20 MCQ's

1. (TCO 1) Which of the following would not be considered an internal user of accounting data for a company? (Points : 4) 
President of a company
Controller of a company
Creditor of a company
Salesperson of a company

2. (TCO 1) Resources owned by a business are referred to as _________. (Points : 4) 
stockholders’ equity.
liabilities.
assets.
revenues.

3. (TCO 1) To show how successfully your business performed during a period of time, you would report its revenues and expenses in the _________. (Points : 4) 
balance sheet.
income statement.
statement of cash flows.
retained earnings statement.

4. (TCO 1) Henson Company began the year with retained earnings of $175,000. During the year, the company recorded revenues of $250,000, expenses of $190,000, and paid dividends of $20,000. What was Henson’s retained earnings at the end of the year? (Points : 4) 
$255,000
$215,000
$405,000
$235,000

1. (TCO 4) Which of the following statements is not true? (Points : 4) 
Comparability means using the same accounting principles from year to year within a company.
Reliability is the quality of information that gives assurance that it is free of error or bias.
Relevant accounting information must be capable of making a difference in a decision.
The FASB’s overriding criterion is that the accounting rule adopted should be the one that generates the most useful financial information for making a decision. 

2. (TCO 4) Using the following balance sheet and income statement data, what is the current ratio?
Current assets $9,000 Net income $12,000
Current liabilities 4,000 Stockholders’ equity 24,000
Total assets 30,000 Total liabilities 6,000
Average common shares outstanding was 10,000 (Points : 4) 
1.75:1
2.00:1
0.44:1
2.25:1

3. (TCO4) Using the following balance sheet and income statement data, what is the total amount of working capital?
Current assets $12,000 Net income $12,000
Current liabilities 8,000 Stockholders’ equity 24,000
Total assets 32,000 Total liabilities 8,000
Average common shares outstanding was 10,000 (Points : 4) 
$4,000
$24,000
$3,000
$10,000

4. (TCO 4) Using the following balance sheet and income statement data, what is the debt to total assets ratio?
Current assets $7,000 Net income $12,000
Current liabilities 4,000 Stockholders’ equity 21,000
Total assets 30,000 Total liabilities 9,000
Average common shares outstanding was 10,000 (Points : 4) 
75%
19%
57%
30%

1. (TCO 2) Franklin Company provided consulting services and billed the client $2,500. As a result of this event, _________. (Points : 4) 
assets remained unchanged.
assets increased by $2,500.
equity increased by $2,500.
both assets increased by $2,500 and equity increased by $2,500

2. (TCO 2) A credit is not the normal balance for which account listed below? (Points : 4) 
Common stock account
Revenue account
Liability account
Dividends account

3. (TCO 2) In the first month of operations, the total of the debit entries to the cash account amounted to $900 and the total of the credit entries to the cash account amounted to $400. The cash account has a _________ (Points : 4) 
$500 debit balance.
$900 debit balance.
$500 credit balance.
$400 credit balance.

4. (TCO 2) A trial balance would only help in detecting which one of the following errors? (Points : 4) 
A transaction that is not journalized
A journal entry that is posted twice
Offsetting errors made in recording the transaction
A transposition error when transferring the debit side of a journal entry to the ledger

1. (TCO 3) Related buying activities include _________
ordering, receiving, and paying.
ordering, selling, and paying.
ordering, shipping, and billing.
selling, shipping, and paying.

2. (TCO 3) Ron Jones has been a trusted employee for over 10 years. He is responsible for ordering merchandise inventory, receiving the inventory items, and authorizing the payment for these items. Which internal control principle, if any, is being violated?
None, Ron has proven to be trustworthy and has enough experience to do a good job.
Documentation procedures
Establishment of responsibilities
Segregation of duties

3. (TCO 3) For which of the following errors should the appropriate amount be subtracted from the balance per bank on a bank reconciliation?
Check for $43 recorded as $34
Deposit of $500 recorded by bank as $50
A returned $200 check recorded by bank as $20
Check for $35 recorded as $53

4) The standards and rules that are recognized as a general guide for financial reporting are called __________.
standards of financial reporting
generally accepted accounting principles
 operating guidelines
 generally accepted accounting standards

1) Sam's Used Cars uses the specific identification method of costing inventory. During March, Sam purchased three cars for $6,000, $7,500, and $9,750, respectively. During March, two cars are sold for $9,000 each. Sam determines that at March 31, the $9,750 car is still on hand. What is Sam’s gross profit for March?
A. $8,250
B. $4,500
C. $750
D. $5,250 

2) Which one of the following items is not generally used in preparing a statement of cash flows?
A. Additional information
B. Comparative balance sheets
C. Current income statement
D. Adjusted trial balance

3) The cost principle requires that when assets are acquired, they be recorded at __________.
A. list price
B. exchange price paid
C. selling price
D. appraisal value

4) What is the preparation of reports for each level of responsibility in the company’s organization chart called?
A. Master budgeting analysis
B. Responsibility reporting
C. Exception reporting
D. Static reporting