 |
| 1 | |
Which of the following statements are important when choosing the appropriate time period for financial reporting purposes? |
| | A) | The value of information is often linked to its timeliness. |
| | B) | Useful information must reach decision makers frequently and promptly. |
| | C) | Timely information requires that reports be prepared at regular intervals. |
| | D) | All of the above. |
| | E) | None of the above. |
|
|
|
| 2 | |
Which of the following statements is correct concerning the accrual basis of accounting? |
| | A) | The accrual basis does not consider the revenue recognition principle. |
| | B) | The accrual basis must follow the revenue recognition principle but not the expense recognition principle. |
| | C) | The accrual basis uses the adjusting process to recognize revenues when earned and to match expenses with revenues. |
| | D) | The accrual basis recognizes revenues when earned and records expenses when cash is paid. |
| | E) | The accrual basis is the same as the cash basis of accounting. |
|
|
|
| 3 | |
Which of the following statements are correct with respect to the cash basis of accounting? |
| | A) | The cash basis of accounting recognizes revenues when the cash is received. |
| | B) | The cash basis of accounting recognizes expenses when the cash is paid. |
| | C) | The cash basis of accounting is acceptable for GAAP purposes. |
| | D) | All of the above. |
| | E) | None of the above. |
|
|
|
| 4 | |
The steps in the accounting cycle includes the following: adjusting the accounts; preparing a post-closing trial balance; preparing an unadjusted trial balance; analyzing the transactions; journalizing; posting; closing temporary accounts; and preparing the financial statements. What is the proper order of the first five steps? |
| | A) | Analyzing transactions; journalizing; posting; preparing a post-closing trial balance; and adjusting the accounts. |
| | B) | Analyzing transactions; journalizing; posting; preparing an unadjusted trial balance; and adjusting the accounts. |
| | C) | Adjusting the accounts; analyzing the transactions; journalizing; posting; and preparing the financial statements. |
| | D) | Analyzing transactions; journalizing; posting; preparing a post-closing trial balance; and preparing the financial statements. |
| | E) | None of the above. |
|
|
|
| 5 | |
Which of the following accounts represent a current asset on a classified balance sheet? |
| | A) | Short-term investments |
| | B) | Merchandise inventory |
| | C) | Prepaid expenses |
| | D) | Cash |
| | E) | All of the above |
|
|
|
| 6 | |
Which is true about an adjusting entry? |
| | A) | Only a permanent account is adjusted. |
| | B) | Only a temporary account is adjusted. |
| | C) | Both a permanent account and a temporary account are affected. |
| | D) | It is required to satisfy the revenue recognition principle only. |
| | E) | None of the above. |
|
|
|
| 7 | |
What is the formula for the profit margin ratio? |
| | A) | Net income divided by total assets |
| | B) | Net income divided by net sales |
| | C) | Net sales divided by net income |
| | D) | Net income divided by total equity |
| | E) | Net sales divided by total equity |
|
|
|
| 8 | |
Current assets total $30,000, plant and equipment assets, net, total $40,000, current liabilities total $10,000, and long-term liabilities total $20,000. What is the current ratio? |
| | A) | 1.0:1 |
| | B) | 1.5:1 |
| | C) | 2.5:1 |
| | D) | 3.0:1 |
| | E) | None of the above |
|
|
|
| 9 | |
What happens or is accomplished when the adjusting entry for depreciation is recorded? |
| | A) | The cost of the asset is allocated over its useful life. |
| | B) | Expenses decrease. |
| | C) | The carrying (or book) value of the related asset increases in the balance sheet. |
| | D) | All of the above. |
| | E) | None of the above. |
|
|
|
| 10 | |
Which if the following is correct regarding the Accumulated Depreciation account? |
| | A) | It is reported on the income statement. |
| | B) | It has a normal debit balance. |
| | C) | It is a contra asset account, and has a credit balance. |
| | D) | It is a temporary account that must be closed out at year-end. |
| | E) | All of the above. |
|
|
|
| 11 | |
On November 1, a magazine publisher receives $12 million from its customers for annual subscriptions to a monthly magazine. The November issue is immediately sent to those customers to start their subscriptions. Assuming that an adjusting entry was not journalized on November 30, what adjusting entry should be recorded on December 31? |
| | A) | Debit the Unearned Subscriptions account and credit the Subscription Revenue account for $2 million. |
| | B) | Debit the Unearned Subscriptions account and credit the Subscription Revenue account for $1 million. |
| | C) | Debit the Prepaid Subscriptions account and credit the Unearned Subscriptions account for $2 million. |
| | D) | Debit the Prepaid Subscriptions account and credit the Unearned Subscriptions account for $1 million. |
| | E) | None of the above. |
|
|
|
| 12 | |
The ABC Company's employees earn $15,000 for each five-day workweek ending every Friday. If the fiscal year ends on a Tuesday, what adjusting entry should be recorded? |
| | A) | Debit Salary Expense $15,000 and Credit Salaries Payable $15,000. |
| | B) | Debit Salary Expense $6,000 and Credit Salaries Payable $6,000. |
| | C) | Debit Salary Expense $9,000 and Credit Salaries Payable $9,000. |
| | D) | Debit Salaries Payable $10,000 and Credit Salary Expense $10,000. |
| | E) | None of the above. |
|
|
|
| 13 | |
Which of the following is not a temporary account? |
| | A) | Income Summary |
| | B) | Rental Revenue |
| | C) | Common Stock |
| | D) | Dividends |
| | E) | Depreciation Expense-Office Equipment |
|
|
|
| 14 | |
After the closing procedure is complete, which of the following proves the equality of debits and credits? |
| | A) | Income statement |
| | B) | Account form balance sheet |
| | C) | Post-closing trial balance |
| | D) | Work sheet |
| | E) | All of the above |
|
|
|
| 15 | |
Which of the following statements concerning U.S. GAAP and IFRS is true? |
| | A) | Cash Basis is not consistent with neither U.S. GAAP nor IFRS. |
| | B) | IFRS balance sheets normally present noncurrent items first. |
| | C) | Both U.S. GAAP and IFRS include similar guidance for adjusting accounts. |
| | D) | All of the above. |
| | E) | None of the above. |
|
|
.