ACCT556 Midterm Exam Part 1

SKIP TO COURSE MENUSKIP TO TOP FRAME TABS

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11/16/15 12:05 PM
11/16/15 1:23 PM
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46 out of 50 points
1 hour, 17 minutes out of 3 hours.

Question 1
2 out of 2 points

Solvency ratios measure the short-term ability of the company to pay

its maturing obligations.
Answer
Selected Answer:

False

Correct Answer:

False

Question 2
2 out of 2 points

Source documents can provide evidence that a transaction has

occurred.
Answer
Selected Answer:

True

Correct Answer:

True

Question 3
2 out of 2 points

Consistent use of the same accounting principles and methods is

necessary for meaningful analysis of trends within a company.
Answer
Selected Answer:

True

Correct Answer:

True

Question 4
2 out of 2 points

The economic resources that are owned by a business are called

stockholders equity.
Answer
Selected Answer:

False

Correct Answer:

False

Question 5
2 out of 2 points

Financing activities include the purchase or sale of long-lived assets or

the purchase or sale of investment securities.
Answer
Selected Answer:

False

Correct Answer:

False

Question 6
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.
Answer
Selected Answer:

True

Correct Answer:

True

Question 7
2 out of 2 points

Which of the following is not a common way that managers use the
balance sheet?
Answer
Selected
Answer:

Correct
Answer:

To analyze the balances of assets, liabilities, and

stockholders equity throughout the accounting period
To analyze the balances of assets, liabilities, and
stockholders equity throughout the accounting period

Question 8
0 out of 2 points

Which of the following is the least likely consideration that

management uses when deciding whether to pay a dividend?
Answer
Selected
Answer:

Correct
Answer:

Does the company have more cash than it has

opportunities?
Is the company's average number of common shares
outstanding decreasing?

Question 9
2 out of 2 points

The revenue recognition principle dictates that revenue be recognized

in the accounting period in which the performance obligation is

satisfied.
Answer
Selected Answer:

True

Correct Answer:

True

Question 10
2 out of 2 points

The best definition of assets is the

Answer
Selected
Answer:

Correct
Answer:

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 11
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.
Answer
Selected Answer:

True

Correct Answer:

True

Question 12
0 out of 2 points

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.
Answer
Selected Answer:

True

Correct Answer:

False

Question 13
2 out of 2 points

Bathlinks Corporation has a debt to assets ratio of 73%. This tells the
user of Bathlinkss financial statements that
Answer
Selected
Answer:

Correct
Answer:

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 14
2 out of 2 points

The partnership form of business organization

Answer
Selected
Answer:

is a common form of organization for service-type

businesses.

Correct Answer:

is a common form of organization for service-type

businesses.

Question 15
2 out of 2 points

Expense recognition is tied to revenue recognition.

Answer
Selected Answer:

True

Correct Answer:

True

Question 16
2 out of 2 points

Which of the following would not be classified as a long-term liability?

Answer
Selected Answer:

Current maturities of long-term debt

Correct Answer:

Current maturities of long-term debt

Question 17
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.
Answer
Selected Answer:

False

Correct Answer:

False

Question 18
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.
Answer

Selected Answer:

False

Correct Answer:

False

Question 19
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.
Answer
Selected Answer:

True

Correct Answer:

True

Question 20
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.
Answer
Selected Answer:

True

Correct Answer:

True

Question 21
2 out of 2 points

Marvin Services Corporation had the following accounts and balances:

Accounts payable
Accounts receivable
Buildings
Cash

$18,000
3,000
?
9,000

Equipment
Land
Unearned service revenue
Total stockholders' equity

$21,000
21,000
6,000
?

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?
Answer
Selected Answer:

$75,000
Correct Answer:

$75,000

Question 22
2 out of 2 points

Use the following data to calculate the current ratio.

Carne Auto Supplies

Balance Sheet
December 31, 2014

Cash
$ 35,000
65,000
Accounts receivable
50,000
10,000
Inventory
70,000
90,000
Prepaid insurance
40,000
liabilities
$165,000
Stock investments
80,000
Land
95,000
Buildings
$100,000
$120,000
Less: Accumulated
250,000
depreciation
(30,000)
85,000
equity
$370,000
Trademarks
70,000
Total assets
$535,000
equity
$535

Accounts payable

Salaries and wages payable

Mortgage payable
Total

Common stock
Retained earnings
Total stockholders
Total liabilities and
stockholders

Answer
Selected Answer:

2.60 : 1
Correct Answer:

2.60 : 1

Question 23
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.
Answer
Selected Answer:

False

Correct Answer:

False

Question 24
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
Lankstons net income for the year?

Answer
Selected Answer:

$105,000
Correct Answer:

$105,000

Question 25
2 out of 2 points

Owners of business firms are the only people who need accounting
information.
Answer
Selected Answer:

False

Correct Answer:

False