MULTIPLE CHOICE
MULTIPLE CHOICE
1. The balance sheet reports:
a. | the assets, liabilities, gains, and losses for a period of time |
b. | the changes in assets, liabilities, and equity for a period of time |
c. | the assets, expenses, and liabilities as of a certain date |
d. | the probable future benefits, probable future sacrifices, and residual interest for a period of time |
e. | the financial condition of an accounting entity as of a particular date |
2. Which of the following would not appear on a conventional balance sheet?
a. | income taxes payable |
b. | funds from operations |
c. | cash surrender value of life insurance |
d. | appropriation for contingencies (restriction of retained earnings) |
e. | patents |
3. At the beginning of the year, Execon Company had total assets of $200,000, total liabilities of $110,000, and shareholders' equity of $90,000. For the year, Execon Company earned net income of $75,000 and declared cash dividends of $30,000. At the end of the year, the company had total assets of $300,000 and its shareholders' equity was at $135,000. At the end of the year, Execon Corporation had total liabilities of:
a. | $0 |
b. | $45,000 |
c. | $50,000 |
d. | $165,000 |
e. | none of the answers are correct |
4. Ownership of debt instruments of the government and other companies that can be readily converted to cash are best reported as:
a. | long-term investments |
b. | cash |
c. | marketable securities |
d. | intangibles |
e. | inventory of near-cash items |
5. Tangible assets on the balance sheet should include:
a. | equipment |
b. | taxes payable |
c. | trademarks |
d. | bonds payable |
e. | none of the answers are correct |
6. The current asset section of the balance sheet should include:
a. | land |
b. | trademarks |
c. | investment in C Company (for purposes of control) |
d. | dividends payable |
e. | work in process inventory |
7. The current liability section of the balance sheet should include:
a. | buildings |
b. | goodwill |
c. | land held for speculation purposes |
d. | accounts payable |
e. | none of the answers are correct |
8. Which of the following is not a current asset?
a. | marketable securities |
b. | material inventory |
c. | unearned rent income |
d. | prepaid interest |
e. | prepaid insurance |
9. If a parent has some control over a subsidiary but the subsidiary is not consolidated, the subsidiary is accounted for as:
a. | a marketable security |
b. | an investment |
c. | a liability |
d. | a fixed asset |
e. | none of the answers are correct |
10. Which of the following is not a proper use of notes?
a. | To describe the nature and effect of a change in accounting principle, such as from FIFO to LIFO. |
b. | To indicate the basis for asset valuation. |
c. | To indicate the method of depreciation. |
d. | To correct an improper financial statement presentation. |
e. | To describe a firm's debt. |
11. Company A owns shares of Company B and Company C. The statements of Company B are consolidated with those of Company A. The statements of Company C are not consolidated. Company A reports "Minority Interest" on its balance sheet. This account represents:
a. | A's minority share of the stock of B |
b. | A's minority share of the stock of C |
c. | the minority share by outside owners of the stock of A |
d. | the minority share by outside owners of the stock of B |
e. | the minority share by outside owners of the stock of C |
12. Drama Products Inc. has issued redeemable preferred stock. For analysis purposes, these securities are best classified as:
a. | marketable securities |
b. | long-term investments |
c. | long-term debt |
d. | paid-in capital |
e. | retained earnings |
13. Treasury stock is best classified as:
a. | a current asset |
b. | a long-term investment |
c. | a contra liability |
d. | a reduction of stockholders' equity |
e. | a reduction of retained earnings |
14. Which of the following is not a common characteristic of preferred stock?
a. | voting rights |
b. | preference as to dividends |
c. | preference in liquidation |
d. | callability by the corporation |
e. | none of the answers are correct |
15. Which of the following is not a problem inherent in balance sheet presentation?
a. | Most assets are valued at cost. |
b. | Varying methods are used for asset valuation. |
c. | Not all items of value to the firm are included as assets. |
d. | Liabilities related to contingencies may not appear on the balance sheet. |
e. | The owners' interest will be indicated. |
16. Which of the following is not true relating to treasury stock?
a. | A firm creates treasury stock when it repurchases its own stock and does not retire it. |
b. | Treasury stock lowers the stock outstanding. |
c. | Treasury stock may be recorded at the cost of the stock. |
d. | Treasury stock may be recorded at par or stated value. |
e. | Treasury stock is, in essence, an increase in paid-in capital. |
17. Which of the following is not true about an ESOP?
a. | An ESOP will reduce the amount of voting stock in the hands of employees. |
b. | An ESOP must be a permanent trusted plan for the exclusive benefit of the employees. |
c. | The plan participants become eligible for favorable taxation of distributions from the plan. |
d. | Commercial lending institutions, insurance companies, and mutual funds are permitted an exclusion from income for 50% of the interest received on loans used to finance an ESOP's acquisition of company stock. |
e. | An ESOP may reduce the potential of an unfriendly takeover. |
18. The most popular depreciation method for financial reporting is the following:
a. | units-of-production |
b. | sum-of-the-years’-digits |
c. | declining-balance |
d. | straight-line |
e. | other |
19. Which of the following is a current liability?
a. | prepaid insurance |
b. | account receivable |
c. | unearned rent revenue |
d. | building |
e. | common stock |
20. Which of the following accounts would not be classified as an intangible?
a. | franchises |
b. | research and development |
c. | patent |
d. | trademarks |
e. | goodwill |
11 years ago
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