SBS MBA - Accounting Skills 505

Description

Practice for multiple choice exam
Clair Hat
Quiz by Clair Hat, updated more than 1 year ago
Clair Hat
Created by Clair Hat over 8 years ago
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Resource summary

Question 1

Question
If the indirect approach for the statement of cash flows is presented, which of the following items should be subtracted from accrual basis net income to derive cash flow from operating activities?
Answer
  • Gains on the sale of long-term investments
  • Losses on the sale of long-term investments
  • Depreciation expense
  • Amortisation expense

Question 2

Question
For purposes of calculating cash receipts from customers, which of the following adjustments should be made to convert accrual basis sales to cash basis sales?
Answer
  • Add an increase in accounts receivable to accrual basis sales
  • Subtract an increase in accounts receivable from accrual basis sales
  • Add cash in bank to accrual basis sales
  • Add the change in cash to the accrual basis sales

Question 3

Question
In preparing the statement of cash flows, how should non-cash investing/financing activities be reported?
Answer
  • Not be reported
  • Be reported in a separate schedule accompanying the statement of cash flows
  • Be reported in the investing activities section of the statement of cash flows
  • Be reported in the financing activities section of the statement of cash flows

Question 4

Question
On a statement of cash flows, which of the following types of activities would not be disclosed in a separate section?
Answer
  • Operating activities
  • Investing activities
  • Financing activities
  • Contractual activities

Question 5

Question
Which of the following activities would generally be regarded as a financing activity in preparing a statement of cash flows?
Answer
  • Dividend distribution
  • Proceeds from the sale of stocks of other firms
  • Loans made by the entity to other businesses
  • Employees' salaries and wages paid

Question 6

Question
Ames Corporation's net accounts receivable were $750,000 on December 31, 20X1, and $1,250,000 on December 31, 20X2. Net cash sales for 20X2 were $3,300,000. The accounts receivable turnover ratio for 20X2 was 16. What were the total net sales for 20X2?
Answer
  • $12,800,000
  • $16,000,000
  • $16,100,000
  • $19,300,000

Question 7

Question
Thompson Corporation wrote off a $200 uncollectible account receivable against the $2,400 balance in its Allowance for Bad Debts account. Compare the current ratio before the write-off (X) with the current ratio after the write-off (Y).
Answer
  • X greater than Y
  • X equals Y
  • X less than Y
  • Cannot be determined

Question 8

Question
Zhang Corporation had net income of $100,000 paid income taxes of $30,000, and had interest expense of $8,000. What was Zhang's times interest earned ratio?
Answer
  • 12.5
  • 16.25
  • 17.25
  • 17.85

Question 9

Question
Financial statement ratio analysis may be undertaken to study liquidity, turnover, profitability, and other indicators. To which does the current ratio most relate?
Answer
  • Liquidity
  • Turnover
  • Profitability
  • Other indicator

Question 10

Question
Gerber Department Store utilises the retail inventory method. Gerber's beginning inventory cost $140,000 and retailed for $280,000. Purchases for the period amounted to $390,000 and were priced to sell at twice that amount. Sales for the period, all at normal retail, were $600,000. How much is the cost of Gerber's estimated ending inventory?
Answer
  • $115,000
  • $150,000
  • $230,000
  • $300,000

Question 11

Question
Wonder Corporation failed to record the purchase of merchandise on account. The merchandise and related accounts payable should have been recorded but were not. What is the effect of these errors on assets, liabilities, retained earnings, and net income, respectively?
Answer
  • Understated, understated, no effect, no effect
  • Understated, understated, understated, understated
  • Understated, overstated, overstated, understated
  • Overstated, overstated, understated, overstated

Question 12

Question
An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the ending inventory valuation is:
Answer
  • FIFO
  • LIFO
  • Retail
  • Weighted-average

Question 13

Question
Which of the following inventory methods will always produce the same results under both a periodic and perpetual system?
Answer
  • FIFO
  • LIFO
  • Average
  • All of these

Question 14

Question
Ritz Company agreed to purchase certain inventory items from Hostess Corporation. Hostess shipped the goods F.O.B. destination. On December 31, Ritz's accounting year-end, Ritz was aware that the goods had been shipped and would be received any day.
Answer
  • Ritz should include the goods in its inventory calculated on December 31
  • Ritz should include the goods in its inventory calculated on December 31, but should not record the obligation to pay for them
  • Ritz should not include the goods in its inventory calculated on December 31, but should include the related payable on its balance sheet at December 31
  • Ritz should not include the goods in its inventory calculated on December 31, and should not include the related payable on its balance sheet at December 31

Question 15

Question
Inventory accounts should be classified in which section of a balance sheet?
Answer
  • Current assets
  • Investments
  • Property, plant and equipment
  • Intangible assets

Question 16

Question
Under the income statement approach to adjusting entries, the receipt of $5,000 of unearned revenue would be recorded by debiting Cash. What account should be credited?
Answer
  • Cash
  • Revenue
  • Unearned revenue
  • Prepaid revenue

Question 17

Question
At the end of the current accounting period, Johnson Company failed to record utilities consumed during the period. Johnson will be billed for the utilities during the next accounting period. As a result, current period assets, liabilities, equity, and income, respectively, are:
Answer
  • Overstated, overstated, correct, correct
  • Correct, understated, overstated, overstated
  • Overstated, understated, overstated, overstated
  • Overstated, understated, correct, correct

Question 18

Question
The appropriate journal entry to record equipment depreciation expense would consist of a debit to Depreciation Expense and a credit to which of the following accounts?
Answer
  • Equipment
  • Accumulated Depreciation: Equipment
  • Retained Earnings
  • Cash

Question 19

Question
Adjusting entries at the end of an accounting period would not be required for which of the following?
Answer
  • Multiperiod costs that must be split among two or more accounting periods
  • Multiperiod revenues that must be split among two or more accounting periods
  • Expenses that have been incurred in a given period but not as yet recorded in the accounts
  • Revenue that has been earned and recording in the accounting records

Question 20

Question
For purposes of measuring business income, the life of a business is:
Answer
  • divided into specific points in time
  • divided into irregular cycles
  • divided into discrete accounting periods
  • considered to be a continuous cycle

Question 21

Question
Which of the following errors will be disclosed in the preparation of a trial balance?
Answer
  • Recording transactions in the wrong account
  • Duplication of a transaction in the accounting records
  • Posting only the debit portion of a particular journal entry
  • Recording the wrong amount for a transaction to both the account debited and the account credited

Question 22

Question
The trial balance:
Answer
  • is a formal financial statement
  • is used to prove that there are no errors in the journal or ledger
  • provides a listing of every account in the chart of accounts
  • provides a listing of the balance of each account in active use

Question 23

Question
Failure to record the receipt of a utility bill for services already received will result in:
Answer
  • an overstatement of assets
  • an overstatement of liabilities
  • an overstatement of equity
  • an understatement of assests

Question 24

Question
The following comments each relate to the recording of journal entries. Which statement is true?
Answer
  • For any given journal entry, debits must exceed credits.
  • It is customary to record credits on the left and debits on the right.
  • The chart of accounts reveals the amount to debit and credit to the affected accounts.
  • Journalization is the process of converting transactions and events into debit/credit format.

Question 25

Question
The following comments all relate to the recording process. Which of these statements is correct?
Answer
  • The general ledger is a chronological record of transactions.
  • The general ledger is posted from transactions recorded in the general journal.
  • The trial balance provides the primary source document for recording transactions into the general journal.
  • Transposition is the transfer of information from the general journal to the general ledger.

Question 26

Question
The basic sequence in the accounting process can best be described as:
Answer
  • Transaction, journal entry, source document, ledger account, trial balance.
  • Source document, transaction, ledger account, journal entry, trial balance.
  • Transaction, source document, journal entry, trial balance, ledger account.
  • Transaction, source document, journal entry, ledger account, trial balance.

Question 27

Question
Of the following account types, which would be increased by a debit?
Answer
  • Liabilities and expenses
  • Assets and equity
  • Assets and expenses
  • Equity and revenues

Question 28

Question
Gerald has beginning total stockholder's equity of $160,000. During the year total assets increased by $240,000 and total liabilities increased by $120,000. Gerald's net income was $180,000. No additional investments were made; however, dividends did occur during the year. How much were the dividends?
Answer
  • $20,000
  • $60,000
  • $140,000
  • $220,000

Question 29

Question
Which of the following would not be included on a balance sheet?
Answer
  • Accounts receivable
  • Accounts payable
  • Sales
  • Cash

Question 30

Question
Retained earning will change over time because of several factors. Which of the following factors would explain an increase in retained earnings?
Answer
  • Net loss
  • Net income
  • Dividends
  • Investments by stockholders

Question 31

Question
Which of these items would be accounted for as an expense?
Answer
  • Repayment of a bank loan
  • Dividends to stockholders
  • The purchase of land
  • Payment of the current period's rent

Question 32

Question
The accounting profession can be divided into three major categories; specifically, the practice of public accounting, private accounting, and governmental accounting. A somewhat unique and important service of public accounting is:
Answer
  • Financial accounting
  • Managerial accounting
  • Auditing
  • Cost accounting

Question 33

Question
The primary private sector agency that oversees external financial reporting standards is the:
Answer
  • Financial Accounting Standards Board
  • Federal Bureau of Investigation
  • General Accounting Office
  • Internal Revenue Service

Question 34

Question
Which of the following equations properly represents a derivation of the fundamental accounting equation?
Answer
  • Assets + Liabilities = Owner's equity
  • Assets = owner's equity
  • Cash = assets
  • Assets - Liabilities = Owner's Equity

Question 35

Question
Wilson Company owns land that cost $100,000. If a "quick sale" of the land was necessary to generate cash, the company feels it would receive only $80,000. The company continues to report the asset on the balance sheet at $100,000. This is justified under which of the following concepts?
Answer
  • The historical-cost principle
  • The value is tied to objective and verifiable past transactions
  • Neither of the above
  • Both 'a' and 'b'

Question 36

Question
The proper journal entry to record Ransom Company's billing of clients for $500 of services rendered is:
Answer
  • Cash 500 Accounts Receivable 500
  • Accounts Receivable 500 Capital Stock 500
  • Accounts Receivable 500 Service Revenue 500
  • Cash 500 Service Revenue 500

Question 37

Question
The proper journal entry to record $1000 of Dividends paid by Myer's Corporation is:
Answer
  • Dividends 1000 Cash 1000
  • Accounts Payable 1000 Cash 1000
  • Dividends Expense 1000 Cash 1000
  • Dividends Expense 1000 Service Revenue 1000

Question 38

Question
Lynn Lipincott invested land valued at $5000 in her business. This transaction would be recorded by:
Answer
  • Cash 5000 Capital Stock 5000
  • Land 5000 Capital Stock 5000
  • Land 5000 Service Revenue 5000
  • Capital Stock 5000 Land 5000

Question 39

Question
Blankenship Company pays its employees every Friday for work rendered that week. The payroll is typically $10,000 per week. Which of the following journal entries would Blankenship ordinarily record on the Friday payday?
Answer
  • Salary Expense 10,000 Salary Payable 10,000
  • Salary Expense 10,000 Cash 10,000
  • Salary Payable 10,000 Cash 10,000
  • Salary Payable 10,000 Salary Expense 10,000

Question 40

Question
Blankenship Company pays its employees every Friday for work rendered that week. The payroll is typically $10,000 per week. What journal entry would be recorded (on Wednesday) if the end of the accounting period occurred on a Wednesday?
Answer
  • Salary Expense 6,000 Salary Payable 6000
  • Salary Expense 6,000 Cash 6,000
  • Salary Payable 6,000 Cash 6,000
  • Salary Payable 6,000 Salary Expense 6,000

Question 41

Question
Blankenship Company pays its employees every Friday for work rendered that week. The payroll is typically $10,000 per week. Blankenship's year-end occurred on Wednesday, at which time a correct adjusting entry was recorded. On the following Friday, which of the following payroll journal entries should be recorded?
Answer
  • Salary Expense 10,000 Cash 10,000
  • Salary Expense 4,000 Salary Payable 6,000 Cash 10,000
  • Salary Expense 6,000 Salary Payable 4,000 Cash 10,000
  • Salary Payable 10,000 Cash 10,000

Question 42

Question
On November 1, 20X1, Limit Company purchased a one-year insurance policy for $12,000. Limit Company debited Cash and credited Prepaid Insurance for $12,000. At the end of December, 20X1, $2,000 of insurance had expired. The journal entry to properly state all accounts involved on December 31, 20X1, would be:
Answer
  • Insurance Expense 2,000 Prepaid Insurance 22,000 Cash 24,000
  • Insurance Expense 2,000 Prepaid Insurance 2,000
  • Insurance Expense 2,000 Cash 2,000
  • Prepaid Insurance 2,000 Insurance Expense 2,000

Question 43

Question
Simmons Company received and recorded a $5,000 payment for services to be rendered in the future. If the income statement approach to adjusting entries is used, the appropriate adjusting entry at the end of the accounting period for $3,000 of revenue not yet earned would be:
Answer
  • Service Revenue 3,000 Unearned Service Revenue 3,000
  • Service Revenue 2,000 Unearned Service Revenue 2,000
  • Accounts Receivable 3,000 Unearned Service Revenue 3,000
  • No entry would be needed.

Question 44

Question
Hefty Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year. January 2 Beginning Inventory 500 units at $3.00 April 7 Purchased 1,100 units at $3.20 June 30 Purchased 400 units at $4.40 December 7 Purchased 1,600 units at $4.40 Sales during the year were 2,700 units at $5.00. If Hefty used the first-in, first-out method, ending inventory would be:
Answer
  • $2,780
  • $3,960
  • $9,700
  • $10,880

Question 45

Question
Hefty Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year. January 2 Beginning Inventory 500 units at $3.00 April 7 Purchased 1,100 units at $3.20 June 30 Purchased 400 units at $4.00 December 7 Purchased 1,600 units at $4.40 Sales during the year were 2,700 units at $5.00. If Hefty used the periodic LIFO method, cost of goods sold would be:
Answer
  • $2,780
  • $3,960
  • $9,700
  • $10,800

Question 46

Question
Hefty Company wants to know the effect of different inventory methods on financial statements. Given below is information about beginning inventory and purchases for the current year. January 2 Beginning Inventory 500 units at $3.00 April 7 Purchased 1,100 units at $3.20 June 30 Purchased 400 units at $4.00 December 7 Purchased 1,600 units at $4.40 Sales during the year were 2,700 units at $5.00. If Hefty used the Weighted-Average method, gross profit would be:
Answer
  • $3,255
  • $3,415
  • $10,245
  • $13,500

Question 47

Question
Bernstein Corporation recently experienced a fire which destroyed all of its inventory. The following data have been reconstructed from partial accounting information, and pertain to the year up to the date of the fire. Beginning inventory $20,000 Net Purchases $45,000 Sales $80,000 Gross Profit Rate 40% Using the gross profit method, estimate the dollar amount of inventory which was destroyed in the fire.
Answer
  • $17,000
  • $33,000
  • $48,000
  • $65,000

Question 48

Question
Selected information for 20X1 for the Bernstein Company is as follows: Cost of goods sold $6,000,000 Average Inventory $2,000,000 Net sales $8,000,000 Average receivables $3,000,000 Net Income $1,000,000 Assuming a 360-day business year, what was the inventory turnover ratio for Bernstein?
Answer
  • 3
  • 4
  • 5
  • 6
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