29 Jan Investing and financing

ACCT212 Financial Accounting

WEEK 1 CHECKPOINT

Question 1

(TCO 1) Accounting

measures business activities.

processes data into reports and communicates the data to decision makers.

is often called the language of business.

All of the above

Question 2

(TCO 1) Decision makers who use accounting include

the SEC.

investors.

managers.

All of the above

Question 3

(TCO 1) The Financial Accounting Standards Board is responsible for establishing

the code of professional conduct for accountants.

the Securities and Exchange Commission.

generally accepted accounting principles.

international accounting financial standards.

Question 4

(TCO 1) The accounting assumption that states that the business, rather than its owners, is the reporting unit is the

entity assumption.

going concern assumption.

stable-monetary-unit assumption.

historical cost assumption.

Question 5

(TCO 1) The accounting equation can be stated as

Assets + Stockholders’ Equity = Liabilities.

Assets – Liabilities = Stockholders’ Equity.

Assets = Liabilities – Stockholders’ Equity.

Assets – Stockholders’ Equity + Liabilities = Zero.

Question 6

(TCO 1) The owners’ equity of any business is its

revenues minus expenses.

assets minus liabilities.

assets plus liabilities.

paid-in capital plus assets.

Question 7

(TCO 1) Net income is computed as

revenues – expenses – dividends.

revenues + expenses.

revenues – expenses.

revenues – expenses + dividends.

Question 8

(TCO 1) Which of the following would appear on the balance sheet?

Assets and operating cash flows

Dividends and liabilities

Assets and liabilities

Owners’ equity and revenues

Question 9

(TCO 1) Which statement(s) summarizes the revenues, gains, expenses, and losses of an entity?

Balance sheet

Statement of cash flows and income statement

Statement of retained earnings and statement of operations

Income statement

Question 10

(TCO 1) What is the proper order for the categories of the statement of cash flows?

Financing activities, investing activities, and operating activities

Operating activities, investing activities, and financing activities

Operating activities, financing activities, and investing activities

Investing activities, financing activities, and operating activities

ACCT212 Financial Accounting

WEEK 2 CHECKPOINT

Question 1

(TCO 2) The debt created by a business when it makes a purchase on account is a(n)

revenue.

prepaid expense.

account receivable.

account payable.

Question 2

(TCO 2) A company performed services for a customer for cash. This transaction increased assets and

decreased equity.

increased liabilities.

increased expenses.

increased revenues.

Question 3

(TCO 2) When a company borrows cash from the bank

total assets remain the same.

liabilities are increased.

retained earnings is decreased.

total liabilities remain the same.

Question 4

(TCO 2) Which of the following is a true statement regarding T-accounts?

The transaction needs to be analyzed to determine which accounts are affected before entering amounts in the T-accounts.

If a company pays cash, an amount would be entered on the left side of the T-account.

T-accounts are only used to record complex transactions.

To debit an asset, an amount is entered on the left side of the T-account and to debit a liability an amount is entered on the right side of the T-account.

Question 5

(TCO 2) An important rule of debits and credits is

credits increase a liability account.

debits decrease an asset account

revenues are increased by a debit.

expenses are increased by a credit.

Question 6

(TCO 2) Accounting transactions are initially recorded in the

T-account.

ledger.

journal.

financial statements.

Question 7

(TCO 3) Under accrual accounting, revenue is recorded

when the cash is collected, regardless of when the services are performed.

when the services are performed, regardless of when the cash is received.

either when the cash is received or the sale is made.

only if the cash is received at the same time the services are performed.

Question 8

(TCO 3) The event that triggers revenue recognition for the sale of goods is the

date a contract is signed.

date cash is received.

transfer of control of the goods to the purchaser.

completion of the services.

Question 9

(TCO 3) The balance sheet reports

assets, liabilities and stockholders’ equity.

the changes in retained earnings.

assets, liabilities, revenues and expenses.

revenues and expenses.

Question 10

(TCO 3) Closing entries

are made at the beginning of each accounting period.

prepare the accounts for the next period’s transaction.

cannot be done using a computer.

are the same as adjusting entries.

ACCT212 Financial Accounting

WEEK 3 CHECKPOINT

Question 1

(TCO 5) The three main components of the fraud triangle are

rationalization, opportunity, and greed.

opportunity, motive, and lack of ethics.

motive, opportunity, and rationalization.

None of the above

Question 2

(TCO 5) Fraud is the ultimate unethical act in business because

the perpetrators usually do so for their own short-term economic gain at the expense of others.

fraud is illegal.

fraud violates the rights of many for the temporary betterment of a few.

All of the above

Question 3

(TCO 5) The primary way that fraud is prevented and detected is through a proper system of

checks and balances.

management directives.

internal control.

internal and external audits.

Question 4

(TCO 5) The “tone at the top”

is a component of the control procedures.

starts with low level employees.

means that owners and top managers must behave honorably to set a good example for employees.

is set by the PCAOB.

Question 5

(TCO 5) The information system component of internal control

ensures that every system that processes accounting data should have the ability to capture transactions as they occur.

monitors controls.

offers hints of where fraud or errors could occur.

ensures that the IT department has adequate control procedures in place to ensure that no one can hack into the company’s database.

Question 6

(TCO 5) Creating bogus websites for the purpose of stealing unauthorized data is a(n)

encryption device.

phishing expedition.

computer virus.

Trojan horse.

Question 7

(TCO 5) When preparing a bank reconciliation, which of the following items should be added to the book balance?

EFT receipts

Deposits in transit

Collection items

Both EFT receipts and collection items

Question 8

(TCO 5) When a company receives cash by mail

all incoming mail containing cash receipts should be opened by the accounting department.

the mailroom sends all customer checks to the internal audit department.

the remittance advice goes to the accounting department for preparation of the journal entries.

the bank deposit is prepared by the mail room.

Question 9

(TCO 5) Another name for short-term investments is

equity investments.

marketable securities.

market investments.

available-for-sale securities.

Question 10

(TCO 5) Which of the following is a true statement about sales?

Net revenue is gross revenue plus sales discounts less sales returns and allowances.

Sales discounts are offered to customers in order to speed up cash flow.

Sales returns and allowances increase a company’s profit.

Retailers do not generally record sales returns and allowances in a separate account.

ACCT212 Financial Accounting

WEEK 4 CHECKPOINT

Question 1

(TCO 4) The cost of the inventory that the business has sold to customers is called

inventory.

cost of goods sold.

purchases.

gross profit.

Question 2

(TCO 4) The cost of inventory that is still on hand and has not been sold to customers is called

cost of goods sold, an expense that appears on the balance sheet.

inventory, a current asset that appears on the income statement.

inventory, a current asset that appears on the balance sheet.

purchases, an expense that appears on the income statement.

Question 3

(TCO 4) A small _____ would most likely use a perpetual inventory system.

automobile dealership

fabric store

restaurant

flower shop

Question 4

(TCO 4) The cost of inventory is the

purchase price.

sum of all the costs incurred to bring the inventory to its intended use.

sum of all the costs incurred to bring the inventory to its intended use, plus any discounts and allowances.

sum of all the costs incurred to bring the inventory to its intended use, less any discounts and allowances.

Question 5

(TCO 4) ABC Auto Sales sells new Lexus vehicles. ABC will most likely use the _____ method to cost its ending inventory.

first-in, first-out

last-in, first-out

specific-unit-cost

weighted-average

Question 6

(TCO 4) When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is

higher than cost of goods sold under the LIFO method.

lower than cost of goods sold under the LIFO method.

equal to the gross profit under the LIFO method.

equal to cost of goods sold under the LIFO method.

Question 7

(TCO 4) When inventory prices are falling, the LIFO costing method will generally result in

a lower gross profit than under FIFO.

a higher gross profit than under FIFO.

a lower inventory value than under FIFO.

the same inventory value as FIFO.

Question 8

(TCO 4) The _____ principle states that the financial statements of a business must report enough information for outsiders to make knowledgeable decisions about the business.

consistency

historical cost

disclosure

conservatism

Question 9

(TCO 4) When applying the lower-of-cost-or-market rule, market value generally refers to

FIFO cost using the periodic method.

LIFO cost using the periodic method.

current sales price of the inventory.

current replacement cost of the inventory.

Question 10

(TCO 4) The inventory turnover ratio

is determined by dividing cost of goods sold by net sales.

shows how many times the company sold its average level of inventory.

should be high for a company that sells high-priced inventory items.

will be lower for companies that have many low-priced items in their inventory .

ACCT212 Financial Accounting

WEEK 5 CHECKPOINT

Question 1

(TCO 6) An asset with no physical form, but that has special rights to current and expected future benefits is a(n)

intangible asset.

natural resource.

plant asset.

fixed asset.

Question 2

(TCO 6) The process of allocating the cost of a plant asset to expense over the period in which the asset is used is called

amortization.

allocation.

depreciation.

disclosure.

Question 3

(TCO 6) All of the following are classified as natural resources and are depleted except for

land.

timber.

minerals.

oil.

Question 4

(TCO 6) An investor who owns 25% of the outstanding stock of another company should report the investment using the

market value method.

consolidated method.

equity method.

historical cost method.

Question 5

(TCO 6) All of the following are necessary to compute the future value of a single amount except the

interest rate.

number of periods.

principal.

maturity value.

Question 6

(TCO 6) All of the following are reported as current liabilities except

bonds payable.

sales tax payable.

accounts payable.

unearned revenues.

Question 7

(TCO 6) The current ratio is current assets

minus current liabilities.

divided by current liabilities.

plus current liabilities.

multiplied by current liabilities.

Question 8

(TCO 6) If bonds are issued at a discount, it means that the

market interest rate is higher than the stated interest rate.

market interest rate is lower than the stated interest rate.

financial strength of the issuer is weak.

bond is convertible.

Question 9

(TCO 6) Bonds which are backed only by the good faith of the borrower are referred to as

junk bonds.

unregistered bonds.

debenture bonds.

callable bonds.

Question 10

(TCO 6) The financing option that has the lowest risk to a company is financing by

retained earnings.

issuing stock.

issuing bonds payable.

issuing notes payable.

ACCT212 Financial Accounting

WEEK 6 CHECKPOINT

Question 1

(TCO 7) The authority structure of a corporation would show the

board of directors delegating to the stockholders.

president delegating to the board of directors.

chief financial officer delegating to the board of directors.

stockholders delegating to the board of directors.

Question 2

(TCO 7) The basic unit of ownership for a corporation is

dividends.

stock.

retained earnings.

capital.

Question 3

(TCO 7) When a company issues common stock greater than its par value, the excess should be credited to

retained earnings.

common stock.

paid-in capital in excess of par.

capital.

Question 4

(TCO 7) Reasons that a company would purchase treasury stock include all of the following except

management wants to avoid a takeover by an outside party.

it needs the stock for distribution to employees under stock purchase plans.

it wants to increase net assets by buying its stock low and reselling it at a higher price.

management wants to decrease earnings per share of common stock.

Question 5

(TCO 7) The date when a cash dividend becomes a legal obligation is on the

date of record.

declaration date.

last day of the corporate year.

payment date.

Question 6

(TCO 7) If stock is issued for an asset other than cash, the asset should be recorded on the books of the corporation at

fair market value.

cost.

par value of the stock.

zero.

Question 7

(TCO 1) The statement of cash flows

can be prepared instead of an income statement.

must be prepared daily.

summarizes the operating, financing, and investing activities of an entity.

is part of the income statement.

Question 8

(TCO 1) The best gauge of a company’s ability to produce ample cash to continue as a going concern is net cash provided by

operating activities.

investing activities.

financing activities.

analytical activities.

Question 9

(TCO 1) Which of the three types of activities reported on the statement of cash flows is the most critical?

Investing activities

Operating activities

Financing activities

Investing and financing activities

Question 10

(TCO 1) Investing activities include

obtaining cash from creditors.

collecting cash on loans.

obtaining capital from owners.

repaying borrowed money.