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Accounting Test 2

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chapters 5- 8
juliaofjjj
Quiz by juliaofjjj, updated more than 1 year ago
juliaofjjj
Created by juliaofjjj almost 10 years ago
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Resource summary

Question 1

Question
If 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"?
Answer
  • $8,000
  • $2,000
  • $4,500
  • $4,000

Question 2

Question
Which of the following is not a normal function of a financial analyst?
Answer
  • Issue earnings forecasts.
  • Examine the records underlying the financial statements to certify their conformance with GAAP.
  • Make buy, hold, and sell recommendations on companies' stock.
  • Advise institutional investors on their securities holdings.

Question 3

Question
The classified balance sheet format allows one to ascertain quickly which of the following?
Answer
  • The most valuable asset of the company.
  • The specific due date for all liabilities of the company.
  • What liabilities must be paid within the upcoming year.
  • None of the above.

Question 4

Question
When a company issues stock with a par value, what columns are typically presented in the statement of stockholders' equity?
Answer
  • Common Stock Additional Paid-In Capital Property, Plant and Equipment
  • Cash Property, Plant and Equipment
  • Common Stock Additional Paid-In Capital Retained Earnings
  • Common Stock Additional Paid-In Capital Cash

Question 5

Question
When 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.
Answer
  • 2
  • 1 and 3
  • 1 and 2
  • 1, 2 and 3

Question 6

Question
When using the allowance method, as bad debt expense is recorded,
Answer
  • Total assets remain the same and stockholders' equity remains the same.
  • Total assets decrease and stockholders' equity decreases.
  • Total assets increase and stockholders' equity decreases.
  • Total liabilities increase and stockholders' equity decreases.

Question 7

Question
The inventory costing method selected by a company will affect
Answer
  • The balance sheet.
  • The income statement.
  • The statement of retained earnings.
  • All of the above.

Question 8

Question
Which of the following is not a component of the cost of inventory.
Answer
  • Administrative overhead
  • direct labor
  • raw materials
  • factory overhead

Question 9

Question
An increasing inventory turnover ration
Answer
  • Indicates a longer time span between the ordering and receiving of inventory.
  • Indicates a shorter time span between the ordering and receiving of inventory.
  • Indicates a shorter time span between the purchase and sale of inventory.
  • Indicates a longer time span between the purchase and sale of inventory.

Question 10

Question
Which 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.
Answer
  • 1
  • 2
  • 2 and 3
  • all three

Question 11

Question
Which 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?
Answer
  • FIFO
  • Average cost
  • LIFO
  • Specific identification

Question 12

Question
Which of the following is false regarding a perpetual inventory system?
Answer
  • Physical counts are not needed since records are maintained on a transaction-by-transaction basis.
  • The balance in the inventory account is updated with each inventory purchase and sale transaction.
  • Cost of goods sold is increased as sales are recorded.
  • The account Purchases is not used as inventory is acquired.

Question 13

Question
Under what method(s) of depreciation is an asset's net book value the depreciable base (the amount to be depreciated)?
Answer
  • straight-line method
  • declining-balance method
  • units-of-production method
  • all of the above

Question 14

Question
A company wishes to report the highest earnings possible for financial reporting purposes. Therefore, when calculating depreciation,
Answer
  • It will follow the MACRS depreciation tables prescribed by the IRS.
  • It will select the shortest lives possible for its assets.
  • It will select the lowest residual values for its assets.
  • It will estimate higher residual values for its assets.

Question 15

Question
How 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.
Answer
  • 3
  • 2
  • 1
  • none

Question 16

Question
When recording depreciation, which of the following statements is true?
Answer
  • Total assets increase and stockholders' equity increases.
  • Total assets decrease and total liabilities increase.
  • Total assets decrease and stockholders' equity increases.
  • None of the above are true.

Question 17

Question
The proper treatment of outstanding checks on the bank reconciliation requires:
Answer
  • adding them back to the book balance of cash.
  • adding them back to the bank balance of cash
  • deducting them from the book balance of cash.
  • deducting them from the bank balance of cash.

Question 18

Question
The 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?
Answer
  • $15,800
  • $15,450
  • $16,150
  • $350

Question 19

Question
The 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?
Answer
  • $15,800
  • $15,450
  • $16,150
  • $350

Question 20

Question
During periods of rising prices, which of the following is true?
Answer
  • The use of FIFO will result in smaller net income than LIFO.
  • The use of FIFO will result in a larger cost of goods sold than LIFO.
  • The use of LIFO will result in a smaller cost of goods sold than FIFO.
  • The use of FIFO will result in a higher ending inventory than LIFO.

Question 21

Question
Consider 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?
Answer
  • $23,500
  • $20,000
  • $19,000
  • $24,500

Question 22

Question
Inventory 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:
Answer
  • net income for the period was overstated.
  • net income for the following period will be overstated.
  • the cost of goods sold for the current period was understated.
  • total equity for the current year is overstated.

Question 23

Question
An 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?
Answer
  • $3,400
  • $3,500
  • $4,500
  • $4,800

Question 24

Question
An 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.
Answer
  • $3,680
  • $5,600
  • $4,480
  • $4,000

Question 25

Question
Goodwill as reported in a balance sheet:
Answer
  • is a favorable reputation.
  • only occurs when one company purchases another company.
  • is the increase in sales caused by customers satisfaction.
  • is never reported on a balance sheet.
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