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WorksheetsWGU Accounting
Total questions: 80
Worksheet time: 40mins
A borrower benefits from providing financial information regarding income and expenses in the form of a lower interest rate on the loan because of reduced uncertainty for the lender with regard to repayment.
True
False
Which of the following is NOT one of the three primary financial statements?
The Statement of Retained Earnings
The Balance Sheet
The Statement of Cash Flows
The Income Statement
One reason for a company's preparing and providing financial statements is to reduce uncertainty for an investor regarding the firm's future financial performance.
True
False
The idea that the activities of the entity are to be separated from those of the individual owner is the
Separate entity concept
Arm's-length transaction assumption
Money measurement concept
Going concern assumption
Which of the following financial statements provides a picture of the enterprise at a particular point in time?
Balance Sheet
Statement of Retained Earnings
Statement of cash flow
Income Statement
Which of the following accounts is considered to be the most liquid?
Lane
Inventory
Accounts Receivable
Cash
The idea that businesses must be accounted for as though they will exist at least for the foreseeable future is the
Arm's-length transaction assumption
Entity concept
Monetary measurement concept
Going concern concept
Which of the following would be considered a long-term liability?
Wages payable
Mortgage payable
Accounts payable
Land
Which of the following generally is NOT considered to be a liability?
Accounts payable
Taxes payable
Inventory
Notes payable
Owners of a corporation are referred to as
stockholders
debtors
creditors
partners
Which of the following types of accounts show evidence of aquired resources?
Owners' equity
Both liabilities and owners' equity
Assests
Liabilities
Which of the following is generally considered to be an asset?
Notes payable
Mortgage payable
Unearned revenue
Accounts Receivable
If a corporation has total assets of $350,000, total liabilities of $150,000, and retained earnings of $100,000, what is the amount of capital stock?
$100,000 Capitalstock:$350,000−$150,000−$100,000=$100,000
$0
$250,000
$150,000
Current assets usually are listed on a balance sheet in
Decreasing order of profitability
Increasing order of liquidity
A random fashion
Decreasing order of liquidity
Which of the following accounts would NOT be considered a current asset?
Inventory
Accounts receivable
Equipment
Cash
In non-U.S. Balance sheets, you will often see each of the following EXCEPT:
Property, plant, and equipment will be listed first
The stockholders’ equity section will be listed first on the balance sheet
Current assets and current liabilities will be netted together
This is sometimes done in place of recognition when the effects of an event cannot be quantified with any degree of certainty.
Valuation
Materiality
Disclosure
Recognition
The process of determining the dollar value to assign to an item that is to be recognized in the financial statements is called
Valuation
Disclosure
Materiality
Recognition
The process of valuation involves computing numbers that are both
Comparable and consistent
Relevant and reliable
Material and conservative
Understandable and useful
The process of formally recording an item in the accounting records so that it will be reflected in the financial statements is called
Materiality
Recognition
Valuation
Disclosure
Historical cost has long been used in accounting because it is
Reliable
Conservative
Relevant
Useful
When an investor pays cash into a business to become a part owner, the effect on the accounting equation for the business will be to
Increase Cash and increase Paid-in Capital
Increase Cash and increase a liability
Increase a liability and increase Paid-in Capital
Decrease a liability and increase Paid-in Capital
When a company borrows money from a bank to be repaid in over time, the effect on the accounting equation for the company will be to
Increase Cash and increase Paid-in Capital
Increase Cash and increase Bank Loan Payable
Increase Cash and decrease Bank Loan Payable
Increase Bank Loan Payable and increase Paid-in Capital
When a company pays for a warehouse by paying cash, the effect on the accounting equation will be to
Increase Buildings and increase a liability
Increase Equipment in increase Cash
Increase Equipment and decrease Cash
Increase Buildings and decrease Cash
When a company buys a warehouse by using a mortgage with a local bank, the effect on the accounting equation for the company will be to
Decrease Cash and increase Buildings
Increase Buildings and increase Mortgage Payable
Increase Cash and increase Mortgage Payable
Increase Mortgage Payable and increase Inventory
When a company rents a warehouse by paying for the first six month’s rent in advance, the effect on the accounting equation on the day of payment would be to
Increase Buildings and decrease Cash
Increase Prepaid Rent and decrease Cash
Increase Land and decrease Cash
Increase Cash and increase Prepaid Rent
A company’s asset mix is determined by
Dividing each asset item on the balance sheet by total assets
Dividing each asset item on the balance sheet by total equity
Dividing each asset item on the balance sheet by total liabilities
Dividing each balance sheet item by total sales for the period
A company’s asset mix is strongly influence by
Government regulation affecting the company
The company’s industry
A company’s competitors
The philosophy of management regarding financing decisions
Financing mix is a measure of
A company’s competitors
Government regulation affecting the company
The degree to which a company finances assets using liabilities or owners’ equity
The company’s industry
Given the following information, compute comprehensive income -
Extraordinary Loss -80
Income Taxes 150
Interest Expense 100
Operating Income 1,500
Unrealized Gain not included in Net Income 120
$1,500
$1,170
$1,250
$1,290 $1,500−$150−$100−$80+120=$1,290
A measure of a company's performance that is intended to summarize in one number the overall economic performance of a company in a given period is -
Net Income
Income from Continuing Operations
Operating Income
Comprehensive Income
Operating Income is equal to -
Gross Profit plus Cost of Goods Sold
Sales less Cost of Goods Sold
Comprehensive Income plus and unrealized gains and losses not included in Net Income
Income from Continuing Operations plus Income Tax Expense and Interest Expense plus/minus other miscellaneous revenues, expenses, gains, and losses
Given the following information, compute operating income
Cost of Goods Sold $2,000
Extraordinary Item -170
Income Taxes 350
Interest Expense 200
Operating Expenses 1,500
Sales 5,500
$1,450
$1,280
$3,500
$2,000
Gross profit is the difference between -
Sales and Variable Costs
Operating Income and Income Tax Expense
Sales and Cost of Goods Sold
Net Income and Comprehensive Income
Which of the following is the correct way to date an income statement?
At December 31, 2012
December 31, 2012
As of December 31, 2012
For the Year Ended December 31, 2012
If a company has $528,000 of sales revenue, pays $26,400 in dividends, and has net income of $158,400, how much were the expenses for the year?
$343,200
$396,000
$369,600
$422,400
Which of the following is a revenue generating activity?
Selling capital stock
Borrowing money from a bank
Selling a product
Paying rent
When a company determines to get out of a specific line of business
Only the net of revenues and expenses and the net of the assets and liabilities is disclosed in the financial statements.
Assets and liabilities from the discontinued line are included with other assets and liabilities until they are sold.
Revenues and expenses from that line of business are excluded from the company’s recurring revenues and expenses when preparing an income statement.
All revenues, expenses, assets, and liabilities of the discontinued line of business are excluded from the financial statements and instead are disclosed in the financial statement notes.
With a multiple-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two.
True
False
When revenue and expense items are arranged to highlight important profit relationships, the resulting income statement format is called a -
single-step income statement
comparative income statement
multiple-step income statement
classified income statement
With a single-step income statement all revenues are grouped together, all expenses are grouped together, and net income is computed as the difference between the two.
True
False
Under the general rule of revenue recognition, revenue is recognized when
marketability and market price are assured.
all related expenses have been incurred.
the earnings process is complete, and a valid promise of payment has been received.
a contractual agreement exists, and cash collection is assured.
An example of direct matching of an expense with revenues would be
depreciation expense.
direct labor costs incurred to produce inventory sold during a period.
office salaries expense.
advertising expense.
Which of the following principles best describes the rationale for matching administrative and selling expenses with revenues of the current period?
Systematic and rational allocation
Direct matching
Immediate recognition
Partial recognition
Which of the following is NOT an acceptable basis for the recognition of expenses?
Systematic and rational allocation
Direct matching
Cash disbursement
Immediate recognition
The revenue principle states that revenue should be recognized at a point when
the seller has shipped merchandise to a customer under the terms that the customer need not pay for the merchandise until it is sold.
an order for shipment of a definite amount of merchandise has been received.
an exchange transaction involving goods and services has occurred and the earnings process is essentially complete.
a contract between buyer and seller has been signed by both parties.
Costs that can be reasonably associated with specific revenues but NOT with specific products should be
charged to expense in the period incurred.
allocated to specific products based on the best estimate of the production processing time.
capitalized and then amortized over a period not to exceed 60 months.
expensed in the period in which the related revenue is recognized.
Which of the following categories of expenses is subject to immediate recognition on the income statement?
The salary of the company president
Utilities expense for the production line of a manufacturer
Repairs and maintenance expense incurred on production equipment of a manufacturer
The salary of the production foreman
Which of the following is an application of the principle of systematic and rational allocation?
Telephone expense
Depreciation expense
Sales commissions
Office salaries
Analysis of revenue and expense transactions requires the use of the:
Assets-to-equity Ratio
Break-even Point
Expanded Accounting Equation
Cash Flow Adequacy Equation
Thus far, the only national government to adopt the accrual basis for its official accounting system is ______.
The United States of America
No country has adopted the accrual basis for its official accounting system
France
New Zealand
Which of the following statements is true regarding retained earnings?
Increasing revenues will increase retained earnings
Increasing expenses will decrease retained earnings
ncreasing dividends will decrease retained earnings
All of the statements are true
______ is/are not considered to be an expense of doing business.
Wages
Cash dividends
Buying Landscaping Supplies
None are considered to be an expenses of doing business
____ is increased and ____ is decreased when cash is collected from customers who had previously purchased a product or service on account.
Cash, Accounts Receivable
Assets, Liability
Debt, Cash
Cash, Accounts Payable
Most forecasting exercises begin with a forecast of
total assets.
sales.
cash.
net income.
If a company anticipates a 40% increase in sales volume, then it is most likely that the company will need about a 40% increase in
property, plant, and equipment.
accounts payable.
operating profit.
bank loans payable.
The statement of cash flows replaces the
Balance sheet
Statement of financial position
Income statement
None of these
The statement of cash flows
Is intended primarily to provide necessary information for assessing the profitability of an entity
Provides a connecting link between two consecutive income statements
Summarizes all cash inflows and outflows of an entity for a given period of time
Is a required statement only for those companies using cash-basis accounting
Which of the following is NOT a purpose of the statement of cash flows?
It provides investors with information about the investing and financing activities of an entity.
It measures the profitability of an entity.
It provides information about an entity's cash receipts and payments over a period of time.
It highlights changes in managerial strategy regarding investments and finances.
Which of the following statements is NOT true?
The statement of cash flows provides details as to how the cash account changed during a period.
The statement of cash flows does not replace the income statement.
The statement of cash flows sheds some light on a company's ability to generate income in the future.
The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement.
Which of the following would be classified as an operating activity on a statement of cash flows?
Cash received from selling equity securities
Cash dividends paid to stockholders
Cash received as dividends on investments
Cash paid to purchase treasury stock
Which of the following is the typical sequencing of activities on the statement of cash flows?
Investing, financing, and operating
Operating, investing, and financing
Investing, operating, and financing
Operating, financing, and investing
Which of the following would NOT be reported as an investing activity on a statement of cash flows?
Collection of a long-term note receivable
Amounts borrowed
Sale of a building
Extending loans to other entities
Significant noncash financing transactions
Should not be disclosed in the body of a statement of cash flows but should appear in the notes to the financial statements elsewhere
Are included parenthetically on a statement of cash flows
Should not be disclosed at all since they are irrelevant to actual performance
Are deducted from net income to determine cash provided by operating activities on a statement of cash flows
Which of the following would be reported as a cash flow from financing activities?
Cash receipts from dividends on long-term investments
Cash receipts from the issuance of long-term debt
Cash receipts from the sale of equipment
Cash receipts from interest on notes receivable
Which of the following would be reported as a financing activity on a statement of cash flows?
Purchase of treasury stock
Receipt of a dividend
Payment of interest
Proceeds from the sale of land
Which of the following would NOT be considered cash or cash equivalents for purposes of preparing a statement of cash flows?
Checking accounts
Treasury bills
Money market funds
Notes receivable
The repayment of the principal on a loan should be classified as a(n)
Noncash transaction
Financing activity
Operating activity
Investing activity
Which of the following would NOT be reported as an investing activity on a statement of cash flows?
Extending loans to other entities
Sale of a building
Collection of a long-term note receivable
Amounts borrowed
Which of the following would be added to net income on a statement of cash flows prepared using the indirect method?
A gain from the sale of equipment
A decrease in accounts receivable
A decrease in accounts payable
Dividends received
The method that begins with net income or net loss and adjusts that number for items that did not affect cash is called the
Indirect method
Operating method
Cash-equivalent method
Direct method
Which of the following would be subtracted from net income on a statement of cash flows prepared by the indirect method?
A decrease in accounts receivable
An increase in accounts payable
An decrease in wages payable
Depreciation expense
Which of the following would be deducted from net income on a statement of cash flows prepared using the indirect method?
A decrease in accounts receivable
Dividends paid
A gain from the sale of equipment
An increase in accounts payable
Which of the following ratios is used to measure the profit earned on each dollar invested in a firm?
Asset turnover
Current ratio
Return on equity
Return on sales
Which of the following ratios is calculated using only balance sheet numbers?
Price earnings ratio
Return on sales
Current ratio
Asset turnover
Which of the following ratios represents an indication of investors' expectations concerning a firm's growth potential?
Return on equity
Earnings per share
Asset turnover
Price-earnings ratio
Which of the following below generally is the most useful in analyzing companies of different sizes?
Price-level accounting
Audit report
Comparative statements
Common-sized financial statements
In a common-size balance sheet, using the percent of sales method, each item on the balance sheet is typically expressed as a percentage of
Net income
Assets
Sales revenue
Equity
In a common-size income statement, each item on the statement is expressed as a percentage of
Gross profit
Revenue
Net income
Expenses
A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do?
Determine which companies in the same industry are at approximately the same stage of development.
Evaluate financial statements of companies within a given industry of approximately the same value.
Ascertain the relative potential of companies of similar size in different industries.
Compare the mix of revenue, and expenses, and determine efficient use of resources within a company over time or between companies within a given industry without respect to relative size.
