Reference no: EM13843681

Question 1 

Which financial statements would you use to determine how much cash is used up in operations?

A. Balance Sheet

B. Statement of Earnings (Income Statement)

C. Statement of Cash Flows

D. Statement of Changes in Owner's Equity (Statement of Stockholder's Equity)


Question 2 

Which of the following organizations currently sets accounting standards in the USA?

A. Financial Accounting Standards Board

B. Public Company Accounting Oversight Board

C. Government Accounting Standards Board

D. International Accounting Standards Board

Question 3

Which financial statement's accounts are "zeroed out" at year-end?

A. Balance Sheet

B. Statement of Earnings (Income Statement)

C. Statement of Cash Flows

D. Statement of Changes in Owner's Equity (Statement of Stockholder's Equity)

Question 4

Which of the following types of people do not hold roles in a corporation?

A. Shareholders

B. Members

C. Directors

D. Officers
Question 5

The definition of expense is decreases in equity other than operating activities and investments.

True
False
Question 6
Accrual accounting means that revenues and expenses are recognized when cash is received/paid.

True
False
Question 7
Under the Sarbanes-Oxley Act of 2002, what will happen to CEOs and CFOs if the company must restate their financial statements for any reason?

A. They will be given a raise by the Board of Directors

B. They will have to pay back their bonuses

C. They will become shareholders

D. They will register with the PCAOB.
Question 8

Today, the accounting standards setters issue accounting standards through which of the following?

A. Statements of Financial Accounting Concepts (SFAC)

B. FASB Accounting Standards Codification (FASB ASC)

C. GASB Accounting Standards Codification (GASB ASC)

D. FASB Accounting Standards (FAS)

Question 9
Which of the following states that expenses must be matched to revenue in the proper accounting period?

A. Going Concern Assumption

B. Historical Cost Principle

C. Conservatism Principle

D. Matching Principle


Question 10 

The definition of revenue is increases in assets or reductions of liabilities.

True
False
Question 11
The revenue recognition principle states that revenue is recognized when it is earned and when it is realized or realizable.

True
False

Question 12 

Which of the following is not a financial statement element of the balance sheet?

A. Assets

B. Comprehensive Income

C. Liabilities

D. Equity
Question 13

Which assumption do accountants use when in doubt, using the accounting method that is least likely to overstate assets/revenues/gains and understate liabilities/expenses/losses.

A. Going Concern Assumption

B. Historical Cost Principle

C. Conservatism Principle

D. Matching Principle

Question 14
Fundamental qualitative characteristics of financial information are relevance and

A. Faithful representation

B. Enhancing qualitative characteristics

C. Cost benefit constraint

D. Fundamental recognition criteria

Question 15 
Net income in the Statement of Earnings (Income Statement) is closed out to which of the following accounts at year-end.

A. Retained earnings

B. Profit & loss

C. Net increase/decrease in cash

D. Dividends
Question 16

In a partnership business entity, decisions are made by a Board of Directors.

True
False
Question 17
Which of the following is not an external user of financial statements?

A. Investor

B. The company's CEO

C. Creditor

D. Supplier

Question 18 
Which of the following is the accounting equation?

A. Assets + Liabilities = Equity

B. Revenue - Expenses = Income

C. Assets - Liabilities - Equity

D. Assets = Liabilities + Equity
Question19 

What is a financial statement user's main focus in reviewing a statement of cash flows?

A. Net increase(decrease) in cash

B. Net income

C. Beginning cash

D. Gains and losses

Question 20
What decisions would an investor use financial statements for?

A. Can I secure the firm's assets to guarantee my money in bankruptcy?

B. Can the firm pay me a dividend?

C. Will my invoices be paid on time?

D. Can the firm repay my principal and interest on designated due dates?
Question 2 1

Which of the following financial statements measures profitability over a period of time with a start date and end date?

A. Balance Sheet

B. Statement of Earnings (Income Statement)

C. Statement of Cash Flows

D. Statement of Changes in Owner's Equity (Statement of Stockholder's Equity)

Question 2 2
Which of the following organizations has the legal authority to establish U.S. GAAP, but permits the accounting profession to self-regulate?

A. Financial Accounting Standards Board

B. Public Company Accounting Oversight Board

C. Securities and Exchange Commission

D. International Accounting Standards Board
Question 2 3

Which of the following financial statements measures financial position on a specific date?

A. Balance Sheet

B. Statement of Earnings (Income Statement)

C. Statement of Cash Flows

D. Statement of Changes in Owner's Equity (Statement of Stockholder's Equity)

Question 24 

Which of the following is not a financial statement?

A. Statement of Financial Position

B. Statement of Cash Flows

C. Schedule of Expenses

D. Statement of Stockholder's Equity


Question 25 

Which of the following is an operating activity in the income statement?

A. Gains

B. Revenue

C. Losses

D. Equity


Question 26 

In a set of books, which of the following presents a list of account names or a reporting entity?

A. Subsidiary ledger

B. Chart of accounts

Question 27
Which of the following is a contra receivable account?

A. Accounts payable

B. Allowance for uncollectible accounts

C. Accumulated depreciation

D. Notes receivable


Question 28 

Which journal entry is correct to record an equipment purchase in cash for $50,000?

A.
DR: Equipment Expense $50,000

CR: Cash $50,000

B.
DR: Equipment $50,000

CR: Accounts Payable $50,000

C.
DR: Equipment $50,000

CR: Cash $50,000

D.
DR: Cash $50,000

CR: Equipment $50,000


Question 29 

What is the normal account balance of an equity account?

A. Debit

B. Credit


Question 30 

What is the normal account balance of a revenue account?

A. Debit

B. Credit


Question 31 

Which of the following is a summary of all of the accounts used to record the firm's transactions?

A. Journal

B. Subsidiary ledger

C. Ledger

D. General ledger


Question 32 

What is the normal account balance of a liability account?

A. Debit

B. Credit


Question 33 

What is the normal account balance of an asset account?

A. Debit

B. Credit


Question 34 

Which type of transaction does a firm conduct with a separate entity?

A. External transactions

B. Internal transactions


Question 35 

One of the six steps of measuring external transactions includes

A. Preparing the chart of accounts

B. Determining the debits and credits in a bank statement

C. Using source documents to identify accounts affected

D. Posting an equity transaction


Question 36 

Two functions of financial accounting are reporting/communicating financial data in financial statements and

A. Accounting for money

B. Measuring business activities

C. Banking

D. Regulatory compliance


Question 37 

Which journal entry is correct to record the issuance of $25,000 in common stock?

A.
DR: Cash $25,000

CR: Equity $25,000

B.
DR: Notes Payable $25,000

CR: Common Stock $25,000

C.
DR: Cash $25,000

CR: Common Stock $25,000

D.
DR: Common Stock $25,000

CR: Cash $25,000



Question 38 

How is an asset account decreased?

A. Debit

B. Credit


Question 39 

Which journal entry is correct to accrue wages expense on 12/31/201X for $15,000 incurred in the last week of the year that will be paid next year?

A.
DR: Wages Expense $15,000

CR: Wages Payable $15,000

B.
DR: Wages Expense $15,000

CR: Cash $15,000

C.
DR: Wages Payable $15,000

CR: Wages Expense $15,000

D.
DR: Cash $15,000

CR: Wages Expense $15,000


Question 40 

The accounting cycle includes the full set of procedures used to accomplish the measurement/communication process in financial accounting.

True
False

Question 41 

Which journal entry is correct to accrue utilities expense for $2,000?

A.
DR: Utilities expense $2,000

CR: Accrued expenses $2,000

B.
DR: Utilities expense $2,000

CR: Cash $2,000

C.
DR: Accrued expenses $2,000

CR: Utilities expense $2,000

D.
DR: Cash $2,000

CR: Utilities expense $2,000


Question 42 

Which of the following stores transactions in chronological order in the order posted?

A. Journal

B. Subsidiary ledger

C. Ledger

D. General ledger


Question 43 

In what direction does financial information flow in an entity's books from detail to summary?

A. General ledger > source documents > accounts > financial statements

B. Source documents > accounts > trial balance > financial statements

C. Financial statements > trial balance > general ledger > accounts

D. Accounts > general ledger > trial balance > financial statements


Question 44 

Which journal entry is correct to record a cash receipt for $2,000?

A.
DR: Accounts Payable $2,000

CR: Cash $2,000

B.
DR: Cash $2,000

CR: Accounts Receivable $2,000

C.
DR: Accounts Receivable $2,000

CR: Cash $2,000

D.
DR: Cash $2,000

CR: Revenue $2,000


Question 45 

In a set of books, which of the following best describes what is used to summarize captured transactions related to a particular item over time?

A. Accounts

B. Ledger


Question 46 

How is an expense account decreased?

A. Debit

B. Credit


Question 47 

Which journal entry is correct to record a vendor bill on account for consulting services for $5,000?

A.
DR: Consulting Services Expense $5,000

CR: Cash $5,000

B.
DR: Cash $5,000

CR: Consulting Services Expense $5,000

C.
DR: Accounts Payable $5,000

CR: Consulting Services Expense $5,000

D.
DR: Consulting Services Expense $5,000

CR: Accounts Payable $5,000


Question 48 

Which journal entry is correct to record a two-year insurance policy paid in full for 24,000 on 1/1/201X?

A.
DR: Cash $24,000

CR: Insurance expense $24,000

B.
DR: Insurance expense $24,000

CR: Prepaid Asset-Insurance $24,000

C.
DR: Insurance expense $24,000

CR: Cash $24,000

D.
DR: Prepaid Asset-Insurance $24,000

CR: Cash $24,000


Question 49 

The books do not consist of

A. Accounts, sub-ledgers & journals

B. Bank statements

C. General ledger

D. Financial statements


Question 50 

Which journal entry is correct to record a credit sale for $10,000?

A.
DR: Cash $10,000

CR: Revenue $10,000

B.
DR: Accounts Receivable $10,000

CR: Revenue $10,000

C.
DR: Revenue $10,000

CR: Cash $10,000

D.
DR: Revenue $10,000

CR: Accounts Receivable $10,000


Question 51 

Expenses are recognized under three methods. Which of the following is not one of the methods?

A. Expense when incurred

B. Expense when cash is paid

C. Amortize ratably(evenly) over accounting period(s)

D. Expense immediately under the Principle of Conservatism


Question 52 

Which of the following is a special journal entry that is recorded at the close of the accounting period to properly record events that have occurred during the period - where certain balance sheet asset/liability items are posted to the income statement?

A. Deferral

B. Accrual

C. Adjusting entry

D. Closing entry


Which expense recognition method would be used to record depreciation expense?

A. Expense when incurred

B. Expense when cash is paid

C. Amortize ratably(evenly) over accounting period(s)

D. Expense immediately under the Principle of Conservatism


Question 54 

What is the calculation for depreciation expense under the straight-line method?

A. Accumulated Depreciation ÷ Useful Life

B. Asset Cost ÷ Useful Life

C. Asset Basis X Book Value ÷ Asset Cost

D. Liability Cost ÷ Useful Life


Question 55 

A closing entry closes net income to retained earnings.

True
False

Question 56 

As part of the journal entry to close the retained earnings account at year-end, retained earnings is credited and revenue is

A. Debited

B. Credited


Question 57 

Which of the following results in an asset that will provide future benefits?

A. Prepaid expense

B. Accrued expense


Question 58 

Which expense recognition method would be used to record expired costs?

A. Expense when incurred

B. Expense when cash is paid

C. Amortize ratably(evenly) over accounting period(s)

D. Expense immediately under the Principle of Conservatism


Question 59 

Which of the following contain temporary accounts that are reset to zero year-end?

A. Balance sheet

B. Income statement


Question 60 

To record a cash purchase of depreciable assets such as equipment, cash would be credited and which account would be debited?

A. Equipment

B. PP&E

C. Accumulated depreciation

D. Intangible assets



Question 61 

Revenue recognition involves

A. recording revenue before it is earned

B. always recording revenue before cash is received

C. always recording revenue when cash is received

D. the rules to record revenue before or after cash is received


Question 62 

The four revenue recognition criteria under SAB 104 are

A. Evidence of an arrangement (contract) exists, installment sales have been recorded, seller's price is fixed, collectability is reasonably assured

B. Installment sales have been recorded, delivery has occurred or services have been rendered, seller's price is fixed, collectability is reasonably assured

C. Evidence of an arrangement (contract) exists, seller's price is fixed, collectability is reasonably assured, delivery has occurred or services have been rendered

D. Evidence of an arrangement (contract) exists, seller's price is fixed, cash has been received, delivery has occurred or services have been rendered


Question 63 

What is the book value of an asset that cost $100,000 and has an accumulated depreciation balance of $40,000?

A. $20,000

B. $40,000

C. $60,000

D. $80,000


Question 64 

Which of the following is used to prepare the financial statements?

A. Unadjusted trial balance

B. Adjusted trial balance

C. General ledger accounts

D. Journal entries


Question 65 

Which of the following results in an asset (accounts receivable) for future benefits to be received (cash)?

A. Deferral

B. Accrual


Question 66 

The income statement accounts appear on the post-closing trial balance.

True
False

Question 67 

As part of the journal entry to close the retained earnings account at year-end, retained earnings is credited and expense is

A. Debited

B. Credited


Question 68 

What is the annual depreciation expense of an asset that cost $50,000 with a useful life of 5 years?

A. $5,000

B. $10,000

C. $25,000

D. $50,000


Question 69 

Which expense recognition method would be used to record Cost of Goods Sold?

A. Expense when incurred

B. Expense when cash is paid

C. Amortize ratably(evenly) over accounting period(s)

D. Expense immediately under the Principle of Conservatism


Question 70 

What is the accumulated depreciation balance of an asset that was purchased for $40,000 on 1/1/2011 with a useful life of 4 years on 12/31/2013?

A. $10,000

B. $20,000

C. $30,000

D. $40,000


Question 71 

Which of the following contain permanent accounts that roll forward forever?

A. Balance sheet

B. Income statement


Question 72 

Which of the following results in a liability for future performance (obligation)?

A. Deferral

B. Accrual


Question 73 

Which of the following results in a liability (obligation) that will subsequently be settled in cash or performance.

A. Prepaid expense

B. Accrued expense


Question 74 

The journal entry to record $5,000 in equipment depreciation expense is debit depreciation expense $5,000 and

A. Credit equipment $5,000

B. Credit accumulated depreciation $5,000

C. Debit accumulated depreciation $5,000

D. Credit accumulated depreciation $10,000


Question 75 

Which balance sheet account does depreciation expense build up in over time?

A. Net PP&E

B. Depreciation expense

C. Accumulated depreciation

D. Contra depreciation expense


Question 76 

In understanding fraud, which of the following is a reason to commit fraud?

A. Motive

B. Rationalization

C. Misrepresentation

D. Opportunity


Question 77 

Which type of fraud involves using one's occupation for personal enrichment through the deliberate misappropriation of a firm's resources?

A. Scienter

B. Occupational fraud

C. Standard fraud

D. Classic fraud


Question 78 

Who are insiders?

A. Shareholders of the company

B. Officers

C. Directors

D. Officers & directors


Question 79 

In large firms, segregation of duties is not easily achieved because there are large accounting teams.

True
False

Question 80 

In understanding fraud, which of the following is an attempt to justify fraudulent behavior?

A. Motive

B. Rationalization

C. Misrepresentation

D. Opportunity


Question 81 

Which of the following companies is best known for its accounting scandal?

A. JPMorgan Chase & Co.

B. Enron Corporation

C. Carnegie Steel Company

D. The Carlyle Group


Question 82 

Which of the following components of internal control describe the internal control consciousness is influenced and set by management "Tone at the Top?"

A. Control environment

B. Monitoring

C. Existing control activities

D. Information and communication systems


Question 83 

Internal control is implemented by the external auditors.

True
False

Question 84 

Which of the following components of internal control supports the identification, capture and exchange of information in a timely manner?

A. Control environment

B. Monitoring

C. Existing control activities

D. Information and communication systems


Question 85 

Which of the following is not an element of the fraud triangle?

A. Motive

B. Rationalization

C. Misrepresentation

D. Opportunity



Question 86 

Which of the following components of internal control provides policies & procedures that prevent or detect errors by employees in their routine work?

A. Control environment

B. Monitoring

C. Existing control activities

D. Information and communication systems


Question 87 

Which of the following is not one of the three objectives of an entity's internal controls?

A. Reliability of financial reporting (lying, financial statement fraud).

B. Effectiveness and efficiency of operations (stealing, asset misappropriation).

C. Compliance with applicable laws and regulations (cheating, corruption).

D. Reasonable assurance provided by auditors.


Question 88 

In understanding fraud, which of the following relates to a lack of effective controls?

A. Motive

B. Rationalization

C. Misrepresentation

D. Opportunity


Question 89 

Which of the following is a tort (wrongful act) where a party makes an intentional misrepresentation to another party that is depending on the representation.

A. Negligence

B. Lying

C. Fraud

D. Conspiracy


Question 90 

What is the best way to keep customer checks from coming in contact with a company's employees?

A. Designate a person who is not a member of the accounting team to open check envelopes.

B. Instruct customers to send their checks to a lockbox.

C. Ask customers to FedEx their checks.

D. Ask customers to deliver their checks in person to the Treasurer.


Which account is a contra receivables account that maintains data related to invoice reserves, write downs, and write offs?

A. Allowance for uncollectible accounts

B. Expense

C. Stockholder's equity

D. Comprehensive income


Question 92 

A company's reserve policy for receivables is "reserve 100% of receivables over 120 days." The aging report indicates the following:

Current=$6,000 1-30=$1,000 31-60=$24,000 61-90=$3,000 91-120=$2,000 >121=$4,000

Total: $40,000
What amount should be reserved?

A. $1,000

B. $2,000

C. $3,000

D. $4,000


Question 93 

What is the formula to calculate interest revenue?

A. Interest Revenue ÷ Annual Interest Rate

B. Face Value X Annual Interest Rate

C. Face Value ÷ Annual Interest Rate


Question 94 

A company's reserve policy for receivables is "reserve 5% of total receivables" The aging report indicates the following: Current=$6,000 1-30=$1,000 31-60=$24,000 61-90=$3,000 91-120=$2,000 >121=$4,000

Total: $40,000
What amount should be reserved?

A. $1,000

B. $2,000

C. $3,000

D. $4,000


Question 95 

Which type of risk is inherent in a process when a company delivers goods or services to a customer, and allows them to pay in the future?

A. Audit risk

B. Business risk

C. Credit risk

D. Risk of material misstatement


Question 96 

Discount terms such as "Net 30" (n/30) mean

A. Payment is due after 30 days

B. Total after discounts, payment is due within 30 days

C. Thirty days

D. $30 will be discounted


Question 97 

On 1/1/14, the allowance for doubtful accounts balance is $10,000. The net adjustment for allowance for doubtful accounts on 12/31/14 increased by $5,000. If the ending gross A/R balance is $100,000, what amount will be presented for bad debt expense on the income statement at 12/31/14?

A. $15,000

B. $10,000

C. $5,000

D. ($15,000)



Question 98 

The direct write off method is permitted under U.S. GAAP.

True
False

Question 99 

Which type of risk is inherent in a process when a company delivers goods or services to a customer, and allows them to pay in the future?

A. Audit risk

B. Business risk

C. Credit risk

D. Risk of material misstatement


Question 100 

What is the journal entry to record the full collection of cash related to principal on a note receivable?

A. DR: Cash; CR: Notes Receivable

B. DR: Notes Receivable; CR: Cash

C. DR: A/R; CR: Notes Receivable

D. DR: Notes Receivable; CR: Revenue


The "current" classification in the balance sheet means less than 12 months.

True
False

The owners in a corporation are called stockholders or shareholders.

True
False

A fundamental correlation that exists in business is that as a public company's earnings increase, their stock price increases.

True
False

Which journal entry is correct to record cash dividends of $50,000 paid to stockholders?

A.
DR: Dividends Expense $50,000

CR: Cash $50,000

B.
DR: Retained earnings $50,000

CR: Cash $50,000

C.
DR: Dividends payable $50,000

CR: Retained earnings $50,000

D.
DR: Cash $50,000

CR: Retained earnings $50,000


How is a revenue account increased?

A. Debit

B. Credit


Which of the following is a contra asset account?

A. Intangible Assets

B. Goodwill

C. Accumulated Depreciation

D. Inventory


The sample chart of accounts that we reviewed in class for Alpha Engineering Corp. included an account description, financial statement line item classification, account number and

A. Journal entry number

B. Normal account balance

C. Trial balance

D. Statement of cash flows classification


Outstanding checks not cleared by the bank result in a bank balance that is lower than the GL balance.

True
False

In small firms, segregation of duties can still be achieved, but in different ways than large firms achieve their objectives.

True
False

ion 78 

Which of the following is not a component of segregation of duties?

A. Recording transactions

B. Preventive controls

C. Custody

D. Recordkeeping


Question 81 

The following is not a cash fraud scheme.

A. Stealing cash from a cash register.

B. Writing an A/R check to a fictitious vendor and cashing it.

C. Modifying a payroll check, adding an extra zero at the end.

D. Falsifying amounts on an expense report and submitting it for reimbursement.


The Wall Street Journal Reports that an investigation found that a company filed false financial statements with the Securities and Exchange Commission (SEC). The stock drops 60% within a few hours of the news. Who suffered a loss resulting from the improper filing that triggered a stock sell-off?

A. Shareholders of the company

B. The Securities and Exchange Commission

C. External auditors

D. Officers of the company



In large firms, segregation of duties is not easily achieved because there are large accounting teams.

True
False

Question 86 

What is the asset that is most susceptible to employee fraud?

A. Intangible assets

B. Accounts receivable

C. Cash

D. Trading securities


Segregation of duties reduces opportunities for any individual to both perpetrate and conceal errors or fraud in the normal course of duties.

True
False

A vendor provides a customer with a discount as part of their business agreement. The discount that the vendor provides is 2% if the bill is paid within ten days. The vendor allows the customer to pay within thirty days. What amount of cash will the customer remit on an invoice for $1,000 if the customer pays on day nine?

A. $1,020

B. 1,000

C. $980

D. $20


Which of the following is a writing that requires a party to repay borrowed funds?

A. Bond

B. Promissory note

C. Credit line

D. Venture capital funding


Which of the following is not an item presented on a Promissory Note?

A. Maker

B. Due date

C. Payee

D. Drawer


A vendor provides a customer with a discount as part of their business agreement. The discount that the vendor provides is 2% if the bill is paid within ten days. The vendor allows the customer to pay within thirty days. What is the sales discount on an invoice for $1,000 if the customer pays on day thirty one?

A. $0

B. $20

C. $200

D. $50


What is the journal entry to write off a receivable that will never be collected?

A. DR: Allowance for Doubtful Accounts; CR: A/R

B. DR: Bad Debt Expense; CR: Allowance for Doubtful Accounts

C. DR: Allowance for Doubtful Accounts; CR: Bad Debt Expense

D. DR: A/R; CR: Bad Debt Expense

What is the journal entry to record an increase in the allowance for doubtful accounts?

A. DR: Allowance for Doubtful Accounts; CR: A/R

B. DR: Bad Debt Expense; CR: Allowance for Doubtful Accounts

C. DR: Allowance for Doubtful Accounts; CR: Bad Debt Expense

D. DR: A/R; CR: Bad Debt Expense



The following journal entry is always correct in recording bad debt expense under the allowance method:

DR: Bad Debt Expense XXX

CR: Accounts Receivable XXX

True
False

A vendor provides a customer with a discount as part of their business agreement. The discount that the vendor provides is 2% if the bill is paid within ten days. How will this be presented on the bill if the vendor allows the customer to pay within thirty days?

A. Net-30

B. 2/10 Net-30

C. 2% of Net

D. 2/30 Net 10