fundamenta
| Financial Accounting Exam 2 | |||||
| 1) | The fundamental accounting equation is a reflection of the: | ||||
| Money measurement concept | |||||
| Conservatism concept | |||||
| Dual-aspect concept | |||||
| Historical cost concept | |||||
| 2) | |||||
| The historical cost concept reflects the fact that financial accounting practice favors: | |||||
| Reliability over relevance | |||||
| Management’s best guess over historical financial information | |||||
| Relevance over reliability | |||||
| Consensus market values over historical financial information | |||||
| 3) | |||||
| Jon Sports’ inventory account increased from $25,000 on December 31, 2003 to $30,000 on December 31, 2004. Which one of the following items would be included in the operating section of its 2004 indirect method statement of cash flows? | |||||
| Add increase in inventory $5,000 | |||||
| Subtract increase in inventory ($5,000) | |||||
| Add inventory balance $20,000 | |||||
| Subtract inventory balance ($20,000) | |||||
| 4) | |||||
| Turnkey Systems, Inc. began the month of June, 2004 with a prepaid expenses balance of $240,000. During the month, debits totaling $110,000 and credits totaling $80,000 were made to the prepaid expenses account. What was the June, 2004 ending balance of prepaid expenses? | |||||
| A debit balance of $210,000 | |||||
| A credit balance of $210,000 | |||||
| A debit balance of $270,000 | |||||
| A credit balance of $270,000 | |||||
| 5) | |||||
| Pentex and Marbro, small companies in the stationery business, each had a dollar gross margin of $20,000 during September 2004. Pentex’s September sales were twice that of Marbro’s. If Pentex’s gross margin as a percentage of sales for September was 10%, Marbro’s gross margin as a percentage of sales for the same period was: | |||||
| 10% | |||||
| 5% | |||||
| 20% | |||||
| Cannot be calculated | |||||
| 6) | |||||
| When an entity recognizes revenue before it has received cash for the sale, it records an increase in a(n): | |||||
| Liability such as ‘Advances from customers’ | |||||
| Accounts payable | |||||
| Accounts receivable | |||||
| Prepaid expense | |||||
| 7) | |||||
| Juan Foods pays off a long-term debt in full. Which one of the following statements describes the effect of the sale on Juan Foods? | |||||
| Current ratio increases; total debt to equity ratio decreases | |||||
| Current ratio decreases; total debt to equity ratio decreases | |||||
| Current ratio decreases; total debt to equity ratio increases | |||||
| Current ratio increases; total debt to equity ratio increases | |||||
| 8) | On January 1, 2005, Mansfield Company has a retained earnings balance of $256,000. During 2005, its net income is $44,000 and it announces and pays $12,000 in dividends. There is no other dividend-related activity during the year. Its December 31, 2005 retained earnings balance is: | ||||
| $212,000 | |||||
| $288,000 | |||||
| $300,000 | |||||
| $224,000 | |||||
| 9) | |||||
| Juan Foods makes a cash sale with a positive gross margin. Which one of the following statements describes the effect of the sale on Juan Foods? | |||||
| Current ratio increases | |||||
| Current ratio decreases | |||||
| No change to Juan Foods’ current ratio | |||||
| Insufficient information to judge effect on current ratio | |||||
| 10) | |||||
| Juan Foods pays off a long-term debt in full. Which one of the following statements best describes the appropriate book-keeping for this transaction? |
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