The objective of general-purpose financial reporting is to provide financial information

The objective of general-purpose financial reporting is to provide financial information about a reporting entity to each of the following except

present investors.

all of these answers are correct.

potential lenders.

potential equity investors.

What is the primary objective of financial reporting as indicated in the conceptual framework?

Provide information about those investing in the entity.

All of these answer choices are correct.

Provide information that is useful to those making investing and credit decisions.

Provide information that is useful to management.

Which of the following is a fundamental quality of useful accounting information?

Neutrality

Relevance

Materiality

Comparability

Which of the following is an ingredient of relevance?

Neutrality.

Verifiability.

Timeliness.

Materiality.

Issuance of common stock for cash affects which basic element of financial statements

Which of the following is not a basic element of financial statements?

Losses.

Revenue.

Assets.

Balance sheet.

Issuance of common stock for cash affects which basic element of financial statements?

Losses.

Liabilities.

Equity.

Revenues.

Preparation of consolidated financial statements when a parent-subsidiary relationship exists is an example of the

economic entity assumption.

relevance characteristic.

comparability characteristic.

neutrality characteristic.

The assumption that a company will not be sold or liquidated in the near future is known as the

economic entity assumption.

none of these answer choices are correct.

monetary unit assumption.

periodicity assumption.

The measurement principle includes the

historical cost principle and the fair value principle.

historical cost principle only.

revenue recognition principle and expense recognition principle.

fair value principle only.

Which of the following statements about materiality is correct

Which of the following statements about materiality is correct?

Materiality is a matter of relative size or importance.

An item must make a difference or it need not be disclosed.

An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.

All of these answers are correct.

The second level of the conceptual framework includes each of the following except

enhancing qualities.

fundamental qualities.

elements.

principles.

The IASB and the FASB are working on a joint project that has an objective of developing a conceptual framework that leads to standards that are:

principle-based and internally consistent.

principle-based and rigid in nature.

rule-based and flexible in nature.

rule-based and internally consistent.

Factors that shape an accounting information system include the

Factors that shape an accounting information system include the

all of these answer choices are correct.

nature of the business.

volume of data to be handled.

size of the firm.

Debit always means

none of these answer choices are correct.

the right side of an account.

an increase.

a decrease.

A trial balance

supplies a listing of open accounts and their balances that are used in preparing financial statements.

all of these answer choices are correct.

is normally prepared three times in the accounting cycle.

proves that debits and credits are equal in the ledger.

Which of the following is a real (permanent) account?

Accounts Receivable

Service Revenue

Goodwill

Both Goodwill and Accounts Receivable.

Nominal accounts are also called

real accounts.

temporary accounts.

permanent accounts.

none of these answer choices are correct.

Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise

1. Cumberland Co. sells $2,000 of inventory to Hancock Co. for cash. Cumberland paid $1,250 for the merchandise. Under a perpetual inventory system, which of the following journal entry(ies) would be recorded?

	a.	debit Cash, $1,250; credit Sales, $1,250
	b.	debit Accounts Receivable, $2,000; credit Sales, $2,000; and debit Cost of Merchandise Sold, $1,250; credit Merchandise Inventory, $1,250
	c.	debit Cash, $2,000; credit Merchandise Inventory, $1,250
	d.	debit Cash, $2,000; credit Sales, $2,000; and debit Cost of Merchandise Sold, $1,250; credit Merchandise Inventory, $1,250

Answer = d

1. Taking advantage of a 2/10, n/30 purchases discount is equal to a savings yearly rate of approximately

	a.	36%
	b.	20%
	c.	24%
	d.	2%

Answer = a

1. Sales to customers who use bank credit cards such as MasterCard and Visa are usually recorded by a

	a.	debit to Sales, debit to Credit Card Expense, and a credit to Cash
	b.	debit to Cash and a credit to Sales
	c.	debit to Cash, credit to Credit Card Expense, and a credit to Sales
	d.	debit to Bank Credit Card Sales, debit to Credit Card Expense, and a credit to Sales

Answer = b

Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a

1. Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a

	a.	debit to Merchandise Inventory
	b.	credit to Accounts Receivable
	c.	debit to Sales
	d.	credit to Merchandise Inventory

Answer = d

1. If the seller is to pay the freight costs of delivering merchandise, the delivery terms are stated as

	a.	FOB seller
	b.	FOB destination
	c.	FOB shipping point
	d.	FOB n/30

Answer = b

1. The amount of the total cash paid to the seller for merchandise purchased for consumption would normally include

	a.	only the list price
	b.	the list price plus the sales tax
	c.	only the sales tax
	d.	the list price less the sales tax

Answer = b

1. Inventory shrinkage is recorded when

	a.	merchandise is returned by a buyer
	b.	merchandise purchased from a seller is incomplete or short
	c.	merchandise is returned to a seller
	d.	there is a difference between a physical count of inventory and inventory records

Answer = d

Net income plus operating expenses is equal to

Net income plus operating expenses is equal to

	a.	Sales
	b.	gross profit
	c.	cost of merchandise available for sale
	d.	cost of merchandise sold

Answer = b

A company, using the periodic inventory system, has merchandise inventory costing $210 on hand at the beginning of the period.  During the period, merchandise costing $635 is purchased.  At year-end, merchandise inventory costing $160 is on hand.  The cost of merchandise sold for the year is

	a.	$685
	b.	$265
	c.	$635
	d.	$795

Answer = a

The inventory system employing accounting records that continuously disclose the amount of inventory is called

	a.	perpetual
	b.	periodic
	c.	physical
	d.	Retail

Answer = a

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a

Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a

	a.	debit to Cash
	b.	credit to Merchandise Inventory
	c.	debit to Merchandise Inventory
	d.	credit to Customer Refunds Payable

Answer = c

When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the

	a.	account form
	b.	horizontal form
	c.	report form
	d.	comparative form

Answer = c

A chart of accounts for a merchandising business

	a.	usually is the same as the chart of accounts for a service business
	b.	usually is standardized by the FASB for all merchandising businesses
	c.	always uses a three-digit numbering system
	d.	usually requires more accounts than does the chart of accounts for a service business

Answer = d

Under the perpetual inventory system, all purchases of merchandise are debited to the account

	a.	Cost of Merchandise Available for Sale
	b.	Cost of Merchandise Sold
	c.	Purchases
	d.	Merchandise Inventory

Answer = d

The statement of owner's equity shows

The statement of owner's equity shows

	a.	beginning and ending capital and all the changes in the owner's capital as a result of net income (loss), and withdrawals
	b.	only net income, beginning capital, and withdrawals
	c.	only total assets, beginning and ending capital
	d.	only net income, beginning and ending capital

Answer = a

What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

	a.	income from operations
	b.	gross sales
	c.	net income
	d.	gross profit

Answer = d

Merchandise subject to terms 2/10, n/30, FOB shipping point, is sold on account to a customer for $25,000. What is the amount of the sales discount allowable?

	a.	$150
	b.	$500
	c.	$460
	d.	$260

Answer = b

Merchandise is ordered on November 10; the merchandise is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on November 13; the merchandise is received by the buyer on November 18; the entry is made in the buyer's accounts on November 20.  The credit period begins with what date?

	a.	November 10
	b.	November 18
	c.	November 20
	d.	November 13

Answer = b

The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be

The journal entry to record the receipt of inventory purchased for cash in a perpetual inventory system would be

	a.	Jan. 1  Office Supplies               1,500 Cash                                       1,500
	b.	Jan. 1  Purchases                       1,500 Accounts Payable                    1,500
	c.	Jan. 1  Cash                               1,500 Accounts Receivable               1,500
	d.	Jan. 1  Merchandise Inventory    1,500 Cash                                       1,500

If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are

	a.	FOB destination
	b.	consigned
	c.	FOB shipping point
	d.	n/30

The proper journal entry to record the receipt of inventory purchased on account in a periodic inventory system would be

	a.	Jan. 1  Merchandise Inventory    1,600 Accounts Payable              1,600
	b.	Jan. 1  Purchases                     1,600 Accounts Receivable        1,600
	c.	Jan. 1  Office Supplies              1,600 Accounts Payable              1,600
	d.	Jan. 1  Purchases                     1,600 Accounts Payable              1,600