ACCT125 Quiz 1 of 3

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Question 11 points  Save   What is the term applied to the excess of net revenue from sales over the cost of merchandise sold? Gross profit Income from operations Net income Gross sales   Question 21 points  Save   Expenses that CANNOT be traced directly to operations are identified as other income. operating expenses. cost of goods sold. other expenses.   Question 31 points  Save   What is subtracted from sales to arrive at net sales? Sales returns and allowances Sales discounts Both sales discounts and sales returns and allowances Neither sales discounts nor sales returns and allowances   Question 41 points  Save   The sales discount account is a contra account to Sales.TrueFalse   Question 51 points  Save   NBC Company had $32,000 in net sales, $15,000 in cost of merchandise sold, $18,000 in operating expenses, and $2,000 in other income. What is NBC Company’s gross profit? $17,000 $3,000 $1,000 ($1,000)   Question 61 points  Save   Where are selling and administrative expenses found on the multi-step income statement? Before gross profit After sales and before gross profit After net income and before expenses After gross profit   Question 71 points  Save   Under a perpetual inventory system, accounting records continuously disclose the amount of inventory. increases in inventory resulting from purchases are debited to Purchases. there is no need for a year-end physical count. the purchase returns and allowances account is credited when goods are returned to vendors.   Question 81 points  Save   When purchases of merchandise are made for cash, the transaction increases Cash; decreases Merchandise Inventory. increases Merchandise Inventory; decreases Cash. increases Merchandise Inventory; decreases Cash Discounts. increases Merchandise Inventory; decreases Purchases.   Question 91 points  Save   
Deana, Inc.

Deana, Inc. purchased merchandise for $500,000, received credit for purchase returns of $25,000, took purchase discounts of $10,000, and paid transportation in of $20,000.

Refer to Deana, Inc. If Deana, Inc. had $20,000 in beginning inventory, and sold goods costing $300,000, what is the ending inventory balance?

 $165,000 $240,000 $200,000 $185,000   Question 101 points  Save   Operating expenses are subtracted from fees earned for a service business and from gross profit for a merchandising business.TrueFalse   Question 111 points  Save   In credit terms of 1/10, n/30, the “10” represents the number of days in the discount period. full amount of the invoice. number of days when the entire amount is due. percent of the cash discount.   Question 121 points  Save   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? $160 $150 $140 $100   Question 131 points  Save   
A. Bonds Company

The following is a single-step income statement for the A. Bonds Company:

 A. Bonds Company

Income Statement

For the Year Ended December 31, 2010

Revenues:  Net Sales$250,000 Interest Income  17,500 Total Revenues $267,500Expenses:  Cost of Goods Sold$ 50,000 Selling Expenses20,000 General and Administrative Expenses27,500 Interest Expense12,500 Income Tax Expense  39,000 Total Expenses  149,000Net Income $118,500   

Refer to A. Bonds Company. If the income statement were prepared in a multiple-step format, income from operations would be

 $101,000. $113,500. $118,500. $152,500.   Question 141 points  Save   Sales to customers who use bank credit cards, such as MasterCard and VISA, are generally treated as credit sales.TrueFalse   Question 151 points  Save   For the perpetual inventory system, which of the following effects does NOT occur upon the return from a customer of merchandise sold on account? Increases Sales Returns and Allowances and decreases Accounts Receivable Decreases Cost of Merchandise Sold and increases Merchandise Inventory Increases Purchase Returns and Allowances and decreases Merchandise Inventory All of these occur.   Question 161 points  Save   Net income or loss may appear on the income statement of both a service business and a merchandising business.TrueFalse   Question 171 points  Save   The indirect method of preparing the statement of cash flows reconciles net income with net cash flows from operating activities.TrueFalse   Question 181 points  Save   A sale of $600 on account subject to a sales tax of 5% would increase account receivable by $570.TrueFalse   Question 191 points  Save   On the income statement, the merchandise inventory at the beginning of the period is added to sales to yield the cost of merchandise sold during the period.TrueFalse   Question 201 points  Save   Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense? Selling expense Miscellaneous expense Administrative expense Other expense   Question 211 points  Save   Net sales is equal to sales plus cost of merchandise sold.TrueFalse   Question 221 points  Save   Investing activities include collecting cash on loans made. obtaining cash from creditors. obtaining capital from owners. repaying money previously borrowed.   Question 231 points  Save   The merchandise inventory account is found on the balance sheet.TrueFalse   Question 241 points  Save   If the buyer is to pay the delivery expense of delivering merchandise, delivery terms are stated as FOB shipping point. FOB destination. FOB n/30. FOB buyer.   Question 251 points  Save   Merchandise with an invoice price of $6,000 is purchased subject to terms of 2/10, n/30, FOB destination. Transportation costs paid by the seller totaled $125.

What is the net cost of the merchandise?

 $6,125 $6,005 $5,880 $5,755   Question 261 points  Save   Shares of ownership are evidenced by issuing bonds payable. commercial paper. shares of stock. notes payable.tr>   Question 271 points  Save   Creditors have preference to assets behind stockholders if a business fails.TrueFalse   Question 281 points  Save   Rights to payments from customers are liabilities. prepaid expenses. accounts receivable. accounts payable.   Question 291 points  Save   The purchase of factory equipment would be an example of which type of business activity? Financing Investing Operating All of these   Question 301 points  Save   A summary of the cash receipts and cash payments for a specific period of time is a(n) income statement. balance sheet. statement of cash flows. retained earnings statement.   Question 311 points  Save   Given the following list of accounts, calculate Total Assets: Accounts Receivable$   5,000Capital Stock20,000Cash19,300Equipment15,400Fees Earned44,400Miscellaneous Expense18,200Rent Expense4,150Retained Earnings6,550Wages Expense13,900   $84,100 $59,700 $46,250 $39,700   Question 321 points  Save   Which of the following is NOT an example of a capital market stakeholder? Banks Owners Suppliers Stockholders   Question 331 points  Save   Over 90% of the total dollars of business receipts are received by proprietorships.TrueFalse   Question 341 points  Save   The popularity of the sole proprietorship is due to the ease and low cost of organizing.TrueFalse   Question 351 points  Save   Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept? Business entity concept Going concern concept Objectivity concept Adequate disclosure concept   Question 361 points  Save   Use the following information to determine Total Stockholders’ Equity: Total Assets$  50,000Total Liabilities$  15,000Total Stockholders’ EquityxTotal Retained Earnings$  13,000   $52,000 $50,000 $35,000 $22,000   Question 371 points  Save   Including all relevant data a reader needs to understand the financial condition and performance of a business refers to which concept? Adequate disclosure concept Going concern concept Objectivity concept Business entity concept   Question 381 points  Save   _____ is the increase in assets from selling products and services. Revenue Liabilities Products Stockholders’ Equity   Question 391 points  Save   The resources a business owns are called assets. liabilities. earnings. stockholders’ equity.   Question 401 points  Save   More that 70% of businesses are organized as what type of business? Not-for-profit Corporation Partnership Sole proprietorship   Question 411 points  Save   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? Net income for 2010 totaled $29,000. Net income for 2010 totaled $59,000. Total retained earnings increased by $59,000 during 2010. Total retained earnings decreased by $30,000 during 2010.   Question 421 points  Save   Reporting the financial condition of a business at a point in time and the changes in the financial condition of a business over a period of time are the two major objectives of tax accounting. union contracts. managerial accounting. financial accounting.   Question 431 points  Save   Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert’s net income for the month of September? Accounts Payable$   5,000Capital Stock10,000Cash14,300Equipment15,400Fees Earned54,400Miscellaneous Expense18,200Rent Expense4,150Retained Earnings6,550Wages Expense13,900   $32,450 $27,450 $6,550 $18,150   Question 441 points  Save   A list of assets, liabilities, and owners’ equity as of a specific date is a(n) income statement. balance sheet. statement of cash flows. retained earnings statement.   Question 451 points  Save   The portion of a corporation’s net income retained in the business is called income statement. balance sheet. statement of cash flows. retained earnings.   Question 461 points  Save   A corporation is a business that is legally separate and distinct from its owners.TrueFalse   Question 471 points  Save   A low-cost emphasis strives to provide no-frills, standardized products and services. products and services that provide unique market needs. products and services that provide prestige and image for customers. products and services that compete on features other than price.   Question 481 points  Save   Cash collected from sales during the normal course of business would be an example of which type of business activity? Operating Investing Financing None of these   Question 491 points  Save   Large corporations such as ExxonMobil and Walmart are organized as limited liability corporations.TrueFalse   Question 501 points  Save   The following are examples of internal stakeholders EXCEPT: managers. creditors. employees. All of these are internal stakeholders.   Question 511 points  Save   Expenses can be defined as assets consumed. services used in the process of generating revenues. costs that have been incurred during the normal course of business. all of these.   Question 521 points  Save   
Exhibit 2-1  
Total Assets
Total LiabilitiesBeginning of the year$100,000$ 60,000End of the year$500,000$325,000   

Refer to Exhibit 2-1. What is net income, assuming $50,000 of stock was issued and no dividends were paid?

 $110,000 $85,000 $70,000 $200,000   Question 531 points  Save   Johnson, Inc. receives $5,000 cash for fees earned. What is the effect of this transaction? Total assets remain unchanged. Cash flow from Financing Activities will increase. Net income will increase. Retained earnings will remain unchanged.   Question 541 points  Save   The accounting equation is expressed as follows: Assets = Liabilities + Stockholders’ Equity.TrueFalse   Question 551 points  Save   The two sides of the accounting equation do NOT have to be equal.TrueFalse   Question 561 points  Save   Revenues decrease stockholders’ equity.TrueFalse   Question 571 points  Save   The payment of $15,000 for expenses was recorded by Spears Co. as an increase in cash of $15,000 and a decrease in retained earnings of $15,000. What is the effect of this error on the accounting equation? Total assets will exceed total liabilities and stockholders’ equity by $15,000. Total assets will exceed total liabilities and stockholders’ equity by $30,000. Total assets will be less than total liabilities and stockholders’ equity by $30,000. The error will not affect the accounting equation.   Question 581 points  Save   Dividends are an example of an expense.TrueFalse   Question 591 points  Save   Rush Corporation borrowed $25,000 from the bank. Which of the following accurately shows the effects of the transaction? Increase cash $25,000 and decrease notes payable $25,000 Increase cash $25,000 and increase notes payable $25,000 Decrease cash $25,000 and decrease notes payable $25,000 Decrease cash $25,000 and increase notes payable $25,000   Question 601 points  Save   Declaring and paying cash dividends affects which accounts? Cash only Capital stock only Cash and retained earnings Cash and capital stock   Question 611 points  Save   Which of the following is NOT considered to be a liability? Note payable Accounts receivable Unearned revenues Accounts payable   Question 621 points  Save   ABC Company deposited $20,000 in a bank account in return for issuing shares in the corporation. This transaction would affect which two financial statement elements? Assets and stockholders’ equity Assets and liabilities Liabilities and stockholders’ equity None of these   Question 631 points  Save   Which of the following situations increase stockholders’ equity? Supplies are purchased on account. Services are provided on account. Cash is received from customers. Utility bill will be paid next month.   Question 641 points  Save   Buying equipment for cash affects which accounts? Cash only Retained earnings only Equipment and retained earnings Cash and equipment   Question 651 points  Save   Fees earned and received in cash will increase operating activity cash flows as well as retained earnings.TrueFalse   Question 661 points  Save   Which of the following will increase stockholders’ equity? Expenses > revenues Owner investment Accounts payable Dividends   Question 671 points  Save   DAF Company paid a utility bill of $300 and paid rent of $700 in December. By how much would these events reduce stockholders’ equity? $300 $1,000 $400 $700   Question 681 points  Save   The effect of every transaction is an increase or a decrease in one or more of the accounting equation elements.TrueFalse   Question 691 points  Save   The basic elements of a financial accounting system include a framework for preparing financial statements.TrueFalse   Question 701 points  Save   Which of the following statements is NOT true about liabilities? Liabilities are debts owed to outsiders. Account titles of liabilities often include the term “payable.” Cash received before services are performed is considered to be a liability. Liabilities do not include wages owed to employees of the company.   Question 711 points  Save   Which of the following transactions changes the mix of assets only? Paid for supplies with cash Borrowed money from Second National Bank Received money for fees earned Received a utility bill   Question 721 points  Save   By keeping a running total of the effects of transactions, the accounting equation provides a framework for summarizing the effects of a series of transactions.TrueFalse   Question 731 points  Save   The payment of a liability decreases assets and stockholders’ equity. increases assets and decreases liabilities. decreases assets and increases liabilities. decreases assets and decreases liabilities.   Question 741 points  Save   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 Cash Flows from Operating Activities. Cash Flows from Investing Activities. Cash Flows from Financing Activities. Noncash transaction.   Question 751 points  Save   Equality of the accounting equation means that no errors have occurred.TrueFalse   Question 761 points  Save   Current liabilities are usually due within one month or less. one week or less. one year or less. more than one year.   Question 771 points  Save   Which of the following is an example of an intangible asset? Goodwill Patents Copyrights All of these   Question 781 points  Save   Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in the cash flows from financing activities section. the cash flows from investing activities section. a separate schedule. the cash flows from operating activities section.   Question 791 points  Save   Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method? A decrease in inventory A decrease in accounts payable Preferred dividends declared and paid A decrease in accounts receivable   Question 801 points  Save   XYZ Co. paid $1,000 in dividends to stockholders. How does this transaction affect the accounts of XYZ? Cash will decrease by $1,000 and retained earnings will decrease by $1,000. Cash will decrease by $1,000 and expenses will increase $1,000. Cash will decrease by $1,000 and revenues will decrease $1,000. Net income will decrease by $1,000.   Question 811 points  Save   The fixed asset section of a balance sheet may also be labeled as property, plant, and equipment.TrueFalse   Question 821 points  Save   Under accrual accounting, expenses are recorded when incurred regardless of when paid.TrueFalse   Question 831 points  Save   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? Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Flow from Financing Activities There is no effect on the statement of cash flows.   Question 841 points  Save   Accrual accounting does NOT require that the accounting records be updated prior to preparing financial statements.TrueFalse   Question 851 points  Save   Unearned rent, representing rent paid for the next six months’ occupancy, would be reported on the landlord’s balance sheet as a(n) asset. liability. capital stock. revenue.   Question 861 points  Save   Deferred revenues (unearned revenues) are items initially recorded as liabilities, but expected to become _____ over time. liabilities assets revenues expenses   Question 871 points  Save   Which of the following is NOT reported as revenue on the income statement? Unearned revenue Fees revenue Commissions revenue Rent revenue   Question 881 points  Save   Under the cash basis of accounting, expenses are recorded when paid.TrueFalse   Question 891 points  Save   The revenue recognition concept states that revenue should be recorded in the same period as the cash is received.TrueFalse   Question 901 points  Save   XYZ Co. received $3,000 in payments from clients for services billed in a previous month. Which accounts will be affected and by what amounts under the accrual basis of accounting? Cash will increase by $3,000 and accounts receivable decrease by $3,000. Cash will increase by $3,000 and revenues will increase $3,000. Accounts receivable will increase by $3,000 and revenue will increase by $3,000. Accounts receivable will increase by $3,000 and cash will increase by $3,000.   Question 911 points  Save   Under the cash basis of accounting, a business records only transactions involving increases or decreases of its cash.TrueFalse   Question 921 points  Save   Accumulated depreciation is _____ to get the carrying value. added to equipment subtracted from equipment added to accounts payable subtracted from accounts payable   Question 931 points  Save   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.TrueFalse   Question 941 points  Save   
Donald Duck Co.

Donald Duck Co. has a five-day workweek (Monday through Friday). Employees earn $500 per day.

Refer to Donald Duck Co. How much cash will be paid on Friday?

 $500 $1,500 $2,500 $1,000   Question 951 points  Save   Fees receivable would appear on the balance sheet as a(n) asset. liability. fixed asset. unearned revenue.   Question 961 points  Save   St. Nick Corporation’s Toy-Making Supplies account showed a beginning balance of $200 and supplies purchased of $800. There were $400 of supplies on hand at year-end. The year-end adjustment would include an increase in Toy-Making Supplies Expense for $1,000. $800. $600. $400.  Question 971 points  Save   The process that begins with the analysis of transactions and ends with preparing the accounting records for the next accounting period is called the accounting cycle.TrueFalse   Question 981 points  Save   Which of the following is an example of a deferred expense? Prepaid advertising Unearned revenue Accounts payable Accounts receivable   Question 991 points  Save   Rights that are short-term in nature are called intangible assets.TrueFalse   Question 1001 points  Save   Current assets are assets that are expected to be converted to cash, sold or used up within 6 months.TrueFalse 

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