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DeVry Cincinnati ACCT 212 Exam Guide

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1. Which of the following persons or groups have the ultimate control of a corporation?;the chief executive officer;the chief operating officer;the audit committee;the stockholders;2. Financial statements are;reports issued by outside consultants who are hired to analyze key operations of the business.;reports created by management that states it is responsible for the acts of the corporation.;standard documents that tell us how well a business is performing and where it stands in financial terms.;standard documents issued by outside consultants who are hired to analyze key operations of the business in financial terms.;3. All of the following are forms of business organizations except;proprietorship.;partnership.;restaurant.;corporation.;4.The largest organization of professional accountants in the United States is the;American Institute of Certified Public Accountants.;Securities and Exchange Commission.;Financial Accounting Standards Board.;Auditing Standards Board.;5. The Financial Accounting Standards Board is responsible for establishing;the American Institute of Certified Public Accountants.;the Securities and Exchange Commission.;generally accepted accounting principles.;the code of professional conduct for accountants.;6. The principle which states that assets acquired by the business should be recorded at their actual price is the;objectivity principle.;stable dollar principle.;cost principle.;reliability principle.;7. The accounting equation can be stated as;Assets + Liabilities = Stockholders' equity.;Assets = Liabilities + Stockholders' equity.;Assets = Liabilities - Stockholders' equity.;Assets + Stockholders' equity = Liabilities.;8. The owners' interest in the assets of a corporation is known as;assets.;stockholders' equity.;expenses.;revenues.;9. Which of the following financial statements would a potential investor most likely use to evaluate a company's financial performance for the current period?;balance sheet;income statement;statement of cash flows;retained earnings statement;10. Assets appear on the;balance sheet.;income statement.;retained earnings statement.;statement of cash flows.;11. Dividends appear on the;retained earnings statement.;income statement.;balance sheet;both the retained earnings statement and the income statement.;12. The statement of cash flows is divided into three categories relating to cash flows from operating, investing, and;management planning activities.;financing activities.;strategic positioning activities.;marketing activities.;13. Gains and losses appear on which of the financial statements listed below?;the balance sheet;the income statement;the retained earnings statement;the statement of cash flows;14. Cash spent to purchase new equipment would appear on the statement of cash flows as;a financing activity.;an operating activity.;an investing activity.;purchases of new equipment do not appear on a statement of cash flows.;15. Which financial statement is based on the accounting equation?;statement of retained earnings;income statement;statement of cash flows;balance sheet;1. Accounts are grouped together in a book called the;ledger.;trial balance;journal.;accounting equation.;2. The normal balance of an expense account is a __________ while the normal balance of a revenue account is a __________.;debit, debit;credit, credit;credit, debit;debit, credit;3. Accounting transactions are first recorded in a book or record called a;file.;ledger.;journal.;source document;4. What is the first step in the journalizing process?;Enter the transaction in the journal.;Arrange data in chronological order.;Determine what accounts will be affected and whether to debit or credit them.;Post the transaction to the ledger.;5. The normal balance of Accounts Receivable is a __________ because it is a(n) __________ account.;credit, liability;debit, expense;credit, stockholders' equity;debit, asset;6. Posting, a part of the accounting process, refers to;copying amounts from the accounts in the general ledger to the journal.;copying amounts from the financial statements to the general ledger.;copying amounts from the journal to the appropriate accounts in the general ledger.;copying amounts from the general ledger to the financial statements.;7. A chart of accounts is;a list of all accounts.;a list of all balance sheet accounts.;a list of all income statement accounts.;a list of all accounts with their ending balances.;8. On December 1, 2003, Blue Mountain Snow Removal Service receives $1,800 in advance for an agreement to remove snow from a client's parking lot during the months of December, January, and February. As of December 31, 2003, Blue Mountain Snow Removal Service;would have a $1,200 liability to its client under accrual accounting, and would have a $1,800 liability to its client under cash-basis accounting.;would have recognized $600 revenue under accrual accounting, and would have recognized $1,800 revenue under cash-basis accounting.;would have a $0 liability to its client under accrual accounting, and would have a $1,200 liability to its client under cash-basis accounting.;would have recognized $600 cash under accrual accounting, and would have recognized 1,800 cash under cash-basis accounting.;9. An accrual refers to an event;where the cash has not been exchanged between the two parties.;that will never involve an income statement account.;that will never involve cash.;where the cash has already exchanged hands between the two parties.;10. A deferral refers to an event;where the recognition of an expense or revenue is recorded before the cash is paid or received.;where the liability for an expense is recorded after the expense is actually incurred.;where the liability for an expense is recorded before the expense is actually incurred.;where the recognition of an expense or revenue is recorded after the cash is paid or received.;11. The accounting principle which tells accountants when to record revenue and in what amount is called the;matching principle;revenue principle.;full disclosure principle.;going concern principle.;12. The accounting principle which serves as the basis for determining when to record expenses is the;going concern principle.;revenue principle.;full disclosure principle.;matching principle.;13. Adjusting entries;are prepared at the option of the accountant.;are not needed under the accrual basis of accounting.;are prepared at the beginning of the accounting period to update all accounts.;are prepared at the end of the accounting period to update certain accounts.;14. Book value is defined as;Your;depreciation expense plus accumulated depreciation.;the cost of a plant asset less depreciation expense.;the cost of a plant asset less accumulated depreciation.;the cost of a plant asset plus accumulated depreciation.;15. In what order are financial statements generally prepared?;balance sheet, statement of retained earnings, and income statement;income statement, statement of retained earnings, and balance sheet;income statement, balance sheet, and statement of retained earnings;statement of retained earnings, income statement, and balance sheet;1. All of the following are purposes of internal control except;to safeguard assets.;to ensure accurate and reliable accounts records.;to encourage adherence to company policies.;to ensure the company makes a profit.;2. Who has the primary responsibility for establishing and maintaining a company's system of internal control?;the company's top management;the company's internal auditors;the company's external auditors;the company's stockholders;3. For effective internal control in an organization, who should keep the inventory records?;accountant;treasurer;sales persons;inventory warehouse supervisor;4. Which of the following is a limitation of internal control?;safeguarding company assets;accurate and reliable accounting records;operational efficiency;employee collusion;5. An Internet hacker may sometimes succeed in defeating a company's firewall system and burrow into the company's Web site. Which layer of the onion model of e-commerce system security would the hacker be likely to encounter next?;an encryption device;an incident response procedure;an intrusion detection device;another firewall;6. When preparing a bank reconciliation, which of the following items would be subtracted from the bank balance?;deposits in transit;bank service charges;EFT cash payments;outstanding checks;7. Securities include;only debt instruments.;only equity instruments.;may be debt or equity instruments.;represent Accounts Receivable and Notes Receivable on the balance sheet.;8. A ledger that contains a separate account for each customer is called an accounts receivable;control ledger;current ledger;trade ledger;subsidiary ledger;9. A critical element of internal control over collections of accounts receivables is;depositing the cash from the cash register on a daily basis;setting up a petty cash account;using a check writing machine;the separation of cash-handling and cash-accounting duties;10. The two accepted methods of recording bad debts are the;allowance method and the aging method;receivables method and the aging method;allowance method and the direct write-off method;direct write-off method and the percentage-of-sales method;11. Net accounts receivable is calculated as;sales less sales returns and allowances;accounts receivable less uncollectible-account expense;accounts receivable less allowance for uncollectible accounts;accounts receivable plus allowance for uncollectible accounts;12. Which principle of accounting prescribes the use of the allowance method of accounting for bad debts?;full disclosure principle;historical cost principle;revenue recognition principle;matching principle;13. The formula for computing interest expense is equal to;principal x interest rate x time.;(interest rate x principal) / time;(principal x time) / interest rate;principal / (interest rate + time).;14. The number of days it takes to collect the average amount of receivables is called;the quick ratio;the acid-test ratio;the current ratio;days' sales in receivables;15. Which of the following ratios is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio?;acid-test ratio;equity ratio;debt ratio;days' sales in receivables;1. The largest expense category on the income statement of most merchandising companies is;cost of goods sold;other expenses;selling expenses;administrative expenses;2. In a merchandising business, gross profit is equal to sales revenue minus;the sum of cost of goods sold, operating expenses, and prepaid expenses;the sum of cost of goods sold and operating expenses;cost of goods sold;the sum of cost of goods sold and sales commissions;3. Technological advances in computers and inventory tracking have;made perpetual inventory records less expensive to maintain;completely eliminated the need to physically count inventory;made journal entries unnecessary for inventory purchases;made perpetual inventory records more expensive to maintain;4. Given the following data, what is the cost of goods sold?;Sales revenue $1,980,000;Beginning inventory 380,000;Ending inventory 340,000;Purchases 1,250,000;$690,000;$770,000;$1,290,000;$1,210,000;5. Given the following data, what is the cost of ending inventory?;Sales revenue $1,450,000;Cost of goods sold 845,000;Beginning inventory 310,000;Purchases 950,000;$1,485,000;$415,000;$1,035,000;$205,000;6. When the LIFO method is used, ending inventory is assumed to consist of;the oldest units;the most recently purchased units;the units with the highest per unit cost;the units with the lowest per unit cost;7. When the FIFO method is used, cost of goods sold is assumed to consist of;the most recently purchased units;the units with the lowest per unit cost;the units with the highest per unit cost;the oldest units;8. The lower-of-cost-or-market rule is an application of;accounting conservatism;the disclosure principle;the consistency principle;the materiality concept;9. Treating a capital expenditure as a immediate expense;understates expenses and overstates owners' equity;understates expenses and understates assets;overstates assets and overstates owner's equity;overstates expenses and understates net income;10. Which of the following depreciation methods best fits those assets that tend to wear out before they become obsolete?;depletion method;straight-line method;double-declining-balance method;units-of-production method;11. Depreciable cost is defined as;book value;estimated residual value;cost minus accumulated depreciation;cost minus estimated residual value;12. In which of the following depreciation methods is annual depreciation calculated as the difference between the asset's historical cost and its residual value, divided by the asset's useful life in years?;double-declining-balance;straight-line;units-of-production;MACRS;13. Book value is defined as;cost less salvage value;cost less accumulated depreciation;current market value less salvage value;current market value less accumulated depreciation;14. All of the following are intangible assets except;trademarks;natural gas;goodwill;copyrights;15. Most intangible assets are;amortized over a period of 40 years or less;amortized over a period of 20 years or less;amortized over a period greater than 40 years;expensed immediately on the income statement;1. Current liabilities are obligations due within;one year or within the company's normal operating cycle if it is longer than one year.;one year or within the company's normal operating cycle if it is shorter than one year.;one month or within the company's normal operating cycle if it is longer than one month;one month or within the company's normal operating cycle if it is shorter than one month;2. Warranty expense should be recorded in the period;that the product sold is repaired or replaced;the product is sold;immediately following the period in which the product is sold;that the product is paid for by the customer;3. Short-term notes payable;are generally due within three months, with a maximum time period of six months.;are shown as a reduction to notes receivable on the balance sheet, with an appropriate footnote disclosure;are shown on the balance sheet with current liabilities;are shown on the balance sheet after bonds payable;4. Which is the preferred method to use when amortizing a bond discount or premium?;straight-line method of amortization;market-interest rate method of amortization;effective-interest method of amortization;both s A and B;5. All of the following are advantages of issuing stock except;less risky to the issuing corporation;creates no liabilities for the corporation;creates no interest expense which must be paid;generally results in a higher earnings per share;6. All of the following are advantages of issuing bonds except;interest expense is tax deductible;does not dilute control of the corporation;less risky to the issuing corporation;generally results in higher earnings per share;7. Corporations are separate taxable entities. The earnings of a corporation are subject to;federal unemployment taxes;taxation by the SEC;double taxation;the same method of taxation as partnership earnings;8. The number of stocks currently in the hands of stockholders is the same as the number of stocks;issued.;authorized.;outstanding;proposed by the board of directors;9. Which of the following types of business organizations terminates when its ownership structure changes?;partnerships and proprietorships;partnerships and corporations;proprietorships and corporations;only corporations;10. The ultimate control of the corporation rests with the;SEC and congress;chief executive officer;stockholders.;employees;11. All of the following are basic rights of a stockholder except;the right to vote;the right to receive a proportionate share of any assets remaining before the corporation pays its liabilities in the event of liquidation;the right to maintain one's proportionate ownership in the corporation;the right to receive a proportionate part of any dividend;12. In a corporation, the two basic sources of stockholders' equity are;paid-in capital and operating capital;paid-in capital and retained earnings;donated capital and paid-in capital;donated capital and retained earnings;13. Stock that a corporation has issued and later reacquired is called;issued stock;outstanding stock;treasury stock;authorized stock;14. A dividend becomes a legal liability of the corporation on the;date of payment;date of declaration;date of record;date of distribution;15. Which of the following shows the relationship between net income and average common stockholders' equity?;current ratio;acid-test ratio;return on equity;return on assets;1. A statement of cash flows;is prepared at the option of management;may be combined with the balance sheet;is a basic financial statement required for publicly held companies;may be combined with the statement of retained earnings at the option of management;2. Cash means more than just cash on hand and cash in the bank. Highly liquid, short-term investments that are easily convertible into cash are called;common stock;cash equivalents;promissory notes;accounts receivable;3. The statement of cash flows is designed to fulfill all of the following purposes except;to determine the company's ability to pay dividends to stockholders;to assess the collectibility of accounts receivable;to predict future cash flows;to show the relationship of net income to changes in the company's cash;4. The most important section of a statement of cash flows is the;operating activities;investing activities;financing activities;All of the sections are equally important;5. Investors analyze the statement of cash flows to determine;the debt-to-equity ratio;which businesses are expanding and which are shrinking;which companies are reporting unearned revenues;total interest earned during the period;6. Cash received from customers would be reported on the statement of cash flows under;investing activities;operating activities;financing activities;in the schedule of noncash investing and financing activities;7. The issuance of bonds for cash would be reported on a statement of cash flows under the;operating activities;investing activities;financing activities;no activities because issuing bonds for cash would not be reported on a statement of cash flows;8. The issuance of common stock for cash would be reported on a statement of cash flow under;the operating activities;the investing activities;the financing activities;either investing activities or operating activities;9. Cash collected from customers can be computed by the following formula;ending accounts receivable plus beginning accounts receivable minus sales;ending accounts receivable minus beginning accounts receivable plus sales;beginning accounts receivable minus ending accounts receivable plus sales;beginning accounts receivable minus ending accounts receivable minus sales;10. The amount of cash paid for dividends for the current year can be calculated by the following formula;beginning dividends payable minus ending dividends payable plus dividends declared;beginning dividends payable plus ending dividends payable plus dividends declared;beginning dividends payable minus ending dividends payable minus dividends declared;beginning dividends payable plus ending dividends payable minus dividends declared;11. The sale of treasury stock is a(n) __________ on a statement of cash flows;operating activity;investing activity;financing activity;financing activity or an investing activity;12. On December 31, 2004, the Bison Bit Company's Retained Earnings account had a balance of $420,000. During 2004, the company incurred a net loss of $85,000, declared stock dividends of $15,000, and paid cash dividends of $10,000. If the Dividends Payable account increased $4,000 during 2004, the January 1, 2004, balance in the Retained Earnings account was;$534,000;$476,000;$526,000;$306,000;13. King Edward Company reported plant assets, net of accumulated depreciation, on January 1, 2004, at $427,500 and $579,300 on December 31, 2004. The income statement showed depreciation of $38,700. King Edward Company acquired $275,000 of plant assets during the year and reported proceeds from the sale of plant assets of $89,200 for the year. The gain or loss resulting from the sale of plant assets was;$3,400 loss;$2,390 loss;$4,700 gain;$5,050 gain;14. On January 1, 2004, Prepaid Insurance had a balance of $6,700 and on December 31, 2004, a balance of $8,320. The income statement for the year reported Insurance Expense of $49,310. Payments for insurance during the year amounted to;$49,310;$47,690;$50,930;$57,630;15. The amount founds in the Salaries Payable account for NovaLights Company were $14,500 and $16,000 on December 31, 2003, and December 31, 2004, respectively. Cash paid to employees for the years ended December 31, 2003, and December 31, 2004, were $255,000 and $280,000, respectively. NovaLights Company's Salary Expense for the year ended December 31, 2004, was;$253,500;$281,500;$278,500;$256,500;1. Horizontal analysis involves the study of;percentage changes in comparative financial statements;percentage and/or dollar amount changes in various financial statement amounts from year to year;the change in key financial statement ratios over a certain time frame or horizon;the changes in individual financial statement amounts as a percentage of some related total;2. A company reported $75,000 of income for 2003, $80,000 for 2004, and $90,000 for 2005. The percentage change in net income from 2004 to 2005 was;9.1%.;11.1%.;12.5%.;16.7%.;3. Assuming the Accounts Receivable balance at the end of 2003 is $80,000, and it has decreased by 15% per year since the end of 2001, the balance at the end of 2001 (rounded to the nearest whole dollar) was;$110,727;$99,188;$94,188;$53,333;4. Which of the following would be most likely to reveal that cost of goods sold is 125% of the amount shown for a base year?;trend analysis;ratio analysis;vertical analysis;horizontal analysis;5. When performing vertical analysis of an income statement, which of the following is usually used as the base?;Operating income;net sales;net income;gross profit;6. Vertical analysis looks at;percentage changes in the balances shown in comparative financial statements.;the change in key financial statement ratios over a specified period of time;the dollar amount of the change in various financial statement amounts from year to year;individual financial statement items expressed as a percentage of a base (which represents 100%).;7. Common-size financial statements represent a form of;ratio analysis;vertical analysis;trend analysis;horizontal analysis;8. Of the items listed below, the one most helpful in the comparison of different size companies is;horizontal analysis;comparison of their net incomes;preparation of common-size financial statements;comparison of their working capital balances;9. Analyzing the statement of cash flows may help analysts determine the financial health of a company. Which of the following signs below is not an indicator of a financially healthy company?;The company's operations are a major source (not a use) of cash.;The company's operations are a major use (not a source) of cash;The company's investing activities include more purchases than sales of long-term assets.;The company's financing activities are not dominated by borrowing;10. The current ratio is calculated as;total assets / total liabilities;current assets / total liabilities;current assets x current liabilities;current assets / current liabilities;11. Working capital is defined as;current liabilities - current assets;current assets - current liabilities;total assets - total liabilities;current assets + current liabilities;12. Inventory turnover is calculated as;average inventory for the period / cost of goods sold;cost of goods sold / average inventory for the period;gross profit for the period / average inventory for the period;average inventory for the period / gross profit for the period;13. Accounts receivable turnover is calculated as;total cost of goods sold / 365 days;total net credit sales / average net accounts receivable;average net accounts receivable / 365 days;total net credit sales / cost of goods sold;14. The times-interest-earned ratio is calculated as;income from operations / interest expense;net income / interest expense;net income after taxes + interest expense/interest expense;income from operations \'2D interest expense/interest expense;15. The dividend yield is calculated as;dividends per share / market price per share of common stock;dividends per share / earnings per share of common stock;dividends per share / book value per share of common stock;dividends per share / number of shares of common stock

 

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