An examination of the financial statements of a business to ensure that they conform with generally accepted accounting

1. An examination of the financial statements of a business to ensure that they conform with generally accepted accounting principles is called? • A certification • An audit • A verification • A validation

2. An examination of the financial statements of a business to ensure that they conform with generally accepted accounting principles is called? • A certification • An audit • A verification • A validation

3. 2. Morrow Corp. makes a credit sales (i.e., sale on account) to a customer. The effect of this transaction on the accounting equation is that? • Assets increase and liabilities increase • Assets increase and stockholder’s equity increases • Liabilities increase and stockholder’s equity decreases • Liabilities decrease and stockholder’s equity increases

4. 2. Morrow Corp. makes a credit sales (i.e., sale on account) to a customer. The effect of this transaction on the accounting equation is that? • Assets increase and liabilities increase • Assets increase and stockholder’s equity increases • Liabilities increase and stockholder’s equity decreases • Liabilities decrease and stockholder’s equity increases

5. 3.On January 1, 2005, Thomas Company paid $1000 for a two-year insurance policy on the building. The accounting period ends December 31. At the end of 2005, the financial statement should report? • Prepaid Insurance $500; Insurance Expense $500 • Prepaid Insurance $0; Insurance Expense $1000 • Prepaid Insurance $1000; Insurance Expense $0 • Prepaid Insurance $250; Insurance Expense $250

6. 3.On January 1, 2005, Thomas Company paid $1000 for a two-year insurance policy on the building. The accounting period ends December 31. At the end of 2005, the financial statement should report? • Prepaid Insurance $500; Insurance Expense $500 • Prepaid Insurance $0; Insurance Expense $1000 • Prepaid Insurance $1000; Insurance Expense $0 • Prepaid Insurance $250; Insurance Expense $250

7. 4.Retained earnings refers to? • The amount reported as “the bottom line” on the income statement • The accumulated amount of past earnings of a corporation that has not been distributed to shareholders as dividends • The total amount of stockholder’s equity for a corporation • The amount that shareholders have invested by purchasing a corporation’s stock

8. 4.Retained earnings refers to? • The amount reported as “the bottom line” on the income statement • The accumulated amount of past earnings of a corporation that has not been distributed to shareholders as dividends • The total amount of stockholder’s equity for a corporation • The amount that shareholders have invested by purchasing a corporation’s stock

9. 5.The amount of rent expense reported on the income statement is? • The amount of cash paid for rent in the current period • The amount of cash paid for rent in the current period less any unpaid rent at the end of the period • The amount of rent used up (incurred) in the current period to help generate revenue • An increase in net income

10. 5.The amount of rent expense reported on the income statement is? • The amount of cash paid for rent in the current period • The amount of cash paid for rent in the current period less any unpaid rent at the end of the period • The amount of rent used up (incurred) in the current period to help generate revenue • An increase in net income

11. 6.The advantages of incorporation include all of the following except? • Ability to raise capital • Tax deductibility of dividends • Ease of transfer of ownership • Limited liability of owners

12. 6.The advantages of incorporation include all of the following except? • Ability to raise capital • Tax deductibility of dividends • Ease of transfer of ownership • Limited liability of owners

13. 7. A cash inflow from financing activities includes? • Proceeds from selling investments in equity securities of another company • Proceeds from selling equipment • Proceeds from issuance of bonds payable • Receipt of interest payments

14. 7. A cash inflow from financing activities includes? • Proceeds from selling investments in equity securities of another company • Proceeds from selling equipment • Proceeds from issuance of bonds payable • Receipt of interest payments

15. 8.Under accrual basis accounting, revenues are? • Recognized when they are earned • Recognized when cash is received • Recognized when they are incurred • Recognized when cash is paid

16. 8.Under accrual basis accounting, revenues are? • Recognized when they are earned • Recognized when cash is received • Recognized when they are incurred • Recognized when cash is paid

17. 9. Which financial statement shows the financial position of a business as of a given date? • Balance sheet • Income statement • Statement of cash flows • Statement of retained earnings

18. 9. Which financial statement shows the financial position of a business as of a given date? • Balance sheet • Income statement • Statement of cash flows • Statement of retained earnings

19. 10.The accounts payable account has a beginning balance of $1000 and we purchased $3000 of inventory on credit during the month. The ending balance was $800. How much did we pay our creditors during the month? • $2800 • $3000 • $3200 • $3800

20. 10.The accounts payable account has a beginning balance of $1000 and we purchased $3000 of inventory on credit during the month. The ending balance was $800. How much did we pay our creditors during the month? • $2800 • $3000 • $3200 • $3800

21. 11.Adjusting entries never include? • Prepaid expenses • Interest payable • Unearned revenue • Cash

22. 11.Adjusting entries never include? • Prepaid expenses • Interest payable • Unearned revenue • Cash

23. 12. If you wanted to know what accounting rules a company follows related to its inventory, where would you look? • The notes to the financial statements • The income statement • The balance sheet • The headings to the financial statements

24. 12. If you wanted to know what accounting rules a company follows related to its inventory, where would you look? • The notes to the financial statements • The income statement • The balance sheet • The headings to the financial statements

25. 13. At the end of December, the owner of an apartment complex realized that the December rent had not been collected from one of the tenants amounting to $500. On December 31, the owner would show which of the following on its financial statements? • Unearned rent revenue of $500 • Rent Receivable of $500 • Rent Payable of $500 • Rent Expense of $500

26. 13. At the end of December, the owner of an apartment complex realized that the December rent had not been collected from one of the tenants amounting to $500. On December 31, the owner would show which of the following on its financial statements? • Unearned rent revenue of $500 • Rent Receivable of $500 • Rent Payable of $500 • Rent Expense of $500

27. 14. Which of the following accounts is increased by credit entries and decreased by debit entries? • Cash • Advertising Expense • Equipment • Accounts payable

28. 14. Which of the following accounts is increased by credit entries and decreased by debit entries? • Cash • Advertising Expense • Equipment • Accounts payable

29. 15. The primary objective of financial information is to? • Provide information to detect fraud in the preparation of financial statements • Provide information about the taxable income of the company • Provide managers with information about the efficiency and effectiveness of the production process • Provide useful economic information about a business to help external parties make sound financial decisions

30. 15. The primary objective of financial information is to? • Provide information to detect fraud in the preparation of financial statements • Provide information about the taxable income of the company • Provide managers with information about the efficiency and effectiveness of the production process • Provide useful economic information about a business to help external parties make sound financial decisions

31. 16. Which of the following is the private body responsible for establishing generally accepted accounting principles (GAAP)? • PCAOB • SEC • FASB • APB

32. 16. Which of the following is the private body responsible for establishing generally accepted accounting principles (GAAP)? • PCAOB • SEC • FASB • APB

33. 17.Failure to make an adjusting entry to recognize accrued utilities payable would cause an? • Understatement of expenses and liabilities and an overstatement of stockholder’s equity • Overstatement of expenses and liabilities and an understatement of stockholder’s equity • Understatement of expenses, liabilities, and stockholder’s equity • Overstatement of assets, expenses, and stockholder’s equity

34. 17.Failure to make an adjusting entry to recognize accrued utilities payable would cause an? • Understatement of expenses and liabilities and an overstatement of stockholder’s equity • Overstatement of expenses and liabilities and an understatement of stockholder’s equity • Understatement of expenses, liabilities, and stockholder’s equity • Overstatement of assets, expenses, and stockholder’s equity

35. 18.Which of the following accounts would not be closed at the end of the accounting period? • Dividends • Sales revenue • Cost of goods sold • Inventory

36. 18.Which of the following accounts would not be closed at the end of the accounting period? • Dividends • Sales revenue • Cost of goods sold • Inventory

37. 19. Which accounting principle states that expenses incurred in generating revenue should be recorded in the same period in which the revenue is recognized? • Historical cost principle • Going concern principle • Matching principle • Revenue recognition principle

38. 19. Which accounting principle states that expenses incurred in generating revenue should be recorded in the same period in which the revenue is recognized? • Historical cost principle • Going concern principle • Matching principle • Revenue recognition principle

39. 20. Abrahams Corporation reported the following amounts at the end of the first year of operations, December 31, 2009: contributed capital $100,000; sales revenue $400,000; total assets $300,000; $5,000 dividends; and total liabilities $180,000. Retained earnings would be? • $20,000 • $30,000 • $70,000 • $80,000

40. 20. Abrahams Corporation reported the following amounts at the end of the first year of operations, December 31, 2009: contributed capital $100,000; sales revenue $400,000; total assets $300,000; $5,000 dividends; and total liabilities $180,000. Retained earnings would be? • $20,000 • $30,000 • $70,000 • $80,000

41. 21. Which of the following direct effects on the fundamental accounting model is not possible as a result of transaction analysis? • Increase a liability and increase an asset • Decrease stockholder’s equity and increase an asset • Increase an asset and decrease an asset • Decrease stockholder’s equity and decrease an asset

42. 21. Which of the following direct effects on the fundamental accounting model is not possible as a result of transaction analysis? • Increase a liability and increase an asset • Decrease stockholder’s equity and increase an asset • Increase an asset and decrease an asset • Decrease stockholder’s equity and decrease an asset

43. 22. On January 1, 2009, the ledger of Global Corporation correctly showed supplies inventory of $500. During 2009, supplies purchases amounted to $1200. A count (inventory) of supplies on hand at December 31, 2009, showed $600. The 2009 income statement should report supplies expense amounting to? • $1200 • $1100 • $800 • $600

44. 22. On January 1, 2009, the ledger of Global Corporation correctly showed supplies inventory of $500. During 2009, supplies purchases amounted to $1200. A count (inventory) of supplies on hand at December 31, 2009, showed $600. The 2009 income statement should report supplies expense amounting to? • $1200 • $1100 • $800 • $600

45. 23. Assets are? • Probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services • Stockholders’ equity minus liabilities • Probable future economic benefits owned by an entity as a result of past transactions • The financing provided by the owners and the operations of a business

46. 23. Assets are? • Probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services • Stockholders’ equity minus liabilities • Probable future economic benefits owned by an entity as a result of past transactions • The financing provided by the owners and the operations of a business

47. 24. Which of the following is most often included in current assets? • Prepaid expenses • Property, plant, and equipment • Intangible assets • Unearned revenue

48. 24. Which of the following is most often included in current assets? • Prepaid expenses • Property, plant, and equipment • Intangible assets • Unearned revenue

49. 25. Which characteristic states that accounting information is unbiased and verifiable? • Consistency • Comparability • Relevance • Reliability

50. 25. Which characteristic states that accounting information is unbiased and verifiable? • Consistency • Comparability • Relevance • Reliability