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Test answers for Financial Accounting 2016

(602 / 3, CL) Last updated: January 23
Elance • Fin. & Mgt.
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602 Answered Test Questions:

1. What is a deposit in transit?

Answers:

• A deposit not received by the company. It's in the mail.

• A deposit that is expected.

• A deposit that was made at month end but is not reported on the bank statement until the following month.

• A deposit received but not deposited in the bank at month end.

2. Inventory falls under which category?

Answers:

• Long term liability

• Retained Earnings

• Current Liability

• Current Assets

• Non current assets

3. Which is not a method to account for the loss of receivables?

Answers:

• Factoring of Receivables Method

• Allowance for Doubtful Accounts Method

• Direct Write Off Method

4. What does a business owe all of its assets to?

Answers:

• banks, credit unions

• creditors, owners

• workers, owners

• creditors, workers

5. What is the best definition of Retained earnings?

Answers:

• The remaining balance of Net Income after dividends have been subtracted.

• Cash required to be held for loan repayment requirements

• Liquid funds in escrow required by lender convenants

• The difference of cash holdings at the beginning of the year and cash at end of the year

6. Which of the following gives the correct sequence of accounting procedures?

Answers:

• Journal, ledger, trial balance, and financial statements.

• Financial statements, journal, ledger, and trial balance.

• Financial statements, trial balance, ledger, and journal.

• Ledger, trial balance, journal, and financial statements.

7. Which of the following is NOT an asset account?

Answers:

• Accounts Receivable

• Accounts Payable

• Inventory

• Cash

• Goodwill

8. What is the definition of FIFO for inventory valuation purposes?

Answers:

• It is assumed that items purchased first are sold first.

• It is assumed that items purchased last are sold first.

• It is assumed that items purchased are valued at the greater of cost or market value

• The system updates inventory accounts after each purchase or sale.

9. What is a journal?

Answers:

• both of these

• book of original entry

• a record of financial transactions in order by date

10. Which of the following sections would you find on a balance sheet?

Answers:

• price to earnings ratio

• interest expense

• liabilities

• amortized expenses

• quick ratio

11. If Assets = $25,000 and Liabilities = $15,000 what is the amount of equity?

Answers:

• -($10,000)

• $40,000

• $5,000

• $10,000

12. Corporations whose stock is publicly traded must have their financial statements ________ by independent certified public accountants.

Answers:

• audited

• lend

• sold

• bought

13. Financial accounting relies on which of the following concepts?

Answers:

• Time's Up!

• principles

• all of these

• assumptions

• conventions

14. Common stock is recorded where on the financial statements?

Answers:

• In other expense.

• In stockholders??? equity.

• In accounts payable.

• In accounts receivable.

15. Trademarks are an example of:

Answers:

• Physical assets

• Depreciation

• Liabilities

• PP&E

• Intangible assets

16. What is an example of an item that would be included in calculating comprehensive income?

Answers:

• Effects of accounting adjustments from earlier periods.

• All of these

• Foreign currency translation adjustments.

• Temporary changes in market value of noncurrent investments.

17. Goodwill is an example of:

Answers:

• Depreciation

• A liability

• A physical asset

• An intangible asset

• PP&E

18. Accounting firms generally do many things including:

Answers:

• All of these

• Management Consulting Services

• Audit or Assurance Services

• None of these

• Tax Services

19. What does LIFO stand for?

Answers:

• Lower interest, first out

• Last in, first out

• Last in, Last out

• Last in final out

• Lower inventory for outsiders

20. What is the FISH inventory method?

Answers:

• Last in,last out

• First in,last out

• first-in, still-here

• First in,first out

21. Property is listed under which category?

Answers:

• Expense

• Liability

• Shareholder Equity

• Asset

• Revenue

22. What is long-term debt considered?

Answers:

• Expense

• Shareholder Equity

• Liability

• Asset

• Revenue

23. When a bond is sold at par, what price is it sold for?

Answers:

• Any of the other options

• Below face value

• Face value

• None of the other options

• Above face value

24. "EBIT" stands for____

Answers:

• Retained Earnings before Interest expense deductions

• It is not an expression or acronym used in Financial Accounting

• Earnings before tax, interest and dividends

• It is a form of taxable interest.

25. What does CPA stand for?

Answers:

• Certified Professional Accountant

• Certified Public Accountant

• Commerce Public Accountant

• Chartered Public Accountant

26. The terms 2/10, n/30 mean?

Answers:

• 2 Days to get a $10 discount otherwise you pay in full.

• 2% penalty incurred if not paid within 10 days.

• $2 discount within 10 days, no discount within 30 days

• 2% discount if paid within 10 days, net amount due within 30 days.

27. Which of the following is the correct format for the balance sheet in order of occurrence?

Answers:

• liabilities, assets, stockholder???s equity.

• assets, liabilities, stockholder???s equity.

• stockholder???s equity, liabilities, assets.

• assets, stockholder???s equity, liabilities

28. Financial accounting serves the following purposes:

Answers:

• producing financial statements for meeting regulatory requirements

• All of the Above

• producing information used by the management of a business entity for decision making, planning and performance evaluation

• producing general purpose financial statements

29. A sole proprietorship is a business owned by:

Answers:

• 3 people

• 5 people

• 1 person

• 2 people

• 4 people

30. What is an example of a current liability?

Answers:

• Shareholders Equity

• Prepaid Expense

• Depreciation

• Property, Plant and Equipment

• Accounts Payable

31. You have received cash but have not provided a service, which account should be used to record this?

Answers:

• Taxes Payable

• Salaries Payable

• COGS

• Unearned Revenue

• Revenue

32. If Assets = $25,000 and Liabilities = $35,000 what is the amount of equity?

Answers:

• $40,000

• $5,000

• $10,000

• -($10,000)

33. Standard costing typically includes which of the following costs?

Answers:

• All of these

• Direct labor

• Manufacturing overhead

• Direct material

34. Large corporations must follow the ___________ basis of accounting.

Answers:

• accrual

• cash

• debit

• credit

35. Under US GAAP, what constitutes an audit?

Answers:

• To ensure that management is not cheating shareholders.

• An examination of the financial reports to ensure that they represent what they claim and conform with GAAP.

• An examination of the financial reports to ensure that they represent what they claim and conform with USPAP.

• To make sure that the company does not get in trouble with the PCAOB.

36. What is plant (facility) considered?

Answers:

• Liability

• Shareholder Equity

• Asset

• Expense

• Revenue

37. Cash balance is found in which section of the financial statements?

Answers:

• Other Liabilities

• Gross Revenues

• Current Assets

• Fixed Assets

38. Publicly traded companies employ _____ to audit the financial statements for their inclusion in reports to the shareholders.

Answers:

• Lawyers

• Financial analysts

• Investment attorneys

• Financial advisors

• CPAs

39. What is the definition of posting in the accounting cycle?

Answers:

• Filing information with the IRS

• Creation of the Income Statement

• Posting activity moves balances of journal entries to ledger accounts

• Development of the Trial Balance

40. By law, who is the only person qualified to sign an audit report?

Answers:

• A student with a masters in accounting

• CPA licensed individual only

• A principal at an accounting firm only

• An accounting major

• Anyone

41. What does AICPA stand for?

Answers:

• American Institute of Certified Public Accountants

• American Institute of Chartered Public Accountants

• American Institute of Credentialed Public Accountants

• American Institute of Chartered Private Accountants

• American Institute of Certified Private Accountants

42. How are Accounts Receivables classified on the Balance Sheet?

Answers:

• As an Asset

• As a Liability

• As Credit Owed

• As a Short Term Liability

43. What is a patent considered?

Answers:

• Intangible Asset

• Expense

• Revenue

• Shareholders Equity

• Tangible Asset

44. What does FIFO stand for?

Answers:

• From Inventory For Orders

• Funds In For Outsiders

• Fast In, First Out

• First in, First out

• Final Inventory, First Out

45. Why are standard cost amounts not always equal to the actual cost amounts?

Answers:

• Poor estimation efforts on the part of management.

• Extraordinary events recognized by the accounting reporting process.

• Standard cost is expected cost, actuals can be different.

• The variability of commodity inputs.

46. The acronym for the common rules and standards that companies must follow when preparing its external financial statements is ______.

Answers:

• PAAC

• GAAP

• GAP

• AAGP

47. What must one do to record transactions?

Answers:

• determine which accounts the transaction affects

• measure the event in monetary terms

• all of these

• record the transactions in a ledger

48. Companies registered with the Securities and Exchange Commission are required to have their financial statements audited by an external auditor.

Answers:

• True

• False

49. To what account group does 'cash on hand' belong?

Answers:

• Liability

• Expense

• Shareholder Equity

• Asset

• Revenue

50. A copyright is an example of:

Answers:

• An intangible asset

• A liability

• Depreciation

• PP&E

• A physical asset

51. On the cash flow statement, buying of a stock is found in the _________ section.

Answers:

• Investing

• Financing

• Not located on the cash flow statement

• Income

• Operating

52. What is Goodwill in financial reporting?

Answers:

• Goodwill is a charitable donation place. You can take household items to Goodwill and get a tax dedution.

• There is no such account that is considered Goodwill in accounting.

• Goodwill is something you do without wanting anything in return.

• Goodwill is an Asset account. When a company is purchased for more than the assets are worth the off setting account is called Goodwill.

53. Once a discontinued operation is disposed of, the gain or loss can be disclosed in the notes to the financial statements

Answers:

• False

• True

54. What is the bottom line of an income statement?

Answers:

• Company's total sales

• Company's total investments

• Company's net earnings or losses

• Company's net worth

• Company's total expenses

55. What is the definition of Current Liabilities?

Answers:

• The balancing account to Short Term Assets

• A contra account to Long Term Liabilities

• Debts that are callable by a creditor

• Liabilities that are expected to liquidate within a year or normal operating cycle, whichever is longer

56. As found on an income statement, revenue can best be defined as:

Answers:

• Gross receipts earned by the company selling its goods or intangible assets

• Gross receipts earned by the company selling its depreciated supplies or services

• Gross receipts earned by the company selling its shares or services

• Gross receipts earned by the company selling its goods or services

• Gross receipts earned by the company selling its intangible assets or services

57. ______ consist of assets that a retail or wholesale company acquires for resale or goods that manufacturers produce for sale.

Answers:

• other assets

• intangible assets

• inventories

• prepaid expenses

58. What is preferred stock considered?

Answers:

• Revenue

• Liability

• Expense

• Shareholder Equity

• Asset

59. The end product for an income statement is:

Answers:

• Net earnings or net interest

• Net income or net loss

• Net dividends or net depreciation

• Net profits or net gain

• Net accumulation or net income

60. Which of the following is the Control Account?

Answers:

• Accounts Payable

• All of the listed accounts are Control Accounts

• Accounts Receivable

• Inventory

61. Tangible, long lived assets used in the operations of the business are classified as ____.

Answers:

• intangible assets

• property, plant, and equipment

• other assets

• inventories

62. Franchise Licenses are an example of:

Answers:

• PP&E

• Intangible assets

• Depreciation

• Physical assets

• Liabilities

63. Which types of entities are considered "flow through" entities?

Answers:

• All of these

• Sole Proprietership

• Partnership

• Limited Liability Corporation

64. Payments made to the shareholders of a corporation for profit are called:

Answers:

• Salary

• Distributions or Dividends

• Payroll

• Share of profits

• Gain

65. If managers are granted the opportunity to buy additional firm shares at a predetermined price on or before a future date, they are said to be owners of:

Answers:

• performance shares.

• direct intervention.

• executive stock options.

• takeover threats.

66. An ordinary share dividend is:

Answers:

• None of these

• Interest on money lent to the company by its shareholders.

• The directors??? remuneration

• An expense of running the company

• Part of the company profits used to reward the shareholders for their investment

67. Realized revenue means a  transaction where goods and services are exchanged for cash or claims to cash.

Answers:

• True

• False

68. If the accountant forgets to record salary expense in the Statement of Income, what is the result?

Answers:

• Retained earnings is too low.

• Retained earnings is correctly stated, as the omission only affects the Income Statement.

• Net income is too low.

• Net income is too high.

69. Under which category is Mortgage Payable?

Answers:

• Current Assets

• Long-term Assets

• Long-term Liabilites

• Current Liabilities

• Fixed Assets

70. On the cash flow statement, buying of a bond is found in the _________ section.

Answers:

• Income

• Not located on the cash flow statement

• Financing

• Investing

• Operating

71. What is NOT one of the sections of the Cash Flow statement?

Answers:

• Cash flows from financing activities

• Cash flows from operating activities

• Cash flows from investing activities

• Cash flows from shareholder contribution

72. What is one method for recording uncollectible receivables?

Answers:

• Cash basis

• Nonrecognition

• Direct write-off

• Accrual

73. Which of the following is a category or element of the balance sheet?

Answers:

• Gains

• Liabilities

• Expenses

• Losses

74. The listing of all of the accounts available for use in a company's accounting system is known as the ?

Answers:

• Chart of accounts

• Account Heads

• Account Classification

• Account Information

• Account Categorizing

75. Which reports allow the interested party to evaluate the profitability of a business?

Answers:

• balance sheet

• statement of owners equity

• statement of cash flows

• income statement

• all of these

76. How frequently should the 10-Q be filed for a public company?

Answers:

• Daily

• Monthly

• Annually

• Never filed

• Quarterly

77. Standard costing is usually associated with:

Answers:

• Manufacturing cost of product

• High tech contract labor

• Commodity pricing

• Comparable industry analysis

78. What is short-term debt considered?

Answers:

• Expense

• Shareholder Equity

• Revenue

• Asset

• Liability

79. What is the best definition for Salvage value?

Answers:

• The price that the parts of a piece of equipment could be sold for

• An industry standard, published valuation

• The estimated value that an asset will realize upon its sale at the end of its useful life

• What the property could be sold for today

80. What is taxes payable considered?

Answers:

• Expense

• Asset

• Revenue

• Shareholder Equity

• Liability

81. What is NOT considered a current asset?

Answers:

• Cash and cash equivalents

• Inventories

• Prepaid expenses

• Dividends payable

82. What is interest payable considered?

Answers:

• Expense, Income

• Revenue, Loss

• Shareholder, Equity

• Liability, Expense

• Asset, Liability

83. What is the definition of LIFO for inventory valuation purposes?

Answers:

• It is assumed that items purchased first are sold first.

• It is assumed that items purchased are valued at the greater of cost or market value

• It is assumed that items purchased last are sold first.

• The system updates inventory accounts after each purchase or sale.

84. The financial statement that reports the assets, liabilities, and stockholders' (owner's) equity at a specific date is the

Answers:

• Statement of Expenses

• Statement of Cash flows

• Statement of Shareholder's (Owner's) Equity

• Income Statement

• Balance Sheet

85. What type of account Is Rent Payable?

Answers:

• Contra-Asset

• Property, Plant and Equipment

• Liability

• Asset

86. What account group does 'accounts receivable' belong?

Answers:

• Shareholder Equity

• Expense

• Liability

• Asset

• Revenue

87. what is IAS?

Answers:

• International accounting standards

• internal accounting system

• international auditing standards

• included available sale

• international assignment system

88. At January 1, 2010, the balance of equity was $200,000. During the year of 2010, revenue and expenses were as follows: Revenue = $300,000; Expenses = $240,000. What is the balance of equity at December 31, 2010?

Answers:

• $300,000

• $260,000

• $360,000

• $240,000

89. What is the purpose of an adjusting journal entry?

Answers:

• To adjust account balances to reflect correct amounts under accrual-based accounting

• The equivalent of balancing a check book for a business with their bank statements and cash accounts

• A journal entry to move amounts from Temp. accounts to B/S or I/S accounts

• It is an interim step to evaluate if a compilation of journal acccounts such that Assets=Liabilities+Equity

90. Which of the following is considered an internal user of financial information?

Answers:

• Government agencies

• Board of Directors

• Investors

• Suppliers

• Lenders

91. Which of these is NOT an intangible asset?

Answers:

• Licenses

• Copyrights

• Franchises

• Patents

• Equipment

92. Generally Accepted Accounting Principles may be described as:

Answers:

• The rules used in preparing tax returns.

• The standards used in preparing financial statements.

• Guidelines for establishing a strong system of internal control.

• Guidelines for keeping a business entity profitable and solvent.

93. What is the benefit of a limited liabilty corporation, LLC?

Answers:

• The company cannot be sued.

• Taxation as a partnership, without personal risks, financial and legal, like a corporation.

• The company is not liable for the debts it incurs.

• Liability is shared among more than one person.

94. What is considered a current asset?

Answers:

• Patents

• Accounts Receivable

• Goodwill

• Property, plant and equipment

95. Net income =

Answers:

• Revenues - Liabilities

• Assets - Liabilities

• Assets - Expenses

• Revenues - Expenses

96. Which one of the following is NOT one of the four basic income statement components?

Answers:

• Gains

• Revenue

• Expenses

• Losses

• Depreciation

97. Which is an example of a Current Asset?

Answers:

• Property, Plant and Equipment

• Cash or Bank Balance

• Depreciation

• Accounts Payable

• Equity

98. What is bonds payable considered?

Answers:

• Revenue

• Expense

• Asset

• Shareholder Equity

• Liability

99. Prepaid rent can be found on which part of the balance sheet

Answers:

• Long term liabilities

• Current assets

• Current liabilities

• Property plant and equipment

100. Which of these is NOT a tangible asset?

Answers:

• Trademarks

• Buildings

• Fixtures

• Land

• Natural Resources

101. GAAP generally uses one of two measurement principles. Which of the following IS one of these two principles?

Answers:

• Fair value principal

• Subsidized value principal

• Logical value principal

• Expense principal

• Amortized principal

102. Which of the following factors is likely to be an area of difficulty in a large multinational group of companies?

Answers:

• The preparation of the group financial statements.

• All of the these

• Foreign currency translation

• None of these

• Compliance with international accounting standards

103. What does IFRS stand for?

Answers:

• International Financial Reporting Standards

• Intermediate Financial Recording Standards

• International Fiscal Reporting Standards

• International Financial Recording Standards

• Intermediate Fiscal Recording Standards

104. Mergers and acquisitions are covered under which accounting concept?

Answers:

• Currency Translation

• Revenue

• Business Combinations

• Inventories

• Depreciation

105. What is the best definition of Paid-in capital?

Answers:

• Assets-Liabilities=Paid-in Capital

• The amount shareholders contributed to the company in exchange for the shares of common stock or preferred stock less stated par value of the securities

• Loans made by shareholders to the company

• The excess of purchase price over asset value when a company is acquired

106. Which of the following is NOT a current asset?

Answers:

• Land

• Accounts receivable

• Inventory

• Prepaid insurance

107. What is not a component of interest computations?

Answers:

• Expected inflation

• Interest Rate

• Principal

• Time

108. What is the difference between the accounts 'rent receivable' and 'rent revenue'?

Answers:

• 'Rent receivable' is a balance sheet asset account and 'Rent revenue' is an income statement account

• 'Rent revenue' is a balance sheet account and 'Rent receivable' is an income statement account

109. What does the acronym EBITDA mean?

Answers:

• Earnings Before Interest, Tax, Depreciation and Amortization

• Earnings Before Investments, Trade receivables, Depreciation and Amortisation

110. Rules governing financial accounting are for the benefit of:

Answers:

• All outside stakeholders

• Only banks

• Company owners only

• Company management

• Internal members of the company

111. What type of ratio is Return On Assets (ROA)?

Answers:

• Valuation Ratio

• Merger vs. Consolidation Ratio

• Profitability Ratio

• Lease vs. Buy Ratio

• Credit Analysis Ratio

112. Which side of a T-account is a debit recorded?

Answers:

• Right

• Both

• None of these

• Left

113. At the end of the accounting period, the revenue and expense accounts of the company are moved to what account?

Answers:

• cash

• accounts receivable

• current liabilities

• depreciation

• retained earnings

114. What type of account is Interest Receivable?

Answers:

• Contra-Asset

• Asset

• Long term Liability

• Short term Liability

115. What type of account is Prepaid Rent?

Answers:

• Asset

• Short term Liability

• Contra-Asset

• Long term Liability

116. Which cost are trading securities reported at?

Answers:

• Historic cost minus depreciation

• Historic cost

• Fair value

• Amortized cost

• Amortized cost minus depreciation

117. Which of the following would not be a current asset?

Answers:

• Supplies

• Prepaid Insurance

• Accounts Receivable

• Land

118. The statement of cash flows contains certain components of both the income statement and the balance sheet.

Answers:

• False

• True

119. The following items are current assets except:

Answers:

• inventories

• marketable securities

• goodwill

• accounts receivables

• cash

120. What is the normal balance of revenue accounts?

Answers:

• Credit

• Debit

121. For a material item to be classified as an extraordinary item on the income statement, it must be:

Answers:

• probable and infrequent in nature.

• unusual in nature and infrequent in occurrence.

• estimated and probable.

• current and unusual in frequency.

122. What is goodwill considered?

Answers:

• Shareholder Equity

• Revenue

• Asset

• Liability

• Expense

123. Which one of these is financial accounting based on?

Answers:

• double entry bookkeeping

• single entry bookkeeping

• all of these

• tripple entry bookkeeping

124. What is wages payable considered?

Answers:

• Expense

• Revenue

• Liability

• Asset

• Shareholder Equity

125. The personal assets of the owner of a company will not appear on the company's balance sheet because of which principle/guideline?

Answers:

• Economic entity

• Cost

• Monetary Unit

126. Why is an increase in inventory shown as a negative amount in the statement of cash flows?

Answers:

• An increase in inventory indicates that a company has purchased more goods than it has sold. Increasing inventory requires a cash outflow. Cash outflows have a negative effect on the company???s cash balance.

• An increase in inventory indicates that a company has sold more goods than it has purchased. Increasing inventory requires a cash inflow. Cash inflows have a negative effect on the company???s cash balance.

127. Which of the following is a cash expense?

Answers:

• Depreciation

• Loss on sale of PP&E

• Interest

• Impairment of goodwill

• Stock-based compensation

128. Which of the following is an asset account?

Answers:

• Retained earnings

• Treasury stock

• Accounts Payable

• Prepaid rent

• Unearned revenue

129. Which of the following accounts will be found on the balance sheet?

Answers:

• Cost of Goods Sold

• Inventory

• Tax expense

• Salary expense

• Rent expense

130. What is additional paid-in-capital considered?

Answers:

• Shareholder Equity

• Liability

• Asset

• Revenue

• Expense

131. Which of the following is a long term asset?

Answers:

• On a balance sheet, the value of a company's property, equipment and other capital assets expected to be used within one year.

• On a balance sheet, the value of a company's property, equipment and other capital assets expected to be useable for more than one year, minus depreciation.

• On an income statement, the value of a company's property, equipment and other capital assets expected to be useable for more than one year, minus depreciation.

• On an income statement, the value of a company's property, equipment and other capital assets expected to be useable for less than one year, minus depreciation.

132. Are audited financial statements guaranteed to be free of error?

Answers:

• Yes - once audited, no errors can exist (including fraud)

• No - auditors only guarantee that the net income is correct

• Yes - once audited, no errors can exist (beyond fraud)

• Yes - accuracy is guaranteed

• No - they are guaranteed to be presented fairly

133. What is the Balance Sheet version of the accounting equation?

Answers:

• Net Income = Revenue - Expenses

• Assets = Liabilities + Beginning Equity + Net Income

• Assets = Liabilities + Equity

• Assets + Liabilities = Equity

134. What are the components of Double Entry accounting?

Answers:

• Assets=Liabilities+Equity

• At least one Debit entry and one Credit entry

• Revenues-Expenses=Net Income

• Assets=Liabilities+Paid in Capital +Retained Earnings

135. In the USA, how frequently are public companies required to release financial performance?

Answers:

• Monthly

• Annually only

• Quarterly

• Semi-annually

• Never

136. What is NOT a current liability?

Answers:

• Convertible debt

• Income taxes payable

• Accounts payable

• Short-term borrowings

137. What is not a typical component of A Work in Progress Account?

Answers:

• Sales Tax

• Overhead

• Labor

• Raw Materials

138. What is an example of a semi-variable expense?

Answers:

• Salesperson's compensation based on both salary and commission

• Workers compensation expense per employee.

• Rent

• Utilities

139. What is an increase in the inventory account journaled as?

Answers:

• Debit.

• Credit.

140. On the cash flow statement, depreciation is found in the _________ section.

Answers:

• Investing

• Not located on the cash flow statement

• Income

• Operating

• Financing

141. Accounting equation is given as

Answers:

• Assets = Liabilities + Owners Equity

• Assets + Liabilities = Owners Equity

• Liabilities = Assets + Owners Equity

• Owners Equity = Liabilities+ Assets

142. Which of the following measures the number of times a company sold its average level of inventory during the period?

Answers:

• Accounts receivable turnover

• Average Inventory

• Average age of Inventories

• Inventory Turnover

• Sales to inventory ratio

143. What is an example of a contra account?

Answers:

• Marketable Securities

• Convertible debentures

• Patents

• Allowance for doubtful accounts

144. Acme company has a beginning year Retained earnings balance of $10,000, Net income for the year of $5,000 and declares dividends totaling $3,000. What is the ending Retained earnings balance?

Answers:

• $7,000

• $2,000

• $12,000

• $15,000

145. Which of the following is a category or element of the balance sheet?

Answers:

• All of these

• Gains

• Losses

• Expenses

• Liabilities

146. Equity can be best defined as the amount of ownership left in the business after deducting total liabilities from total assets.

Answers:

• True

• False

147. The multiple-step income statement for a merchandiser shows each of the following features except:

Answers:

• gross profit

• operating expenses

• cost of goods sold

• sales revenue

• investing activities

148. Working capital is a measure of

Answers:

• liquidity

• profitability

• solvency

• consistency

149. Which statement would you find accumulated depreciation?

Answers:

• Cash flow statement

• Not found on any of the other choices

• Income statement

• Balance sheet

• Statement of retained earnings

150. On the cash flow statement, a change in accounts receivable is found in the _________ section.

Answers:

• Income

• Not located on the cash flow statement

• Operating

• Financing

• Investing

151. On the cash flow statement, taxes paid are found in the _________ section.

Answers:

• Financing

• Income

• Investing

• Not located on the cash flow statement

• Operating

152. Which of the following defines market value?

Answers:

• Latest closing price on a publicly traded exchange

• The value of an executed contract for asset sale

• An industry standard, published valuation

• What the property could be sold for today

153. On the cash flow statement, change in accounts payable is found in the _________ section.

Answers:

• Not located on the cash flow statement

• Investing

• Income

• Operating

• Financing

154. Which accounting assumption states that an enterprise will continue in operation long enough to carry out its existing objectives and commitments?

Answers:

• Going concern assumption

• Monetary unit assumption

• Time period assumption

• Economic entity assumption

155. Which of the following would NOT be included on a balance sheet?

Answers:

• Prepaid Rent.

• Retained earnings.

• Accumulated depreciation.

• Cost of goods sold.

156. Which of the following is not a current asset?

Answers:

• Bank Balance

• Fixtures

• Prepaid Insurance

• Inventory

• Accounts Receivable

157. (US GAAP ) You pay a dividend, what happens on the cash flow statement and in which section?

Answers:

• Cash decreases - Operating section

• Cash increases - Investing section

• Cash decreases - Financing section

• Cash increases - Financing section

• Cash increases - Operating section

158. What are the assets of a business?

Answers:

• loans

• debit

• resources

• credit

159. Which of these is a Debit account?

Answers:

• Equity

• Liability

• Revenue

• Expense

160. The notes to the financial statement provide details that are not shown on the financial statements.

Answers:

• False

• True

161. Which of the following is an example of a contingent liability?

Answers:

• Accrued payroll.

• Notes payable.

• An environmental lawsuit.

• Prepaid Rent.

162. What is retained earnings considered?

Answers:

• Asset

• Revenue

• Shareholder Equity

• Expense

• Liability

163. The fair value principal indicates that assets and ____ should be reported at fair value (the priced received to sell an asset or settle  ____).

Answers:

• Interest

• Liabilities

• Shareholders equity

• Debt

• Amortized bonds

164. Which of the following defines current assets on the balance sheet?

Answers:

• Assets placed on the balance sheet within the past year

• Expected to be converted to cash or consumed within a month or normal reporting period whichever is longer

• Past assets

• Expected to be converted to cash or consumed within a year or normal operating cycle whichever is longer

165. If a company receives cash in exchange for a note and the present value of the note is less than the amount of the note, the difference is the:

Answers:

• Coupon

• Discount

• Convertible value

• Principle

166. The difference between the balance of a plant asset account and the related accumulated depreciation account is the asset's _____.

Answers:

• book value

• market value

• liability

• contra asset

167. Which of the following defines book value?

Answers:

• An industry standard, published valuation

• Latest closing price on a publicly traded exchange

• What the property could be sold for today

• Asset basis less accumulated depreciation

168. What method of depreciation is used most often for land?

Answers:

• Straight-line.

• Land is not depreciated.

• Double declining balance.

• Weighted average balance

169. What is considered a prepaid expense?

Answers:

• Expense

• Revenue

• Asset

• Liability

• Shareholder Equity

170. A snapshot of the company best correlates to which financial statement?

Answers:

• statement of retained earnings

• income statement

• Current Report of Company's Holdings

• statement of cash flows

• balance sheet

171. What is the net number calculated from the three parts of the Statement of Cash Flows?

Answers:

• Net increase (decrease) in Assets

• Net increase (decrease) in cash

• Net increase (decrease) in Liabilities

• Net increase (decrease) in Shareholder's Equity

172. How does a company adjust its financial statements for the effect of inflation?

Answers:

• The income or expense is shown as "Other" on the income statement

• It does not.

• The category shows on the financing section of the cashflow statement.

• An entry is made on Other Comprehensive Income

173. What are two criteria for identifying an economic event as an Extraordinary item?

Answers:

• Unusual in nature and the first such occurrence

• None of these

• Identified impairment and Market Value increase or decrease

• Unusual in nature and infrequent in occurrence

174. Deciding whether to record a sale when the order for services is received or when the services are performed  is an example of a

Answers:

• valuation issue

• recognition issue

• communication issue

• classification issue

175. The current ratio is an indicator of which following characteristic of an organization?

Answers:

• The investment potential

• The current level of profitability.

• None of these

• The liquidity in the short term.

• The future level of profitability

176. An account a retail business would have _________, but a service business wouldn't.

Answers:

• Sales

• Accounts Receivable

• Cash

• Cost Of Goods Sold

177. What is the correct journal entry for the purchase of merchandise on account?

Answers:

• debit to inventory; credit to accounts receivable

• debit to inventory; credit to cash

• debit to inventory; credit to accounts payable

• debit to accounts payable; credit to cash

178. What is the purpose of a subsidiary ledger?

Answers:

• To monitor minority investment returns

• To keep records of subsidiary companies

• To maintain historical trial balance reports

• To keep detailed information about certain accounts

179. Which of the following defines a fixed asset?

Answers:

• Property used in a productive capacity which will benefit the enterprise for over five years

• Property used in a productive capacity which will benefit the enterprise for less than one year

• Property used in a productive capacity which will benefit the enterprise for longer than one year

• Property used in a productive capacity which will be depreciated over a 10 year or greater period of time.

180. The U.S. government agency with authority over the financial reporting requirements of publicly traded corporations is the _______.

Answers:

• AICPA

• SEC

• FASB

• IRS

181. At which cost are sale securities reported?

Answers:

• Historic cost

• Historic cost minus depreciation

• Amortized cost

• Fair value

• Amortized cost minus depreciation

182. A decrease in liabilities is recorded as a:

Answers:

• Debit

• Credit

183. What are the types of expenses that will increase and decrease in the same direction as movement in sales?

Answers:

• Labor expenses

• Fixed expenses

• Variable expenses

• Overhead expenses

184. Which of these typically has a credit balance?

Answers:

• All of these

• Liability

• Equity

• Revenue

185. An increase in revenue is journaled as a ____.

Answers:

• Debit

• Credit

186. Why are income taxes not incorporated into the breakeven unit sales calculation?

Answers:

• Because sales taxes are incorporated into the analysis.

• Because at breakeven there will be no profit and no income tax due.

• Firms will have different income tax brackets.

• It is a theoretical budgeting exercise.

187. What is the equivalent of a "real account"?

Answers:

• Temporary Account

• Building expense

• Sales account

• Permanent account

188. ABC Co. has current assets of $50,000 and total assets of $150,000. ABC has current liabilities of $30,000 and total liabilities of $80,000. What is the amount of ABC's owner's equity?

Answers:

• $ 120,000

• $ 70,000

• $ 20,000

• $ 30,000

189. Which of the following is true regarding the comparison between managerial and financial accounting?

Answers:

• Managerial accounting has a past focus and financial accounting has a future focus.

• Managerial accounting is generally more precise.

• Managerial accounting need not follow Generally Accepted Accounting Principles (GAAP), while financial accounting must follow them.

• The emphasis on managerial accounting is relevance and the emphasis on financial accounting is timeliness.

190. What is the basic financial statement equation?

Answers:

• Assets + Liabilities = Owner's Equity

• Sales - Allowances - Expenses = Taxable Income

• Current Assets = Current Liabilties + Owner's Equity

• Assets - Liabilities = Owner's Equity

• Assets = Cash + Current Assets + Property

191. What is the best definition of Net Working Capital?

Answers:

• A measure of the margin of current liablities over current assets

• A measure of asset leverage

• A measure of the margin of current assets over current liabilities

• A measure of operating leverage

192. If a newspaper company receives an annual subscription payment prior to delivering any papers, what is the initial accounting entry?

Answers:

• Debit Cash; Credit Unearned Subscription Revenue

• Debit Accounts Receivable; Credit Subscription Revenue

• Debit Cash; Credit Retained Earnings

• Debit Accounts Receivable; Credit Cost of Goods Sold

193. What do negative amounts on the Statement of Cash Flow depict?

Answers:

• Source of Cash

• Negative Retained earnings

• Use of Cash

• Gain on sale of fully depreciated assets

194. On the cash flow statement, repayment of long-term debt is found in the _________ section.

Answers:

• Investing

• Not located on the cash flow statement

• Income

• Operating

• Financing

195. Which one of the following is NOT a principle of GAAP (US)?

Answers:

• Efficient Operations

• Materiality

• Matching principle

• Full Disclosure principle

• Going Concern

196. Which of the following assets is the hardest to liquidate?

Answers:

• Land

• Inventories

• Accounts receivable

• Goodwill

197. What is the best definition of Expense?

Answers:

• The increase in resources from the operations of an entity

• None of these

• The use of resources to generate revenue

• Payable accounts

198. Which accounting method reflects the matching principle?

Answers:

• Asset based accounting

• Equity balanced accounting

• Accrual basis accounting

• Cash basis accounting

199. What does a debit signify in bookkeeping?

Answers:

• a decrease in assets or liabilities

• an increase in assets or liabilities

• an increase in assets or a decrease in liabilities

• an increase in liabilities or decrease in assets

200. What is one reason for the Shareholder's Equity balance to be negative?

Answers:

• The amount of Net Income earned to date is a negative number that is (negatively) greater than the original paid-in-capital

• The market value of land owned by the company has dropped

• The company has reported a non-recurring gain on disposal of assets

• Cash balances have not been sufficient to meet current liabilities

201. Another name for the balance sheet is:

Answers:

• Statement of Financial Position

• Statement of Operations

• Statement of assets and assisted assets

• Statement of profit and loss

202. Which of the following defines liabilities on the balance sheet?

Answers:

• Expected to be converted to cash or consumed after a year or normal operating cycle whichever is longer

• Present obligations to transfer resources in the future

• Obligations for which full responsibility of the reporting company has not yet been identified

203. On the cash flow statement, proceeds from issuing bonds are found in the _________ section.

Answers:

• Financing

• Operating

• Not located on the cash flow statement

• Income

• Investing

204. If a business owner wants to protect him/herself from liabilities associated with their business, it is recommended that he/she establish a sole proprietorship.

Answers:

• True

• False

205. What is an example of an extraordinary item?

Answers:

• Gains or losses from the abandonment of property, plant and equipment

• Effects of a strike

• Impact of a hurricane on a factory

• Impairment of receivables and inventories

206. What is another definition for "recognizing" revenue?

Answers:

• Recording revenue

• Accepting cash for a delivered product/service

• Issuing a receipt for a customer's payment

• Taking an order

207. You issue bonds, what happens on the cash flow statement and in which section?

Answers:

• Cash decreases - Financing section

• Cash increases - Operating section

• Cash increases - Financing section

• Cash increases - Investing section

• Cash decreases - Operating section

208. ABC Co. incurs cleanup expense of $500 on December 30, 2010. The supplier's invoice states that the $500 is due by January 10, 2011. ABC follows the accrual basis of accounting and its accounting year ends on December 31. What is the effect of the cleanup service on the December balance sheet of ABC?

Answers:

• No effect on owner's equity

• Assest increased

• No effect in 2010

• Liabilities Increased

209. A decrease in equity from a Net Income loss will be a:

Answers:

• Debit to Equity

• Credit Dividends Payable

• Debit to Cash

• Credit to Equity

210. A client pays ABC Co. $10,000 in December to perform services  in 45 days. ABC uses the accrual basis of accounting. In December ABC will debit Cash for $10,000. What will be the other account to balance this entry prepared by ABC?

Answers:

• Unearned Revenue

• Asset

• Account receivable

• Owners Equity

• Drawing

211. On the financial statements, a long-term asset is reported:

Answers:

• at cost less accumulated depreciation on the balance sheet.

• at cost plus accumulated depreciation on the balance sheet.

• as a prepaid expense on the income statement.

• at fair market value on the balance sheet.

212. When a sale is made with the credit terms 2/10 net 30, the 2 refers to the:

Answers:

• Discount rate

• Interest rate

• Discount period

• Tax rate

213. What is NOT an example of an expense account?

Answers:

• Dividends

• Depreciation

• Wages

• Amortization

214. Which is considered to be liability?

Answers:

• Unearned Revenue

• Depreciation

• Accounting Receivable

• Prepaid expense

215. Which is considered a cash expense?

Answers:

• Amortization

• Depletion

• Leasehold Improvements

• Depreciation

216. On the Statement of Cashflows, the Indirect and Direct methods for the Cashflows from operations must equal each other.

Answers:

• False

• True

217. Plumbing companies, beauty salons, and auto repair shops are often sole proprietorships.

Answers:

• False

• True

218. What is a fundamental concept of accrual accounting?

Answers:

• Mark-to-Market to reflect daily changes in securities' value

• Recognizing economic activities when the transaction is complete.

• Daily posting of balances of journal entries to ledger accounts

• Recognizing economic activities regardless of when cash transactions occur

219. Which of the following accounts is a contra account?

Answers:

• Accumulated depreciation, equipment.

• Unearned revenue.

• Dividends.

• Depreciation expense, office equipment.

220. A complete set of financial statements for Hartman Company, at December 31, 1999, would include each of the following, except:

Answers:

• Balance sheet as of December 31, 1999.

• Income statement for the year ended December 31, 1999.

• Statement of projected cash flows for 2000.

• Notes containing additional information that is useful in interpreting the financial statements.

221. What are supplies considered?

Answers:

• Revenue

• Shareholder Equity

• Assets

• Liabilities

• Expenses

222. A firm is purchasing equipment for its operations. The equipment has a useful life of 7 years. On the firm???s financial statements the equipment should be recorded as:

Answers:

• Credit to Property, Plant and Equipment and a Debit to Cash.

• Debit to Property, Plant and Equipment and a Credit to Depreciation Expense.

• Debit Property, Plant & Equipment and Credit Cash.

223. Assets are usually reported on the balance sheet at which amount?

Answers:

• expected selling price

• current market value

• cost

224. To account for an increase in Accounts Payable:

Answers:

• Credit Cash

• Credit Accounts Payable

• Debit Accounts Payable

• Debit Cash

225. If you own 40% of a company, what is the appropriate accounting method?

Answers:

• Equity Method

• Doesn't need to be included

• Proportionate Consolidation (Joint Venture)

• Consolidation

• SFAS 115

226. What type of account is Member Distributions?

Answers:

• Expense

• Income Statement

• Equity

• Asset

• Liability

227. With a decrease in an expense, you must _____ the account.

Answers:

• Debit

• Credit

228. Which of the following will be found on the income statement?

Answers:

• Tax liability

• Taxes due

• Tax expense

• None are found on a typical income statement

• Taxes payable

229. What is a Perpetual Inventory System?

Answers:

• It is assumed that items purchased are valued at the greater of cost or market value

• The system updates inventory accounts at the beginning and end of each reporting period

• The system updates inventory accounts after each purchase or sale.

• It is assumed that items purchased are valued at the lesser of cost or market value

230. The monetary unit assumption enables accounting to _____ economic events.

Answers:

• Quantify

• Attack

• Qualify

• Defend

• Track

231. Free Cash Flow (FCF) is best described as:

Answers:

• Finance cash flow - Dividends payable

• Investing cash flow - Interest receivable

• Operating cash flow - Tax expense

• Operating cash flow - Capital expenditures

232. What is the journal entry for salary?

Answers:

• Salary expense debit/ cash credit

• Salary expense debit/salary payable credit

• Salary expense debit/ bank credit

233. How frequently should the 10-K be filed for a public company?

Answers:

• Never filed

• Monthly

• Daily

• Quarterly

• Annually

234. Under IFRS the following costs are expensed:

Answers:

• relocation and reorganization

• start-up

• all of them

• training

• none of them

235. Accrual basis of accounting is considered better than the cash basis because:

Answers:

• it matches liabilities with expenses.

• it matches revenue with expenses

• revenue is recognized when cash is received.

• adjusting entries are NOT required.

236. The cost principal dictates that companies record ____ at their cost.

Answers:

• Earnings

• Dividends

• Stocks

• Bonds

• Assets

237. Current assets MINUS current liabilities is:

Answers:

• net worth

• working capital

• current ratio

238. Where is the line item Paid-in Capital in excess of Par?

Answers:

• Convertible securities

• Shareholders' equity on the Balance sheet

• Included in Retained earnings

• A contra-account to Par Value

239. Accumulated Depreciation is a(n) ___ on the balance sheet.

Answers:

• Asset

• Contra-asset

• Contra-liability

• Liability

• Stockholder's Equity

240. Recording revenues when earned and expenses when incurred is associated with what basis of accounting?

Answers:

• Accrual

• Deferred Basis

• Modified Accrual

• Cash Basis

• Cash Accrual Basis

241. What is the balance of all revenue and expense accounts once closed to Revenue summary?

Answers:

• $0

• The average of the beginning and ending balances

• The same as at the beginning of the period

• The orignial balance less the contra account balance at the end of the period

242. The financial statement that reports the revenues and expenses for a specific period of time is the:

Answers:

• Statement of cash flows

• Balance Sheet

• Income statement

• None of these

• Statement of Shareholder Equity

243. What is not a typical inventory account for a manufacturer?

Answers:

• Merchandise Inventory

• Finished materials

• Work in Progress

• Raw materials

244. What is the economic entity assumption?

Answers:

• Requires that activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities

• Requires that activities regarding payroll be kept unified and combined with the activities of its owner and all other economic entities

• Requires that activities of the entity be kept unified and combined with the activities of its owner and all other economic entities

• Requires that activities of the bookkeeper be kept separate and distinct from the activities of its owner and all other economic entities

• Requires that activities regarding payroll be kept separate and distinct from the activities of its owner and all other economic entities

245. The normal balance for equity accounts:

Answers:

• Are on the credit side

• Are equal to Assets + Liabilities

• Are positive if the company reported a profit in the latest year

• Are on the debit side

246. The best definition of noncurrent assets is:

Answers:

• Assets that have been appraised at below market value.

• Assets placed on the balance sheet within the past year.

• Assets expected to be converted to cash or consumed for multiple operating cycle.

• Assets that do not change in value over time.

247. Components of the financial statements include:

Answers:

• Balance Sheet, Cash Flow Statement, Statement of Changes in Equity, Auditors report

• Income Statement, Balance Sheet, Ratio analysis, Cash flow Statement

• Balance Sheet, Income Statement, Cash flow statement, Statement of Changes in equity, Note to the Accounts

248. You purchase $1200 worth of inventory on credit. Your journal entries would have __

Answers:

• Debits will be higher than credits

• Credits will be higher than debits

• Cash Balance will go down

• Debits and Credits balance out

249. The annual form every public company must file with the SEC is called:

Answers:

• 8-q

• 10-q

• 8-k

• Annual Report

• 10-k

250. The quick ratio EXCLUDES which of the following?

Answers:

• Inventory

• Cash

• Accounts Receivable

251. Which is NOT a common method of depreciation?

Answers:

• Double-Declining Balance

• MACRS

• Straight-Line

• Triple-Declining Balance

252. What is the net book value of a noncurrent asset?

Answers:

• the net amount reported on the balance sheet for an intangible asset.

• the net amount reported on the income statement for a long-term asset.

• the net amount reported on the income statement for an intangible asset.

• the net amount reported on the balance sheet for a long-term asset.

253. In accrual accounting, the matching principle states that:

Answers:

• transactions and events producing cash flow are allocated only to time periods in which the cash flow occur

• expenses incurred to generate revenue are recognized in the same time period as the revenue

• an entity should recognize revenues only when received and expense only when they are paid

254. Which of the following can be found in the FINANCING section of the cash flow statement?

Answers:

• Buying of stock

• Taxes

• Issuing bonds

• Buying bonds

• Net Income

255. What is the normal balance for contra asset accounts?

Answers:

• Debit

• Credit

256. If a firm has a great deal of inventory built up which of the following ratios would be the largest?

Answers:

• Cash ratio.

• Quick ratio.

• Current Ratio.

• Gross profit margin ratio.

257. Contra Asset Account means?

Answers:

• An asset Account which is Expected to Have Nil Balance

• All of these

• An asset Account Which is depreciated to nil residual value over its life

• An asset account which is expected to have a credit balance (which is contrary to the normal debit balance of an asset account).

258. Which account is at the bottom of the Statement of Cash Flows, displaying: _____  at the beginning and at the end of the period?

Answers:

• Shareholders' Equity

• Cash

• Retained Earnings

• Total Assets

259. What is a contra-account for Accounts Receivable?

Answers:

• Bad Debt Account

• Allowance for unpaid balances

• Bad Debt Expense

• Unreceived Cash Account

• Allowance for Doubtful Accounts

260. Each payment on a mortgage note payable consists of:

Answers:

• interest on the original balance of the loan.

• interest on the original balance of the loan and reduction of loan principal.

• interest on the unpaid balance of the loan.

• reduction of loan principal only.

• interest on the unpaid balance of the loan and reduction of loan principal.

261. On the cash flow statement, proceeds from issuing stock are found in the _________ section.

Answers:

• Not located on the cash flow statement

• Financing

• Investing

• Income

• Operating

262. Summarize IAS 1 (IFRS).

Answers:

• Investments in debt & equity securities

• Noncontrolling interest

• Presentation of financial statements

• Currency Translation

• Business Combinations

263. Which organization is most like IASB, but monitors and improves the standards under US GAAP?

Answers:

• FAS

• SEC

• AICPA

• PCAOB

• FASB

264. What type of account is allowance for doubtful accounts?

Answers:

• A cost of good account

• A contra sales account

• A contra asset account

• A liability account

265. Under the Securites and Exchange Act of 1933, ("1933 Act") which forms must be filed by U.S. registrants.

Answers:

• Form 11-D

• Form 2X-ZF

• Sarbanes-Oxley Form 404F

• 10-K, 10-Q

• Hart-Scott-Rodino

266. Which is not one of the principles of US GAAP?

Answers:

• Materiality

• Matching Principle

• Cost Reduction Principle

• Going Concern

• Conservatism

267. Which of the following will be found on the balance sheet?

Answers:

• Wages payable

• Tax expense

• Rent expense

• Salary expense

• Gain on the sale of inventory

268. How do you calculate straight-line depreciation?

Answers:

• 2 * Asset value - salvage / 2 * useful life

• Production in year x / total possible production

• Asset value - salvage / useful life

• Asset value / useful life

• None of the calculations are correct

269. The Governmental Accounting Standards Board defines general capital assets as all Capital assets other than those accounted for in Proprietary funds or trust funds.

Answers:

• True

• False

270. Which of the following line items are part of cost of goods sold?

Answers:

• none of them

• selling, general and administrative costs

• research and development costs

• all of them

• advertising

271. What is NOT an acceptable depreciation method?

Answers:

• Accrual method

• Sum-of-the-years'-digits method

• Straight line method

• Declining balance method

272. What is an investment in bonds considered?

Answers:

• Shareholder Equity

• Expense

• Asset

• Revenue

• Liability

273. A normal balance of asset accounts is journaled as a ____.

Answers:

• Credit

• Debit

274. Assets are depreciated:

Answers:

• to determine the salvage value of the asset.

• none of these

• because assets are always worthless after their useful life.

• to match the costs with the benefit of the asset.

275. Which is not one of the principles of US GAAP?

Answers:

• Conservatism

• Revenue Recognition Principle

• Matching Principle

• Profitable Entity Principle

• Going Concern

276. Internal users are individuals and organizations outside a company who want financial information about the company.

Answers:

• True

• False

277. Which of the following statements is false?

Answers:

• to decrease a receivable, debit the account

• to increase a receivable, debit the account

• to increase revenue, credit the account

• to increase cash, debit the account

278. Balance sheet provides Financial position of an organization

Answers:

• Year to date

• For the year

• As of a specific date

• Since inception

279. What is the formula for Net Profit Margin?

Answers:

• Net Income/Sales

• Operating Income/Sales

• Gross Profit/Sales

• Gross Profit/Net Income

280. What is an appropriate set of journal entries to recognize the declaration of dividends?

Answers:

• Debit Paid-in capital; Credit Cash

• Debit Dividends payable; Credit Retained Earnings;

• Debit Convertible Stock; Credit cash

• Debit Retained Earnings; Credit Dividends payable

281. Which of the following statements is true about the reporting of operating segments by a business?

Answers:

• All companies, whether publicly-held or not, are required to present this information.

• All companies, whether publicly-held or not, are allowed to present this information but no companies are required to present it.

• Publicly-held companies are required to present this information while other companies are allowed to present it.

• Privately-held companies are required to present this information while publicly-held companies are allowed to present it.

282. Which of the following can be found in the INVESTING section of the cash flow statement?

Answers:

• Issuing of bonds

• Buying of bonds

• Dividends paid

• Issuing of stock

• Income taxes

283. Which of the following principles does NOT result in adjusting entries being made?

Answers:

• Accrual basis of accounting.

• Cash basis of accounting.

• Revenue recognition.

• The matching principle.

284. What is an investment in stocks considered?

Answers:

• Expense

• Asset

• Liability

• Revenue

• Shareholder Equity

285. (US GAAP ) Your accounts receivable drops from the prior year. What happens on the cash flow statement and in which section?

Answers:

• Cash increases - Financing section

• Cash decreases - Investing section

• Cash increases - Operating section

• Cash decreases - Operating section

• No change

286. Which is NOT an intangible asset?

Answers:

• Patent

• Subscriber list

• Trademark

• Unused Line of Credit

287. What is NOT true about assets on the balance sheet?

Answers:

• Increases in asset accounts are recorded on the debit side

• Assets represent future economic benefits

• Assets must equal liabilities

• Assets have normal balances on the debit side

288. How do you calculate gross profit percentage?

Answers:

• Assets divided by Net Income

• Sales divided by Net Income

• Gross Margin divided by Sales

• Operating Income divided by Cost of Goods Sold

• Net Income divided by Sales

289. What are the two methods acceptable to present cash flows from operating activities?

Answers:

• Cash and Accrual method

• Direct and Indirect method

• GAAP and Tax basis method

• Only the matching principle method is accepted

290. Which is NOT one of the major categories on a cash flow statement?

Answers:

• All the options are major categories of a cash flow statement

• Operating

• Investing

• Income

• Financing

291. What is the best definition for Depletion?

Answers:

• The process of allocating the original cost of equipment to the periods benefited

• The process of allocating the original cost of a natural resource to the quantity at which the resource is extracted

• The process of allocating the original cost of an intangible asset to the periods benefited

• The estimated sales price of the property at the end of its useful life

292. What determines if work performed on an owned building's roof is expensed?

Answers:

• The cost will always be capitalized on the balance sheet

• The cost will always be expensed

• If the repair cost can be deemed material to the business

• If the work is deemed a repair that does not extend the building's life, it is expensed

293. Why is the Balance sheet referred to as a "picture in time"?

Answers:

• The comparison of balances from the prior year period as compared to the current period show the general health of the company

• The balance sheet best depicts the value of the company over time

• The balance sheet reflects historical values of inventory, assets, debt, etc. rather than market value.

• The amounts shown on the line items of the balance sheet are the values as of the last day of the period being presented

294. Which of the following is the classification of a redeemable preference share?

Answers:

• Financial asset

• Equity instrument

• None of the above

• Financial liability

295. Which of the following statements regarding revenue recognition is FALSE?

Answers:

• Transactions giving rise to revenue should be arms-length.

• Earning activities are substantially completed.

• Risk of ownership has passed from seller to buyer.

• Cash must be received to recognize revenue.

296. Which of the following will be found on the balance sheet?

Answers:

• Wages expense

• Net Income

• Cost of Goods Sold

• Additional Paid in Capital

• Shares outstanding

297. (US GAAP ) Your accounts receivable increases from the prior year, what happens on the cash flow statement and in which section?

Answers:

• Cash decreases - Financing section

• Cash increases - Operating section

• Cash increases - Financing section

• Cash decreases - Operating section

• No change

298. What is on the right side of the trial balance?

Answers:

• Balances of all credit accounts

• The difference of Assets-(Liabilities+Equity)

• The difference of Assets-Liabilities

• Balances of all debit accounts

299. What is done with the transactions in a company?

Answers:

• they are recorded

• neither of these

• they are summarized

• both of these

300. On the cash flow statement, net income is found in the _________ section.

Answers:

• Not located on the cash flow statement

• Investing

• Income

• Operating

• Financing

301. Which type of lease is reflected on a company's balance sheet?

Answers:

• Capital Lease

• Deferred Lease

• Rent Lease

• Operating Lease

302. After the initial recognition, bonds payable shall be measured at amortized cost using:

Answers:

• Straight line method

• Bond outstanding method

• Effective interest method

• Nominal interest rate method

303. Which of the following can be found in the OPERATING section of the income statement?

Answers:

• Issuing bonds

• Taxes (not deferred)

• Depreciation

• Dividends

• Purchase of property

304. Cash flow statements are required by:

Answers:

• The auditors of a company.

• Company law.

• The shareholders of a company

• International Financial Reporting Standard No. 1

• Non of the above

305. Which of the following is not closed out to a zero balance in the closing entries?

Answers:

• Expenses

• Assets

• Revenues

• Drawings

306. Under straight-line depreciation, what percent of the cost of equipment to be allocated will be recognized in the third year of a 5 year economic life?

Answers:

• 30%

• 10%

• 15%

• 20%

307. What is the best definition for Amortization?

Answers:

• Asset basis less accumulated depreciation

• The process of allocating the original cost of an intangible asset to the periods benefited

• The process of allocating the original cost of a natural resource to the quantity at which the resource is extracted

• The process of allocating the original cost of equipment to the periods benefited

308. When is an expense recognized under the matching principle?

Answers:

• When the order is accepted

• When the related revenue is recognized

• When cash is received

• When receipt of payment seems reasonably certain

309. An example of financial expense in a multistep income statement would be:

Answers:

• selling expense.

• interest expense.

• prepaid expense.

• income taxes.

310. What is the impact to Net cash provided by (used for) financing activities from a company issuing long-term debt?

Answers:

• Positive: Source of cash

• None of these

• Negative: Use of cash

• No impact: the cash is held by the bank for covenant requirements

311. On the cash flow statement, dividends paid are found in the _________ section.

Answers:

• Operating

• Income

• Financing

• Not located on the cash flow statement

• Investing

312. If you accept payment in advance of delivering services, you debit cash and credit what?

Answers:

• Deferred Revenue

• Deferred Expense

• Prepaid Expense

• Accounts Receivable

• Accounts Payable

313. What are the journal entries for a company issuing 1,000 shares of stock at $8/share issue price and no par value?

Answers:

• Debit cash $8,000; credit paid-in-capital $8,000

• A company cannot issue stock without a par value

• Debit cash $8,000; Credit Convertible Debt $8,000

• Debit Retained Earnings $8,000; credit paid-in capital $8,000

314. If the balance of inventories is $5,000 at 1/1/2010 and $3,500 at 12/31/2010, how is that represented on the Statement of cashflows?

Answers:

• Cashflows from operating activities reflect a positive $1,500 source of cash

• Cashflows from financing activities reflect a negative ($1,500) use of cash

• Cashflows from financing activities reflect a positive $1,500 source of cash

• Cashflows from operating activities reflect a negative ($1,500) use of cash

315. Which of the following can be found in the FINANCING section of the cash flow statement?

Answers:

• Taxes

• Issuing stock

• Dividends received

• Buying of stock

• Buying bonds

316. Where is comprehensive income reported in the income statement?

Answers:

• Seperatly after net income.

• In Investment section

• In the Operating section

• In Finance section

• In the liabilities section of the BalanceSheet

317. Which is not one of the principles of US GAAP?

Answers:

• Going Concern

• Full Disclosure Principle

• Materiality

• Value-added Assumption

• Time Period Assumption

318. If the balance of accounts receivable is $2,000 at 1/1/2010 and $3,500 at 12/31/2010, how is that represented on the Statement of Cash Flows?

Answers:

• Cashflows from financing activities reflect a positive $1,500 source of cash

• Cashflows from operating activities reflect a positive $1,500 source of cash

• Cashflows from financing activities reflect a negative ($1,500) use of cash

• Cashflows from operating activities reflect a negative ($1,500) use of cash

319. What is the formula for   Accounts Receivable Turnover Ratio?

Answers:

• Net Income/((Beginning Accounts Receivable + Ending Accounts Receivable)/2))

• Average Accounts Receivable/Net Income

• Sales/((Beginning Accounts Receivable + Ending Accounts Receivable)/2))

• Average Accounts Receivable/Assets

320. The purpose of the income statement is to show cash sources and uses during a specific period of time.

Answers:

• False

• True

321. Under which classification on the balance sheet would Notes Payable NOT appear?

Answers:

• Current Liabilities

• Long term liabilities

• Current Assets

• All of these are correct.

322. What is the formula for  Price Earnings (PE) Ratio?

Answers:

• Market price of stock per share/(Paid in capital/share +par value per share of stock)

• Market price of stock per share/par value of stock

• Net Earnings/Common Shares Outstanding

• Market Price of Common Stock Per Share/Earnings Per Share

323. Deferred credits will appear on the balance sheet in which category?

Answers:

• Reserves

• Equity

• Assets

• Profit

• Liabilities

324. When a company pays dividends, which type of cash flow does this represent?

Answers:

• Financing.

• Free cash flow.

• Investing.

• Operating.

325. If Company X issued 10,000 shares with a stated value of $1 per share at $5 a share, how would this transaction be reflected on their balance sheet?

Answers:

• Credit to Cash for 50,000; Debit to Common Stock for 10,000; Credit to Additional Paid in Capital for 40,000

• Debit to Cash for 50,000; Credit to Common Stock for 10,000; Credit to Additional Paid in Capital for 40,000

• Debit to Cash for 50,000; Credit to Common Stock for 40,000; Credit to Additional Paid in Capital for 10,000

• Debit to Cash for 50,000; Credit to Common Stock for 50,000

326. Which of the following would NOT be an adjustment to net income using the indirect method?

Answers:

• Amortization Expense

• Depreciation Expense

• An increase in Prepaid Rent

• Increase in market value of company- owned property

327. What line item will always be a positive amount on the Statement of Cash Flows (Indirect Method)?

Answers:

• Net Income (Loss)

• Cash provided by (used in) operating activities

• Depreciation

• Cash provided by (used in) financing activities

328. Which business components are reported in Discontinued Operations?

Answers:

• The assets of the operation which are contractually obligated to an outside entity

• Business components which do not producing revenue

• The liabilities of the business components which have been contractually accepted by another entity

• Operations and cash flows which are eliminated from ongoing operation

329. In a cash flow statement the payment of a preference dividend will be included:

Answers:

• Under operating activities

• None of these

• Under returns on investments

• Under financing activities

330. When the expensed tax rate changes, deferred tax:

Answers:

• Expense is calculated using current tax rates with no adjustments

• Liability and Asset accounts are maintained at historical tax rate until reverse.

• Liability and Asset accounts are adjusted to reflect the new expected tax rate.

331. What is the asset method of adjusting entries?

Answers:

• Non of the above

• Initial transaction recorded as a revenue/expense

• Initial transaction recorded as an asset/liability

• All of the above

332. Which is considered Extraordinary Items?

Answers:

• none of these

• Effects of major natural casualties, if rare in the area

• all of these

• Effects of major natural casualties, not uncommon in the area

• Write-down of inventories or write-off of receivables

333. What is a basis point?

Answers:

• A basis point is 100/100

• A basis point is 10/100

• A basis point is a tenth(1/10) of a percentage point

• A basis point is a hundredth (1/100) of a percentage point

• A basis point is 100/1

334. Which of the following would normally be a current liability?

Answers:

• None of these

• All of these

• Amount payable in 3 years

• Loan payable in two years

• Unearned revenue

335. Where are gains / losses shown for securities classified as trading securities?

Answers:

• Income Statement

• Letter to investments

• Not shown anywhere

• Letter from auditors

• Balance Sheet

336. In the financial statements, when a convertible bond is retired, it is shown as:

Answers:

• as equity on the balance sheet.

• as a reduction to cash and long-term liability on the balance sheet.

• a reduction in depreciation expense on the income statement.

• as an extraordinary gain or loss on the income statement.

337. What is an example of a noncurrent liability?

Answers:

• Trade accounts payable

• Goodwill

• Paid-in Capital

• Capital lease obligation

338. Typically, increasing interest rates:

Answers:

• none of the above.

• discourage corporate investments.

• discourage individuals from saving.

• encourage corporate borrowing.

• encourage corporate expansion.

339. What is the formula for   Earnings Per Share (EPS)?

Answers:

• Retained Earnings/Number of Common Shares Outstanding

• Net Income per share/Par Value of Common stock

• Net Income/Number of Common Shares Outstanding

• None of these

340. (US GAAP ) Your accounts payable increases from the prior year, what happens on the cash flow statement and in which section?

Answers:

• Cash increases - Financing section

• No change

• Cash decreases - Operating section

• Cash increases - Operating section

• Cash decreases - Financing section

341. What is the formula for  Asset Turnover Ratio?

Answers:

• Asset/Shareholders' equity

• Sales/Ending Assets

• Net Income/Average Assets

• Sales/((Beginning Total Assets + Ending Total Assets)/2))

342. If ending inventory is overcounted (overstated in value) the following is understated:

Answers:

• Net Income

• Current ratio

• Cost of goods sold

• Working capital

343. On the cash flow statement, depletion is found in the _________ section.

Answers:

• Financing

• Investing

• Operating

• Not located on the cash flow statement

• Income

344. What is the formula for  Return on Assets (ROA)?

Answers:

• Earnings Per Share/Asset Turnover

• (Current Assets - Current Liabilities)/Total Assets

• Net Income/((Beginning Assets + Ending Assets)/2))

• Assets/Operating Income

345. What is factoring of accounts receivable?

Answers:

• A weighted calculation of expected payment profiles of customers based on stratification.

• A review of the likelihood of repayment at the end of each accounting cycle.

• A firm sells receivables at a discount to face value for immediate cash.

• A contra account named Allowance for doubtful accounts

346. Which of the following can be found in the INVESTING section of the cash flow statement?

Answers:

• Income taxes

• Issuing of bonds

• Dividends paid

• Issuing of stock

• Buying of equities

347. Which of the following are the components of owners' equity section of the balance sheet?

Answers:

• all of them

• retained earings

• treasury stock

• minority interest

• none of them

348. What is the formula for   Return on Equity (ROE)?

Answers:

• Earnings Per Share/ Common Equity

• Shareholders' equity/Operating Income

• Net Income/((Beginning Stockholders' Equity + Ending Stockholders' Equity)/2))

• (Current Shareholders' equity - Diluted earnings)/Total Shareholders' equity

349. Notes to Financial Statements are given to

Answers:

• Increase understandability

• Impress the reader

• To make Financial Statements look comprehensive

• Confuse reader

• Give as much information as possible

350. What is a compensating balance of cash?

Answers:

• An adjunct account to marketable securities.

• A contra-asset account.

• Cash required for payment of tax

• A minimum credit balance that a bank may require a borrower to keep on deposit as a condition for granting a loan.

• Cash restricted for dividend payments.

351. XYZ, Inc. is closing books for July.  It has spent 12,000USD for air conditioning on the weekend for employees working overtime. On which financial statement will this figure appear?

Answers:

• On the income statement for special expenses.

• On the balance sheet as a contra account to prepaid expense.

• On the income statement as part of cost of goods sold.

• On the income statement as a SG&A expense

• On the income statement as an extraordinary expense.

352. (US GAAP ) Your accounts payable drops from the prior year, what happens on the cash flow statement and in which section?

Answers:

• Cash decreases - Financing section

• Cash increases - Operating section

• Cash decreases - Operating section

• Cash increases - Financing section

• No change

353. The company uses BTC Bank to process  customer credit cards payments. The fees charged by BTC Bank  are called:

Answers:

• Bank charges

• Credit card charges

• Credit card monthly fees

• Merchant fees

354. Choose the correct statement about GAAP.

Answers:

• Only publicly traded companies must comply with GAAP.

• Firms may not restate financial statements previously issued.

• GAAP are laws.

• It is a violation of SEC regulations for publicly traded companies to depart from GAAP.

355. On the cash flow statement, amortization is found in the _________ section.

Answers:

• Income

• Operating

• Investing

• Not located on the cash flow statement

• Financing

356. Land is reported on the Balance Sheet at:

Answers:

• Historical Cost

• Market Value

• Cost minus Accumulated Depreciation

• Book Value

• Opportunity Cost

357. Every transaction will affect how many accounts?

Answers:

• One

• Two

• Two or more

358. In the annual report, where would a financial statement reader find out if the company???s financial statements give a fair depiction of its financial position and operating results?

Answers:

• Balance Sheet

• Auditor's report

• Management discussion and analysis section

• Notes to the financial statements

359. Financial statements report the current market value of a company.

Answers:

• True

• False

360. The following information pertains to Bayside Corporation:  Equipment purchase: $50,000  Salvage value: $5,000  Useful life: 7 years  Year-1 depreciation: $14,285.70  What depreciation method does Bayside Corporation use?

Answers:

• Double declining balance.

• Units-of-production.

• Depletion.

• Straight-line.

361. Which of the following accounts is not closed using the Income Summary Account

Answers:

• Sales

• Cash

• Supplies Expense

• All of the listed accounts are closed using the Income Summary Accounts

362. A sinking fund, pension fund or plant expansion fund are all examples of what?

Answers:

• A short-term investment

• A long-term investment

• None of these

• A long-term liability

363. Johnny???s Car Repair Shop started the year with total assets of $60,000 and total liabilities of $40,000.  During  the year the business recorded $100,000 in car repair revenues, $55,000 in expenses, and dividends of $10,000.  The net income reported by Johnny???s Car Repair Shop for the year was:

Answers:

• $35,000

• $90,000

• none of the options is listed

• $45,000

• $20,000

364. A company began the accounting period with $50,000 in owner???s capital, ended with $75,000 in owner???s capital, and the owner withdrew $30,000 during the period for personal use. What was the company???s net  income or loss for the period?

Answers:

• $30,000 net loss

• $55,000 net income

• $5,000 net income

• $5,000 net loss

365. A large company purchases a $250 digital camera and expenses it immediately instead of recording it as an asset and depreciating it over its useful life. This practice may be acceptable because of which principle/guideline?

Answers:

• Materiality

• Cost

• Matching

366. The book value of an asset is its:

Answers:

• Cost minus salvage value minus accumulated depreciation

• Cost minus accumulated depreciation

• Cost minus salvage value

• Market value

• Cost plus accumulated depreciation minus salvage value

367. If the balance of accounts payable is $8,000 at 1/1/2010 and $6,500 at 12/31/2010, how is that represented on the Statement of cashflows?

Answers:

• Cashflows from financing activities reflect a positive $1,500 source of cash

• Cashflows from financing activities reflect a negative ($1,500) use of cash

• Cashflows from operating activities reflect a negative ($1,500) use of cash

• Cashflows from operating activities reflect a positive $1,500 source of cash

368. Unearned Subscription Revenue is recorded:

Answers:

• As a liability on the Balance Sheet

• Recorded as a contra-Liability on the Balance Sheet

• Not Recorded

• Recorded on the Income Statement

• Recorded as an Asset on the Balance Sheet

369. GAAP and Tax code depreciation methodologies are always economically equivalent in the first year the asset is put into use.

Answers:

• True

• False

370. If beginning capital was $25,000, ending capital is $37,000, and the owner's withdrawals were $23,000, the amount of net income or net loss for the period was:

Answers:

• Net income of $35,000

• Net loss of $14,000

• Net loss of $35,000

• Net income of $14,000

371. What is an example of judgement and estimation used in accounting?

Answers:

• Market price of marketable securities.

• Collectibility of receivables.

• Likelihood of repayment of bank debt.

• End of year dividends to be declared.

372. What is an example of a period cost?

Answers:

• Labor

• Overhead

• Raw Materials

• General and Administrative costs

373. What is the common period of time that a fixed expense is assumed to be unchangeable?

Answers:

• One year

• One month

• One accounting period

374. How is a contribution margin ratio calculated?

Answers:

• (Sales price - fixed cost per unit)/Variable cost

• (Sales price - fixed cost per unit)/Sales price

• (Sales price - variable cost per unit)/Sales price

• Contribution margin/(Variable+fixed cost)

375. National Auto uses debt, preferred stock, and common stock to finance operations. Calculation of the cost of capital requires identification of the:

Answers:

• net present value of the project to be financed.

• company's product.

• percentage of financing coming from each financing source.

• risk-free rate.

376. When calculating earnings per share (EPS) for firms with complex capital structures, stock options are ordinarily considered to be:

Answers:

• embedded securities.

• potentially dilutive securities.

• derivative securities.

• antidilutive securities.

377. While analyzing the financial statements, an analyst should:

Answers:

• treat convertible bonds like equity when the stock price exceeds the conversion price.

• Never treat convertible bonds like debt.

• always treat convertible bonds like debt.

• always treat convertible bonds like equity

378. What is one of the requirements for a business component to be reported in Discontinued Operations?

Answers:

• The business component is not producing revenue

• The liabilities of the business component have been contractually accepted by another entity

• The business does not have significant "continuing involvement"

• The assets of the operation are contractually obligated to an outside entity

379. All of the following are recognized depreciation methods for GAAP reporting EXCEPT:

Answers:

• Double Declining Balance

• Sum of the Years Digit

• Modified Accelerated Cost Recovery

• Straight Line Method

380. Common size income statements express all income statement items as a percentage of:

Answers:

• sales.

• industry averages.

• net income.

• assets.

381. An investment that the holder tends to sell in 30 days or less is classified as a:

Answers:

• Held to Maturity Security

• Trading Security

• Available for Sale Security

382. What is an example of an asset that is not stated at acquisition (historical) cost?

Answers:

• Inventory

• Land

• Marketable securities.

• Accounts payable

383. Which of the following can be found in the INVESTING section of the cash flow statement?

Answers:

• Income taxes

• Dividends paid

• Issuing of stock

• Disposal of a subsidiary or business

• Issuing of bonds

384. What is the order of cash sources (uses) as presented in the Statement of Cash Flows?

Answers:

• Operating, Financing, Investing

• Operating, Investing, and Financing

• Financing, Operating, Investing

• Investing, Operating, Financing

385. What is the formula for Working Capital Turnover Ratio?

Answers:

• Sales/(Current Assets - Current Liabilities)

• (Current Assets - Inventories)/Current Liabilities

• Current Liabilities/Current Assets

• Current Assets/Current Liabilities

386. What is the formula for  Debt to Equity Ratio?

Answers:

• All Interest-bearing debt / Shareholders' equity

• Long-term debt / Market value of equity

• Long-term debt / Common shareholders' equity

• Total Liabilities / Total Shareholder's Equity

387. Public companies use external auditors to issue an opinion on their financial statements. The opinion that expresses that all statements are presently fairly and in accordance with GAAP is:

Answers:

• Correct

• Incorrect

• Unqualified

• Qualified

388. What is the first line item of the Cashflows from operating activities under the Indirect method?

Answers:

• Gross Profit

• Operating Income

• Net Income

• Cash reciepts

389. An increase in interest rates is most likely to benefit:

Answers:

• all firms without any outstanding debt.

• firms that issued debt at a lower cost than current rates.

• all firms with outstanding debt.

• firms that issued debt at a higher cost than current rates.

390. According to GAAP, How is deferred revenue treated under cash basis accounting?

Answers:

• The revenue is deferred until the customer receives the product/service

• Deferrals are not recognized under cash basis accounting

• The entire amount of revenue is booked when delivered

• Amounts owed or due are placed in escrow

391. How is deferred revenue treated under accrual basis accounting?

Answers:

• Deferrals are not recognized under accrual basis accounting

• The revenue is deferred until the customer's cash payment is received

• The revenue is not recognized until the customer receives the product/service

• Amounts owed or due are placed in escrow

392. What is the internal rate of return?

Answers:

• Both of these describe the internal rate of return.

• In capital budgeting, the internal rate of return is the interest rate that results in an investment having a net present value of zero.

• The internal rate of return is the interest rate that will discount an investment???s future cash amounts so that the sum of the present values will be equal to cash paid at the beginning of the investment

393. Diluted EPS, as compared to EPS, takes into consideration all of these additional variables, except:

Answers:

• Convertible debt

• Volume of stock trading on the market

• Stock options

394. Discount on Bonds Payable:

Answers:

• is added to bonds payable on the balance sheet

• increases over the term of the bonds

• is a contra account

• has a credit balance

• is a adjunct account

395. Stock splits affect the following accounts when booked:

Answers:

• There is no book entry

• Retained Earnings, Common Stock

• Dividend expense, Common Stock

• Dividend expense, Common Stock, Paid-in Capital

• Retained Earnings, Common Stock, Dividends Payable

396. What is the formula for   Inventory Turnover Ratio?

Answers:

• Average Accounts Receivable/Inventories

• Sales/((Beginning Inventories + Ending Inventories)/2))

• Cost of goods sold/((Beginning Inventories + Ending Inventories)/2))

• Net Income/((Beginning Inventories + Ending Inventories)/2))

397. On the cash flow statement, dividends received from stock is found in the _________ section.

Answers:

• Income

• Investing

• Operating

• Financing

• Not located on the cash flow statement

398. If a company using accrual accounting has quarterly (end of quarter) interest payments on a bond, what will they recognize at the end of the first month of the quarter?

Answers:

• Debit-Current Portion of Long Term Debt; Credit-Interest Expense

• Debit-Interest Expense; Credit-Interest Payable;

• Debit-Interest Payable; Credit-Interest Expense

• Debit-Interest Expense; Credit-Current Portion of Long Term Debt;

399. What is NOT true about Unearned Revenue?

Answers:

• The balance decreases as services are provided and related revenue is recognized??

• It is the amount of cash received for the services not provided yet

• It is a liability account representing the obligation to provide services in the future

• It is an asset account that depletes as the services/products are delivered

400. On the financial statements, an income tax payable is recorded as debit:

Answers:

• income tax payable and credit prepaid expense.

• income tax payable and credit income tax expense.

• prepaid expense and credit income tax payable.

• income tax expense and credit income tax payable.

401. What is the formula for Inventory Turnover?

Answers:

• Cost of Goods Sold / Average Inventory

• Cost of Goods Sold / Sales

• Sales / Average Inventory

• Average Inventory / Cost of Goods Sold

• Net Sales / Accounts Receivable

402. What is the balance sheet presentation of a Note Payable discount?

Answers:

• Reduction of Marketable securities balance

• Contra-asset account

• Contra-liability account

• It is not found on the Balance sheet

403. Which of the following defines a permanent account?

Answers:

• Accounts that have balances that will not change period to period

• Accounts that are required to be maintained per GAAP

• Accounts that have balances located in Long-term Assets

• Accounts that have balances which carry over beyond the current accounting period

404. For the input for product, what are two usual cost variances that are measured for direct materials?

Answers:

• Fixed overhead and budget.

• Variable overhead and volume produced.

• Labor rate and labor hours.

• Cost and quantity used.

405. What is a format that is NOT acceptable for reporting comprehensive income?

Answers:

• Reported in the separate statement of comprehensive income

• Reported in the statement of changes in equity

• Reported as a summary in the footnotes

• Reported in the income statement below net income

406. According to IFRS 18 revenue recognition, revenue is recognized:

Answers:

• when the goods are delivered

• when the sale is made

• when the risks and rewards of the ownership of the goods are transferred to the buyer

407. Which of the following can be found in the INVESTING section of the cash flow statement?

Answers:

• Dividends paid

• Income taxes

• Gains from the sale of an asset

• Issuing of stock

• Issuing of bonds

408. If Acme issued 8,000 shares of common stock with par value of $1 per share and an issue price of $4 per share, what is the starting balance of paid-in-capital?

Answers:

• $36,000

• $24,000

• $5/share

• $8,000

409. What is a Closing Entry?

Answers:

• The final journal entry for a reporting period

• A journal entry to move amounts from temporary accounts to B/S or I/S accounts

• A journal acccount such that Assets=Liabilities+Equity

• A balancing amount

410. A company with a Z-Score above 3.0 is likely to fail.

Answers:

• True

• False

411. Neutrality means that financial accounting information should

Answers:

• not have undesirable or negative consequence

• be free from bias towards a predetermined result.

• all of the above

• not be influence or affect the decisions of users

412. What is the formula for   Quick Ratio?

Answers:

• Current Assets/Current Liabilities

• (Current Assets - Inventories)/Current Liabilities

• Accounts Payable/Cash

• Current Liabilities/Current Assets

413. A company must account for its investment in another company's stock using the equity method when they own more than:

Answers:

• 20%

• 70%

• 10%

• 50%

414. In regards to measuring and recording acquisition cost, what is the cost principle?

Answers:

• Only expenditures in the acquisition of an asset should be recorded as the cost of the asset; the preparation of the asset for use is recorded as an expense

• All expenditures made in acquiring and preparing an asset for use should be recorded as the cost of the asset

• Only expenditures made in acquiring an asset should be recorded as the cost of the asset

• All expenditures made in acquiring and preparing an asset in addition to the present value of the future cash flows of the asset should be recorded as the cost of the asset

• Only expenditures in preparing an asset should be recorded as the cost of the asset; the cost of acquisition is recorded as an expense

415. What accounts are NOT considered "Other Comprehensive Income?"

Answers:

• Net income before taxes.

• Unrealized gains and losses of available-for-sale securities.

• Gains and losses from foreign currency translation.

• Income from operating activities

• Gaines and losses from cash flow hedges.

416. What are acceptable accounting treatments to recognize the cost of intangible assets over time?

Answers:

• None of these

• Recognition of the full expense at the end of economic contribution to the entity

• Straight line depreciation over the life of the asset

• Straight line amortization over the life

• Straight line amortization over the useful life

417. Which of the following parties is least likely to benefit from risky strategies that increase risk and expected return for a company?

Answers:

• Stockholders

• Creditors

• Chief executive officers

418. When you pay an expense via company credit card what general ledger category is credited?

Answers:

• Liabilities

• Assets

• Equity

• Expenses

• Revenue

419. Which of the following is not considered as financial statement under GAAP?

Answers:

• Statement of Retained Earnings

• Statement of Comprehensive Income

• All of the above choices are considered financial statement.

• Statement of Cash Flow

• Statement of Financial Position

420. What is NOT a typical classification for a receivable?

Answers:

• Current receivables

• Trade receivables

• Noncurrent receivables

• Deposit receivables

421. Which of the following is considered non-current liabilities?

Answers:

• Investment in Bonds

• Estimated Warranties Payable

• Trade Accounts Payable to be paid next two years.

• Notes Payable due within 6 months

• Deferred Tax Liability

422. Unearned revenue on a company's balance sheet is an:

Answers:

• Item reflected in the result of operations

• Obligation incurred and paid

• Item not yet reflected in the result of operations

• Items incurred and paid

423. The United States government set the standards outlined in US GAAP?

Answers:

• No

• Yes

424. Material events that have an uncertain outcome will be reported where?

Answers:

• In the contractual situations section of the supplemental balance sheet information.

• Comprehensive income.

• In the contingency section of the supplemental balance sheet information.

• Post-balance sheet disclosures.

425. What does ACFE stand for?

Answers:

• The Association of Certified Financial Examiners

• The Association of Certified Fraud Examiners

• The Alliance of Certified Fraud Examiners

• The Association of Certified Fund Examiers

• The Alliance of Certified Financial Examiners

426. When the return on equity equation (ROE) is decomposed, what three ratios comprise the components of ROE?

Answers:

• Net profit margin, asset turnover, asset multiplier.

• Net profit margin, inventory turnover, equity multiplier.

• Gross profit margin, asset turnover, equity multiplier.

• Net profit margin, asset turnover, equity multiplier.

427. Based upon the conservatism accounting principle, when should a gain on sale of property disposal be recognized?

Answers:

• When the cash is collected.

• When the operation is deemed discontinued.

• When the sale is contracted.

• When the market price is determined.

428. FOXCO sells 1000 shares with a par value of $1.00 for $10.00 per share. What is the amount of paid in capital?

Answers:

• $9000

• $8000

• $11000

• $10000

• $1000

429. Which of the following is a pervasive constraint on the information that can be provided by financial reporting

Answers:

• Neutrality

• Timeliness

• Cost

• Materiality

• Cost and materiality

430. The purpose of the closing process is

Answers:

• to reduce temporary accounts to zero balances and to reflect the changes that have occurred in that account during the period

• to disclose the sources of changes in the various permanent shareholders' equity accounts that occurred during the period

• to present the financial position of the company on a particular date

• to summarize the profit generating activities of a company that occurred during a particular period of time

431. What is the formula for Book Value of Equity Per Common Share?

Answers:

• Shareholders' equity/Number of Common shares

• Retained earnings/Number of fully diluted shares outstanding

• Retained earnings/Number of common shares

• Shareholders' equity/Number of fully diluted shares outstanding

432. The lessee's carrying amount of an asset from the capitalization of a lease would be periodically reduced is defined by:

Answers:

• Depreciation of the asset

• Portion of the minimum lease payment allocable to the interest

• Total minimum lease payment

• Portion of the minimum lease payment allocable to reduction of the lease liability

433. What is a type of an affirmative covenant required by a lender?

Answers:

• Requirement to not solicit a new loan from other banks

• Requirement to report financial performance

• Requirement to not issue more stock

• Requirement to not take on additional debt

434. When the debit side of the trial balance equals the credit side, the trial balance is error free.

Answers:

• False

• True

435. What is the formula for   Interest Coverage Ratio?

Answers:

• Sales/Interest expense

• Net Cashflow/Interest Expense

• Earnings before interest and Income tax expenses/Interest Expense

• Net Income/Interest Expense

436. If a company receives cash in exchange for a note and the present value of the note is less than the amount of the note, the difference is :

Answers:

• Placed in a contra asset account for notes payable

• Depreciated using the "Effective Interest method"

• Amortized using the "Accrual method"

• Amortized using the "Effective Interest method"

437. Under IFRS, which is NOT correct in relation to the treatment of assets?

Answers:

• You can use straight-line depreciation

• You can use LIFO

• You can use depletion

• You can amortize

• You can use FIFO

438. The control features of a bank account do not include:

Answers:

• providing a double record of all bank transactions.

• None of them

• minimizing the amount of cash that must be kept on hand.

• safeguarding cash by using a bank as a depository.

• having bank auditors verify the correctness of the bank balance per books.

439. What is withholding tax?

Answers:

• Tax deducted at the end of a contract

• Tax deducted at source

• Tax exempt

• Tax deducted after 1 year

• Tax deducted at the beginning of a contract

440. In a period of deflation, the cost flow method that results in the lowest income taxes is the:

Answers:

• Average cost method

• Gross profit method

• LIFO

• FIFO

• Specific identification

441. What will be the subsequent measurement of investments in equity instruments that do not have a quoted price in an active market and whose fair value cannot be reliably determined?

Answers:

• Cost

• Amortized cost using the straight line method

• Agreed value

• Amortized cost using effective interest method

• Fair value

442. When a capital lease is initiated, what value is it recorded at on the balance sheet?

Answers:

• The market value of the leased asset

• The present value of the future rental payments for the use of the leased asset

• The book value of the leased asset

443. Which of the following can be found in the INVESTING section of the cash flow statement?

Answers:

• Income taxes

• Gains on PP&E

• Issuing of bonds

• Dividends paid

• Issuing of stock

444. Revenue recognized after cash has been received follows which accounting method?

Answers:

• deferred income

• delayed recognition

• none of these

• accrual accounting

• cash basis accounting

445. In cash flow statement what will be the treatment of Dividends paid?

Answers:

• It can be deducted from Operating activities or Investing activities,

• Dividends paid can be deducted from Financing activities only

• Dividends paid can be deducted either from Operating activities or Financing activities

• It can be deducted from Operating activities only

446. On the cash flow statement, disposal of a business or subsidiary is found in the _________ section.

Answers:

• Financing

• Not located on the cash flow statement

• Investing

• Income

• Operating

447. Under a debt restructuring involving substantial modification of terms, the future cash flows under the new terms should be discounted using:

Answers:

• Interest rate under the new terms

• Original effective interest rate

• Market rate of interest

• Prime interest rate

448. An intangible asset may be amortized for a maximum of:

Answers:

• Intangible assets cannot be amortized.

• 15 years.

• 25 years.

• 40 years.

449. Goods totaling $50,000 were puchased Febuary 2 with the terms of 2/10, n/30. Returns of $10,000 were made on Febuary 10. What discount, if any, can be availed of if the invoice was paid Febuary 12?

Answers:

• $250

• $1,000

• $800

• $200

• $0

450. A company recently acquires 85% control over another company. They account for this investment under the initial value method. The subsidiary earns $100,000 income during the year, pays $75,000 dividends, and has excess amortizations of $10,000. How much should the investment in sub account increase as a result of these operations?

Answers:

• 0

• 131250

• 175000

• 138750

451. Karson Inc. issues 10-year bonds with a maturity value of $200,000.  If the bonds are issued at a premium, this indicates that:

Answers:

• the contractual interest rate exceeds the market interest rate.

• the market interest rate exceeds the contractual interest rate.

• no relationship exists between the two rates.

• the contractual interest rate and the market interest rate are the same.

452. Accounts payable; a liability account that identifies an obligation to pay suppliers in the near future. Before the account can be transfered to the_____the_____must be reconciled to____.

Answers:

• general ledger, balance, Invoices

• general ledger, balance, expenses recognized -holdings

• closing account, fixed, general ledger

• balance sheet, closing entry, match

• general ledger, sum, reconciled

453. What does CFE stand for?

Answers:

• Certified Fund Examiner

• Chartered Financial Expert

• Certified Financial Expert

• Certified Fraud Examiner

454. How does GAAP require companies to treat R&D Expense?

Answers:

• Only expense once revenue is fully recognized that was generated by the R&D project

• Expense in the period incurred

• Capitalize and expense over the life of the benefit from the R&D project

• Capitalize and expense over the period of the R&D project

455. Acme Co. had Shareholder's Equity of $50,000 at 1/1/2010. During 2010 the company issued common stock for proceeds of $100,000, paid dividends of $10,000 and purchased treasury stock for $20,000. The Cashflows from financing activities section will reflect:

Answers:

• Net (source of) cash of $120,000

• Net (source of) cash of $70,000

• Net (use of) cash of $70,000

456. Which of the following is not classified as financial asset?

Answers:

• Inventory

• Cash

• Long-term Notes Receivable

• Investment in Equity Security

• Accounts Receivable

457. MJG Company has the following information: *Net Loss = 100,000 *Total Assets = 3,000,000 *Common Stock, Dec 31 = 1,000,000 *Additional Paid in Capital = 500,000 *Dividends Declared = 700,000  The debt-to-equity ratio is 50% at December 31. What was the retained earnings on January 1?

Answers:

• 600,000

• 500,000

• 1,100,000

• 1,300,000

• 3,700,000

458. Is a slogan or jingle sometimes reported as an asset on the balance sheet? If so, categorized under what?

Answers:

• Yes, Goodwill

• No, they can only be mentioned in disclosure notes.

• No, but they may be reported and valued on the income statement

• No

• Yes, Intangible Intellectual assets

459. How is Loss on sale of assets accounted for on the Statement of Cash Flows?

Answers:

• Subtracted from Net Income in Cashflows from Operations

• Added back to Net Income in Cashflows from Operations

• Subtracted from Net Income in Cashflows from Investing activities

• Disclosed in footnotes to the statement

460. What will be the Price-Earnings Ratio if the Basic Earnings per Share is $1.80 and market price of each share is $27?

Answers:

• 13.25

• 0.0667

• 15

• .15

461. What is an example of a defined benefit retirement plan?

Answers:

• IRA

• Company-funded pension

• SEP

• 401-K

462. Which of the following is an example of a deferral?

Answers:

• Recognizing expenses incurred but not yet recorded

• Recognizing revenues earned but not yet recorded

• Accruing year-end wages

• Recording prepaid rent

463. An analyst gathered the following information about a company:  ??? 01/01/01 - 20,000 shares issued and outstanding at the beginning of the year ??? 04/01/01 - 5.0% stock dividend ??? 07/01/01 - 5,000 shares repurchased ??? 10/01/01 - 2:1 stock split  What is the company???s weighted average number of shares outstanding at the end of 2001?

Answers:

• 45,000.

• 37,000.

• 39,500.

• 47,000.

464. A fixed asset that is fully depreciated would:

Answers:

• be disposed of immediately as it is no longer useful.

• continue to have depreciation expense even though it is held longer than it???s useful life.

• have no value remaining even though it had an estimated salvage value.

• be held as an asset until disposed of.

465. Net Cash Provided By Operating Activities divided by Average Total Liabilities is also known as:

Answers:

• Current Ratio

• Times Interest Earned

• Cash Debt Coverage Ratio

• Current Cash Debt Coverage Ratio

466. Acme Co. sold a piece of equipment for $10,000; the depreciated value was $2,000; what is reflected on the Cashflows from investing activities in the period of disposal?

Answers:

• $8,000 source of cash from sale of PP&E

• $2,000 source of cash from sale of PP&E

• $10,000 source of cash from sale of PP&E

• No effect, this transaction will be reflected in the Cashflows from financing activities

467. Accruals occur when the cash flow comes _____ either expense or revenue recognition.

Answers:

• never

• during

• after

• before

468. For accounting purposes, which of the following is NOT an essential characteristic of an asset?

Answers:

• The enterprise can obtain the benefit and can limit others' access to it.

• Its value is known with certainty.

• It embodies a probable future economic benefit.

469. In analyzing a company's financial statements, which financial statement would a potential investor use primarily to assess the company's liquidity and financial flexibility?

Answers:

• Income Statement.

• Balance Sheet.

• Statement of retained earnings.

• Statement of Cash Flows.

470. Which of the following is among the items reported on the income statement "above the line" on a pretax basis?

Answers:

• Unusual or infrequent items.

• Discontinued operations.

• Extraordinary items.

• Changes in accounting principle.

471. What is an example of an adjusting journal entry?

Answers:

• Interest expense that is owed, but not yet paid or due

• A journal acccount such that Assets=Liabilities+Equity

• The final journal entry for a reporting period

• A journal entry that moves amounts from Temp. accounts to B/S or I/S accounts

472. A cash basis statement to report a company's revenues and expenses is called:

Answers:

• Profit and Loss Statement

• Statement of Financial Position

• Statement of Cashflows

• Statement of Revenues and Expenses

473. Under IFRS, what is the appropriate accounting treatment for ownership over 50%?

Answers:

• Consolidation

• Proportionate Consolidation (Joint Venture)

• Equity Method

• SFAS 115

• Doesn't need to be included

474. On July 1, 2014, PQR Company received a $150,000 simple interest note for 5 months at 12% simple interest from ABC Trading. After 3 months, PQR needed cash so it discounted the note at the MEBank at a discount rate of 14%. How much will PQR receive as a proceeds from the discounting of the notes?

Answers:

• $150,000

• $153,825

• $153,675

• $3,675

• $157,500

475. Which of the following should not be taken into account when determining the cost of inventories?

Answers:

• All of the above are part of the cost of inventories

• Import duties on shipping of inventory inward

• Storage cost of part-finished goods

• Trade discount

• Recoverable purchase taxes

476. (US GAAP ) You declare a dividend. What happens on the cash flow statement and in which section?

Answers:

• Cash decreases - Operating section

• Cash increases - Financing section

• Cash decreases - Investing section

• Cash increases - Operating section

• No change

477. In calculating the income to be reported for two different segments of a company, general operating expenses must be allocated between the two. How should this allocation be made?

Answers:

• According to the relative size of the assets of the two segments

• According to the relative profitability of the two segments

• According to the relative sales of the two segments

• In the same manner as applied for internal decision-making purposes

478. Where, in order on the Income statement, is the reporting of discontinued operations?

Answers:

• Footnoted after all Income statement line item presentation

• After Extraordinary items

• After Interest expense and included in EBIT

• After Net Income, before Extraordinary items

479. Closing entries reset the balances of each revenue and expense account to zero and transfer these balances to _________.

Answers:

• the income statement

• the balance sheet

• the trial balance

• retained earnings

• the general journal

480. Revenue is recognized when it is both earned and realized.

Answers:

• True

• False

481. According to the IASB Framework, the process of reporting an item in the financial statements of an entity is:

Answers:

• Disclosure.

• Recognition.

• Statement of Financial Position.

• Presentation.

482. Which ratio or formula would provide the most accurate picture of a company's liquidity situation if it could not sell it's inventory to help cover its' debts?

Answers:

• Cash and Cash Equivalents / Total Liabilities

• Liquidity Ratio

• Current Assets / Current Liabilities

• Current Ratio

• Acid test ratio

483. Under US GAAP, if you own 75% of a company, what is the appropriate accounting method?

Answers:

• SFAS 115

• Proportionate Consolidation (Joint Venture)

• Consolidation

• Equity Method

• Doesn't need to be included

484. ABC Ltd has declared an ordinary share dividend of ??200,000 at 31/12/2011. Which of the following correctly explains the accounting entries for the dividend at the year end?

Answers:

• Expense in profit and loss account, reserve on the balance sheet

• Appropriation of profit, reserve on the balance sheet.

• None of these

• Appropriation of profit, current liability on the balance sheet.

• Expense in profit and loss account, creditor on the balance sheet.

485. For accounting purposes, which of the following is NOT an essential characteristic of an asset?

Answers:

• It embodies a probable future economic benefit.

• The enterprise can obtain the benefit and can limit others' access to it.

• Its value is known with certainty.

486. Which of the following would NOT be reported below the line?

Answers:

• Discontinued operations.

• Effects of changes in accounting principles.

• Extraordinary items.

• A stock split.

487. What is the equation for asset turnover?

Answers:

• None of these

• Total Assets / Current Assets

• Net Sales / Total Assets

• Net Income / Total Assets

488. Under FASB 13, to qualify as a capital lease and not an operating lease, which of the following is true?

Answers:

• The lease term equals 20% or more of the estimated economic life of the property.

• The lease must contain a bargain purchase option.

• Capital leases do not exist, all leases are accounted for in the same manner on the balance sheet.

• The lease can only include real estate.

• The present value of the minimum lease payments at the beginning of the lease term equals or exceeds 50% of the fair market value of the property.

489. Which cost are held-to-maturity securities reported at?

Answers:

• Amortized cost minus depreciation

• Historic cost minus depreciation

• Amortized cost

• Historic cost

• Fair value

490. What is prime cost?

Answers:

• Manufacturing cost plus material cost

• All labor costs in the manufacturing process.

• Material costs plus wages and salaries

• Any material, manufacturing, transportation, and labor costs that are necessary for production

• Direct labour plus FOH Cost

491. What is the gain or loss on disposal of an asset if at the time of the disposal its cost is $100000, the Bookvalue is $50000, and it sold for $30000?

Answers:

• $10,000

• $20,000

• $50,000

• $-50,000

• $-20,000

492. What causes a corporation???s market value to be greater than its book value?

Answers:

• LIFO

• The accountant???s cost principle

• FIFO

493. Reggy Company expects to have a record year, with net income increasing by 20 percent. Reggy would like to share this increase with stockholders, how would Reggy record this? As a:

Answers:

• contingent liability as the payment is not reasonably estimable and the stockholders will not be known until the payment date.

• dividend expense in the operating section of the income statement.

• dividend payable in the current liabilities section of the balance sheet.

• dividend payable in the stockholders section of the income statement.

494. If a company issues stock to another company in order to acquire a parcel of land, where will that transaction be disclosed (if material)?

Answers:

• Cashflows from equity transactions

• Cashflows from investing activities

• Cashflows from financing activities

• As a footnote in the Statement of cashflows or in other disclosure notes as part of the financials.

495. Simons Company is purchasing land to build a new factory. The following are the expenses incurred to purchase the land: ???  Purchase price of the land $150,000  ???  Real estate commissions $10,500  ???  Back property taxes $5,000  ???  Survey $5,000  At what amount should Simons record the land?

Answers:

• $170,500.

• $160,200.

• $165,500.

• $171,500.

• $160,000.

496. If a company issues stock to another company in order to acquire a parcel of land, where will that transaction be reflected in the Statement of cashflows?

Answers:

• Not in any of the three parts of the Statement of cashflows

• Cashflows from financing activities

• Cashflows from investing activities

• Cashflows from equity transactions

497. What is not an allowance method for uncollectible receivables?

Answers:

• Percentage of Receivables

• Income Statement approach

• None of these

• Percentage of Sales

• Special allowance accounts

498. A pension fund is:

Answers:

• an intermediary used by the employer to meet plan obligations

• an agreement where an employer pays monetary benefits to employees once their period of active service ends.

• established by an employer to organize the investment of employees' retirement funds contributed by the employer and employees.

• used by an employer to hold employees' contributions and allows employees to withdraw them at any time.

499. Which of the following statements correctly summarizes the key characteristics of a sole trader???s business?

Answers:

• The trader has unlimited liability, takes sole responsibility for management of the business and no audit is needed.

• The trader has unlimited liability and must have the business accounts audited.

• None of these

• Liability is limited to the providers of loan finance and only the trader takes an active part in managing the business.

• All of these

500. At 12/31/10 there were 1,000,000 shares issued and 300,000 where held as treasury stock.  During 2011, 100,000 shares were excercised via stock options and the company repurchased 50,000 of its outstanding shares.  How many shares were outstanding as of 12/31/11?

Answers:

• 700,000

• 1,100,000

• 750,000

• 1,000,000

• 1,050,000

501. Miller Investments has $50,000 in liabilities and $50,000 in stockholders??? equity. If Miller issues debt with warrants of $50,000, and attached warrants are valued at $10,000, the firm???s debt-to-equity ratio after the issue will be:

Answers:

• 2.2

• 1.8

• 1.6

• 2.0

• 1.5

502. A material loss should be presented separately as a component of income from continuing operations when it is:

Answers:

• An extraordinary item.

• Not unusual in nature but infrequent in occurrence.

• Unusual in nature and infrequent in occurrence.

• A cumulative effect-type change in accounting principle.

503. Which of the following is considered a cash expense?

Answers:

• none of these

• Amortization

• Bad debt

• Depreciation

• Tax expense

504. Which of the following is correct for two companies that want to file a consolidated tax return as an affiliated group?

Answers:

• One company must hold at least 51% of the other company's stock.

• None of above

• One company must hold at least 80 % of the other company's voting stock.

• One company must hold at least 65 % of the other company voting stock.

• The cannot file one unless one company owns 100% of the other's voting stock.

505. What is an example of a financial transaction that does not incorporate the time value of money?

Answers:

• Marketable securities.

• Capitalized leases.

• Sinking funds for debt retirements.

• Amotrization of bond payable discounts.

506. A bond is issued at 101 above par. How are the excess proceeds recorded by the issuer?

Answers:

• Debit to Petty Cash

• As a debit to Discount on Bonds Payable

• Credit to Income on Bonds Payable

• As a debit to Premium on Bonds Payable

• As a credit to Premium on Bonds Payable

507. Directors of a limited company are under an obligation to:

Answers:

• None of these

• File copies of the financial statements with the registrar of companies.

• Send summary financial statements to all shareholders.

• Produce financial statements which are correct in all respects.

• Send financial statements to employees

508. When bonds are redeemed before maturity, the gain or loss on redemption is the difference between the cash paid and the:

Answers:

• original selling price of the bonds.

• face value of the bonds less(plus) amortized bond discount(premium).

• carrying value of the bonds.

• face value of the bonds.

• maturity value of the bonds.

509. How are funds used for development of a patent that are NOT expensed on the Income Statement accounted for on the Cashflow statement?

Answers:

• Amortized using the "Intangible method"

• Operating Activities - Add back amortization of intangibles

• Investing Activities - Intangible Assets

• Added back to Net Income in Cashflows from Operations

510. Under SFAS 115, which is not a category for securities?

Answers:

• Held-to-maturity

• Common Stock

• Available for sale

• Trading security

• All are categories under SFAS 115

511. For a firm with a simple capital structure, all of the following are necessary to measure basic earnings per share (EPS) EXCEPT:

Answers:

• none of these

• the timing and number of shares issued or repurchased during the year.

• dividends paid to common shareholders.

• dividends paid to preferred shareholders.

• number of shares outstanding at the beginning of the year.

512. One million shares of common stock outstanding at the beginning of 1999 ??? 200,000 shares issued on the last day of March ??? 500,000 shares issued on the last day of June ??? 800,000 shares issued on the last day of September.  What is the number of shares that should be used to compute 1999 earnings per share for the QRK Company?

Answers:

• 2.5 million.

• 3.5 million.

• 1.5 million.

• 4.5

• 1.9 million.

513. Called up capital can be more than:

Answers:

• Issued Capital

• Entrepreneurial Capital

• Authorized Capital

• Borrowed Capital

• Paid up Capital

514. In Year One, a company is sued for $500,000 and believes that it is reasonably possible that it will lose between $200,000 and $350,000 but probable that it will lose between $140,000 and $200,000. In Year Two, the law suit is settled for $190,000. What income effect should the company recognize in Year Two?

Answers:

• Loss of $50,000

• Recovery of $10,000

• 850000

• Recovery of $85,000

• Loss of $20,000

515. Compared to its 2004 cash-basis net income, Potoma Co.'s 2004 accrual-basis net income increased when it:

Answers:

• Had lower accrued expenses on December 31, 2004, than on January 1, 2004.

• Sold used equipment for cash at a gain in 2004.

• Declared a cash dividend in 2003 that it paid in 2004.

• Wrote off more accounts receivable balances than it reported as uncollectible accounts expense in 2004.

516. All of the following are shown on the income statement net of tax EXCEPT:

Answers:

• unusual or infrequent items.

• discontinued operations.

• changes in accounting principles.

• extraordinary items.

517. What is a definition of appropriated retained earnings?

Answers:

• Unrestricted retained earnings.

• Earnings that have been pledged in a declared dividend.

• Earnings that are attributable to a subsidiary owner.

• Retained earnings that have contractual requirements.

518. Where would purchased treasury stock with cash be classified on the Statement of cashflows?

Answers:

• Cashflows from financing activities

• Cashflows from equity transactions

• Cashflows from investing activities

• None of these

519. What type of transaction is not included in Comprehensive income reporting?

Answers:

• Transactions with owners.

• Effects of accounting adjustments from earlier periods.

• Foreign currency translation adjustments.

• Temporary changes in market value of noncurrent investments.

520. What is another term for a claim to a firm's resources?

Answers:

• Cashflow

• Equity

• Risk

• Liability

521. If you own 5% of a company, what is the appropriate accounting method?

Answers:

• Doesn't need to be included

• Consolidation

• SFAS 115

• Proportionate Consolidation (Joint Venture)

• Equity Method

522. A new asset has been received in exchange for an old asset. What is the most likely value to be used in recording the newly-received asset?

Answers:

• Appraised vale of the asset received

• Book value of the asset given up

• Fair value of the asset received

• Fair value of the asset given up

523. Which one is not The Fraud Triangle?

Answers:

• Lack of audit trial

• Lack of audit procedure

• Perceived Pressure

• Retionalization

• Perceived Opportunity

524. What is an example of a temporary account?

Answers:

• Short-term Liabilities

• Short-term Assets

• Revenue Account

• Income Summary

525. What is NOT a line item that would be found in the Cashflows from financing  activities

Answers:

• Repayment of long-term debt

• Issuance of stock

• Paying dividends to stockholders

• Providing loans to other companies

526. The RR Corporation had cash flow from operations of $20 million. RR purchased $5 million in equipment and sold $3 million of equipment during the period. Cash flows from financing were $2 million. What is RR's free cash flow for the period (in millions)?

Answers:

• $18

• $20

• $22

• $24

527. Investors (such as suppliers and bankers) use accounting information to evaluate the risks of granting credit or lending money.

Answers:

• False

• True

528. Which is equivalent to Horizontal analysis?

Answers:

• Top-down Analysis

• Common-size Analysis

• DuPont Analysis

• Trend Analysis

• None of these

529. Under GAAP which method is NOT allowed for writing-off bad debts

Answers:

• Time's Up!

• Percentage of receivable method

• Percent of sales method

• Allowance Method

• Direct write-off method

• Aging method

530. What is the formula for   Dividend Yield?

Answers:

• Annual Dividends per common share/Number of shares outstanding

• Annual Dividends per common share/Par value of Common stock per share

• Annual Dividends per common share/Book value of Common stock per share

• Annual Dividends per common share/Market price of Common stock per share

531. Which of the following does NOT have a dilutive effect on earnings per share?

Answers:

• Preferred Stock

• Options

• Contingent stock agreements

• Convertible securities

532. Revenues are deferred to a balance sheet liability account until they are earned in a later period. The account is called:

Answers:

• Revenue Recognition

• None of these

• Deferrals

• All of these

• Revenue Receivable

533. In a period of inflation, inventory valuation with the LIFO methodology would be higher or lower than if the firm had adopted the FIFO methodology?

Answers:

• Higher

• It depends on the nature of the firm's business lines.

• Lower

• No difference.

534. At the beginning of 2001, Osami Corporation had 1.4 million shares of common stock outstanding and no preferred stock. At the end of August 2001, Osami issued 1.2 million new shares of common stock. If Osami reported net income equal to $7.2 million, what were its earnings per share (EPS) for 2001?

Answers:

• $2.07

• $3.52

• $2.77.

• $4.00.

535. At what point in time are shareholders entitled to a cash dividend?

Answers:

• On the date of record.

• On the ex-dividend date.

• When a company has excessive net income.

• On the date of declaration.

536. How does a preparer of financial statements differentiate a firm's revenues and a firm's recognized gains?

Answers:

• The matching principle.

• It depends on the firm's typical activities.

• Revenue recognition principles.

• The relevance principle.

• Period cost Principal cost

537. What is the definition of a contribution margin?

Answers:

• Revenues less standard cost*unit volume

• Revenues less (variable + fixed expenses)

• Revenues less variable expenses

• Revenues less fixed expenses

538. A company has cash of $30,000, accounts receivable of $150,000, inventory of $140,000, and accounts payable of $200,000. Which of the following is correct?

Answers:

• The quick ratio is 1.6 : 1 and the current ratio is 0.9 : 1.

• The quick ratio is 0.9 : 1 and the current ratio is 1.6 : 1.

• The quick ratio is 1.6 : 1 and the current ratio is 1.6 : 1.

• The quick ratio is .9 : 1 and the current ratio is 0.9 : 1.

539. Extraordinary income statement amounts are shown after comprehensive income is calculated.

Answers:

• False

• True

540. Employer payroll taxes do not include:

Answers:

• FICA taxes

• Federal income taxes

• Federal unemployment taxes

• None of these

• State unemployment taxes

541. At the beginning of this year Aramed had 400,000 shares of common stock outstanding. Aramed paid a 10 percent stock dividend on March 31 of this year. Aramed issued 90,000 new common shares on June 20 of this year and repurchased 12,000 shares on December 1. The number of shares Aramed should use in computing earnings per share at the end of the year is:

Answers:

• 476,000.

• 484,000.

• 475,000.

• 490,500.

542. Which of the following would be included in the cost of goods sold calculation of an income statement?

Answers:

• Delivery vehicle repairs

• Freight inwards

• Selling commissions

• Discount allowed

• Bad debts

543. Reporting accounts receivable at net realizable value is a departure from the accounting principle of:

Answers:

• Historical cost.

• Fair value.

• Market value.

• Conservatism.

544. What is the purpose of an 8-K filing with the SEC?

Answers:

• When you announce earnings

• 8-K doesn't exist

• Quarterly Report

• Annual Report

• Special circumstances

545. What is the impact to Net cash provided by (used for) financing activities  of interest paid on long-term debt?

Answers:

• No impact: the cash is held by the bank for covenant requirements

• Negative: Use of cash

• None of these

• Positive: Source of cash

546. For US companies, what is the most common method of presenting Cashflows from operating activities?

Answers:

• Indirect method

• Direct method

• Accrual method

• Matching principle method

547. How is the contribution margin used to calculate a firm's breakeven unit amount?

Answers:

• Contribution margin per unit * Units sold

• Fixed Costs/Contribution margin per unit sold

• Standard Costs/Contribution margin per unit sold

• Variable Costs/Contribution margin per unit sold

548. What are two key elements of the  comparability accounting principle?

Answers:

• Comparing companies over time and comparing accounting standards.

• A firms ability to compare profitablity across business units and geographic regions.

• Comparing a firm over time and comparing companies with each other.

549. What is the equivalent of a nominal account?

Answers:

• Cash held in a a foreign currency

• Temporary Account

• Non-material event entry

• Permanent account

550. Retained earnings is equal to

Answers:

• Common stock - dividends + revenues - expenses

• Common stock + additional paid-in-capital - dividends + revenues - expenses

551. Which of the following statements about agency problems is TRUE?

Answers:

• The agency conflict between bondholders and stockholders cannot exist if managers are attempting to maximize share price.

• As long as managers stay within the law, there are no effective controls that stockholders can implement to control managerial actions.

• Bond covenants are used to motivate managers to act in the interests of shareholders.

• Agency conflicts are common.

552. When bonds are converted into common stock:

Answers:

• the market price of the stock is considered in the entry.

• a gain or loss is recognized.

• the face price of the bonds is transferred to paid-in capital.

• the market price of the bonds is transferred to paid-in capital.

• the carrying value of the bonds is transferred to paid-in capital accounts.

553. Which of the following is considered to be a non-operational income statement item?

Answers:

• Merger Expense

• Realized investment gains (for a bank)

• Depletion

• Amortization of intangibles

• Bad debt expense

554. When bonds are redeemed before maturity, the gain or loss on redemption is the difference between the cash paid and the:

Answers:

• carrying value of the bonds.

• maturity value of the bonds.

• original selling price of the bonds.

• face value of the bonds.

• face value of the bonds less(plus) amortized bond discount(premium).

555. Which of the following transactions would not be treated as a reversing entry on the first day of the new accounting period?

Answers:

• Stationery purchased but not used

• Wages incurred but not yet paid

• Allowance for Doubtful debts

• Insurance paid in advance

• Rent received but not yet earned

556. Summarize IFRS 3 (IFRS).

Answers:

• Business Combinations

• Currency Translation

• Depreciation

• Inventories

• Revenue

557. How would an investor expect to see carrying costs for a natural resource extraction company? (e.g. mining, drilling, timber)

Answers:

• Capitalized as development expense.

• Allocated over the economically viable life of the resource.

• Matched against the sales of the extracted product.

• Depleted over time as the resource is used up.

558. Under straight-line depreciation, what amount of the cost of equipment (less salvage value)  purchased 9/1/2010 will be recognized in calendar year 2015  for an asset with a 5 year economic life?

Answers:

• 20%

• 85%

• 15%

559. How is an adjunct account different from a contra account?

Answers:

• The adjunct account is recognized on the cashflow statement.

• An adjunct account only affects a stockholder's equity account.

• The adjunct account is recognized on the income statement.

• An adjunct account increases the amount of the balance sheet account.

560. A warranty payable is recorded as:

Answers:

• an estimated expense on the income statement when the sale is made.

• a prepaid expense when the sale is made.

• an actual current liability when repairs are made.

• an actual expense when repairs are made after the sale.

561. (US GAAP ) You have depreciation for the past year, what happens on the cash flow statement and in which section?

Answers:

• Cash increases - Operating section

• Cash decreases - Financing section

• Cash increases - Financing section

• Cash decreases - Operating section

• No change

562. When a company issues a stock dividend which of the following would be affected?

Answers:

• Earnings per share.

• Total stockholder's equity.

• Total assets.

• Total liabilities.

563. Summarize IAS 3 (IFRS).

Answers:

• Currency Translation

• Presentation of financial statements

• Business Combinations

• Inventories

• Investments in debt & equity securities

564. Deferred credits will appear on the balance sheet as:

Answers:

• an owner's/stockholder's equity

• a liability

• an current asset

• a non-current asset

• an expense

565. Which of the following can be found in the FINANCING section of the cash flow statement?

Answers:

• Buying bonds

• Taxes

• Dividends paid

• Dividends received

• Buying of stock

566. The initial recording of unearned revenue would generate a:

Answers:

• debit to cash

• debit to prepaid expense

• debit to revenue

• credit to cash.

567. A sinking fund is a(n):

Answers:

• Expense

• Liability

• Contra-asset

• Contra-liability

• Asset

568. When closing stock increases, what is the effect on gross profit?

Answers:

• gross profit decreases

• no effect

• increases and then decreases

• gross profit increases

569. For a discontinued operation, what is the date at which management formally commits itself to a formal plan to dispose of the business segment?

Answers:

• Announcement date.

• Phase-out date.

• Disposal date.

• Measurement date.

570. What is the formula for   Dividend Payout Ratio?

Answers:

• Cash Dividends/Net Income

• Stock dividend awarded per share

• Cash Dividends/Shares outstanding

• Cash dividends/Shareholders' equity

571. Where in the financial statements of a company, would you most typically find operating leases?

Answers:

• Cash Flow statement.

• Balance Sheet - as liabilities.

• Balance Sheet - as assets.

• Balance Sheet - as shareholder equity.

• Notes to the financial statements.

572. One item reported as an element of other comprehensive income is:

Answers:

• The portion of impairment recognized in earnings available-for-sale debt securities and held-to-maturity debt securities

• Unrealized holding gains and losses due to the transfer from held-to-maturity securities to available-for-sale securities

• Realized holding gains and losses due to the transfer from held-to-maturity securities to available-for-sale securities

• Realized holding gains and losses on "available for sale" securities

573. What is the best definition of an Asset basis?

Answers:

• Purchase price of an asset less accumulated depreciation

• The purchase price of an asset

• The full cost of placing a fixed asset in service

• The purchase price of an asset less salvage value

574. Various standard-setting bodies, in consultation with the accounting profession and the business community, determine guidelines for GAAP. Which of the following standard-setting bodies does NOT contribute to enhancing GAAP?

Answers:

• PCFOB

• IASB

• SEC

• PCAOB

575. In a cash flow statement a bonus issue will:

Answers:

• appear in Operating cash flow

• appear in Financing cash flow

• appear in Investing cash flow

• not appear as no cash flow occurs as a result of a bonus issue.

576. A business receives a check from a customer for ??256 in full agreed settlement of an account which showed a debit balance of ??270. Which of the following entries correctly records this transaction?

Answers:

• Debit cash ??256, debit discount allowed ??14, credit debtor ??270

• Debit cash ??256, debit discount allowed ??14, credit creditor ??270.

• Credit cash ??256, credit discount received ??14, debit debtor ??270

• Debit cash ??256, debit discount received ??14, credit debtor ??270

577. What does FASB No. 142 represent?

Answers:

• Goodwill Impairment Testing

• Fair Value

• Business Combinations

• Auditing

• Financial Reporting

578. (US GAAP ) You receive a dividend, what happens on the cash flow statement and in which section?

Answers:

• Cash increases - investing section

• Non of the above

• Cash decreases - Operating section

• Cash increases - Financing section

• Cash decreases - Financing section

579. Which is NOT one of the criteria of determining if a lease should be considered a capital lease?

Answers:

• If the asset has a "buy out" option

• If the asset is required to be transferred to the lessor at the end of the lease

• Discounted present value of all lease payments exceeds 90% of the asset's value

• None of these

• Transfer of ownership at the end of the lease

580. What is NOT a line item that would be found in the Cashflows from investing activities?

Answers:

• ??Purchase of investments in equity securities of another company

• Purchase of Property, Plant & Equipment

• Loans made to suppliers

• Income tax payments on interest earned on bonds held

581. How are prior period adjustments reflected in current net income?

Answers:

• The adjustments are reflected in Extraordinary items.

• The adjustment is reflected on the cashflow statement.

• The adjustments are not reflected.

• The adjustments are made directly to the revenue or expense accounts.

582. Under US GAAP, if you own 50% of a company, what is the appropriate accounting method?

Answers:

• SFAS 115

• Equity Method

• Consolidation

• Doesn't need to be included

• Proportionate Consolidation (Joint Venture)

583. Under US GAAP, what is the appropriate accounting treatment for ownership under 20%?

Answers:

• Consolidation

• Doesn't need to be included

• Equity Method

• Proportionate consolidation

• SFAS 115 Rules

584. Summarize IAS 7 (IFRS).

Answers:

• Noncontrolling interest

• Inventories

• Business Combinations

• Cash flow statements

• Currency Translation

585. Can equities be classified as held-to-maturity?

Answers:

• Equities can never be held-to-maturity

• They are always held-to-maturity

• Only hybrid securities can be held-to-maturity

586. Which type of a capital structure contains no dilutive securities?

Answers:

• Complex.

• Simple.

• Functional.

• Basic.

587. The basic earnings per share calculation  excludes:

Answers:

• Preferred stock dividends

• Bond interest

• Dilutive securities

• Treasury Stock

588. Which of the following would be reported as an investing activity in a company's statement of cash flows?

Answers:

• Collection of an overdue account receivable from a customer.

• Collection of proceeds from a note payable.

• Collection of a tax refund from the government.

• Collection of a note receivable from a related party.

589. On the cash flow statement, interest received from a bond is found in the _________ section.

Answers:

• Not located on the cash flow statement

• Operating

• Investing

• Income

• Financing

590. International Financial Reporting Standard IFRS 7 deals with the reporting of:

Answers:

• government grants

• foreign exchange rates

• accounting errors

• financial instruments

• inventory valuation

591. Generally, where are gains / losses shown for securities classified as available for sale securities?

Answers:

• Balance Sheet

• Component of shareholder equity

• Income Statement

• Not shown anywhere

• Letter from auditors

592. How do you calculate double declining depreciation (first year)?

Answers:

• 2 * Asset value - salvage value / useful life

• Asset value / useful life

• 2 * Asset value - salvage value / 2 * useful life

• Production in year x / total possible production

• 2 * Asset value / useful life

593. What is the formula for  Price/Book Ratio

Answers:

• Market Price of Common Stock Per Share/(Retained earnings/Common shares outstanding)

• Market Price of Common Stock Per Share/Par Value per share

• Market Cap/Book Value

• Market Capitalization of the Company/Book Value of Assets

594. The deferred tax liability can have a much larger balance than other liability accounts because:

Answers:

• Most businesses have great tax lawyers

• The deferred tax liability account is not usually much larger than other liability accounts

• Businesses have extremely high tax rates and frequently need to push off paying their taxes

• It is the only liability account not listed at it's present value

595. How is a firm's holding of a marketable security deemed insulated from a change in value based on interest rate changes?

Answers:

• The security is very close to the date of maturity.

• There is a contract to sell the security at a fixed price.

• The security's value is tied to a foreign currency index.

• The security is so far "in the money" that any change would be insignificant.

596. Regarding bank reconciliation, Adjusting entries are made for which of the following reconciling adjustments?

Answers:

• Book to true balance

• Both bank to true and book to true balance

• Bank to true balance

597. If a company has negative net income the net change in cash on the Statement of cashflows will also be negative.

Answers:

• False

• True

598. Q-Tell Incorporated is in the communications industry and has the same absolute dollar level of current liabilities as the average firm in the industry. The current ratio and quick ratio for Q-Tell and the communications industry are as follows:  Industry: Current Ratio of 3.0, Quick Ratio of 2.5 Q-Tell: Current Ratio of 3.0, Quick Ratio of 2.1  Relative to the communications industry Q-Tell is most likely to have:

Answers:

• more cash, marketable securities, and receivables.

• less inventory.

• more inventory.

• more payables.

599. A firm has a patent that they would like to expense over its useful life. Which of the following would the firm credit to record this expense over the patent???s life?

Answers:

• Accumulated depreciation.

• Accumulated depletion.

• Asset

• Amortization expense

600. Which of the following will be NOT found on the cash flow statement?

Answers:

• Inventory

• Notes payable

• Depreciation

• Stock dividends

• Cash

601. Summarize FAS 160.

Answers:

• Preparation of the balance sheet (all elements)

• Currency Translation

• Noncontrolling Interest

• Dividend practices

• Preparation of the income statement (all elements)

602. A consignee (the agent selling the goods) will include the value of the inventory for sale on their balance sheet while they are in possession of the saleable goods.

Answers:

• False

• True


3 NOT Answered Yet Test Questions:

(hold on, will be updated soon)
603. What is true about a contra account?

Answers:

• It has the same T-account orientation (Debit/Credit) as the account it offsets

• It always has a negative balance

• It always has a positive balance

• It has the opposite T-account orientation (Debit/Credit) as the account it offsets

604. If you own 30% of a company, what is the appropriate accounting method?

Answers:

• Equity Method

• Consolidation

• Doesn't need to be included

• Proportionate Consolidation (Joint Venture)

• SFAS 115

605. Acme company has 5,000 shares outstanding, and Retained earnings balance of $12,000. If Acme declares a dividend of $3/share, what is the resulting Retained earnings balance?

Answers:

• $0

• The dividends are not allowed under corporate law because a company cannot have negative Retained earnings

• $7,000

• -($3,000) ; Retained Losses