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40_Accounting MCQ_08Jan

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Question;Financial Accounting Exam 2;1);The fundamental accounting equation is a reflection of the;Money;measurement concept;Conservatism;concept;Dual-aspect;concept;Historical;cost concept;2);The historical cost concept reflects the fact that financial;accounting practice favors;Reliability over relevance;Management's best guess over;historical financial information;Relevance over reliability;Consensus market values over historical;financial information;3);Jon Sports' inventory account increased from $25,000 on December 31;2003 to $30,000 on December 31, 2004. Which one of the following items would;be included in the operating section of its 2004 indirect method statement of;cash flows?;Add;increase in inventory $5,000;Subtract;increase in inventory ($5,000);Add;inventory balance $20,000;Subtract;inventory balance ($20,000);4);Turnkey Systems, Inc. began the month of June, 2004 with a prepaid;expenses balance of $240,000. During the month, debits totaling $110,000 and;credits totaling $80,000 were made to the prepaid expenses account. What was;the June, 2004 ending balance of prepaid expenses?;A debit balance of $210,000;A credit balance of $210,000;A debit balance of $270,000;A credit balance of $270,000;5);Pentex and Marbro, small companies in the stationery business, each;had a dollar gross margin of $20,000 during September 2004. Pentex's September;sales were twice that of Marbro's. If Pentex's gross margin as a percentage;of sales for September was 10%, Marbro's gross margin as a percentage of;sales for the same period was;10%;5%;20%;Cannot;be calculated;6);When an entity recognizes revenue before it has received cash for the;sale, it records an increase in a(n);Liability such as 'Advances from;customers;Accounts payable;Accounts receivable;Prepaid expense;7);Juan Foods pays off a long-term debt in full. Which one of the;following statements describes the effect of the sale on Juan Foods?;Current ratio increases, total debt;to equity ratio decreases;Current ratio decreases, total debt;to equity ratio decreases;Current ratio decreases, total debt;to equity ratio increases;Current ratio increases, total debt;to equity ratio increases;8);On January 1, 2005, Mansfield Company has a retained earnings balance;of $256,000. During 2005, its net income is $44,000 and it announces and pays;$12,000 in dividends. There is no other dividend-related activity during the;year. Its December 31, 2005 retained earnings balance is;$2,12,000;$2,88,000;$3,00,000;$2,24,000;9);Juan Foods makes a cash sale with a positive gross margin. Which one;of the following statements describes the effect of the sale on Juan Foods?;Current ratio increases;Current ratio decreases;No change to Juan Foods' current;ratio;Insufficient information to judge;effect on current ratio;10);Juan Foods pays off a long-term debt in full. Which one of the;following statements best describes the appropriate book-keeping for this;transaction?;Debit cash, credit long-term debt;Debit long-term debt, credit owners;equity;Debit owners' equity, credit;long-term debt;Debit long-term debt, credit cash;11);On March 31, 2005, Cars, Inc. owes Preston Devices, one of its;suppliers, $25,000 for previous purchases. During April 2005, Preston sells;Cars devices with a sales price of $10,000 and a cost to Preston of $8,000.;During April Cars pays Preston $12,000 against the amount owed to Preston.;What is the effect of these April transactions on Preston's balance sheet?;Cash;increased by $12,000, accounts receivable decreased by $2,000, inventory;decreased by $8,000, retained earnings increased by $2,000.;Accounts;receivable increased by $2,000, inventory decreased by $8,000, cash increased;by $12,000, retained earnings increased by $12,000.;Cash;increased by $12,000, retained earnings decreased by $2,000, inventory;decreased by $10,000, accounts receivable decreased by $12,000.;Cash;increased by $2,000, accounts receivable decreased by $2,000, inventory;decreased by $8,000, retained earnings decreased by $12,000.;12);Consider the same scenario as in the previous question: On March 31;2005, Cars, Inc. owes Preston Devices, one of its suppliers, $25,000 for;previous purchases. During April 2005, Preston sells Cars devices with a;sales price of $10,000 and a cost to Preston of $8,000. During April Cars;pays Preston $12,000 against the amount owed to Preston. If Preston had no;other sales and records no other collections from customers during the month;of April, the operating section of Preston's indirect method statement of;cash flows for April will show the following de-accrual adjustments to net;income;Subtract;change in accounts receivable, add change in inventory.;Add;change in accounts receivable, subtract change in inventory;Add;change in accounts receivable, add change in inventory.;Subtract;change in accounts receivable, subtract change in inventory.;13);Planet Music buys all of its inventory on credit. During 2005, Planet;Music's inventory account increased by $10,000. Which of the following;statements must be true for Planet Music during 2005?;It;made payments of less than $10,000 to suppliers.;It;made cash payments of $10,000 to suppliers.;It;made more cash payments to its suppliers than it recorded as cost of goods;sold.;It;paid less cash to suppliers than it recorded as cost of goods sold.;14);On December 31, 2005, Juan Foods purchases a van for $12,000. How does;the purchase of the van affect Juan Foods' 2005 income statement?;Decreases;sales by $12,000;Increases;operating expenses by $12,000;No;material effect;Increases;cost of goods sold by $12,000;15);To be recorded as a liability, an item must meet three specific;conditions. Two of them are: it must involve probable future sacrifice of;economic resources by the entity, and it must be a present obligation that;arose as a result of a past transaction. Which one of the following is the;third condition?;The;item must reduce the market value of the recording entity;It;must involve a transfer of resources to another entity;It;must involve the expenditure of cash now or in the future;It;must not cause total liabilities to exceed total assets;16);The next 9 questions are based on Patnode Inc.'s balance sheets at;year end 2004 and 2005.;During 2005, Patnode announced and paid dividends of $1,000, the only;dividend-related activity during the year. What was its 2005 net income?;$5,600;$3,600;$4,600;Cannot be estimated;17);During 2005, Patnode had a cash outflow of $15,000 for investing;activities and a cash inflow of $7,000 from financing activities. Its 2005;cash flow from operations was;Outflow;of $15,000;Inflow;of $15,000;Outflow;of $8,000;Inflow;of $8,000;18);Patnode's 2005 statement of cash flows contains four items in the;financing section. Three of them are: Short-term debt issued, $15,000;Short-term debt paid, ($10,000) and Dividends paid, ($1,000). What is the;fourth item in the financing section?;Retained earnings, $4,600;Common stock issued, $3,000;Long-term debt paid, ($3,000);Cash from financing, $3,000;19);How much total depreciation and amortization expense did Patnode;record during 2005?;$10,000;$6,000;$3,000;$5,000;20);During 2005, Patnode recorded sales of $17,000. How much cash did it;collect from its customers?;$17,000;$14,000;$3,000;Cannot be estimated;21);Which one of the following items will not appear in the operating;section of Patnode's 2005 indirect method cash flow statement?;Deduct: increase in accounts;receivable $3,000;Add: decrease in accounts payable;$1,000;Add: increase in taxes payable $2,400;Add: decrease inventories $6,000;22);What is Patnode's current ratio at the end of 2004?;2.46;0.41;1.12;0.89;23);What is Patnode's total debt to equity ratio at the end of 2004;(rounded to two decimal places)?;5.3;0.19;0.25;4.04;24);Patnode recorded a 2005 tax expense of $3,000. What amount did it pay;to the tax authorities during 2005?;$2,400;$7,000;$600;$5,400;25);Kirby, Inc. records a sale with a gross margin of $1,400. Which one of;the following statements correctly describes the effect of such a sale on its;balance sheet?;Common stock increases by $1,400;The sales revenue account increases;by $1,400;The gross margin account increases by;$1,400;The retained earnings account;increases by $1,400;26);Sandy Robbins is the sole owner of a hair salon. He often takes small;amounts of "lunch money" from the cash register, figuring that;it is my business anyway." His accountant, however, insists that;Sandy make a note of the cash he takes, and at the end of the each accounting;period, she debits owners' equity and credits the cash account for the total;amount that Sandy has taken during the period.;In recording the cash withdrawals even though Sandy is sole;proprietor, the accountant is correctly applying the;Matching;concept;Entity;concept;Materiality;concept;Conservatism;concept;27);Anderson Electronics' 2005 return on sales percentage is 20%. Its 2005;net income is $40,000. What is its 2005 sales?;$4,00,000;$80,000;$2,00,000;$1,00,000;28);Anderson Electronics' 2005 return on sales percentage is 20%. Its 2005;net income is $40,000. What is its 2005 sales?;$4,00,000;$80,000;$2,00,000;$1,00,000;29);During June 2005, Bextra Inc. recorded sales of $55,000 but only;$20,000 was collected in cash from customers. Cost of goods sold of $38,000.;What was the effect of these sales on Bextra's current ratio?;Current ratio increases;Current ratio decreases;Current ratio remains unchanged;Insufficient information provided to;judge effect on current ratio;30);Which one of the following statements is not true;about statements of cash flows prepared according to U.S. GAAP?;The operating section of the indirect;method starts with the net income of the period;In the indirect method statement, the;period's depreciation is added to net income because it is a source of cash;Interest payments are included in the;operating section of the direct method statement;The investing section of the direct;method statement for a period is identical to the investing section of the;indirect method statement for the same period;31);A company raised $50,000 in cash by taking a one-year loan of $10,000;and a 5-year loan of $40,000. Which of the following is the correct journal;entry to record this transaction?;Debit short-term debt $40,000, debit;retained earnings $10,000, credit cash $50,000;Debit short-term debt $50,000, credit;cash $50,000;Debit cash $50,000, credit long-term;debt $50,000;Debit cash $50,000, credit short-term;debt $10,000, credit long-term debt $40,000;32);Which one of the following statements describes the rules about;posting transactions into T-accounts in the ledger?;For;assets, debits are entered on the left, for liabilities, credits are entered;on the left;For;assets, credits are entered on the left, for liabilities, debits are entered;on the left;Debits;on the left, credits on the right;Credits;on the left, debits on the right;33);Baxtra, Inc. pays $20,000 in cash as interest to its lenders during;2005. According to U.S. GAAP, in which section of the statement of cash flows;would this payment be included?;The;operating section;The;financing section;The;investing section;Depends;on whether cash flow statement is direct or indirect method.;34);Taylor Company had a salaries payable balance of $18,000 on December;31, 2004. During 2005, it paid $50,000 in cash as salaries, and recorded a;salary expense of $50,000. Its December 31, 2005 salaries payable balance is;$50,000;$18,000;$1,00,000;Cannot;be determined from the information provided;35);On April 30, 2005, Zono Electronics, Inc. made a payment of $3,500 to;Imperial Distributors, a supplier. Choose the statement that best describes;the recording of this financial transaction by Imperial Distributors.;Debit;cash $3,500, credit accounts payable $3,500;Debit;accounts receivable $3,500, credit cash $3,500;Debit;accounts payable $3,500, credit cash $3,500;Debit;cash $3,500, credit accounts receivable $3,50;36);Sardi Company estimates its 2005 tax expense to be $80,000. It makes a;cash payment of $20,000 to the tax authorities on December 31, 2005. How;should this transaction be recorded by Sardi?;Debit;tax expense $80,000, credit cash $60,000, credit taxes payable $20,000;Debit;tax expense $80,000, credit cash $20,000, credit taxes payable $60,000;Debit;tax expense $80,000, credit cash $20,000;Debit;tax expense $80,000, credit cash $20,000, credit accounts payable $60,000;37);On June 1, 2005, Planet Music has accounts payable of $45,000. During;the month, debits of $3,000 and credits of $11,000 were made to the account.;At the end of June 2005, what was the accounts payable balance?;A;credit balance of $53,000;A;debit balance of $42,000;A;credit balance of $56,000;A;debit balance of $53,000;38);Barnaby & Sons receives a large shipment of goods from its;supplier. It pays $58,000 at the time of delivery and promises to pay the;remaining $42,000 within the next two months. What is appropriate journal;entry for this transaction?;Debit;cash $42,000, debit inventory $16,000, credit accounts payable $58,000;Debit;inventory $100,000, credit cash $58,000, credit accounts payable $42,000;Debit;accounts payable $58,000, credit cash $42,000, credit inventory $16,000;Debit;accounts payable $58,000, debit cash $42,000, credit inventory $100,000;39);Annie's Fitness sells a set of free weights to a customer for $1,000.;The customer pays $600 in cash and puts the rest on her store credit account.;Which one of the following statements describes the most appropriate;accounting for the transaction?;Debit;cash $600, debit accounts receivable $400, credit cost of good sold $1000;Debit;cash $600, debit accounts receivable $400, credit revenues $1,000;Debit;revenues $1,000, credit cash $600, credit accounts receivable $400;Debit;cash $600, debit accounts receivable $400, credit inventory $1,000;40);Annie's Fitness sells a set of free weights to a customer for which;Annie's had paid $750. Which one of the following statements describes the;most appropriate accounting for the transaction?;Debit cost of goods sold expense;$750, credit cash $750;Debit inventory $750, credit cost of;goods sold expense $750;Debit cost of goods sold expense;$750, credit inventory $750;Debit inventory $750, credit accounts;payable $750

 

Paper#37204 | Written in 18-Jul-2015

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