Question 1

Income statements prepared using which basis provide the most information about future cash flows?

Accepted Answer

A)  Actual basis
B)  Cash basis
C)  Historical basis
D)  Accrual basisE) B) and C)
F) A) and D)

Question 2

Which of the following would normally be recorded with an adjusting entry?

Accepted Answer

A)  Sales on account.
B)  Payment for supplies bought on account.
C)  Wage expense
D)  Amortization expense.E) A) and B)
F) All of the above

Question 3

If a company sold a capital asset in the normal course of its operations, where would the gain be reported on a multi-step income statement?

Accepted Answer

A)  In income from operations
B)  In income from non-operating sources
C)  In Income from discontinued operations
D)  In income from asset dispositionsE) A) and B)
F) A) and C)

Question 4

Which of the following amounts would be shown net of tax in the income statement?

Accepted Answer

A)  The gain on the sale of a fixed asset.
B)  The gain from the expropriation of land.
C)  The loss from writing down obsolete inventory.
D)  The loss incurred during a labour strike.E) B) and D)
F) B) and C)

Question 5

Which of the following is a listing of all the account balances at a specific point in time?

Accepted Answer

A)  The balance sheet.
B)  The chart of accounts.
C)  The general ledger.
D)  The trial balance.E) A) and D)
F) A) and C)

Question 6

Which of the following is not a characteristic of an extraordinary item?

Accepted Answer

A)  Unusual
B)  Infrequent
C)  Due to an error
D)  Not the result of a management decisionE) All of the above
F) A) and C) C

Question 7

A deficit occurs when:

Accepted Answer

A)  Assets exceed liabilities.
B)  Expenses exceed revenues for the year.
C)  Dividends exceed income for the year.
D)  Cumulative expenses and dividends have exceeded income.E) A) and D)
F) B) and C) D

Question 8

Which of the following sequences concerning the accounting cycle is correct?

Accepted Answer

A)  Journalize, post, adjusting entries, financial statements
B)  Transaction analysis, trial balance, post, adjusted trial balance
C)  Post, adjusting entries, closing entries, financial statements
D)  Adjusting entries, closing entries, adjusted trial balance, financial statementsE) None of the above
F) All of the above

Question 9

Which of the following is not true about earnings per share?

Accepted Answer

A)  Companies with discontinued items must only report EPS on income before such items.
B)  Must be reported on the income statement or in the notes accompanying the financial statements.
C)  Are calculated using a weighted average of the outstanding shares.
D)  In complex situations, financial statements might include up to six EPS calculations.E) A) and B)
F) C) and D)

Question 10

Which of the following would be the closing entry for dividends declared?

Accepted Answer

A)  Dr.Expense summary, Cr.Dividends declared
B)  Dr.Retained earnings, Cr.Dividends declared
C)  Dr.Dividends declared, Cr.Expense summary
D)  Dr.Dividends declared, Cr.Retained earningsE) None of the above
F) A) and C)

Question 11

Melrose Corporation's books revealed the following data for the current year:
Net income $50,000
Retained earnings $750,000
Common shares, January 1 25,000 shares
Common shares, December 31 30,000 shares
The earnings per share is:

Accepted Answer

A)  $30.00
B)  $2.00
C)  $1.82
D)  $1.67E) A) and B)
F) A) and D)

Question 12

An example of a contra asset account is:

Accepted Answer

A)  Accumulated amortization
B)  Amortization expense
C)  Discount on Bonds Payable
D)  Prepaid expensesE) A) and B)
F) A) and C)

Question 13

Which of the following accounts could be included in both the "income from operations" and the "income from non-operating sources" sections of the income statement?

Accepted Answer

A)  Interest expense
B)  Amortization expense
C)  Bad debt expense
D)  Insurance expenseE) A) and D)
F) A) and C)

Question 14

Which of the following is the first step in the accounting cycle?

Accepted Answer

A)  Recognize that a transaction has occurred
B)  Prepare a source document
C)  Prepare a chart of accounts
D)  Journalize a transactionE) None of the above
F) A) and D) C

Question 15

Which of the following statements about the trail balance is NOT true?

Accepted Answer

A)  Debit balances must equal credit balances.
B)  It includes only assets, liability and equity accounts.
C)  It is useful for detecting errors.
D)  It is an important step in the accounting cycle.E) A) and D)
F) B) and C)

Question 16

The right side of a T account is also known as the:

Accepted Answer

A)  debit side.
B)  credit side.
C)  asset side.
D)  liability side.E) A) and D)
F) A) and C)

Question 17

Which of the following would cause the trial balance to be out of balance?

Accepted Answer

A)  An entry recorded with only debits
B)  An unrecorded entry
C)  An entry recorded twice
D)  An entry recorded to the wrong accountsE) A) and B)
F) A) and C)

Question 18

Which of the following relationships best expresses the double-entry nature of an accounting system?

Accepted Answer

A)  assets = liabilities
B)  assets = debits
C)  liabilities = credits
D)  debits = creditsE) B) and D)
F) A) and D)

Question 19

A list of all the accounts used by the company in its accounting records is referred to as a:

Accepted Answer

A)  Chart of accounts
B)  Adjusted trial balance
C)  General journal
D)  General ledgerE) None of the above
F) A) and D)

Question 20

Which of the following is not a purpose of an income statement?

Accepted Answer

A)  To determine how much money the company owes its suppliers.
B)  To aid in the projection of future results.
C)  To aid in the assessment of a company's performance over a period of time.
D)  To aid in the calculation of earnings per share for the period.E) B) and D)
F) B) and C)

Exam 3: Processing Data Through the Accounting System

Income statements prepared using which basis provide the most information about future cash flows?

Correct AnswerverifiedShow Answer

Which of the following would normally be recorded with an adjusting entry?

Correct AnswerverifiedShow Answer

If a company sold a capital asset in the normal course of its operations, where would the gain be reported on a multi-step income statement?

Correct AnswerverifiedShow Answer

Which of the following amounts would be shown net of tax in the income statement?

Correct AnswerverifiedShow Answer

Which of the following is a listing of all the account balances at a specific point in time?

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of an extraordinary item?

Correct AnswerverifiedC

A deficit occurs when:

Correct AnswerverifiedD

Which of the following sequences concerning the accounting cycle is correct?

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Which of the following is not true about earnings per share?

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Which of the following would be the closing entry for dividends declared?

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Melrose Corporation's books revealed the following data for the current year: Net income $50,000 Retained earnings $750,000 Common shares, January 1 25,000 shares Common shares, December 31 30,000 shares The earnings per share is:

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An example of a contra asset account is:

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Which of the following accounts could be included in both the "income from operations" and the "income from non-operating sources" sections of the income statement?

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Which of the following is the first step in the accounting cycle?

Correct AnswerverifiedC

Which of the following statements about the trail balance is NOT true?

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The right side of a T account is also known as the:

Correct AnswerverifiedShow Answer

Which of the following would cause the trial balance to be out of balance?

Correct AnswerverifiedShow Answer

Which of the following relationships best expresses the double-entry nature of an accounting system?

Correct AnswerverifiedShow Answer

A list of all the accounts used by the company in its accounting records is referred to as a:

Correct AnswerverifiedShow Answer

Which of the following is not a purpose of an income statement?

Correct AnswerverifiedShow Answer

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C

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D

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C

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