ACCT 504 Final Exam MCQs Only

Question 1.1. (TCO A) An advantage of the corporate form of business is _____. (Points : 5)

      [removed] it is simple to establish

      [removed] the corporate tax rate is less than the personal tax rate

      [removed] corporations must pay dividends

      [removed] the shareholders are not responsible for the corporation’s debts

Question 2.2. (TCO A) Dividends flow through which one of the following statements? (Points : 5)

      [removed] The Balance Sheet

      [removed] The Statement of Retained Earnings

      [removed] The Income Statement

      [removed] None of the above

Question 3.3. (TCOs A, B) Below is a partial list of account balances for LBJ Company:

Cash	$15,000
Prepaid insurance	1,000
Accounts receivable	3,500
Accounts payable	3,000
Notes payable	6,000
Common stock	100,000
Dividends	1,500
Revenues	75,000
Expenses	45,500

What did LBJ Company show as total credits? (Points : 5)

      [removed] $185,500

      [removed] $250,500

      [removed] $66,000

      [removed] $184,000

Question 4.4. (TCOs B, E) Which of the following statements is correct with regard to accrual accounting? (Points : 5)

      [removed] Accrual accounting is consistent with the matching principle.

      [removed] Accrual accounting is less complex than the cash-basis method.

      [removed] Accrual accounting does not record expenses until paid.

      [removed] Accrual accounting does not record revenue until payment is received.

Question 5.5. (TCO D) Which inventory method will result in the lowest income taxes when prices are decreasing? (Points : 5)

      [removed] The average cost method

      [removed] LIFO

      [removed] FIFO

      [removed] Income tax expense will be the same.

Question 6.6. (TCO A, E) Equipment was purchased for $27,000. Freight charges amounted to $1,000 and there was a cost of $5,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $5,000 salvage value at the end of its 7-year useful life. Depreciation expense each year using the straight-line method will be _____. (Points : 5)

      [removed] $4,714

      [removed] $4,000

      [removed] $3,857

      [removed] $3,285

Question 7.7. (TCOs D, G) When the market rate of interest is equal to the stated rate of interest on the bond, the bond will require _____. (Points : 5)

      [removed] a debit to Discount on Bonds Payable

      [removed] a credit to Discount on Bonds Payable

      [removed] a credit to Bonds Payable

      [removed] a debit to Bonds Payable

Question 8.8. (TCO C) Accounts receivable arising from sales to customers amounted to $50,000 and $45,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $150,000. Based on these transactions, the cash flows from operating activities to be reported on the statement of cash flows would be _____. (Points : 5)

      [removed] $195,000

      [removed] $145,000

      [removed] $115,000

      [removed] $155,000

Question 9.9. (TCO F) If you are calculating the percentage change between 2 years worth of sales data, you are conducting a _____. (Points : 5)

      [removed] common-size analysis

      [removed] vertical analysis

      [removed] horizontal analysis

      [removed] ratio analysis

Question 10.10. (TCO F) When performing a common-size Income Statement, the 100% figure is _____. (Points : 5)

      [removed] net sales

      [removed] total liabilities plus stockholders’ equity

      [removed] net income

      [removed] total assets

Question 11.11. (TCO F) Ratios are most useful in expressing _____. (Points : 5)

      [removed] cause-and-effect relationships

      [removed] the relationships between numbers

      [removed] the delta between numbers

      [removed] the root cause of the problem

Question 12.12. (TCO F) Creditors are usually most concerned with analyzing _____. (Points : 5)

      [removed] the company stock price

      [removed] turnover

      [removed] liquidity

      [removed] profitability

Question 13.13. (TCO F) Shareholders are usually most interested in evaluating _____. (Points : 5)

      [removed] profitability

      [removed] leverage

      [removed] turnover

      [removed] the ability to pay debts as they come due

Question 14.14. (TCO G) To calculate the market value of a bond, we need to use the time-value-of-money concept called _____. (Points : 5)

      [removed] interpolation

      [removed] future value

      [removed] compounding

      [removed] discounting

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