Which of the following scenarios best describes the historical cost principle? _____

A company frequently updates it asset values to current prices

Exchange transactions determine the cost of asset value

Land purchased 10 years ago is revalued annually at market value

Assets are carried on a company's books at purchase value

What best describes an arms-length transaction? _____

The parts department manager dictates employee pricing for shop goods

Buyers and sellers are generally independent and have equal information

A company with a monopoly dictates prices to consumers

Parents sell a vacation home to their only daughter at a discount price

Companies that record accounting events as they happen use: _____

Hybrid accounting

Accrual accounting

Modified accrual accounting

Cash-basis accounting

An example of the periodicity assumption is: _____

An owner that frequently looks at his checking account

Each accounting event and financial statement must follow the same time period

An overworked accountant who records business events when he has time

A company that prepares financial statements each month

On August 1, a business collected $3,300 rent in advance, debiting Cash and crediting Unearned rent revenue. The tenant was paying one year's rent in advance. At December 31, the business must account for the amount of rent it has earned. Indicate which category of adjustment is described. _____

Depreciation

Prepaid expense

Unearned revenue

Accrued expense

Which type of income statement account has the opposite type of balance as the Capital account? _____

Liability

Expense

Asset

Revenue

Which of the following would NOT be a note placed on a financial statement? _____

An assumption regarding an asset

The use of FIFO to report inventory

CEO salary

Certain administrative expenses for a given period

The cash basis method of accounting is popular for: _____

Product costing

Tax return preparation

Accrued expenses

Bank reconciliations

The cash basis method of accounting can be misleading because it skews a company's: _____

Financial statements

Trial balance

Journal entries

Transactions

Which is NOT a general principle for revenue recognition? _____

Seller present merchandise at a single price

A settled arrangement exists between a buyer and seller

Delays hindering the delivery of goods is acceptable

Goods sold on account are assumed to be collectible

Cash represents coin, currency, and standard bank deposits. Companies also report cash equivalents. Which of the following is an example of a cash equivalent item? _____

Money market

Bill of lading

Customer payment

Invoice for goods received

Part of a treasurer's job is to create controls that limit access to his company's cash. What would be a good example of a cash control for receipts? _____

Requiring credit cards used for business purchases

Using two employees to receive and open mail

Checking customer IDs

Placing deposits in a bank dropbox

Sam runs a carwash. He uses a petty cash drawer to make quick payments for needed items. Lately, however, he is concerned that someone is using the money for unauthorized purposes. What should he do? _____

Only use petty cash for employee lunches

Compare register receipts with petty cash receipts

Have a manager sign off on petty cash tickets

Set up a second bank account for petty cash

Internal controls are designed to safeguard assets, encourage employees to follow company policies, promote operational efficiency, and ensure accurate accounting records. Which objective is most important? _____

Ensure accurate accounting records

Safeguard assets

Promote operational efficiency

Encourage employees to follow company policies

Which bank control protects against forgery? _____

Deposit ticket

Bank statements

Signature card

General Journal

Which bank control reports what the bank did with the customer's cash each period? _____

Bank statements

Signature card

Deposit ticket

General Journal

Which bank control confirms the amount of money put into the bank? _____

General Journal

Deposit ticket

Bank statements

Signature card

Consider accounts receivable and notes receivable. Which of the following is NOT a feature of accounts receivable? _____

Do not charge interest

Does not require a promissory note

Are more formal than accounts receivable

Reside in the current asset section of the balance sheet

The proper definition for the term "note receivable" is: _____

Amounts to be collected from customers from sales made on credit

Transaction results in a liability for this party

Transaction results in a receivable for this party

The debtor promises to pay the creditor a definite sum at a future date usually with interest

The proper definition for the term "maturity date" is: _____

Transaction results in a receivable for this party

Serves as evidence of the indebtedness and includes the terms of the debt

The date a note is due to be paid in full

Amounts to be collected from customers from sales made on credit