ACCOUNTING QUIZ

ACCOUNTING QUIZ

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1. The matching principle requires: (Points : 2)

That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user
The use of the direct write-off method for bad debts
The use of the allowance method of accounting for bad debts
That bad debts be disclosed in the financial statements
That bad debts not be written off

Question 2. 2. Many companies use accelerated depreciation in computing taxable income because: (Points : 2)

It is required by the tax rules
It is required by financial reporting rules
It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due
Using it causes a company to use higher income in the early years of the asset’s useful life
The results are identical to straight-line depreciation

Question 3. 3. A contingent liability: (Points : 2)

Is always of a specific amount
Is a potential obligation that depends on a future event arising out of a past transaction or event
Is an obligation not requiring future payment
Is an obligation arising from the purchase of goods or services on credit
Is an obligation arising from a future event

Question 4. 4. Advance ticket sales totaling $6,000,000 cash would be recognized as follows: (Points : 2)

Debit Sales, credit Unearned Revenue
Debit Unearned Revenue, credit Sales
Debit Cash, credit Unearned Revenue
Debit Unearned Revenue, credit Cash

Question 5. 5. Revenue expenditures: (Points : 2)

Are additional costs of plant assets that do not materially increase the asset’s life or its productive capabilities
Are known as balance sheet expenditures
Extend the asset’s useful life
Substantially benefit future periods
Are debited to asset accounts

Question 6. 6. A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is: (Points : 2)

$0.75
$0.625
$0.875
$6.00
$8.00

Question 7. 7. Obligations due to be paid within one year or within the company’s operating cycle, whichever is longer, are: (Points : 2)

Current assets
Current liabilities
Earned revenues
Operating cycle liabilities
Bills

Question 8. 8. The interest accrued on $3,600 at 7% for 60 days is: (Points : 2)

$36
$42
$252
$180
$420

Question 9. 9. A company had a fixed interest expense of $6,000, its income before interest expense and any income taxes was $18,000 and its net income was $8,400. The company’s times interest earned ratio is equals to (Points : 2)

0.33
0.71
1.40
3.00
12,000

Question 10. 10. In the accounting records of a defendant, lawsuits: (Points : 2)

Are estimated liabilities
Should always be recorded
Should always be disclosed
Should be recorded if payment for damages is probable and the amount can be reasonably estimated

Question 11. 11. Depletion: (Points : 2)

Is the process of allocating the cost of natural resources to periods in which they are consumed
Is also called depreciation
Is also called amortization
Is an unrealized expense reported in equity
Is the process of allocating the cost of intangibles to periods in which they are used

Question 12. 12. A method of estimating bad debts expense that involves a detailed examination of outstanding accounts and their length of time past due is the: (Points : 2)

Direct write-off method
Aging of accounts receivable method
Percentage of sales method
Aging of investments method
Percent of accounts receivable method

Question 13. 13. Pepsi’s accounts receivable turnover was 9.9 for this year and 11.0 for last year. Coke’s turnover was 9.3 for this year and 9.3 for last year. These results imply that: (Points : 2)

Coke has the better turnover for both years
Pepsi has the better turnover for both years
Coke’s turnover is improving
Coke’s credit policies are too loose
Coke is collecting its receivables more quickly than Pepsi in both years

Question 14. 14. A machine originally had an estimated useful life of 5 years, but after 3 complete years, it was decided that the original estimate of useful life should have been 10 years. At that point the remaining cost to be depreciated should be allocated over the remaining: (Points : 2)

2 years
5 years
7 years
8 years
10 years

Question 15. 15. FICA taxes include: (Points : 2)

Social Security taxes
Charitable giving
Employee income taxes
Unemployment taxes

Question 16. 16. Which of the following statements is true? (Points : 2)

Interest on bonds is tax deductible
Interest on bonds is not tax deductible
Dividends to stockholders are tax deductible
Bonds do not have to be repaid

Question 17. 17. The right of common shareholders to protect their proportionate interest in a corporation by having the first opportunity to buy additional proportionate shares of common stock issued by the corporation
is called a: (Points : 2)

Preemptive right
Proxy right
Right to call
Financial leverage

Question 18. 18. A corporation’s distribution of additional shares of its own stock to its stockholders without the receipt of any payment in return is called a: (Points : 2)

Stock dividend
Stock subscription
Premium on stock
Discount on stock
Treasury stock

Question 19. 19. A bond sells at a discount when the: (Points : 2)

Contract rate is above the market rate
Contract rate is equal to the market rate
Contract rate is below the market rate
Bond has a short-term life
Bond pays interest only once a year

Question 20. 20. When a bond sells at a premium: (Points : 2)

The contract rate is above the market rate
The contract rate is equal to the market rate
The contract rate is below the market rate
It means that the bond is a zero coupon bond
The bond pays no interest

Question 21. 21. Secured bonds: (Points : 2)

Are also referred to as debentures
Have specific assets of the issuing company pledged as collateral
Are backed by the issuer’s bank
Are subordinated to those of other unsecured liabilities
Are the same as sinking fund bonds

Question 22. 22. To provide security to creditors and to reduce interest costs, bonds and notes payable can be secured by: (Points : 2)

Safe deposit boxes
Mortgages
Equity
The FASB
Debentures

Question 23. 23. What is the debt to equity ratio for a company who has $700,000 in total liabilities and $3,500,000 in total equity? (Points : 2)

20%
5
$2,100,000
2%
.5

Question 24. 24. Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are: (Points : 2)

Debentures
Discounted notes
Installment notes
Indentures
Investment notes

Question 25. 25. A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value factor for an annuity for 7 years at 9% is 5.0330. The present value of the loan is: (Points : 2)

$9,000
$5,033
$63,000
$57,330
$45,297

Question 26. 26. A company issues 9%, 20-year bonds with a par value of $750,000. The current market rate is 9%. The amount of interest owed to the bondholders for each semiannual interest payment is. (Points : 2)

$0
$33,750
$67,500
$750,000
$1,550,000

Question 27. 27. Bonds that have interest coupons attached to their certificates, which the bondholders detach during each interest period and present to a bank for collection, are called: (Points : 2)

Coupon bonds
Callable bonds
Serial bonds
Convertible bonds

Question 28. 28. A company borrowed $300,000 cash from the bank by signing a 5-year, 8% installment note. The present value factor for an annuity at 8% for 5 years is 3.9927. Each annuity payment equals $75,137. The present value of the note is: (Points : 2)

$75,137
$94,013
$300,000
$375,685

Question 29. 29. A bondholder that owns a $1,000, 10%, 10-year bond has: (Points : 2)

Ownership rights
The right to receive $10 per year until maturity
The right to receive $1,000 at maturity
The right to receive $10,000 at maturity

Question 30. 30. Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is called: (Points : 2)

Noncumulative preferred stock
Participating preferred stock
Callable preferred stock
Cumulative preferred stock
Convertible preferred stock

Question 31. 31. A company has a profit margin of 12%. If net income is equal to $450,000 and average total asset is equal to $600,500, how much are sales? (Points : 2)

$1,050,500
$126,060
$72,060
$54,000
$3,750,000

Question 32. 32. An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n): (Points : 2)

Short-term marketable equity security
Operating activity
Common stock
Cash equivalent
Financing activity

Question 33. 33. The statement of cash flows reports: (Points : 2)

Assets, liabilities and equity
Revenues, gains, expenses and losses
Cash inflows and outflows for an accounting period
Equity, net income and dividends
Changes in equity

Question 34. 34. The average number of times a company’s inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance is equal to the: (Points : 2)

Accounts receivable turnover
Inventory turnover
Days’ sales uncollected
Current ratio

Question 35. 35. Wessen Company reports net income of $180,000 for the year ended December 31, 2010. It also reports $45,800 depreciation expense, $21,410 amortization expense and a $15,000 gain on the sale of machinery. Its comparative balance sheets reveal a $28,300 increase in accounts receivable, $20,400 decrease in accounts payable, $10,470 increase in prepaid expenses, and $33,140 decrease in wages payable. What is the net cash flows provided (used) by operating activities using the indirect method? (Points : 2)

($140,200)
$133,490
$139,900
($133,490)
$78,300

Question 36. 36. A company’s transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from: (Points : 2)

Operating activities
Investing activities
Financing activities
Direct activities
Indirect activities

Question 37. 37. One of several ratios that reflects solvency includes the: (Points : 2)

Acid-test ratio
Current ratio
Times interest earned ratio
Total asset turnover
Days’ sales in inventory

Question 38. 38. The ability to provide financial rewards sufficient to attract and retain financing is called: (Points : 2)

Liquidity and efficiency
Solvency
Profitability
Market prospects
Creditworthiness

Question 39. 39. A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales is equal to the: (Points : 2)

Acid-test ratio
Merchandise turnover
Price earnings ratio
Accounts receivable turnover
Profit margin ratio

Question 40. 40. Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as: (Points : 2)

Financing activities
Investing activities
Operating activities
Direct activities
Indirect activities

Question 41. 41. Net sales divided by average accounts receivable is equal to the: (Points : 2)

Days’ sales uncollected
Average accounts receivable ratio
Current ratio
Profit margin
Accounts receivable turnover ratio

Question 42. 42. Net income divided by net sales is equal to the: (Points : 2)

Return on total assets
Profit margin
Current ratio
Total asset turnover
Days’ sales in inventory

Question 43. 43. A company had a market price of $83.12 per share, earnings per share of $4.87 and dividends per share of $5.40. Its price-earnings ratio is equal to: (Points : 2)

.056
.065
8.09
15.39
17.07

Question 44. 44. Financial reporting refers to: (Points : 2)

The application of analytical tools to general-purpose financial statements
The communication of relevant financial information to decision makers
Financial statements only
Ratio analysis
Profitability

Question 45. 45. Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the: (Points : 2)

Inventory turnover ratio
Profit margin
Days’ sales in inventory
Current ratio
Total asset turnover

Question 46. 46. Selected information from Doodle Company’s for 2010 is below (in millions):
Inventory decreased $6.0
Accounts Payable increased by $7.0
Cost of goods sold $36.50
Salaries Expense $24.0
Salaries Payable decreased $6.0
Accounts Receivable increased by $10.0
Sales $56.4
What is the amount of cash paid for salaries by Doodle during 2010? (Points : 2)

$4.0
$6.0
$24.0
$30.0
$18.0

Question 47. 47. Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as: (Points : 2)

Period-to-period statements
Controlling statements
Successive statements
Comparative statements
Serial statements

Question 48. 48. External users of financial information: (Points : 2)

Are those individuals involved in managing and operating the company
Include internal auditors and consultants
Are not directly involved in operating the company
Make strategic decisions for a company
Make operating decisions for a company

Question 49. 49. Trend analysis is also called: (Points : 2)

Financial analysis
Ratio analysis
Index number trend analysis
Industry analysis

Question 50. 50. Which of the following items is not likely to be considered an extraordinary item? (Points : 2)

Loss from an unexpected union strike
Condemnation of property by the city government
Loss of use of property due to a new and unexpected environmental regulation
Loss due to an earthquake in Florida
Expropriation of property by a foreign government

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