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An advantage of bonds is:Bonds do not affect owner control

A bank that is authorized to accept deposits of amounts payable to the federal government is a:Federal depository bank

A benefit of using an accelerated depreciation method is that:It yields larger depreciation expense in the early years of an asset’s life. 

A bond sells at a discount when the:Contract rate is below the market rate.

A cash equivalent is:An investment readily convertible to a known amount of cash. 

A company’s had fixed interest expense of $5,000, its income before interest expense and income taxes is $17,000, and its net income is $9,400. The company’s time’s interest earned ratio equals: 3.4

A company’s total liabilities divided by its total stockholders’ equity is called the:Debt-to-equity ratio.

A company made an error in calculating and reporting amortization expense in 2015. The error was discovered in 2016.The item should be reported as a prior period adjustment:on the 2016 statement of retained earnings.

A company that uses the net method of recording purchases made a purchase of $400 with terms of 2/10, n/30. The entry to record the purchase would be:Debit Merchandise Inventory $392; credit Accounts Payable $392.

A contract pledging title to assets as security for a note or bond is known as a(an): Mortgage

A contingent liability is:A potential obligation that depends on a future event arising from a past transaction or event.

A promissory note received from a customer in exchange for an account receivable is recorded by the payee as:A note receivable.

A properly designed internal control system:Lowers the company’s risk of loss.

A proxy is:A document that delegates a stockholder’s voting rights to an agent.

A seller (or provider) of goods or services to a business organization, usually a manufacturer or wholesaler, is known as a: Vendor

A short-term note payable:Is a written promise to pay a specified amount on a definite future date within one year or the company’s operating cycle, whichever is longer

Accounts payable are:Amounts owed to suppliers for products and/or services purchased on credit.

Accounting standards: Require that companies include a statement of cash flows in a complete set of financial statements.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:Operating activities.  

All of the following statements regarding accounting treatments for liabilities under U.S. GAAP and IFRS are true except:Use of the fair value option to account for bonds and notes is not acceptable under U.S. GAAP or IFRS.

All of the following are true of known liabilities except:May depend on some future event occurring.

Amortization is:The systematic allocation of the cost of an intangible asset to expense over its estimated useful life.

An analysis that explains differences between the checking account balance according to the depositor’s records and the balance reported on the bank statement is a(n):Bank reconciliation

Another name for a capital expenditure is:Balance sheet expenditure.

An example of a transaction that must be disclosed as a noncash investing and financing activity includes all but which of the following?A transaction exchanging cash equivalents for cash

Bonds that have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity are known as:Callable bonds.

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as: Serial Bonds.

Cash equivalents:Are short-term, highly liquid investment assets.

Changes in accounting estimates are: Accounted for in current and future periods.

Charger Company’s most recent balance sheet reports total assets of $27,000,000, total liabilities of $15,000,000 and total equity of $12,000,000. The debt to equity ratio for the period is (rounded to two decimals):1.25

Changes in retained earnings are commonly reported in the:Statement of stockholders’ equity.

Collateral agreements for a note or bond can:Reduce the risk of loss in comparison with unsecured debt.

The number of days’ sales uncollected is calculated by:Dividing accounts receivable by net sales and multiplying by 365. 

Companies report the cost of stock options in the:Income statement.

Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $104,500$4,625

Debt guarantees are:Considered to be contingent liabilities.

Depletion is The process of allocating the cost of natural resources to the period when it is consumed.

Depreciation: Is the process of allocating the cost of a plant asset to expense. 

Employee vacation benefits:Are estimated liabilities

Employers’ responsibilities for payroll do not include: Recording an expense for the employee Federal Income Tax withholding.

Estimated liabilities commonly arise from all of the following except:Unearned revenues.

Extraordinary repairs:Extend the useful life of an asset beyond its original estimate.

FICA taxes include:Social Security and Medicare taxes.

Honoring a note receivable indicates that the maker has:Paid in full

Internal control systems are:Required by Sarbanes-Oxley (SOX) to be documented and certified if the company’s stock is traded on an exchange

In many states, the minimum amount that stockholders must contribute to the corporation, and which is intended to protect the creditors of the corporation, is called the:Minimum legal capital.

Land improvements are:Assets that increase the usefulness of land, but that have a limited useful life and are subject to depreciation.

Managers place a high priority on internal control systems because the systems assist managers in all of the following except: Assuring that no loss will occur. 

Natural resources are: Consumable assets such standing timber, mineral deposits, and oil and gas fields.

Obligations not expected to be paid within the longer of one year or the company’s operating cycle are reported as:Long-term liabilities.

Obligations to be paid within one year or the company’s operating cycle, whichever is longer, are:Current liabilities.

Prior period adjustments to financial statements can result from:Unacceptable accounting practices. 

Prior period adjustments are reported in the:Statement of retained earnings. 

Principles of internal control include all of the following except:Maintaining security by having one person track and record assets.

Promissory notes that require the issuer to make a series of payments consisting of both interest and principal are:Installment notes. 

Preparing a bank reconciliation on a monthly basis is an example of:Protecting assets by proving the accuracy of cash records.

Retained earnings:Generally consists of a company’s cumulative net income less any net losses and dividends declared since its inception.

Recording employee payroll deductions may involve:Liabilities to federal and state governments.

Reporting the details of notes is consistent with which accounting principle that requires financial statements (including footnotes) to report all relevant information?Full disclosure.

Secured bonds:Have specific assets of the issuing company pledged as collateral.

Sellers allow customers to use credit cards for all of the following reasons except: To be able to charge more due to fees and interest.

Stockholders’ equity consists of which of the following?Paid-in capital and retained earnings.

The accounts receivable turnover is calculated by:Dividing net sales by average accounts receivable.

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:Full disclosure principle.

The annual Federal Unemployment Tax Return is:Form 940

The amount of annual cash dividends distributed to common shareholders relative to the common stock’s market value is the:Dividend yield

The amount of income earned per share of a company’s outstanding common stock is known as:Earnings per share.

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:Financing activities

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:Investing activities.

The board of directors of a corporation:Are responsible for and have final authority for managing corporate activities.

The difference between the amount received from issuing a note payable and the amount repaid at maturity is referred to as:Interest. 

The Discount on Bonds Payable account is: A contra liability

The document that the purchasing department prepares and sends to the vendor to place an order is called thePurchase order.

The cash flow on total assets ratio:Can be an indicator of earnings quality.

The costs of bringing a corporation into existence, including legal fees, promoter fees, and amounts paid to obtain a charter are called:Organization expenses.

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:Net income.

The Federal Insurance Contributions Act (FICA) requires that each employer file a:Form 941.

The indirect method for the preparation of the operating activities section of the statement of cash flows:Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities

The number of shares that a corporation’s charter allows it to sell is referred to as:Authorized stock.

The matching principle, as applied to bad debts, requires:The use of the allowance method of accounting for bad debts.

The materiality constraint, as applied to bad debts:Permits the use of the direct write-off method when bad debts expenses are relatively small.

The relevant factors in computing depreciation do not include: Market value

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers:Direct method of reporting net cash provided or used by operating activities. The price-earnings ratio is calculated by dividing:Market value per share by earnings per share.

The statement of cash flows reports:Cash inflows and cash outflows for an accounting period.

The straight-line depreciation method and the double-declining-balance depreciation method:Produce the same total depreciation over an asset’s useful life

The specific meaning of goodwill in accounting is:The amount by which a company’s value exceeds the value of its individual assets and liabilities. 

The three parties involved with a check are:The maker, the payee, and the bank.

The total amount of cash and other assets received by a corporation from its stockholders in exchange for its stock is:Referred to as paid-in capital.

The total cost of an asset less its accumulated depreciation is called:Book value.

The wage bracket withholding table is used to:Compute federal income tax withholding.

Times interest earned is calculated by: Multiplying interest expense by income before interest expense.

When a company is obligated for sales taxes payable, it is reported as a(n):Current liability.

When a corporation has only one class of stock, the stock is called:Common stock.

When originally purchased, a vehicle costing $23,000 had an estimated useful life of 8 and an estimated salvage value of $1,500A company’s ability to pay interest even if sales decline.

Which internal control principle prescribes the use of pre-numbered printed checks?Maintain adequate records.

Which of the following is not true about the Allowance for Doubtful Accounts?It is a liability account.

Which of the following items is reported on the statement of cash flows under financing activities?Payment of a cash dividend. 

Which one of the following is representative of typical cash flows from operating activities?Receipts of cash sales.