Question 1

On a company's cash flow statement, the amount it receives when it borrows money would be considered

Accepted Answer

A)  Operating 
B)  Investing 
C)  Financing 
D)  Not a cash flow 
A)  Operating 
B)  Investing 
C)  Financing 
D)  Not a cash flow C

Question 2

A contract which has not yet been performed by either party is called an executory contract.

Accepted Answer

A) True 
 B)False  True

Question 3

Assume that a company has purchased some supplies during a month. When it bought the supplies, it recorded a reduction in cash, and an increase in an asset called supplies. At the end of the month, what entry, if any, should be recorded using accrual accounting to reflect the fact that half of the supplies have been used up?

Accepted Answer

A)  No entry is needed, since no cash payment is being made at the end of the month. 
B)  An entry reducing the supplies asset, increasing an expense, and decreasing equity 
C)  An entry reducing the supplies asset, increasing a liability, and not changing equity 
D)  An entry reducing the supplies asset, decreasing an expense, and reducing equity 
A)  No entry is needed, since no cash payment is being made at the end of the month. 
B)  An entry reducing the supplies asset, increasing an expense, and decreasing equity 
C)  An entry reducing the supplies asset, increasing a liability, and not changing equity 
D)  An entry reducing the supplies asset, decreasing an expense, and reducing equity B

Question 4

The objective of financial reporting, according to the FASB's Conceptual framework, can best be described as

Accepted Answer

A)  Providing decision-useful information to the investors and creditors 
B)  Setting up rules that will cause business to act in a socially responsible manner 
C)  Providing decision-useful information to governments 
D)  Providing detailed information for managerial decisions 
A)  Providing decision-useful information to the investors and creditors 
B)  Setting up rules that will cause business to act in a socially responsible manner 
C)  Providing decision-useful information to governments 
D)  Providing detailed information for managerial decisions

Question 5

An inflow of cash received by a company when it sold new common stock to investors is best classified as which type of cash flow?

Accepted Answer

A)  Operating 
B)  Investing 
C)  Financing 
D)  Not a cash flow 
A)  Operating 
B)  Investing 
C)  Financing 
D)  Not a cash flow

Question 6

On a company's cash flow statement, the amount it receives when it pays taxes is considered which type of cash flow?

Accepted Answer

A)  Operating 
B)  Investing 
C)  Financing 
D)  Not a cash flow 
A)  Operating 
B)  Investing 
C)  Financing 
D)  Not a cash flow

Question 7

A company's payment of cash for repayment of a loan would properly be considered which type of cash flow?

Accepted Answer

A)  Operating 
B)  Investing 
C)  Financing 
D)  Not a cash flow 
A)  Operating 
B)  Investing 
C)  Financing 
D)  Not a cash flow

Question 8

Assume that a company has earned income during the year, and has not yet paid any income taxes. At the end of the year, what entry, if any, should be recorded using accrual accounting to reflect the fact that the company will have to pay taxes on the income it has earned?

Accepted Answer

A)  No entry is needed, since no cash payment has yet been made. 
B)  An entry reducing an asset, increasing an expense, and decreasing equity 
C)  An entry increasing a liability, increasing an expense, and decreasing equity 
D)  An entry decreasing a liability, increasing an expense, and reducing equity 
A)  No entry is needed, since no cash payment has yet been made. 
B)  An entry reducing an asset, increasing an expense, and decreasing equity 
C)  An entry increasing a liability, increasing an expense, and decreasing equity 
D)  An entry decreasing a liability, increasing an expense, and reducing equity

Question 9

The rule for recognizing revenues in generally accepted accounting principles is that

Accepted Answer

A)  Revenues should be recognized when earned, even if the amount that can be realized is not predictable at that time 
B)  Revenues should be recognized when cash is received, even if they are not yet earned 
C)  Revenues should be recognized when an earnings process is substantially complete, and the revenue is either realized or realizable 
D)  Management may choose between recognizing revenues when earned or when cash is received 
A)  Revenues should be recognized when earned, even if the amount that can be realized is not predictable at that time 
B)  Revenues should be recognized when cash is received, even if they are not yet earned 
C)  Revenues should be recognized when an earnings process is substantially complete, and the revenue is either realized or realizable 
D)  Management may choose between recognizing revenues when earned or when cash is received

Question 10

Assume a company is in the business of renting office space to tenants. In December, the company rented an office to a tenant. It has not yet received the rent payment for December, but it is confident that it will receive the money in January. It has not yet made any entry related to the December rent. Under accrual accounting, the company should make which of the following adjustments, if any, to its records, as of the end of December?

Accepted Answer

A)  No adjustment is needed, since the rent has not been collected. 
B)  It should record an increase in assets, an increase in expenses, and a decrease in equity. 
C)  It should record an increase in assets, an increase in revenues, and an increase in equity. 
D)  It should record a decrease in liabilities, an increase in revenues, and an increase in equity. 
E)  It should record a decrease in liabilities, a decrease in expenses, and a decrease in equity. 
A)  No adjustment is needed, since the rent has not been collected. 
B)  It should record an increase in assets, an increase in expenses, and a decrease in equity. 
C)  It should record an increase in assets, an increase in revenues, and an increase in equity. 
D)  It should record a decrease in liabilities, an increase in revenues, and an increase in equity. 
E)  It should record a decrease in liabilities, a decrease in expenses, and a decrease in equity.

Question 11

The money owed by a business to its bank related to an outstanding loan would be considered a

Accepted Answer

A)  Revenue 
B)  Asset 
C)  Liability 
D)  Equity 
A)  Revenue 
B)  Asset 
C)  Liability 
D)  Equity

Question 12

According to the FASB, the objective of general purpose financial reporting is to provide information that is useful to the government in regulating the economy.

Accepted Answer

A) True 
 B)False

Question 13

All of the following items are liabilities except

Accepted Answer

A)  Salaries payable 
B)  Income tax expense 
C)  Loans payable 
D)  Unearned income 
A)  Salaries payable 
B)  Income tax expense 
C)  Loans payable 
D)  Unearned income

Question 14

The financial accounting "element" that best describes the outflow of resources during a period to pay rent on an office for that period is

Accepted Answer

A)  Assets 
B)  Liability 
C)  Equity 
D)  Expense 
E)  Revenue 
A)  Assets 
B)  Liability 
C)  Equity 
D)  Expense 
E)  Revenue

Question 15

A student group is taking a trip. The group expects between 100 and 200 students. The group could hire its own buses, or give students tickets to use existing bus companies. Each bus it hires holds 40 students. If it gives students tickets to existing bus companies, it can buy exactly the number of tickets needed. In this example, the cost of giving tickets to students to existing bus companies is an example of a

Accepted Answer

A)  Variable cost 
B)  Fixed cost 
C)  Step cost 
D)  Mixed cost 
A)  Variable cost 
B)  Fixed cost 
C)  Step cost 
D)  Mixed cost

Question 16

""Comprehensive income"" and ""net income"" mean the same thing.

Accepted Answer

A) True 
 B)False

Question 17

"Cash dividends paid" affect the computation of comprehensive income.

Accepted Answer

A) True 
 B)False

Question 18

"Comprehensive income" includes all factors that change equity during the year, including all transactions with a company's owners.

Accepted Answer

A) True 
 B)False

Question 19

Assume that a landlord collects $4,000 from a tenant in December for rent for an office in January. Under accrual accounting, the books at the end of December should reflect

Accepted Answer

A)  A liability of $4,000 and a revenue of $4,000 
B)  Cash of $4,000 and a revenue of $4,000 
C)  Nothing at all 
D)  Cash of $4,000 and a liability of $4,000 
A)  A liability of $4,000 and a revenue of $4,000 
B)  Cash of $4,000 and a revenue of $4,000 
C)  Nothing at all 
D)  Cash of $4,000 and a liability of $4,000

Question 20

In accounting, the concept for whether information is large enough to matter is

Accepted Answer

A)  Representational faithfulness 
B)  Timeliness 
C)  Consistency 
D)  Materiality 
A)  Representational faithfulness 
B)  Timeliness 
C)  Consistency 
D)  Materiality

On a company's cash flow statement, the amount it receives when it borrows money would be considered

A contract which has not yet been performed by either party is called an executory contract.

The objective of financial reporting, according to the FASB's Conceptual framework, can best be described as

An inflow of cash received by a company when it sold new common stock to investors is best classified as which type of cash flow?

On a company's cash flow statement, the amount it receives when it pays taxes is considered which type of cash flow?

A company's payment of cash for repayment of a loan would properly be considered which type of cash flow?

Assume that a company has earned income during the year, and has not yet paid any income taxes. At the end of the year, what entry, if any, should be recorded using accrual accounting to reflect the fact that the company will have to pay taxes on the income it has earned?

The rule for recognizing revenues in generally accepted accounting principles is that

The money owed by a business to its bank related to an outstanding loan would be considered a

According to the FASB, the objective of general purpose financial reporting is to provide information that is useful to the government in regulating the economy.

All of the following items are liabilities except

The financial accounting "element" that best describes the outflow of resources during a period to pay rent on an office for that period is

""Comprehensive income"" and ""net income"" mean the same thing.

"Cash dividends paid" affect the computation of comprehensive income.

"Comprehensive income" includes all factors that change equity during the year, including all transactions with a company's owners.

Assume that a landlord collects $4,000 from a tenant in December for rent for an office in January. Under accrual accounting, the books at the end of December should reflect

In accounting, the concept for whether information is large enough to matter is

How Accounting Works

Choosing Accounting Software

Managing Your Accounts

Accounting for Inventory

Doing Business Day to Day

Tackling the General Ledger

Reconciling Bank and Credit Card Statements

Setting up New Team Members

Understanding Insurance

Other Benefits and Reimbursements

Payroll Taxes

Appendix

Filters

Exam 2: Selecting Your Business Structure

On a company's cash flow statement, the amount it receives when it borrows money would be considered

A contract which has not yet been performed by either party is called an executory contract.

The objective of financial reporting, according to the FASB's Conceptual framework, can best be described as

An inflow of cash received by a company when it sold new common stock to investors is best classified as which type of cash flow?

On a company's cash flow statement, the amount it receives when it pays taxes is considered which type of cash flow?

A company's payment of cash for repayment of a loan would properly be considered which type of cash flow?

Assume that a company has earned income during the year, and has not yet paid any income taxes. At the end of the year, what entry, if any, should be recorded using accrual accounting to reflect the fact that the company will have to pay taxes on the income it has earned?

The rule for recognizing revenues in generally accepted accounting principles is that

The money owed by a business to its bank related to an outstanding loan would be considered a

According to the FASB, the objective of general purpose financial reporting is to provide information that is useful to the government in regulating the economy.

All of the following items are liabilities except

The financial accounting "element" that best describes the outflow of resources during a period to pay rent on an office for that period is

""Comprehensive income"" and ""net income"" mean the same thing.

"Cash dividends paid" affect the computation of comprehensive income.

"Comprehensive income" includes all factors that change equity during the year, including all transactions with a company's owners.

Assume that a landlord collects $4,000 from a tenant in December for rent for an office in January. Under accrual accounting, the books at the end of December should reflect

In accounting, the concept for whether information is large enough to matter is

How Accounting Works

Choosing Accounting Software

Managing Your Accounts

Accounting for Inventory

Doing Business Day to Day

Tackling the General Ledger

Reconciling Bank and Credit Card Statements

Setting up New Team Members

Understanding Insurance

Other Benefits and Reimbursements

Payroll Taxes

Appendix

Filters