1.Which of the following is the primary purpose of accounting? A. To establish a business B. To identify, record and communicate business transactions C. To deceive stockholders D. To keep from paying taxes

2. Which of the following is found on the income statement? A. Cash B. Accounts Receivable C. Common Stock D. Salaries Expense

3. An Asset is: A. only acquired with cash B. something the company owns C. only contributed by stockholders D. a companys obligation to pay

4. Which of the following is found on the Balance Sheet? A. Service Revenue B. Net Income C. Operating Activities D. Retained Earnings

5. Net Income: A. Decreases equity B. Represents the amount of assets owners put into a business C. Equals assets minus liabilities D. Is the excess of revenues over expenses

6. If equity is $300,000 and liabilities are $192,000, then assets equal: A. $108,000 B. $192,000 C. $300,000 D. $492,000

7. The description of the relation between a companys assets, liabilities and equity, which is expressed as Assets = Liabilities + Equity are known as the: A. Income statement equation B. Accounting equation C. Business equation D. Return on equity ratio

8. Photometer Company paid off $30,000 of its accounts payable in cash. What is the journal entry that will be recorded?

A. Debit Accounts Payable $30,000, Credit Accounts Receivable $30,000 B. Debit Cash $30,000, Credit Accounts Receivable $30,000

C. Debit Accounts Payable $30,000, Credit Cash $30,000

D. Debit Accounts Receivable $30,000, Credit Cash $30,000

9. Apatha Company has assets of $600,000, liabilities of $250,000 and equity of $350,000. It buys office equipment on credit for $75,000. What is the effect on the accounting equation? A. Assets increase by $75,000 and expenses increase by $75,000 B. Assets increase by $75,000 and expenses decrease by $75,000 C. Liabilities increase by $75,000 and expenses decrease by $75,000 D. Assets decrease by $75,000 and expenses decrease by $75,000

10. Viscount Company collected $42,000 cash on its accounts receivable. What is the journal entry that will be recorded?

A. Debit Cash $42,000; Credit Accounts Receivable $42,000 B. Debit Sales $42,000; Credit Cash $42,000 C. No journal entry is required D. Debit Accounts Receivable $42,000; Credit Sales $42,000

11. A company had sales of $695,000 and its cost of goods sold of $278,000. Its gross margin equals: A. $(417,000) B. $695,000 C. $278,000 D. $417,000

12. Merchandise inventory: A. Is an expense B. Is a current asset purchased for resale C. Includes office supplies D. Is classified with investments on the balance sheet

13. Closing Entries would be prepared before

A. Financial Statements are prepared

B. A post-closing Trial Balance

C. An Adjusted Trial Balance

D. Adjusting Entries

14. The Closing Entry for an Expense account would

A. Debit Income Summary and Credit the expense

B. Debit the expense and Credit Income Summary

C. Credit Retained Earnings and Debit the expense

D. Credit Revenue and debit the expense

15. The Retained Earnings Statement is based on which of the following relationships?

A. Retained Earnings Net Income Dividends

B. Retained Earnings Net Income + Dividends

C. Retained Earnings + Net Income + Dividends

D. Retained Earnings + Net Income Dividends

16. If current assets are $90,000 and current liabilities are $30,000, working capital will be:

A. 33.3%

B. 3:1

C. $60,000

D. $120,000

17. Dividends will have what effect on Retained Earnings?

A. Increase

B. Decrease

C. No effect

D. Depends if there is a Net Income or Loss

18. Which accounts should be closed?

A. Expenses and Revenues

B. Dividends

C. Income Summary

D. All of the above

19. What type of inventory system ensures the most up to date balances at all times?

A. Perpetual Inventory System

B. Periodic Inventory System

C. No Inventory System

D. Mofrey Inventory System

20. The Just in Time concept of inventory management is best illustrated by:

A. Receiving deliveries of materials from suppliers just before the materials are used in the production process.

B. Completing the manufacturing process just before the deadline established by the customer

C. An automated factory that reduces production time below that of other companies in the industry

D. Selling finished products before they go out of style

21. An asset which costs $7,200 and has accumulated depreciation of $1,800 is sold for $4,500. What amount will be recognized when the asset is sold?

A. A gain of $900

B. A loss of $900

C A loss of $2,700

D. A gain of $2,700

22. Which depreciation method is most commonly used among publicly owned corporations?

A. Straight-Line

B. Double Declining Balance

C. Units of Output

D. All three are equally used

23. A bond that sells for 102 has a cost of

A. $1,002

B. $1,020

C. $1,200

D. $1,000

24. If a bond selling at 102, it is selling at

A. Maturity value plus 2% interest

B. A discount

C. A premium

D. $102 per bond

25. Most preferred stock have the following characteristics, EXCEPT:

A. To receive dividends on a preferred basis

B. Cumulative Dividends

C. Voting Rights

D. Callable at the option of the corporation

26. Cash dividends paid to stockholders will appear in which section of the statement of cash flows:

A. Operating

B. Investing

C. Financing

D. Discontinued

27. Which of the following would usually be the greatest amount?

A. The number of shares authorized

B. The number of shares issued

C. The number of shares outstanding

D. They must all be the same amount

28. Which of the following is an investing activity?

A. Purchase of equipment

B. Payment of interest

C. Issuing common stock

D. Issuing Long-term debt

29. Which of the following would indicate a cash disbursement?

A. Selling equipment at a loss

B. A decrease in accounts receivable

C. An increase in prepaId expenses

D. A decrease in inventory

30. The credit term 2/10, n/30 means

A. After 10 days 2% interest is charged

B. There is a 10% discount if payment is received within 30 days

C. There is a 2% discount if the payment is received within 10 days

D. There is a 10% discount if paid immediately and a 2% discount if paid within 30 days