2024 – Question 1 An aging of accounts receivable schedule is based on the premise that

Question 1 
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.
True 
False 
Question 2 
Goods that have been purchased FOB destination but are in transit, should be excluded from a physical count of goods by the buyer.
True 
False 
Question 3 
To obtain maximum benefit from a bank reconciliation, the reconciliation should be prepared by the employee authorized to sign checks.
True 
False 
Question 4 
The economic resources that are owned by a business are called stockholders’ equity.
True 
False 
Question 5 
Solvency ratios measure the short-term ability of the company to pay its maturing obligations.
True 
False 
Question 6 
An advantage of using the periodic inventory system is that it requires less record keeping than the perpetual inventory system.
True 
False 
Question 7 
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
Long Term 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
2.07 : 1
1.67 : 1
3.00 : 1
2.60 : 1

Question 8 
Bathlinks Corporation has a debt to assets ratio of 73%. This tells the user of Bathlinks’s financial statements that
Bathlinks is getting a 27% return on its assets.
there is a risk that Bathlinks cannot pay its debts as they come due.
73% of the assets are financed by the stockholders.
based on this measure, the user should not invest in Bathlinks.
Question 9 
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.
True 
False 
Question 10 
Which of the following would not be classified as a long-term liability?
Current maturities of long-term debt
Bonds payable
Mortgage payable
Lease liabilities
Question 11 
Requiring employees to take vacations is a weakness in the system of internal controls because it does not promote operational efficiency.
True 
False 
Question 12 
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?
$39,000
$54,000
$69,000
$75,000

Question 13 
The revenue recognition principle dictates that revenue be recognized in the accounting period in which the performance obligation is satisfied.
True 
False 
Question 14 
Financing activities include the purchase or sale of long-lived assets or the purchase or sale of investment securities.
True 
False 
Question 15 
Consistent use of the same accounting principles and methods is necessary for meaningful analysis of trends within a company.
True 
False 
Question 16 
Expense recognition is tied to revenue recognition.
True 
False 
Question 17 
The multiple-step income statement is considered more useful than the single-step income statement because it highlights the components of net income.
True 
False 
Question 18 
The best definition of assets is the
cash owned by the company.
collections of resources belonging to the company and the claims on these resources.
owners’ investment in the business.
resources belonging to a company that have future benefit to the company.
Question 19 
Owners of business firms are the only people who need accounting information.
True 
False 
Question 20 
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’s net income for the year?
$60,000
$150,000
$105,000
$195,000

 

Question 21 
Which of the following is not a common way that managers use the balance sheet?
To analyze the balances of assets, liabilities, and stockholders’ equity throughout the accounting period
To determine if the cash balance is sufficient for future needs
To analyze the balance between debt and common stock financing
To analyze the balance of accounts receivable on the last day of the accounting period
Question 22 
Source documents can provide evidence that a transaction has occurred.
True 
False 
Question 23 
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 
False 
Question 24 
Which of the following is the least likely consideration that management uses when deciding whether to pay a dividend?
Does the company have more cash than it has opportunities?
Is the company’s average number of common shares outstanding decreasing?
Does the company have uses for cash that will increase its value?
What are the company’s cash needs?
Question 25 
The partnership form of business organization
is a separate legal entity.
is a common form of organization for service-type businesses.
enjoys an unlimited life.
has limited liability.