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Accounting Test 2
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Questions in this quiz (25)
1If a company reported the following items on its income statement...
Cost of goods sold: $6,000
income tax expense: $2,000
interest expense: $500
operating expenses: $3,500
sales revenue: $14,000
what amount would be reported for the subtotal "income from operations"?- A$8,000
- B$2,000
- C$4,500
- D$4,000
2Which of the following is not a normal function of a financial analyst?
- AIssue earnings forecasts.
- BExamine the records underlying the financial statements to certify their conformance with GAAP.
- CMake buy, hold, and sell recommendations on companies' stock.
- DAdvise institutional investors on their securities holdings.
3The classified balance sheet format allows one to ascertain quickly which of the following?
- AThe most valuable asset of the company.
- BThe specific due date for all liabilities of the company.
- CWhat liabilities must be paid within the upcoming year.
- DNone of the above.
4When a company issues stock with a par value, what columns are typically presented in the statement of stockholders' equity?
- ACommon Stock
Additional Paid-In Capital
Property, Plant and Equipment - BCash
Property, Plant and Equipment - CCommon Stock
Additional Paid-In Capital
Retained Earnings - DCommon Stock
Additional Paid-In Capital
Cash
- ACommon Stock
5When a company using the allowance method writes off a specific customer's $100,000 account receivable from the accounting system, which of the following statements are true?
1. Total stockholders' equity remains the same.
2. Total assets remain the same.
3. Total expenses remain the same.- A2
- B1 and 3
- C1 and 2
- D1, 2 and 3
- A2
6When using the allowance method, as bad debt expense is recorded,
- ATotal assets remain the same and stockholders' equity remains the same.
- BTotal assets decrease and stockholders' equity decreases.
- CTotal assets increase and stockholders' equity decreases.
- DTotal liabilities increase and stockholders' equity decreases.
7The inventory costing method selected by a company will affect
- AThe balance sheet.
- BThe income statement.
- CThe statement of retained earnings.
- DAll of the above.
8Which of the following is not a component of the cost of inventory.
- AAdministrative overhead
- Bdirect labor
- Craw materials
- Dfactory overhead
9An increasing inventory turnover ration
- AIndicates a longer time span between the ordering and receiving of inventory.
- BIndicates a shorter time span between the ordering and receiving of inventory.
- CIndicates a shorter time span between the purchase and sale of inventory.
- DIndicates a longer time span between the purchase and sale of inventory.
10Which of the following regarding the lower of cost or market rule for inventory are true?
1. The lower of cost or market rule is an example of the historical cost principle.
2. When the replacement cost of inventory drops below the cost shown in the financial records, net income is reduced.
3. When the replacement cost of inventory drops below the cost shown in the financial records, total assets are reduced.- A1
- B2
- C2 and 3
- Dall three
11Which inventory method provides a better matching of current costs with sales revenue on the income statement and outdates values for inventory on the balance sheet?
- AFIFO
- BAverage cost
- CLIFO
- DSpecific identification
12Which of the following is false regarding a perpetual inventory system?
- APhysical counts are not needed since records are maintained on a transaction-by-transaction basis.
- BThe balance in the inventory account is updated with each inventory purchase and sale transaction.
- CCost of goods sold is increased as sales are recorded.
- DThe account Purchases is not used as inventory is acquired.
13Under what method(s) of depreciation is an asset's net book value the depreciable base (the amount to be depreciated)?
- Astraight-line method
- Bdeclining-balance method
- Cunits-of-production method
- Dall of the above
14A company wishes to report the highest earnings possible for financial reporting purposes. Therefore, when calculating depreciation,
- AIt will follow the MACRS depreciation tables prescribed by the IRS.
- BIt will select the shortest lives possible for its assets.
- CIt will select the lowest residual values for its assets.
- DIt will estimate higher residual values for its assets.
15How many of the following statements regarding goodwill are true?
-Goodwill is not reported unless purchased in an exchange.
-Goodwill must be reviewed annually for possible impairment.
-Impairment of goodwill results in a decrease in net income.- A3
- B2
- C1
- Dnone
16When recording depreciation, which of the following statements is true?
- ATotal assets increase and stockholders' equity increases.
- BTotal assets decrease and total liabilities increase.
- CTotal assets decrease and stockholders' equity increases.
- DNone of the above are true.
17The proper treatment of outstanding checks on the bank reconciliation requires:
- Aadding them back to the book balance of cash.
- Badding them back to the bank balance of cash
- Cdeducting them from the book balance of cash.
- Ddeducting them from the bank balance of cash.
18The unadjusted debit balance of the Allowance for Doubtful Accounts account is $350. Uncollectible accounts are estimated to be $15,800, based on the percent of sales method. After recording the appropriate journal entry for the bad debts expense, what will be the balance of the Bad Debt Expense account?
- A$15,800
- B$15,450
- C$16,150
- D$350
19The unadjusted credit balance of the Allowance for Doubtful Accounts account is $350. Uncollectible accounts are estimated to be $15,800, based on an analysis of a schedule of aging of accounts receivable. After recording the appropriate journal entry for the bad debts expense, what will be the balance of the Bad Debt Expense account?
- A$15,800
- B$15,450
- C$16,150
- D$350
20During periods of rising prices, which of the following is true?
- AThe use of FIFO will result in smaller net income than LIFO.
- BThe use of FIFO will result in a larger cost of goods sold than LIFO.
- CThe use of LIFO will result in a smaller cost of goods sold than FIFO.
- DThe use of FIFO will result in a higher ending inventory than LIFO.
- AThe use of FIFO will result in smaller net income than LIFO.
21Consider the following:
ITEM A:
Units on hand = 2,000
Cost/Unit = $5.00
Market/Unit = $5.50
ITEM B:
Units on hand = 3,000
Cost/Unit = $4.50
Market/Unit = $3.00
Using the lower of cost or market rule applied on an item-to-item basis., what will be the value of the ending inventory reported on the balance sheet?- A$23,500
- B$20,000
- C$19,000
- D$24,500
22Inventory at the end of the current period was understated because one bin of inventory was not counted and its value not included in the ending inventory totals. Because of this error:
- Anet income for the period was overstated.
- Bnet income for the following period will be overstated.
- Cthe cost of goods sold for the current period was understated.
- Dtotal equity for the current year is overstated.
23An asset with an estimated 5-year useful life and an estimated residual value of $5,000 was purchased for $22,000 cash plus a $500 delivery fee on the first day of the fiscal year. Using the straight-line method, determine the depreciation expense for the second fiscal year?
- A$3,400
- B$3,500
- C$4,500
- D$4,800
24An asset with an estimated 10-year useful life and an estimated residual value of $5,000 was purchased for $28,000 cash on the first day of the fiscal year. Based on the declining balance method at twice the straight-line rate, what is the depreciation expense for the second fiscal year.
- A$3,680
- B$5,600
- C$4,480
- D$4,000
25Goodwill as reported in a balance sheet:
- Ais a favorable reputation.
- Bonly occurs when one company purchases another company.
- Cis the increase in sales caused by customers satisfaction.
- Dis never reported on a balance sheet.
Information
- Description
- chapters 5- 8
- Author
- juliaofjjj
- Language
- English
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