Question 1.1. The sales revenue generated during the normal course of business would be an example of which type of business activity?

        Operating

        Investing

        Financing

        None of these

 

Question 2.2. Which statement is normally prepared first?

        Income statement

        Balance sheet

        Statement of cash flows

        Retained earnings statement

 

Question 3.3. A list of assets, liabilities, and owners’ equity as of a specific date is a(n) 

        income statement.

        balance sheet.

        statement of cash flows.

        retained earnings statement.

 

Question 4.4. Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert’s net income for the month of September?

 

Accounts Payable        $5,000

Capital Stock           $10,000

Cash                       $14,300

Equipment           $15,400

Fees Earned            $54,400

Miscellaneous Expense   $18,200

Rent Expense              $4,150

Retained Earnings      $6,550

Wages Expense     $13,900

 

        $32,450

        $27,450

        $6,550

        $18,150     

 

Question 5.5. For EFG Co., the transaction “Payment of dividends” would 

        increase total assets.

        decrease total assets.

        have no effect on total assets.

        increase stockholders’ equity.

 

Question 6.6. The basic financial statements do NOT include the 

        income statement.

        tax return

        balance sheet.

        statement of cash flows.

 

Question 7.7. For EFG Co., the transaction “Payment of interest expense” would 

        increase total assets.

        decrease total assets.

        have no effect on total assets.

        increase stockholders’ equity.

 

Question 8.8. 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.

 

Question 9.9. The __________ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis. 

        accounting equation

        retained earnings statement

        intangible asset section

        classified balance sheet

 

Question 10.10. Updating accrual accounting records prior to preparing financial statements is called 

        the closing process.

        converting to cash basis accounting.

        the adjustment process.

        going concern adjustments.

 

Question 11.11. Unearned revenue is what type of an account? 

        Asset

        Revenue

        Stockholders’ equity

        Liability          

 

Question 12.12. The unearned rent account has a balance of $40,000. If $3,000 of the $40,000 is unearned at the end of the accounting period, the amount of the adjusting entry is 

        $3,000.

        $40,000.

        $37,000.      

        $43,000.

 

Question 13.13. 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.

 

Question 14.14. Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense? 

        Selling expense

        Miscellaneous expense

        Administrative expense

        Other expense

 

Question 15.15. Which expenses are subtracted from gross profit to arrive at income from operations? 

        All expenses

        Cost of merchandise sold

        Operating expenses

        Sales expenses

 

Question 16.16. Dig, Inc. had the following merchandise transactions in October:

 

Purchases                $ 50,000

Purchase returns       $ 4,000

Purchase discounts   $ 1,000

Transportation in        $ 2,000

 

What is the total cost of merchandise purchased for Dig, Inc.?

        $50,000

        $47,000     

        $52,000

        $48,000

 

Question 17.17. A firm’s internal control environment is influenced by 

        Management’s operating style.

        organizational structure.

        personnel policies.

        all of these.

 

Question 18.18. Which of the following would be added to the balance per books on a bank reconciliation? 

        Service charges

        Outstanding checks

        Deposits in transit

        Notes collected by the bank

 

Question 19.19. The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to 

        report on the financial activities of the company.

        report on any fraud and theft detected in the company.

        report on the state of the economy and likelihood of fraud.

        report on the effectiveness of the company’s internal controls.

 

Question 20.20. Which of the following is NOT defined as cash? 

        Coins

        Checks

        Money orders

        Commercial paper

 

Question 21.21. A written promise to pay a sum of money on demand or at a definite time is called a(n) 

        default.

        deferral.

        accrual.

        promissory note.

 

Question 22.22. A note receivable due in 18 months is listed on the balance sheet under the caption 

        long-term liabilities.

        fixed assets.

        current assets.

        investments.

 

Question 23.23. In reference to a promissory note, the person who makes the promise to pay is called the 

        maker.

        payee.

        seller.

        receiver.

 

Question 24.24. The due date of a 90-day note dated July 5 is 

        September 30.

        October 2.

        October 3.

        October 1.

 

Question 25.25. 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.

 

Question 26.26. Salvage value has a similar meaning as 

        residual value.

        scrap value.

        book value.

        both residual value and scrap value.

 

Question 27.27. Expenditures for research and development are generally recorded as 

        current operating expenses.

        assets and amortized over their estimated useful life.

        assets and amortized over 40 years.

        current assets.

 

Question 28.28. A company acquired some land for $80,000 to construct a new office complex. Legal fees paid were $2,300, delinquent taxes assumed were $3,400, and $5,850 was paid to remove an old building from which salvaged materials sold for $1,950. What is the cost basis for the land? 

        $93,500

        $91,550

        $85,700

        $89,600     

 

Question 29.29. 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.

 

Question 30.30. What options does a business have when financing operations? 

        Debt financing

        Equity financing

        Asset financing

        Both debt financing and equity financing

 

Question 31.31. If a corporation issues only one class of stock, it is called 

        common stock.

        treasury stock.

        no-par stock.

        preferred stock.

 

Question 32.32. 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.

 

Question 33.33. The par value per share of common stock represents 

        the minimum selling price of the stock established by the articles of incorporation.

        the minimum amount the stockholder will receive when the corporation is liquidated.

        the monetary amount assigned to each share of stock in the articles of incorporation.

        the amount of dividends per share to be received each year.

 

Question 34.34. An employee receives an hourly rate of $27, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 46; federal income tax withheld, $350; cumulative earnings for year prior to current week, $99,700; social security tax rate, 6.0% on maximum of $106,800; and Medicare tax rate, 1.5% on all earnings. What is the net pay for the employee? 

        $798.85

        $873.77

        $953.16

        $1,223.77

 

Question 35.35. 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.