When an asset is sold, a gain occurs when the

sale price exceeds the book value of the asset sold.

When an account is written off using the allowance method, the

net accounts receivable will stay the same.

used to evaluate a company's liquidity

Under the allowance method, writing off an uncollectible account

affects only balance sheet accounts.

Gross profit equals the difference between

sales revenue and cost of goods sold.

The book value of an asset is equal to the

asset's cost less accumulated depreciation.

The custodian of a company asset should

not have access to the accounting records for that asset.

If a plant asset is retired and is fully depreciated

no gain or loss on disposal will be recorded.

The account Allowance for Doubtful Accounts is classified as a(n)

contra account to Accounts Receivable.

The percentage of receivables basis for estimating uncollectible accounts emphasizes

the relationship between A/R and bad debts expense.

A corporation has which of the following set of characteristics?

Easier to transfer ownership and no personal liability

cause zero balance in revenue and expense accts

The normal balance of any account is the

Side that increases that account

Accrued expenses are:

incurred but not yet paid or recorded.

The double-entry system requires that each transaction must be recorded

in at least two different accounts.

In preparing a bank reconciliation, outstanding checks are

deducted from the balance per bank.

Collection of a $600 Accounts Receivable

increases an asset $600; decreases an asset $600.

If bonds are issued at a premium, the stated interest rate is

higher than the market rate of interest.

is the value assigned per share in the corporate charter.

The proprietorship form of business organization

receives favorable tax treatment relative to a corporation

If services are rendered on account, then

stockholders' equity will increase

Which one of the following is not an objective of a system of internal controls?

Overstate liabilities in order to be conservative.

Bad Debt Expense is considered

a necessary risk of doing business on a credit basis.

The custodian of a company asset should

not have access to the accounting records for that asset.

If a company pays dividends of $10,000,

Both R.E. and S.E. will be reduced by $10,000.

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BUS 201 Final Exam Review

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Review from Final Exam Ch 1-11

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Questions 44

Answers

1
When an asset is sold, a gain occurs when the
sale price exceeds the book value of the asset sold.
sale price exceeds the depreciable cost of the asset sold.
sale price exceeds the original cost of the asset sold.
book value exceeds the sale price of the asset sold.
2
When an account is written off using the allowance method, the
allowance account will increase.
net accounts receivable will stay the same.
net accounts receivable will decrease
cash realizable value of total A/R will increase.
3
Classify: Tearing down warehouse on new land purchase
Land improvement
Equipment
Building
Land
4
Working capital is
= current assets by current liabilities.
used to evaluate a company's solvency
= current liablities minus current assets
used to evaluate a company's liquidity
5
It is not true that current assets are resources that are expected to be
consumed within one year.
sold within one year.
acquired within one year.
realized in cash within one year.
6
Which of the following is an example of a deferral adjusting entry? (hint what's on books)
Accrued expense
Accrued revenue
Prepaid expense
All of these choices are correct.
7
Under the allowance method, writing off an uncollectible account
affects both balance sheet and income statement
affects only income statement accounts.
is not acceptable practice.
affects only balance sheet accounts.
8
Inventory showed that 240 units were on hand. If the company uses FIFO, ending inventory is?
1818
1302
1200
1320
9
The expense recognition principle matches:
customers with businesses.
expenses with revenues.
assets with liabilities.
creditors with businesses.
10
Gross profit equals the difference between
sales revenue and operating expenses.
sales revenue and cost of goods sold plus operating expenses
net income and operating expenses.
sales revenue and cost of goods sold.
11
The total dollar amount of assets to be classified as current assets.
$600,000
$855,000
$510,000
$435,000
12
The book value of an asset is equal to the
blue book value relied on by secondary markets.
asset's cost less accumulated depreciation.
replacement cost of the asset.
asset's fair value less its historical cost.
13
The custodian of a company asset should
be someone outside the company.
not have access to the accounting records for that asset.
be an accountant.
have access to the accounting records for that asset.
14
Which of the following would be deducted from the balance per books on a bank reconciliation?
Outstanding checks.
Notes collected by the bank.
Service charges.
Deposits in transit.
15
Which of the following is not considered an asset?
Dividends
Accounts Receivable
Inventory
Equipment
16
In a perpetual inventory system, cost of goods sold is recorded
each time a sale occurs.
on a monthly basis.
on a daily basis.
on an annual basis.
17
If a plant asset is retired and is fully depreciated
a gain on disposal will be recorded.
a loss on disposal will be recorded.
no gain or loss on disposal will be recorded.
phantom depreciation must be taken
18
The term "FOB" denotes
free only (to) buyer.
freight charge on buyer.
free on board.
freight on board.
19
The account Allowance for Doubtful Accounts is classified as a(n)
contra account of Bad Debt Expense.
liability.
contra account to Accounts Receivable.
expense.
20
The percentage of receivables basis for estimating uncollectible accounts emphasizes
the relationship between A/R and bad debts expense.
the relationship between sales and accounts receivable.
cash realizable value.
income statement relationships
21
A corporation has which of the following set of characteristics?
Easier to transfer ownership and no personal liability
Simple to set up and control with founder
Harder to raise funds and gives owner control
Tax advantages, increased skills and resources
22
A business organized as a separate legal entity is a
Corporation
Government unit
Partnership
Proprietor
23
Closing entries:
cause zero balance in revenue and expense accts
summarize the activity in every account.
reduce the number of permanent accounts.
are prepared before the financial statements.
24
The interest on a $15,000, 6%, 90-day note receivable is
$675
$450
$900
$225
25
The normal balance of any account is the
Left side
Side the decreases that account
Side that increases that account
Right side
26
Accrued expenses are:
paid and recorded in an asset account after they are used
incurred but not yet paid or recorded.
paid and recorded in an asset account before they are used
incurred and already paid or recorded.
27
A corporate board of directors does not generally
Select officers
declare dividents
formulate operating policy
execute policy
28
The double-entry system requires that each transaction must be recorded
in two sets of books.
in at least two different accounts.
first as a revenue and then as an expense.
in a journal and in a ledger.
29
In preparing a bank reconciliation, outstanding checks are
added to the balance per bank.
added to the balance per books.
deducted from the balance per bank.
deducted from the balance per books.
30
Collection of a $600 Accounts Receivable
increases an asset $600; decreases a liability $600.
increases an asset $600; decreases an asset $600.
decreases an asset $600; decreases a liability $600
decreases a liability $600; increases stock. equity $600
31
Land improvements should be depreciated over the useful life of the
land improvements.
land or land improvements, whichever is longer.
buildings on the land.
land.
32
If bonds are issued at a premium, the stated interest rate is
lower than the market rate of interest.
adjusted to a higher rate of interest.
higher than the market rate of interest.
too low to attract investors.
33
Par value
is the value assigned per share in the corporate charter.
represents what a share of stock is worth.
represents the original selling price for a share of stock.
is established for a share of stock after it is issued.
34
The proprietorship form of business organization
is classified as a separate legal entity.
separates the business with the personal
must have at least two owners in most states.
receives favorable tax treatment relative to a corporation
35
If services are rendered on account, then
stockholders' equity will increase
liabilities will decrease.
liabilities will increase.
assets will decrease.
36
Which one of the following is not an objective of a system of internal controls?
Overstate liabilities in order to be conservative.
Enhance the accuracy and reliability of accounting record
Reduce the risks of errors.
Safeguard company assets.
37
Bad Debt Expense is considered
avoidable unless there is a recession.
a necessary risk of doing business on a credit basis.
an internal control weakness.
an avoidable cost in doing business on a credit basis.
38
The custodian of a company asset should
have access to the accounting records for that asset.
be someone outside the company.
not have access to the accounting records for that asset.
be an accountant.
39
Cost of lighting parking lot
Equipment
Land improvement
Land
Building
40
Ratios that measure the income or operating success of a company for a given period of time are
liquidity ratios
solvency ratios
trending ratios
profitablity ratios
41
If a company pays dividends of $10,000,
net income will be reduced by $10,000.
retained earnings will be reduced by $10,000
stockholders' equity will be increased by $10,000
Both R.E. and S.E. will be reduced by $10,000.
42
The lower of cost or market basis of valuing inventories is an example of
Conservatism
Historical Cost
Comparablility
Consitency
43
The net amount expected to be received in cash from receivables is termed the
cash-good value.
cash-equivalent value.
gross cash value.
cash realizable value.
44
Bonds that may be exchanged for common stock at the option of the bondholders are called
callable bonds
convertible bonds
stock bonds
Options

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