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1.

Financial accounting is an information system that:

assigns a share price to every company

tracks and records an organization's business transactions

provides information about the company's executives

predicts the financial survival of a company

2.Jeff Brown is the sole owner of Shoe Central, a small shoe shop. One day, he buys a used car for his personal use, and pays $2,000 from his checking
account. The fact that this transaction has no effect on Shoe Central's financial accounts is an application of the:

Materiality concept

Money measurement concept

Going concern concept

Entity concept

3.Jeff Brown, owner of Shoe Central, a small shoe store, buys cleaning supplies for his store once every six months. The fact that his accountant writes
off, or records as expenses, the full cost of the cleaning supplies when they are purchased, rather than each monthly accounting period as they are
used, is an application of the:

Matching concept

Money measurement concept

Materiality concept

Historical cost concept

4.Oliver Enterprises buys a new stamping machine for $10,000 at an auction held by a company in bankruptcy proceedings. The machine is a very good
deal; Oliver would have paid about $12,000 to buy it in the open market. Which of the following statements best describes the application of the historical
cost concept?

Oliver should record the new machine asset for $12,000, the most relevant amount

Oliver should record the new machine asset for $10,000, the most reliable amount

Oliver should record the machine at the average appraised value from at least three appraisers

Oliver should record the new machine asset for $10,000 and immediately record a gain of $2,000

5.Tournas Sports receives a special order for 100 team jerseys. The customer pays the full amount, $2,000, at the time of the order. The jerseys will be
delivered in two weeks. Choose the statement that best reflects the application of the revenue recognition concept at the time of the order:

Revenue of $2,000 has been earned and realized

Revenue of $2,000 has been earned but not realized

Revenue of $2,000 has been realized but it has not been earned

Revenue of $2,000 has neither been earned nor realized

6.On April 30, Jemison Engineering receives a special order for a swing set, to be delivered to the customer in a month's time. Jemison purchases a
number of items specifically for the construction of the swing set: lumber, chains, railings and paint. According to the matching concept, when will
Jemison Engineering record the cost of those special items as a cost of goods sold expense:

As each item is purchased

As each item is used in the production of the swing set

When the revenue for the swing set is recorded

As soon as the special order is received

7.Which of the following financial statements describes an entity's financial position at a point in time?

A direct method statement of cash flows

An income statement

A balance sheet

An indirect method statement of cash flows


8.Choose the word that best completes the following sentence: In the statement of cash flows, an organization's cash flows are classified as those
arising from operating activities, ________ activities and financing activities.

Trading

Planning

Selling

Investing

9.In the statement of cash flows, the purchase of a building is classified as:

A financing activity

An investing activity

An operating activity

None of the above

10.Which one of the following is classified in the statement of cash flows as an operating activity?

Getting a loan from a bank

Buying a computer system that will last 5 years

Selling merchandise

None of the above

11.Temtron Inc. pays $1,000 in cash as interest to its lenders during 2014. According to U.S. GAAP, in which section of the statement of cash flows
would this payment be included?

The operating section

The financing section

The investing section

None of the above

12.Since auditors have to attest to the validity of a company's financial statements, what among the following is the most important characteristic for an
auditor to have?

Huge personal wealth

Knowing a good lawyer

Independence

Personal relationships with the company's managers

13.Select one answer that best fills the blank: Assets minus liabilities equals __________ .

Income

Cash

Owners' equity

Common Stock

14.Net Income = Revenues minus ___________________ .

Cash

Sales

Debt

Expenses
15.In financial accounting, relevance refers to:

the verifiability of the reported information

the precision of the reported information

the objectivity of the reported information

the usefulness of the reported information for economic decisions

16.Which one of the following is the best definition of owners' equity?

The market value of the outstanding common stock

The amount that owners would receive if they sold the entity

The cash balance less outstanding debts

The difference between assets and liabilities

17.On June 30, 2015, Martin Co. has assets of $22,000 and owners' equity of $5,000. Its liabilities on that date must total:

$17,000

$22,000

$27,000

Cannot be determined without its common stock balance on June 30, 2015

18. Which of the following is one of several conditions that must be met for an item to be recorded as an asset?

At least 50% of the item's purchase price has to have been paid to the seller in cash

It must have a measurable resale value

The item can be used as collateral in getting a loan from a bank

The item must have been acquired at a measurable cost

19.Which one of the following conditions is not a requirement for an item to be recorded as a liability on a company's balance sheet?

It involves a probable future sacrifice of economic resources by the company

It reduces the market value of the company

It involves a probable future sacrifice to another entity

It is a present obligation, arising from a past transaction or event

20.On October 10, Jayson Company receives an order for a $700 TV which it will deliver to the customer on October 17. The customer pays the full
amount in cash at the time of the order. Besides recording the receipt of $700 cash, what else should Jayson record on October 10?

Record $700 revenue

Record some of the $700 as revenue now and the rest on delivery of the TV

Record a $700 liability

Make no record at this time; record revenue and receipt of cash on delivery of TV

21. Tripod Inc. began the month with accounts receivable of $25,000. During the month, it collected $12,000 from customers and sold $5,000 of
merchandise on credit. Its accounts receivable balance at the end of the month is:

$32,000

$18,000

$42,000

Cannot be calculated

The next 4 questions refer to the December 31, 2014 Balance Sheet of Paxson Company.
22. Paxson began 2014 with an inventory T-account debit balance of $22,000. In 2014, its inventory purchases amounted to $42,000, and it had no
inventory-related write-downs or losses. What amount did Paxson record as cost of goods sold expense in 2014?

$46,000

$38,000

$4,000

Cannot be estimated from the data provided

23.Paxson began 2014 with the following non-current asset balances: Plant and equipment (net) $29,500; Patent (net) $14,000. No long-term assets
were purchased or sold during the year. How much amortization and depreciation expense did Paxson record during 2014?

$1,500

$2,000

$3,500

Cannot be estimated

24.In 2014, Paxson incurred a net loss of $2,500. No dividends were declared or paid during 2014. What was Paxson's retained earnings balance one
year earlier on December 31, 2013?

$24,500

$2,500

$19,500

Cannot be estimated

25.Paxson's December 31, 2013 prepaid expense balance was $9,000. During 2014, $7,000 of the prepaid expense asset expired. How much cash did
Paxson pay toward prepaid expenses in 2014?

$4,000

$8,000

$10,000

Cannot be estimated
The next 4 questions refer to Bayside Company's 2014 Income Statement.

26.Bayside began 2014 with an inventory T-account debit balance of $155,000. Inventory purchases during the year amounted to $75,000. There were
no inventory-related write-downs or losses. Its December 31, 2014 inventory account balance is:

$170,000

$140,000

$10,000

Cannot be estimated

27.Bayside began 2014 with a retained earnings account balance of $132,000. During 2014, it did not declare or pay any dividends. Its December 31,
2014 retained earnings account balance is:

$132,000

$120,000

$144,000

Cannot be calculated

28.Bayside began 2014 with an interest payable account balance of $13,000. On December 31, 2014, its interest payable account balance is $11,000.
How much interest was paid during 2014?

$4,000

$5,000

$2,000

$3,000

29.Bayside began 2014 with a taxes payable account balance of $3,000. During the year, it made a cash payment of $2,000 to the tax authorities. On
December 31, 2014, its taxes payable account balance is:

$7,000

$5,000

$8,000

Cannot be calculated

30.The first line item in Torrington Company's statement of cash flows is its positive net income for the period. From this we can say for sure that:

This is Torrington's direct method statement of cash flows

Torrington's cash flow from operations is positive

This is Torrington's indirect method statement of cash flows

Torrington's operating cash flows exceeded its net income for the period

31.Plaza Realty's statement of cash flows shows that during 2014, it had a net investing cash inflow of $20,000; a net financing outflow of $10,000 and a
net increase in the cash balance of $30,000. Its cash flow from operations must be:

A net inflow of $0

A net inflow of $20,000

A net inflow of $40,000

A net outflow of $30,000

32.Spinner Toy Company's inventory account increased from $15,000 on December 31, 2013 to $20,000 on December 31, 2014. Pick one statement
from the set below that would reconcile with this increase in Spinner's inventory account:

Spinner's 2014 cost of goods sold was $42,000; its 2014 inventory purchases were $37,000

Spinner's 2014 cost of goods sold was $20,000; its 2014 inventory purchases were $15,000

Spinner's 2014 cost of goods sold was $42,000; its 2014 inventory purchases were $47,000

Spinner's 2014 cost of goods sold was $15,000; its 2014 inventory purchases were $10,000
33.The next 5 questions are based on the following scenario:

On January 1, 2012, Suntory Company purchased a stamping machine for $100,000. It had an estimated useful life of 5 years and a disposal value of
$10,000. The machine is depreciated on a straight-line basis and on December 31, 2016, it is sold for $20,000.

The fact that the machine is recorded as an asset on January 1, 2012 and depreciated - or recorded as an expense - over time, is a reflection of the:

Materiality concept

Matching concept

Conservatism concept

Consistency concept

34.On January 1, 2012, Suntory Company purchased a stamping machine for $100,000. It had an estimated useful life of 5 years and a disposal value
of $10,000. The machine is depreciated on a straight-line basis and on December 31, 2016, it is sold for $20,000. In 2014, how much annual
depreciation expense would Suntory record on the stamping machine?

$20,000

$10,000

$18,000

Cannot be estimated with the data provided

35.On January 1, 2012, Suntory Company purchased a stamping machine for $100,000. It had an estimated useful life of 5 years and a disposal value
of $10,000. The machine is depreciated on a straight-line basis and on December 31, 2016, it is sold for $20,000. On Suntory's December 31, 2014
balance sheet accounts, the stamping machine would have a net book value of:

$46,000

$36,000

$54,000

$64,000

36.On January 1, 2012, Suntory Company purchased a stamping machine for $100,000. It had an estimated useful life of 5 years and a disposal value
of $10,000. The machine is depreciated on a straight-line basis and on December 31, 2016, it is sold for $20,000. For the 2016 annual accounting
period, Suntory will:

Record a loss of $10,000 on the stamping machine

Reduce the depreciation recorded on the stamping machine by $20,000

Reduce the depreciation recorded on the stamping machine by $10,000

Record a gain of $10,000 on the stamping machine

37.On January 1, 2012, Suntory Company purchased a stamping machine for $100,000. It had an estimated useful life of 5 years and a disposal value
of $10,000. The machine is depreciated on a straight-line basis and on December 31, 2016, it is sold for $20,000. The $20,000 cash inflow from the sale
of the stamping machine will:

Be included in the operating activities section of Suntory's 2016 statement of cash flows

Be included in the investing activities section of Suntory's 2016 statement of cash flows

Be included in the financing activities section of Suntory's 2016 statement of cash flows

Not be included in Suntory's 2016 statement of cash flows


38.The following 3 questions are based on Jonas & Daughters' cash T-account at the close of business on December 31, 2014.

Jonas & Daughters' 2014 cash flow from operations is:

A net inflow of $38,000

A net outflow of $38,000

A net inflow of $46,000

A net outflow of $46,000

39.Jonas & Daughters' 2014 cash flow from investing activities is:

A net inflow of $10,000

A net outflow of $7,000

A net outflow of $1,000

A net inflow of $7,000

40.Jonas & Daughters' 2014 cash flow from financing activities is:

A net inflow of $75,000

A net outflow of $68,000

A net inflow of $68,000

A net inflow of $50,000

41.A company raised $50,000 in cash by taking a one-year loan from a bank. Which of the following best describes the journal entry to record this
transaction:

Debit short-term debt $25,000; credit cash $25,000

Debit short-term debt $50,000; credit cash $50,000

Debit cash $50,000; credit long-term debt $50,000

Debit cash $50,000; credit short-term debt $50,000

42.Which one of the following statements describes the rules about posting transactions into T-accounts in the ledger:

For assets, debits are entered on the left; for liabilities, credits are entered on the left

For assets, credits are entered on the left; for liabilities, debits are entered on the left

Debits on the left; credits on the right

Credits on the left; debits on the right

43.Morgan & Sons needs to record annual depreciation of $12,000 on its plant assets. Which statement best describes the appropriate way to record
the depreciation?

Debit accumulated depreciation $12,000; credit depreciation expense $12,000

Debit depreciation expense $6,000; credit accumulated depreciation $6,000


Debit depreciation expense $12,000; credit accumulated depreciation $12,000

Debit accumulated depreciation $12,000; credit plant assets $12,000

44.Taylor Company had a salaries payable balance of $420,000 on December 31, 2013. During 2014, it paid $550,000 in cash as salaries, and recorded
a salary expense of $500,000. Its December 31, 2014 salaries payable balance is:

$470,000

$370,000

$920,000

Cannot be determined from the information provided

45.On June 30, 2014, Zono Electronics, Inc. made a payment of $3,500 to State Bank. Of that payment, $2,500 was interest and the rest was a payment
towards the outstanding long-term loan principal. Choose the statement that best describes the recording of this financial transaction:

Debit long-term loan $2,500; debit interest expense $1,000; credit cash $3,500

Debit cash $3,500; credit long-term loan $2,500; credit interest expense $1,000

Debit long-term loan $3,500; credit cash $3,500

Debit interest expense $2,500; debit long-term loan $1,000; credit cash $3,500

46.Sardi Company estimates its 2015 tax expense to be $30,000. It makes a cash payment of $20,000 to the tax authorities on December 31, 2015.
Choose the statement that best describes the recording of this transaction:

Debit tax expense $30,000; credit cash $10,000; credit taxes payable $20,000

Debit tax expense $30,000; credit cash $20,000; credit taxes payable $10,000

Debit tax expense $20,000; credit cash $20,000

Debit tax expense $30,000; credit cash $20,000; credit accounts payable $10,000

47.On June 1, 2015, Planet Music has accounts payable of $12,000. During the month, debits of $3,000 and credits of $11,000 were made to the
account. At the end of June 2015, what was the accounts payable balance?

A credit balance of $20,000

A debit balance of $20,000

A credit balance of $4,000

A debit balance of $4,000

48.Barnaby & Sons receives a large shipment of goods from its supplier. It pays $42,000 at the time of delivery and promises to pay the remaining
$58,000 within the next two months. What is the appropriate journal entry for this transaction?

Debit cash $42,000; debit inventory $16,000; credit accounts payable $58,000;

Debit inventory $100,000; credit cash $42,000; credit accounts payable $58,000

Debit accounts payable $58,000; credit cash $42,000; credit inventory $16,000

Debit accounts payable $58,000; debit cash $42,000; credit inventory $100,000

49.Pots and Things, a cookware retailer, sells a coffee machine to a customer for $150. The customer pays $100 in cash and puts the rest on her store
credit account. Which one of the following statements describes the most appropriate accounting for the transaction?

Debit cash $100; debit accounts receivable $50; credit cost of good sold $150

Debit cash $100; debit accounts receivable $50; credit revenues $150

Debit revenues $150; credit cash $100; credit accounts receivable $50

Debit cash $100; debit accounts receivable $50; credit inventory $150
50.Pots and Things, the cookware retailer, sells a crock pot to a customer for which Pots and Things had paid $90. Which one of the following
statements describes the most appropriate accounting for the transaction:

Debit cost of goods sold expense $90; credit cash $90

Debit inventory $90; credit cost of goods sold expense $90

Debit cost of goods sold expense $90; credit inventory $90

Debit inventory $90; credit accounts payable $90