acct 3001 exam 1 practice

Topics: Income statement, Balance sheet, Revenue Pages: 5 (1212 words) Published: February 5, 2015
PRACTICE – Ch1 through Ch6

Chapter 1

1.What is the objective of financial reporting?
a.Provide information that is useful to management in making decisions. b.Provide information that clearly portray nonfinancial transactions. c.Provide information about the reporting entity that is useful to present and potential equity investors lenders, and other creditors. d.Provide information that excludes claims to the resources.

2.When making decisions, investors are interested in assessing? a.the company’s ability to generate net cash inflows.
b.management’s ability to protect and enhance the capital providers’ investments. c.Both a and b.
d.the company’s ability to generate net income.

Chapter 2
3.What is meant by comparability when discussing financial accounting information? a.Information has predictive or confirmatory value.
b.Information is reasonably free from error.
c.Information that is measured and reported in a similar fashion across companies. d.Information is timely.

4.The two fundamental qualities that make accounting information useful for decision making are a.comparability and timeliness.
b.materiality and neutrality.
c.relevance and faithful representation.
d.faithful representation and comparability.

7.Which of the following elements of financial statements is not a component of comprehensive income? a.Revenues
b.Distributions to owners
c.Losses
d.Expenses

9.Generally, revenue from sales should be recognized at a point when a.management decides it is appropriate to do so.
b.the product is available for sale to the ultimate consumer. c.the entire amount receivable has been collected from the customer and there remains no further warranty liability. d.none of these.

Chapter 3
10.An accounting record into which the essential facts and figures in connection with all transactions are initially recorded is called the
a.ledger.
b.account.
c.trial balance.
d.none of these.

11.When an item of expense is paid and recorded in advance, it is normally called a(n)
a.prepaid expense.
b.accrued expense.
c.estimated expense.
d.cash expense.

12. An accrued expense can best be described as an amount
a.paid and currently matched with earnings.
b.paid and not currently matched with earnings.
c.not paid and not currently matched with earnings.
d.not paid and currently matched with earnings.

13.Hansen Corporation received cash of $27,000 on September 1, 2012 for one year’s rent in advance and recorded the transaction with a credit to Unearned Rent Revenue. The December 31, 2012 adjusting entry is

a.debit Rent Revenue and credit Unearned Rent Revenue, $9,000.
b.debit Rent Revenue and credit Unearned Rent Revenue, $18,000.
c.debit Unearned Rent Revenue and credit Rent Revenue, $9,000.
d.debit Cash and credit Unearned Rent Revenue, $18,000.

14.L’Orange Company's account balances at December 31, 2012 for Accounts Receivable and the Allowance for Doubtful Accounts are $480,000 debit and $900 credit. Sales during 2012 were $1,350,000. It is estimated that 2% of sales will be uncollectible. The adjusting entry would include a credit to the allowance account for

a.$14,400.
b.$13,500.
c.$12,600.
d.$27,000.

Chapter 4
15.In order to be classified as an extraordinary item in the income statement, an event or transaction should be a.unusual in nature, infrequent, and material in amount.
b.unusual in nature and infrequent, but it need not be material. c.infrequent and material in amount, but it need not be unusual in nature. d.unusual in nature and material, but it need not be infrequent.

16.For Ronda Company, the following information is available: Cost of goods sold$175,000
Income tax expense27,000
Operating expenses105,000
Sales500,000
Dividend revenue12,000

In Ronda's multiple-step income statement, gross profit
a.should not be...
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