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Various Introduction to Accounting Questions

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1.At 12/31/2006, the financial statements of Dollar Market included the following numbers:

Beginning inventory $100,000
Ending inventory 80,000
Cost of goods sold 270,000
Sales revenue 540,000

The company's inventory turnover ratio for the year is
a. 2
b. 2.7
c. 3
d. 6

2. Credits
a. decrease both assets and liabilities.
b. decrease assets and increase liabilities.
c. increase both assets and liabilities.
d. increase assets and decrease liabilities.

3. The steps in preparing a trial balance include all of the following except

a. listing the account titles and their balances.
b. totaling the debit and credit columns.
c. proving the equality of the two columns.
d. transferring journal amounts to ledger accounts.

4. The full disclosure principle requires that

a. revenue should be recognized in the period in which it is earned.
b. expenses should be matched against revenues in the period when the effort was expended to earn the revenue.
c. circumstances and events that make a difference to financial statement users should be disclosed in the financial statements.
d. the economic life of the business be divided into artificial time periods.

5.The summary of significant accounting policies footnoted in the financial statements would not normally discuss

a. depreciation methods.
b. board of directors salaries.
c. method of inventory costing.
d. amortization of intangible assets.

6. The cost principle is the basis for preparing financial statements because it is

a. a conservative value.
b. relevant and objectively measured, and verifiable.
c. an international accounting standard.
d. the most accurate measure of purchasing power.

7. Which of the following is a constraint in applying generally accepted accounting principles?
a. Conservatism
b. Cost
c. Consistency
d. Time period

8. Return on common stockholders' equity is
a. net income divided by the number of common shares outstanding.
b. net income divided by total stockholders' equity
c. net income divided by total assets.
d. net income divided by common equity.

9. Conservatism in accounting means to

a. understate assets.
b. understate net income.
c .understate sales.
d. choose the method that will be least likely to overstate assets and income.

10. Profit margin is a measure of
a. liquidity.
b. profitability.
c. solvency.
d. risk.

11. The information provided in the notes that accompany financial statements is required because of the
a. cost principle.
b. full disclosure principle.
c. matching principle.
d. revenue recognition principle.
12. A post-closing trial balance is prepared

a. after closing entries have been journalized and posted.
b. before closing entries have been journalized and posted.
c. after closing entries have been journalized but before the entries are posted.
d. before closing entries have been journalized but after the entries are posted.

13. Which account listed below would be double ruled in the ledger as part of the closing process?
a. Cash
b. Common Stock
c. Dividends
d. Accumulated Depreciation

14. The step in the accounting cycle that is performed on a periodic basis (i.e., monthly, quarterly) is
a. analyzing transactions.
b. journalizing and posting adjusting entries.
c. preparing a post-closing trial balance.
d. posting to ledger accounts.

15. A correcting entry

a. must involve one balance sheet account and one income statement account.
b. is another name for a closing entry.
c. may involve any combination of accounts.
d. is a required step in the accounting cycle.

16. Intangible assets include all of the following except:
a. Marketable securities.
b. Patents.
c. Copyrights.
d. Goodwill.

17. The custodian of an asset should
a. be an accountant.
b. have access to the accounting records for the asset.
c. be someone from outside the company.
d. not have access to the accounting records for the asset.

18. From an internal control standpoint, the asset most susceptible to improper diversion and use is
a. prepaid insurance.
b. cash.
c. buildings.
d. land.

19. Related buying activities include
a. ordering, receiving, paying.
b. ordering, selling, paying.
c. ordering, shipping, billing.
d. selling, shipping, paying.

20. Checks received through the mail should

a. immediately be endorsed "For Deposit Only."
b. be sent to the accounts receivable subsidiary ledger clerk for immediate posting to the customer's account.
c. be cashed at the bank as soon as possible.
d. be "rung up" on a cash register immediately.

21. Allowing only the treasurer to sign checks is an example of
a. documentation procedures.
b. separation of duties.
c. other controls.
d. establishment of responsibility.

22. A petty cash fund of $100 is replenished when the fund contains $4 in cash and receipts for $93. The entry to replenish the fund would
a. credit Cash Over and Short for $3.
b. credit Miscellaneous Revenue for $3.
c. debit Cash Over and Short for $3.
d. debit Miscellaneous Expense for $3.

23. When opening a bank checking account, a signature card

a.indicates to whom money is to be paid.
b. indicates each person authorized to sign checks on the account.
c. is attached to all pre-printed checks.
d. is required only when dealing with an out-of-state bank.

24. Dolan Company had checks outstanding totaling $5,400 on its June bank reconciliation. In July, Dolan Company issued checks totaling $38,900. The July bank statement shows that $26,300 in checks cleared the bank in July. A check from one of Dolan Company's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding checks on Dolan Company's July bank reconciliation should be
a. $12,600.
b. $18,000.
c. $17,700.
d. $7,200.

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Solution Preview

1. c. 3 ($270,000/(($100,000+$80,000)/2))
2. b. decrease assets and increase liabilities.
3. d. transferring journal amounts to ledger accounts.
4. c. circumstances and events that make a difference to financial statement users should be disclosed in the financial statements.
5. b. board of ...

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