Question 1

An adjusting entry will not take the format of which one of the following entries?

Accepted Answer

A) A debit to an expense account and a credit to an asset account 
B) A debit to an expense account and a credit to a revenue account 
C) A debit to an asset account and a credit to a revenue account 
D) A debit to a liability account and a credit to a revenue account 
E) An adjusting entry could take the format of any choice a through d. 
A) A debit to an expense account and a credit to an asset account 
B) A debit to an expense account and a credit to a revenue account 
C) A debit to an asset account and a credit to a revenue account 
D) A debit to a liability account and a credit to a revenue account 
E) An adjusting entry could take the format of any choice a through d.

Question 2

Items classified as operating expenses reflect management's judgment that the item is a cost of the core business.

Accepted Answer

A) True 
 B)False

Question 3

Operating risk arises from the asset side of the business, and financing risk arises from debt.

Accepted Answer

A) True 
 B)False

Question 4

The accounting system uses a device called an account.An account

Accepted Answer

A) is created each time a transaction takes place. 
B) accumulates the increases and decreases that occur during the period for a single item. 
C) is created only for income statement items. 
D) is created only for balance sheet items. 
E) None of these answer choices is correct. 
A) is created each time a transaction takes place. 
B) accumulates the increases and decreases that occur during the period for a single item. 
C) is created only for income statement items. 
D) is created only for balance sheet items. 
E) None of these answer choices is correct.

Question 5

The statement of cash flows begin with revenues; for this reason, analysts often refer to revenue growth as "top-line" growth.

Accepted Answer

A) True 
 B)False

Question 6

Other (nonoperating) items follow operating expenses or the subtotal for operating profit.Most firms reporting under U.S.GAAP separately report financing costs, such as

Accepted Answer

A) principal payments. 
B) interest revenue. 
C) interest expense. 
D) principal receipts. 
E) none of the above. 
A) principal payments. 
B) interest revenue. 
C) interest expense. 
D) principal receipts. 
E) none of the above.

Question 7

A firm sells its headquarters building at a gain. This means that at the time of sale

Accepted Answer

A) the cash or other assets received were greater than the building's book value. 
B) the cash or assets received in a transaction were less than the carrying value of the assets given up. 
C) the cash or other assets received were greater than the building' carrying value. 
D) the cash or assets received in a transaction were less than the building's book value. 
E) Both choices a and c are correct. 
A) the cash or other assets received were greater than the building's book value. 
B) the cash or assets received in a transaction were less than the carrying value of the assets given up. 
C) the cash or other assets received were greater than the building' carrying value. 
D) the cash or assets received in a transaction were less than the building's book value. 
E) Both choices a and c are correct.

Question 8

Retained earnings measures the cumulative excess of net income over dividends for the life of a firm.Cumulative means that retained earnings aggregates all undistributed earnings.

Accepted Answer

A) True 
 B)False

Question 9

Shareholders of Augusta Corporation have received $35,000 in dividends in the current year.At year end the corporation has total assets of $500,000, total liabilities equal to $300,000, and contributed capital totaling $100,000.If retained earnings at the beginning of the year was $80,000, what was Augusta's net income for the current year?

Accepted Answer

A) $80,000 
B) $215,000 
C) $55,000 
D) $10,000 
E) $45,000 
A) $80,000 
B) $215,000 
C) $55,000 
D) $10,000 
E) $45,000

Question 10

Which of the following is/are false?

Accepted Answer

A) Firms do not necessarily recognize revenues when they receive cash 
B) Firms do not necessarily recognize expenses when they disburse cash. 
C) Net income will not necessarily equal cash flow from operations each period. 
D) A profitable firm will likely borrow funds in order to remain in business, but eventually operations must generate cash to repay the borrowing. 
E) None of the above are false 
A) Firms do not necessarily recognize revenues when they receive cash 
B) Firms do not necessarily recognize expenses when they disburse cash. 
C) Net income will not necessarily equal cash flow from operations each period. 
D) A profitable firm will likely borrow funds in order to remain in business, but eventually operations must generate cash to repay the borrowing. 
E) None of the above are false

Question 11

Columbia Manufacturing Corp.purchased a new lathe machine for its baseball bat manufacturing plant on January 1.The machine cost $12,000 and is expected to be used in production for 4 years at which time its estimated salvage value will be $2,000.The yearly straight-line depreciation for this asset would be

Accepted Answer

A) $2,500 
B) $3,000 
C) $4,000 
D) $12,000 
E) $9,500 
A) $2,500 
B) $3,000 
C) $4,000 
D) $12,000 
E) $9,500

Question 12

If Moore pays a $600 insurance premium for a one-year policy on January 31 for coverage from February 1 of Year1 through January 31 of Year 2, the journal entry to be made at the end of February Year 1 would include a debit to Insurance Expense for $600.

Accepted Answer

A) True 
 B)False

Question 13

The income statement is not also called the statement of

Accepted Answer

A) operations 
B) operating activity 
C) profit and loss 
D) receipts and disbursements 
E) All of the above are different names assigned to the income statement. 
A) operations 
B) operating activity 
C) profit and loss 
D) receipts and disbursements 
E) All of the above are different names assigned to the income statement.

Question 14

The last step in the accounting record-keeping process is:

Accepted Answer

A) making adjusting journal entries to the accounts to correct errors and to reflect the financial statement impacts of items that occur because of usage or the passage of time. 
B) preparing the income statement for the period from amounts in the income statement accounts. 
C) closing the temporary income statement accounts to retained earnings. 
D) preparing the balance sheet from amounts in the balance sheet accounts. 
E) preparing the statement of cash flows from balance sheet amounts and from details of transactions affecting the cash account. 
A) making adjusting journal entries to the accounts to correct errors and to reflect the financial statement impacts of items that occur because of usage or the passage of time. 
B) preparing the income statement for the period from amounts in the income statement accounts. 
C) closing the temporary income statement accounts to retained earnings. 
D) preparing the balance sheet from amounts in the balance sheet accounts. 
E) preparing the statement of cash flows from balance sheet amounts and from details of transactions affecting the cash account.

Question 15

Recording revenues and expenses directly in the Retained Earnings account suppresses information about the causes of net income.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following concepts best characterizes the accrual basis of accounting?

Accepted Answer

A) Conservatism 
B) Matching 
C) Understandability 
D) Going concern 
E) Unit of measurement 
A) Conservatism 
B) Matching 
C) Understandability 
D) Going concern 
E) Unit of measurement

Question 17

Subtracting nonoperating expenses from operating income yields:

Accepted Answer

A) income tax expense. 
B) profit before income taxes. 
C) net income. 
D) gross profit. 
E) none of the above. 
A) income tax expense. 
B) profit before income taxes. 
C) net income. 
D) gross profit. 
E) none of the above.

Question 18

Common terminology, but not definitions in U.S.GAAP and IFRS, often refers to the difference between sales and cost of sales as gross margin, gross profit, or gross income.

Accepted Answer

A) True 
 B)False

Question 19

Describe the relationship between the balance sheet and the income statement.

Accepted Answer

RELATIONSHIP BETWEEN THE BALANCE SHEET A

Question 20

Which of the following are not an example of adjusting entries?

Accepted Answer

A) recognition of depreciation on equipment purchased during the year 
B) recording the expiration of a portion of the cost of prepaid insurance that was purchased during the previous year 
C) recognition of income tax expense on the net income before income taxes earned during the period 
D) recording of collections received from customers during the period 
E) all of the above 
A) recognition of depreciation on equipment purchased during the year 
B) recording the expiration of a portion of the cost of prepaid insurance that was purchased during the previous year 
C) recognition of income tax expense on the net income before income taxes earned during the period 
D) recording of collections received from customers during the period 
E) all of the above

An adjusting entry will not take the format of which one of the following entries?

Items classified as operating expenses reflect management's judgment that the item is a cost of the core business.

Operating risk arises from the asset side of the business, and financing risk arises from debt.

The accounting system uses a device called an account.An account

The statement of cash flows begin with revenues; for this reason, analysts often refer to revenue growth as "top-line" growth.

Other (nonoperating) items follow operating expenses or the subtotal for operating profit.Most firms reporting under U.S.GAAP separately report financing costs, such as

A firm sells its headquarters building at a gain. This means that at the time of sale

Retained earnings measures the cumulative excess of net income over dividends for the life of a firm.Cumulative means that retained earnings aggregates all undistributed earnings.

Which of the following is/are false?

If Moore pays a $600 insurance premium for a one-year policy on January 31 for coverage from February 1 of Year1 through January 31 of Year 2, the journal entry to be made at the end of February Year 1 would include a debit to Insurance Expense for $600.

The income statement is not also called the statement of

The last step in the accounting record-keeping process is:

Recording revenues and expenses directly in the Retained Earnings account suppresses information about the causes of net income.

Which of the following concepts best characterizes the accrual basis of accounting?

Subtracting nonoperating expenses from operating income yields:

Common terminology, but not definitions in U.S.GAAP and IFRS, often refers to the difference between sales and cost of sales as gross margin, gross profit, or gross income.

Describe the relationship between the balance sheet and the income statement.

Which of the following are not an example of adjusting entries?

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters

Exam 3: The Basics of Record Keeping and Financial Statement Preparation: Income Statement

An adjusting entry will not take the format of which one of the following entries?

Items classified as operating expenses reflect management's judgment that the item is a cost of the core business.

Operating risk arises from the asset side of the business, and financing risk arises from debt.

The accounting system uses a device called an account.An account

The statement of cash flows begin with revenues; for this reason, analysts often refer to revenue growth as "top-line" growth.

Other (nonoperating) items follow operating expenses or the subtotal for operating profit.Most firms reporting under U.S.GAAP separately report financing costs, such as

A firm sells its headquarters building at a gain. This means that at the time of sale

Retained earnings measures the cumulative excess of net income over dividends for the life of a firm.Cumulative means that retained earnings aggregates all undistributed earnings.

Which of the following is/are false?

If Moore pays a $600 insurance premium for a one-year policy on January 31 for coverage from February 1 of Year1 through January 31 of Year 2, the journal entry to be made at the end of February Year 1 would include a debit to Insurance Expense for $600.

The income statement is not also called the statement of

The last step in the accounting record-keeping process is:

Recording revenues and expenses directly in the Retained Earnings account suppresses information about the causes of net income.

Which of the following concepts best characterizes the accrual basis of accounting?

Subtracting nonoperating expenses from operating income yields:

Common terminology, but not definitions in U.S.GAAP and IFRS, often refers to the difference between sales and cost of sales as gross margin, gross profit, or gross income.

Describe the relationship between the balance sheet and the income statement.

Which of the following are not an example of adjusting entries?

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Introduction to Financial Statement Analysis

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

Filters