Accy 303 - These are the comprehension questions that usually comes up on the exams PDF

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These are the comprehension questions that usually comes up on the exams...

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Accy 303 chapters 1-3 Assets created by selling goods and services on credit are: Accounts receivable. The right side of a T-account is a(n): Credit. Identify the account below that is classified as an asset account: Supplies A $130 credit to Supplies was credited to Fees Earned by mistake. By what amounts are the accounts under- or overstated as a result of this error? Supplies, overstated $130; Fees Earned, overstated $130. After preparing and posting the closing entries for revenues and expenses, the income summary account has a debit balance of $33,000. The entry to close the income summary account will be: Debit Retained Earnings $33,000; credit Income Summary $33,000. The rule that requires financial statements to reflect the assumption that the business will continue operating instead of being closed or sold, unless evidence shows that it will not continue, is the: Going-concern assumption. The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the: Business entity assumption. The adjusting entry to record the salaries earned due to employees for services provided but unpaid at the end of the accounting period affects the accounts in which of the following ways? Debit Salaries Expense and credit Salaries Payable. The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is: Accrual basis accounting. A classified balance sheet: Organizes assets and liabilities into important subgroups that provide more information. A company borrows $125,000 from the Northern Bank and receives the loan proceeds in cash. This represents a(n): Financing activity. A post-closing trial balance reports: All permanent ledger accounts with balances. Rico's Taqueria had cash inflows from operating activities of $27,000; cash outflows from investing activities of $22,000, and cash outflows from financing activities of $12,000. Calculate the net increase or decrease in cash. $7,000 decrease.

At year-end, a trial balance showed total credits exceed total debits by $4,950. This difference could have been caused by: The balance of $5,500 in the Office Equipment account being entered on the trial balance as a debit of $550. The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the: Cost principle. Risk is: The uncertainty about the return expected to be earned. The difference between the cost of an asset and the accumulated depreciation for that asset is called Book Value. Which of the following is the usual final step in the accounting cycle? Preparing a post-closing trial balance. On a trial balance, if the Debit and Credit column totals are equal, then: Equal debits and credits have been recorded for transactions. Revenues are: The increase in equity from a company's sales of products and services. Resources a company owns or controls that are expected to yield future benefits are: Assets. The independent group that is attempting to harmonize accounting practices of different countries is the: IASB. On May 31, the Cash account of Bottle's R Us had a normal balance of $5,000. During May, the account was debited for a total of $12,200 and credited for a total of $11,500. What was the balance in the Cash account at the beginning of May? A $4,300 debit balance. A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n): Balance sheet. If a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation when the first rent payment is collected? Assets would increase $700 and equity would increase $700. Assets, liabilities, and equity accounts are not closed; these accounts are called: Permanent accounts. Net Income: Is the excess of revenues over expenses.

Two common subgroups for liabilities on a classified balance sheet are: Current liabilities and long-term liabilities. It is obvious that an error occurred in the preparation and/or posting of closing entries if: all balance sheet accounts have zero balances.

Chapters 4-6 A merchandiser: Earns net income by buying and selling merchandise. A remittance advice is a(n): Explanation for a payment by check. The days' sales uncollected ratio is used to: Estimate how much time is likely to pass before the current amount of accounts receivable is received in cash. Which of the following accounts would be closed at the end of the accounting period with a debit? Sales. Internal controls that should be applied when a business takes a physical count of inventory should include all of the following except: Counters of inventory should be those who are responsible for the inventory. Regardless of the inventory costing system used, cost of goods available for sale must be allocated at the end of the period between ending inventory and cost of goods sold. All of the following statements related to U.S. GAAP and IFRS are true except: Neither system requires separate disclosure of items when their size, nature, or frequency are important. Decisions management must make in accounting for inventory cost include all of the following except: Customer demand for inventory. The itemized statement of goods prepared by a vendor listing the customer's name, items sold, sales prices, and terms of the sale is called the Invoice. Cash equivalents meet all of the following criteria except: Are more liquid than cash. The number of days' sales uncollected is calculated by: Dividing accounts receivable by net sales and multiplying by 365. The internal document prepared to notify the appropriate persons that goods ordered have been received, describing the quantities and condition of the goods is the Receiving report. The amount recorded for merchandise inventory includes all of the following except:

Freight costs paid by the seller. The operating cycle for a merchandiser that sells only for cash moves from: Purchases of merchandise to inventory to cash sales. Ferguson Co. has a $200 petty cash fund. At the end of the first month the accumulated receipts represent $43 for delivery expenses, $127 for merchandise inventory, and $12 for miscellaneous expenses. The fund has a balance of $18. The journal entry to record the reimbursement of the account includes a: Credit to Cash for $182. Internal control procedures for cash receipts do not require that: All collections for sales are be received immediately upon making the sales. Beginning inventory plus net purchases is: Merchandise (goods) available for sale. Quick assets are defined as: Cash, short-term investments, and current receivables. The inventory turnover ratio: Reveals how many times a company sells its merchandise inventory during a period. A voucher is an internal document or file: Used to accumulate information needed to control cash disbursements and to ensure that transactions are properly recorded. An analysis that explains differences between the checking account balance according to the depositor's records and the balance reported on the bank statement is a(n): Bank reconciliation. A voucher system is a set of procedures and approvals: Designed to control cash disbursements and the acceptance of obligations. During the month of July, Clanton Industries issued a check in the amount of $845 to a supplier on account. The check did not clear the bank during July. In preparing the July 31 bank reconciliation, the company should: Add the check amount to the bank balance. The principles of internal control include: Separate recordkeeping from custody of assets. Which of the following events would cause a bank to debit a depositor's account? The depositor orders new checks through the bank at a cost of $50. If a company made a bank deposit on September 30 that did not appear on the bank statement dated September 30, in preparing the September 30 bank reconciliation, the company should: Add the deposit to the bank statement balance. Goods in transit are included in a purchaser's inventory: When the purchaser is responsible for paying freight charges. Assume that the custodian of a $450 petty cash fund has $64.50 in coins and currency plus $382.50

in receipts at the end of the month. The entry to replenish the petty cash fund will include: A credit to Cash for $385.50. $450.00 - 64.50 - 382.50 = $3.00 cash shortage $450 - 64.50 = $385.50 cash reimbursement needed Giorgio had cost of goods sold of $9,421 million, ending inventory of $2,089 million, and average inventory of $1,965 million. Its inventory turnover equals: 4.79. Inventory Turnover = Cost of Goods Sold/Average Inventory Inventory Turnover = $9,421/$1,965 = 4.79 times Prentice Company, Inc. had cash sales of $94,275, credit sales of $83,450, sales returns and allowances of $1,700, and sales discounts of $3,475. Prentice's net sales for this period equal: $172,550. Net Sales = $94,275 + $83,450 - $1,700 - $3,475 = $172,550 A company has net sales of $752,000 and cost of goods sold of $543,000. Its net income is $17,530. The company's gross margin and operating expenses, respectively, are: $209,000 and $191,470 Gross Margin = Net Sales - Cost of Goods Sold; $752,000 - $543,000 = $209,000 Operating Expenses = Gross Margin - Net Income; $209,000 - $17,530 = $191,470

Chapters 7-9 Axle Co.'s accounts receivable turnover was 9.9 for this year and 11.0 for last year. Betterman's turnover was 9.3 for this year and 9.3 for last year. These results imply that: Axle has the better turnover for both years. The total cost of an asset less its accumulated depreciation is called: Book value. The depreciation method that charges the same amount of expense to each period of the asset's useful life is called: Straight-line depreciation. In the accounting records of a defendant, lawsuits: Should be recorded if payment for damages is probable and the amount can be reasonably estimated. Obligations to be paid within one year or the company's operating cycle, whichever is longer, are: Current liabilities. All of the following are true of known liabilities except: May depend on some future event occurring. Amortization is: The systematic allocation of the cost of an intangible asset to expense over its estimated useful life. The interest accrued on $7,500 at 6% for 90 days is: $112.50 $7,500 * 0.06 * 90/360 = $112.50 The straight-line depreciation method and the double-declining-balance depreciation method: Produce the same total depreciation over an asset's useful life. Gross pay is: Total compensation earned by an employee before any deductions. Honoring a note receivable indicates that the maker has: Paid in full. FICA taxes include: Social Security and Medicare taxes. All of the following statements regarding recognition of receivables under U.S. GAAP and IFRS are true except: GAAP refers to the earnings process and IFRS refers to risk transfer and ownership reward. The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as: Interest. All of the following statements regarding uncertainty in liabilities are true except: A company only records liabilities when it knows whom to pay, when to pay, and how much to pay.

Which of the following are not classified as plant assets? Patent. A company had total sales of $600,000, net sales of $550,000, and an average accounts receivable of $90,000. Its accounts receivable turnover equals: 5.8 Which of the following do not apply to unearned revenues? Amounts to be received in the future from customers for delivery of products or services in the current period. Sellers allow customers to use credit cards for all of the following reasons except: To be able to charge more due to fees and interest. The formula to compute annual straight-line depreciation is: (Cost minus salvage value) divided by the useful life in years. If the times interest earned ratio: Increases, then risk decreases. Which of the following is not true regarding a credit card expense? Credit card expense is not recorded by the seller. An estimated liability: Is a known obligation of an uncertain amount that can be reasonably estimated. The maturity date of a note receivable: Is the day the note is due to be repaid. A company's income before interest expense and income taxes is $350,000 and its interest expense is $100,000. Its times interest earned ratio is: 3.50 The employer should record deductions from employee pay as: Current liabilities. Pepperdine reported net sales of $8,600 million, net income of $126 million and average accounts receivable of $890 million. Its accounts receivable turnover is: 9.7 Betterments are: Expenditures making a plant asset more efficient or productive. The times interest earned ratio reflects: A company's ability to pay interest even if sales decline. All of the following are employer payroll taxes except: Federal income tax equal to that withheld from employees. The materiality constraint, as applied to bad debts: Permits the use of the direct write-off method when bad debts expenses are relatively small.

Chapters 10-13 Corporations may buy back their own stock for any of the following reasons except to: Allow management to assume the voting rights. Three of the most common tools of financial analysis are: Horizontal analysis, vertical analysis, ratio analysis. Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semiannually. The current market rate is 8%. The amount of interest owed to the bondholders for each semiannual interest payment is: $33,750. Preferred stock which confers rights to prior periods' unpaid dividends even if they were not declared is called: Cumulative preferred stock. Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as: Noncumulative preferred stock. All of the following regarding accounting for Treasury Stock under U.S. GAAP and IRFS is true except: Only gains are recognized on retirements of treasury stock under IFRS. The comparison of a company's financial condition and performance to a base amount is known as: Vertical analysis. Book value per share: Reflects the value per share if a company is liquidated at balance sheet amounts. Sinking fund bonds: Require the issuer to set aside assets at specified amounts to retire the bonds at maturity. The ability to generate future revenues and meet long-term obligations is referred to as: Solvency. Preferred stock that the issuing corporation has the option to retire by paying a specified amount to the preferred stockholders is called: Callable preferred stock. All of the following statements regarding leases are true except: Capital leases do not transfer ownership of the asset under the lease, but operating leases often do. A pension plan: Is a contractual agreement between an employer and its employees in which the employer provides benefits to employees after they retire. A premium on common stock: Occurs when a corporation sells its stock for more than par or stated value.

Preferred stock with a feature allowing preferred stockholders to share with common shareholders in any dividends in excess of the percent or dollar amount stated on the preferred stock is called: Participating preferred stock. The ability to provide financial rewards sufficient to attract and retain financing is called: Profitability. A bond sells at a discount when the: Contract rate is below the market rate. A company has earnings per share of $9.60. Its dividend per share is $0.50, its market price per share is $110, and its book value per share is $96. Its price-earnings ratio equals: 11.46 Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called: Common-size comparative statements. Stockholders' equity consists of which of the following? Paid-in capital and retained earnings. The building blocks of financial statement analysis do not include: External analyst services. A dividend preference for preferred stock means that: Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders. Net sales divided by Average accounts receivable, net is the: Accounts receivable turnover ratio. Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as: Serial bonds. Which of the following is true of a stock dividend? Does not affect total equity, but transfer amounts between the components of equity. Bonds that have interest coupons attached to their certificates, which the bondholders present to a bank or broker for collection, are called: Coupon bonds. The comparison of a company's financial condition and performance across time is known as: Horizontal analysis. Quick assets divided by current liabilities is the: Acid-test ratio. The statement of changes in stockholders' equity: Describes changes in paid-in capital and retained earnings subcategories. Standards for comparisons in financial statement analysis do not include: Management standards.

Stocks that pay relatively large cash dividends on a regular basis are called: Income stocks. The following data were reported by a corporation:

Authorized shares

20,000

Issued shares

15,000

Treasury shares

3,000

The number of outstanding shares is: 12,000 The following data has been collected about Keller Company's stockholders' equity accounts:

Common stock $10 par value 20,000 shares authorized and 10,000 $100,000 shares issued, 9,000 shares outstanding Paid-in capital in excess of par value, common stock

50,000

Retained earnings

25,000

Treasury stock

11,500

Assuming the treasury shares were all purchased at the same price, the cost per share of the treasury stock is: $11.50...