timer Asked: Sep 5th, 2013

Question description

1. The resources a business owns are called (Points : 3)
  stockholders’ equity.

2. Which of the following is an appropriate representation of the accounting equation? (Points : 3)
  Assets + liabilities = stockholders’ equity
  Assets = liabilities + stockholders’ equity
  Assets = liabilities
  Assets = liabilities + retained earnings

3. The “rules” of accounting are called (Points : 3)
  income tax regulations.
  SEC regulations.
  Internet rules.
  Generally Accepted Accounting Principles.

4. Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert’s net income for the month of September?

Accounts Payable


Capital Stock






Fees Earned


Miscellaneous Expense


Rent Expense


Retained Earnings


Wages Expense


  1. (Points : 3)

5. Which of the following accounts is a stockholders' equity account? (Points : 3)
  Capital Stock
  Prepaid Insurance
  Accounts Payable

6. Hodges, Inc. had the following assets and liabilities as of September 30, 2011:





 What is the stockholders’ equity of Hodges as of September 30, 2011? (Points : 3)
  Cannot be determined with this information

7. Johnson, Inc. purchased land for cash. What effect does this transaction have on the following accounts: (Points : 3)
  Increase in Cash and decrease in Land
  Decrease in Cash and decrease in Land
  Increase in Cash and increase in Land
  Decrease in Cash and increase in Land

8. The payment of a liability (Points : 3)
  decreases assets and stockholders' equity.
  increases assets and decreases liabilities.
  decreases assets and increases liabilities.
  decreases assets and decreases liabilities.

9. Fees receivable would appear on the balance sheet as a(n) (Points : 3)
  fixed asset.
  unearned revenue.

10. Deferred expenses (prepaid expenses) are items initially recorded as assets but are expected to become __________ over time. (Points : 3)
  stockholders’ equity

11. Unearned rent, representing rent paid for the next six months’ occupancy, would be reported on the landlord’s balance sheet as a(n) (Points : 3)
  capital stock.

12. On April 1, Tule, Inc. paid $3,600 for an insurance premium on a three-year insurance policy. How does this transaction affect Tule’s accounts? (Points : 3)
  Increase insurance expense and decrease cash by $3,600 each
  Increase prepaid insurance and decrease cash by $3,600 each
  Increase unearned insurance and decrease cash by $3,600 each
  No effect at this time

13. The difference between sales and cost of merchandise sold for a merchandising business is (Points : 3)
  net sales.
  gross sales.
  gross profit.

14. If the seller is to pay the delivery expense of delivering merchandise, the delivery terms are stated as (Points : 3)
  FOB shipping point.
  FOB destination.
  FOB n/30.
  FOB seller.

15. Since merchandise inventory is normally sold within a year, how is it reported on the balance sheet? (Points : 3)
  As a revenue
  As the cost of merchandise sold
  It does not appear on the Balance Sheet
  As a current asset

16. Which of the following would be subtracted from gross profit to reach operating income? (Points : 3)
  Operating expenses
  Other expenses
  Income taxes
  All of these

17. Which of the following would be added to the balance per books on a bank reconciliation? (Points : 3)
  Service charges
  Outstanding checks
  Deposits in transit
  Notes collected by the bank

18. The objectives of internal control are to (Points : 3)
  control the internal organization of the accounting department personnel and equipment.
  provide reasonable assurance that assets are safeguarded, information is processed accurately, and laws and regulations are complied with.
  prevent fraud and promote the social interest of the company.
  provide control over “internal-use only” reports and employee internal conduct.

19. The Sarbanes-Oxley Act of 2002 requires companies and their independent accountants to (Points : 3)
  report on the financial activities of the company.
  report on any fraud and theft detected in the company.
  report on the state of the economy and likelihood of fraud.
  report on the effectiveness of the company’s internal controls.

20. Which of the following elements of internal control focuses upon locating weaknesses and improving control effectiveness? (Points : 3)
  The control environment
  Risk assessment
  Control procedures

21. The two methods of accounting for uncollectible receivables are the allowance method and the (Points : 3)
  equity method.
  direct write-off method.
  interest method.
  cost method.

22. The two most widely used methods for determining the cost of inventory are (Points : 3)
  FIFO and LIFO.
  FIFO and average cost.
  LIFO and average cost.
  gross profit and average cost.

23. In reference to a promissory note, the person who is to receive payment is called the (Points : 3)

24. A 60-day, 12% note for $15,000 dated May 1 is received from a customer on account. 
The maturity value of the note is (Points : 3)

25. A fully depreciated asset must be (Points : 3)
  removed from the books.
  kept on the books until sold or discarded.
  disclosed only in the notes to the financial statements.
  recognized on the income statement as a loss.

26. All amounts paid to get an asset in place and ready for use are referred to as (Points : 3)
  capital expenditures.
  revenue expenditures.
  residual value.
  cost of an asset.

27. A capital expenditure would appear on the (Points : 3)
  income statement under operating expenses.
  balance sheet under fixed assets.
  balance sheet under current assets.
  income statement under other expenses.

28. If a fixed asset is sold and the book value is less than cash received, the company must (Points : 3)
  recognize a loss on the income statement under other expenses.
  recognize a loss on the income statement under operating expenses.
  recognize a gain on the income statement under other revenues.
  Gains and losses are not to be recognized upon the sell of fixed assets.

29. If a corporation issues only one class of stock, it is called (Points : 3)
  common stock.
  treasury stock.
  no-par stock.
  preferred stock.

30. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? (Points : 3)

31. Stockholders' equity (Points : 3)
  is usually equal to cash on hand.
  includes paid-in capital and liabilities.
  includes retained earnings and paid-in capital.
  is shown on the income statement.

32. Which statement below is NOT a reason for a corporation to buy back its own stock? (Points : 3)
  Resale to employees
  Bonus to employees
  For supporting the market price of the stock
  To increase the shares outstanding

33. A bond indenture is (Points : 3)
  a contract between the corporation issuing the bonds and the underwriters selling 
the bonds.
  the amount due at the maturity date of the bonds.
  a contract between the corporation issuing the bonds and the bondholders.
  the amount for which the corporation can buy back the bonds prior to the maturity date.

34. The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 40,000 shares were originally issued and 5,000 were subsequently reacquired. What is the number of shares outstanding? (Points : 3)

35. A corporation has 50,000 shares of $100 par value stock outstanding. If the corporation issues a 4-for-1 stock split, the number of shares outstanding after the split will be (Points : 3)


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