following accounts will be found on the balance sheet?

Answer: • Inventory

Question:* What is additional paid-in-capital considered?

Answer: • Shareholder Equity

Question:* Which of the following is a long term asset?

Answer: • On a balance sheet, the value of a company's property, equipment and other capital assets expected to be useable for more than one year, minus depreciation.

Question:* Are audited financial statements guaranteed to be free of error?

Answer: • No - they are guaranteed to be presented fairly

Question:* What is the Balance Sheet version of the accounting equation?

Answer: • Assets = Liabilities + Equity

Question:* What are the components of Double Entry accounting?

Answer: • At least one Debit entry and one Credit entry

Question:* In the USA, how frequently are public companies required to release financial performance?

Answer: • Quarterly

Question:* What is NOT a current liability?

Answer: • Convertible debt

Question:* What is not a typical component of A Work in Progress Account?

Answer: • Sales Tax

Question:* What is an example of a semi-variable expense?

Answer: • Salesperson's compensation based on both salary and commission

Question:* What is an increase in the inventory account journaled as?

Answer: • Debit.

Question:* On the cash flow statement, depreciation is found in the _________ section.

Answer: • Operating

Question:* Accounting equation is given as

Answer: • Assets = Liabilities + Owners Equity

Question:* Which of the following measures the number of times a company sold its average level of inventory during the period?

Answer: • Inventory Turnover

Question:* What is an example of a contra account?

Answer: • Allowance for doubtful accounts

Question:* Acme company has a beginning year Retained earnings balance of $10,000, Net income for the year of $5,000 and declares dividends totaling $3,000. What is the ending Retained earnings balance?

Answer: • $12,000

Question:* Which of the following is a category or element of the balance sheet?

Answer: • Liabilities

Question:* Equity can be best defined as the amount of ownership left in the business after deducting total liabilities from total assets.

Answer: • True

Question:* The multiple-step income statement for a merchandiser shows each of the following features except:

Answer: • investing activities

Question:* Working capital is a measure of

Answer: • liquidity

Question:* Which statement would you find accumulated depreciation?

Answer: • Balance sheet

Question:* On the cash flow statement, a change in accounts receivable is found in the _________ section.

Answer: • Operating

Question:* On the cash flow statement, taxes paid are found in the _________ section.

Answer: • Operating

Question:* Which of the following defines market value?

Answer: • What the property could be sold for today

Question:* On the cash flow statement, change in accounts payable is found in the _________ section.

Answer: • Operating

Question:* Which accounting assumption states that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?

Answer: • Going concern assumption

Question:* Which of the following would NOT be included on a balance sheet?

Answer: • Cost of goods sold.

Question:* Which of the following is not a current asset?

Answer: • Fixtures

Question:* (US GAAP ) You pay a dividend, what happens on the cash flow statement and in which section?

Answer: • Cash decreases - Financing section

Question:* What are the assets of a business?

Answer: • resources

Question:* Which of these is a Debit account?

Answer: • Expense

Question:* The notes to the financial statement provide details that are not shown on the financial statements.

Answer: • True

Question:* Which of the following is an example of a contingent liability?

Answer: • An environmental lawsuit.

Question:* What is retained earnings considered?

Answer: • Shareholder Equity

Question:* The fair value principal indicates that assets and ____ should be reported at fair value (the priced received to sell an asset or settle ____).

Answer: • Liabilities

Question:* Which of the following defines current assets on the balance sheet?

Answer: • Expected to be converted to cash or consumed within a year or normal operating cycle whichever is longer

Question:* If a company receives cash in exchange for a note and the present value of the note is less than the amount of the note, the difference is the:

Answer: • Discount

Question:* The difference between the balance of a plant asset account and the related accumulated depreciation account is the asset's _____.

Answer: • book value

Question:* Which of the following defines book value?

Answer: • Asset basis less accumulated depreciation

Question:* What method of depreciation is used most often for land?

Answer: • Land is not depreciated.

Question:* What is considered a prepaid expense?

Answer: • Asset

Question:* A snapshot of the company best correlates to which financial statement?

Answer: • balance sheet

Question:* What is the net number calculated from the three parts of the Statement of Cash Flows?

Answer: • Net increase (decrease) in cash

Question:* How does a company adjust its financial statements for the effect of inflation?

Answer: • It does not.

Question:* What are two criteria for identifying an economic event as an Extraordinary item?

Answer: • Unusual in nature and infrequent in occurrence

Question:* Deciding whether to record a sale when the order for services is received or when the services are performed is an example of a

Answer: • recognition issue

Question:* The current ratio is an indicator of which following characteristic of an organization?

Answer: • The liquidity in the short term.

Question:* An account a retail business would have _________, but a service business wouldn't.

Answer: • Cost Of Goods Sold

Question:* What is the correct journal entry for the purchase of merchandise on account?

Answer: • debit to inventory; credit to accounts payable

Question:* What is the purpose of a subsidiary ledger?

Answer: • To keep detailed information about certain accounts

Question:* Which of the following defines a fixed asset?

Answer: • Property used in a productive capacity which will benefit the enterprise for longer than one year

Question:* The U.S. government agency with authority over the financial reporting requirements of publicly traded corporations is the _______.

Answer: • SEC

Question:* At which cost are sale securities reported?

Answer: • Fair value

Question:* A decrease in liabilities is recorded as a:

Answer: • Debit

Question:* What are the types of expenses that will increase and decrease in the same direction as movement in sales?

Answer: • Variable expenses

Question:* Which of these typically has a credit balance?

Answer: • All of these

Question:* An increase in revenue is journaled as a ____.

Answer: • Credit

Question:* Why are income taxes not incorporated into the breakeven unit sales calculation?

Answer: • Because at breakeven there will be no profit and no income tax due.

Question:* What is the equivalent of a "real account"?

Answer: • Permanent account

Question:* ABC Co. has current assets of $50,000 and total assets of $150,000. ABC has current liabilities of $30,000 and total liabilities of $80,000. What is the amount of ABC's owner's equity?

Answer: • $ 70,000

Question:* Which of the following is true regarding the comparison between managerial and financial accounting?

Answer: • Managerial accounting need not follow Generally Accepted Accounting Principles (GAAP), while financial accounting must follow them.

Question:* What is the basic financial statement equation?

Answer: • Assets - Liabilities = Owner's Equity

Question:* What is the best definition of Net Working Capital?

Answer: • A measure of the margin of current assets over current liabilities

Question:* If a newspaper company receives an annual subscription payment prior to delivering any papers, what is the initial accounting entry?

Answer: • Debit Cash; Credit Unearned Subscription Revenue

Question:* What do negative amounts on the Statement of Cash Flow depict?

Answer: • Use of Cash

Question:* On the cash flow statement, repayment of long-term debt is found in the _________ section.

Answer: • Financing

Question:* Which one of the following is NOT a principle of GAAP (US)?

Answer: • Efficient Operations

Question:* Which of the following assets is the hardest to liquidate?

Answer: • Goodwill

Question:* What is the best definition of Expense?

Answer: • The use of resources to generate revenue

Question:* Which accounting method reflects the matching principle?

Answer: • Accrual basis accounting

Question:* What does a debit signify in bookkeeping?

Answer: • an increase in assets or a decrease in liabilities

Question:* What is one reason for the Shareholder's Equity balance to be negative?

Answer: • The amount of Net Income earned to date is a negative number that is (negatively) greater than the original paid-in-capital

Question:* Another name for the balance sheet is:

Answer: • Statement of Financial Position

Question:* Which of the following defines liabilities on the balance sheet?

Answer: • Present obligations to transfer resources in the future

Question:* On the cash flow statement, proceeds from issuing bonds are found in the _________ section.

Answer: • Financing

Question:* If a business owner wants to protect him/herself from liabilities associated with their business, it is recommended that he/she establish a sole proprietorship.

Answer: • False

Question:* What is an example of an extraordinary item?

Answer: • Impact of a hurricane on a factory

Question:* What is another definition for "recognizing" revenue?

Answer: • Recording revenue

Question:* You issue bonds, what happens on the cash flow statement and in which section?

Answer: • Cash increases - Financing section

Question:* ABC Co. incurs cleanup expense of $500 on December 30, 2010. The supplier's invoice states that the $500 is due by January 10, 2011. ABC follows the accrual basis of accounting and its accounting year ends on December 31. What is the effect of the cleanup service on the December balance sheet of ABC?

Answer: • Liabilities Increased

Question:* A decrease in equity from a Net Income loss will be a:

Answer: • Debit to Equity

Question:* A client pays ABC Co. $10,000 in December to perform services in 45 days. ABC uses the accrual basis of accounting. In December ABC will debit Cash for $10,000. What will be the other account to balance this entry prepared by ABC?

Answer: • Unearned Revenue

Question:* On the financial statements, a long-term asset is reported:

Answer: • at cost less accumulated depreciation on the balance sheet.

Question:* When a sale is made with the credit terms 2/10 net 30, the 2 refers to the:

Answer: • Discount rate

Question:* What is NOT an example of an expense account?

Answer: • Dividends

Question:* Which is considered to be liability?

Answer: • Unearned Revenue

Question:* Which is considered a cash expense?

Answer: • Leasehold Improvements

Question:* On the Statement of Cashflows, the Indirect and Direct methods for the Cashflows from operations must equal each other.

Answer: • True

Question:* Plumbing companies, beauty salons, and auto repair shops are often sole proprietorships.

Answer: • True

Question:* What is a fundamental concept of accrual accounting?

Answer: • Recognizing economic activities regardless of when cash transactions occur

Question:* Which of the following accounts is a contra account?

Answer: • Accumulated depreciation, equipment.

Question:* A complete set of financial statements for Hartman Company, at December 31, 1999, would include each of the following, except:

Answer: • Statement of projected cash flows for 2000.

Question:* What are supplies considered?

Answer: • Assets

Question:* A firm is purchasing equipment for its operations. The equipment has a useful life of 7 years. On the firm’s financial statements the equipment should be recorded as:

Answer: • Debit Property, Plant & Equipment and Credit Cash.

Question:* Assets are usually reported on the balance sheet at which amount?

Answer: • cost

Question:* To account for an increase in Accounts Payable:

Answer: • Credit Accounts Payable

Question:* If you own 40% of a company, what is the appropriate accounting method?

Answer: • Equity Method

Question:* What type of account is Member Distributions?

Answer: • Equity

Question:* With a decrease in an expense, you must _____ the account.

Answer: • Credit

Question:* Which of the following will be found on the income statement?

Answer: • Tax expense

Question:* What is a Perpetual Inventory System?

Answer: • The system updates inventory accounts after each purchase or sale.

Question:* The monetary unit assumption enables accounting to _____ economic events.

Answer: • Quantify

Question:* Free Cash Flow (FCF) is best described as:

Answer: • Operating cash flow - Capital expenditures

Question:* What is the journal entry for salary?

Answer: • Salary expense debit/salary payable credit

Question:* How frequently should the 10-K be filed for a public company?

Answer: • Annually

Question:* Under IFRS the following costs are expensed:

Answer: • all of them

Question:* Accrual basis of accounting is considered better than the cash basis because:

Answer: • it matches revenue with expenses

Question:* The cost principal dictates that companies record ____ at their cost.

Answer: • Assets

Question:* Current assets MINUS current liabilities is:

Answer: • working capital

Question:* Where is the line item Paid-in Capital in excess of Par?

Answer: • Shareholders' equity on the Balance sheet

Question:* Accumulated Depreciation is a(n) ___ on the balance sheet.

Answer: • Contra-asset

Question:* Recording revenues when earned and expenses when incurred is associated with what basis of accounting?

Answer: • Accrual

Question:* What is the balance of all revenue and expense accounts once closed to Revenue summary?

Answer: • $0

Question:* The financial statement that reports the revenues and expenses for a specific period of time is the:

Answer: • Income statement

Question:* What is not a typical inventory account for a manufacturer?

Answer: • Merchandise Inventory

Question:* What is the economic entity assumption?

Answer: • Requires that activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities

Question:* The normal balance for equity accounts:

Answer: • Are on the credit side

Question:* The best definition of noncurrent assets is:

Answer: • Assets expected to be converted to cash or consumed for multiple operating cycle.

Question:* Components of the financial statements include:

Answer: • Balance Sheet, Income Statement, Cash flow statement, Statement of Changes in equity, Note to the Accounts

Question:* You purchase $1200 worth of inventory on credit. Your journal entries would have __

Answer: • Debits and Credits balance out

Question:* The annual form every public company must file with the SEC is called:

Answer: • 10-k

Question:* The quick ratio EXCLUDES which of the following?

Answer: • Inventory

Question:* Which is NOT a common method of depreciation?

Answer: • Triple-Declining Balance

Question:* What is the net book value of a noncurrent asset?

Answer: • the net amount reported on the balance sheet for a long-term asset.

Question:* In accrual accounting, the matching principle states that:

Answer: • expenses incurred to generate revenue are recognized in the same time period as the revenue

Question:* Which of the following can be found in the FINANCING section of the cash flow statement?

Answer: • Issuing bonds

Question:* What is the normal balance for contra asset accounts?

Answer: • Credit

Question:* If a firm has a great deal of inventory built up which of the following ratios would be the largest?

Answer: • Current Ratio.

Question:* Contra Asset Account means?

Answer: • An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account).

Question:* Which account is at the bottom of the Statement of Cash Flows, displaying: _____ at the beginning and at the end of the period?

Answer: • Cash

Question:* What is a contra-account for Accounts Receivable?

Answer: • Allowance for Doubtful Accounts

Question:* Each payment on a mortgage note payable consists of:

Answer: • interest on the unpaid balance of the loan and reduction of loan principal.

Question:* On the cash flow statement, proceeds from issuing stock are found in the _________ section.

Answer: • Financing

Question:* Summarize IAS 1 (IFRS).

Answer: • Presentation of financial statements

Question:* Which organization is most like IASB, but monitors and improves the standards under US GAAP?

Answer: • FASB

Question:* What type of account is allowance for doubtful accounts?

Answer: • A contra asset account

Question:* Under the Securites and Exchange Act of 1933, ("1933 Act") which forms must be filed by U.S. registrants.

Answer: • 10-K, 10-Q

Question:* Which is not one of the principles of US GAAP?

Answer: • Cost Reduction Principle

Question:* Which of the following will be found on the balance sheet?

Answer: • Wages payable

Question:* How do you calculate straight-line depreciation?

Answer: • Asset value - salvage / useful life

Question:* The Governmental Accounting Standards Board defines general capital assets as all Capital assets other than those accounted for in Proprietary funds or trust funds.

Answer: • True

Question:* Which of the following line items are part of cost of goods sold?

Answer: • none of them

Question:* What is NOT an acceptable depreciation method?

Answer: • Accrual method

Question:* What is an investment in bonds considered?

Answer: • Asset

Question:* A normal balance of asset accounts is journaled as a ____.

Answer: • Debit

Question:* Assets are depreciated:

Answer: • to match the costs with the benefit of the asset.

Question:* Which is not one of the principles of US GAAP?

Answer: • Profitable Entity Principle

Question:* Internal users are individuals and organizations outside a company who want financial information about the company.

Answer: • False

Question:* Which of the following statements is false?

Answer: • to decrease a receivable, debit the account

Question:* Balance sheet provides Financial position of an organization

Answer: • As of a specific date

Question:* What is the formula for Net Profit Margin?

Answer: • Net Income/Sales

Question:* What is an appropriate set of journal entries to recognize the declaration of dividends?

Answer: • Debit Retained Earnings; Credit Dividends payable

Question:* Which of the following statements is true about the reporting of operating segments by a business?

Answer: • Publicly-held companies are required to present this information while other companies are allowed to present it.

Question:* Which of the following can be found in the INVESTING section of the cash flow statement?

Answer: • Buying of bonds

Question:* Which of the following principles does NOT result in adjusting entries being made?

Answer: • Cash basis of accounting.

Question:* What is an investment in stocks considered?

Answer: • Asset

Question:* (US GAAP ) Your accounts receivable drops from the prior year. What happens on the cash flow statement and in which section?

Answer: • Cash increases - Operating section

Question:* Which is NOT an intangible asset?

Answer: • Unused Line of Credit

Question:* What is NOT true about assets on the balance sheet?

Answer: • Assets must equal liabilities

Question:* How do you calculate gross profit percentage?

Answer: • Gross Margin divided by Sales

Question:* What are the two methods acceptable to present cash flows from operating activities?

Answer: • Direct and Indirect method

Question:* Which is NOT one of the major categories on a cash flow statement?

Answer: • Income

Question:* What is the best definition for Depletion?

Answer: • The process of allocating the original cost of a natural resource to the quantity at which the resource is extracted

Question:* What determines if work performed on an owned building's roof is expensed?

Answer: • If the work is deemed a repair that does not extend the building's life, it is expensed

Question:* Why is the Balance sheet referred to as a "picture in time"?

Answer: • The amounts shown on the line items of the balance sheet are the values as of the last day of the period being presented

Question:* Which of the following is the classification of a redeemable preference share?

Answer: • Equity instrument

Question:* Which of the following statements regarding revenue recognition is FALSE?

Answer: • Cash must be received to recognize revenue.

Question:* Which of the following will be found on the balance sheet?

Answer: • Additional Paid in Capital

Question:* (US GAAP ) Your accounts receivable increases from the prior year, what happens on the cash flow statement and in which section?

Answer: • Cash decreases - Operating section

Question:* What is on the right side of the trial balance?

Answer: • Balances of all credit accounts

Question:* What is done with the transactions in a company?

Answer: • both of these

Question:* On the cash flow statement, net income is found in the _________ section.

Answer: • Operating

Question:* Which type of lease is reflected on a company's balance sheet?

Answer: • Capital Lease

Question:* After the initial recognition, bonds payable shall be measured at amortized cost using:

Answer: • Effective interest method

Question:* Which of the following can be found in the OPERATING section of the income statement?

Answer: • Depreciation

Question:* Cash flow statements are required by:

Answer: • International Financial Reporting Standard No. 1

Question:* Which of the following is not closed out to a zero balance in the closing entries?

Answer: • Assets

Question:* Under straight-line depreciation, what percent of the cost of equipment to be allocated will be recognized in the third year of a 5 year economic life?

Answer: • 20%

Question:* What is the best definition for Amortization?

Answer: • The process of allocating the original cost of an intangible asset to the periods benefited

Question:* When is an expense recognized under the matching principle?

Answer: • When the related revenue is recognized

Question:* An example of financial expense in a multistep income statement would be:

Answer: • interest expense.

Question:* What is the impact to Net cash provided by (used for) financing activities from a company issuing long-term debt?

Answer: • Positive: Source of cash

Question:* On the cash flow statement, dividends paid are found in the _________ section.

Answer: • Financing

Question:* If you accept payment in advance of delivering services, you debit cash and credit what?

Answer: • Deferred Revenue

Question:* What are the journal entries for a company issuing 1,000 shares of stock at $8/share issue price and no par value?

Answer: • Debit cash $8,000; credit paid-in-capital $8,000

Question:* If the balance of inventories is $5,000 at 1/1/2010 and $3,500 at 12/31/2010, how is that represented on the Statement of cashflows?

Answer: • Cashflows from operating activities reflect a positive $1,500 source of cash

Question:* Which of the following can be found in the FINANCING section of the cash flow statement?

Answer: • Issuing stock

Question:* Where is comprehensive income reported in the income statement?

Answer: • Seperatly after net income.

Question:* Which is not one of the principles of US GAAP?

Answer: • Value-added Assumption

Question:* If the balance of accounts receivable is $2,000 at 1/1/2010 and $3,500 at 12/31/2010, how is that represented on the Statement of Cash Flows?

Answer: • Cashflows from operating activities reflect a negative ($1,500) use of cash

Question:* What is the formula for Accounts Receivable Turnover Ratio?

Answer: • Sales/((Beginning Accounts Receivable + Ending Accounts Receivable)/2))

Question:* The purpose of the income statement is to show cash sources and uses during a specific period of time.

Answer: • False

Question:* Under which classification on the balance sheet would Notes Payable NOT appear?

Answer: • Current Assets

Question:* What is the formula for Price Earnings (PE) Ratio?

Answer: • Market Price of Common Stock Per Share/Earnings Per Share

Question:* Deferred credits will appear on the balance sheet in which category?

Answer: • Liabilities

Question:* When a company pays dividends, which type of cash flow does this represent?

Answer: • Financing.

Question:* If Company X issued 10,000 shares with a stated value of $1 per share at $5 a share, how would this transaction be reflected on their balance sheet?

Answer: • Debit to Cash for 50,000; Credit to Common Stock for 10,000; Credit to Additional Paid in Capital for 40,000

Question:* Which of the following would NOT be an adjustment to net income using the indirect method?

Answer: • Increase in market value of company- owned property

Question:* What line item will always be a positive amount on the Statement of Cash Flows (Indirect Method)?

Answer: • Depreciation

Question:* Which business components are reported in Discontinued Operations?

Answer: • Operations and cash flows which are eliminated from ongoing operation

Question:* In a cash flow statement the payment of a preference dividend will be included:

Answer: • Under financing activities

Question:* When the expensed tax rate changes, deferred tax:

Answer: • Liability and Asset accounts are adjusted to reflect the new expected tax rate.

Question:* What is the asset method of adjusting entries?

Answer: • Initial transaction recorded as an asset/liability

Question:* Which is considered Extraordinary Items?

Answer: • Effects of major natural casualties, if rare in the area

Question:* What is a basis point?

Answer: • A basis point is a hundredth (1/100) of a percentage point

Question:* Which of the following would normally be a current liability?

Answer: • Unearned revenue

Question:* Where are gains / losses shown for securities classified as trading securities?

Answer: • Income Statement

Question:* In the financial statements, when a convertible bond is retired, it is shown as:

Answer: • as a reduction to cash and long-term liability on the balance sheet.

Question:* What is an example of a noncurrent liability?

Answer: • Capital lease obligation

Question:* Typically, increasing interest rates:

Answer: • discourage corporate investments.

Question:* What is the formula for Earnings Per Share (EPS)?

Answer: • Net Income/Number of Common Shares Outstanding

Question:* (US GAAP ) Your accounts payable increases from the prior year, what happens on the cash flow statement and in which section?

Answer: • Cash increases - Operating section

Question:* What is the formula for Asset Turnover Ratio?

Answer: • Sales/((Beginning Total Assets + Ending Total Assets)/2))

Question:* If ending inventory is overcounted (overstated in value) the following is understated:

Answer: • Cost of goods sold

Question:* On the cash flow statement, depletion is found in the _________ section.

Answer: • Operating

Question:* What is the formula for Return on Assets (ROA)?

Answer: • Net Income/((Beginning Assets + Ending Assets)/2))

Question:* What is factoring of accounts receivable?

Answer: • A firm sells receivables at a discount to face value for immediate cash.

Question:* Which of the following can be found in the INVESTING section of the cash flow statement?

Answer: • Buying of equities

Question:* Which of the following are the components of owners' equity section of the balance sheet?

Answer: • all of them

Question:* What is the formula for Return on Equity (ROE)?

Answer: • Net Income/((Beginning Stockholders' Equity + Ending Stockholders' Equity)/2))

Question:* Notes to Financial Statements are given to

Answer: • Increase understandability

Question:* What is a compensating balance of cash?

Answer: • A minimum credit balance that a bank may require a borrower to keep on deposit as a condition for granting a loan.

Question:* XYZ, Inc. is closing books for July. It has spent 12,000USD for air conditioning on the weekend for employees working overtime. On which financial statement will this figure appear?

Answer: • On the income statement as a SG&A expense

Question:* (US GAAP ) Your accounts payable drops from the prior year, what happens on the cash flow statement and in which section?

Answer: • Cash decreases - Operating section

Question:* The company uses BTC Bank to process customer credit cards payments. The fees charged by BTC Bank are called:

Answer: • Merchant fees

Question:* Choose the correct statement about GAAP.

Answer: • It is a violation of SEC regulations for publicly traded companies to depart from GAAP.

Question:* On the cash flow statement, amortization is found in the _________ section.

Answer: • Operating

Question:* Land is reported on the Balance Sheet at:

Answer: • Historical Cost

Question:* Every transaction will affect how many accounts?

Answer: • Two or more

Question:* In the annual report, where would a financial statement reader find out if the company’s financial statements give a fair depiction of its financial position and operating results?

Answer: • Auditor's report

Question:* Financial statements report the current market value of a company.

Answer: • False

Question:* The following information pertains to Bayside Corporation: Equipment purchase: $50,000 Salvage value: $5,000 Useful life: 7 years Year-1 depreciation: $14,285.70 What depreciation method does Bayside Corporation use?

Answer: • Double declining balance.

Question:* Which of the following accounts is not closed using the Income Summary Account

Answer: • Cash

Question:* A sinking fund, pension fund or plant expansion fund are all examples of what?

Answer: • A long-term investment

Question:* Johnny’s Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000. During the year the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of $10,000. The net income reported by Johnny’s Car Repair Shop for the year was:

Answer: • $45,000

Question:* A company began the accounting period with $50,000 in owner’s capital, ended with $75,000 in owner’s capital, and the owner withdrew $30,000 during the period for personal use. What was the company’s net income or loss for the period?

Answer: • $55,000 net income

Question:* A large company purchases a $250 digital camera and expenses it immediately instead of recording it as an asset and depreciating it over its useful life. This practice may be acceptable because of which principle/guideline?

Answer: • Materiality

Question:* The book value of an asset is its:

Answer: • Cost minus accumulated depreciation

Question:* If the balance of accounts payable is $8,000 at 1/1/2010 and $6,500 at 12/31/2010, how is that represented on the Statement of cashflows?

Answer: • Cashflows from operating activities reflect a negative ($1,500) use of cash

Question:* Unearned Subscription Revenue is recorded:

Answer: • As a liability on the Balance Sheet

Question:* GAAP and Tax code depreciation methodologies are always economically equivalent in the first year the asset is put into use.

Answer: • False

Question:* If beginning capital was $25,000, ending capital is $37,000, and the owner's withdrawals were $23,000, the amount of net income or net loss for the period was:

Answer: • Net income of $35,000

Question:* What is an example of judgement and estimation used in accounting?

Answer: • Collectibility of receivables.

Question:* What is an example of a period cost?

Answer: • General and Administrative costs

Question:* What is the common period of time that a fixed expense is assumed to be unchangeable?

Answer: • One accounting period

Question:* How is a contribution margin ratio calculated?

Answer: • (Sales price - variable cost per unit)/Sales price

Question:* National Auto uses debt, preferred stock, and common stock to finance operations. Calculation of the cost of capital requires identification of the:

Answer: • percentage of financing coming from each financing source.

Question:* When calculating earnings per share (EPS) for firms with complex capital structures, stock options are ordinarily considered to be:

Answer: • potentially dilutive securities.

Question:* While analyzing the financial statements, an analyst should:

Answer: • treat convertible bonds like equity when the stock price exceeds the conversion price.

Question:* What is one of the requirements for a business component to be reported in Discontinued Operations?

Answer: • The business does not have significant "continuing involvement"

Question:* All of the following are recognized depreciation methods for GAAP reporting EXCEPT:

Answer: • Modified Accelerated Cost Recovery

Question:* Common size income statements express all income statement items as a percentage of:

Answer: • sales.

Question:* An investment that the holder tends to sell in 30 days or less is classified as a:

Answer: • Trading Security

Question:* What is an example of an asset that is not stated at acquisition (historical) cost?

Answer: • Marketable securities.

Question:* Which of the following can be found in the INVESTING section of the cash flow statement?

Answer: • Disposal of a subsidiary or business

Question:* What is the order of cash sources (uses) as presented in the Statement of Cash Flows?

Answer: • Operating, Investing, and Financing

Question:* What is the formula for Working Capital Turnover Ratio?

Answer: • Sales/(Current Assets - Current Liabilities)

Question:* What is the formula for Debt to Equity Ratio?

Answer: • Total Liabilities / Total Shareholder's Equity

Question:* Public companies use external auditors to issue an opinion on their financial statements. The opinion that expresses that all statements are presently fairly and in accordance with GAAP is:

Answer: • Unqualified

Question:* What is the first line item of the Cashflows from operating activities under the Indirect method?

Answer: • Net Income

Question:* An increase in interest rates is most likely to benefit:

Answer: • firms that issued debt at a lower cost than current rates.

Question:* According to GAAP, How is deferred revenue treated under cash basis accounting?

Answer: • Deferrals are not recognized under cash basis accounting

Question:* How is deferred revenue treated under accrual basis accounting?

Answer: • The revenue is not recognized until the customer receives the product/service

Question:* What is the internal rate of return?

Answer: • Both of these describe the internal rate of return.

Question:* Diluted EPS, as compared to EPS, takes into consideration all of these additional variables, except:

Answer: • Volume of stock trading on the market

Question:* Discount on Bonds Payable:

Answer: • is a contra account

Question:* Stock splits affect the following accounts when booked:

Answer: • There is no book entry

Question:* What is the formula for Inventory Turnover Ratio?

Answer: • Cost of goods sold/((Beginning Inventories + Ending Inventories)/2))

Question:* On the cash flow statement, dividends received from stock is found in the _________ section.

Answer: • Investing

Question:* If a company using accrual accounting has quarterly (end of quarter) interest payments on a bond, what will they recognize at the end of the first month of the quarter?

Answer: • Debit-Interest Expense; Credit-Interest Payable;

Question:* What is NOT true about Unearned Revenue?

Answer: • It is an asset account that depletes as the services/products are delivered

Question:* On the financial statements, an income tax payable is recorded as debit:

Answer: • income tax expense and credit income tax payable.

Question:* What is the formula for Inventory Turnover?

Answer: • Cost of Goods Sold / Average Inventory

Question:* What is the balance sheet presentation of a Note Payable discount?

Answer: • Contra-liability account

Question:* Which of the following defines a permanent account?

Answer: • Accounts that have balances which carry over beyond the current accounting period

Question:* For the input for product, what are two usual cost variances that are measured for direct materials?

Answer: • Cost and quantity used.

Question:* What is a format that is NOT acceptable for reporting comprehensive income?

Answer: • Reported as a summary in the footnotes

Question:* According to IFRS 18 revenue recognition, revenue is recognized:

Answer: • when the risks and rewards of the ownership of the goods are transferred to the buyer

Question:* Which of the following can be found in the INVESTING section of the cash flow statement?

Answer: • Gains from the sale of an asset

Question:* If Acme issued 8,000 shares of common stock with par value of $1 per share and an issue price of $4 per share, what is the starting balance of paid-in-capital?

Answer: • $24,000

Question:* What is a Closing Entry?

Answer: • A journal entry to move amounts from temporary accounts to B/S or I/S accounts

Question:* A company with a Z-Score above 3.0 is likely to fail.

Answer: • False

Question:* Neutrality means that financial accounting information should

Answer: • be free from bias towards a predetermined result.

Question:* What is the formula for Quick Ratio?

Answer: • (Current Assets - Inventories)/Current Liabilities

Question:* A company must account for its investment in another company's stock using the equity method when they own more than:

Answer: • 20%

Question:* In regards to measuring and recording acquisition cost, what is the cost principle?

Answer: • All expenditures made in acquiring and preparing an asset for use should be recorded as the cost of the asset

Question:* What accounts are NOT considered "Other Comprehensive Income?"

Answer: • Income from operating activities

Question:* What are acceptable accounting treatments to recognize the cost of intangible assets over time?

Answer: • Straight line amortization over the useful life

Question:* Which of the following parties is least likely to benefit from risky strategies that increase risk and expected return for a company?

Answer: • Creditors

Question:* When you pay an expense via company credit card what general ledger category is credited?

Answer: • Liabilities

Question:* Which of the following is not considered as financial statement under GAAP?

Answer: • Statement of Retained Earnings

Question:* What is NOT a typical classification for a receivable?

Answer: • Deposit receivables

Question:* Which of the following is considered non-current liabilities?

Answer: • Deferred Tax Liability

Question:* Unearned revenue on a company's balance sheet is an:

Answer: • Item not yet reflected in the result of operations

Question:* The United States government set the standards outlined in US GAAP?

Answer: • No

Question:* Material events that have an uncertain outcome will be reported where?

Answer: • In the contingency section of the supplemental balance sheet information.

Question:* What does ACFE stand for?

Answer: • The Association of Certified Fraud Examiners

Question:* When the return on equity equation (ROE) is decomposed, what three ratios comprise the components of ROE?

Answer: • Net profit margin, asset turnover, equity multiplier.

Question:* Based upon the conservatism accounting principle, when should a gain on sale of property disposal be recognized?

Answer: • When the cash is collected.

Question:* FOXCO sells 1000 shares with a par value of $1.00 for $10.00 per share. What is the amount of paid in capital?

Answer: • $9000

Question:* Which of the following is a pervasive constraint on the information that can be provided by financial reporting

Answer: • Cost and materiality

Question:* The purpose of the closing process is

Answer: • to reduce temporary accounts to zero balances and to reflect the changes that have occurred in that account during the period

Question:* What is the formula for Book Value of Equity Per Common Share?

Answer: • Shareholders' equity/Number of Common shares

Question:* The lessee's carrying amount of an asset from the capitalization of a lease would be periodically reduced is defined by:

Answer: • Depreciation of the asset

Question:* What is a type of an affirmative covenant required by a lender?

Answer: • Requirement to report financial performance

Question:* When the debit side of the trial balance equals the credit side, the trial balance is error free.

Answer: • False

Question:* What is the formula for Interest Coverage Ratio?

Answer: • Earnings before interest and Income tax expenses/Interest Expense

Question:* If a company receives cash in exchange for a note and the present value of the note is less than the amount of the note, the difference is :

Answer: • Amortized using the "Effective Interest method"

Question:* Under IFRS, which is NOT correct in relation to the treatment of assets?

Answer: • You can use LIFO

Question:* The control features of a bank account do not include:

Answer: • having bank auditors verify the correctness of the bank balance per books.

Question:* What is withholding tax?

Answer: • Tax deducted at source

Question:* In a period of deflation, the cost flow method that results in the lowest income taxes is the:

Answer: • FIFO

Question:* What will be the subsequent measurement of investments in equity instruments that do not have a quoted price in an active market and whose fair value cannot be reliably determined?

Answer: • Cost

Question:* When a capital lease is initiated, what value is it recorded at on the balance sheet?

Answer: • The present value of the future rental payments for the use of the leased asset

Question:* Which of the following can be found in the INVESTING section of the cash flow statement?

Answer: • Gains on PP&E

Question:* Revenue recognized after cash has been received follows which accounting method?

Answer: • cash basis accounting

Question:* In cash flow statement what will be the treatment of Dividends paid?

Answer: • Dividends paid can be deducted from Financing activities only

Question:* On the cash flow statement, disposal of a business or subsidiary is found in the _________ section.

Answer: • Investing

Question:* Under a debt restructuring involving substantial modification of terms, the future cash flows under the new terms should be discounted using:

Answer: • Original effective interest rate

Question:* An intangible asset may be amortized for a maximum of:

Answer: • 40 years.

Question:* Goods totaling $50,000 were puchased Febuary 2 with the terms of 2/10, n/30. Returns of $10,000 were made on Febuary 10. What discount, if any, can be availed of if the invoice was paid Febuary 12?

Answer: • $800

Question:* A company recently acquires 85% control over another company. They account for this investment under the initial value method. The subsidiary earns $100,000 income during the year, pays $75,000 dividends, and has excess amortizations of $10,000. How much should the investment in sub account increase as a result of these operations?

Answer: • 0

Question:* Karson Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, this indicates that:

Answer: • the contractual interest rate exceeds the market interest rate.

Question:* Accounts payable; a liability account that identifies an obligation to pay suppliers in the near future. Before the account can be transfered to the_____the_____must be reconciled to____.

Answer: • general ledger, balance, Invoices

Question:* What does CFE stand for?

Answer: • Certified Fraud Examiner

Question:* How does GAAP require companies to treat R&D Expense?

Answer: • Expense in the period incurred

Question:* Acme Co. had Shareholder's Equity of $50,000 at 1/1/2010. During 2010 the company issued common stock for proceeds of $100,000, paid dividends of $10,000 and purchased treasury stock for $20,000. The Cashflows from financing activities section will reflect:

Answer: • Net (source of) cash of $70,000

Question:* Which of the following is not classified as financial asset?

Answer: • Inventory

Question:* MJG Company has the following information: *Net Loss = 100,000 *Total Assets = 3,000,000 *Common Stock, Dec 31 = 1,000,000 *Additional Paid in Capital = 500,000 *Dividends Declared = 700,000 The debt-to-equity ratio is 50% at December 31. What was the retained earnings on January 1?

Answer: • 1,300,000

Question:* Is a slogan or jingle sometimes reported as an asset on the balance sheet? If so, categorized under what?

Answer: • Yes, Intangible Intellectual assets

Question:* How is Loss on sale of assets accounted for on the Statement of Cash Flows?

Answer: • Added back to Net Income in Cashflows from Operations

Question:* What will be the Price-Earnings Ratio if the Basic Earnings per Share is $1.80 and market price of each share is $27?

Answer: • 15

Question:* What is an example of a defined benefit retirement plan?

Answer: • Company-funded pension

Question:* Which of the following is an example of a deferral?

Answer: • Recording prepaid rent

Question:* An analyst gathered the following information about a company: • 01/01/01 - 20,000 shares issued and outstanding at the beginning of the year • 04/01/01 - 5.0% stock dividend • 07/01/01 - 5,000 shares repurchased • 10/01/01 - 2:1 stock split What is the company’s weighted average number of shares outstanding at the end of 2001?

Answer: • 37,000.

Question:* A fixed asset that is fully depreciated would:

Answer: • be held as an asset until disposed of.

Question:* Net Cash Provided By Operating Activities divided by Average Total Liabilities is also known as:

Answer: • Cash Debt Coverage Ratio

Question:* Acme Co. sold a piece of equipment for $10,000; the depreciated value was $2,000; what is reflected on the Cashflows from investing activities in the period of disposal?

Answer: • $10,000 source of cash from sale of PP&E

Question:* Accruals occur when the cash flow comes _____ either expense or revenue recognition.

Answer: • after

Question:* For accounting purposes, which of the following is NOT an essential characteristic of an asset?

Answer: • Its value is known with certainty.

Question:* In analyzing a company's financial statements, which financial statement would a potential investor use primarily to assess the company's liquidity and financial flexibility?

Answer: • Balance Sheet.

Question:* Which of the following is among the items reported on the income statement "above the line" on a pretax basis?

Answer: • Unusual or infrequent items.

Question:* What is an example of an adjusting journal entry?

Answer: • Interest expense that is owed, but not yet paid or due

Question:* A cash basis statement to report a company's revenues and expenses is called:

Answer: • Statement of Revenues and Expenses

Question:* Under IFRS, what is the appropriate accounting treatment for ownership over 50%?

Answer: • Consolidation

Question:* On July 1, 2014, PQR Company received a $150,000 simple interest note for 5 months at 12% simple interest from ABC Trading. After 3 months, PQR needed cash so it discounted the note at the MEBank at a discount rate of 14%. How much will PQR receive as a proceeds from the discounting of the notes?

Answer: • $153,825

Question:* Which of the following should not be taken into account when determining the cost of inventories?

Answer: • Recoverable purchase taxes

Question:* (US GAAP ) You declare a dividend. What happens on the cash flow statement and in which section?

Answer: • No change

Question:* In calculating the income to be reported for two different segments of a company, general operating expenses must be allocated between the two. How should this allocation be made?

Answer: • In the same manner as applied for internal decision-making purposes

Question:* Where, in order on the Income statement, is the reporting of discontinued operations?

Answer: • After Net Income, before Extraordinary items

Question:* Closing entries reset the balances of each revenue and expense account to zero and transfer these balances to _________.

Answer: • retained earnings

Question:* Revenue is recognized when it is both earned and realized.

Answer: • False

Question:* According to the IASB Framework, the process of reporting an item in the financial statements of an entity is:

Answer: • Recognition.

Question:* Which ratio or formula would provide the most accurate picture of a company's liquidity situation if it could not sell it's inventory to help cover its' debts?

Answer: • Acid test ratio

Question:* Under US GAAP, if you own 75% of a company, what is the appropriate accounting method?

Answer: • Consolidation

Question:* ABC Ltd has declared an ordinary share dividend of £200,000 at 31/12/2011. Which of the following correctly explains the accounting entries for the dividend at the year end?

Answer: • Appropriation of profit, current liability on the balance sheet.

Question:* For accounting purposes, which of the following is NOT an essential characteristic of an asset?

Answer: • Its value is known with certainty.

Question:* Which of the following would NOT be reported below the line?

Answer: • A stock split.

Question:* What is the equation for asset turnover?

Answer: • Net Sales / Total Assets

Question:* Under FASB 13, to qualify as a capital lease and not an operating lease, which of the following is true?

Answer: • The lease must contain a bargain purchase option.

Question:* Which cost are held-to-maturity securities reported at?

Answer: • Amortized cost

Question:* What is prime cost?

Answer: • Any material, manufacturing, transportation, and labor costs that are necessary for production

Question:* What is the gain or loss on disposal of an asset if at the time of the disposal its cost is $100000, the Bookvalue is $50000, and it sold for $30000?

Answer: • $-20,000

Question:* What causes a corporation’s market value to be greater than its book value?

Answer: • The accountant’s cost principle

Question:* Reggy Company expects to have a record year, with net income increasing by 20 percent. Reggy would like to share this increase with stockholders, how would Reggy record this? As a:

Answer: • dividend payable in the current liabilities section of the balance sheet.

Question:* If a company issues stock to another company in order to acquire a parcel of land, where will that transaction be disclosed (if material)?

Answer: • As a footnote in the Statement of cashflows or in other disclosure notes as part of the financials.

Question:* Simons Company is purchasing land to build a new factory. The following are the expenses incurred to purchase the land: • Purchase price of the land $150,000 • Real estate commissions $10,500 • Back property taxes $5,000 • Survey $5,000 At what amount should Simons record the land?

Answer: • $170,500.

Question:* If a company issues stock to another company in order to acquire a parcel of land, where will that transaction be reflected in the Statement of cashflows?

Answer: • Not in any of the three parts of the Statement of cashflows

Question:* What is not an allowance method for uncollectible receivables?

Answer: • Special allowance accounts

Question:* A pension fund is:

Answer: • established by an employer to organize the investment of employees' retirement funds contributed by the employer and employees.

Question:* Which of the following statements correctly summarizes the key characteristics of a sole trader’s business?

Answer: • The trader has unlimited liability, takes sole responsibility for management of the business and no audit is needed.

Question:* At 12/31/10 there were 1,000,000 shares issued and 300,000 where held as treasury stock. During 2011, 100,000 shares were excercised via stock options and the company repurchased 50,000 of its outstanding shares. How many shares were outstanding as of 12/31/11?

Answer: • 750,000

Question:* Miller Investments has $50,000 in liabilities and $50,000 in stockholders’ equity. If Miller issues debt with warrants of $50,000, and attached warrants are valued at $10,000, the firm’s debt-to-equity ratio after the issue will be:

Answer: • 1.5

Question:* A material loss should be presented separately as a component of income from continuing operations when it is:

Answer: • Not unusual in nature but infrequent in occurrence.

Question:* Which of the following is considered a cash expense?

Answer: • Tax expense

Question:* Which of the following is correct for two companies that want to file a consolidated tax return as an affiliated group?

Answer: • One company must hold at least 80 % of the other company's voting stock.

Question:* What is an example of a financial transaction that does not incorporate the time value of money?

Answer: • Marketable securities.

Question:* A bond is issued at 101 above par. How are the excess proceeds recorded by the issuer?

Answer: • As a credit to Premium on Bonds Payable

Question:* Directors of a limited company are under an obligation to:

Answer: • File copies of the financial statements with the registrar of companies.

Question:* When bonds are redeemed before maturity, the gain or loss on redemption is the difference between the cash paid and the:

Answer: • carrying value of the bonds.

Question:* How are funds used for development of a patent that are NOT expensed on the Income Statement accounted for on the Cashflow statement?

Answer: • Investing Activities - Intangible Assets

Question:* Under SFAS 115, which is not a category for securities?

Answer: • Common Stock

Question:* For a firm with a simple capital structure, all of the following are necessary to measure basic earnings per share (EPS) EXCEPT:

Answer: • dividends paid to common shareholders.

Question:* One million shares of common stock outstanding at the beginning of 1999 • 200,000 shares issued on the last day of March • 500,000 shares issued on the last day of June • 800,000 shares issued on the last day of September. What is the number of shares that should be used to compute 1999 earnings per share for the QRK Company?

Answer: • 2.5 million.

Question:* Called up capital can be more than:

Answer: • Paid up Capital

Question:* In Year One, a company is sued for $500,000 and believes that it is reasonably possible that it will lose between $200,000 and $350,000 but probable that it will lose between $140,000 and $200,000. In Year Two, the law suit is settled for $190,000. What income effect should the company recognize in Year Two?

Answer: • Loss of $50,000

Question:* Compared to its 2004 cash-basis net income, Potoma Co.'s 2004 accrual-basis net income increased when it:

Answer: • Had lower accrued expenses on December 31, 2004, than on January 1, 2004.

Question:* All of the following are shown on the income statement net of tax EXCEPT:

Answer: • unusual or infrequent items.

Question:* What is a definition of appropriated retained earnings?

Answer: • Retained earnings that have contractual requirements.

Question:* Where would purchased treasury stock with cash be classified on the Statement of cashflows?

Answer: • Cashflows from financing activities

Question:* What type of transaction is not included in Comprehensive income reporting?

Answer: • Transactions with owners.

Question:* What is another term for a claim to a firm's resources?

Answer: • Equity

Question:* If you own 5% of a company, what is the appropriate accounting method?

Answer: • SFAS 115

Question:* A new asset has been received in exchange for an old asset. What is the most likely value to be used in recording the newly-received asset?

Answer: • Fair value of the asset given up

Question:* Which one is not The Fraud Triangle?

Answer: • Lack of audit trial

Question:* What is an example of a temporary account?

Answer: • Revenue Account

Question:* What is NOT a line item that would be found in the Cashflows from financing activities

Answer: • Providing loans to other companies

Question:* The RR Corporation had cash flow from operations of $20 million. RR purchased $5 million in equipment and sold $3 million of equipment during the period. Cash flows from financing were $2 million. What is RR's free cash flow for the period (in millions)?

Answer: • $18

Question:* Investors (such as suppliers and bankers) use accounting information to evaluate the risks of granting credit or lending money.

Answer: • True

Question:* Which is equivalent to Horizontal analysis?

Answer: • Trend Analysis

Question:* Under GAAP which method is NOT allowed for writing-off bad debts

Answer: • Direct write-off method

Question:* What is the formula for Dividend Yield?

Answer: • Annual Dividends per common share/Market price of Common stock per share

Question:* Which of the following does NOT have a dilutive effect on earnings per share?

Answer: • Preferred Stock

Question:* Revenues are deferred to a balance sheet liability account until they are earned in a later period. The account is called:

Answer: • Deferrals

Question:* In a period of inflation, inventory valuation with the LIFO methodology would be higher or lower than if the firm had adopted the FIFO methodology?

Answer: • Higher

Question:* At the beginning of 2001, Osami Corporation had 1.4 million shares of common stock outstanding and no preferred stock. At the end of August 2001, Osami issued 1.2 million new shares of common stock. If Osami reported net income equal to $7.2 million, what were its earnings per share (EPS) for 2001?

Answer: • $4.00.

Question:* At what point in time are shareholders entitled to a cash dividend?

Answer: • On the date of record.

Question:* How does a preparer of financial statements differentiate a firm's revenues and a firm's recognized gains?

Answer: • It depends on the firm's typical activities.

Question:* What is the definition of a contribution margin?

Answer: • Revenues less variable expenses

Question:* A company has cash of $30,000, accounts receivable of $150,000, inventory of $140,000, and accounts payable of $200,000. Which of the following is correct?

Answer: • The quick ratio is 0.9 : 1 and the current ratio is 1.6 : 1.

Question:* Extraordinary income statement amounts are shown after comprehensive income is calculated.

Answer: • False

Question:* Employer payroll taxes do not include:

Answer: • Federal income taxes

Question:* At the beginning of this year Aramed had 400,000 shares of common stock outstanding. Aramed paid a 10 percent stock dividend on March 31 of this year. Aramed issued 90,000 new common shares on June 20 of this year and repurchased 12,000 shares on December 1. The number of shares Aramed should use in computing earnings per share at the end of the year is:

Answer: • 484,000.

Question:* Which of the following would be included in the cost of goods sold calculation of an income statement?

Answer: • Freight inwards

Question:* Reporting accounts receivable at net realizable value is a departure from the accounting principle of:

Answer: • Historical cost.

Question:* What is the purpose of an 8-K filing with the SEC?

Answer: • Special circumstances

Question:* What is the impact to Net cash provided by (used for) financing activities of interest paid on long-term debt?

Answer: • None of these

Question:* For US companies, what is the most common method of presenting Cashflows from operating activities?

Answer: • Indirect method

Question:* How is the contribution margin used to calculate a firm's breakeven unit amount?

Answer: • Fixed Costs/Contribution margin per unit sold

Question:* What are two key elements of the comparability accounting principle?

Answer: • Comparing a firm over time and comparing companies with each other.

Question:* What is the equivalent of a nominal account?

Answer: • Temporary Account

Question:* Retained earnings is equal to

Answer: • Common stock - dividends + revenues - expenses

Question:* Which of the following statements about agency problems is TRUE?

Answer: • Agency conflicts are common.

Question:* When bonds are converted into common stock:

Answer: • the carrying value of the bonds is transferred to paid-in capital accounts.

Question:* Which of the following is considered to be a non-operational income statement item?

Answer: • Merger Expense

Question:* When bonds are redeemed before maturity, the gain or loss on redemption is the difference between the cash paid and the:

Answer: • carrying value of the bonds.

Question:* Which of the following transactions would not be treated as a reversing entry on the first day of the new accounting period?

Answer: • Allowance for Doubtful debts

Question:* Summarize IFRS 3 (IFRS).

Answer: • Business Combinations

Question:* How would an investor expect to see carrying costs for a natural resource extraction company? (e.g. mining, drilling, timber)

Answer: • Depleted over time as the resource is used up.

Question:* Under straight-line depreciation, what amount of the cost of equipment (less salvage value) purchased 9/1/2010 will be recognized in calendar year 2015 for an asset with a 5 year economic life?

Answer: • 15%

Question:* How is an adjunct account different from a contra account?

Answer: • An adjunct account increases the amount of the balance sheet account.

Question:* A warranty payable is recorded as:

Answer: • an estimated expense on the income statement when the sale is made.

Question:* (US GAAP ) You have depreciation for the past year, what happens on the cash flow statement and in which section?

Answer: • Cash increases - Operating section

Question:* When a company issues a stock dividend which of the following would be affected?

Answer: • Earnings per share.

Question:* Summarize IAS 3 (IFRS).

Answer: • Business Combinations

Question:* Deferred credits will appear on the balance sheet as:

Answer: • a liability

Question:* Which of the following can be found in the FINANCING section of the cash flow statement?

Answer: • Dividends paid

Question:* The initial recording of unearned revenue would generate a:

Answer: • debit to cash

Question:* A sinking fund is a(n):

Answer: • Asset

Question:* When closing stock increases, what is the effect on gross profit?

Answer: • gross profit increases

Question:* For a discontinued operation, what is the date at which management formally commits itself to a formal plan to dispose of the business segment?

Answer: • Measurement date.

Question:* What is the formula for Dividend Payout Ratio?

Answer: • Cash Dividends/Net Income

Question:* Where in the financial statements of a company, would you most typically find operating leases?

Answer: • Notes to the financial statements.

Question:* One item reported as an element of other comprehensive income is:

Answer: • Unrealized holding gains and losses due to the transfer from held-to-maturity securities to available-for-sale securities

Question:* What is the best definition of an Asset basis?

Answer: • The full cost of placing a fixed asset in service

Question:* Various standard-setting bodies, in consultation with the accounting profession and the business community, determine guidelines for GAAP. Which of the following standard-setting bodies does NOT contribute to enhancing GAAP?

Answer: • PCFOB

Question:* In a cash flow statement a bonus issue will:

Answer: • not appear as no cash flow occurs as a result of a bonus issue.

Question:* A business receives a check from a customer for £256 in full agreed settlement of an account which showed a debit balance of £270. Which of the following entries correctly records this transaction?

Answer: • Debit cash £256, debit discount allowed £14, credit debtor £270

Question:* What does FASB No. 142 represent?

Answer: • Goodwill Impairment Testing

Question:* (US GAAP ) You receive a dividend, what happens on the cash flow statement and in which section?

Answer: • Cash increases - investing section

Question:* Which is NOT one of the criteria of determining if a lease should be considered a capital lease?

Answer: • If the asset is required to be transferred to the lessor at the end of the lease

Question:* What is NOT a line item that would be found in the Cashflows from investing activities?

Answer: • Income tax payments on interest earned on bonds held

Question:* How are prior period adjustments reflected in current net income?

Answer: • The adjustments are not reflected.

Question:* Under US GAAP, if you own 50% of a company, what is the appropriate accounting method?

Answer: • Equity Method

Question:* Under US GAAP, what is the appropriate accounting treatment for ownership under 20%?

Answer: • SFAS 115 Rules

Question:* Summarize IAS 7 (IFRS).

Answer: • Cash flow statements

Question:* Can equities be classified as held-to-maturity?

Answer: • Only hybrid securities can be held-to-maturity

Question:* Which type of a capital structure contains no dilutive securities?

Answer: • Simple.

Question:* The basic earnings per share calculation excludes:

Answer: • Dilutive securities

Question:* Which of the following would be reported as an investing activity in a company's statement of cash flows?

Answer: • Collection of a note receivable from a related party.

Question:* On the cash flow statement, interest received from a bond is found in the _________ section.

Answer: • Operating

Question:* International Financial Reporting Standard IFRS 7 deals with the reporting of:

Answer: • financial instruments

Question:* Generally, where are gains / losses shown for securities classified as available for sale securities?

Answer: • Component of shareholder equity

Question:* How do you calculate double declining depreciation (first year)?

Answer: • 2 * Asset value / useful life

Question:* What is the formula for Price/Book Ratio

Answer: • Market Cap/Book Value

Question:* The deferred tax liability can have a much larger balance than other liability accounts because:

Answer: • It is the only liability account not listed at it's present value

Question:* How is a firm's holding of a marketable security deemed insulated from a change in value based on interest rate changes?

Answer: • The security is very close to the date of maturity.

Question:* Regarding bank reconciliation, Adjusting entries are made for which of the following reconciling adjustments?

Answer: • Book to true balance

Question:* If a company has negative net income the net change in cash on the Statement of cashflows will also be negative.

Answer: • True

Question:* Q-Tell Incorporated is in the communications industry and has the same absolute dollar level of current liabilities as the average firm in the industry. The current ratio and quick ratio for Q-Tell and the communications industry are as follows: Industry: Current Ratio of 3.0, Quick Ratio of 2.5 Q-Tell: Current Ratio of 3.0, Quick Ratio of 2.1 Relative to the communications industry Q-Tell is most likely to have:

Answer: • more inventory.

Question:* A firm has a patent that they would like to expense over its useful life. Which of the following would the firm credit to record this expense over the patent’s life?

Answer: • Asset

Question:* Which of the following will be NOT found on the cash flow statement?

Answer: • Stock dividends

Question:* Summarize FAS 160.

Answer: • Noncontrolling Interest

Question:* A consignee (the agent selling the goods) will include the value of the inventory for sale on their balance sheet while they are in possession of the saleable goods.

Answer: • False

Question:* What is true about a contra account?

Question:* If you own 30% of a company, what is the appropriate accounting method?

Question:* Acme company has 5,000 shares outstanding, and Retained earnings balance of $12,000. If Acme declares a dividend of $3/share, what is the resulting Retained earnings balance?

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