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Accounting Packet B Multiple Choice - 1. The communication stage of accounting is accomplished by

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Question;Accounting Packet BMultiple ChoiceIdentify the choice that best completes the statement or answers the question.____1. The communication stage of accounting is accomplished bya. storing data.b. reporting to decision makers.c. processing data.d. recording data.____2. Which of the following transactions does not involve an exchange of value?a. Payment of a debtb. Purchase of a building on creditc. Borrowing moneyd. Loss from theft____3. Which of the following forms of organization are considered to be separate entities by accountants?a. Partnerships onlyb. Sole proprietorships onlyc. Corporations onlyd. Sole proprietorships, partnerships, and corporations____4. Standards for state and local governments are established by thea. IRS.b. IASB.c. GASB.d. AICPA.____5. An auditor maintains no direct financial interest in the company he or she is auditing. The principle beingfollowed isa. independence.b. integrity.c. objectivity.d. due care.____6. When a business reports an asset at an inflated dollar amount, it has violated the measurement issue ofa. recognition.b. valuation.c. classification.d. realization.____7. A purchase is recognized in the accounting records whena. payment is made for the item purchased.b. the purchase requisition is sent to the purchasing department.c. title transfers from the seller to the buyer.d. the buyer receives the seller's bill.____8. The withdrawal of cash by the owner willa. decrease net income..b. increase liabilities.c. not affect total assetsd. decrease owner's equity.____9. Which of the following gives the correct sequence of accounting procedures?a. Financial statements, trial balance, ledger, journalb. Financial statements, journal, ledger, trial balancec. Journal, ledger, trial balance, financial statementsd. Ledger, trial balance, journal, financial statements____ 10. The general journal does not have a column titleda. Description.b. Account Balance.c. Date.d. Post. Ref.____ 11. Which of the following terms does not mean the same as the others?a. Footingb. Folioc. LPd. Post. Ref.____ 12. The Post. Ref. column in the general journal is used to show that an amount has been posted to the ledgerwhen which of the following is placed in it?a. An Xb. Journal numberc. Journal page numberd. Account number____ 13. Which of the following accounts probably would be listed before the others in a chart of accounts?a. Insurance Expenseb. Grace Peterson, Withdrawalsc. Notes Payabled. Accumulated Depreciation, Buildings____ 14. When a credit sale takes place,a. a revenue account will increase.b. liabilities will increase.c. one asset account will increase and another will decrease.d. assets will be unaffected.____ 15. Retailers often end their fiscal years.a. during the slack seasonb. during the peak of the busy season.c. at different times each year, depending on the tax consequences.d. on June 30.____ 16. Which of the following is an application of accrual accounting?a. Depreciating a building as quickly as allowed by income tax regulationsb. Recording utilities expense in the accounting period covered by the monthly billc. Expensing a machine in its entirety when purchasedd. Recording revenue at the time payment is received____ 17. Which of the following is a condition required by the SEC for the recognition of revenue?a. Completion of goods manufacturedb. Execution of a promissory notec. Price in excess of $100d. Reasonable assurance of collection____ 18. Use this information to answer the following question.The trial balance for Sanchez Company appears as follows:Sanchez CompanyTrial BalanceDecember 31, 2010CashAccounts ReceivablePrepaid InsuranceSuppliesOffice EquipmentAccumulated DepreciationOffice EquipmentAccounts PayableMaria Sanchez, CapitalService RevenueSalaries ExpenseRent Expense$ 20050050150400$ 200300600500100200$1,600______$1,600If on December 31, 2010, the insurance still unexpired amounted to $20, the adjusting entry would contain aa.b.c.d.debit to Prepaid Insurance for $30.credit to Prepaid Insurance for $30debit to Insurance Expense for $20.credit to Prepaid Insurance for $20.____ 19. Use this information pertaining to Salvino Company to answer the following question.1.The corporation's Store Supplies account showed a beginning debit balance of $200 and supplies purchasedof $800. There were $300 of supplies on hand at year end.2.Depreciation on a building is estimated to be $5,000.3.A one-year insurance policy was purchased for $2,000. Three months have passed since the purchase.4.Accrued interest on a note receivable amounted to $100.5.The company received a $3,600 advance payment during the year on services to be performed. By the endof the year, one-fourth of the services had been performed.The adjusting entry for depreciation on the building isa. Depreciation Expense - Building5,000Accumulated Depreciation - Building5,000b. Accumulated Depreciation - Building 5,000Depreciation Expense - Building5,000c. Building,5,000Depreciation Expense - Building5,000d. Accumulated Depreciation - Building 5,000Building5,000____ 20. Which of the following accounts is not closed during the closing process?a. Owner's Capitalb. Commissions Earnedc. Income Summary.d. Withdrawals____ 21. After all closing entries have been posted, which of the following accounts is most likely to have a nonzerobalance?a. Interest Expenseb. Wages Payablec. Service Revenued. Income Summary____ 22. The owner's Capital, Withdrawals, and Income Summary accounts for Laurel Repair Company for theaccounting period are presented below in T account form after the recording and posting of closing entries:12/3112/3112/31Fran Laurel, Capital2001/112/31Fran Laurel Summary50012/314002,0004003/16/19/112/31Fran Laurel, Withdrawals5012/31505050200900The total amount of expenses for the period isa. $200.b. $400.c. $900.d. $500.____ 23. In preparing closing entries, which of the following columns of the work sheet are the most helpful?a. Adjusted Trial Balance columnsb. Income Statement columnsc. Adjustments columnsd. Balance Sheet columns____ 24. The post-closing trial balance containsa. neither real accounts nor nominal accounts.b. nominal accounts only.c. real accounts only.d. both real accounts and nominal accounts.____ 25. Which of the following accounts might appear in the adjusted trial balance but not in the post-closing trialbalance?a. Depreciation ExpenseEquipmentb. Owner's Capitalc. Unearned Revenued. Income Summary____ 26. An amount would not appear opposite the Withdrawals account in which of the following work sheetcolumns?a. Trial Balanceb. Income Statementc. Balance Sheetd. Adjusted Trial Balance____ 27. All the following are standards of accounting information excepta. flexibility.b. reliability.c. understandability.d. relevance.____ 28. The Securities and Exchange Commission instituted rules requiring the chief executive officers and chieffinancial officers of all publicly traded companies to certify that, to their knowledge, the quarterly and annualstatements that their companies file with the SEC area. 100 percent accurate and contain no misstatements, errors, or mistakes.b. accurate and complete.c. subject to interpretation due to the many accounting rules and regulations.d. not to be used except by individuals working for the company.____ 29. Which of the following accounting conventions would an accountant most likely apply when facing majoruncertainties?a. Full disclosureb. Conservatismc. Materialityd. Consistency____ 30. Which accounting convention requires a note to the financial statements explaining the company's method ofrevenue recognition?a. Comparability and consistencyb. Materialityc. Conservatismd. Full disclosure____ 31. Goodwill would appear in which balance sheet section?a. Investmentsb. Property, plant, and equipmentc. Current assetsd. Intangible assets____ 32. Interest expense on a mortgage would be classified on a multistep income statement under the headinga. general and administrative expenses.b. selling expenses.c. cost of goods sold.d. other revenues and expenses.____ 33. The debt to equity ratio equalsa. owner's equity divided by total liabilities.b. owner's equity divided by long-term liabilities.c. total liabilities divided by owner's equity.d. current liabilities divided by average owner's equity.____ 34. Use this balance sheet and income statement to answer the following question. Use ending balances wheneveraverage balances are required for computing ratios.Abner SystemsBalance SheetDecember 31, 2010AssetsCurrent assetsInvestmentsProperty, plant, and equipmentIntangible assets$ 8,8741,0005,1265,000Total assets$20,000LiabilitiesCurrent liabilitiesLong-term liabilitiesTotal liabilitiesOwner's EquityDale Abner, CapitalTotal liabilities andowner's equity$ 4,0001,000$ 5,00015,000$20,000Abner SystemsIncome StatementFor the Year Ended December 31, 2010Net salesCost of goods soldGross marginOperating expensesNet income$24,0008,000$16,00011,200$ 4,800The current ratio for Abner Systems isa. 0.75.b. 1.00.c. 1.13.d. 2.22.____ 35. Use this balance sheet and income statement to answer the following question. Use ending balances wheneveraverage balances are required for computing ratios.Abner SystemsBalance SheetDecember 31, 2010AssetsCurrent assetsInvestmentsProperty, plant, and equipmentIntangible assets$ 6,0001,0008,0005,000LiabilitiesCurrent liabilitiesLong-term liabilitiesTotal liabilitiesOwner's EquityDale Abner, CapitalTotal liabilities and$ 4,0001,000$ 5,00015,000Total assets$20,000owner's equity$20,000Abner SystemsIncome StatementFor the Year Ended December 31, 2010Net salesCost of goods soldGross marginOperating expensesNet income$24,0008,000$16,00011,200$ 4,800The return on assets for Abner Systems isa. 30 percent.b. 150 percent.c. 33-1/3 percent.d. 24 percent.____ 36. Which of the following does not include net income in its computation?a. Debt to equity ratiob. Return on assetsc. Return on equityd. Profit margin____ 37. Which of the following does not represent a sale?a. Merchandise placed aside for a customer who plans to come in next week and pay withcashb. Purchase of merchandise by a customer who pays cashc. Sale of merchandise to a customer who uses a credit cardd. Purchase of merchandise by a customer who uses a debit card____ 38. Which of the following companies would be most likely to use a computerized perpetual inventory system?a. Fur dealerb. Car dealershipc. Auto parts stored. Boat dealership____ 39. Which of the following goods would not be included in merchandise inventory for a purchasing company?a. Goods in transit shipped FOB shipping pointb. Goods on hand in the showroomc. Goods in transit shipped FOB destinationd. Goods ordered and received from the supplier____ 40. The entry to record a $750 sale with terms of 2/10, n/30 would include a(n)a. decrease to Accounts Receivable for $750.b. increase to Sales for $750.c. increase to Sales Discounts for $15.d. decrease to Sales for $735.____ 41. Goods totaling $7,000 purchased February 2 on terms of 2/10, n/30 and on which returns of $1,000 weremade on February 10 would be subject to which of the following discounts if paid for on February 12?a.b.c.d.$120$140$160$20____ 42. Under the perpetual inventory system, which of the following accounts would not be used?a. Cost of Goods Soldb. Merchandise Inventoryc. Salesd. Purchases____ 43. The amount of cost of goods available for sale during the year depends on the amounts ofa. beginning merchandise inventory, net cost of purchases, and ending merchandiseinventory.b. beginning merchandise inventory and cost of goods sold.c. beginning merchandise inventory, cost of goods sold, and ending merchandise inventory.d. beginning merchandise inventory and net cost of purchases.____ 44. Which of the following is not considered in computing net cost of purchases?a. Freight-out expensesb. Purchasesc. Freight paid on purchased goodsd. Purchases returns and allowances____ 45. Use this information to answer the following question.Account NameSalesSales Returns and AllowancesPurchasesPurchases Returns and AllowancesFreight-InSelling ExpensesGeneral and Administrative ExpensesDebitCredit293,00010,00068,0008,00012,00030,000110,000In addition, beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000.Net income for the period wasa. $173,000.b. $93,000.c. $63,000.d. $203,000.____ 46. Feathertouch Company sold merchandize worth $800 on credit, terms n/15. The merchandize sold had cost$550. What is the required journal entry to record the transaction and to transfer the cost of merchandizeinventory to cost of goods sold under the periodic inventory system?a. Accounts Receivables800Sales800No entry for transfer to cost of goods sold.b. SalesAccounts Receivables800800Merchandize InventoryCost of Goods Sold550550c. Accounts ReceivablesMerchandize InventoryCost of Goods SoldMerchandize Inventoryd. Merchandize InventorySalesCost of Goods SoldMerchandize Inventory800800250250800800550550____ 47. The consistency convention requires thata. a company use the same independent auditors year after year.b. all companies operating in the same industry use the same accounting methods.c. the selection of a company's accounting policies be disclosed in its financial statements.d. a company use the same accounting procedures year after year.____ 48. Which of the following should be reported net of the related income tax effect on the income statement?a. Loss due to a discontinued segment of a businessb. Sale of a temporary investment at a lossc. Loss due to shopliftingd. Sale of an inventory item at a loss____ 49. The purpose of a statement of stockholders' equity is toa. disclose the computation of book value per share of stock.b. budget the transactions expected to occur during the forthcoming period.c. replace the statement of retained earnings.d. summarize the changes in the components of stockholders' equity for a period of time.____ 50. At the beginning of 2010, Helms Corporation had 34,000 shares of $10 par value common stock issued andoutstanding. During January 2010, Helms declared and distributed a 10 percent stock dividend. The marketvalue of Helms's stock was $24 throughout the month of January. The entry to be recorded for the declarationof stock dividend isa. Stock DividendsCommon Stock DistributableAdditional Paid-in Capital81,600b. Common Stock DistributableCommon Stock81,600c. Common Stock DistributableCommon StockRetained Earnings81,600d. Stock DividendsCash68,00034,00047,60081,60034,00047,600____ 51. A small stock dividend should be recorded on the basis ofa. par or stated value.68,000b. original issue price.c. market value.d. cost.____ 52. Royer Corporation engaged in this transaction:Converted loans payable to stock.Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cashflows.a. Financing activities sectionb. Schedule of noncash investing and financing transactionsc. Investing activities sectiond. Operating activities section____ 53. Royer Corporation engaged in this transaction:Purchased 30-day U.S. Treasury bill.Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cashflows.a. Does not represent a cash flowb. Operating activities sectionc. Investing activities sectiond. Financing activities section____ 54. Royer Corporation engaged in this transaction:Purchased 60-day commercial paper.Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cashflows.a. Does not represent a cash flowb. Operating activities sectionc. Financing activities sectiond. Investing activities section____ 55. Assume the indirect method is used to compute net cash flows from operating activities. For this itemextracted from the financial statementsLoss on Sale of Investmentindicate the effect on net income inarriving at net cash flows from operating activities by choosing one of the following:a. Add to net income to arrive at net cash flows from operating activitiesb. Subtract from net income to arrive at net cash flows from operating activitiesc. Not used to adjust net income to calculate net cash flows from operating activities____ 56. Assume the indirect method is used to compute net cash flows from operating activities. For this itemextracted from the financial statementsGain on Disposal of Equipmentindicate the effect on net incomein arriving at net cash flows from operating activities by choosing one of the following:a. Add to net income to arrive at net cash flows from operating activitiesb. Subtract from net income to arrive at net cash flows from operating activitiesc. Not used to adjust net income to calculate net cash flows from operating activities____ 57. Which of the following items would not be included in a statement of cash flows prepared using the indirectmethod?a. Net incomeb. Cash paid for dividendsc. Sale of a plant assetd. Cash paid for wages____ 58. Lagunas Corporation sold investments for $102,000 cash that cost $90,000. The journal entry to record theincrease in cash flow is:a. Cash102,000Investments90,000Gain on Sale of Investments12,000b. CashLoss on Sale of InvestmentsInvestments90,00012,000c. InvestmentsCash102,000d. CashInvestments90,000102,000102,00090,000____ 59. Liquidity ratios are an indication of a company'sa. ability to effectively employ its resources.b. overall debt to equity position.c. overall debt position.d. ability to pay bills when they are due and to meet unexpected needs for cash.____ 60. Which of the following describes the interest coverage ratio?a. Income before income taxes plus interest expense divided by interest expenseb. Income after income taxes plus interest expense divided by interest expensec. Income after income taxes divided by interest expensed. Income before income taxes minus interest expense divided by interest expense____ 61. How would the collection of an account receivable affect the current ratio and the quick ratio, respectively?a. No effect on current ratio, increase in quick ratiob. Increase in current ratio, increase in quick ratioc. No effect on current ratio, no effect on quick ratiod. Decrease in current ratio, decrease in quick ratio____ 62. Assuming that the current ratio was 1.6 times and the quick ratio was 1.4 times before this transaction, theentry to record the payment of a previously declared and recorded cash dividend willa. increase the current ratio and the quick ratio.b. decrease the current ratio and the quick ratio.c. increase the current ratio but have no effect on the quick ratio.d. have no effect on the current ratio or the quick ratio.____ 63. Days' payable is a measure ofa. liquidity.b. volatility.c. long-term solvency.d. profitability.____ 64. Management accountinga. deals primarily with people and organizations outside of the business entity.b. requires only periodic reporting on a regular basis.c. uses any type of useful measurement unit, including physical as well as monetarymeasures.d. deals only with the double-entry recording system.____ 65. The unit of measurement used in management accounting isa. primarily the historical dollar.b. usually current replacement cost.c. any measurement unit that is useful in a particular situation.d. the measurement unit used by competing companies.____ 66. Which of the following is not part of the "perform" stage in the management process?a. Matching human resources to the task to be performedb. Hiring and training personnelc. Identifying operating activities that minimize wasted. Controlling operations____ 67. Services that support the primary processes in the value chain area. human resources, legal services, information systems, and management accounting.b. research and development, design, supply, production, marketing, distribution, andcustomer service.c. research and development, marketing, supply, design, production, distribution, andinformation systems.d. marketing, legal, and accounting services.____ 68. Which of the following is not a result of adopting a just-in-time operating environment?a. Reduced materials wasteb. Reduced production timec. Reduced total labor hoursd. Reduced production costs____ 69. Activity-based costing traces costs to a company's activities related toa. purchasing and setup.b. production and nonproduction.c. production only.d. nonproduction only.____ 70. Materials and supplies that cannot be traced conveniently to specific products are calleda. indirect materials.b. raw materials.c. minor materials.d. direct materials.____ 71. All manufacturing costs incurred and assigned to products that are being produced are classified asa. variable costs.b. allocated costs.c. product costs.d. overhead costs.____ 72. Which of the following costs is considered overhead?a. Indirect labor onlyb. Indirect materials onlyc. Indirect materials and indirect labord. None of these____ 73. In a manufacturing environment, costs of materials initially flowa. into the Work in Process Inventory account.b. into the Materials Inventory account.c. directly to Cost of Goods Sold.d. into the Finished Goods Inventory account.____ 74. Predetermined overhead rates generally are useful for all but which of the following?a. Price determinationb. Estimating production levelsc. Inventory valuationd. Product costing____ 75. Which of the following accounts would be adjusted by the disposal of an immaterial amount of overappliedoverhead?a. Finished Goods Inventoryb. Materials Inventoryc. Work in Process Inventoryd. Cost of Goods Sold

 

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