ACC 556 WEEK 5 MIDTERM EXAM PART I
Question 1
Management may choose any inventory costing method it desires as long as the cost flow assumption chosen is consistent with the physical movement of goods in the company.
False
False
• Question 2
2 out of 2 points
An aging of accounts receivable schedule is based on the premise that the longer the period an account remains unpaid, the greater the probability that it will eventually be collected.
False
False
• Question 3
2 out of 2 points
To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the employee authorized to sign checks.
False
False
• Question 4
2 out of 2 points
Expense recognition is tied to revenue recognition.
True
True
• Question 5
0 out of 2 points
Which of the following is not a common way that managers use the balance sheet?
To analyze the balance between debt and common stock financing
To analyze the balances of assets, liabilities, and stockholders’ equity throughout the accounting period
• Question 6
2 out of 2 points
Which of the following would not be classified as a long-term liability?
Current maturities of long-term debt
Current maturities of long-term debt
• Question 7
2 out of 2 points
Solvency ratios measure the short-term ability of the company to pay its maturing obligations.
False
False
• Question 8
2 out of 2 points
Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.
False
False
• Question 9
0 out of 2 points
The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.
False
True
• Question 10
0 out of 2 points
Use the following data to calculate the current ratio.
Carne Auto Supplies
Balance Sheet
December 31, 2014
Cash $ 35,000 Accounts payable $ 65,000
Accounts receivable 50,000 Salaries and wages payable 10,000
Inventory 70,000 Mortgage payable 90,000
Prepaid insurance 40,000 Total liabilities $165,000
Stock investments 80,000
Land 95,000
Buildings $100,000 Common stock $120,000
Less: Accumulated Retained earnings 250,000
depreciation (30,000) 85,000 Total stockholders’ equity $370,000
Trademarks 70,000 Total liabilities and
Total assets $535,000 stockholders’ equity $535
3.00 : 1
2.60 : 1
• Question 11
2 out of 2 points
Lankston Company began the year by issuing $90,000 of common stock for cash. The company recorded revenues of $825,000, expenses of $720,000, and paid dividends of $45,000. What was Lankston- net income for the year?
$105,000
$105,000
• Question 12
0 out of 2 points
The partnership form of business organization
has limited liability.
is a common form of organization for service-type businesses.
• Question 13
2 out of 2 points
A concentration of credit risk is a threat of nonpayment from a single customer or class of customers that could adversely affect the financial health of the company.
True
True
• Question 14
2 out of 2 points
Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of Bathlinks- financial statements that
there is a risk that Bathlinks cannot pay its debts as they come due.
there is a risk that Bathlinks cannot pay its debts as they come due.
• Question 15
2 out of 2 points
Owners of business firms are the only people who need accounting information.
False
False
• Question 16
0 out of 2 points
Financing activities include the purchase or sale of long-lived assets or the purchase or sale of investment securities.
True
False
• Question 17
2 out of 2 points
Which of the following is the least likely consideration that management uses when deciding whether to pay a dividend?
Is the company's average number of common shares outstanding decreasing?
Is the company's average number of common shares outstanding decreasing?
• Question 18
2 out of 2 points
The best definition of assets is the
resources belonging to a company that have future benefit to the company.
resources belonging to a company that have future benefit to the company.
• Question 19
2 out of 2 points
Marvin Services Corporation had the following accounts and balances:
Accounts payable $18,000 Equipment $21,000
Accounts receivable 3,000 Land 21,000
Buildings ? Unearned service revenue 6,000
Cash 9,000 Total stockholders' equity ?
If the balance of the Buildings account was $45,000 and the equipment was sold for $21,000, what would be the total of stockholders' equity?
$75,000
$75,000
• Question 20
2 out of 2 points
An advantage of using the periodic inventory system is that it requires less record keeping than the perpetual inventory system.
True
True
• Question 21
2 out of 2 points
Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company.
True
True
• Question 22
2 out of 2 points
The economic resources that are owned by a business are called stockholders’ equity.
False
False
• Question 23
2 out of 2 points
The multiple-step income statement is considered more useful than the single-step income statement because it highlights the components of net income.
True
True
• Question 24
2 out of 2 points
Source documents can provide evidence that a transaction has occurred.
True
True
• Question 25
2 out of 2 points
Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods by the buyer.
True
True
USA 
India