Term
1.The income statement is intended to inform the reader of:
a. The overall financial condition of the firm at a point in time
b. how much the firm has earned during an accounting period
c. how much income has been distributed to shareholders
d. the cash flow generated by the firm over a period of time
(Accounting Systems and Financial Statements) |
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Definition
b. how much the firm has earned during an accounting period |
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Term
2. Depreciation, from an accounting viewpoint, can best be thought of as:
a. accounting for the physical deterioration of an asset
b. writing off assets like patents, trademarks, and copyrights
c. matching income produced by the depreciable asset with the cost of buying it
d. allocating the cost of the depreciable asset to the periods in which it gives service
(Accounting Systems and Financial Statements) |
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Definition
d. allocating the cost of the depreciable asset to the periods in which it gives service |
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Term
3.Which of the following does not appear on the income statement?
a. Cost of goods sold
b. Depreciation expense
c. Accumulated depreciation
d. Earnings before interest and tax
e. Gross margin
(Income Statement) |
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Definition
c. Accumulated depreciation |
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Term
4.Net working capital can be referred to as
a. Total assets minus current liabilities
b. Current assets minus total liabilities
c. Cash minus current liabilities
d. Current assets minus current liabilities
(Balance Sheet) |
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Definition
d. Current assets minus current liabilities |
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Term
6.When a receivable is written off as uncollectable, entries will usually be made into which accounts?
a. bad debt reserve
b. Bad debt expenses
c. Accounts receivable
d. Both a and b
e. Both a and c
(Balance Sheet)
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Definition
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Term
7.During the last year Alpha Co had Net income of $150, paid $20 in dividends, and sold new stock for $40. Beginning equity for the year was $700. Ending Equity was:
a. $830
b. $840
c. $850
d. $870
(Balance Sheet) |
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Definition
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Term
8.Taxable income is
a. Total income excluding exempt items less deductions and exemptions
b. Gross income less deductions
c. The sum of everything a person makes
d. Gross income less deductions
(Personal Taxes) |
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Definition
a. Total income excluding exempt items less deductions and exemptions |
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Term
9.Investors pay federal income taxes on the interest earned on bonds issued by:
a. Cities
b. Counties
c. States
d. The federal government
(Personal Taxes) |
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Definition
d. The federal government |
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Term
10.The federal tax system allows firms that have a tax loss in a year to apply the loss against past and future earnings. The process is referred to as loss carrybacks and carry forwards and permits the loss to be:
a. Carried forward for 20 years after having been carried back evenly over the past two years
b. Carried back or forward for as many as 20 years
c. Spread evenly over the last two years and evenly over the next 20 years
d.Carried back two years and forward as many as 20 years
(Corporate Taxes) |
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Definition
d. Carried back two years and forward as many as 20 years |
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Term
11.Three years ago a piece of equipment was purchased for $10,000. Assuming an eight-year life and straight-line depreciation, financial statements for the third year will show:
a.Depreciation expense of $3,000 on the income statement, and accumulated depreciation of $3,000 on the balance sheet
b.Depreciation expense of $1250 on the income statement, and accumulated depreciation of $3000 on the balance sheet
c.Depreciation expense of $1250 on the income statement, and accumulated depreciation of $3750 on the balance sheet
d.Depreciation expense of $1250 on the income statement, and accumulated depreciation of $1250 on the balance sheet |
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Definition
a. Depreciation expense of $1250 on the income statement, and accumulated depreciation of $3750 on the balance sheet |
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Term
12.Selected accounts are listed below. How much is he firm’s operating income:
Accrued payroll $ 2000
Sales 45000
Cost of goods sold 26000
Interest expense 1000
Expenses (other than interest) 8000
a.$8000
b.$10000
c.$9000
d.$11000
(Income Statement) |
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Definition
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Term
13.Ben bought an ice cream machine 2 years ago for $8000. The depreciation life for ice cream machines is 4 years. Ben uses straight line depreciation and a convention of taking one-half year’s depreciation in the first year. Ben just sold his machine to Jerry for $6000. What will be Ben’s Capital Gain/ (Loss) on this transaction?
a.$1000
b.$2000
c.$5000
d.($2000)
(Balance Sheet) |
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Definition
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Term
14.The following tax schedule applies to an individual. Her taxable income is $40000. How much is her total tax?
10% of the first $10000
15% of the next $15000
25% of the next $10000
35% of the next $20000
a.$8500
b.$10000
c.$7500
d.$7000
(Personal Taxes) |
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Definition
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Term
15.A corporate bond is yielding 9%. You are in the 35% tax bracket. What is the after tax yield on the bond?
a.5.85%
b.8.10%
c.3.90%
d.12.15%
(Personal Taxes) |
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Definition
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Term
16.An accrual is best defined as:
a.A completed transaction that results in a liability
b.An accumulation of a liability in regard to an incomplete transaction
c.A completed transaction that results in an asset
d.Any liability that has not been paid
(Balance Sheet) |
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Definition
a. An accumulation of a liability in regard to an incomplete transaction |
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Term
17.Which of the following is not part of working capital?
a.Accumulated depreciation
b.Accounts payable
c.Accounts receivable
d.Inventory
(Balance Sheet) |
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Definition
a. Accumulated depreciation |
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Term
18.Which of the following is a tax deductible expense?
a.Repayment of the principle portion of a loan
b.Dividends
c.The purchase of inventory
d.Depreciation
(Income Statement and Balance Sheet) |
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Definition
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Term
19.When must a vendor be paid in full under the terms of 2/10, n 30?
a.10 days from today
b.On February 10th
c.On the 30th of the current month
d.30 days from today
(Balance Sheet) |
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Definition
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Term
20.The accounts receivable balance can be misleading because:
a.It may contain substantial amounts which will never be collected.
b.The figures represent money that is incoming as opposed to tangible assets.
c.Customers often delay payment which blows up the balance
d.It is not adjusted for the bad debt reserve.
(Accounts Receivable) |
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Definition
a.It may contain substantial amounts which will never be collected. |
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Term
21.An asset still in use beyond its life estimate is said to be:
a.A good investment
b.Fully depreciated
c.Fully functional
d.In poor condition
(Depreciation) |
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Definition
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Term
22.Which statement is true?
a.Beginning equity + net income = ending equity
b.Beginning equity + net income – dividends = ending equity
c.Beginning equity + net income – dividends + new stock = ending equity
d.All of these statements are true
(Equity) |
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Definition
| d. All of these statements are true |
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Term
23.In most companies the bulk of accounts payable arises from
a.buying inventory on credit
b.selling inventory on credit
c.Buying airline tickets for traveling employees on credit.
d.Customers paying off old bills
(Accounts Payable) |
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Definition
| d. customers paying off old bills |
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Term
24.The biggest difference between the income statement and the balance sheet is:
a.The income statement shows incoming deposits, while the balance sheet shows account balances from the bank.
b.The income statement is submitted to the government, while the balance sheet is sown to investors.
c.The income statement is always more accurate than the balance sheet.
d.The balance sheet represents flows at a point in time while the income statement reflects flows over a time period.
(Accounting Systems and Financial statements) |
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Definition
d. The balance sheet represents flows at a point in time while the income statement reflects flows over a time period. |
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Term
25.Depreciation expense of $2000 will cause:
a.Accounts receivable to be reduced by$2000
b.Cash to be reduced by $2000
c.Accumulated depreciation to increase by $2000
d.Accounts payable to increase by $2000
(Balance Sheet) |
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Definition
a. Accumulated depreciation to increase by $2000 |
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Term
5. Accounting accruals are important in
a. accounting for depreciation
b. providing for unpaid payroll, rent, interest, and other expenses that relate to the current accounting period
c. drawing checks on the last day of the current accounting period to properly reflect expense in that period
d. providing for bad debts that may eventually be deemed uncollectible
(Balance Sheet) |
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Definition
| b. providing for unpaid payroll, rent, interest,, and other expenses that relate to the current accounting period |
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