GB 518 Quiz 3 GB518 Financial Accounting Principles and Analysis 1. � Question : � Which of the following elements are found on the income statement? � � � � � � � Cash � � � � � � � Accounts Receivable � � � � � � � Common Stock � � � � � � � Retained Earnings � � � � � � Salaries Expense Question 2. � Question : � Fast-Forward had cash inflows from operations of $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was: � � � � � � $40,500 increase � � � � � � � $40,500 decrease � � � � � � � $134,500 decrease � � � � � � � $134,000 increase Question 3. � Question : � A debit is: � � � � � � � An increase in an account � � � � � � � The right-hand side of a T-account � � � � � � � A decrease in an account � � � � � � The left-hand side of a T-account � � � � � � � An increase to a liability account Question 4. � Question : � Which of the following elements are found on the Balance Sheet? � � � � � � � Service Revenue � � � � � � � Net Income � � � � � � � Operating Activities � � � � � � � Utilities Expense � � � � � � Retained Earnings Question 5. � Question : � A credit is used to record: � � � � � � � An increase in an expense account � � � � � � � An increase in an asset account � � � � � � An increase in an unearned revenue account � � � � � � � A decrease in a revenue account � � � � � � � A decrease to retained earnings Question 6. � Question : � Apatha Company has assets of $600,000, liabilities of $250,000 and equity of $350,000. It buys office equipment on credit for $75,000. The effects of this transaction include: � � � � � � � Assets increase by $75,000 and expenses increase by $75,000 � � � � � � � Assets increase by $75,000 and expenses decrease by $75,000 � � � � � � � Liabilities increase by $75,000 and expenses decrease by $75,000 � � � � � � � Assets decrease by $75,000 and expenses decrease by $75,000 � � � � � � Assets increase by $75,000 and liabilities increase by $75,000 Question 7. � Question : � Of the following accounts, the one that normally has a credit balance is: � � � � � � � Cash � � � � � � � Office Equipment � � � � � � Sales Salaries Payable � � � � � � � Dividends � � � � � � � Sales Salaries Expense Question 8. � Question : � The primary objective of financial accounting is: � � � � � � � To serve the decision-making needs of internal users � � � � � � To provide financial statements to help external users analyze and interpret an organization’s activities � � � � � � � To monitor and control company activities � � � � � � � To provide information on both the costs and benefits of managing products and services � � � � � � � To know what, when and how much to produce Question 9. � Question : � The debt ratio is used: � � � � � � � To measure the amount of equity relative to the expenses � � � � � � To reflect the risk associated with a company’s debts � � � � � � � Only by banks when a business applies for a loan � � � � � � � To determine how much debt a firm should pay off Question 10. Question : � The principle that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash and (3) measures the amount of revenue as the cash plus the cash equivalent value of any non-cash assets received from customers in exchange for goods or services is called the: � � � � � � � Going-concern principle � � � � � � � Cost principle � � � � � � Revenue recognition principle � � � � � � � Objectivity principle � � � � � � � Business entity principle Question 11. Question : � Creditors’ claims on the assets of a company are called: � � � � � � � Net losses � � � � � � � Expenses � � � � � � � Revenues � � � � � � � Equity � � � � � � Liabilities Question 12. Question : � An example of a financing activity is: � � � � � � � Buying office supplies � � � � � � Obtaining a long-term loan � � � � � � � Buying office equipment � � � � � � � Selling inventory � � � � � � � Buying land Question 13. Question : � A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth $140,000 and purchased for $137,000. The land should be recorded in the purchaser’s books at: � � � � � � � $95,000 � � � � � � $137,000 � � � � � � � $138,500 � � � � � � � $140,000 � � � � � � � $150,000 Question 14. Question : � Prepaid expenses are: � � � � � � � Payments made for products and services that do not ever expire � � � � � � � Classified as liabilities on the balance sheet � � � � � � � Decreases in retained earnings � � � � � � Assets that represent prepayments of future expenses Question 15. Question : � A company has twice as much owner’s equity as it does liabilities. If total liabilities are $50,000, what amounts of assets are owned by the company? � � � � � � � $50,000 � � � � � � � $100,000 � � � � � � $150,000 � � � � � � � $200,000 Question 16. Question : � The main purpose of adjusting entries is to: � � � � � � Record external transactions and events � � � � � � Record internal transactions and events � � � � � � � Recognize assets purchased during the period � � � � � � � Recognize debts paid during the period � � � � � � � Correct errors Question 17. Question : � Which of the following statements is incorrect? � � � � � � � An income statement reports revenues earned less expenses incurred � � � � � � An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments � � � � � � � Interim financial reports can be based on one-month or three-month accounting periods � � � � � � � Property, plant and equipment are referred to as plant assets Question 18. Question : � On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account and the company records adjustments only at year-end, the adjusting entry at the end of the first year is: � � � � � � � Debit Prepaid Insurance, $1,800; credit Cash, $1,800 � � � � � � � Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440 � � � � � � � Debit Prepaid Insurance, $360; credit Insurance Expense, $360 � � � � � � Debit Insurance Expense, $360; credit Prepaid Insurance, $360 � � � � � � � Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440 Question 19. Question : � A company pays each of its two office employees each Friday at the rate of $100 per day each for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is: � � � � � � � Debit Unpaid Salaries $600 and credit Salaries Payable $600 � � � � � � Debit Salaries Expense $400 and credit Salaries Payable $400 � � � � � � � Debit Salaries Expense $600 and credit Salaries Payable $600 � � � � � � � Debit Salaries Payable $400 and credit Salaries Expense $400 Question 20. Question : � Based on the following information, what would be the beginning balance in the Retained Earnings Account, assuming all accounts have a normal balance? Cash $ 6,754 � � Dividends � $ 2,000 Accounts receivable $ 13,733 � Consulting fees earned � $ 13,718 Office supplies � � $ 2,625 � � Rent expense $ 3,673 Land $ 37,153 � Salaries expense � $ 6,642 Office equipment � $ 14,535 � Telephone expense � $ 560 Accounts payable � $ 6,463 � � Miscellaneous expense � � $ 280 Common stock � � $ 54,490 � Retained Earnings � ? � � � � � � � $0 � � � � � � � $13,718 � � � � � � � $13,155 � � � � � � $13,284 � � Question 21. Question : � Unearned revenue is reported on the financial statements as: � � � � � � � A revenue on the balance sheet � � � � � � A liability on the balance sheet � � � � � � � An unearned revenue on the income statement � � � � � � � An asset on the balance sheet � � � � � � � An operating activity on the statement of cash flows Question 22. Question : � Which of the following identifies the proper order of the accounting cycle? � � � � � � Analyze, Journalize, Unadjusted Trial Balance � � � � � � � Analyze, Post, Unadjusted Trial Balance � � � � � � Journalize, Post, Adjusted Trial Balance � � � � � � � Unadjusted Trial Balance, Adjusted Trial Balance, Close � � � � � � � Adjusted Trial Balance, Adjustments, Financial Statements Question 23. Question : � The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: � � � � � � � Cash basis accounting � � � � � � � The matching principle � � � � � � � The time period principle � � � � � � Accrual basis accounting � � � � � � � Revenue basis accounting Question 24. Question : � A balance sheet that places the assets above the liabilities and equity is called a(n): � � � � � � Report form balance sheet � � � � � � � Account form balance sheet � � � � � � Classified balance sheet � � � � � � � Unadjusted balance sheet Question 25. Question : � A classified balance sheet: � � � � � � � Measures a company’s ability to pay its bills on time � � � � � � Organizes assets and liabilities into important subgroups � � � � � � � Presents revenues, expenses and net income � � � � � � � Reports operating, investing and financing activities Question 26. Question : � A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011? � � � � � � $3,250 � � � � � � � $3,500 � � � � � � � $4,000 � � � � � � � $6,500 � � &
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