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Quiz 1

Due Jun 18 at 11:55pm

Points 1000

Questions 40
Available Jun 16 at 2am - Jun 18 at 11:55pm 3 days

Time Limit 180 Minutes

This quiz was locked Jun 18 at 11:55pm.


Attempt History
Attempt Time Score

LATEST Attempt 1 149 minutes 975 out of 1,000


Score for this quiz: 975 out of 1,000
Submitted Jun 18 at 9:58am
This attempt took 149 minutes.

Question 1
25 / 25 pts
One objective of financial reporting is to provide

information about the investors in the business entity.


information about the liquidation values of the resources held by the enterprise.
Correct!

information that is useful in assessing cash flow prospects.

information that will attract new investors.

Question 2
25 / 25 pts
Accounting information is considered to be relevant when it

can be depended on to represent the economic conditions and events that it is intended
to represent.
Correct!

is capable of making a difference in a decision.

is understandable by reasonably informed users of accounting information.

is verifiable and neutral.

Question 3
25 / 25 pts
Allowing firms to estimate rather than physically count inventory at interim (quarterly) periods is
an example of a trade-off between

verifiability and reliability.

reliability and comparability.

Correct!
timeliness and verifiability.

neutrality and consistency.

Question 4
25 / 25 pts
An accrued expense can best be described as an amount

paid and currently matched with earnings.

paid and not currently matched with earnings.

not paid and not currently matched with earnings.

Correct!

not paid and currently matched with earnings.

Question 5
25 / 25 pts
An unearned revenue can best be described as an amount

collected and currently matched with expenses.

Correct!

collected and not currently matched with expenses.

not collected and currently matched with expenses.


not collected and not currently matched with expenses.

Question 6
25 / 25 pts
Charging off the cost of a wastebasket with an estimated useful life of 10 years as an expense
of the period when purchased is an example of the application of the

consistency characteristic.

matching principle.

Correct!

materiality constraint.

historical cost principle.

Question 7
25 / 25 pts
Comprehensive income includes all of the following except

dividend revenue.

losses on disposal of assets.

Correct!

investments by owners.
unrealized holding gains.

Question 8
25 / 25 pts
For which of the following transactions would the use of the present value of an ordinary annuity
concept be appropriate in calculating the present value of the asset obtained or the liability
owed at the date of incurrence?

Correct!

A capital lease is entered into with the initial lease payment due one month subsequent
to the signing of the lease agreement.

A capital lease is entered into with the initial lease payment due upon the signing of the
lease agreement.

A ten-year 8% bond is issued on January 2 with interest payable semiannually on


January 2 and July 1 yielding 7%.

A ten-year 8% bond is issued on January 2 with interest payable semiannually on


January 2 and July 1 yielding 9%.

Question 9
25 / 25 pts
How much must be invested now to receive $10,000 for 15 years if the first $10,000 is received
today and the rate is 9%?

Present Value of
Periods Ordinary Annuity at 9
14 7.78615
15 8.06069
16 8.31256

$80,607

Correct!
$87,862

$150,000

$73,125

Question 10
25 / 25 pts
Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 26
and 27 is based on 8% interest compounded annually.

Periods Future Value of 1 at 8%


1 1.080
2 1.166
3 1.260
4 1.360
5 1.469

If $3,000 is put in a savings account today, what amount will be available three years from today?

$3,000 1.260

Correct!

$3,000 1.260

3,000 1.080 3

($3,000 1.080) + ($3,000 1.166) + ($3,000 1.260)

Question 11
25 / 25 pts
Use the following 8% interest factors for question 29:

Present Value of Ordinary Future Value of Ordinary Annuity


Annuity
7 periods 5.2064 8.92280
8 periods 5.7466 10.63663
9 periods 6.2469 12.48756

If $5,000 is deposited annually starting on January 1, 2012 and it earns 8%, what will the balance
be on December 31, 2019?

$44,614

$48,183

$53,183

Correct!

$57,438

Question 12
25 / 25 pts
If a petty cash fund is established in the amount of $250, and contains $150 in cash and $95 in
receipts for disbursements when it is replenished, the journal entry to record replenishment
should include credits to the following accounts

Petty Cash, $75.

Petty Cash, $100.


Cash, $95; Cash Over and Short, $5.

Correct!

Cash, $100.

Question 13
25 / 25 pts
If the inventory account at the end of the year is understated, the effect will be to

overstate the gross profit on sales.

understate the net purchases.

Correct!

overstate the cost of goods sold.

overstate the goods available for sale.

Question 14
25 / 25 pts
In order to be classified as an extraordinary item in the income statement, an event or
transaction should be

Correct!

unusual in nature, infrequent, and material in amount

unusual in nature and infrequent, but it need not be material.

infrequent and material in amount, but it need not be unusual in nature


unusual in nature and material, but it need not be infrequent.

Question 15
25 / 25 pts
Information in the income statement helps users to

evaluate the past performance of the enterprise.

provide a basis for predicting future performance.

help assess the risk or uncertainty of achieving future cash flows.

Correct!

all of these.

Question 16
0 / 25 pts
May Co. prepared an aging of its accounts receivable at December 31, 2012 and determined
that the net realizable value of the receivables was $300,000. Additional information is available
as follows:

Allowance for uncollectible accounts at


1/1/12credit balance $34,000

Accounts written off as uncollectible during 23,000


2012:

Accounts receivable at 12/31/12: 325,000


Uncollectible accounts recovered during 2012:
5,000

For the year ended December 31, 2012, May's bad debt expense would be:
Correct Answer

$25,000.

$23,000.

$16,000.

You Answered

$9,000.

Question 17
25 / 25 pts
On December 30, 2012, Cey, Inc. purchased a machine from Frank Corp. in exchange for a
noninterest-bearing note requiring eight payments of $50,000. The first payment was made on
December 30, 2012, and the others are due annually on December 30.
On Cey's December 31, 2012 balance sheet, the net note payable to Frank is what?

Note: At date of issuance, the prevailing rate of interest for this type of note was 11%. Present
value factors are as follows:

Present Value of Ordinary


Annuity of 1 at 11% Present Value of Annuity
Period Due of 1 at 11%
7 4.712 5.231
8 5.146 5.712
Correct!

$235,600.
$257,300.

$261,775.

$285,600.

Question 18
25 / 25 pts
On January 1, 2011, Marr Co. exchanged equipment for a $400,000 zero-interest-bearing note
due on January 1, 2014. The prevailing rate of interest for a note of this type at January 1, 2011
was 10%. The present value of $1 at 10% for three periods is 0.75. What amount of interest
revenue should be included in Marr's 2012 income statement?

$0

$30,000

Correct!

$33,000

$40,000

Question 19
25 / 25 pts
On May 1, 2012, a company purchased a new machine which it does not have to pay for until
May 1, 2014. The total payment on May 1, 2014 will include both principal and interest.
Assuming interest at a 10% rate, the cost of the machine would be the total payment multiplied
by what time value of money factor?

Future value of annuity of 1


Future value of 1

Present value of annuity of 1

Correct!

Present value of 1

Question 20
25 / 25 pts
Present value is

the value now of a future amount.

the amount that must be invested now to produce a known future value.

always smaller than the future value.

Correct!

all of these.

Question 21
25 / 25 pts
The balance sheet is useful for analyzing all of the following except

liquidity.

solvency.
Correct!

profitability.

financial flexibility.

Question 22
25 / 25 pts
The basic accounting concept that refers to the tendency of accountants to resolve uncertainty
in favor of understating assets and revenues and overstating liabilities and expenses is known
as the

Correct!

conservatism constraint.

materiality constraint.

substance over form principle.

industry practices constraint.

Question 23
25 / 25 pts
The correct order to present current assets is

Cash, accounts receivable, prepaid items, inventories.

Correct!

Cash, accounts receivable, inventories, prepaid items.


Cash, inventories, accounts receivable, prepaid items.

Cash, inventories, prepaid items, accounts receivable.

Question 24
25 / 25 pts
The Financial Accounting Standards Board

has issued a series of pronouncements entitled Statements on Auditing Standards.

was the forerunner of the current Accounting Principles Board.

is the arm of the Securities and Exchange Commission responsible for setting financial
accounting standards.
Correct!

is appointed by the Financial Accounting Foundation

Question 25
25 / 25 pts
The major distinction between the Financial Accounting Standards Board (FASB) and its
predecessor, the Accounting Principles Board (APB), is

the FASB issues exposure drafts of proposed standards.

Correct!

all members of the FASB are fully remunerated, serve full time, and are independent of
any companies or institutions.
all members of the FASB possess extensive experience in financial reporting.

a majority of the members of the FASB are CPAs drawn from public practice.

Question 26
25 / 25 pts
The most authoritative category of generally accepted accounting principles includes all of the
following except

Accounting Research Bulletins.

APB Opinions.

FASB Standards.

Correct!

FASB Technical Bulletins.

Question 27
25 / 25 pts
The purpose of Statements of Financial Accounting Concepts is to

establish GAAP.

modify or extend the existing FASB Standards Statement.


Correct!

form a conceptual framework for solving existing and emerging problems.

determine the need for FASB involvement in an emerging issue.


Question 28
25 / 25 pts
The two primary qualities that make accounting information useful for decision making are

comparability and consistency.

materiality and timeliness.

reliability and comparability.

Correct!

relevance and reliability.

Question 29
25 / 25 pts
Under the allowance method of recognizing uncollectible accounts, the entry to write off an
uncollectible account

increases the allowance for uncollectible accounts.

has no effect on the allowance for uncollectible accounts.

Correct!

has no effect on net income.

decreases net income.


Question 30
25 / 25 pts
Given below are the future value factors for 1 at 8% for one to five periods. Each of the items 26
and 27 is based on 8% interest compounded annually.

Periods Future Value of 1 at 8%


1 1.080
2 1.166
3 1.260
4 1.360
5 1.469

What amount will be in a bank account three years from now if $6,000 is invested each year for
four years with the first investment to be made today?

Correct!

($6,000 1.260) + ($6,000 1.166) + ($6,000 1.080) + $6,000

$6,000 1.360 4

($6,000 1.080) + ($6,000 1.166) + ($6,000 1.260) + ($6,000 1.360)

$6,000 1.080 4

Question 31
25 / 25 pts
Item 28 applys to the appropriate use of present value tables. Given below are the present value
factors for $1.00 discounted at 10% for one to five periods. This question is based on 10% interest
compounded annually.

Present Value of $1

Periods Discounted at 10% per Period


1 0.909
2 0.826
3 0.751
4 0.683
5 0.621

What is the present value today of $6,000 to be received six years from today?

$6,000 0.909 6

$6,000 0.751 2

Correct!

$6,000 0.621 0.909

$6,000 0.683 3

Question 32
25 / 25 pts
Which of the following is a generally accepted method of determining the amount of the
adjustment to bad debt expense?

A percentage of sales adjusted for the balance in the allowance

Correct!

A percentage of sales not adjusted for the balance in the allowance

A percentage of accounts receivable not adjusted for the balance in the allowance

An amount derived from aging accounts receivable and not adjusted for the balance in
the allowance

Question 33
25 / 25 pts
Which of the following is an acceptable method of presenting the income statement?

A single-step income statement

A multiple-step income statement

A consolidated statement of income

Correct!

All of these

Question 34
25 / 25 pts
Which of the following is not considered cash for financial reporting purposes?

Petty cash funds and change funds

Money orders, certified checks, and personal checks

Coin, currency, and available funds

Correct!

Postdated checks and I.O.U.'s

Question 35
25 / 25 pts
Which of the following is true when accounts receivable are factored without recourse?of the
following is true when accounts receivable are factored without recourse??
The transaction may be accounted for either as a secured borrowing or as a sale,
depending upon the substance of the transaction.

The receivables are used as collateral for a promissory note issued to the factor by the
owner of the receivables.
Correct!

The factor assumes the risk of collectibility and absorbs any credit losses in collecting
the receivables.

The financing cost (interest expense) should be recognized ratably over the collection
period of the receivables.

Question 36
25 / 25 pts
Which of the following items will not appear in the retained earnings statement?

Net loss

Prior period adjustment

Correct!

Discontinued operations

Dividends

Question 37
25 / 25 pts
Which one of the following types of losses is excluded from the determination of net income in
income statements?

Material losses resulting from transactions in the company's investments account.


Material losses resulting from unusual sales of assets not acquired for resale.

Material losses resulting from the write-off of intangibles.

Correct!

Material losses resulting from correction of errors related to prior periods.

Question 38
25 / 25 pts
Why are certain costs of doing business capitalized when incurred and then depreciated or
amortized over subsequent accounting cycles?

To reduce the federal income tax liability

To aid management in cash-flow analysis

Correct!

To match the costs of production with revenues as earned

To adhere to the accounting constraint of conservatism

Question 39
25 / 25 pts
Working capital is

capital which has been reinvested in the business.

unappropriated retained earnings.


cash and receivables less current liabilities.

Correct!

none of these.

Question 40
25 / 25 pts
Year-end net assets would be overstated and current expenses would be understated as a
result of failure to record which of the following adjusting entries?

Expiration of prepaid insurance

Depreciation of fixed assets

Accrued wages payable

Correct!

All of these

Quiz Score: 975 out of 1,000