MGMT 30A Midterm practice questions

Which of the following external groups uses accounting information to determine whether the company can pay its obligations?

A. Investors in common stock

B. Marketing Managers

C. Creditors

D. Salesperson of a company

Creditors

Which of the following would not be considered an internal user of accounting data for a company?

A. The president of the company

B. The controllers of a company

C. Creditor of a company

D. Salesperson of a company

C. Creditor of a Company

Ending retained earnings for a period is equal to beginning

A. Retained earnings + Net income + Dividends

B. Retained earnings - Net Income - Dividends

C. Retained Earnings + Net Income - Dividends

D. Retained Earnings - Net Income Dividends

C. Retained Earnings + Net Income - Dividends

The financial statement that summarizes the changes in retained earnings for a period of time is the

A. balance sheet

B. income statemetn

C. statement of cash flows

D . retained earnings statement

D. retained earnings statement

An income statement

presents the revenues and expenses for a specific period of time

which financial statement is prepared first?

income statement

Which of the following would not be classified as a long term liability?

A. current maturities of long-term debt

B. bonds payable

C. mortgage payable

D. lease liabilites

A. current maturities of long term debt

Which of the following is not a current liability?

A. Salaries and Wages Payable

B. Accounts Payable

C. Taxes Payable

D. Bonds Payable

D. Bonds Payable

In a classified balance sheet, assets are usually classified as

currents assets; long term investments; property, plant, and equipment; and intangible assets

On a classified balance sheet, short term investments are classified as

a current asset

A current asset is

expected to be converted to cash or used in the business within a relatively short period of time

If services are rendered on account, then

stockholders' equity will increase

the payment of a liability

decreases assets and liabilites

a revenue generally

increases assets and stockholders' equity

which of the following has no effect on retained earnings?

A. expense

B. dividends

C. land purchase

D. revenue

D. land purchase

A ledger

is a collection of the entire group of accounts maintained by a company

Posting

transfers journal entries to ledger accounts

A trial balance is a listing of

general ledger accounts and balances

A trial balance proves

the mathematical equality of debits and credits after the posting process

A trial balance will not balance if

A. a correcting journal entry is posted twice.

B. a $50 cash dividend is debited to dividends for $500 and credited to cash for $50.

C. a $300 payment on accounts payable is debited to accounts payable for $30 and credited to cash for $30.

D. a transaction is not posted at all.

C. b. a $50 cash dividend is debited to dividends for $500 and credited to cash for $50.

A trial balance would only help in detecting which one of the following errors?

A. a transaction that is not journalized

B. a journal entry that is posted twice

C. offsetting errors made in recording the transaction

D. a transposition error when transferring the debit side of journal entry to the ledger

D. a transposition error when transferring the debit side of a journal entry to the ledger

the revenue recognition principle dictates that revenue should be recognized in the accounting records

when the performance obligation is satisfied

The expense recognition principle matches

expenses with revenues

A furniture factory's employees work overtime to finish an order that is sold on January 31. The office sends a statement to the customer in early February and payment is received by mid-February. The overtime wages should be expensed in

January

Using accrual accounting, expenses are recorded and reported only

when they are incurred whether or not cash is paid

The primary difference between accrued revenues and unearned revenues is that accrued revenues have:

not been recorded and unearned revenues have

the primary difference between prepaid and accrued expenses is that prepaid expenses have

been recorded and accrued expenses have not

an adjusting entry

affects a balance sheet account and an income statement account

prepaid expenses are

paid and recorded in an asset account before they are used or consumed

if a company fails to adjust for accrued revenues

assets will be understated and revenues will be understated

gross profit equals the difference between

sales revenue and cost of goods sold

under a perpetual inventory system

accounting records continuously disclose the amount of inventory

which of the following items does not result in an adjustment in the merchandise inventory account under a perpetual system?

A. a purchase of merchandise

B. a return of merchandise inventory to the supplier

C. payment of freight costs for goods shipped to a customer

D. payment of freight costs for goods received from a supplier

C. payment of freight costs for goods shipped to a customer

Multiple-step income statements show

both income from operations and gross profit

interest expense would be classified on a multiple step income statement under the heading

other expenses and losses

if goods in transit are shipping FOB destination

the seller has legal title to the goods until they are delivered

which of the following should not be included in the physical inventory of a company?

A. goods held on consignment from another company

B. goods in transit from another company shipped FOB shipping point

C. goods shipped on consignment to another compnay

D. All of the above

A. Goods held on consignment from another company

Goods held on consignment are

never owned by the consignee

Receivables are

claims that are expected to be collected in cash

under the allowance method, Bad Debt Expense is recorded

for an amount that the company estimates it will not collect

when the allowance method of accounting for uncollectible accounts is used, Bad Debt Expense is recorded

in the same year as the credit sale

When an account is written off using the allowance method, accounts receivable

decreases and the allowance account decreases

a debit balance is the Allowance for Doubtful Accounts

indicates that actual bad debt write-offs have exceeded previous provisions for bad debts

A high accounts receivable turnover ratio indicates

customers are making payments very quickly

What are included in assets?

Cash, Debt Investments, Account Receivables, Notes Receivables, Inventory, Supplies, Prepaid Insurance

What are included in Long-Term Investments?

Stock Investments and Investment in real estate

What are included in Property, Plant, and Equipment?

Land, Equipment, (subtract) Accumulated Depreciation

What are included in Current Liabilities

Notes payable, accounts payable, unearned sales revenue, salaries and wages payable, interest payable

What are Long Term Liabilities

Mortgage Payable and Notes Payable

What is included in Stockholders' Equity?

Common Stock and Retained Earnings

When the terms are FOB shipping point

ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller

When the terms are FOB destination

ownership of the goods remains with the seller until the goods reach the buyer

What happens in a perpetual inventory system?

- companies maintain detailed records of the cost of each inventory purchase and sale

- a company determines the cost of goods sold each time a sale occurs

What happens in a periodic inventory system?

companies do not keep detailed inventory records of the goods on hand throughout the period. They determine the cost of goods sold only at the end of the accounting period

What are the steps to determine the cost of goods sold under a periodic inventory system

1. Determine the cost of goods on hand at the beginning of the accounting period.

2. Add to it the cost of goods purchased.

3. Subtract the cost of goods on hand as determined by the physical inventory count at the end of the accounting period.