Question 1 Owners of business firms are the only people who need accounting information.
Question 2 Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.
Question 3 Expense recognition is tied to revenue recognition.
Question 4 A concentration of credit risk is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of the company.
Question 5 Lankston Company began the year by issuing $90,000 of common stock for cash. The company recorded revenues of $825,000, expenses of $720,000, and paid dividends of $45,000. What was Lankston's net income for the year?
Question 6 Source documents can provide evidence that a transaction has occurred.
Question 7 Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods by the buyer.
Question 8 Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company.
Question 9 Marvin Services Corporation had the following accounts and balances:
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Accounts payable
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$18,000
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Equipment
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$21,000
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Accounts receivable
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3,000
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Land
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21,000
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Buildings
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?
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Unearned service revenue
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6,000
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Cash
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9,000
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Total stockholders' equity
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?
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If the balance of the Buildings account was $45,000 and the equipment was sold for $21,000, what would be the total of stockholders' equity?
Question 10
Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of Bathlinks's financial statements that
Question 11
The multiple-step income statement is considered more useful than the single-step income statement because it highlights the components of net income.
Question 12
Financing activities include the purchase or sale of long-lived assets or the purchase or sale of investment securities.
Question 13
Which of the following is the least likely consideration that management uses when deciding whether to pay a dividend?
Question 14
The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.
Question 15
Which of the following is not a common way that managers use the balance sheet?
Question 16
The partnership form of business organization
Question 17
Solvency ratios measure the short-term ability of the company to pay its maturing obligations.
Question 18
Use the following data to calculate the current ratio.
Carne Auto Supplies
Balance Sheet
December 31, 2014
Cash $ 35,000 Accounts payable $ 65,000
Accounts receivable 50,000 Salaries and wages payable 10,000
Inventory 70,000 Mortgage payable 90,000
Prepaid insurance 40,000 Total liabilities $165,000
Stock investments 80,000
Land 95,000
Buildings $100,000 Common stock $120,000
Less: Accumulated Retained earnings 250,000
depreciation (30,000) 85,000 Total stockholders' equity $370,000
Trademarks 70,000 Total liabilities and
Total assets $535,000 stockholders' equity $535
Question 19
The best definition of assets is the
Question 20
Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company.
Question 21
The economic resources that are owned by a business are called stockholders' equity.
Question 22
Which of the following would not be classified as a long-term liability?
Question 23
To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the employee authorized to sign checks.
Question 24
An advantage of using the periodic inventory system is that it requires less record keeping than the perpetual inventory system.
Question 25
An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.