A100 Final Exam IU

Which of the following is primarily responsible for the information provided in the financial statements?

A) Board of Directors

B) Internal Accounting Staff

C) Company Top Management

D) External Auditors

Company Top Management

Which of the following describes the primary objective of financial accounting?

A) To provide information about a business' future business strategies.

B) To provide useful financial information only to stockholders.

C) To provide useful financial information about a business to help external parties make informed decisions.

D) To provide useful financial information about a business to help internal parties make informed decisions.

To provide useful financial information about a business to help external parties make informed decisions.

Financial accounting standards are known collectively as GAAP. What does that acronym stand for?

A) Generally Authorized Auditing Principles

B) Generally Applied Accounting Procedures

C) Governmentally Approved Accounting Practices

D) Generally Accepted Accounting Principles

Generally Accepted Accounting Principles

For accounting information to be useful, it must be which of the following?

A) It must be comparable and reliable.

B) It must be consistent and comparable.

C) It must be a faithful representation and relevant.

D) It must be relevant and consistent.

It must be a faithful representation and relevant.

Which of the following best describes the purpose of an audit?

A) To audit every transaction that an entity entered into.

B) To establish that a corporation's stock is a sound investment.

C) To prove the accuracy of an entity's financial statements.

D) To lend credibility to an entity's financial statements.

To lend credibility to an entity's financial statements.

Which of the following is considered to be an expense on the income statement?

A)Prepaid Expenses.

B)Wages payable.

C)Notes payable.

D)Cost of goods sold.

Cost of goods sold.

At the beginning of 2020, a corporation had assets of $270,000 and liabilities of $160,000. During 2020, assets increased $25,000 and liabilities increased $5,000. What was stockholders' equity at December 31, 2020?

A) $130,000.

B) $190,000.

C) $140,000.

D) $80,000.

$130,000.

Which of the following would not be reported in the operating activities section of a cash flow statement?

A) Cash paid for interest expense.

B) Cash paid for dividends to stockholders.

C) Cash paid for employee wages.

D) Cash received from customers.

Cash paid for dividends to stockholders.

Seitz Trucking's retained earnings increased $20,000 during the current year. What was Seitz Trucking's current year net income or loss given that Seitz Trucking declared $25,000 of dividends during this year?

A) Net loss was $5,000.

B) Net loss was $45,000.

C) Net income was $45,000.

D) Net income was $5,000.

Net income was $45,000.

Which of the following correctly describes the various financial statements?

A) The balance sheet is a financial statement that covers a period of time.

B) The statement of stockholders' equity is a financial statement at a specific point in time.

C) The cash flow statement is a financial statement at a specific point in time.

D) An income statement covers a period of time.

An income statement covers a period of time.

A company purchased supplies for cash, which will be consumed during future months. Which of the following correctly describes the impact of the supplies purchase on the financial statements?

A) Operating expenses will increase.

B) Operating income will decrease.

C) Total assets will decrease.

D) Total assets will remain unchanged.

Total assets will remain unchanged.

Recognizing an expense may be accompanied by which of the following?

A) An increase in assets

B) A decrease in revenue

C) A decrease in assets

D) A decrease in liabilities

A decrease in assets

Which of the following transactions will result in an increase in operating income as of the date of the transaction?

A) The receipt of cash dividends from an investment.

B) Collection of cash from a customer for services to be provided at a later date.

C) Providing a service to a customer on account.

D) The sale of investments at a gain

Providing a service to a customer on account.

On January 1, Year 1, Seitz Trucking paid $155,000 to purchase a truck. The truck was expected to have a four-year useful life and a $20,000 salvage value. If ST uses the straight-line method, the amount of net book value shown on the Year 1 balance sheet is:

A) $33,750

B) $121,250

C) $155,000

D) $135,000

$121,250

Hoosier Company experienced an accounting event that affected its financial statements as indicated below.

- Increase in Assets &

- Increase in Equity &

- Increase in Financing Cash Flows

Which of the following accounting events could have caused these effects on the elements of Hoosier's financial statements?

A) Borrowed money from a bank

B) Earned cash revenue

C) Paid a cash dividend

D) Issued common stock

Issued common stock

Direct costs:

A) can be easily traced to a particular cost object.

B) are incurred to benefit a particular accounting period.

C) are the variable costs of producing a product.

D) are incurred due to a specific decision.

can be easily traced to a particular cost object.

Manufacturing overhead includes:

A) all manufacturing costs except direct labor.

B) all selling and administrative costs.

C) all direct material, direct labor and administrative costs.

D) all manufacturing costs except direct labor and direct materials.

all manufacturing costs except direct labor and direct materials.

Calvin Corp., a merchandising company, reported the following results for November:Sales $4,096,400 Cost of goods sold (all variable) $2,194,500 Total variable selling expense $238,700 Total fixed selling expense $144,700 Total variable administrative expense $238,700 Total fixed administrative expense $282,900

The contribution margin for November is:

A) $1,424,500

B) $1,901,900

C) $996,900

D) $3,191,400

$1,424,500

The salary paid to the president of a company would best be classified on the income statement as a(n):

A) direct labor cost.

B) product cost.

C) period cost.

D) manufacturing overhead cost.

period cost.

Which of the following is true?

A) Variable costs per unit will vary depending on the level of production.

B) Fixed costs per unit always stay the same.

C) Total fixed costs plus total variable costs will always equal total sales.

D) The contribution margin will always equal fixed costs plus net income.

The contribution margin will always equal fixed costs plus net income.

A $3.00 increase in a product's variable expense per unit accompanied by a $3.00 increase in its selling price per unit will:

A) have no effect on the break-even volume.

B) have no effect on the contribution margin ratio.

C) none of these answers are correct.

D) decrease the contribution margin.

have no effect on the break-even volume.

Which of the following costs are always irrelevant in decision making?

A) sunk costs

B) fixed costs

C) avoidable costs

D) opportunity costs

sunk costs

Roosevelt Inc. breaks even when it sells 1,600 units. The company's variable cost per unit is $10 and the selling price is $25 per unit. The total fixed cost are $24,000 & the contribution margin is $24,000. How many units does Roosevelt need to sell to earn $40,000 in net income?

A) 4,267

B) 1,760

C) 3,600

D) 3,200

4,267

The usual starting point for a master budget is:

A) the budgeted income statement.

B) the production budget.

C) the sales forecast or sales budget.

D) the direct materials purchase budget.

the sales forecast or sales budget.

A company with $500,000 in operating assets is considering the purchase of a machine that costs $60,000 and which is expected to reduce operating costs by $15,000 each year. These reductions in cost occur evenly throughout the year. The payback period for this machine in years is closest to:

A) 8.3 years

B) 0.25 years

C) 4 years

D) 33.3 years

4 years

Crockin Corporation is considering a machine that will save $9,000 a year in cash operating costs each year for the next six years. At the end of six years it would have no salvage value. If this machine costs $33,165 now, the machine's internal rate of return is closest to (Ignore income taxes.):

Use the table to determine the discount factor(s).IRR table.pdfDownload IRR table.pdf

A) 19%

B) 18%

C) 16%

D) 17%

16%

Which of the following statements is false?

A) Time-series analysis examines a company's performance over time.

B) The North American Industry Classification System assigns industry codes based on business operations.

C) When computing the component percentages for a common size analysis of the income statement, net income is the base figure.

D) It is often useful to compare a company's performance with that of a competitor.

When computing the component percentages for a common size analysis of the income statement, net income is the base figure.

Which of the following transactions will increase a current ratio, which is currently 2.5?

A) Using cash to pay an account payable.

B) Collecting an account receivable.

C) Receiving cash from signing a 6-month note payable.

D) Accruing (Recording, Increasing) an expense.

Using cash to pay an account payable.

The debt-to-equity ratio measures which of the following?

A) Profitability.

B) Market strength.

C) Liquidity.

D) Leverage.

Leverage.

Which of the following statements is true regarding stockholders?

A) They are creditors of the company.

B) They are owners of the company.

C) They expect to receive interest on their investment.

D) They expect to receive their investment back at a specified point in time.

They are owners of the company.

Which of the following is correctly classified?

A) Borrowing money from the bank is an operating cash flow.

B) Buying a building is an investing cash flow.

C) Selling stock to stockholders is an investing cash flow.

D) Paying for operations of the business is an investing cash flow.

Buying a building is an investing cash flow.

Dividends are:

A) payments made to both creditors and stockholders.

B) required to be paid to creditors.

C) voluntary payments made by the company to creditors.

D) payments made to stockholders.

payments made to stockholders.

Which of the following is true regarding the SEC?

A) It was established in 1934.

B) It comes under the control of the FASB.

C) Its rules and regulations apply to all companies, both public and private.

D) It was enacted as a result of Sarbanes-Oxley.

E) It is responsible for preparing the financial statements of all publicly-held companies.

It was established in 1934.

Which of the following is true of the IASB?

A) It is responsible for IFRS.

B) It is the new accounting standard established by Sarbanes-Oxley.

C) This is a company's internal accounting standards book.

D) It is the rule-making body of the SEC.

E) It is responsible for the accounting rules used in the U.S.

It is responsible for IFRS.

Which of the following is a liability account?

A) Retained earnings

B) Equipment

C) Utilities payable

D) Common stock

Utilities payable

Which of the following accurately describes retained earnings?

A) All the net incomes of the company minus any net losses or dividends paid.

B) A fund of cash that has been set aside until the company pays dividends to stockholders.

C) This account plus the company's total liabilities must equal the company's total assets.

D) The cash remaining from the company's net income for the year minus any dividends the company paid during the year.

All the net incomes of the company minus any net losses or dividends paid.

Which of the following is true?

A) Assets + liabilities = stockholders' equity

B) Assets - liabilities = stockholders' equity

C) Assets = stockholders' equity - liabilities

D) Assets = liabilities + retained earnings

E) Assets - retained earnings = liabilities

Assets - liabilities = stockholders' equity

Which of the following statements are true?

A) Retained earnings is a Balance Sheet account.

B) If no dividends were paid, net income will always equal ending retained earnings.

C) The Balance Sheet is in balance when net income equals ending retained earnings.

D) The Balance Sheet covers a period of time, while the Income Statement is at one point in time.

Retained earnings is a Balance Sheet account.

Accrual accounting

A) is not allowed under GAAP.

B) is the same as cash basis of accounting.

C) requires showing revenue on the Income Statement when it is earned, whether or not the cash has been received.

D) impacts the Income Statement but not the Balance Sheet.

requires showing revenue on the Income Statement when it is earned, whether or not the cash has been received.

Which of the following is true of the Statement of Retained Earnings?

A) This statement must be prepared before the Income Statement can be completed.

B) The ending balance on this statement is the total of stockholders' equity.

C) The ending balance on this statement is the cash that is available for dividends.

D) The ending retained earnings always becomes the beginning retained earnings at the start of the next period.

The ending retained earnings always becomes the beginning retained earnings at the start of the next period.

Which of the following is true regarding the Statement of Cash Flows?

A) It must be prepared prior to the Income Statement.

B) It is the one statement that relies on accrual accounting.

C) This statement is based on the principles of double-entry bookkeeping.

D) The beginning balance of this statement is the ending balance of cash at the end of the prior period.

The beginning balance of this statement is the ending balance of cash at the end of the prior period.

Which of the following is true?

A) The ending balances in the stockholders' equity accounts will always become the beginning balances at the start of the next period.

B) Ending retained earnings will always equal ending stockholders' equity if the books are in balance.

C) Assets minus liabilities must equal stockholders' equity.

D) Stockholders equity is the total cash the company earned as well as received from stockholders.

Assets minus liabilities must equal stockholders' equity.

Which of the following is true when a company borrows money from the bank?

A) The amount borrowed will eventually become an expense on the company's Income Statement.

B) The interest that must be paid increases both assets and liabilities.

C)The interest associated with the loan will eventually be shown as an expense on the company's Income Statement.

D) When the cash is received by the company, both assets and stockholders' equity are increased.

The interest associated with the loan will eventually be shown as an expense on the company's Income Statement.

The accounting equation is out of balance when

A) ending cash does not equal ending net income.

B) total assets do not equal the total of liabilities plus stockholders' equity.

C) ending retained earnings does not equal net income.

D) the ending balance on the Statement of Cash Flows does not equal the ending balance of total assets on the Balance Sheet.

total assets do not equal the total of liabilities plus stockholders' equity.

Which of the following is true?

A) Total expenses always equals the amount of cash paid for them during the period.

B) Revenue can include some amounts that have not yet been received by the company

C) Ending balances on the Balance Sheet are zeroed out before starting the new period.

D) Expenses are recorded as an expense only after they have been paid.

Revenue can include some amounts that have not yet been received by the company

Anjou Inc. owes its only employee $600 at the end of its first month in business. Anjou will pay its employee in the next month. Which of the following is true?

A) Because no payment was made in month 1, Anjou does not need to record any entries until month 2, when the payment is made.

B) Even though the payment has not yet been made, Anjou must reduce its cash account and record a liability for the amount due.

C) Anjou records the transaction in the first month as if the payment was made. The entry is to reduce cash and record salary expense on the Income Statement.

D) Anjou records the salary expense on the Income Statement and salaries payable on the Balance Sheet

Anjou records the salary expense on the Income Statement and salaries payable on the Balance Sheet

During the month, Pinto Company earned $12,000 in revenue, but only $10,000 of that had been received by the end of the month. Pinto's only expense was advertising of $3,000, but the company will pay for that next month. How much did Pinto report in net income for the month?

A) $10,000

B) $9,000

C) $7,000

D) $12,000

$9,000

During January, Bradbury Co. made $46,000 in total sales. All of the sales were for cash, except one sale to Lima for $1,500, which was on account. When Lima pays Bradbury in February, which of the following will be true?

A) Both Bradbury's total revenue and cash will increase by $1,500 in February.

B) There will be no change to either Bradbury's total assets or net income for February.

C) Bradbury's total assets will increase by $1,500 when the cash is received, but no other accounts will be changed.

D) Bradbury's net income will increase by $1,500, but no other accounts will be impacted.

There will be no change to either Bradbury's total assets or net income for February.

Morgan Company paid $400 for advertising brochures when it went into business on January 1. By January 31st, Morgan had given away one-fourth of these flyers. Which entry should Morgan make at January 31 to correctly state its accounts?

A) Decrease cash by $100, and increase supplies expense by $100

B) Decrease the asset account supplies by $100, and increase supplies expense by $100.

C) Increase both the asset account supplies and the expense account supplies expense by $100.

D) Make no entry to the asset accounts, and increase supplies expense by $100.

Decrease the asset account supplies by $100, and increase supplies expense by $100.

Elyptical, Inc. paid three months of rent for $9,000 on April 1st. At April 30th, which of the following would correctly state Elyptical's accounts?

A) Prepaid rent $0; rent expense $9,000

B) Prepaid rent $0; rent expense $3,000

C) Prepaid rent $6,000; rent expense $3,000

D) Prepaid rent $3,000; rent expense $6,000

Prepaid rent $6,000; rent expense $3,000

Which of the following transactions increases total assets?

A) Collecting an accounts receivable

B) Recording depreciation expense

C) Paying six months rent in advance

D) Purchasing inventory on account

Purchasing inventory on account

Unearned revenue is

A) cash that has been received from customers but not yet earned.

B) revenue that has not yet been received.

C) revenue that has been earned but not yet received.

D) a concept used only in cash-basis accounting.

E) cash that has not been either earned or received.

cash that has been received from customers but not yet earned.

Which of the following is true?

A) Depreciation expense on the Income Statement is never for more than one year.

B) Depreciation expense always equals accumulated depreciation.

C) Accumulated depreciation is a liability account on the company's Balance Sheet.

D) Depreciation expense is the amount of cash paid for depreciation during the year.

Depreciation expense on the Income Statement is never for more than one year.

On October 1, 2025, Wolfie Co. bought equipment for $12,000. Wolfie expects the equipment will last for three years and then be worthless. Which of the following is correct for the company's annual financial statements at December 31, 2026?

A) Depreciation expense $4,000; accumulated depreciation $7,000

B) Depreciation expense $5,000; accumulated depreciation $5,000

C) Depreciation expense $4,000; accumulated depreciation $5,000

D) Depreciation expense $5,000; accumulated depreciation $4,000

Depreciation expense $4,000; accumulated depreciation $5,000

Which of the following is true regarding accounts receivable?

A) Both revenue and liabilities are increased when the sale is made.

B) Revenue is increased when the cash is collected.

C) Total assets do not change when the cash is collected.

D) Total assets do not change when the sale is made.

Total assets do not change when the cash is collected.

Meldrum Company purchased land $6,000 in 2019. During 2025, Meldrum sold one-half of that land for $4,500 and bought another plot of land for $4,000. What was the balance in the land account at December 31, 2025?

A) $8,500

B) $10,000

C) $5,500

D) $7,000

$7,000

Which of the following best describes interest payable?

A) The amount of interest expense incurred during the period.

B) The total amount of interest owed at the end of the period.

C) The total amount of interest that has been paid on the loan by the end of the period.

D) The total amount of interest that will be owed at the loan's maturity.

The total amount of interest owed at the end of the period.

Your bookkeeper forgot to make the adjustment for depreciation expense at the end of the period. What impact does that error have on your financial statements?

A) Assets are overstated, and expenses are understated.

B) Liabilities are overstated, and expenses are understated.

C) Both assets and net income are understated.

D) Both assets and expenses are overstated.

Assets are overstated, and expenses are understated.

Which of the following is true about stockholders' equity?

A) This section of the Balance Sheet will always equal total assets.

B) This section of the Balance Sheet can only be increased if the company sells more stock to its stockholders.

C) Corporations always must have at least two accounts in this section of the Balance Sheet: common stock and retained earnings.

D) Retained earnings in stockholders equity is the one account on the Balance Sheet that the ending balance at the end of the period is zeroed out and does not carry over to the following period.

Corporations always must have at least two accounts in this section of the Balance Sheet: common stock and retained earnings.

Which of the following accounts would NOT be located on the Balance Sheet?

A) Retained earnings

B) Accumulated depreciation

C) Cost of goods sold

D) Interest payable

Cost of goods sold

Utilities payable at the end of the reporting period are

A) the total utilities used during the period.

B) the amount paid for utilities during the period.

C) the utilities used but not yet paid at the end of the period.

D) the amount paid for utilities but not yet used at the end of the period.

the utilities used but not yet paid at the end of the period.

When a company make an end-of-the-period adjustment for depreciation,

A) it decreases retained earnings.

B) there is no impact on total assets.

C) the Balance Sheet stays in balance because total assets and total liabilities are decreased by the same amount.

D) the cash paid for depreciation reduces total assets.

it decreases retained earnings.

Company A delivered inventory to Company B on January 6th. Company B paid Company A for the inventory on January 20th. Company B sold all of the inventory to Customer on February 3rd. Customer paid Company B for the inventory on February 9th. On which day did Company B record an expense on its Income Statement for this inventory?

A) January 6

B) January 20

C) February 3

D) February 9

February 3

Marvelous Company had sales of $66,000 during the year. The company's expenses were advertising expense of $8,000, depreciation expense of $5,000, and cost of goods sold of $16,000. In addition, Marvelous sold a plot of land and incurred a $1,000 loss. What was Marvelous' gross profit for the year?

A) $37,000

B) $36,000

C) $38,000

D) $50,000

$50,000

Which of the following statements is true?

A) Managerial accounting for companies in the US is governed by GAAP.

B) Managerial accounting statements are prepared to go to parties outside the company.

C) Managerial accounting is more future oriented than financial accounting.

D) The results of both managerial and financial accounting are reported only in currency.

Managerial accounting is more future oriented than financial accounting.

Which of the following statements is true regarding product (inventoriable) costs and period costs?

A) Insurance on the factory is a period cost

B) The salary of the CEO of the company is a product cost

C) Property taxes on the factory is a product cost

D) The cost of labor in the factory is a period cost

Property taxes on the factory is a product cost

Which of the following would be considered a period cost for a manufacturing firm?

A) The fork life driver's wages

B) The president of the company's salary

C) Depreciation on equipment in the factory

D) Property taxes on the factory

The president of the company's salary

Which of the following is a period cost?

A) Insurance on the factory building

B) Salesman's commissions on the sale of a product

C) Direct materials

D) Factory supervisor's salary

Salesman's commissions on the sale of a product

Which of the following is true?

A) Total fixed costs vary exactly as the level of production varies.

B) Variable costs are fixed per unit.

C) The contribution margin per unit varies as the number of units varies.

D) Fixed costs are fixed per unit.

Variable costs are fixed per unit.

Management wants to use their production facilities to full capacity because

A) it will reduce the fixed costs per unit.

B) it will reduce the total fixed costs.

C) it will reduce the variable costs per unit.

D) it will reduce the total variable costs.

it will reduce the fixed costs per unit.

Last month, Buren, Inc. manufactured 10,000 units of its only product, and the cost per unit was $60. At this level of production, variable costs are 50% of total unit costs. If 10,500 units are manufactured this month and cost behavior patterns remain unchanged

A) total variable cost will remain unchanged.

B) variable cost per unit will increase.

C) fixed costs per unit will increase.

D) total cost per unit will decrease.

total cost per unit will decrease.

Last year Dallas Company reported sales of $640,000, a contribution margin of $160,000, and a net loss of $40,000. Based on this information, Dallas needed how much in total sales to breakeven?

A) $800,000

B) $640,000

C) $480,000

D) $720,000

$800,000

A product sells for $20 per unit and has a contribution margin ratio of 40%. Fixed expenses total $120,000 annually. How many units must be sold to yield an annual net income of $30,000?

A) 20,000

B) 18,750

C) 25,000

D) 12,500

18,750

Venice Company had $46,000 in total assets, $26,000 in current liabilities, and $10,000 in stockholders' equity at December 31, 2026. At that time Venice's current ratio was 1.5. How much did Venice have in current assets at December 31, 2026?

A) $24,000

B) $15,000

C) $10,000

D) $39,000

$39,000

Daily, Inc. began 2025 with $6,400 in inventory and ended the year with $5,600 in inventory. During 2025, Daily sold $32,000 of its inventory for a total of $69,000. At the end of 2025, Daily still owed $3,500 to its suppliers of inventory. How much was Daily's inventory turnover ratio?

A) 5.46

B) 5.20

C) 5.33

D) 5.86

5.33

Madison Company issued 200 shares of stock for $10 apiece when it began business on January 1, 2019. No stock has been issued since that time. The balance in stockholders' equity at January 1, 2025 was $40,000. During 2025, $10,000 was paid in dividends. At December 31, 2025, Madison had total assets of $92,000 and total liabilities of $32,000. What was Madison's earnings per share?

A) $260

B) $160

C) $200

D) $150

$150

Kirtland Company went into business in 2016 when it sold 200 shares of stock for $20 apiece. No more stock has been issued since that time. At December 31, 2025, Kirtland had $16,000 in its retained earnings, and at December 31, 2026, retained earnings was $12,000. Kirtland paid $10,000 in dividends during 2026. What is Kirtland's earnings per share for 2026?

A) $300

B) $2

C) $50

D) $30

$30

Which of the following is a solvency ratio?

A) Current ratio

B) Deb-to-equity ratio

C) Earnings per share

D) Return on equity ratio

Current ratio

Which of the following ratios is of the most importance in determining the price of a stock on the stock market?

A) Current ratio

B) Debt-to-equity

C) Earnings per share

D) Return on equity

Earnings per share