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MGMT 200 Exam #2 (Purdue) Questions with Verified Answers (Graded A)
Credit sales are recorded as A. Debit Cash, credit Deferred Revenue B. Debit Service Revenue, credit Accounts Receivable C. Debit Cash, credit Service R... [Show More] evenue D. Debit Accounts Receivable, credit Service Revenue - ANSWER-D Identify the condition(s) that must exist for a sale and the related receivable to be recognized. A. Collection of cash is probable B. The company must have collected cash from at least one previous sale to the customer C. Goods or services have been provided to the customer D. Two of the other answers are conditions that must exist - ANSWER-D Which of the following items are classified as receivables? A. Tax refund claims B. Amounts owed by customers C. Amounts loaned and expected to be collected D. All of the other answers are classified as receivables - ANSWER-D Identify the likely disadvantage(s) of extending credit to customers A. Delay or failure to collect cash B. Lower profitability C. Lower revenues D. All of the other answers are disadvantages of extending credit to customers - ANSWER-A The Sales Returns account is an expense account A. True B. False - ANSWER-B Which of the following computations would be used to compute Net Revenue? A. Total Revenue + Accounts Receivable - Sales Discounts - Sales Allowances B. Net Revenue + Sales Allowances - Sales Discounts C. Total Revenue - Sales Discounts - Sales Allowances D. Net Income - Change in Accounts Receivable - ANSWER-C When customers purchase products on account, Knomark, Inc. offers them a 2% reduction in the amount owed if they pay within 10 days. This is an example of a: A. Bad debt B. Sales discount C. Sales return D. Sales allowances - ANSWER-B When a company sells a $100 service with a 20% trade discount, $80 of revenue is recognized. A. True B. False - ANSWER-A The Sales Discounts account is an example of a contra revenue account. A. True B. False - ANSWER-A A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances. A. True B. False - ANSWER-B If a company has total revenues of $100,000, sales discounts of $3,000, sales returns of $4,000, and sales allowances of $2,000, the income statement will report net revenues of $91,000. A. True B. False - ANSWER-A LePage's Inc. shipped the wrong color of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. The price reduction is an example of a: A. Trade discount B. Sales discount C. Sales allowance D. Sales return - ANSWER-C The net realizable value of accounts receivable is the full amount owed by customers A. True B. False - ANSWER-B The purpose of recording an allowance for uncollectible accounts is to: A. Record the sales returns and allowances B. Report net sales conservatively C. Report accounts receivable at net realizable value D. Report accounts receivable for the total amount of sales in the period - ANSWER-C At December 31, Gill Co. reported accounts receivable of $238,000 and an allowance for uncollectible accounts of $600 (credit) before any adjustments. An analysis of accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. The amount of the adjustment for uncollectible accounts would be A. $6,540 B. $7,800 C. $7,140 D. $7,740 - ANSWER-A At December 31, Tremble Music had account balances in Accounts Receivable of $300,000 and in Allowance for Uncollectible Accounts of $1,000 (debit) before any adjustments. An analysis of Tremble's December 31 accounts receivable suggests that 5% of the account balances are not expected to be collected. The balance of Allowance for Uncollectible Accounts after adjustment will be: A. $1,000 B. $16,000 C. $14,000 D. $15,000 - ANSWER-D At the end of the year, Mark Inc. estimates future bad debts to be $6,500. The Allowance for Uncollectible Accounts has a credit balance of $2,500 before any year‐end adjustment. What adjustment should Mark Inc. record for the estimated bad debts at the end of the year? A. Debit Bad Debt Expense, $6,500; credit Allowance for Uncollectible Accounts, $6,500 B. Debit Bad Debt Expense, $4,000; credit Allowance for Uncollectible Accounts $4,000 C. Debit Allowance for Uncollectible Accounts, $9,000; credit Bad Debt Expense, $9,000 D. Debit Bad Debt Expense, $9,000; credit Allowance for Uncollectible Accounts, $9,000 - ANSWER-B A company expects 5% of its newer accounts receivable to be uncollectible and 20% of its older accounts to be uncollectible. If the company has $40,000 of newer accounts and $5,000 of older accounts, the total estimate of uncollectible accounts is $2,000. A. True B. False - ANSWER-B Crimson Inc. recorded credit sales of $750,000, of which $600,000 is not yet due, $100,000 is past due for up to 180 days, and $50,000 is past due for more than 180 days. Under the aging of receivables approach, Crimson Inc. expects it will not collect 1% of the amount not yet due, 10% of the amount past due for up to 180 days, and 20% of the amount past due for more than 180 days. The allowance account had a debit balance of $1,000 before adjustment. After adjusting for bad debt expense, what is the ending balance of the allowance account? A. $29,000 B. $28,000 C. $27,000 D. $26,000 - ANSWER-D Under the allowance method, when a company writes off an account receivable as an actual bad debt, it records an expense A. True B. False - ANSWER-B Cochrane, Inc. accounts for bad debts using the allowance method. On June 1, Cochrane wrote off $2,500 customer account. Based on Cochrane's estimation, the customer will never pay any portion of the balance in his account. What effect will this write‐off have on Cochrane's balance sheet at the time of the write‐off? A. An increase to stockholders' equity and a decrease to liabilities B. No effect C. An increase to assets and an increase to stockholders' equity D. A decrease to assets and a decrease to stockholders' equity - ANSWER-B The direct write‐off method is not normally an acceptable method for GAAP because it fails to report: A. Revenue from the sale of goods or services to customers B. Cash collected from customers C. Accounts receivable for their net realizable value D. The amounts receivable from customers - ANSWER-C A note receivable is reported in the balance sheet A. Always as a current asset B. Always as a long‐term asset C. As either a current asset or long‐term asset depending on the expected collection date D. As a contra asset - ANSWER-C On September 1, 2018, Middleton Corp. lends cash and accepts a $1,000 note receivable that offers 12% interest and is due in six months. How much interest revenue will Middleton Corp. report during 2018? A. $20 B. $40 C. $30 D. $60 - ANSWER-B A company's ratio of net sales (cash and credit sales) to average accounts receivable can be interpreted as management's ability to: A. Collect cash from all sales to customers B. Effectively market its products and services C. Generate profits for investors D. Reduce costs of selling products and services to customers - ANSWER-A Sandburg Veterinarian reports the following information for the year: What is Sandburg's receivables turnover ratio? Net credit sales $120,000 Average accounts receivable 20,000 Cash collections on credit sales 100,000 A. 6.0 B. 5.0 C. 1.2 D. 0.2 - ANSWER-A An increase in a company's receivables turnover ratio typically means the company is A. Having trouble paying debts as they become due. B. Less profitable. C. More effectively granting and collecting credit to customers. D. Losing customers to its competitors. - ANSWER-C Even though the percentage‐of‐receivables method and the percentage‐of‐credit‐sales method use different accounts to estimate future uncollectible accounts, the amount of bad debt expense reported in the income statement will always be the same under the two methods. A. True B. False - ANSWER-B Which of the following statements is true with respect to the percentage‐of‐credit‐sales method for estimating uncollectible accounts? A. The amount recorded for bad debt expense does not depend on the balance of the allowance for uncollectible accounts B. This method is referred to as the balance sheet approach C. This method does not allow for future uncollectible accounts D. Under this method, bad debt expense is recorded at the time of an actual bad debt - ANSWER-A Costs that are expensed when incurred are called? A. Product costs B. Direct costs C. Inventoriable costs D. Period costs E. Indirect costs - ANSWER-D Which of the following statements is true? A. Product costs affect only the balance sheet B. Product costs affect only the income statement inventory C. Period costs affect only the balance sheet D. Neither product costs nor period costs affect the Statement of Retained Earnings. This can also be a true statement if the period costs were prepaid (i.e., prepaid advertising, depreciation) E. Product costs eventually affect both the balance sheet and the income statement - ANSWER-E The cost of unsold inventory at the end of the year is classified as a(n) ______ in the ______. A. Asset; Balance sheet B. Expense; Income statement C. Liability; Balance sheet D. Revenue; Income statement - ANSWER-A One of the major differences between service companies and retail or manufacturing companies is that retailers and manufacturers must account for: A. Current assets B. Inventory C. Selling expenses D. Deferred revenue - ANSWER-B Inventory does not include A. Materials used in the production of goods to be sold. B. Assets intended to be sold in the normal course of business. C. Equipment used in the manufacturing of assets for sale. D. Assets currently in production for normal sales. - ANSWER-C Cost of goods sold is: A. Reported in the income statement B. Reported in the balance sheet C. A current asset D. The cost of inventory on hand at the end of the period - ANSWER-A If a company has ending inventory of $25,000, purchases during the year of $95,000, and beginning inventory of $30,000, cost of goods sold equals $90,000. A. True B. False - ANSWER-B Beginning inventory is $30,000. Purchases of inventory during the year are $50,000. Cost of goods sold is $60,000. What is ending inventory? A. $20,000 B. $30,000 C. $10,000 D. $50,000 - ANSWER-A Which level of profitability is considered profit from normal operations? A. Gross profit B. Operating income C. Income before taxes D. Net income - ANSWER-B Sales revenue less cost of goods sold is referred to as operating income A. True B. False - ANSWER-B The primary distinction between operating activities and nonoperating activities in a multiple‐step income statement is whether the activity is: A. A large or small dollar amount B. Part of primary business operations C. Related to current versus long‐term assets D. Reported as a revenue or an expense - ANSWER-B Gross profit is calculated as net sales minus A. Nonoperating expenses and income tax expense. B. Operating expenses. C. Cost of goods sold. D. All of the other answers are subtracted from net sales. - ANSWER-C Which of the following is not a period cost? A. Legal costs B. Public relations costs C. Sales commissions D. Wages of assembly‐line workers E. The salary of a company's chief financial officer (CFO). - ANSWER-D Companies are not allowed to report inventory costs by assuming which units of inventory are sold and which units still remain on hand. A. True B. False - ANSWER-B Using the weighted‐average cost method, the average cost of inventory is calculated as the average unit cost of inventory purchased during the year. A. True B. False - ANSWER-B In accounting for inventory, the assumed cost flow must match the physical goods flow. A. True B. False - ANSWER-B The inventory cost flow assumption that is least likely to match the physical flow of inventory for most companies is: A. FIFO B. LIFO C. Weighted‐average D. Specific identification - ANSWER-B Inventory methods such as LIFO and FIFO deal more with goods flow than with cost flow. A. True B. False - ANSWER-B A company has the following inventory transactions: Jan. 1 Beginning inventory 100 units @ $4 each Jan. 15 Purchase 100 units @ $5 each Jan. 31 Purchase 100 units @ $6 each What would be the cost of goods sold under the FIFO method if 120 units were sold in January? A. $600 B. $500 C. $620 D. $720 - ANSWER-B A company has the following inventory transactions: Jan. 1 Beginning inventory 100 units @ $4 each Jan. 15 Purchase 100 units @ $5 each Jan. 31 Purchase 100 units @ $6 each What would be the cost of goods sold under the LIFO method if 120 units were sold in January? A. $600 B. $500 C. $700 D. $720 - ANSWER-C LIFO is considered an income statement approach for reporting inventory because it: A. Always results in a higher amount of net income [Show Less]
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MGMT 200 (Purdue) Exam 1 Questions with 100% correct Answers
Preparing a budget for a business is considered A. financial accounting. B. managerial accounting - ANSWER-B Accounting is the information system that... [Show More] A. measures business activities B. communicates the results to decision makers C. processes information into reports D. all of the above. - ANSWER-D Which of the following is not an external user of a business's financial information? A. Taxing authorities B. Customers C. Employees D. Investors - ANSWER-C Which statement below best describes the accounting equation? A. The change in retained earnings equals net income less dividends. B. Equality of revenue and expense transactions over time. C. Financing activities equal investing and operating activities. D. Resources of the company equal creditors' and owners' claims to those resources. - ANSWER-D Owners' claims to the company's resources are referred to as: A. Liabilities. B. Assets. C. Stockholders' equity. D. Net liabilities. - ANSWER-C If total assets of a company equal $25,000 and total stockholders' equity equals $10,000, then total liabilities equal $15,000. A. True B. False - ANSWER-A Amounts owed to suppliers for supplies purchased on account are defined as a(n): A. Revenue. B. Asset. C. Liability. D. Expense - ANSWER-C If total liabilities of a company equal $29,000 and total stockholders' equity equals $15,000, then total assets equal $14,000. A. True B. False - ANSWER-B Financial accounting does not deal with which of the following? A. Measuring a company's economic activity. B. Providing information to internal users. C. Preparing financial reports. D. Communicating financial results to investors. - ANSWER-B The accounting equation shows that a company's resources equal creditors' and owners' claims to those resources. A. True B. False - ANSWER-A An alternative form of the accounting equation is: A. Assets ‐ Liabilities = Stockholders' Equity. B. Net Income = Revenues ‐ Expenses. C. Stockholders' Equity = Assets + Liabilities. D. Assets = Liabilities ‐ Stockholders' Equity. - ANSWER-A Which of the following does not represent an asset of a company? A. Supplies held by the company. B. Amounts owed to suppliers. C. Equipment owned and used for operations. D. Amounts receivable from customers. - ANSWER-B The amounts recorded when the company sells products or provides services to customers are referred to as: A. Liabilities B. Revenues C. Assets D. Expenses - ANSWER-B If a company has stockholders' equity of $25,000 at the end of the year, which of the following statements must be true? A. The company has issued $25,000 of common stock. B. Net income for the year equals $25,000. C. The company's assets exceed liabilities by $25,000. D. Total revenues during the year equal $25,000. - ANSWER-C The costs of providing goods and services to customers are referred to as: A. Assets B. Expenses C. Liabilities D. Revenues - ANSWER-B Which of the following best describes revenue? A. Resources of a company. B. Sales of goods and services to a customer. C. Cash received from a customer. D. Dividends paid to stockholders. - ANSWER-B The difference between revenues and expenses is referred to as net income or net loss. A. True B. False - ANSWER-A Use the following amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000 A. $6,000. B. $8,000. C. $4,000 D. $14,000. - ANSWER-B Dividends represent a return of the company's profits to its owners, the stockholders. A. True B. False - ANSWER-A The resources of a company are referred to as: A. Liabilities B. Revenues C. Assets D. Expenses - ANSWER-C Liabilities can be best described as: A. The amount of expenses over the past year. B. The amount expected to be distributed to stockholders. C. The amount owed to creditors D. The amount of services provided to customers during the year. - ANSWER-C Most business enterprises in the United States are A. government units. B. partnerships C. sole proprietorships. D. corporations. - ANSWER-C Transfer of ownership will not affect the continuity of a A. corporation or partnership B. corporation C. partnership D. sole proprietorship - ANSWER-B Which business form has the advantage of limited liability? A. Corporation B. Sole proprietorship C. Partnership D. All business forms share equal limited liability - ANSWER-A Which of the following is an operating activity? A. Issuing common stock. B. Paying dividends. C. Borrowing cash from a bank to acquire a factory. D. Paying electricity bills for the month. - ANSWER-D Financing activities include: A. The purchase of a building. B. Issuing common stock to stockholders. C. Transactions with company employees. D. Selling goods or services to customers. - ANSWER-B How many of the following transactions are operating activities? 1. Borrowed $50,000 from the bank 2. Purchased $12,000 in supplies 3. Provide services to customers for $27,000 4. Paid the utility bill of $750 5. Purchased a delivery truck for $12,000 6. Received $25,000 from issuing common stock A. One. B. Two C. Three D. Four - ANSWER-C Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as: A. Investing activities. B. Operating activities. C. Management activities. D. Financing activities. - ANSWER-B The equation best describing the income statement is: A. Revenues ‐ Expenses = Income B. Assets = Revenues - Expenses C. Assets = Liabilities + Stockholders' Equity D. Revenues + Expenses = Income - ANSWER-A The costs related to rent, utilities, and salaries in the current reporting period are examples of liabilities. A. True B. False - ANSWER-B Which of the following items would not appear in an income statement? A. Salaries expense B. Service revenue C. Cash D. Advertising expense - ANSWER-C Which of the following best explains the meaning of total stockholders' equity? A. The difference between total revenues and total expenses, less dividends for the year. B. The amount of common stock less dividends over the life of the company. C. All revenues, expenses, and dividends over the life of the company. D. The amount of capital invested by stockholders plus profits retained over the life of the company. - ANSWER-D The statement of changes in stockholders' equity is a financial statement that summarizes stockholders' equity at a point in time. A. True B. False - ANSWER-B Retained earnings at the end of the year is calculated using: A. Beginning retained earnings, income, and dividends. B. Common stock and dividends. C. Stockholders' equity, income, and dividends. D. Income and dividends. - ANSWER-A Which of the following accounts represents a resource of the company? A. Common stock. B. Service revenue. C. Accounts receivable. D. Supplies expense. - ANSWER-C Emmitt had the following final balances after the first year of operations: assets, $55,000; stockholders' equity, $25,000; dividends, $3,000; and income, $10,000. What is the amount of Emmitt's liabilities? A. $55,000. B. $30,000. C. $13,000. D. $ 7,000. - ANSWER-B Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings. A. True B. False - ANSWER-A How many of following accounts would appear in a year‐end balance sheet? Accounts Payable $4,400 Salaries Expense 12,800 Cash 1,700 Common Stock 2,400 Service Revenue 8,300 Supplies 4,300 Retained Earnings 1,100 Utilities Expense 5,000 A. five B. four C. three D. two - ANSWER-A Investing cash flows in the statement of cash flows would include which of the following? A. Paying salaries for the month. B. Purchase of land. C. Paying dividends to stockholders. D. Selling goods or services to customers. - ANSWER-B Cash received from bank borrowing would be reported in the statement of cash flows as what type of activity? A. Investing B. Organizing C. Operating D. Financing - ANSWER-D Income (loss) appears in which two financial statements? A. Balance sheet and income statement. B. Income statement and statement of stockholders' equity. C. Statement of stockholders' equity and balance sheet. D. Income appears in only one financial statement. - ANSWER-B Which one of the following statements regarding financial reports is correct? A. The balance sheet classifies all assets according to operating, investing, and financing activities. B. The income statement is used to show that a company's resources equal claims to those resources. C. The statement of stockholders' equity updates the balances of common stock and retained earnings for related transactions during the year. D. The statement of cash flows shows cash inflows and outflows from operating activities only. - ANSWER-C The financial statement(s) that record activity over an interval of time include the A. Income statement B. Balance sheet C. Balance sheet and income statement D. Income statement and statement of cash flows. - ANSWER-D In what order are the following financial statements prepared: (1) balance sheet, (2) income statement, and (3) statement of stockholders' equity? A. 1, 2, 3. B. 3,2,1 C. 1,3,2 [Show Less]
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MGMT 200 Exam 1 - Purdue University Questions with correct Answers
Preparing a budget for a business is considered A. financial accounting. B. managerial accounting. - ANSWER-B. managerial accounting. (Management accoun... [Show More] ting provides information to people within an organization while financial accounting is mainly for those outside it, such as shareholders.) Accounting is the information system that A. measures business activities B. communicates the results to decision makers C. processes information into reports D. all of the above. - ANSWER-D. all of the above. Which of the following is not an external user of a business's financial information? A. Taxing authorities B. Customers C. Employees D. Investors - ANSWER-C. Employees Which statement below best describes the accounting equation? A. The change in retained earnings equals net income less dividends. B. Equality of revenue and expense transactions over time. C. Financing activities equal investing and operating activities. D. Resources of the company equal creditors' and owners' claims to those resources. - ANSWER-D. Resources of the company equal creditors' and owners' claims to those resources. (assets = liabilities + stockholders' equity) Owners' claims to the company's resources are referred to as: A. Liabilities. B. Assets. C. Stockholders' equity. D. Net liabilities. - ANSWER-C. Stockholders' equity. (assets = liabilities + stockholders' equity) If total assets of a company equal $25,000 and total stockholders' equity equals $10,000, then total liabilities equal $15,000. A. True B. False - ANSWER-A. True (Assets = Liabilities + Equity $25,000 = $15,000 + $10,000) Amounts owed to suppliers for supplies purchased on account are defined as a(n): A. Revenue. B. Asset. C. Liability. D. Expense. - ANSWER-C. Liability (assets = liabilities + stockholders' equity) If total liabilities of a company equal $29,000 and total stockholders' equity equals $15,000, then total assets equal $14,000. A. True B. False - ANSWER-B. False (Assets = Liabilities + Equity $44,000 = $29,000 + $15,000) Financial accounting does not deal with which of the following? A. Measuring a company's economic activity. B. Providing information to internal users. C. Preparing financial reports. D. Communicating financial results to investors. - ANSWER-B. Providing information to internal users. The accounting equation shows that a company's resources equal creditors' and owners' claims to those resources. A. True B. False - ANSWER-A. True An alternative form of the accounting equation is: A. Assets ‐ Liabilities = Stockholders' Equity. B. Net Income = Revenues ‐ Expenses. C. Stockholders' Equity = Assets + Liabilities. D. Assets = Liabilities ‐ Stockholders' Equity. - ANSWER-A. Assets ‐ Liabilities = Stockholders' Equity. Which of the following does not represent an asset of a company? A. Supplies held by the company. B. Amounts owed to suppliers. C. Equipment owned and used for operations. D. Amounts receivable from customers. - ANSWER-B. Amounts owed to suppliers. (Liability) The amounts recorded when the company sells products or provides services to customers are referred to as: A. Liabilities B. Revenues C. Assets D. Expenses - ANSWER-B. Revenues (Revenues are recorded at the time the company provides products or services to customers) If a company has stockholders' equity of $25,000 at the end of the year, which of the following statements must be true? A. The company has issued $25,000 of common stock. B. Net income for the year equals $25,000. C. The company's assets exceed liabilities by $25,000. D. Total revenues during the year equal $25,000. - ANSWER-C. The company's assets exceed liabilities by $25,000. (assets = liabilities + stockholders' equity assets ‐ liabilities = stockholders' equity assets ‐ liabilities = $25,000) The costs of providing goods and services to customers are referred to as: A. Assets B. Expenses C. Liabilities D. Revenues - ANSWER-B. Expenses Using the information below from the accounting records of Knomark Corporation, stockholders' claims to the company's resources amount to: -Assets $1,200,000 -Liabilities $800,000 -Net income $100,000 -Retained earnings $250,000 A. $1,200,000 B. $800,000. C. $250,000 D. $400,000 - ANSWER-D. $400,000 (assets = liabilities + stockholders' equity $1,200,000 = $800,000 + $400,000) Which of the following best describes revenue? A. Resources of a company. B. Sales of goods and services to a customer. C. Cash received from a customer. D. Dividends paid to stockholders. - ANSWER-B. Sales of goods and services to a customer. The difference between revenues and expenses is referred to as net income or net loss. A. True B. False - ANSWER-A. True Use the following amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000 A. $6,000. B. $8,000. C. $4,000. D. $14,000. - ANSWER-B. $8,000 (Revenues - Expenses = Net Income) Dividends represent a return of the company's profits to its owners, the stockholders. A. True B. False - ANSWER-A. True The resources of a company are referred to as: A. Liabilities B. Revenues C. Assets D. Expenses - ANSWER-C. Assets (Assets benefit future operations. Examples are cash, inventory, supplies, accounts receivable, buildings and equipment.) Liabilities can be best described as: A. The amount of expenses over the past year. B. The amount expected to be distributed to stockholders. C. The amount owed to creditors D. The amount of services provided to customers during the year. - ANSWER-C. The amount owed to creditors (Storage account used is accounts payable) Most business enterprises in the United States are A. government units. B. partnerships C. sole proprietorships. D. corporations. - ANSWER-C. sole proprietorships. Transfer of ownership will not affect the continuity of a A. corporation or partnership B. corporation C. partnership D. sole proprietorship - ANSWER-B. corporation Which business form has the advantage of limited liability? A. Corporation B. Sole proprietorship C. Partnership D. All business forms share equal limited liability - ANSWER-A. Corporation (Stockholders of a corporation are not obligated to pay the corporation's debts out of their own pocket.) Which of the following is an operating activity? A. Issuing common stock. B. Paying dividends. C. Borrowing cash from a bank to acquire a factory. D. Paying electricity bills for the month. - ANSWER-D. Paying electricity bills for the month. Financing activities include: A. The purchase of a building. B. Issuing common stock to stockholders. C. Transactions with company employees. D. Selling goods or services to customers. - ANSWER-B. Issuing common stock to stockholders. How many of the following transactions are operating activities? 1. Borrowed $50,000 from the bank 2. Purchased $12,000 in supplies 3. Provide services to customers for $27,000 4. Paid the utility bill of $750 5. Purchased a delivery truck for $12,000 6. Received $25,000 from issuing common stock A. One. B. Two C. Three D. Four - ANSWER-C. Three (2. Purchased $12,000 in supplies 3. Provide services to customers for $27,000 4. Paid the utility bill of $750) Transactions related to the primary business activities of the company, such as selling goods and services to customers, are referred to as: A. Investing activities. B. Operating activities. C. Management activities. D. Financing activities. - ANSWER-B. Operating activities. Amalgamated Company engages in the following cash payments: -Paid dividends to owners $2,000 -Paid rent 500 -Repay loan to the bank 5,000 -Purchase equipment 1,000 What is the total amount of cash paid for operating activities? A. $1,500 B. $500 C. $6,000. D. $2,000 E. $7,000 - ANSWER-B. $500 (?) The equation best describing the income statement is: A. Revenues ‐ Expenses = Income B. Assets = Revenues - Expenses C. Assets = Liabilities + Stockholders' Equity D. Revenues + Expenses = Income - ANSWER-A. Revenues ‐ Expenses = Income (DADE CLER) The costs related to rent, utilities, and salaries in the current reporting period are examples of liabilities. A. True B. False - ANSWER-B. False (these are examples of expenses) Which of the following items would not appear in an income statement? A. Salaries expense B. Service revenue C. Cash D. Advertising expense - ANSWER-C. Cash Which of the following best explains the meaning of total stockholders' equity? A. The difference between total revenues and total expenses, less dividends for the year. B. The amount of common stock less dividends over the life of the company. C. All revenues, expenses, and dividends over the life of the company. D. The amount of capital invested by stockholders plus profits retained over the life of the company. - ANSWER-D. The amount of capital invested by st [Show Less]
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MGMT 200 UW Exam Questions and Answers 2023
Fisher v. Texas - ANSWER-Fisher application rejected, sued for UT for considering race in application as violation of 14th amendment equal protection. Affi... [Show More] rmed for UT Liebeck v. Mcdonalds - ANSWER-Takeaway: face of tort laws for frivolous lawsuits even though she suffered irreparable burns, settled out of court Tillman v. Commercial Credit Loans - ANSWER-Tillman took out loans with "single premium" insurance later outlawed contained standard arbitration clause Tillman sued for breach of good faith and fair dealing Ruled for CCL Law - ANSWER-body of rules and conduct prescribed by controlling authority and having binding legal effect stare decisis - ANSWER-must stand by decided cases in past, higher courts can overrule lower Civil law - ANSWER-belongings or rights Criminal law - ANSWER-freedom Procedural Law - ANSWER-process of administering law substantive law - ANSWER-general principles defining rights and duties strict constructionists - ANSWER-constitution end all be all judicial activists - ANSWER-believes law evolves duty based ethics - ANSWER-do the right thing utilitarianism - ANSWER-whats best for the greatest number Kitty Genovese - ANSWER-stabbed and nobody helped her (utilitarianism) Eric v. Betty - ANSWER-Betty didn't disclose her son robert(step dad) was a rapist, raped Eric Sues Betty because she didn't disclose info Court rules for Betty no obligation to help someone (utilitarianism) Soldano v. O'Daniels - ANSWER-Soldano Wanted to use the phone in a bar to call help for his father who had been shot. O'Daniels refused to let him use the phone. Court ruled for Soldano because you cannot interfere with someone trying to help someone English common law - ANSWER-to keep peace, fact finding action in equity - ANSWER-civil trial w/o jury when relief sought is equitable in nature. ex: divorce federalism - ANSWER-self governing statutes under umbrella of federal gov statutes - ANSWER-laws enacted by congress or state legislator ordinance - ANSWER-laws enacted by city/council codes - ANSWER-compilations of statutes case or controversy - ANSWER-courts can only decide cases where actual conflict exists executive branch lawmaking - ANSWER-legislative can override presidents veto (2/3) president executive orders judicial lawmaking - ANSWER-judge may apply common law (unwritten law) dicta - ANSWER-any part of court opinion that is unnecessary to resolution legislative lawmaking - ANSWER-statutes, ordinances lawmaking by the people - ANSWER-initiative- an electoral process to make new statutes by filing petitions federal law - ANSWER-constitution, treaties, statutes by congress, agency law, federal court state law - ANSWER-state constitutions, statutes by state, state agency law, state court private law - ANSWER-regulates rights between private persons and or private corps. ex: contracts public law - ANSWER-public rights and obligations ex: constitutional, administrative, criminal, international international law - ANSWER-governs relations among sovereign nations domestic law - ANSWER-within u.s. ethics - ANSWER-standards of fair and honest social behavior morals - ANSWER-values concerning right and wrong (do the right thing) code of ethics - ANSWER-a statement agreed on moral rules for a profession, business or group situational ethics - ANSWER-flexibility in application of moral laws deductive logic - ANSWER-logical reasoning from two or more propositions to come to a conclusion syllogism - ANSWER-pattern of deductive reasoning, contains major premise, minor premise, and conclusion major/ general premise - ANSWER-moral ethical standard minor/specific premise - ANSWER-conduct being scrutinized conclusion - ANSWER-applying ethical standard to conduct nonnormative statements - ANSWER-reflect no value judgement (neutral) normative statements - ANSWER-reflect what should be or how one should act moral philosophy to action (3 steps) - ANSWER-1. break down reasoning process (non and normative statements) isolate moral standard 2. gather all facts 3. use deductive logic positive law - ANSWER-rules members of society are obliged to obey (wearing clothes) or punished by gov. culpability - ANSWER-criminal behavior Citations. STUDY - ANSWER-Ashcroft v. Iqbal (case name), 556 U.S. 662 (U.S. reports with edition page number) 129 S. Ct. 1937 (supreme court reporter with edition and page number) 2009 (year decided) appellant - ANSWER-party who appeals to higher court appellee - ANSWER-party who defends the earlier court opinion adversarial system - ANSWER-parties in legal disputes are opponents inquisitorial system - ANSWER-judge investigates, questions witnesses and seeks evidence before trial legal assistant (paralegals) - ANSWER-assists attorney but cannot practice law fiduciary relationship - ANSWER-a relationship where one has the obligation to perform duties in the best interest of the other in propria persona (pro se) - ANSWER-person reps themselves w/o attorney contingency fee - ANSWER-payment to lawyer which is a fixed percentage agreed upon in advance Legal Services Corp (LSC) - ANSWER-federal corp that distributes tax dollars to provide attorneys to people who cannot afford them pro bono publico - ANSWER-when an attorney provides legal services to poor but worthy clients who cannot afford them legal service plans - ANSWER-insurance plans available to make legal services more affordable public interest law firm - ANSWER-non profit law firm professional ethics - ANSWER-written rules of conduct adopted by members of professional groups moral turpitude - ANSWER-conduct contrary to justice, honesty, and good morals. attorneys may be disciplined for it attorney-client privilege - ANSWER-right of clients to keep communications private with attorney cannot break privilege if they learn of other crimes client has committed conflict of interest - ANSWER-clients interests are at odds with another because the attorney has served, serves, or might serve the other client frivolous lawsuits - ANSWER-claims intended to retaliate or punish. waste of time and money retainer fee - ANSWER-fee paid to attorney to be on standby kohlberg dilemma - ANSWER-woman near death one drug can save her husband can't afford. steal? associations of lawyers - ANSWER-general partnerships, prof corps, LLP (paralegals cannot be shareholders) attorneys are only provided in? - ANSWER-criminal cases fee shifting statutes - ANSWER-loser pays all attorney fees lawyer punishments - ANSWER-disbarment suspension probation censure American Bar Association prohibits - ANSWER-exorbitant fees stealing funds from client soliciting neglecting a clients case misusing client funds moral turpitude Gov. lawyers (DA) purpose? - ANSWER-bound to see justice is done, must turn over all evidence to other attorney FRCPII - ANSWER-permits sanctions for frivolous lawsuits champerty - ANSWER-one cannot financially participate in the lawsuit of another legal malpractice - ANSWER-violation of the duty of due care. to prove malpractice the client must prove they would have won the case otherwise ADR - ANSWER-resolving conflicts outside of court RPC 1.1 Competence - ANSWER-must provide competent rep of client RPC 1.4 Communication - ANSWER-lawyer shall inform client of decisions and goals RPC 1.6 Confidentiality - ANSWER-a lawyer shall not reveal info unless: to prevent death to prevent client from committing a crime RPC 1.7 Conflict of interest - ANSWER-a lawyer shall not represent a client if it involves concurrent conflict of interest RPC 1.8 conflict of interest: current clients - ANSWER-a lawyer shall acquire ownership, possessory, or other adverse interest to client RPC 3.3 Candor toward tribunal - ANSWER-lawyer shall not knowingly make false facts, fail to disclose facts, or disclose info not disclosed by opposing council to tribunal RPC 4.1 truthfulness in statements to others - ANSWER-while repping a client, a lawyer may not make false statement of fact or fail to disclose fact to a third person when necessary to avoid in assisting criminal activity by client RPC 8.3 reporting prof misconduct - ANSWER-lawyer must inform authority when they know another lawyer has committed misconduct rule doesn't apply when protected by RPC 1.6 The Commerce clause - ANSWER-gives congress power to regulate business Necessary and Proper CLause - ANSWER-gives congress power "to make all laws which shall be necessary and proper for carrying into execution the foregoing powers and all other powers vested by this constitution supremacy clause - ANSWER-states constitution is supreme law of the land interstate commerce - ANSWER-business concerning more than one state Katzenbach v. Mcclung - ANSWER-racist restaurant wouldn't let black people sit and eat said they couldn't be tried because they ordered food form different state (interstate commerce) established that the power of congress to regulate interstate extends to state discrimination State regulation responsibility - ANSWER-agency law contract law property insurance police power law tort law federal regulation responsibility - ANSWER-aviation interstate commerce postal foreign trade patents and copyrights state and federal shared responsibility - ANSWER-securities environment taxation employment law consumer protection Hughes v. Oklahoma - ANSWER-Hughes shipped minnows out of Oklahoma when oklahoma prohibited it. hughes loses but appeals to supreme court since gov regulates interstate commerce hughes won b/c of supremacy clause 3 part test federal taxation - ANSWER-16th amend. gave gov tax power supreme court rarely questions state taxation - ANSWER-interstate commerce protected by constitution businesses taxed fairly apportionment dividing income into states by businesses taxes cannot impede foreign trade 1st amendment - ANSWER-freedom of speech, religion, press 2nd amendment - ANSWER-right to bear arms 3rd amendment - ANSWER-quartering of soldiers 4th amendment - ANSWER-no unreasonable search and seizure (warrants) warrantless searches allowed for closely regulated businesses 5th amendment - ANSWER-rights of the accused self incrimination (does not apply to corps) no person shall be a witness against themselves just compensation-requires gov to pay for property when gov requires owner to sell b/c it is deemed for public use 6th amendment - ANSWER-trial rights for criminal cases 7th amendment - ANSWER-trial rights for civil cases 8th amendment - ANSWER-no cruel or unusual punishments 9th amendment - ANSWER-rights of the people 10th amendment - ANSWER-rights of the states exclusionary rule - ANSWER-evidence attained improperly cannot be used regulatory takings - ANSWER-5ht amend. destruction of property in search and seizure must be complete for compensation eminent domain - ANSWER-the right of the gov to declare private property for public use with compe [Show Less]
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MGMT 200 - Chapter 7 Questions with correct Answers
The formula for straight-line depreciation is a. (cost + residual value)/service life. b. service life/(cost + residual value). c. cost/service life. d... [Show More] . (cost - residual value)/service life. - ANSWER-d The formula to calculate an activity-based depreciation rate is: a. cost/actual production during the year. b. cost/estimated total production. c. (cost - residual value)/estimated total production. d. (cost - residual value)/actual production during the year. - ANSWER-c The formula to calculate the depreciation for the units-of-production method (activity-based depreciation) is ((cost - residual value)/total estimated production) x ______. a. historical cost b. current-year activity or production c. gross profit percentage d. total activity or production - ANSWER-b Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries? a. Credit accumulated depreciation $60,000 b. Credit gain on exchange of asset $40,000 c. Credit equipment $100,000 d. Credit equipment $80,000 e. Debit accumulated depreciation $60,000 f. Debit equipment $80,000 g. Debit equipment $65,000 - ANSWER-b, c, e, f Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries? a. Debit equipment $50,000 b. Credit equipment $90,000 c. Credit accumulated depreciation $70,000 d. Credit equipment $70,000 e. Debit equipment $45,000 f. Debit accumulated depreciation $70,000 g. Credit gain on exchange of asset $30,000 - ANSWER-a, b, f, g The profit margin ratio is defined as ________ ________ divided by net sales.(Enter one word per blank) - ANSWER-net income Pearce Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $120,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $50,000 and a book value of $32,000. The journal entry to record this exchange will include which of the following entries? a. Debit equipment $32,000 b. Debit accumulated depreciation $40,000 c. Debit loss on exchange $30,000 d. Credit equipment $120,000 e. Credit accumulated depreciation $40,000 f. Debit equipment $50,000 - ANSWER-b, c, d, f The gain or loss on disposal of an asset is calculated as: a. the cost of the asset less the accumulated depreciation b. consideration received less the fair value of the asset sold c. amount received less the book value of asset sold d. the fair value of the asset less the accumulated depreciation - ANSWER-c What is the formula for the profit margin ratio? a. Net income divided by average total assets. b. Gross profit divided by sales. c. Net income divided by average shareholders' equity. d. Net income divided by net sales. - ANSWER-d The journal entry to retire old equipment that is not fully depreciated includes a: a. debit to cash b. debit to loss c. debit to accumulated depreciation d. credit to loss e. credit to equipment - ANSWER-b, c, e When an asset is no longer useful, but cannot be sold, we have a ________. - ANSWER-retirement Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries? a. Debit loss on exchange $10,000 b. Debit equipment $35,000 c. Debit accumulated depreciation $40,000 d. Debit loss on equipment $15,000 e. Debit equipment $40,000 f. Credit equipment $90,000 g. Credit accumulated depreciation $40,000 - ANSWER-a, c, e, f Which of the following are long-term tangible assets? a. Equipment b. Accounts receivable c. Copyright d. Trademark e. Property - ANSWER-a, e The purchase price and all costs to bring an asset to its desired condition and location for use should be ______. a. accrued b. expensed c. capitalized - ANSWER-c An asset that has no physical substance is referred to as a(n) a. finite asset. b. intangible asset. c. depreciable asset. d. current asset. - ANSWER-b A(n) ________ is the exclusive right to manufacture a product or use a process granted for a period of ________ years. - ANSWER-patent, 20 Long-term tangible assets include a. goodwill. b. buildings. c. patents. d. land. e. equipment. - ANSWER-b, d, e A(n) ________ is protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years. - ANSWER-copyright True or false: The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use. - ANSWER-true An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service is referred to as a a. trademark. b. patent. c. copyright. d. franchise. - ANSWER-a An asset that has no physical substance is called a(n) ________ asset. - ANSWER-intangible A contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time is called a a. trademark. b. franchise. c. copyright. d. patent. - ANSWER-b Which of the following items are initially recorded as an expense on the income statement? (choose two) a. Research and development costs b. Advertising costs c. Purchased intangibles - ANSWER-a, b The exclusive legal right to manufacture a product or to use a process is called a(n) ________. - ANSWER-patent The types of expenditures that can occur subsequent to an asset's acquisition are a. goodwill. b. repairs and maintenance. c. additions. d. improvements. - ANSWER-b, c, d A(n) ________ is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book. - ANSWER-copyright The allocation of the cost of a tangible fixed asset is referred to as ________, whereas the allocation of the cost of an intangible asset is referred to as ________. - ANSWER-depreciation, amortization A(n) ________ is an exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service. - ANSWER-trademark The allocation of the cost of a tangible asset over its service life is referred to as ________. (Enter one word per blank) - ANSWER-depreciation A(n) ________ is a contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time. (Enter one word per blank) - ANSWER-franchise Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides ________. - ANSWER-benefits (revenues) Definition: allocation of the cost of a tangible fixed asset - ANSWER-depreciation Definition: allocation of the cost of natural resources - ANSWER-depletion Definition: allocation of the cost of an intangible asset - ANSWER-amortization True or false: Depreciation is a valuation method for property and equipment. - ANSWER-false For accounting purposes, depreciation is a. a decline in value of an asset. b. an allocation of a cost of an asset. c. the selling price of an asset. - ANSWER-b Which account is credited in a journal entry to record depreciation on machinery? a. Machinery b. Cash c. Depreciation Expense d. Accumulated Depreciation - ANSWER-d When we recognize depreciation, we allocate a portion of the asset's cost to each year in which the asset a. decreases in value. b. provides benefits to the company. c. is owned by the company. - ANSWER-b Where is the account accumulated depreciation on equipment found on the financial statements? a. As an asset account on the balance sheet b. As a contra account to equipment on the balance sheet c. As a liability account on the balance sheet d. As an expense account on the income statement - ANSWER-b Which of the following items are initially recorded as an expense on the income statement? a. Purchased intangibles b. Advertising costs c. Research and development costs - ANSWER-b, c The original cost of the asset less the accumulated depreciation is the ________ ________ of the asset. - ANSWER-book value Depreciation is a process of cost ________, and not a process of valuation. - ANSWER-allocation Which of these are parts of the journal entry to record depreciation? a. Credit Depreciation Expense b. Credit Accumulated Depreciation c. Debit Accumulated Depreciation d. Debit Depreciation Expense - ANSWER-b, d On January 1, 2018, Pritchett Corporation purchased equipment for $50,000. The equipment had a five-year life with a $10,000 residual value. Pritchett uses the straight-line depreciation method. What is the book value of the equipment on January 1, 2021? a. $30,000 b. $26,000 c. $20,000 d. $34,000 - ANSWER-b The accumulated depreciation account is classified as a(n) a. asset. b. expense. c. liability. d. contra asset. - ANSWER-d The estimated use the company expects to obtain from an asset before disposing of it is referred to as the ________ life of the asset. (Enter one word per blank) - ANSWER-service The term used to describe the amount the company expects to receive for an asset at the end of its service life is a. historical cost. b. residual value. c. lower of cost or market value. d. impairment value. - ANSWER-b The original cost of an asset minus accumulated depreciation is a. residual value. b. book value. c. disposal value. d. goodwill. - ANSWER-b Straight-line, declining-balance, and activity-based refer to methods commonly used to ________ property, plant, and equipment. - ANSWER-depreciate On January 1, 2018, Lennox Corporation purchased equipment for $100,000. Lennox depreciated the equipment straight--line over 10 years with no residual value. What is the book value of the equipment on January 1, 2021? a. $50,000 b. $60,000 c. $100,000 d. $70,000 - ANSWER-d The service life or useful life of an asset is a. determined by MACRS tables. b. the time period from the purchase of the asset until it becomes impaired. c. the estimated use that the company expects to obtain from the asset before disposing of it. - ANSWER-c Which statement is true about the straight-line method of depreciation? a. It recognizes expense proportionately with the amount of use of the asset. b. It allocates an equal amount of depreciation to each year the asset is used. c. It is the preferred method for companies expecting to use the asset more in its early years of life. d. It is an accelerated method of depreciation. - ANSWER-b ________ value is the amount the company expects to receive for the asset at the end of its service life. (Enter one word per blank) - ANSWER-residual (salvage) The depreciable cost is a. historical cost less accumulated depreciation. b. the cost of the asset minus the residual value. c. cost of the asset plus the residual value. d. cost of the asset minus depreciation expense. - ANSWER-b Which of the following are commonly used depreciation methods? a. Increasing-balance b. Straight-line c. Declining-balance d. Value-based e. Activity-based - ANSWER-b, c, e Straight-line deprecation is calculated as the depreciable cost divided by a. the estimated service life of the asset. b. the residual value of the asset. c. the cost of the asset. - ANSWER-a The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the a. MACRS b. straight-line method. c. units-of-output method. d. double-declining-balance method. - ANSWER-b Total depreciation recorded over an asset's service life is: a. highest when the double-declining balance method is used b. lowest when the activity-based method is used c. the same regardless of the depreciation method used d. lowest when the straight-line method is used - ANSWER-c The depreciable cost of an asset is the asset's cost minus its estimated ________ value. (Enter one word per blank) - ANSWER-residual (salvage) Which of the following does not differ among the different depreciation methods? a. Depreciation recognized during the last year of the asset's service life. b. Depreciation recognized during the earlier years. c. Total depreciation recognized over the asset's service life. - ANSWER-c The formula for calculating declining balance depreciation is the depreciation rate per year times a. the book value at the beginning of the year. b. the cost less the residual value. c. the cost less the residual value less the accumulated depreciation. - ANSWER-a Units of production or units of output are alternative terms for the ________-________ depreciation method. - ANSWER-activity based Straight-line and declining balance methods allocate the cost of a long-term asset based on ________, while an activity-based method allocates the cost of an asset based on its ________. - ANSWER-time, use Straight-line deprecation is calculated as the depreciable cost divided by a. the estimated service life of the asset. b. the cost of the asset. c. the residual value of the asset. - ANSWER-a The formula for calculating the double-declining-balance method is a. book value at beginning of year x 2/estimated service life b. historical cost x 1/service life. c. book value at beginning of the year less residual value x 2/ estimated service life. d. historical cost less residual value x 2/estimated service life. - ANSWER-a Other terms used for an activity-based depreciation method are: a. units of production method b. productivity method c. units of output method d. base depreciation method - ANSWER-a, c Use of MACRS for tax purposes usually results in ________ income tax in the earlier years of an asset's life. - ANSWER-lower Which depreciation methods allocate the cost of long-term assets based on time? a. valuation method b. declining-balance c. straight-line [Show Less]
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MGMT 200 Exam 1 Questions with Verified Answers
T/F - Accounting is a system of maintaining records of a company's operations and communicating that information to decision makers - ANSWER-True XYZ Ai... [Show More] rlines, Inc. flies throughout North America employing a strategy of short flights using smaller aircraft to increase efficiencies and utilization. The Company's policy is to provide a cash refund to customers for unused aircraft tickets. When should XYZ recognize revenue for ticket sales? A. When the passenger pays for the ticket. B. When the airline sells the ticket. C. When the plane arrives at its destination. D. When boarding passes are taken at the plane door - ANSWER-C. When the plane arrives at its destination. T/F - The primary functions of financial accounting are to measure business activities of a company and to communicate those measurements to internal parties for decision‐making purposes. - ANSWER-False (Primarily External) Which statement below best describes the accounting equation? A. The change in retained earnings equals net income less dividends. B. Equality of revenue and expense transactions over time. C. Resources of the company equal creditors' and owners' claims to those resources. D. Financing activities equal investing and operating activities. - ANSWER-C. Resources of the company equal creditors' and owners' claims to those resources. T/F - If total assets of a company equal $12,000 and total stockholders' equity equals $4,000, then total liabilities equal $8,000. - ANSWER-True An alternative form of the accounting equation is: A. Net Income = Revenues ‐ Expenses. B. Stockholders' Equity = Assets + Liabilities. C. Assets = Liabilities ‐ Stockholders' Equity. D. Assets ‐ Liabilities = Stockholders' Equity - ANSWER-D. Assets ‐ Liabilities = Stockholders' Equity T/F - If total liabilities of a company equal $16,000 and total stockholders' equity equals $9,000, then total assets equal $7,000. - ANSWER-False Liabilities can be best described as: A. The amount of expenses over the past year. B. The amount expected to be distributed to stockholders. C. The amount owed to creditors. D. The amount of services provided to customers during the year. - ANSWER-C. The amount owed to creditors. If a company has stockholders' equity of $60,000 at the end of the year, which of the following statements must be true? A. The company's assets exceed liabilities by $60,000. B. The company has issued $60,000 of common stock. C. Net income for the year equals $60,000. D. Total revenues during the year equal $60,000 - ANSWER-A. The company's assets exceed liabilities by $60,000. The amounts recorded when the company sells products or provides services to customers are referred to as: A. Liabilities B. Revenues C. Assets D. Expenses - ANSWER-B. Revenues T/F - The difference between revenues and expenses is referred to as net income or net loss. - ANSWER-True The costs associated with producing revenues are referred to as: A. Dividends. B. Assets. C. Liabilities. D. Expenses. - ANSWER-D. Expenses Use the following appropriate amounts to calculate net income: Revenues, $12,000; Liabilities, $5,000; Expenses, $4,000; Assets, $19,000; Dividends, $4,000 A. $6,000. B. $8,000. C. $4,000. D. $14,000 - ANSWER-B. $8,000 Which of the following best describes revenue? A. Resources of a company. B. Sales of goods and services to a customer. C. Cash received from a customer. D. Dividends paid to stockholders. - ANSWER-B. Sales of goods and services to a customer. T/F - Dividends represent a return of the company's profits to its owners, the stockholders. - ANSWER-True Most business enterprises in the United States are A. government units. B. partnerships C. sole proprietorship. D. corporations. - ANSWER-C. sole proprietorship T/F - Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation. - ANSWER-True Transfer of ownership will not affect the continuity of a A. corporation of partnership B. corporation C. partnership D. sole proprietorship - ANSWER-B. corporation T/F - A corporation is an entity that is legally separate from its owners. - ANSWER-True Which of the following is an operating activity? A. Issuing common stock. B. Paying dividends. C. Borrowing cash from a bank to acquire a factory. D. Paying electricity bills for the month. - ANSWER-D. Paying electricity bills for the month. How many of the following transactions are operating activities? • Borrowed $50,000 from the bank • Purchased $12,000 in supplies • Provide services to customers for $27,000 • Paid the utility bill of $750 • Purchased a delivery truck for $12,000 • Received $25,000 from issuing common stock A. One. B. Two C. Three D. Four - ANSWER-C. Three Financing activities include: A. The purchase of a building. B. Issuing common stock to stockholders. C. Transactions with company employees. D. Selling goods or services to customers. - ANSWER-B. Issuing common stock to stockholders. Which of the following items would not appear in an income statement? A. Salaries expense B. Advertising expense C. Service revenue D. Cash - ANSWER-D. Cash LePage's has an ending Retained Earnings balance of $51,100. If during the year LePage's paid dividends of $4,300 and had net income of $22,500, then what was the beginning Retained Earnings balance? A. $24,300 B. $32,900 C. $300 D. $69,300 - ANSWER-B. $32,900 (Beginning Balance = Ending Balance - Net Income + Dividends) T/F - Dividends are considered an expense in running the business and reported in the income statement. - ANSWER-False T/F - The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time. - ANSWER-False Investing cash flows in the statement of cash flows would include which of the following? A. Paying salaries for the month. B. Purchase of land. C. Paying dividends to stockholders. D. Selling goods or services to customers. - ANSWER-B. Purchase of Land Which of the following accounts represents a resource of the company? A. Common stock. B. Service revenue. C. Accounts receivable. D. Salaries expense. - ANSWER-C. Accounts receivable Cash received from bank borrowing would be reported in the statement of cash flows as what type of activity? A. Investing B. Organizing C. Operating D. Financing - ANSWER-D. Financing T/F - Any transaction that affects the income statement ultimately affects the balance sheet through the balance of retained earnings. - ANSWER-True Net income (loss) appears in which two financial statements? A. Balance sheet and income statement. B. Income statement and statement of stockholders' equity. C. Statement of stockholders' equity and balance sheet. D. Net income appears in only one financial statement. - ANSWER-B. Income statement and statement of stockholders' equity. The financial statement(s) that record activity over an interval of time include the A. Income statement B. Balance sheet C. Balance sheet and income statement D. Income statement and statement of cash flows. - ANSWER-D. Income statement and statement of cash flows. Which of the following best represents value created for stockholders during the current period? A. Retained earnings B. Total assets. C. Net income. D. Stockholders' equity. - ANSWER-C. Net Income In what order are the following financial statements prepared: (1) balance sheet, (2) income statement, and (3) statement of stockholders' equity? A. 1, 2, 3. B. 3, 2, 1 C. 1, 3, 2 D. 2, 3, 1 - ANSWER-D. 2, 3, 1 Which financial statement best reveals to investors and creditors information about a company's debt? A. Income statement B. Balance sheet C. Statement of cash flows D. Statement of stockholders' equity - ANSWER-B. Balance sheet The independent, private‐sector group that is primarily responsible for setting financial reporting standards in the United States is the: A. FASB. B. IASB. C. SEC. D. IRS. - ANSWER-A. FASB. The major underlying assumptions of accounting include all of the following except: A. Economic entity. B. Monetary unit. C. Legal liability. D. Going concern. - ANSWER-C. Legal liability Of the following, the most important objective for financial accounting is to provide information useful for: A. Predicting cash flows. B. Determining taxable income. C. Providing accountability. D. Increasing future profi - ANSWER-A. Predicting Cash Flows The assumption that a business will continue to operate into the future is the: A. Monetary unit assumption. B. Periodicity assumption. C. Economic entity assumption. D. Going concern assumption. - ANSWER-D. Going concern assumption Fundamental qualitative characteristics of accounting information are: A. Relevance and comparability. B. Comparability and consistency C. Faithful representation and relevance. D. Faithful representation and consistency - ANSWER-C. Faithful representation and relevance The assumption that the life of the business can be divided into time intervals for reporting purposes is the: A. Monetary unit assumption. B. Periodicity assumption. C. Economic entity assumption. D. Going concern assumption. - ANSWER-B. Periodicity assumption External events include all of the following except: A. Paying rent. B. Purchasing equipment. C. Using office supplies. D. Collecting an account receivable - ANSWER-C. Using office supplies The full set of procedures used to accomplish the measurement/communication process of financial accounting is referred to as the: A. Trial balance B. Accounting cycle C. Chart of accounts D. General ledger - ANSWER-B. Accounting Cycle Those who lend money or deliver goods and services before being paid are called A. investors B. debtors C. underwriters D. creditors - ANSWER-D. creditors What is the best definition of an accounts receivable? A. an amount owed by the company to others. B. owners' investment in the business. C. amounts owed by customers to a company D. none of the above - ANSWER-C. amounts owed by customers to a company The accounting equation is in balance if there is a (an) A. increase in liabilities and an increase in equity B. decrease in assets and an increase in liabilities C. increase in assets and an increase in equity D. decrease in equity and an increase in assets - ANSWER-C. increase in assets and an increase in equity Which of the following is not possible when recording a transaction? A. Liabilities increase and assets decrease. B. Stockholders' equity increases and assets increase. C. One asset increases and another asset decreases. D. Stockholders' equity decreases and assets decrease. - ANSWER-A. Liabilities increase and assets decrease. T/F - The accounting equation will not be in balance when a business transaction increases and decreases assets in the same amount? - ANSWER-False The accounting equation is in balance if there is a (an) A. increase in liabilities and an increase in equity B. decrease in assets and an decrease in liabilities C. decrease in assets and an increase in equity D. decrease in equity and an increase in assets - ANSWER-B. decrease in assets and an decrease in liabilities Which of the following would increase assets and increase liabilities? A. Provide services to customers on account. B. Purchase office supplies on account. C. Pay dividends to stockholders D. Receive a utility bill but do not pay it immediately - ANSWER-B. Purchase office supplies on account. Knomark, Inc. sold $500 of shoe polish to a customer on account on January 1. On January 11 Knomark collected the cash from that customer. What is the impact on Knomark's accounting equation from the collection of cash? A. No net effect to the accounting equation. B. Decrease assets and increase liabilities. C. Increase assets and increase liabilities. D. Decrease assets and decrease liabilities. - ANSWER-A. No net effect to the accounting equation Investments by stockholders have what effect on the accounting equation? A. Assets increase and liabilities increase. B. Expenses increase and liabilities increase. C. Assets increase and revenues increase. D. Assets increase and stockholders' equity increases. - ANSWER-D. Assets increase and stockholders equity increases When a payment is made on an account payable A. Assets and stockholders' equity decrease. B. Assets and liabilities decrease. C. Liabilities and revenues decrease. D. Assets and expenses decrease. - ANSWER-B. Assets and Liabilities decrease. 1. Issued 10,000 shares of common stock for $15,000 cash. 2. Purchased land for $12,000, signing a note payable for the full amount. 3. Purchased office equipment for $1,200 cash. 4. Received cash of $14,000 for services provided to customers during the month. 5. Purchased $300 of office supplies on account. 6. Paid employees $10,000 for their first month's salaries. What was the total amount of ATI's liabilities following these six transactions? A. $12,300. B. $27,300. C. $22,600. D. $15,500. - ANSWER-A. $12,300 2. Purchased land for $12,000, signing a note payable for the full amount 5. Purchased $300 of office supplies on account Accounting Equation - ANSWER-Assets = Liabilities + Stockholders Equity Stockholders Equity = Common Stock + Retained Earnings Retained Earnings = Revenues - Expenses - Dividends A business provides a service to [Show Less]
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MGMT 200 Purdue Final Exam 2023 Questions and Answers
Woodcrest, Inc. borrowed $50,000 from a local bank and signed a promissory note. What entry should Woodcrest record? A. Debit Cash, $50,000; Credit Notes ... [Show More] Receivable, $50,000. B. Debit Notes Receivable, $50,000; Credit Cash, $50,000. C. Debit Cash, $50,000; Credit Notes Payable, $50,000. D. Debit Notes Payable, $50,000; Credit Cash, $50,000. - ANSWER-C. Debit Cash, $50,000; Credit Notes Payable, $50,000. We record interest expense in the period in which we pay it, rather than in the period we incur it A. True B. False - ANSWER-B. False On November 1, 2018, Knomark, Inc. signed a $100,000, 6%, six‐month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. Knomark should report interest payable at December 31, 2018, in the amount of A. $0. B. $1,000 C. $2,000 D. $3,000 - ANSWER-B. $1,000 On November 1, 2018, Boiler Bakery signed a $200,000, 6%, six‐month note payable with the amount borrowed plus accrued interest due six months later on May 1, 2019. Boiler Bakery records the appropriate adjusting entry for the note on December 31, 2018. What amount of cash will be needed to pay back the note payable plus any accrued interest on May 1, 2019? A. $200,000. B. $202,000 C. $204,000 D. $206,000 - ANSWER-D. $206,000 A contingency is best described as a(n) a. currentliability. b. probable liability. c. potential liability. d. estimatedliability. - ANSWER-c. potential liability. If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be A. Disclosed, but not reported as a liability B. Disclosed and reported as a liability C. Neither disclosed nor reported as a liability D. Reported as a liability, but not disclosed - ANSWER-A. Disclosed, but not reported as a liability Reeves Co. filed suit against Higgins, Inc., seeking damages for copyright violations. Higgins' legal counsel believes it is probable that Higgins will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should Higgins report this litigation? A. As a liability for $100,000 with disclosure of the range B. As a liability for $150,000 with disclosure of the range C. As a liability for $200,000 with disclosure of the range D. As a disclosure only. No liability is reported - ANSWER-A. As a liability for $100,000 with disclosure of the range Away Travel filed suit against West Coast Travel seeking damages for copyright violations. West Coast Travel's legal counsel believes it is reasonably possible that West Coast Travel will settle the lawsuit for an estimated amount in the range of $100,000 to $200,000, with all amounts in the range considered equally likely. How should West Coast Travel report this litigation? A. As a liability for $100,000 with disclosure of the range B. As a liability for $150,000 with disclosure of the range C. As a liability for $200,000 with disclosure of the range D. As a disclosure only. No liability is reported - ANSWER-D. As a disclosure only. No liability is reported If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is probable, a contingent liability should be A. Disclosed, but not reported as a liability B. Disclosed and reported as a liability C. Neither disclosed nor reported as a liability D. Reported as a liability, but not disclosed - ANSWER-B. Disclosed and reported as a liability Footnote disclosure is required for material potential losses when the loss is at least reasonably possible: A. Only if the amount is known. B. Only if the amount is known or reasonably estimable. C. Unless the amount is not reasonably estimable. D. Even if the amount is not reasonably estimable. - ANSWER-D. Even if the amount is not reasonably estimable. Ford estimates engine warranty expense in the year a car is sold. This best follows which of the following accounting principles? A. historical cost B. full disclosure C. consistency D. matching - ANSWER-D. matching The balance in the Warranty Liability account is always equal to Warranty Expense A. True B. False - ANSWER-B. False Strikers, Inc. sells soccer goals to customers over the Internet. History has shown that 2% of Strikers' goals will need repair under the warranty program. For the year, Strikers has sold 4,000 goals and 45 have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty expense for the year? A. $0 B. $16,000 C. $7,000 D. $9,000 - ANSWER-B. $16,000 Strikers, Inc. sells soccer goals to customers over the Internet. History has shown that 2% of Strikers' goals will need repair under the warranty program. For the year, Strikers has sold 4,000 goals and 45 have been repaired. If the estimated cost to repair a goal is $200, what would be the warranty liability at the end of the year? A. $0 B. $16,000 C. $7,000 D. $9,000 - ANSWER-C. $7,000 We record gain contingencies when the gain is probable and the amount is reasonably estimable A. True B. False - ANSWER-B. False The mixture of debt and equity securities is generally the same for most companies. A. True B. False - ANSWER-B. False Which of the following is not a true statement? A. Companies that are believed to have high bankruptcy risk generally receive low credit ratings and must pay a higher interest rate for borrowing B. As a company's level of debt increases, the risk of bankruptcy increases C. Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax‐deductible D. The mixture of liabilities and stockholders' equity a business uses is called its capital structure - ANSWER-C. Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax‐deductible A debt to equity ratio of 1.0 means that half of the company's assets are financed by creditors. A. True B. False - ANSWER-A. True Cash flow generally limits the amount of debt a business can finance. A. True B. False - ANSWER-A. True The entry to record a monthly payment on an installment note A. Increases expense, decreases liabilities, and decreases assets. B. Increases expense, increases liabilities, and increases assets. C. Increases expense, decreases liabilities, and increases assets. D. Increases expense, increases liabilities, and decreases assets. - ANSWER-A. Increases expense, decreases liabilities, and decreases assets. In each succeeding payment on an installment note A. The amount that goes to decreasing the carrying value of the note is unchanged. B. The amount that goes to decreasing the carrying value of the note decreases. C. The amount that goes to decreasing the carrying value of the note increases. D. The amounts paid for both interest and principal increase proportionately. - ANSWER-C. The amount that goes to decreasing the carrying value of the note increases. In each succeeding payment on an installment note A. The amount of interest expense increases. B. The amount of interest expense decreases. C. The amount of interest expense is unchanged. D. The amounts paid for both interest and principal increase proportionately. - ANSWER-B. The amount of interest expense decreases. A corporation obtains a $125,000, 6%, five‐year loan for equipment on January 1, 2018. If the monthly payment is $2,416.60, by how much will the carrying value decrease when the first payment is made on January 31, 2018 A. $1,791.60 B. $625.00 C. $2,416.60 D. $1,000.60 - ANSWER-A. $1,791.60 Which of the following definitions describes a term bond? A. Matures on a single date. B. Secured only by the "full faith and credit" of the issuing corporation. C. Matures in installments. D. Supported by specific assets pledged as collateral by the issuer. - ANSWER-A. Matures on a single date. A callable bond allows the holder to repay the bonds before their scheduled maturity date at a specified call price. A. True B. False - ANSWER-B. False The term used for bonds that are unsecured as to principal is A. series bonds B. debenture bonds C. indenture bonds. D.callable bonds. - ANSWER-B. debenture bonds Convertible bonds allow the borrower to convert each bond into a specified number of shares of common stock A. True B. False - ANSWER-B. False The advantages of obtaining long‐term funds by issuing bonds, rather than issuing additional common stock, include which of the following? A. Funds are obtained without surrendering ownership control. B. Interest expense is tax‐deductible. C. The company's default risk decreases. D. Funds are obtained without surrendering ownership control, as well as, interest expense is tax‐deductible. - ANSWER-D. Funds are obtained without surrendering ownership control, as well as, interest expense is tax‐deductible. The rate quoted in the bond contract used to calculate the cash payments for interest is called the A. Effective rate B. Yield rate C. Market rate D. Stated rate - ANSWER-D. Stated rate We can calculate the issue price of a bond as the face amount plus the total periodic interest payments A. True B. False - ANSWER-B. False A premium occurs when the issue price of a bond is above its face amount A. True B. False - ANSWER-A. True A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 6%. These bonds will sell at a price that is: A. Equal to $500,000 B. More than $500,000 C. Less than $500,000 D. The answer cannot be determined from the information provided - ANSWER-B. More than $500,000 The price of a bond is equal to: A. The future value of the face amount only B. The present value of the interest only C. The present value of the face amount plus the present value of the stated interest payments D. The future value of the face amount plus the future value of the stated interest payments - ANSWER-C. The present value of the face amount plus the present value of the stated interest payments Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 7% interest. The current market rate of interest is 7%. Which of the following is correct? A. Both bonds will sell for the same amount B. Bond X will sell for more than Bond Y C. Bond Y will sell for more than Bond X D. Both bonds will sell at a premium - ANSWER-B. Bond X will sell for more than Bond Y Which of the following is true for bonds issued at a discount? A. The stated interest rate is greater than the market interest rate B. The market interest rate is greater than the stated interest rate C. The stated interest rate and the market interest rate are equal D. The stated interest rate and the market interest rate are unrelated - ANSWER-B. The market interest rate is greater than the stated interest rate Seaside issues a bond with a stated interest rate of 10%, face value of $50,000, and due in 5 years. Interest payments are made semi‐annually. The market rate for this type of bond is 8%. What is the issue price of the bond? A. $83,920 B. $46,320 C. $54,055 D. $50,000 - ANSWER-C. $54,055 Bonds payable should be reported as a long‐term liability in the balance sheet at: A. Face value B. Current bond market price C. Carrying value D. Face value less accrued interest since the last interest payment date - ANSWER-C. Carrying value Samson Enterprises issued a ten‐year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial statements? A. Increase assets B. Increase liabilities C. Increase stockholders' equity D. Increase assets and liabilities - ANSWER-D. Increase assets and liabilities The cash payment each period is calculated as the carrying value times the market rate A. True B. False - ANSWER-B. False Interest expense on bonds payable is calculated as the: A. Face amount times the stated interest rate B. Face amount times the market interest rate C. Carrying value times the market interest rate D. Carrying value times the stated interest rate - ANSWER-C. Carrying value times the market interest rate When bonds are issued at a premium (above face amount), the carrying value and the corresponding interest expense increase over time A. True B. False - ANSWER-B. False For bonds issued at a premium, the difference between interest expense and the cash paid increases the carrying value of the bonds A. True B. False - ANSWER-B. False The carrying value, using the effective interest method, would increase each year: A. The carrying value of bonds will never increase B. If the bonds were sold at either a discount or a premium C. If the bonds were sold at a premium D. If the bonds were sold at a discount - ANSWER-D. If the bonds were sold at a discount A $500,000 bond issue sold for $510,000. Therefore, the bonds A. Sold at a premium because the stated interest rate was higher than the market rate B. Sold for the $500,000 face amount plus $10,000 of accrued interest C. Sold at a discount because the stated interest rate was higher than the market rate D. Sold at a premium because the market interest rate was higher than the stated rate - ANSWER-A. Sold at a premium because the stated interest rate was higher than the market rate An amortization schedule for a bond issued at a discount: A. Has a carrying value that decreases over time B. Is contained in the balance sheet C. Is a schedule that reflects the changes in bonds payable over its term to maturity D. Reflects interest expense decreasing over the term of the bond - ANSWER-C. Is a schedule that reflects the changes in bonds payable over its term to maturity Bonds usually sell at a discount when A. investors are willing to invest in the bonds only at rates that are higher than the stated interest rate. B. investors are willing to invest in the bonds at rates that are lower than the stated interest rate. C. investors are willing to invest in the bonds at the stated interest rate. D. a capital gain is expected. - ANSWER-A. investors are willing to invest in the bonds only at rates that are higher than the stated interest rate X2 will issue callable bonds on January 1, 2018. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity. What is the annual stated interest rate on the bonds? A. 3% B. 3.5%. C. 6% D. 7% - ANSWER-D. 7% X2 will issue callable bonds on January 1, 2018. The bonds pay interest annually on December 31 each year. X2's accountant has projected the following amortization schedule from issuance until maturity. What is the annual market interest rate on the bonds? A. 3% B. 3.5% C. 6% D. 7% - ANSWER-C. 6% If bonds are retired by an issuer by purchase on the open market at a price below the bonds' carrying value, a gain will result. A. True B. False - ANSWER-A. True Gains/losses on the early extinguishment of debt are reported as part of operating income in the income statement A. True B. False - ANSWER-B. False A gain or loss is recorded on bonds retired at maturity A. True B. False - ANSWER-B. False When bonds are called for retirement, any excess of the bonds' call price over the bonds' carrying value is reported as a loss on the income statement. A. True B. False - ANSWER-A. True When using vertical analysis, we express income statement accounts as a percentage of A. Net income B. Sales C. Total expenses D. Gross profit - ANSWER-B. Sales When using vertical analysis, we express balance sheet accounts as a percentage of A. Cash B. Total assets C. Total liabilities D. Total stockholders' equity - ANSWER-B. Total assets Which of the following is an example of vertical analysis? A. Comparing gross profit across companies B. Comparing income statement items as a percentage of sales C. Comparing debt with industry averages D. Comparing the change in sales over time - ANSWER-B. Comparing income statement items as a percentage of sales To calculate a year‐to‐year percentage change in any financial statement line item such as sales, you should take the current year's amount, subtract the prior year's amount, then divide by ______, and finally multiply the result by 100 A. net income B. total assets C. the current year's amount D. the prior year's amount - ANSWER-D. the prior year's amount Brady's Inflation Needle Co. reports accounts receivable of $200,000 in 2017 and $250,000 in 2018. Using horizontal analysis, what would be the percentage increase or decrease in accounts receivable? A. 25% decrease B. 25% increase C. 150% decrease D. 150% increase - ANSWER-B. 25% increase Which of the following is an example of horizontal analysis? A. Comparing gross profit across companies B. Comparing gross profit with operating expenses C. Comparing assets with equity D. Comparing the change in sales over time - ANSWER-D. Comparing the change in sales over time A company with a current ratio of 2.0 is considered more liquid than one with a current ratio of 3.0. A. True B. False - ANSWER-B. False Assuming a current ratio of 1.0, how will the purchase of supplies with cash affect the ratio? A. Increase the current ratio B. No change to the current ratio C. Decrease the current ratio D. Could either increase or decrease the current ratio - ANSWER-B. No change to the current ratio Which type of account is gross margin? A. An income account B. An expense account C. An asset account D. None of these are correct - ANSWER-D. None of these are correct Profit margin and gross margin are the same thing. A. True B. False - ANSWER-B. False Will the profit margin of a business be higher than its gross margin? A. Yes B. No - ANSWER-B. No Richard's Sporting Goods reports net income of $100,000, net sales of $500,000, and average assets of $1,000,000. The profit margin is A. 10% B. 20% C. 50% D. 5 times - ANSWER-B. 20% Calculate the company's profit margin for 2018 on the following schedule. A. .9% B. 4% C. 9% D. 32% - ANSWER-B. 4% The company's 2018 gross margin ratio on the following schedule is: A. 38%. B. 80%. C. 40%. D. 60%. - ANSWER-A. 38%. When a corporation is formed what document is filed with a state jurisdiction? a) Charter of organization b) Common stock registration form c) Articles of incorporation d) Articles of business organization - ANSWER-c) Articles of incorporation The CEO of a company is elected by a vote of the shareholders. a. true b. false - ANSWER-b. false Limited liability means that even in the event of bankruptcy, stockholders in a corporation can lose no more than the amount they invested in the company a. True b. False - ANSWER-a. True All publicly held corporations are regulated by what government organization? a. TheFinancialAccountingStandardsBoard b. The Commission on Accounting Procedures c. The Accounting Principles Board d. The Securities and Exchange Commission - ANSWER-d. The Securities and Exchange Commission Advantages of the corporate form of business include which of the following? I. Double taxation II. Ability to raise capital III. Ability to transfer ownership IV. More paperwork V. Limited liability a. II b. II., III., V c. I., II., III d. II.,IV.,V - ANSWER-b. II., III., V Which of the following is a reason that a corporation would prefer to issue stock instead of bonds? a. Dividendpaymentscanbedeductedfor income tax purposes but interest payments cannot b. Expansion is accomplished without surrendering ownership control c. The risk of going bankrupt is less d. AlL oF these - ANSWER-c. The risk of going bankrupt is less Contributed capital is the amount stockholders have invested in the company a. true b. false - ANSWER-a. true The par value of common stock represents the a. liquidation value of the stock b. book value of the stock c. amount received by the corporation when the stock was originally issued d. legal nominal value assigned to the stock - ANSWER-d. legal nominal value assigned to the stock Par value is the legal capital per share of stock that's assigned when the corporation is first established [Show Less]
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MGMT 200- Purdue University (Exam 1) Questions with correct Answers
Accounting is a system of maintaining records of a company's operations and communication that information to decision makers. - ANSWER-True What makes ... [Show More] accounting a valuable discipline? - ANSWER-Provides information to make decisions Financial accounting does not deal with which of the following? - ANSWER-Providing information to internal users Which of the following groups is not among the external users for whom financial statements are prepared? - ANSWER-Managers Product profitability reports for a business are considered - ANSWER-Managerial accounting Preparing a budget for a business is considered - ANSWER-Managerial accounting (Budgets are internal documents and generally not shared outside of the organization) Which of the following would NOT be an objective of external users reading a company's financial statements? - ANSWER-Assessing the company's contribution to social politics. What is the primary purpose of financial accounting? - ANSWER-Measure business activities and communicate those measures to external users to make decisions. When a company receives a product previously ordered, a recordable accounting transaction has occurred - ANSWER-Yes (affects financial position and can be measured in money) When a company inquires about the availability of inventory, a transaction has occurred - ANSWER-No When payment is received for services not yet rendered, no entry is recorded until that service has been rendered. - ANSWER-False (affects financial position since cash is received) Which of the following business events is not a transaction recorded in financial accounting? - ANSWER-Signing an agreement with a supplier An alternative form of the accounting equation is: - ANSWER-Assets - Liabilities = Stockholders' Equity The resources of a company are referred to as: - ANSWER-Assets (assets benefit future operations. Examples are cash, inventory, supplies, accounts receivable, buildings and equipment.) Liabilities can be best described as: - ANSWER-The amount owed to creditors What is the best definition of an asset? - ANSWER-Resources that benefit future operations What is the best definition of an accounts receivable? - ANSWER-Amounts owed by customers to a company. Those who lend money or deliver goods and services before being paid are called - ANSWER-Creditors (Assets = Liabilities( creditors' claims) + Equity (owners' claims)) If total assets increase $30,000 during a period and total liabilities increased $12,000 during the same period, the amount and direction (increase or decrease) of the change in stockholders' equity for that period is: - ANSWER-an $18,000 increase. assets = liabilities + equity (+$30,000) - (+$12,000) = x (+$30,000) - (+$12,000) = (+$18,000) At the end of its year, J&L Services, Inc., a computer services business, had total assets of $25,000 and equity of $10,000. How much were J&L Services' liabilities? - ANSWER-$15,000 assets - equity = liabilities $25,000 - $10,000 = $15,000 The amounts recorded when the company sells products or provided services to customers are referred to as: - ANSWER-Revenues (revenues are recorded at the time the company provides products or services to customers) Which of the following best describes revenue? - ANSWER-Sales of goods and services to a customer The cost associated with producing revenues are referred to as: - ANSWER-Expenses Dividends represent a return of the company's profit to its owners, the stockholders. - ANSWER-True (not classified as an "expense") Which of the following items is not a specific account in a company's accounting records? - ANSWER-Income Using the information below from the accounting records of Gulf Corporation, stockholders' claims to the company's resources amount to: Assets $1,000,000 Liabilities $500,000 Net income $200,000 Retained earnings $200,000 - ANSWER-$500,000 assets - liabilities = stockholders' equity $1,000,000 - $500,000 = $500,000 Use the following amounts to calculate net income: Revenues, $50,000; Liabilities, $10,000; Expenses, $40,000; Assets, $30,000; Dividends, $5,000 - ANSWER-$10,000 Revenues $50,000 Expenses - (40,000) Net income = $10,000 The financial statements of Royce Corporation contain the following. How much is its net income? Wages payable $11,000 Revenues 15,000 Accounts receivable 16,000 Expenses 10,000 Cash 7,000 - ANSWER-$5,000 (Net income= Revenues- Expenses) If a company has stockholders' equity of $5,000 at the end of the year, which of the following statements must be true? - ANSWER-The company's assets exceed liabilities by $5,000. assets = liabilities + stockholders' equity assets - liabilities = stockholders' equity assets - liabilities- $5,000 Which of the following transactions are operating activities? - ANSWER-Provide services to customers for $10,000, Paid employee wages of $3,500, and Purchased $12,000 in supplies. Limited liability means the stockholders are not held personally responsible for the financial obligations of the corporation - ANSWER-True Transfer of ownership will not affect the continuity of a - ANSWER-corporation How many of the following accounts would appear in a year-end income statement? Accounts Payable $4,400 Salaries Expense 12,800 Cash 1,700 Common Stock 2,400 Service Revenue 8,300 Truck Expense 4,300 Retained Earnings 1,100 Utilities Expense 5,000 - ANSWER-Four; Salaries Expense, Service Revenue, Truck Expense, and Utilities Expense (Revenues and Expenses) The statement of changes in stockholders' equity is a financial statement that summarizes stockholders' equity at a point in time. - ANSWER-False (summarizes the changes in stockholders' equity over an interval of time) Which of the following best explains the meaning of total stockholders' equity? - ANSWER-The amount of capital invested by stockholders plus profits retained over the life of the company Retained earnings at the end of the year is calculated using: - ANSWER-Beginning retained earnings, income, and dividends Given the information below about Woodcrest Corporation, what was the amount of dividends the company paid in the current period? Beginning retained earnings 50,000 Ending retained earnings 100,000 Decrease in cash 50,000 Income 75,000 Change in stockholders' equity 15,000 - ANSWER-25,000 Beginning R/E 50,000 Income + 75,000 = 125,000 Less dividends - 25,000 Ending R/E = 100,000 The benefits of a statement of cash flows are to - ANSWER-Determine ability to pay indebtedness and cash dividends, Estimate future cash flows, and Evaluate asset management What would affect operating cash flows reported in the statement of cash flows (all transactions involve cash)? - ANSWER-Decrease in wages payable of $12,000 during the year and Increase in inventory of $10,000 Which of the following is false regarding the balance sheet? The balance sheet summarizes the net changes in specific account balances over a period in time. The retained earnings balance on the balance sheet agrees with the ending retained earnings balance shown on the statement of changes in stockholders' equity The accounts on the balance sheet represent the basic accounting equation for a company The balance sheet reports the amount of assets, liabilities, and stockholders' equity of a company at a point in time - ANSWER-The balance sheet summarizes the net changes in specific account balances over a period in time. How many of the following accounts would appear in a year-end balance sheet? Wages Expense Salaries Payable Fees Earned Common Stock Supplies Service Revenue Retained Earnings Cash - ANSWER-Five; Salaries Payable, Common Stock, Supplies, Retained Earnings, and Cash Income (loss) appears in which two financial statements? - ANSWER-Income statement and the statement of changes in stockholders' equity In what order are the following financial statements prepared: (1) statement of changes in stockholders' equity, (2) income statement, (3) balance sheet? - ANSWER-2, 1, 3 Which financial statements best reveals to investors and creditors information about a company's indebtedness? - ANSWER-Balance sheet Which of the following best represents value created for stockholders during the current period? - ANSWER-Earnings (earnings reflect profits earned (value created) by the company during the current period) The most important objective for financial accounting is to provide information useful for: - ANSWER-Predicting cash flows The economic entity concept requires that - ANSWER-A company should maintain separate set of financial records for each business entity or subsidiary A list of all account names used to record transactions of a company is referred to as the: - ANSWER-Chart of accounts The accounting equation is in balance if there is a - ANSWER-decrease in assets and a decrease in equity Which of the following is not possible when recording a transaction? Stockholders' equity increases and assets increase One asset increases and another asset decreases Liabilities increase and assets decrease Stockholders' equity decreases and assets decrease - ANSWER-Liabilities increase and assets decrease The accounting equations is in balance if there is a: Decrease in assets and a decrease in liabilities increase in liabilities and an increase in equity decrease in assets and an increase in equity decrease in equity and an increase in assets - ANSWER-decrease in assets and a decrease in liabilities Receiving cash from an account receivable: - ANSWER-Increases one asset and decreases another asset Which of the following would increase assets and increase liabilities? Provide services to customers on account Pay dividends to stockholders Receive a utility bill but do not pay it immediately Purchase office supplies on account - ANSWER-Purchases office supplies on account Washington, Inc. sold $300 of office supplies to a customer on account on September 12. On September 30, Washington collected the cash from that customer. What is the impact on Washington's accounting equation from the collection of cash? - ANSWER-No net effect to the accounting equation (increases asset and decreases asset) Following the transactions of Newco, Inc. during the month of October: 1. Issued 10,000 shares of common stock for $25,000 cash. 2. Purchased land for $50,000, signing a note payable for the full amount 3. Received cash of $10,000 for services provided to customers during the month 4. Purchased $500 of office supplies on account 5. Purchased office equipment for $5,000 cash What was the total amount of Newco's liabilities following these five transactions? - ANSWER-$50,500 (2+4=50,500) The purchase of $5,000 of liability insurance policy for the next year on account will - ANSWER-Increase both assets and liabilities by $5,000 What transaction changes only the mix of assets and does not affect liabilities or stockholders equity? - ANSWER-Purchased equipment for $25,000 cash assume that J&K, Inc. performed advertising services for a bakery on account for $1,500. How would this transaction affect J&K, Inc.? - ANSWER-Increase both assets and equity by $1,500 When a company pays employees' salaries or the current period, how will the basic accounting equation be affected? - ANSWER-Stockholders' equity decreases Following are transactions of Beverly, Inc., a new company: 1. Purchased office equipment for $500 cash 2. Purchased land for $20,000, signing a note payable for the full amount 3. paid cash of $10,000 for repair services provided last month 4. Purchased $300 of office supplies on account 5. Issued 10,000 shares of common stock for $50,000 cash 6. Paid employees $25,000 for their first month's salaries How many of these transactions decreases Beverly's total assets? - ANSWER-Two; Paid cash of $10,000 for repair services last month and Paid employees for $25,000 for their first month's salaries Assume that Perfect Clean, Inc. performed cleaning services for a business on account for $200. How would this transaction affect Perfect Clean, Inc.? - ANSWER-Increase both assets and equity by $200 An increase to an asset account is shown with a ________. An increase to a liability account is shown with a __________-. - ANSWER-Debit; credit Which of the following is true? The debit is on the right side of the account The credit is on the left side of a liability account The debit is on the right side of an expense account The debit is on the left side of the account - ANSWER-The debit is on the left side of the account The left side of an account is used to record what? - ANSWER-Debits Which of the following is correct? Prepaid expenses are decreased with a debit Unearned revenue liability is increase with [Show Less]
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