Problem 1. The primary users of external financial reports are
a. Those who direct day to day operations of a business enterprise
b. Individuals who have an economic interest in the firm but who are not part of management
c. Managers of an enterprise who plan, implement plans, and control costs
d. None of the above
Problem 2. If a company has $15,000 in assets and $10,000 in equities, then liabilities are
a. $25,000
b. $10,000
c. $5,000
d. $0
Problem 3. A revenue account is increased with
a. Debits
b. Credits
c. Equities
d. None of the above
Problem 4. Expense items that have been incurred during a period but not recorded by the end of the period are:
a. Prepaid liabilities
b. Prepaid expenses
c. Deferred expenses
d. Unrecorded liabilities
Problem 5. A purchase of $900 of supplies on account was journalized and posted as $900 debit to Supplies on Hand and a $900 credit to Accounts Receivable. The entry to correct this error is
a. A $900 debit to accounts payable and a $900 credit to accounts receivable
b. A $900 debit to supplies on hand and a $900 credit to accounts payable
c. A $900 debit to accounts receivable and a $900 credit to accounts payable
d. A $900 debit to accounts receivable and a $900 credit to supplies on hand
Problem 6. The retained earnings balance of Werner Company was $46,800 on January 1, 2005. Net income for 2005 was $26,480. If retained earnings had a credit balance of $21,000 after closing entries were posted on December 31, 2005 and if additional stock of $13,000 was issued during the year, dividends paid during 2005 were:
a. $38,800
b. $52,280
c. $65,280
d. none of the above
7. If net purchases are $200,000 and beginning and ending accounts payable balances are $25,000 and $20,000, respectively, cash paid for purchases is
a. $195,000
b. $200,000
c. $205,000
d. $210,000
Problem 8. The tools of financial statement analysis are not â??staticâ? they have, and will continue, to evolve as the nature of doing business and/or the needs of financial statement users change
a. True
b. False
Problem 9.Which of the following costs would be LEAST likely to be a fixed cost:
a. Plant property taxes
b. Plant supervisorâ??s salary
c. Utilities costs
d. Executive salaries
Problem 10. Sales income minus total fixed costs is equal to:
a. Net income
b. Contribution margin
c. Gross margin
d. None of these choices