125(1)

Q1. Given the following list of accounts, calculate Total Assets:

Accounts Receivable	5,000
Capital Stock	20,000
Cash	19,300
Equipment	15,400
Fees Earned	44,400
Miscellaneous Expense	18,200
Rent Expense	4,150
Retained Earnings	6,550
Wages Expense	13,900

a. $84,100 b. $59,700 c. $46,250 d. $39,700 Q2. Which of the following is TRUE in regards to a limited liability company? a. It is organized as a corporation. b. It can elect to be taxed as a partnership. c. It provides tax and liability advantages to the owners. d. All are correct. Q3. Due to various fraudulent business practices and accounting coverups in the early 2000s, Congress enacted the Sarbanes-Oxley Act of 2002. The act was responsible for establishing a new oversight board for public accountants called the a. Generally Accepted Accounting Practices for Public Accountants Board. b. Public Company Accounting Oversight Board. c. Congressional Accounting Oversight Board. d. None are correct. Q4. Large corporations such as ExxonMobil and Walmart are organized as limited liability companies. a. true b. false Q5. A note payable requires payment of the amount borrowed plus a. interest. b. cash. c. accounts payable. d. investments. Q6. The basic type of stock issued to owners is called common stock. a. true b. false Q7. Over 90% of the total dollars of business receipts are received by proprietorships. a. true b. false Q8. Which of the following businesses use a premium-price emphasis? a. Value City Furniture b. Abercrombie & Fitch c. Wal-Mart Supercenters d. Southwest Airlines Q9. Which of the items below is NOT a business organization form? a. Venture entrepreneurship b. Proprietorship c. Partnership d. Corporation Q10. The popularity of the sole proprietorship is due to the ease and low cost of organizing. a. true b. false Q11. Which principle determines the amount initially entered into the records for purchases? a. Cost principle b. Going concern concept c. Business entity concept d. Objectivity concept Q12. What is the primary objective of most businesses? a. To maximize profits b. To pay dividends to stockholders c. To provide a benefit to society d. To manufacture a quality product Q13. Costs incurred in operating a business are also known as a. revenues. b. expenses. c. liabilities. d. dividends. Q14. The objective of most businesses is to maximize profits. a. true b. false Q15. Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $30,000 during 2010. Which of the following statements is correct? a. Net income for 2010 totaled $29,000. b. Net income for 2010 totaled $59,000. c. Total retained earnings increased by $59,000 during 2010. d. Total retained earnings decreased by $30,000 during 2010. Q16. A business stakeholder has an interest in the economic performance of a business. a. true b. false Q17. More that 70% of businesses are organized as what type of business? a. Not-for-profit b. Corporation c. Partnership d. Sole proprietorship Q18. Stockholders in a corporation are internal stakeholders. a. true b. false Q19. Companies using a low-cost emphasis provide products and services that compete on features other than price. a. true b. false Q20. Recording revenue when a sale is made most directly relates to which concept? a. Going concern concept b. Periodicity concept c. Matching concept d. Adequate disclosure concept Q21. The debt created by a business when it makes a purchase on account is referred to as an a. account payable. b. account receivable. c. asset. d. expense payable. Q22. Which statement is normally prepared first? a. Income statement b. Balance sheet c. Statement of cash flows d. Retained earnings statement Q23. Who has first preference to assets in case a business fails? a. Stockholders b. Long-term creditors c. Customers d. Employees Q24. Under a premium-price emphasis, a business designs products that possess _____ for which customers are willing to pay a premium price. a. unique attributes b. high costs c. competitive efficiencies d. longer warranties Q25. The 'rules' of accounting are called a. income tax regulations. b. SEC regulations. c. Internet rules. d. Generally Accepted Accounting Principles. Q26. The first month of operation showed the net cash from operating activities to be $3,760, the net cash from investing activities to be ($5,415), and the ending cash balance to be $3,425. The net cash from financing activities must be a. $1,770. b. $5,080. c. $5,750. d. $12,600. Q27. Flow, Inc. received cash from fees earned. How does this transaction affect the Statement of Cash Flows? a. Increase cash from Operating Activities b. Increase cash from Investing Activities c. Increase cash from Financing Activities d. No effect on the Statement of Cash Flows Q28. A to Z Corporation engaged in the following transaction 'Paid a $10,000 cash dividend.' On the Statement of Cash Flows, the transaction would be classified as a. Cash Flows from Operating Activities. b. Cash Flows from Investing Activities. c. Cash Flows from Financing Activities. d. Noncash transaction. Q29. A to Z Corporation engaged in the following transaction 'Issued a $30,000 note payable to borrow cash from the bank.' On the Statement of Cash Flows, the transaction would be classified as a. Cash Flows from Operating Activities. b. Cash Flows from Investing Activities. c. Cash Flows from Financing Activities. d. Noncash transaction. Q30. Expenses can be defined as a. assets consumed. b. services used in the process of generating revenues. c. costs that have been incurred during the normal course of business. d. all of these. Q31. Rush Corporation borrowed $25,000 from the bank. Which of the following accurately shows the effects of the transaction? a. Increase cash $25,000 and decrease notes payable $25,000 b. Increase cash $25,000 and increase notes payable $25,000 c. Decrease cash $25,000 and decrease notes payable $25,000 d. Decrease cash $25,000 and increase notes payable $25,000 Q32. Dividends are an example of an expense. a. true b. false Q33. A to Z Corporation engaged in the following transaction 'Purchased a building for $80,000 cash.' On the Statement of Cash Flows, the transaction would be classified as a. Cash Flows from Operating Activities. b. Cash Flows from Investing Activities. c. Cash Flows from Financing Activities. d. Noncash transaction. Q34. Which of the following transactions changes the mix of assets only? a. Paid for supplies with cash b. Borrowed money from Second National Bank c. Received money for fees earned d. Received a utility bill Q35. Fees earned and received in cash will increase operating activity cash flows as well as retained earnings. a. true b. false Q36. Johnson, Inc. paid rent expense of $3,500 for the month of October. How are the accounts affected due to this transaction? a. Increase in cash $3,500 and increase in retained earnings $3,500 b. Increase in cash $3,500 and decrease in retained earnings $3,500 c. Decrease in cash $3,500 and decrease in retained earnings $3,500 d. Decrease in cash $3,500 and increase in retained earnings $3,500 Q37. Buying equipment for cash affects which accounts? a. Cash only b. Retained earnings only c. Equipment and retained earnings d. Cash and equipment Q38. The effect of every transaction is an increase or a decrease in one or more of the accounting equation elements. a. true b. false Q39. Miscellaneous expenses are expenses that have an undetermined amount to be paid. a. true b. false Q40. Johnson, Inc. purchased land for cash. What effect does this transaction have on the following accounts: a. Increase in Cash and decrease in Land b. Decrease in Cash and decrease in Land c. Increase in Cash and increase in Land d. Decrease in Cash and increase in Land Q41. Retained earnings will be increased by the amount in the dividend account. a. true b. false Q42. Johnson, Inc. receives $5,000 cash for fees earned. What is the effect of this transaction? a. Total assets remain unchanged. b. Cash flow from Financing Activities will increase. c. Net income will increase. d. Retained earnings will remain unchanged. Q43. For EFG Co., the transaction 'Purchase of store equipment with a note payable' would a. increase total assets. b. decrease total assets. c. have no effect on total assets. d. decrease total liabilities. Q44. It is possible for a transaction to change the makeup of assets, but to NOT affect assets in total. a. true b. false Q45. The payment of utilities expense in cash would affect the operating activities in the statement of cash flows and the income statement but NOT the balance sheet. a. true b. false Q46. Gibbs Company has $16,000 in Retained Earnings, $27,000 in Assets, and $5,000 in Liabilities. How much is in Common Stock? a. $22,000 b. $16,000 c. $11,000 d. $6,000 Q47. When an account receivable is collected in cash, the total assets of the business increase. a. true b. false Q48. A business receives $10,000 cash for a sale of merchandise and records this receipt of cash as an increase in accounts receivable by mistake. The accounting equation is still in balance. a. true b. false Q49. Hodges, Inc. had the following assets and liabilities as of September 30, 2011:

	Assets	$56,327
	Liabilities	$28,416

If assets increased by $3,914 and equity increased by $2,290, what is the increase or decrease in liabilities of Hodges as of October 31, 2011? a. ($1,624) b. $1,624 c. $6,204 d. ($6,204) Q50. The basic financial statements do NOT include the a. income statement. b. tax return. c. balance sheet. d. statement of cash flows. Q51. To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting. a. true b. false Q52. Accrual accounting does NOT require that the accounting records be updated prior to preparing financial statements. a. true b. false Q53. In October, cash is received in advance of rendering services. Assuming that half of the services have been performed by December 31, the year-end adjustment would a. decrease Unearned Service Revenue and decrease Cash. b. increase Accounts Receivable and increase Service Revenue. c. increase Cash and increase Service Revenue. d. decrease Unearned Service Revenue and increase Service Revenue. Q54. Which one of the following should be added to net income in calculating net cash flow from operating activities using the indirect method? a. A gain on the sale of land b. A decrease in accounts payable c. An increase in accrued liabilities d. Dividends paid on common stock Q55. To determine cash payments for operating expenses for the cash flow statement using the direct method, depreciation expense is added to net income. a. true b. false Q56. A&M Co. purchased land for $50,000 with $10,000 paid in cash and $40,000 in a note payable due three years from now. What effect does this transaction have on the accounts under the accrual basis of accounting? a. Net increase in assets of $40,000 and a net increase in liabilities of $40,000 b. Net increase in assets and liabilities of $50,000 c. Net increase in assets of $50,000 and a net decrease in liabilities of $40,000 d. Net increase in assets of $60,000 and a net decrease in liabilities of $40,000 Q57. Under the cash basis of accounting, a business records only transactions involving increases or decreases of its cash. a. true b. false Q58. X&Y Co. received $4,000 in payments from clients for services billed in a previous month. What effect does this transaction have on the accounts under the accrual basis of accounting? a. Total assets increase by $4,000. b. Assets will increase by $4,000 and revenues will increase $4,000. c. Total assets will be decrease by $4,000. d. The net effect on assets is zero. Q59. If land costing $75,000 was sold for $135,000, the amount reported in the investing activities section of the statement of cash flows would be $135,000. a. true b. false Q60. Under the cash basis of accounting, no adjustments are necessary prior to the preparation of the financial statements. a. true b. false Q61. Land is an example of a current asset. a. true b. false Q62. Accumulated depreciation is _____ to get the carrying value. a. added to equipment b. subtracted from equipment c. added to accounts payable d. subtracted from accounts payable Q63. On June 1, Green Pea, Inc. purchased $1,200 worth of supplies on account. Prior to the purchase, the balance in the supplies account was $0. On December 31, the fiscal year-end for Green Pea, it is determined that $500 of supplies have been used up. What is the balance in the supplies account after adjustment? a. $0 b. $700 c. $500 d. $1,200 Q64. Fees receivable would appear on the balance sheet as a(n) a. asset. b. liability. c. fixed asset. d. unearned revenue. Q65. Which of the following is an example of a deferred expense? a. Prepaid advertising b. Unearned revenue c. Accounts payable d. Accounts receivable Q66. The fixed asset section of a balance sheet may also be labeled as property, plant, and equipment. a. true b. false Q67. _____ is/are created when a revenue or expense has NOT been recorded by the end of the accounting period. a. Prepaid advertising b. Premiums received in advance c. Unearned revenue d. Accruals Q68. Under the cash basis of accounting, expenses are recorded when paid. a. true b. false Q69. Current assets are assets that are expected to be converted to cash, sold or used up within 6 months. a. true b. false Q70. When an entry is made to adjust the supplies account and recognize supplies expense for the period, which section of the statement of cash flows is affected? a. Cash Flow from Operating Activities b. Cash Flow from Investing Activities c. Cash Flow from Financing Activities d. There is no effect on the statement of cash flows. Q71. The revenue recognition concept states that revenue should be recorded in the same period as the cash is received. a. true b. false Q72. The _____ is prepared with various sections, subsections, and captions that aid in its interpretation and analysis. a. accounting equation b. retained earnings statement c. intangible asset section d. classified balance sheet Q73. Using accrual accounting, revenue is recorded and reported only a. when cash is received without regard to when the services are rendered. b. when the services are rendered without regard to when cash is received. c. when cash is received at the time services are rendered. d. if cash is received after the services are rendered. Q74. The matching concept requires expenses to be recorded in the same period that the related revenue is recorded. a. true b. false Q75. Every company must use the cash basis of accounting. a. true b. false Q76. Which financial statement reconciles net income with net cash flows from operating activities? a. Balance sheet b. Statement of retained earnings c. Statement of cash flows d. Income statement Q77. Using the indirect method for preparing the statement of cash flows, what is the net cash flow from operating activities if net income is $39,000; depreciation expense is $9,000; and the decrease in accounts payable is $5,000. a. $48,000 b. $53,000 c. $35,000 d. $43,000 Q78. In a multiple-step income statement, sales will be reduced by sales discounts and sales returns and allowances to arrive at net sales. a. true b. false Q79. A sales invoice included the following information: merchandise price, $5,000; terms 1/10, n/eom. Assuming that a credit for merchandise returned of $600 is granted prior to payment, and that the invoice is paid within the discount period, what is the amount of cash received by the seller? a. $4,656 b. $4,400 c. $4,356 d. $4,950 Q80. Multiple-step income statements show: a. gross profit but not income from operations. b. neither gross profit nor income from operations. c. both gross profit and income from operations. d. income from operations but not gross profit. Q81. Which term indicates that merchandise is free of transportation charges to the buyer? a. FOB destination b. Transportation out c. FOB shipping point d. Transportation in Q82. The sales discount account is a contra account to Sales. a. true b. false Q83. A buyer who acquires merchandise under credit terms of 1/10, n/30 has 10 days after the invoice date to take advantage of the cash discount. a. true b. false Q84. Purchases of merchandise increase the merchandise inventory account under the perpetual inventory system. a. true b. false Q85. If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are a. n/30. b. FOB shipping point. c. FOB destination. d. consigned. Q86. The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a a. multiple-step statement. b. revenue statement. c. report-form statement. d. single-step statement. Q87. Expenses that CANNOT be traced directly to operations are identified as a. other income. b. operating expenses. c. cost of goods sold. d. other expenses. Q88. Which of the following would NOT affect the operating activities section of the statement of cash flows, using the indirect method? a. Decrease in merchandise inventory b. Payment on a note payable c. Decrease in unearned rent d. Depreciation expense Q89. If merchandise costing $2,500, terms FOB destination, 2/10, n/30, with transportation costs of $100, is paid within 10 days, the amount of the purchases discount is $52. a. true b. false Q90. A sale of $600 on account subject to a sales tax of 5% would increase account receivable by $570. a. true b. false Q91. Which of the following are subtracted from sales to arrive at net sales? a. Sales returns b. Merchandise inventory c. Accounts receivable d. Cost of merchandise sold Q92. Under the indirect method for preparing the statement of cash flows, decreases in current assets are _____ net income in the cash flows from operating activities section. a. subtracted from b. added to c. not used in calculating d. cannot tell from the information given Q93. Inventory NOT sold at the end of the period is reported as a. cost of goods sold. b. old stock. c. merchandise inventory. d. net purchases. Q94. If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by issuing a a. sales invoice. b. purchase invoice. c. credit memorandum. d. debit memorandum. Q95. Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a(n): a. decrease in Bank Credit Card Sales, increase in Credit Card Expense, and increase in Sales. b. increase in Cash and increase in Sales. c. increase in Cash, decrease in Credit Card Expense, and increase in Sales. d. decrease in Sales, increase in Credit Card Expense, and decrease in Cash. Q96. Gold Co. sold merchandise to Bronze Co. on account, $25,000, terms 2/15, net 45. The cost of the merchandise sold is $18,500. Gold Co. issued a credit memorandum for $2,500 for merchandise returned that originally cost $1,900. Bronze Co. paid the invoice within the discount period. What is amount of net sales from the transactions? a. $22,500 b. $22,000 c. $5,450 d. $22,050 Q97. When the seller offers a sales discount, even if borrowing has to be done, it is generally advantageous for the buyer to pay within the discount period. a. true b. false Q98. When merchandise is purchased to resell to customers, it is recorded in the account entitled a. Supplies. b. Cost of Goods Sold. c. Merchandise Inventory. d. Sales. Q99. If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are stated as a. FOB shipping point. b. FOB destination. c. FOB n/30. d. FOB buyer. Q100. Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $20,000. The seller paid transportation costs of $1,000 and issued a credit memorandum for $5,000 prior to payment. What is the amount of the cash discount allowable? a. $160 b. $150 c. $140 d. $100