Session 37 Handout: 12/8/14
Supplemental Instruction
Iowa State University / Leader:
Course:
Instructor:
Date:
  1. Which of the following is not one of the four basic financial statements?
  2. The balance sheet
  3. The audit report
  4. The income statement
  5. The statement of cash flows
  6. Which of the following regarding retained earnings is false?
  7. Retained earnings is increased by net income
  8. Retained earnings is a component of stockholders’ equity on the balance sheet
  9. Retained earnings is an asset on the balance sheet
  10. Retained earnings represents earnings not distributed to stockholders in the form of dividends
  11. Which of the following is true regarding the income statement?
  12. The income statement is sometimes called the statement of operations
  13. The income statement reports revenues, expenses, and liabilities
  14. The income statement only reports revenues for which cash was received at the point of sale
  15. The income statement reports the financial position of a business at a particular point in time
  16. Which of the following is false regarding the balance sheet?
  17. The accounts shown on a balance sheet represent the basic accounting equation for a particular business
  18. The retained earnings balance shown on the balance sheet must agree with the ending retained earnings balance shown on the statement of retained earnings
  19. The balance sheet summarizes the net changes in specific account balances over a period of time
  20. The balance sheet reports the amount of assets, liabilities, and stockholders’ equity of a business at a point in time
  21. Which of the following is not one of the items required to be shown in the heading of a financial statement?
  22. The financial statement preparer’s name
  23. The title of the financial statement
  24. The financial reporting date or period
  25. The name of the business
  26. Which of the following statements regarding the statement of cash flows is false?
  27. The statement of cash flows separates cash inflows and outflows into three major categories: operating, investing, and financing
  28. The ending cash balance shown on the statement of cash flows must agree with the amount shown on the balance sheet at the end of the same period
  29. The total increase or decrease in cash shown on the statement of cash flows must agree with the bottom line (net income or net loss) reported on the income statement
  30. The statement of cash flows covers a period of time
  31. Which of the following is true?
  32. FASB creates SEC
  33. GAAP creates FASB
  34. SEC creates CPA
  35. FASB creates GAAP
  36. Which of the following is not required by the Sarbanes-Oxley Act?
  37. Top managers of public companies must sign a report certifying their responsibilities for the financial statements
  38. Public companies must maintain an audited system of internal control to ensure accuracy in accounting reports
  39. Public companies must maintain an independent committee to meet with the company’s independent auditors
  40. Top managers of public companies must be members of the American Institute of Certified Public Accountants
  41. Which of the following regarding GAAP is true?
  42. GAAP is an abbreviation for generally applied accounting principles
  43. Changes in GAAP always affect the amount of income reported by a company
  44. GAAP is the abbreviation for generally accepted accounting principles
  45. Changes to GAAP must be approved by the Senate Finance Committee
  46. Which of the following would not be a goal of external users reading a company’s financial statements?
  47. Understanding the current financial state of the company
  48. Assessing the company’s contribution to social and environmental policies
  49. Predicting the company’s future financial performance
  50. Evaluating the company’s ability to generate cash from sales
  51. At period end, Balloon Inc. reported having total assets of $279,451, total liabilities of 152,360, and ending retained earnings of 56,871. What was the balance for contributed capital?
  52. 82,650
  53. 70,220
  54. 127,091
  55. 73,640
  56. Given that Pledge Inc. had a beginning balance in retained earnings of 63,800, total revenues of 150,000, total expenses of 99,200, and dividends of 32,100. What was their net income for the period, and what was their ending retained earnings?
  57. (35,400); 82,500
  58. 67,100; 45,100
  59. 50,800; 82,500
  60. (35,400); 45,100
  1. What is the basic accounting equation?
  2. Assets+Liabilities=Stockholders’ Equity
  3. Assets-Liabilities=Stockholders’ Equity
  4. Assets=Liabilties-Stockholders’ Equity
  5. Assets=Liabilities+Stockholders’ Equity
  6. Which of the following is not an asset?
  7. Land
  8. Cash
  9. Contributed Capital
  10. Equipment
  11. The T-account is used to summarize which of the following?
  12. Increases and decreases to a single account in the accounting system
  13. Debits and credits to a single account in the accounting system
  14. Changes in specific account balances over a time period
  15. All of the above describe how T-accounts are used by accountants
  16. Total assets on a balance sheet prepared on any date must agree with which of the following?
  17. The sum of total liabilities and net income as shown on the income statement
  18. The sum of total liabilities and contributed capital
  19. The sum of total liabilities and retained earnings
  20. The sum of total liabilities and contributed capital and retained earnings
  21. The duality of effects can best be described as follows:
  22. When a transaction is recorded in the accounting system, at least two effects on the basic accounting equation will result
  23. When an exchange takes place between two parties, both parties must record the transaction
  24. When a transaction is recorded, both the balance sheet and the income statement must be impacted
  25. When a transaction is recorded, one account will always increase and one account will always decrease
  26. A company was recently formed with $50000 cash contributed to the company by stockholders. The company then borrowed $20000 from a bank and bought $10000 of supplies on account. The company also purchased $50000 of equipment paying $20000 in cash and issuing a note for the remainder. What is the amount of total assets to be reported on the balance sheet?
  27. $110000
  28. $100000
  29. $90000
  30. None of the above
  31. Which of the following describes how assets are listed on the balance sheet?
  32. In alphabetical order
  33. In order of magnitude, lowest value to highest value
  34. In the order they will be used up or turned into cash
  35. From least current to most current
  36. Which of the following statements describe transactions that would be recorded in the accounting system?
  37. An exchange of an asset for a promise to pay
  38. An exchange of a promise for another promise
  39. Both of the above
  40. None of the above
  41. If a publicly traded company is trying to maximize its perceived value to decision makers external to the corporation, the company is most likely ot report too small a value for which of the following on its balance sheet
  42. Assets
  43. Liabilities
  44. Retained earnings
  45. Contributed capital
  46. Which of the following statements are true regarding debits and credits?
  47. In any given transaction, the total dollar amount of the debits and the total dollar amount of the credits must be equal
  48. Debits decrease certain accounts and credits decrease certain accounts
  49. Liabilities and stockholders’ equity accounts usually end in debit balances
  50. All of the above
  51. Which of the following statements is true regarding the balance sheet?
  52. One cannot determine the true current value of a company by reviewing just its balance sheet
  53. The balance sheet reports assets only if they have been acquired through identifiable transactions
  54. A balance sheet shows only the ending balances, in a summarized format, of balance sheet accounts in the accounting system as of a particular date.
  55. All of the above
  56. Help.com paid $1500 cash for books purchased on account earlier in the month. Which of the following is the correct journal entry for the event?
  57. Cash 1500

Accounts Payable1500

  1. Supplies1500

Cash1500

  1. Accounts Payable1500

Cash1500

  1. Cash1500

Supplies1500

  1. If a company incorrectly records a payment as an asset, rather than as an expense how will this error affect net income in the current period?
  2. Net income will be too high
  3. Net income will be too low
  4. Net income will not be affected by this error
  5. It’s a mystery; nobody really knows
  6. Which of the following accounts normally has a debit balance?
  7. Unearned Revenue
  8. Rent Expense
  9. Retained Earnings
  10. Sales Revenue
  11. When should companies that sell gift cards to customers report revenue?
  12. When the gift card is sold and cash is received
  13. When the gift card is used by the customer
  14. At the end of the year in which the gift card is sold
  15. None of the above
  16. Which of the following items is not a specific account in a company’s accounting records?
  17. Accounts Receivable
  18. Net Income
  19. Sales Revenue
  20. Unearned Revenue
  21. The matching principle controls
  22. Where on the income statement expenses should be presented
  23. When revenues are recognized on the income statement
  24. The ordering of current assets and current liabilities on the balance sheet
  25. When costs are recognized as expenses on the income statement
  26. When expenses exceed revenues in a given period (and there are no gains or losses),
  27. Stockholders’ equity will not be impacted
  28. Stockholders’ equity will be increased
  29. Stockholders’ equity will be decreased
  30. One cannot determine the impact on stockholders’ equity without information about the specific revenues and expenses
  31. When should a company report the cost of an insurance policy as an expense?
  32. When the company first signs the policy
  33. When the company pays for the policy
  34. When the company receives the benefits from the policy over its period of coverage
  35. When the company receives payments from the insurance company for its insurance claims
  36. Which of the following is the entry to be recorded by a law firm when it receives a payment from a new client that will be earned when services are provided in the future?
  37. Debit accounts receivable; credit legal services revenue
  38. Debit unearned revenue; credit legal services revenue
  39. Debit cash; credit unearned revenue
  40. Debit unearned revenue; credit cash
  41. Which account is least likely to be debited when revenue is recorded?
  42. Accounts payable
  43. Accounts receivable
  44. Cash
  45. Unearned revenue
  46. Web Corporation reported the following amounts on its income statement: services revenue, $32500; utilities expense, $300; net income, $1600; and income tax expense, $900. If the only other amount reported on the income statement was for selling expenses, what amount would it be?
  47. $2200
  48. $29700
  49. $30000
  50. $30900
  51. What is the correct way to record the following event: ToysRUs collected $64000 in cash on $132000 of sales of merchandise, the rest were put on accounts.
  52. Sales Revenue132000

Cash64000

Accounts Payable68000

  1. Cash 64000

Accounts Receivable68000

Sales Revenue132000

  1. Cash68000

Accounts Payable64000

Sales Revenue132000

  1. Sales Revenue132000

Cash64000

Accounts Receivable68000

  1. This period Nike had sales revenue of $68975, selling expenses of $10340, general and administrative expenses of $6785, other revenue of $1538, and other expenses totaling $38562. What was Nike’s net income for the period?
  2. $14826
  3. $15203
  4. $11750
  5. $12457
  1. In the expanded accounting equation, what is different from the basic accounting equation
  2. There is no difference between the two
  3. In the expanded accounting equation, Assets is expanded to show that it includes revenues
  4. In the expanded accounting equation, Liabilities is expanded to show that it includes expenses
  5. In the expanded accounting equation, Stockholders’ equity is expanded to show that it consists of retained earnings which includes revenues and expenses
  6. Which of the following trial balances is used as a source for preparing the income statement?
  7. Unadjusted trial balance
  8. Pre-adjusted trial balance
  9. Adjusted trial balance
  10. Post-closing trial balance
  11. Which of the following accounts would NOT be involved in a deferral adjustment?
  12. Prepaid Rent
  13. Unearned Concessions Revenue
  14. Interest Receivable
  15. None of the above
  16. In the term unearned revenue, what does the term “unearned” mean.
  17. The service has been performed, but no money has been received
  18. Money has been received, but the company has not performed and is therefore liable to do so
  19. Money has not been exchanged, nor has a service been performed
  20. A service has been performed and cash has been received but it doesn’t count as revenue until the end of the period
  21. Which answer best describes the correct way to make the first closing entry?
  22. Credit all revenue accounts and debit all expense accounts
  23. Debit retained earnings and credit dividends declared
  24. Credit retained earnings and debit dividends declared
  25. Debit all revenue accounts and credit all expense accounts
  26. Which of the following is the correct order of the accounting process
  27. Analyze transactions, journal entries, financial statements, unadjusted trial balance, adjusting entries, adjusted trial balance, closing entries, post-closing trial balance
  28. Journal entries, analyze transactions, unadjusted trial balance, adjusting entries, adjusted trial balance, financial statements, closing entries, post-closing entries
  29. Analyze transactions, journal entries, unadjusted trial balance, adjusting entries, adjusted trial balance, financial statements, closing entries, post-closing trial balance
  30. Journal entries, analyze transactions, unadjusted trial balance, financial statements, adjusting entries, adjusted trial balance, closing entries, post-closing trial balance
  31. Which of the following accounts would not appear in a closing journal entry?
  32. Interest revenue
  33. Accumulated depreciation
  34. Retained earnings
  35. Salary expense
  36. On December 31, an adjustment is made to reduce unearned revenue and report (earned) revenue. How many accounts will be included in this adjusting journal entry
  37. None
  38. One
  39. Two
  40. Three
  41. When a concert promotions company collects cash for ticket sales two months in advance of the show date, which of the following accounts is recorded?
  42. Accrued liability
  43. Accounts receivable
  44. Prepaid expense
  45. Unearned revenue
  46. Assume a company receives a bill for $10000 for advertising done during the current year. If this bill is not yet recorded at the end of the year, what will the adjusting journal entry include?
  47. Debit to advertising expense of $10000
  48. Credit to advertising expense of $10000
  49. Debit to accrued liabilities of $10000
  50. Need more information to determine
  51. Which account is least likely to appear in an adjusting journal entry?
  52. Cash
  53. Interest receivable
  54. Income tax expense
  55. Salaries payable
  56. Company A has owned a building for several years. Which of the following statements regarding depreciation is false from an accounting perspective?
  57. Depreciation expense for the year will equal accumulated depreciation
  58. Depreciation is an estimated expense to be recorded each period during the building’s life
  59. As depreciation is recorded, stockholders’ equity is reduced
  60. As depreciation is recorded, total assets are reduced
  61. An adjusted trial balance
  62. Shows the ending balances in a debit and credit format before posting the adjusting journal entries
  63. Is prepared after closing entries have been posted
  64. Is a tool used by financial analysts to review the performance of publically traded companies
  65. Shows the ending balances resulting from the adjusting journal entries in a debit and credit format
  66. Assume the balance in prepaid insurance is $2500 but it should be $1500. The adjusting journal entry should include which of the following?
  67. Debit to prepaid insurance of $1000
  68. Credit to insurance expense of $1000
  69. Debit to insurance expense of $1000
  70. Debit to insurance expense of $1500
  71. An adjusting journal entry to recognize accrued salaries payable would cause which of the following?
  72. A decrease in assets and stockholders’ equity
  73. A decrease in assets and liabilities
  74. An increase in expenses, liabilities, and stockholders’ equity
  75. An increase in expenses and liabilities and a decrease in stockholders’ equity
  76. Which of the following financial statements does dividends declared appear on?
  77. Income statement, balance sheet, statement of retained earnings
  78. Income statement, statement of retained earnings
  79. Just the income statement
  80. Just the statement of retained earnings
  81. If total assets increase but total liabilities remain the same, what is the impact on the debt-to-assets ratio?
  82. Increases
  83. Decreases
  84. Remains the same
  85. Cannot be determined without additional information
  86. What type of audit report does a company hope to include with its annual report?
  87. Conservative report
  88. Qualified report
  89. Comparable report
  90. Unqualified report
  91. The asset turnover ratio is directly affected by which of the following categories of business decisions?
  92. Operating and investing decisions
  93. Operating and financing decisions
  94. Investing and financing decisions
  95. Operating, investing, and financing decisions
  96. Which of the following describes the order in which the assets are reported under IFRS?
  97. Increasing order of liquidity
  98. Increasing time to maturity
  99. Decreasing order of liquidity
  100. Decreasing time to maturity
  101. Costco and Sam’s Club are two companies that offer low prices for items packages in bulk. This strategy increases total sales volume but generates less profit for each dollar of sales. Which of the following ratios is improved by this strategy?
  102. Net profit margin
  103. Asset turnover
  104. Debt-to-assets
  105. All of the above
  106. Which of the following transactions will increase the debt-to-assets ratio?
  107. The company issues stock to investors
  108. The company uses cash to buy land
  109. The company issues a note payable to buy machinery
  110. None of the above
  111. Which of the following would increase the net profit margin ratio in the current year?
  112. Increase the amount of research and development in the last month of the year
  113. Decrease the amount of sales in the last month of the year
  114. Postpone routine maintenance work that was to be done this year
  115. All of the above
  116. Which of the following is always included in an annual report but never in a quarterly report?
  117. Balance sheet
  118. Income statement
  119. Management’s discussion and analysis
  120. Auditor’s report
  121. Which of the following reports is filed annually with the SEC?
  122. Form 10-Q
  123. Form 10-K
  124. Form 8-K
  125. Press release
  126. Which of the following describes a time-series analysis of your academic performance?
  127. Counting the number of A’s on your transcript
  128. Comparing the number of A’s you received this year to the number you received last year
  129. Comparing the number of A’s you received this year to the number your friend received
  130. Counting the total number of A’s given out to your class as a whole
  131. Which of the following is not a possible incentive for committing accounting fraud?
  132. Enhance job security
  133. Increase personal wealth
  134. Attract business partners
  135. Following personal ethics
  136. The financial statements portion of the annual report presents what kind of information?
  137. Key figures covering a period of 5 or 10 years
  138. Further information about the financial statements; crucial to understanding the financial statement data
  139. Brief summary of highs and lows during the year
  140. The auditor’s conclusion about whether GAAP was followed
  141. What is a difference between GAAP and IFRS?
  142. GAAP reports using account titles such as statement of financial position and statement of comprehensive income, while IFRS uses titles such as balance sheet and income statement
  143. Under IFRS public companies categorize expenses by business function, while under IFRS companies can categorize by either function or nature
  144. GAAP presents accounts in decreasing order of liquidity and time to maturity, and IFRS presents accounts in increasing order of liquidity and time to maturity.
  145. All of the above are differences
  146. Which of the following internal control principles underlies the requirement that all customers be given a sales receipt?
  147. Segregate duties
  148. Establish responsibility
  149. Restrict access
  150. Document procedures
  151. Which of the following is false regarding a perpetual inventory system
  152. Physical counts are never needed because records are maintained on a transaction-by-transaction basis
  153. The inventory records are updated with each inventory purchase, sale, or return
  154. Cost of goods sold is increased as sales are recorded
  155. A perpetual inventory system can be used to detect shrinkage
  156. Which of the following does not enhance internal control?
  157. Assigning different duties to different employees
  158. Ensuring adequate documentation is maintained
  159. Allowing access only when required to complete assigned duties
  160. None of the above- all enhance internal control
  161. This year your company has purchased less expensive merchandise inventory but has not changed its selling prices. What effect will this change have on the company’s gross profit percentage this year, in comparison to last year?
  162. The ratio will not change
  163. The ratio will increase
  164. The ratio will decrease
  165. Cannot determine
  166. Sales discounts with terms 2/10, n/30 mean
  167. 10 percent discounts for payment received within 30 days of the date of sale
  168. 2 percent discount for payment received within 10 days or the full amount (less returns) is due within 30 days
  169. Two-tenths of a percent discount for payment received within 30 days
  170. None of the above
  171. Mountain Gear, Inc., buys bikes, tents, and climbing supplies from Rugged Rock Corporation for sale to consumers. What type of company is Mountain Gear, Inc?
  172. Service
  173. Retail merchandiser
  174. Wholesale merchandiser
  175. Manufacturer
  176. Upon review of the most recent bank statement, you discover that a check was made out to your supplier for $76 but was recorded in your cash and accounts payable as $67. Which of the following describes the actions to be taken when preparing your bank reconciliation?
  177. Bank-decrease; book-no change
  178. Bank-increase; book-decrease
  179. Bank- no change; book-decrease
  180. Bank- decrease; book- increase
  181. Which of the following is not a component of Net Sales?
  182. Sales Returns and Allowances
  183. Sales Discounts
  184. Cost Goods Sold
  185. Sales Revenue
  186. A $1000 sale is made on May 1 with terms 2/10, n/30. Items with a $100 selling price are returned on May 3. What amount, if received on May 9, will be considered payment in full.
  187. $700
  188. $800
  189. $882
  190. $900
  191. Upon review of your company’s bank statement, you discover that you recently deposited a check form a customer that was rejected by your bank as NSF. Which of the following describes the actions to be taken when preparing your company’s bank reconciliation?

Bank Book