GB 518 Unit 3 Midterm Quiz Updated
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GB 518 Unit 3 Midterm Quiz Updated
GB 518 Quiz 3
GB518 Financial Accounting Principles and Analysis
1. Question : Which of the following elements are found on the income statement?
Cash
Accounts Receivable
Common Stock
Retained Earnings
Salaries Expense
Question 2. Question : Fast-Forward had cash inflows from operations of $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:
$40,500 increase
$40,500 decrease
$134,500 decrease
$134,000 increase
Question 3. Question : A debit is:
An increase in an account
The right-hand side of a T-account
A decrease in an account
The left-hand side of a T-account
An increase to a liability account
Question 4. Question : Which of the following elements are found on the Balance Sheet?
Service Revenue
Net Income
Operating Activities
Utilities Expense
Retained Earnings
Question 5. Question : A credit is used to record:
An increase in an expense account
An increase in an asset account
An increase in an unearned revenue account
A decrease in a revenue account
A decrease to retained earnings
Question 6. Question : Apatha Company has assets of $600,000, liabilities of $250,000 and equity of $350,000. It buys office equipment on credit for $75,000. The effects of this transaction include:
Assets increase by $75,000 and expenses increase by $75,000
Assets increase by $75,000 and expenses decrease by $75,000
Liabilities increase by $75,000 and expenses decrease by $75,000
Assets decrease by $75,000 and expenses decrease by $75,000
Assets increase by $75,000 and liabilities increase by $75,000
Question 7. Question : Of the following accounts, the one that normally has a credit balance is:
Cash
Office Equipment
Sales Salaries Payable
Dividends
Sales Salaries Expense
Question 8. Question : The primary objective of financial accounting is:
To serve the decision-making needs of internal users
To provide financial statements to help external users analyze and interpret an organization’s activities
To monitor and control company activities
To provide information on both the costs and benefits of managing products and services
To know what, when and how much to produce
Question 9. Question : The debt ratio is used:
To measure the amount of equity relative to the expenses
To reflect the risk associated with a company’s debts
Only by banks when a business applies for a loan
To determine how much debt a firm should pay off
Question 10. Question : The principle that (1) requires revenue to be recognized at the time it is earned, (2) allows the inflow of assets associated with revenue to be in a form other than cash and (3) measures the amount of revenue as the cash plus the cash equivalent value of any non-cash assets received from customers in exchange for goods or services is called the:
Going-concern principle
Cost principle
Revenue recognition principle
Objectivity principle
Business entity principle
Question 11. Question : Creditors’ claims on the assets of a company are called:
Net losses
Expenses
Revenues
Equity
Liabilities
Question 12. Question : An example of a financing activity is:
Buying office supplies
Obtaining a long-term loan
Buying office equipment
Selling inventory
Buying land
Question 13. Question : A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth $140,000 and purchased for $137,000. The land should be recorded in the purchaser’s books at:
$95,000
$137,000
$138,500
$140,000
$150,000
Question 14. Question : Prepaid expenses are:
Payments made for products and services that do not ever expire
Classified as liabilities on the balance sheet
Decreases in retained earnings
Assets that represent prepayments of future expenses
Question 15. Question : A company has twice as much owner’s equity as it does liabilities. If total liabilities are $50,000, what amounts of assets are owned by the company?
$50,000
$100,000
$150,000
$200,000
Question 16. Question : The main purpose of adjusting entries is to:
Record external transactions and events
Record internal transactions and events
Recognize assets purchased during the period
Recognize debts paid during the period
Correct errors
Question 17. Question : Which of the following statements is incorrect?
An income statement reports revenues earned less expenses incurred
An unadjusted trial balance shows the account balances after they have been revised to reflect the effects of end-of-period adjustments
Interim financial reports can be based on one-month or three-month accounting periods
Property, plant and equipment are referred to as plant assets
Question 18. Question : On January 1 a company purchased a five-year insurance policy for $1,800 with coverage starting immediately. If the purchase was recorded in the Prepaid Insurance account and the company records adjustments only at year-end, the adjusting entry at the end of the first year is:
Debit Prepaid Insurance, $1,800; credit Cash, $1,800
Debit Prepaid Insurance, $1,440; credit Insurance Expense, $1,440
Debit Prepaid Insurance, $360; credit Insurance Expense, $360
Debit Insurance Expense, $360; credit Prepaid Insurance, $360
Debit Insurance Expense, $360; credit Prepaid Insurance, $1,440
Question 19. Question : A company pays each of its two office employees each Friday at the rate of $100 per day each for a five-day week that begins on Monday. If the monthly accounting period ends on Tuesday and the employees worked on both Monday and Tuesday, the month-end adjusting entry to record the salaries earned but unpaid is:
Debit Unpaid Salaries $600 and credit Salaries Payable $600
Debit Salaries Expense $400 and credit Salaries Payable $400
Debit Salaries Expense $600 and credit Salaries Payable $600
Debit Salaries Payable $400 and credit Salaries Expense $400
Question 20. Question : Based on the following information, what would be the beginning balance in the Retained Earnings Account, assuming all accounts have a normal balance?
Cash $ 6,754 Dividends $ 2,000
Accounts receivable $ 13,733 Consulting fees earned $ 13,718
Office supplies $ 2,625 Rent expense $ 3,673
Land $ 37,153 Salaries expense $ 6,642
Office equipment $ 14,535 Telephone expense $ 560
Accounts payable $ 6,463 Miscellaneous expense $ 280
Common stock $ 54,490 Retained Earnings ?
$0
$13,718
$13,155
$13,284
Question 21. Question : Unearned revenue is reported on the financial statements as:
A revenue on the balance sheet
A liability on the balance sheet
An unearned revenue on the income statement
An asset on the balance sheet
An operating activity on the statement of cash flows
Question 22. Question : Which of the following identifies the proper order of the accounting cycle?
Analyze, Journalize, Unadjusted Trial Balance
Analyze, Post, Unadjusted Trial Balance
Journalize, Post, Adjusted Trial Balance
Unadjusted Trial Balance, Adjusted Trial Balance, Close
Adjusted Trial Balance, Adjustments, Financial Statements
Question 23. Question : The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:
Cash basis accounting
The matching principle
The time period principle
Accrual basis accounting
Revenue basis accounting
Question 24. Question : A balance sheet that places the assets above the liabilities and equity is called a(n):
Report form balance sheet
Account form balance sheet
Classified balance sheet
Unadjusted balance sheet
Question 25. Question : A classified balance sheet:
Measures a company’s ability to pay its bills on time
Organizes assets and liabilities into important subgroups
Presents revenues, expenses and net income
Reports operating, investing and financing activities
Question 26. Question : A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011?
$3,250
$3,500
$4,000
$6,500
$7,000
Question 27. Question : The difference between the cost of an asset and the accumulated depreciation for that asset is:
Depreciation Expense
Unearned Depreciation
Prepaid Depreciation
Depreciation Value
Book Value
Question 28. Question : The length of time covered by a set of periodic financial statements is referred to as the:
Fiscal cycle
Natural business year
Accounting period
Business cycle
Operating cycle
Question 29. Question : A trial balance prepared after the closing entries have been journalized and posted is the:
Unadjusted trial balance
Post-closing trial balance
General ledger
Adjusted trial balance
Work sheet
Question 30. Question : A post-closing trial balance includes:
All ledger accounts with balances, none of which can be temporary accounts
All ledger accounts with balances, none of which can be permanent accounts
All ledger accounts with balances, which include some temporary and some permanent accounts
Only revenue and expense accounts
Only asset accounts
Question 31. Question : The main principles of internal control include which of the following:
Establish responsibilities
Maintain minimal records
Use only computerized systems
Bond all employees
Question 32. Question : Given the following information:
Petty cash balance $ 450.00 Courier receipt $ 82.50
Postage receipt $ 48.00 Office Supplies receipt $ 56.22
Business Meal receipt $ 102.34 Cash on hand at the end of the month $ 76.21
What is the amount of cash over and short?
debit $84.73
credit $84.73
debit $160.94
credit $160.94
no cash over or short would be recorded
Question 33. Question : Cash equivalents:
Are short-term, highly liquid investments
Include 6-month CDs
Include checking accounts
Are recorded in petty cash
Include money orders
Question 34. Question : J.C. Penny had net sales of $28,496 million, its cost of goods sold was $19,092 million and its net income was $997 million. Its gross margin ratio equals:
3.5%
5.2%
33%
67%
149.3%
Question 35. Question : A company had sales of $695,000 and its cost of goods sold of $278,000. Its gross margin equals:
$(417,000)
$695,000
$278,000
$417,000
Question 36. Question : The inventory turnover ratio:
Is used to analyze profitability
Is used to measure solvency
Measures how quickly a company turns over its merchandise inventory
Validates the acid-test ratio
Calculation depends on the company’s inventory valuation method
Question 37. Question : The understatement of the beginning inventory balance causes:
Cost of goods sold to be understated and net income to be understated
Cost of goods sold to be understated and net income to be overstated
Cost of goods sold to be overstated and net income to be overstated
Cost of goods sold to be overstated and net income to be understated
Cost of goods sold to be overstated and net income to be correct
Question 38. Question : Multiple-step income statements:
Are required by the FASB
Contain more detail than a simple listing of revenues and expenses
Are required for the perpetual inventory system
List cost of goods sold as an operating expense
Can only be used in perpetual inventory systems
Question 39. Question : Which inventory valuation method assigns a value to the inventory on the balance sheet that approximates current cost and also mimics the actual flow of goods for most businesses?
FIFO
Weighted average
LIFO
Specific identification
First In Still Here
Question 40. Question : Which of the following is the most serious limitation of internal controls?
Computer error
Human fraud or human error
Cost-benefit principle
Cybercrime
Management fraud
Question 41. Question : The full disclosure principle:
Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made and its effect on net income
Requires that companies use the same accounting method for inventory valuation period after period
Is not subject to the materiality principle
Is only applied to retailers
Is also called the consistency principle
Question 42. Question : ABC Corporation had total quick assets $5,888,000, current assets $11,700,000 and current liabilities $8,000,000. Its acid-test ratio equals:
0.50
0.68
0.74
1.50
2.20
Question 43. Question : An analysis that explains any differences between the checking account balance according to the depositor’s records and the balance reported on the bank statement is a (n):
Internal audit
Bank reconciliation
Bank audit
Trial reconciliation
Analysis of debits and credits
Question 44. Question : Which of the following procedures would weaken the control over cash receipts that arrive through the mail?
After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender’s name, the amount and an explanation of why the money is sent
The bank reconciliation is prepared by a person who does not handle cash or record cash receipts
For safety, only one person should open the mail and that person should immediately deposit the cash received in the bank
The cashier should not also be the record keeper who records the amounts received in the accounting records
All of the above are good internal control procedures over cash receipts that arrive through the mail
Question 45. Question : A company purchased $1,800 of merchandise on December 5. On December 7, it returned $200 worth of merchandise. On December 8, it paid the balance in full, taking a 2% discount. The amount of the cash paid on December 8 equals:
$200
$1,564
$1,568
$1,600
$1,800
Question 46. Question : Herald Company had sales of $135,000, sales discounts of $2,000 and sales returns of $3,200. Herald Company’s net sales equals:
$5,200
$129,800
$133,000
$135,000
$140,200
Question 47. Question : The credit terms 2/10, n/30 are interpreted as:
2% cash discount if the amount is paid within 10 days, with the balance due in 30 days
10% cash discount if the amount is paid within 2 days, with balance due in 30 days
30% discount if paid within 2 days
30% discount if paid within 10 days
2% discount if paid within 30 days
Question 48. Question : Acme-Jones Corporation uses a LIFO perpetual inventory system.
August 2, 25 units were purchased at $12 per unit.
August 5, 10 units were purchased at $13 per unit
August 15, 12 units were sold at $25 per unit.
August 18, 15 units were purchased at $14 per unit.
What was the amount of the ending inventory for the month of August?
$496.00
$486.00 &