Reference no: EM13510158

1. Which statement is normally prepared first?  Income statement
Balance sheet
Statement of cash flows
Retained earnings statement

2. When a business borrows money, it incurs a(n)  tax.
liability.
cash payment.
all of these.

3. More than 70% of businesses are organized as what type of business?  Not-for-profit
Corporation
Partnership
Sole proprietorship

4. Brennan, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $40,000 during 2009. Which of the following statements is correct?  Net income for 2009 totaled $19,000.
Net income for 2009 totaled $59,000.
Total retained earnings increased by $59,000 during 2009.
Total retained earnings decreased by $40,000 during 2009.

5. The statement of cash flows is integrated with the balance sheet because  the cash at the beginning of the period plus or minus the cash flows from operating, investing, and financing activities equals the end of period cash reported on the balance sheet.
the cash at the beginning of the period plus or minus the net income equals the end of period cash reported on the balance sheet.
the cash at the beginning of the period plus or minus assets and liabilities equals the end of period cash reported on the balance sheet.
the cash at the beginning of the period plus or minus the cash flows from operating activities equals the end of period cash reported on the balance sheet.

6. The basic financial statements do NOT include the  income statement.
tax return
balance sheet.
statement of cash flows.

7. A __________ is an economic event that under generally accepted accounting principles affects an element of the financial statements and must be recorded.  framework
control
set of rules
transaction

8. The payment of a liability  decreases assets and stockholders' equity.
increases assets and decreases liabilities.
decreases assets and increases liabilities.
decreases assets and decreases liabilities.

9. Co. received $1,000 from Newbie as rent for the use of a building owned by UNI. How does this transaction affect UNI's accounts if UNI recognizes a liability?  Cash is increased and revenue is increased.
Cash is increased and revenue is decreased.
Cash is increased and unearned revenue is increased.
It is not recorded.

10. Depreciation Expense and Accumulated Depreciation are classified, respectively, as  expense and contra asset.
asset and contra liability.
revenue and asset.
contra asset and expense.

11. Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become __________ over time.  Liabilities
Assets
stockholders%u2019 equity
Expenses

12. A&M Co. provided services of $1,000,000 to clients on account. How does this transaction affect A&M%u2019s accounts?  Increase accounts receivable and cash by $1,000,000 each
Increase accounts receivable and revenues by $1,000,000 each
Increase accounts receivable and unearned revenues by $1,000,000 each
No effect at this time

13. Multiple-step income statements show:  gross profit but not income from operations.
neither gross profit nor income from operations.
both gross profit and income from operations.
income from operations but not gross profit.

14. Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet?  As a revenue
As the cost of merchandise sold
It does not appear on the Balance Sheet
As a current asset

15. The credit terms of a sale are normally indicated on a(n)  purchase order.
invoice.
bill of lading.
account receivable.

16. Inventory shortage is recorded when  merchandise is returned by a buyer.
merchandise purchased from a seller is incomplete or short.
merchandise is returned to a seller.
there is a difference between a physical count of inventory and inventory records.

17. The bank reconciliation  should be prepared by an employee who records cash transactions.
is part of the internal control system.
is for information purposes only.
is sent to the bank for verification.

18. A special cash fund used to make small payments that occur frequently is called a(n)  operating expenses fund.
change fund.
market fund.
petty cash fund.

19. The objectives of internal control are to  control the internal organization of the accounting department personnel and equipment.
provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with.
prevent fraud and promote the social interest of the company.
provide control over %u201Cinternal-use only%u201D reports and employee internal conduct.

20. When a firm uses internal auditors, it is adhering to which of the following internal control elements?  Risk assessment
Proofs and security measures
Monitoring
Separating responsibilities for related operations

21. What type of account is Allowance for Doubtful Accounts?  Contra asset
Asset
Revenue
Expense

22. Merchandise inventory is reported on the balance sheet in the section entitled  current assets.
fixed assets.
current liabilities.
stockholders' equity.

23. Receivables are usually a significant portion of  total current liabilities.
total liabilities.
total current assets.
total assets.

24. The inventory data for an item for November are:
Nov.1 Inventory 25 units at $20
10 Purchased 30 units at $21
30 Purchased 10 units at $22
Sold 35 units

Using the first-in, first-out method, what is the cost of the merchandise inventory of 30 units on November 30?  $640
$605
$623
$660

25. All amounts paid to get an asset in place and ready for use are referred to as  capital expenditures.
revenue expenditures.
residual value.
cost of an asset.

26. Fixed assets are ordinarily presented in the balance sheet  at current market values.
at replacement costs.
at cost less accumulated depreciation.
in a separate section along with intangible assets.

27. Goodwill is  amortized similar to other intangibles.
only written down if an impairment in value occurs.
charged to expense immediately.
amortized over 40 years or its economic life, whichever is shorter.

28. If a capital expenditure is treated as a revenue expenditure, then  expenses are overstated and owners' equity is understated.
expenses are overstated and assets are overstated.
expenses are understated and owners' equity is overstated.
net income is overstated and owners' equity is understated.

29. A bond indenture is  a contract between the corporation issuing the bonds and the underwriters selling
the bonds.
the amount due at the maturity date of the bonds.
a contract between the corporation issuing the bonds and the bondholders.
the amount for which the corporation can buy back the bonds prior to the maturity date.

30. Gross earnings for a payroll period less payroll deductions are referred to as  overtime pay.
bonus pay.
gross pay.
net pay.

31. How is treasury stock shown on the balance sheet?  As an asset
As a decrease in stockholders' equity
As an increase in stockholders' equity
Treasury stock is not shown on the balance sheet.

32. Current liabilities are  due but not receivable for more than one year.
due but not payable for more than one year.
due and receivable within one year.
due and payable within one year.

33. The total earnings of an employee for a payroll period are referred to as  take-home pay.
pay net of taxes.
net pay.
gross pay.

34. Where is interest expense listed on the income statement?  Other expense section
Cost of merchandise sold
Operating expenses
Interest expense is on the balance sheet, not the income statement.

35. A corporation has 50,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be  200,000 shares.
50,000 shares.
250,000 shares.
12,500 shares.