GB 518 Quiz 1 GB518 Financial Accounting Principles and Analysis Question : � If equity is $300,000 and liabilities are $192,000, then assets equal: � � Question 2. � Question : � If assets are $99,000 and liabilities are $32,000, then equity equals: Question 3. � Question : � Reebok had income of $150 million and average assets of $1,800 million. Its return on assets is: Question 4. Question : � Unearned revenues are: � � � Revenues that have been earned and received in cash � � � � � � � Revenues that have been earned but not yet collected in cash � � � � � � Liabilities created when a customer pays in advance for products or services before the revenue is earned � � � � � � � Recorded as an asset in the accounting records � � � � � � � Increases to retained earnings Question 5. � Question : � Technological advancement � � � Has replaced accounting � � � � � � � Has not changed the work that accountants do � � � � � � Has freed accounting professionals to concentrate more on the analysis and interpretation of information � � � � � � � In accounting has replaced the need for decision makers � � � � � � � In accounting is only available to large corporations Question 6. � 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 7. � Question : � Net Income: � Decreases equity � � � � � � � Represents the amount of assets owners put into a business � � � � � � � Equals assets minus liabilities � � � � � � Is the excess of revenues over expenses � � � � � � Represents the owners’ claims against assets Question 8. � Question : � Internal users of accounting information include: � � � Shareholders � � � � � � � Customers � � � � � � � Creditors � � � � � � � Government regulators � � � � � � Line Supervisor Question 9. � 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 10. 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 11. 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 12. 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 13. Question : � Which of the following is the primary purpose of accounting? � To establish a business � � � � � � To identify, record and communicate business transactions � � � � � � � To deceive stockholders � � � � � � � To keep from paying taxes � � � � � � � To establish credit for a company Question 14. Question : � Assets created by selling goods and services on credit are: � Accounts payable � � � � � � Accounts receivable � � � � � � � Liabilities � � � � � � � Expenses Question 15. Question : � Double-entry accounting is an accounting system: � � � That records each transaction twice � � � � � � That records the effects of transactions and other events in at least two accounts with equal debits and credits � � � � � � � In which the impact of each transaction is recorded in two or more accounts but that could include two debits and no credits � � � � � � � That may only be used if T-accounts are used � � � � � � � That insures that errors never occur Question 16. Question : � An example of a financing activity is: � � � Buying office supplies � � � � � � Obtaining a long-term loan � � � � � � � Buying office equipment � � � � � � � Selling inventory � � � � � � � Buying land Question 17. 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 18. Question : � Risk is: � � � Net income divided by average total assets � � � � � � � The reward for investment � � � � � � The uncertainty about the expected return that will be earned from an investment � � � � � � � Unrelated to expected return Question 19. Question : � Which of the following statements best describes the relationship of U.S. GAAP and IFRS? � � � They are identical � � � � � � � They are entirely different conceptual frameworks � � � � � � They are similar but not identical � � � � � � � Neither has anything to do with accounting � � � � � � � They both relate only to publicly traded companies Question 20. Question : � Source documents include all of the following except: � � � � � � � Sales tickets � � � � � � Ledgers � � � � � � � Checks � � � � � � � Purchase orders � � � � � � � Bank statements Question 21. Question : � Stride Rite has total assets of $425 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio. � 38.6% � � � � � � � 13.4% � � � � � � � 34.9% � � � � � � 25.9% � � � � � � � 14.9% Question 22. Question : � An asset created by prepayment of an expense is: � � � � � � � Recorded as a debit to an unearned revenue account � � � � � � Recorded as a debit to a prepaid expense account � � � � � � � Recorded as a credit to an unearned revenue account � � � � � � � Recorded as a credit to a prepaid expense account � � � � � � � Not recorded in the accounting records until the earnings process is complete Question 23. Question : � Increases in retained earnings from a company’s earnings activities are: � � Assets � � � � � � Revenues � � � � � � � Liabilities � � � � � � � Stockholder’s Equity � � � � � � � Expenses Question 24. Question : � Which of the following accounting principles dictates when expenses are recognized? � Revenue recognition principle � � � � � � � Monetary unit principle � � � � � � � Business entity principle � � � � � � Matching principle � � � � � � � Full disclosure principle Question 25. 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 � � � � � � � Promises of payments by customers
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