Practice Exam #1

Report
1. An examination of the financial statements of a business to
ensure that they conform with generally accepted accounting
principles is called?
A.
B.
C.
D.
A certification
An audit
A verification
A validation
1. An examination of the financial statements of a business to
ensure that they conform with generally accepted
accounting principles is called?
A.
B.
C.
D.
A certification
An audit
A verification
A validation
2. Morrow Corp. makes a credit sales (i.e., sale on account) to a
customer. The effect of this transaction on the accounting
equation is that?
A.
B.
C.
D.
Assets increase and liabilities increase
Assets increase and stockholder’s equity increases
Liabilities increase and stockholder’s equity decreases
Liabilities decrease and stockholder’s equity increases
2. Morrow Corp. makes a credit sales (i.e., sale on account) to a
customer. The effect of this transaction on the accounting
equation is that?
A.
B.
C.
D.
Assets increase and liabilities increase
Assets increase and stockholder’s equity increases
Liabilities increase and stockholder’s equity decreases
Liabilities decrease and stockholder’s equity increases
3.On January 1, 2005, Thomas Company paid $1000 for a two-year
insurance policy on the building. The accounting period ends
December 31. At the end of 2005, the financial statement
should report?
A.
B.
C.
D.
Prepaid Insurance $500; Insurance Expense $500
Prepaid Insurance $0; Insurance Expense $1000
Prepaid Insurance $1000; Insurance Expense $0
Prepaid Insurance $250; Insurance Expense $250
3.On January 1, 2005, Thomas Company paid $1000 for a two-year
insurance policy on the building. The accounting period ends
December 31. At the end of 2005, the financial statement
should report?
A.
B.
C.
D.
Prepaid Insurance $500; Insurance Expense $500
Prepaid Insurance $0; Insurance Expense $1000
Prepaid Insurance $1000; Insurance Expense $0
Prepaid Insurance $250; Insurance Expense $250
4.Retained earnings refers to?
A. The amount reported as “the bottom line” on the income
statement
B. The accumulated amount of past earnings of a corporation
that has not been distributed to shareholders as dividends
C. The total amount of stockholder’s equity for a corporation
D. The amount that shareholders have invested by purchasing a
corporation’s stock
4.Retained earnings refers to?
A. The amount reported as “the bottom line” on the income
statement
B. The accumulated amount of past earnings of a corporation
that has not been distributed to shareholders as dividends
C. The total amount of stockholder’s equity for a corporation
D. The amount that shareholders have invested by purchasing a
corporation’s stock
5.The amount of rent expense reported on the income
statement is?
A. The amount of cash paid for rent in the current period
B. The amount of cash paid for rent in the current period
less any unpaid rent at the end of the period
C. The amount of rent used up (incurred) in the current
period to help generate revenue
D. An increase in net income
5.The amount of rent expense reported on the income
statement is?
A. The amount of cash paid for rent in the current period
B. The amount of cash paid for rent in the current period
less any unpaid rent at the end of the period
C. The amount of rent used up (incurred) in the current
period to help generate revenue
D. An increase in net income
6.The advantages of incorporation include all of the following except?
A.
B.
C.
D.
Ability to raise capital
Tax deductibility of dividends
Ease of transfer of ownership
Limited liability of owners
6.The advantages of incorporation include all of the following except?
A.
B.
C.
D.
Ability to raise capital
Tax deductibility of dividends
Ease of transfer of ownership
Limited liability of owners
7. A cash inflow from financing activities includes?
A. Proceeds from selling investments in equity
securities of another company
B. Proceeds from selling equipment
C. Proceeds from issuance of bonds payable
D. Receipt of interest payments
7. A cash inflow from financing activities includes?
A. Proceeds from selling investments in equity
securities of another company
B. Proceeds from selling equipment
C. Proceeds from issuance of bonds payable
D. Receipt of interest payments
8.Under accrual basis accounting, revenues are?
A.
B.
C.
D.
Recognized when they are earned
Recognized when cash is received
Recognized when they are incurred
Recognized when cash is paid
8.Under accrual basis accounting, revenues are?
A.
B.
C.
D.
Recognized when they are earned
Recognized when cash is received
Recognized when they are incurred
Recognized when cash is paid
9. Which financial statement shows the financial position of a business as
of a given date?
A.
B.
C.
D.
Balance sheet
Income statement
Statement of cash flows
Statement of retained earnings
9. Which financial statement shows the financial position of a business as
of a given date?
A.
B.
C.
D.
Balance sheet
Income statement
Statement of cash flows
Statement of retained earnings
10.The accounts payable account has a
beginning balance of $1000 and we purchased
$3000 of inventory on credit during the month.
The ending balance was $800. How much did
we pay our creditors during the month?
A.
B.
C.
D.
$2800
$3000
$3200
$3800
10.The accounts payable account has a
beginning balance of $1000 and we purchased
$3000 of inventory on credit during the month.
The ending balance was $800. How much did
we pay our creditors during the month?
A.
B.
C.
D.
$2800
$3000
$3200
$3800
11.Adjusting entries never include?
A.
B.
C.
D.
Prepaid expenses
Interest payable
Unearned revenue
Cash
11.Adjusting entries never include?
A.
B.
C.
D.
Prepaid expenses
Interest payable
Unearned revenue
Cash
12. If you wanted to know what accounting
rules a company follows related to its
inventory, where would you look?
A.
B.
C.
D.
The notes to the financial statements
The income statement
The balance sheet
The headings to the financial statements
12. If you wanted to know what accounting
rules a company follows related to its
inventory, where would you look?
A.
B.
C.
D.
The notes to the financial statements
The income statement
The balance sheet
The headings to the financial statements
13. At the end of December, the owner of an
apartment complex realized that the
December rent had not been collected from
one of the tenants amounting to $500. On
December 31, the owner would show which of
the following on its financial statements?
A.
B.
C.
D.
Unearned rent revenue of $500
Rent Receivable of $500
Rent Payable of $500
Rent Expense of $500
13. At the end of December, the owner of an
apartment complex realized that the
December rent had not been collected from
one of the tenants amounting to $500. On
December 31, the owner would show which of
the following on its financial statements?
A.
B.
C.
D.
Unearned rent revenue of $500
Rent Receivable of $500
Rent Payable of $500
Rent Expense of $500
14. Which of the following accounts is
increased by credit entries and decreased by
debit entries?
A.
B.
C.
D.
Cash
Advertising Expense
Equipment
Accounts payable
14. Which of the following accounts is
increased by credit entries and decreased by
debit entries?
A.
B.
C.
D.
Cash
Advertising Expense
Equipment
Accounts payable
15. The primary objective of financial
information is to?
A. Provide information to detect fraud in the
preparation of financial statements
B. Provide information about the taxable
income of the company
C. Provide managers with information about
the efficiency and effectiveness of the
production process
D. Provide useful economic information about
a business to help external parties make
sound financial decisions
15. The primary objective of financial
information is to?
A. Provide information to detect fraud in the
preparation of financial statements
B. Provide information about the taxable
income of the company
C. Provide managers with information about
the efficiency and effectiveness of the
production process
D. Provide useful economic information
about a business to help external parties
make sound financial decisions
16. Which of the following is the private body
responsible for establishing generally accepted
accounting principles (GAAP)?
A.
B.
C.
D.
PCAOB
SEC
FASB
APB
16. Which of the following is the private body
responsible for establishing generally accepted
accounting principles (GAAP)?
A.
B.
C.
D.
PCAOB
SEC
FASB
APB
17.Failure to make an adjusting entry to
recognize accrued utilities payable would
cause an?
A. Understatement of expenses and liabilities
and an overstatement of stockholder’s
equity
B. Overstatement of expenses and liabilities
and an understatement of stockholder’s
equity
C. Understatement of expenses, liabilities,
and stockholder’s equity
D. Overstatement of assets, expenses, and
stockholder’s equity
17.Failure to make an adjusting entry to
recognize accrued utilities payable would
cause an?
A. Understatement of expenses and liabilities
and an overstatement of stockholder’s
equity
B. Overstatement of expenses and liabilities
and an understatement of stockholder’s
equity
C. Understatement of expenses, liabilities,
and stockholder’s equity
D. Overstatement of assets, expenses, and
stockholder’s equity
18.Which of the following accounts would not
be closed at the end of the accounting period?
A.
B.
C.
D.
Dividends
Sales revenue
Cost of goods sold
Inventory
18.Which of the following accounts would not
be closed at the end of the accounting period?
A.
B.
C.
D.
Dividends
Sales revenue
Cost of goods sold
Inventory
19. Which accounting principle states that
expenses incurred in generating revenue
should be recorded in the same period in
which the revenue is recognized?
A.
B.
C.
D.
Historical cost principle
Going concern principle
Matching principle
Revenue recognition principle
19. Which accounting principle states that
expenses incurred in generating revenue
should be recorded in the same period in
which the revenue is recognized?
A.
B.
C.
D.
Historical cost principle
Going concern principle
Matching principle
Revenue recognition principle
20. Abrahams Corporation reported the
following amounts at the end of the first year
of operations, December 31, 2009: contributed
capital $100,000; sales revenue $400,000; total
assets $300,000; $5,000 dividends; and total
liabilities $180,000. Retained earnings would
be?
A.
B.
C.
D.
$20,000
$30,000
$70,000
$80,000
20. Abrahams Corporation reported the
following amounts at the end of the first year
of operations, December 31, 2009: contributed
capital $100,000; sales revenue $400,000; total
assets $300,000; $5,000 dividends; and total
liabilities $180,000. Retained earnings would
be?
A.
B.
C.
D.
$20,000
$30,000
$70,000
$80,000
21. Which of the following direct effects on
the fundamental accounting model is not
possible as a result of transaction analysis?
A. Increase a liability and increase an asset
B. Decrease stockholder’s equity and increase
an asset
C. Increase an asset and decrease an asset
D. Decrease stockholder’s equity and
decrease an asset
21. Which of the following direct effects on
the fundamental accounting model is not
possible as a result of transaction analysis?
A. Increase a liability and increase an asset
B. Decrease stockholder’s equity and
increase an asset
C. Increase an asset and decrease an asset
D. Decrease stockholder’s equity and
decrease an asset
22. On January 1, 2009, the ledger of Global
Corporation correctly showed supplies
inventory of $500. During 2009, supplies
purchases amounted to $1200. A count
(inventory) of supplies on hand at December
31, 2009, showed $600. The 2009 income
statement should report supplies expense
amounting to?
A.
B.
C.
D.
$1200
$1100
$800
$600
22. On January 1, 2009, the ledger of Global
Corporation correctly showed supplies
inventory of $500. During 2009, supplies
purchases amounted to $1200. A count
(inventory) of supplies on hand at December
31, 2009, showed $600. The 2009 income
statement should report supplies expense
amounting to?
A.
B.
C.
D.
$1200
$1100
$800
$600
23. Assets are?
A. Probable debts or obligations of an entity
as a result of past transactions which will
be paid with assets or services
B. Stockholders’ equity minus liabilities
C. Probable future economic benefits owned
by an entity as a result of past transactions
D. The financing provided by the owners and
the operations of a business
23. Assets are?
A. Probable debts or obligations of an entity
as a result of past transactions which will
be paid with assets or services
B. Stockholders’ equity minus liabilities
C. Probable future economic benefits owned
by an entity as a result of past
transactions
D. The financing provided by the owners and
the operations of a business
24. Which of the following is most often
included in current assets?
A.
B.
C.
D.
Prepaid expenses
Property, plant, and equipment
Intangible assets
Unearned revenue
24. Which of the following is most often
included in current assets?
A.
B.
C.
D.
Prepaid expenses
Property, plant, and equipment
Intangible assets
Unearned revenue
25. Which characteristic states that accounting
information is unbiased and verifiable?
A.
B.
C.
D.
Consistency
Comparability
Relevance
Reliability
25. Which characteristic states that accounting
information is unbiased and verifiable?
A.
B.
C.
D.
Consistency
Comparability
Relevance
Reliability
26. On January 1, 2009, the balance in
Retained Earnings for Conlon Company was
$125,000. During 2009, the company declared
and paid cash dividends of $20,000, reported
net income of $65,000, sold additional
common stock for $10,000. What was the
balance of Retained Earnings on December 31,
2009?
A.
B.
C.
D.
$210,000
$190,000
$180,000
$170,000
26. On January 1, 2009, the balance in
Retained Earnings for Conlon Company was
$125,000. During 2009, the company declared
and paid cash dividends of $20,000, reported
net income of $65,000, sold additional
common stock for $10,000. What was the
balance of Retained Earnings on December 31,
2009?
A.
B.
C.
D.
$210,000
$190,000
$180,000
$170,000
27. When a company pays back an amount
due to a supplier for a prior purchase?
A. Assets decrease and liabilities decrease
B. Assets increase and stockholder’s equity
increases
C. Liabilities increase and stockholder’s equity
decreases
D. Assets increase and liabilities decrease
27. When a company pays back an amount
due to a supplier for a prior purchase?
A. Assets decrease and liabilities decrease
B. Assets increase and stockholder’s equity
increases
C. Liabilities increase and stockholder’s equity
decreases
D. Assets increase and liabilities decrease
28. The two categories of stockholder’s equity
usually found on the balance sheet of a
corporation are?
A. Contributed capital and long-term liabilities
B. Contributed capital and property, plant,
and equipment
C. Retained earnings and notes payable
D. Contributed capital and retained earnings
28. The two categories of stockholder’s equity
usually found on the balance sheet of a
corporation are?
A. Contributed capital and long-term liabilities
B. Contributed capital and property, plant,
and equipment
C. Retained earnings and notes payable
D. Contributed capital and retained earnings
29. Anna Inc. had the following items reported on its most recent
financial statements:
Total revenues……………..$500,000
Dividends………………$10,000
Total Assets……………..$425,000
Total Liabilities…………$125,000
Total contributed capital….$100,000
Beginning Retained Earnings…$140,000
What total expenses were reported by Anna for the year?
A.$155,000
B.$275,000
C.$310,000
D.$430,000
29. Anna Inc. had the following items reported on its most recent
financial statements:
Total revenues……………..$500,000
Dividends………………$10,000
Total Assets……………..$425,000
Total Liabilities…………$125,000
Total contributed capital….$100,000
Beginning Retained Earnings….$140,000
What total expenses were reported by Anna for the year?
A.$155,000
B.$275,000
C.$310,000
D.$430,000
30. Surfing Magazine receives $50,000 from
customers on April 1, 2009, for one-year
magazine subscriptions. On December 31,
2009, Surfing Magazine should?
A.
B.
C.
D.
Report unearned revenue of $55,000
Report sales revenue of $50,000
Report sales revenue of $37,500
Report unearned revenue of $37,500
30. Surfing Magazine receives $50,000 from
customers on April 1, 2009, for one-year
magazine subscriptions. On December 31,
2009, Surfing Magazine should?
A.
B.
C.
D.
Report unearned revenue of $55,000
Report sales revenue of $50,000
Report sales revenue of $37,500
Report unearned revenue of $37,500
31. Investing activities?
A. Involve day to day events like selling goods
and services, which occur when running a
business
B. Involve the buying or selling of land,
buildings, equipment, and other long-term
investments
C. Only involve financial exchanges
D. All of these
31. Investing activities?
A. Involve day to day events like selling goods
and services, which occur when running a
business
B. Involve the buying or selling of land,
buildings, equipment, and other long-term
investments
C. Only involve financial exchanges
D. All of these
32. Accumulated depreciation?
A.
B.
C.
D.
Is an expense account
Is a liability account
Is a regular asset account
Is an asset contra-account
32. Accumulated depreciation?
A.
B.
C.
D.
Is an expense account
Is a liability account
Is a regular asset account
Is an asset contra-account
33. Cy’s Bar and Grill has $10,000 in utilities
expense during the year. At the beginning of
the year, Cy’s had utilities payable amounting
to $520. At the end of the year, utilities
payable totaled $470. What amount of cash
did Cy’s pay for utilities during the year?
A.
B.
C.
D.
$9950
$10,000
$10,050
$10,990
33. Cy’s Bar and Grill has $10,000 in utilities
expense during the year. At the beginning of
the year, Cy’s had utilities payable amounting
to $520. At the end of the year, utilities
payable totaled $470. What amount of cash
did Cy’s pay for utilities during the year?
A.
B.
C.
D.
$9950
$10,000
$10,050
$10,990
34. At the end of the month, the adjusting
journal entry to record the use of supplies
would include?
A. An increase to supplies and an increase to
expenses
B. A decrease to supplies and an increase to
expense
C. An increase to supplies and an increase to
revenue
D. A decrease to supplies and a decrease to
cash
34. At the end of the month, the adjusting
journal entry to record the use of supplies
would include?
A. An increase to supplies and an increase to
expenses
B. A decrease to supplies and an increase to
expense
C. An increase to supplies and an increase to
revenue
D. A decrease to supplies and a decrease to
cash
35. Primary responsibility for the information
in a corporation’s financial statements rests
with?
A.
B.
C.
D.
The shareholders of the corporation
The managers of the corporation
The Securities and Exchange Commission
The certified public accountant who
audited the financial statements
35. Primary responsibility for the information
in a corporation’s financial statements rests
with?
A.
B.
C.
D.
The shareholders of the corporation
The managers of the corporation
The Securities and Exchange Commission
The certified public accountant who
audited the financial statements

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