1. An examination of the financial statements of a business to ensure that they conform with generally accepted accounting principles is called?

A. A certificationB. An auditC. A verificationD. A validation

1. An examination of the financial statements of a business to ensure that they conform with generally accepted accounting principles is called?

A. A certificationB. An auditC. A verificationD. A validation

2. Morrow Corp. makes a credit sales (i.e., sale on account) to a customer. The effect of this transaction on the accounting equation is that?

A. Assets increase and liabilities increaseB. Assets increase and stockholder’s equity increasesC. Liabilities increase and stockholder’s equity decreasesD. Liabilities decrease and stockholder’s equity increases

2. Morrow Corp. makes a credit sales (i.e., sale on account) to a customer. The effect of this transaction on the accounting equation is that?

A. Assets increase and liabilities increaseB. Assets increase and stockholder’s equity increasesC. Liabilities increase and stockholder’s equity decreasesD. Liabilities decrease and stockholder’s equity increases

3.On January 1, 2005, Thomas Company paid $1000 for a two-year insurance policy on the building. The accounting period ends December 31. At the end of 2005, the financial statement should report?

A. Prepaid Insurance $500; Insurance Expense $500B. Prepaid Insurance $0; Insurance Expense $1000C. Prepaid Insurance $1000; Insurance Expense $0D. Prepaid Insurance $250; Insurance Expense $250

3.On January 1, 2005, Thomas Company paid $1000 for a two-year insurance policy on the building. The accounting period ends December 31. At the end of 2005, the financial statement should report?

A. Prepaid Insurance $500; Insurance Expense $500B. Prepaid Insurance $0; Insurance Expense $1000C. Prepaid Insurance $1000; Insurance Expense $0D. Prepaid Insurance $250; Insurance Expense $250

4.Retained earnings refers to?

A. The amount reported as “the bottom line” on the income statement

B. The accumulated amount of past earnings of a corporation that has not been distributed to shareholders as dividends

C. The total amount of stockholder’s equity for a corporationD. The amount that shareholders have invested by purchasing a

corporation’s stock

4.Retained earnings refers to?

A. The amount reported as “the bottom line” on the income statement

B. The accumulated amount of past earnings of a corporation that has not been distributed to shareholders as dividends

C. The total amount of stockholder’s equity for a corporationD. The amount that shareholders have invested by purchasing a

corporation’s stock

5.The amount of rent expense reported on the income statement is?

A. The amount of cash paid for rent in the current periodB. The amount of cash paid for rent in the current period

less any unpaid rent at the end of the periodC. The amount of rent used up (incurred) in the current

period to help generate revenueD. An increase in net income

5.The amount of rent expense reported on the income statement is?

A. The amount of cash paid for rent in the current periodB. The amount of cash paid for rent in the current period

less any unpaid rent at the end of the periodC. The amount of rent used up (incurred) in the current

period to help generate revenueD. An increase in net income

6.The advantages of incorporation include all of the following except?

A. Ability to raise capitalB. Tax deductibility of dividendsC. Ease of transfer of ownershipD. Limited liability of owners

6.The advantages of incorporation include all of the following except?

A. Ability to raise capitalB. Tax deductibility of dividendsC. Ease of transfer of ownershipD. Limited liability of owners

7. A cash inflow from financing activities includes?

A. Proceeds from selling investments in equity securities of another company

B. Proceeds from selling equipmentC. Proceeds from issuance of bonds payableD. Receipt of interest payments

7. A cash inflow from financing activities includes?

A. Proceeds from selling investments in equity securities of another company

B. Proceeds from selling equipmentC. Proceeds from issuance of bonds payableD. Receipt of interest payments

8.Under accrual basis accounting, revenues are?

A. Recognized when they are earnedB. Recognized when cash is receivedC. Recognized when they are incurredD. Recognized when cash is paid

8.Under accrual basis accounting, revenues are?

A. Recognized when they are earnedB. Recognized when cash is receivedC. Recognized when they are incurredD. Recognized when cash is paid

9. Which financial statement shows the financial position of a business as of a given date?

A. Balance sheetB. Income statementC. Statement of cash flowsD. Statement of retained earnings

9. Which financial statement shows the financial position of a business as of a given date?

A. Balance sheetB. Income statementC. Statement of cash flowsD. Statement of retained earnings

10.The accounts payable account has a beginning balance of $1000 and we purchased $3000 of inventory on credit during the month. The ending balance was $800. How much did we pay our creditors during the month?

A. $2800B. $3000C. $3200D. $3800

10.The accounts payable account has a beginning balance of $1000 and we purchased $3000 of inventory on credit during the month. The ending balance was $800. How much did we pay our creditors during the month?

A. $2800B. $3000C. $3200D. $3800

11.Adjusting entries never include?

A. Prepaid expensesB. Interest payableC. Unearned revenueD. Cash

11.Adjusting entries never include?

A. Prepaid expensesB. Interest payableC. Unearned revenueD. Cash

12. If you wanted to know what accounting rules a company follows related to its inventory, where would you look?

A. The notes to the financial statementsB. The income statementC. The balance sheetD. The headings to the financial statements

12. If you wanted to know what accounting rules a company follows related to its inventory, where would you look?

A. The notes to the financial statementsB. The income statementC. The balance sheetD. The headings to the financial statements

13. At the end of December, the owner of an apartment complex realized that the December rent had not been collected from one of the tenants amounting to $500. On December 31, the owner would show which of the following on its financial statements?

A. Unearned rent revenue of $500B. Rent Receivable of $500C. Rent Payable of $500D. Rent Expense of $500

13. At the end of December, the owner of an apartment complex realized that the December rent had not been collected from one of the tenants amounting to $500. On December 31, the owner would show which of the following on its financial statements?

A. Unearned rent revenue of $500B. Rent Receivable of $500C. Rent Payable of $500D. Rent Expense of $500

14. Which of the following accounts is increased by credit entries and decreased by debit entries?

A. CashB. Advertising ExpenseC. EquipmentD. Accounts payable

14. Which of the following accounts is increased by credit entries and decreased by debit entries?

A. CashB. Advertising ExpenseC. EquipmentD. Accounts payable

15. The primary objective of financial information is to?

A. Provide information to detect fraud in the preparation of financial statements

B. Provide information about the taxable income of the company

C. Provide managers with information about the efficiency and effectiveness of the production process

D. Provide useful economic information about a business to help external parties make sound financial decisions

15. The primary objective of financial information is to?

A. Provide information to detect fraud in the preparation of financial statements

B. Provide information about the taxable income of the company

C. Provide managers with information about the efficiency and effectiveness of the production process

D. Provide useful economic information about a business to help external parties make sound financial decisions

16. Which of the following is the private body responsible for establishing generally accepted accounting principles (GAAP)?

A. PCAOBB. SECC. FASBD. APB

16. Which of the following is the private body responsible for establishing generally accepted accounting principles (GAAP)?

A. PCAOBB. SECC. FASBD. APB

17.Failure to make an adjusting entry to recognize accrued utilities payable would cause an?

A. Understatement of expenses and liabilities and an overstatement of stockholder’s equity

B. Overstatement of expenses and liabilities and an understatement of stockholder’s equity

C. Understatement of expenses, liabilities, and stockholder’s equity

D. Overstatement of assets, expenses, and stockholder’s equity

17.Failure to make an adjusting entry to recognize accrued utilities payable would cause an?

A. Understatement of expenses and liabilities and an overstatement of stockholder’s equity

B. Overstatement of expenses and liabilities and an understatement of stockholder’s equity

C. Understatement of expenses, liabilities, and stockholder’s equity

D. Overstatement of assets, expenses, and stockholder’s equity

18.Which of the following accounts would not be closed at the end of the accounting period?

A. DividendsB. Sales revenueC. Cost of goods soldD. Inventory

18.Which of the following accounts would not be closed at the end of the accounting period?

A. DividendsB. Sales revenueC. Cost of goods soldD. Inventory

19. Which accounting principle states that expenses incurred in generating revenue should be recorded in the same period in which the revenue is recognized?

A. Historical cost principleB. Going concern principleC. Matching principleD. Revenue recognition principle

19. Which accounting principle states that expenses incurred in generating revenue should be recorded in the same period in which the revenue is recognized?

A. Historical cost principleB. Going concern principleC. Matching principleD. Revenue recognition principle

20. Abrahams Corporation reported the following amounts at the end of the first year of operations, December 31, 2009: contributed capital $100,000; sales revenue $400,000; total assets $300,000; $5,000 dividends; and total liabilities $180,000. Retained earnings would be?

A. $20,000B. $30,000C. $70,000D. $80,000

20. Abrahams Corporation reported the following amounts at the end of the first year of operations, December 31, 2009: contributed capital $100,000; sales revenue $400,000; total assets $300,000; $5,000 dividends; and total liabilities $180,000. Retained earnings would be?

A. $20,000B. $30,000C. $70,000D. $80,000

21. Which of the following direct effects on the fundamental accounting model is not possible as a result of transaction analysis?

A. Increase a liability and increase an assetB. Decrease stockholder’s equity and increase

an assetC. Increase an asset and decrease an assetD. Decrease stockholder’s equity and

decrease an asset

21. Which of the following direct effects on the fundamental accounting model is not possible as a result of transaction analysis?

A. Increase a liability and increase an assetB. Decrease stockholder’s equity and

increase an assetC. Increase an asset and decrease an assetD. Decrease stockholder’s equity and

decrease an asset

22. On January 1, 2009, the ledger of Global Corporation correctly showed supplies inventory of $500. During 2009, supplies purchases amounted to $1200. A count (inventory) of supplies on hand at December 31, 2009, showed $600. The 2009 income statement should report supplies expense amounting to?

A. $1200B. $1100C. $800D. $600

22. On January 1, 2009, the ledger of Global Corporation correctly showed supplies inventory of $500. During 2009, supplies purchases amounted to $1200. A count (inventory) of supplies on hand at December 31, 2009, showed $600. The 2009 income statement should report supplies expense amounting to?

A. $1200B. $1100C. $800D. $600

23. Assets are?

A. Probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services

B. Stockholders’ equity minus liabilitiesC. Probable future economic benefits owned

by an entity as a result of past transactionsD. The financing provided by the owners and

the operations of a business

23. Assets are?

A. Probable debts or obligations of an entity as a result of past transactions which will be paid with assets or services

B. Stockholders’ equity minus liabilitiesC. Probable future economic benefits owned

by an entity as a result of past transactions

D. The financing provided by the owners and the operations of a business

24. Which of the following is most often included in current assets?

A. Prepaid expensesB. Property, plant, and equipmentC. Intangible assetsD. Unearned revenue

24. Which of the following is most often included in current assets?

A. Prepaid expensesB. Property, plant, and equipmentC. Intangible assetsD. Unearned revenue

25. Which characteristic states that accounting information is unbiased and verifiable?

A. ConsistencyB. ComparabilityC. RelevanceD. Reliability

25. Which characteristic states that accounting information is unbiased and verifiable?

A. ConsistencyB. ComparabilityC. RelevanceD. Reliability

26. On January 1, 2009, the balance in Retained Earnings for Conlon Company was $125,000. During 2009, the company declared and paid cash dividends of $20,000, reported net income of $65,000, sold additional common stock for $10,000. What was the balance of Retained Earnings on December 31, 2009?

A. $210,000B. $190,000C. $180,000D. $170,000

26. On January 1, 2009, the balance in Retained Earnings for Conlon Company was $125,000. During 2009, the company declared and paid cash dividends of $20,000, reported net income of $65,000, sold additional common stock for $10,000. What was the balance of Retained Earnings on December 31, 2009?

A. $210,000B. $190,000C. $180,000D. $170,000

27. When a company pays back an amount due to a supplier for a prior purchase?

A. Assets decrease and liabilities decreaseB. Assets increase and stockholder’s equity

increasesC. Liabilities increase and stockholder’s equity

decreasesD. Assets increase and liabilities decrease

27. When a company pays back an amount due to a supplier for a prior purchase?

A. Assets decrease and liabilities decreaseB. Assets increase and stockholder’s equity

increasesC. Liabilities increase and stockholder’s equity

decreasesD. Assets increase and liabilities decrease

28. The two categories of stockholder’s equity usually found on the balance sheet of a corporation are?

A. Contributed capital and long-term liabilitiesB. Contributed capital and property, plant,

and equipmentC. Retained earnings and notes payableD. Contributed capital and retained earnings

28. The two categories of stockholder’s equity usually found on the balance sheet of a corporation are?

A. Contributed capital and long-term liabilitiesB. Contributed capital and property, plant,

and equipmentC. Retained earnings and notes payableD. Contributed capital and retained earnings

29. Anna Inc. had the following items reported on its most recent financial statements:Total revenues……………..$500,000

Dividends………………$10,000Total Assets……………..$425,000Total Liabilities…………$125,000Total contributed capital….$100,000Beginning Retained Earnings…$140,000

What total expenses were reported by Anna for the year?

A.$155,000B.$275,000C.$310,000D.$430,000

29. Anna Inc. had the following items reported on its most recent financial statements:Total revenues……………..$500,000

Dividends………………$10,000Total Assets……………..$425,000Total Liabilities…………$125,000Total contributed capital….$100,000Beginning Retained Earnings….$140,000

What total expenses were reported by Anna for the year?

A.$155,000B.$275,000C.$310,000D.$430,000

30. Surfing Magazine receives $50,000 from customers on April 1, 2009, for one-year magazine subscriptions. On December 31, 2009, Surfing Magazine should?

A. Report unearned revenue of $55,000B. Report sales revenue of $50,000C. Report sales revenue of $37,500D. Report unearned revenue of $37,500

30. Surfing Magazine receives $50,000 from customers on April 1, 2009, for one-year magazine subscriptions. On December 31, 2009, Surfing Magazine should?

A. Report unearned revenue of $55,000B. Report sales revenue of $50,000C. Report sales revenue of $37,500D. Report unearned revenue of $37,500

31. Investing activities?

A. Involve day to day events like selling goods and services, which occur when running a business

B. Involve the buying or selling of land, buildings, equipment, and other long-term investments

C. Only involve financial exchangesD. All of these

31. Investing activities?

A. Involve day to day events like selling goods and services, which occur when running a business

B. Involve the buying or selling of land, buildings, equipment, and other long-term investments

C. Only involve financial exchangesD. All of these

32. Accumulated depreciation?

A. Is an expense accountB. Is a liability accountC. Is a regular asset accountD. Is an asset contra-account

32. Accumulated depreciation?

A. Is an expense accountB. Is a liability accountC. Is a regular asset accountD. Is an asset contra-account

33. Cy’s Bar and Grill has $10,000 in utilities expense during the year. At the beginning of the year, Cy’s had utilities payable amounting to $520. At the end of the year, utilities payable totaled $470. What amount of cash did Cy’s pay for utilities during the year?

A. $9950B. $10,000C. $10,050D. $10,990

33. Cy’s Bar and Grill has $10,000 in utilities expense during the year. At the beginning of the year, Cy’s had utilities payable amounting to $520. At the end of the year, utilities payable totaled $470. What amount of cash did Cy’s pay for utilities during the year?

A. $9950B. $10,000C. $10,050D. $10,990

34. At the end of the month, the adjusting journal entry to record the use of supplies would include?

A. An increase to supplies and an increase to expenses

B. A decrease to supplies and an increase to expense

C. An increase to supplies and an increase to revenue

D. A decrease to supplies and a decrease to cash

34. At the end of the month, the adjusting journal entry to record the use of supplies would include?

A. An increase to supplies and an increase to expenses

B. A decrease to supplies and an increase to expense

C. An increase to supplies and an increase to revenue

D. A decrease to supplies and a decrease to cash

35. Primary responsibility for the information in a corporation’s financial statements rests with?

A. The shareholders of the corporationB. The managers of the corporationC. The Securities and Exchange CommissionD. The certified public accountant who

audited the financial statements

35. Primary responsibility for the information in a corporation’s financial statements rests with?

A. The shareholders of the corporationB. The managers of the corporationC. The Securities and Exchange CommissionD. The certified public accountant who

audited the financial statements