Question 1
The balance sheet shows
A. The results of operations
B. All revenues and expenses
C. The amount of net income or loss
D. The financial position of a business at a given time
Question 2
Pepsi's accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coca-Cola's turnover was 9.3 for this year and 9.3 for last year. These results imply that:
A. Coke has the better turnover for both years
B. Pepsi has the better turnover for both years
C. Coke's turnover is improving
D. Coke is collecting its receivables more quickly than Pepsi in both years
Question 3
The consistency concept:
A. Requires a company to consistently use the same accounting method of inventory valuation unless a change will improve financial reporting
B. Requires a company to use one method of inventory valuation exclusively
C. Requires that all companies in the same industry use the same accounting methods of inventory valuation
D. Is also called the full disclosure concept
Question 4
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?
A. FIFO
B. Weighted average
C. LIFO
D. Specific identification
Question 5
Unearned revenue is reported on the financial statements as:
A. A revenue on the balance sheet
B. A liability on the balance sheet
C. An unearned revenue on the income statement
D. An asset on the balance sheet
Question 6
Physical inventory counts:
A. Are not necessary under the perpetual system.
B. Are necessary to measure and adjust for inventory shrinkage.
C. Must be taken at least once a month.
D. Are not necessary under the cost-to benefit constraint.
Question 7
The accounting principle that requires financial statements (including notes) to report all relevant information about the operations and financial condition of a company is called:
A. Relevance
B. Full disclosure
C. Materiality
D. Matching
Question 8
The full disclosure principle:
A. 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
B. Requires that companies use the same accounting method for inventory valuation period after period
C. Is not subject to the materiality principle
D. Is also called the consistency principle
Question 9
The materiality constraint:
A. States that an amount can be ignored if its effect on financial statements is unimportant to the user's business decisions
B. Requires use of the allowance method for bad debts
C. Requires use of the direct write-off method
D. States that bad debts not be written off
Question 10
Under the LIFO method, the flow of goods through the accounting records will:
A. Be the opposite of the physical flow of goods through the business
B. Closely match the physical flow of goods through the business
C. Exactly match the physical flow of goods through the business
D. Have no relationship to the physical flow of goods through the business
Question 11
According to GAAP, the amount of bad debt expense can be estimated by:
A. Only the percent of sales method
B. Only by the aging of accounts receivable method.
C. The percent of sales method or the income statement method
D. The percent of sales method or the percent of receivables method
Question 12
A company receives a 6.2%, 60-day note for $9,650. The total amount of cash due on the maturity date is:
A. $99.72
B. $9,650.00
C. $10,248.30
D. $9,749.72
Question 13
On October 29 of the current year, a company concluded that a customer's $4,400 account receivable was uncollectible and that the account should be written off. What effect will this write-off have on this company's net income and total assets assuming the allowance method is used to account for bad debts?
A. Decrease in net income; no effect on total assets
B. No effect on net income; no effect on total assets
C. Decrease in net income; decrease in total assets
D. Increase in net income; no effect on total assets
Question 14
The matching principle requires:
A. That expenses be ignored if their effect on the financial statements is less important than revenues to the financial statement user
B. The use of the direct write-off method for bad debts
C. The use of the allowance method of accounting for bad debts
D. That bad debts be disclosed in the financial statements
Question 15
During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:
A. Specific identification method
B. Weighted average method
C. FIFO method
D. LIFO method
Question 16
A company had inventory on November 1 of 5 units at a cost of $20 each. On November 2, they purchased 10 units at $22 each. On November 6, 8 units were sold for $55 each. Using the LIFO perpetual inventory method, what was the value of the inventory left on November 6 after the sale?
A. $440
B. $160
C. $176
D. $144
Question 17
An overstatement of ending inventory will cause
A. An overstatement of assets and equity on the balance sheet
B. An understatement of assets and equity on the balance sheet
C. An overstatement of assets and an understatement of equity on the balance sheet
D. An understatement of assets and an overstatement of equity on the balance sheet
Question 18
The interest accrued on $3,600 at 7% for 60 days is:
A. $36
B. $42
C. $252
D. $420
Question 19
When the maker of a note honors a note this indicates that the note is:
A. Signed
B. Paid in full
C. Guaranteed
D. Notarized
Question 20
Goods in transit are included in a purchaser's inventory:
A. At any time during transit
B. When the purchaser is responsible for paying freight charges
C. If the goods are shipped FOB destination
D. After the halfway point between the buyer and seller