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Test Bank For Warren Reeve Duchac’s Financial and Managerial Accounting, 12th

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Test Bank for Warren/Reeve/Duchac’s Financial & Managerial Accounting, 12th. Note : this is not a text book. Description: ISBN-10:1285179811, ISBN-13:978-1285179810.

 

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Warren Reeve Duchac’s Financial and Managerial Accounting, 12th

Chapter 1–Introduction to Accounting and Business

  1. Profit is the difference between
    A. assets and liabilities
    B. the incoming cash and outgoing cash
    C. the assets purchased with cash invested by stockholders and the cash spent to operate the business
    D. the amounts received from customers for goods or services and the amounts paid for
    the inputs used to provide the goods or services
  2. Who among the following uses financial reports?
    A. management
    B. creditors
    C. investors
    D. all are correct
  3. Two common areas of accounting that respectively provide information to internal and external users are
    A. forensic accounting and financial accounting
    B. managerial accounting and financial accounting
    C. managerial accounting and environmental accounting
    D. financial accounting and tax accounting systems
  4. Which type of accountant typically practices as an individual or as a member of a public accounting firm?
    A. Certified Public Accountant
    B. Certified Payroll Professional
    C. Certified Internal Auditor
    D. Certified Management Accountant
  1. Which of the following is not a general-purpose financial statement?
    A. balance sheet
    B. income statement
    C. retained earnings statement
    D. cash budget
  1. Which of the following is a manufacturing business?
    A. Amazon.com.
    B. Wal-Mart.
    C. Ford Motors.
    D. Delta Airlines
  2. Which of the following group of companies are all examples of a merchandising business?
    A. Delta Airlines, Marriott, Gap
    B. Gap, Amazon, NIKE
    C. GameStop, Sony, Dell
    D. GameStop, Best Buy, Gap
  3. Which of the following would not normally operate as a service business?
    A. pet groomer
    B. supermarket
    C. lawn care company
    D. styling salon
  4. Which of the following best describes accounting?
    A. It records economic data but does not communicate the data to users according to any specific rules.
    B. It is an information system that provides reports to users regarding economic activities and condition of a business.
    C. It is of no use by individuals outside of the business.
    D. It is used only for filling out tax returns and for financial statements for various type of governmental reporting requirements.
  5. Which of the following groups are considered to be internal usersof accounting information?
    A. Employees and customers
    B. Customers and vendors
    C. Employees and managers
    D. Government and banks

Chapter 2–Analyzing Transactions

  1. Accounts
    A. do not reflect money amounts
    B. are not used by entities that manufacture products
    C. are records of increases and decreases in individual financial statement items
    D. are only used by large entities with many transactions
  2. Accounts are classified in the ledger
    A. chronologically
    B. alphabetically
    C. in accordance with their appearance in the financial statements
    D. so that accounts used most often are listed first
  3. Revenue should be recognized when
    A. cash is received
    B. the service is performed
    C. the customer places an order
    D. the customer charges an order
  4. Which of the following accounts is a stockholders’ equity account?
    A. Cash
    B. Accounts Payable
    C. Prepaid Insurance
    D. Dividends
  5. The gross increases in retained earnings attributable to business activities are called
    A. assets
    B. liabilities
    C. revenues
    D. expenses
  6. A chart of accounts is
    A. the same as a balance sheet
    B. usually a listing of accounts in alphabetical order
    C. usually a listing of accounts in financial statement order
    D. used in place of a ledger
  7. The debit side of an account
    A. depends on whether the account is an asset, liability or stockholders’ equity item
    B. can be either side of the account depending on how the accountant set up the system
    C. is the right side of the account
    D. is the left side of the account
  8. An account is said to have a debit balance if
    A. the amount of the debits exceeds the amount of the credits
    B. there are more entries on the debit side than on the credit side
    C. there are more entries on the credit side than on the debit side
    D. the first entry of the accounting period was posted on the debit side
  9. Which statement(s) concerning cash is (are) true?
    A. cash will always have more debits than credits
    B. cash will never have a credit balance
    C. cash is increased by debiting
    D. all of the above
  10. Which of the following is true about a T account?
    A. The left-hand side of the T account is called the debit side.
    B. The left-hand side of the T account is called the credit side.
    C. The right-hand side of the T account is called the debit side.
    D. None of these are true.

Chapter 3–The Adjusting Process

  1. The revenue recognition concept
    A. is not in conflict with the cash method of accounting
    B. determines when revenue is credited to a revenue account
    C. states that revenue is not recorded until the cash is received
    D. controls all revenue reporting for the cash basis of accounting
  2. The matching concept
    A. addresses the relationship between the journal and the balance sheet
    B. determines whether the normal balance of an account is a debit or credit
    C. requires that the dollar amount of debits equal the dollar amount of credits on a trial balance
    D. states that expenses related to revenue be reported at the same time the revenue is reported
  3. Using accrual accounting, revenue is recorded and reported only
    A. when cash is received without regard to when the services are rendered
    B. when the services are rendered without regard to when cash is received
    C. when cash is received at the time services are rendered
    D. if cash is received after the services are rendered
  4. Using accrual accounting, expenses are recorded and reported only
    A. when they are incurred, whether or not cash is paid
    B. when they are incurred and paid at the same time
    C. if they are paid before they are incurred
    D. if they are paid after they are incurred
  5. One of the accounting concepts upon which deferrals and accruals are based is
    A. matching
    B. cost
    C. price-level adjustment
    D. conservatism
  6. If the effect of the debit portion of an adjusting entry is to increase the balance of an expense account, which of the following describes the effect of the credit portion of the entry?
    A. decreases the balance of a stockholders’ equity account
    B. increases the balance of a liability account
    C. increases the balance of an asset account
    D. decreases the balance of an expense account
  7. If the effect of the credit portion of an adjusting entry is to increase the balance of a liability account, which of the following describes the effect of the debit portion of the entry?
    A. increases the balance of a contra asset account
    B. increases the balance of an asset account
    C. decreases the balance of a stockholders’ equity account
    D. increases the balance of an expense account
  8. Prior to the adjusting process, accrued expenses have
    A. not yet been incurred, paid, or recorded
    B. been incurred, not paid, but have been recorded
    C. been incurred, not paid, and not recorded
    D. been paid but have not yet been incurred
  9. Prior to the adjusting process, accrued revenue has
    A. been earned and cash received
    B. been earned and not recorded as revenue
    C. not been earned but recorded as revenue
    D. not been recorded as revenue but cash has been received
  10. Deferred expenses have
    A. not yet been recorded as expenses or paid
    B. been recorded as expenses and paid
    C. been incurred and paid
    D. not yet been recorded as expenses

Chapter 4–Completing the Accounting Cycle

  1. What is the major difference between the unadjusted trial balance and the adjusted trial balance?
    A. The adjusted trial balance will show the net income (loss) as an additional account.
    B. Unlike the Adjusted Trial Balance, the Unadjusted Trial Balance will continue with the end-of-period processing even if it is not in balance.
    C. The adjusted trial balance includes the postings of the adjustments for the period in the balance of the accounts.
    D. The adjusted trial balance will be used to record the adjustments for the period.
  2. Once the adjusting entries are posted, the adjusted trial balance is prepared to
    A. verify that the debits and credits are in balance
    B. verify that all of the adjustments were posted in the correct accounts
    C. verify that the net income (loss) is correct for the period
    D. verify the correct flow of accounts into the financial statements
  3. When preparing the retained earnings statement, the beginning retained earnings balance can always be found
    A. in the Income Statement columns of the work sheet
    B. in the statement of cash flows
    C. in the general ledger
    D. in the Adjustments columns of the work sheet
  4. Accumulated depreciation appears on the
    A. balance sheet in the current assets section
    B. balance sheet in the property, plant and equipment section
    C. balance sheet in the long-term liabilities section
    D. income statement as an operating expense
  5. Notes receivable due in 350 days appear on the
    A. balance sheet in the current assets section
    B. balance sheet in the fixed assets section
    C. balance sheet in the current liabilities section
    D. income statement as an expense
  6. Unearned Fees appear on the
    A. balance sheet in the current assets section
    B. balance sheet as a current liability
    C. balance sheet in the stockholders’ equity section
    D. income statement as revenue
  7. Which one of the fixed asset accounts listed below will not have a related contra asset account?
    A. Office Equipment
    B. Land
    C. Delivery Equipment
    D. Building
  8. Prepaid insurance is reported on the balance sheet as a
    A. current asset
    B. fixed asset
    C. current liability
    D. long-term liability
  9. The income statement is prepared from:
    A. either the post-closing trial balance or the unadjusted trial balance columns of the work sheet.
    B. either the unadjusted trial balance or the balance sheet columns of the work sheet.
    C. either the adjusted trial balance or the income statement columns of the work sheet.
    D. both the adjusted trial balance and the balance sheet columns of the work sheet.
  10. Which of the following is not showed on the retained earnings statement of a company?
    A. Ending balance of retained earnings
    B. Net income of the company
    C. Dividends paid by the company
    D. Additional capital stock issued by the company

Chapter 5–Accounting for Merchandising Businesses

  1. Which one of the following is not a difference between a retail business and a service business?
    A. in what is sold
    B. the inclusion of gross profit in the income statement
    C. accounting equation
    D. merchandise inventory included in the balance sheet
  2. Net income plus operating expenses is equal to
    A. cost of merchandise sold
    B. cost of merchandise available for sale
    C. net sales
    D. gross profit
  3. Generally, the revenue account for a merchandising business is entitled
    A. Sales
    B. Fees Earned
    C. Gross Sales
    D. Gross Profit
  1. What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?
    A. gross profit
    B. income from operations
    C. net income
    D. gross sales
  2. The term “inventory” can indicate
    A. merchandise held for sale in the normal course of business
    B. equipment used to manufacture products
    C. supplies
    D. any asset
  3. A company using the periodic inventory system has the following account balances: Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650; Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts, $330.  The cost of merchandise purchased is equal to
    A. $12,670
    B. $9,070
    C. $8,420
    D. $17,230
  1. A company, using the periodic inventory system, has merchandise inventory costing $175 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. $970
    B. $650
    C. $300
    D. $620
  2. Expenses that are incurred directly or entirely in connection with the sale of merchandise are classified as
    A. selling expenses
    B. general expenses
    C. other expenses
    D. administrative expenses
  3. Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?
    A. selling expense
    B. miscellaneous expense
    C. administrative expense
    D. other expense
  4. The form of income statement that derives its name from the fact that the total of all expenses is deducted from the total of all revenues is called a
    A. multiple-step statement
    B. revenue statement
    C. report-form statement
    D. single-step statement

Chapter 6–Inventories

  1. Under a perpetual inventory system, the amount of each type of merchandise on hand is available in the
    A. customer’s ledger
    B. creditor’s ledger
    C. inventory ledger
    D. purchase ledger
  2. Taking a physical count of inventory
    A. is not necessary when a periodic inventory system is used
    B. should be done near year-end
    C. has no internal control relevance
    D. is not necessary when a perpetual inventory system is used
  3. Control of inventory should begin as soon as the inventory is received.  Which of the following internal control steps is not done to meet this goal?
    A. check the invoice to the receiving report
    B. check the invoice to the purchase order
    C. check the invoice with the person who specifically purchased the item
    D. check the invoice extensions and totals
  1. Which of the following is not an example for safeguarding inventory?
    A. Storing inventory in restricted areas.
    B. Physical devices such as two-way mirrors, cameras, and alarms.
    C. Matching receiving documents, purchase orders, and vendor’s invoice.
    D. Returning inventory that is defective or broken.
  2. Which of the following methods is appropriate for a business whose inventory consists of a relatively small number of unique, high-cost items?
    A. FIFO
    B. LIFO
    C. average
    D. specific identification
  3. Ending inventory is made up of the oldest purchases when a company uses
    A. first-in, first-out
    B. last-in, first-out
    C. average cost
    D. retail method
  4. When merchandise sold is assumed to be in the order in which the purchases were made, the company is using
    A. first-in, last-out
    B. last-in, first-out
    C. first-in, first-out
    D. average cost
  5. The two most widely used methods for determining the cost of inventory are
    A. FIFO and LIFO
    B. FIFO and average
    C. LIFO and average
    D. gross profit and average
  6. Cost flow is in the order in which costs were incurred when using
    A. average cost
    B. last-in, first-out
    C. first-in, first-out
    D. weighted average
  7. Cost flow is in the reverse order in which costs were incurred when using
    A. weighted average
    B. last-in, first-out
    C. first-in, first-out
    D. average cost

Chapter 7–Sarbanes-Oxley, Internal Control, and Cash

  1. Which one of the following below is not an element of internal control?
    A. risk assessment
    B. monitoring
    C. information and communication
    D. cost-benefit considerations
  2. Which one of the following below is not a factor that influences a business’s control environment?
    A. management’s philosophy and operating style
    B. organizational structure
    C. proofs and security measurers
    D. personnel policies
  3. When a firm uses internal auditors, it is adhering to which one of the following internal control elements?
    A. risk assessment
    B. monitoring
    C. proofs and security measures
    D. separating responsibilities for related operations
  4. The objectives of internal control are to
    A. control the internal organization of the accounting department personnel and equipment
    B. provide reasonable assurance that operations are managed to achieve goals, financial reports are accurate, and laws and regulations are complied with
    C. prevent fraud, and promote the social interest of the company
    D. provide control over “internal-use only” reports and employee internal conduct
  5. Which one of the following below reflects a weak internal control system?
    A. all employees are well supervised
    B. a single employee is responsible for comparing a receiving report to an invoice
    C. all employees must take their vacations
    D. a single employee is responsible for collecting and recording of cash
  6. Internal control does not consist of policies and procedures that
    A. protect assets from misuse
    B. aid management in directing operations toward achieving business goals
    C. guarantee the company will not go bankrupt
    D. ensure that business information is accurate
  7. A firm’s internal control environment is not influenced by
    A. management’s operating style
    B. organizational structure
    C. personnel policies
    D. monitoring policies
  8. An element of internal control is
    A. risk assessment
    B. journals
    C. subsidiary ledgers
    D. controlling accounts
  9. A necessary element of internal control is
    A. database
    B. systems design
    C. systems analysis
    D. information and communication
  10. In management’s internal control report that is now required of all public companies, which of the following does not have a direct effect on a company’s internal control system?
    A. internal auditors
    B. independent accountants
    C. Board of Director’s audit committee
    D. Board of Trustees

Chapter 8–Receivables

  1. A note receivable due in 18 months is listed on the balance sheet under the caption
    A. long-term liabilities
    B. fixed assets
    C. current assets
    D. investments
  2. The receivable that is usually evidenced by a formal instrument of credit is a(n)
    A. trade receivable.
    B. note receivable.
    C. accounts receivable.
    D. income tax receivable.
  3. Which of the following receivables would not be classified as an “other receivable”?
    A. Advance to an employee
    B. Interest receivable
    C. Refundable income tax
    D. Notes receivable
  4. Notes or accounts receivables that result from sales transactions are often called
    A. non-trade receivables.
    B. trade receivables.
    C. merchandise receivables.
    D. sales receivables.
  5. The term “receivables” includes all
    A. money claims against other entities.
    B. merchandise to be collected from individuals or companies.
    C. cash to be paid to creditors.
    D. cash to be paid to debtors.
  6. When does an account become uncollectible?
    A. when accounts receivable is converted into notes receivable
    B. when discount is availed on notes receivable
    C. there is no general rule for when an account becomes uncollectible
    D. at the end of the fiscal year
  7. The two methods of accounting for uncollectible receivables are the allowance method and the
    A. equity method
    B. direct write-off method
    C. interest method
    D. cost method
  8. The direct write-off method of accounting for uncollectible accounts
    A. emphasizes balance sheet relationships.
    B. is often used by small companies and companies with few receivables.
    C. emphasizes cash realizable value.
    D. emphasizes the matching of expenses with revenues.
  1. Under the direct write-off method of accounting for uncollectible accounts, Bad Debts Expense is debited
    A. at the end of each accounting period.
    B. when a credit sale is past due.
    C. whenever a pre-determined amount of credit sales have been made.
    D. when an account is determined to be worthless.
  2. An alternative name for Bad Debt Expense is
    A. Collection Expense.
    B. Credit Loss Expense.
    C. Uncollectible Accounts Expense.
    D. Deadbeat Expense.

Chapter 9–Fixed Assets and Intangible Assets

  1. A characteristic of a fixed asset is that it is
    A. intangible
    B. used in the operations of a business
    C. held for sale in the ordinary course of the business
    D. a short-term investment
  2. Land acquired so it can be resold in the future is listed in the balance sheet as a(n)
    A. fixed asset
    B. current asset
    C. investment
    D. intangible asset
  3. Which of the following should be included in the acquisition cost of a piece of equipment?
    A. transportation costs
    B. installation costs
    C. testing costs prior to placing the equipment into production
    D. all are correct
  4. Which of the following is included in the cost of constructing a building?
    A. insurance costs during construction
    B. cost of paving parking lot
    C. cost of repairing vandalism damage during construction
    D. cost of removing the demolished building existing on the land when it was purchased
  5. Which of the following is included in the cost of land?
    A. cost of paving a parking lot
    B. brokerage commission
    C. outdoor parking lot lighting attached to the land
    D. fences on the land
  6. Accumulated Depreciation
    A. is used to show the amount of cost expiration of intangibles
    B. is the same as Depreciation Expense
    C. is a contra asset account
    D. is used to show the amount of cost expiration of natural resources
  1. A building with an appraisal value of $154,000 is made available at an offer price of $172,000.  The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000.  The cost basis recorded in the buyer’s accounting records to recognize this purchase is
    A. $154,000
    B. $172,000
    C. $160,000
    D. $120,000
  2. A used machine with a purchase price of $77,000, requiring an overhaul costing $8,000, installation costs of $5,000, and special acquisition fees of $3,000, would have a cost basis of
    A. $93,000
    B. $90,000
    C. $82,000
    D. $85,000
  3. A new machine with a purchase price of $109,000, with transportation costs of $12,000, installation costs of $5,000, and special acquisition fees of $6,000, would have a cost basis of
    A. $114,000
    B. $126,000
    C. $121,000
    D. $132,000
  4. Expenditures that add to the utility of fixed assets for more than one accounting period are
    A. committed expenditures
    B. revenue expenditures
    C. utility expenditures
    D. capital expenditures

Chapter 10–Current Liabilities and Payroll

  1. Current liabilities are
    A. due, but not receivable for more than one year
    B. due, but not payable for more than one year
    C. due and receivable within one year
    D. due and payable within one year
  2. Notes may be issued
    A. when assets are purchased
    B. to creditor’s to temporarily satisfy an account payable created earlier
    C. when borrowing money
    D. all of the above
  3. On June 8, Alton Co. issued an $95,000, 6%, 120-day note payable to Seller Co.  What is the due date of the note?
    A. October 8
    B. October 7
    C. October 6
    D. October 5
  4. On June 8, Alton Co. issued an $90,000, 6%, 120-day note payable to Seller Co.  Assuming a 360-day year for your calculations, what is the maturity value of the note?
    A. $90,450
    B. $90,000
    C. $91,800
    D. $95,400
  1. On July 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co.  Assume that the fiscal year of Alton Co. ends July 31.  Using the 360-day year in your calculations, what is the amount of interest expense recognized by Alton in the current fiscal year?
    A. $1,200.00
    B. $106.67
    C. $306.67
    D. $400.00
  2. On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable to Seller Co.  Assume that the fiscal year of Seller Co. ends June 30.  Using the 360-day year in your calculations, what is the amount of interest revenue recognized by Seller in the following year?
    A. $1,200.00
    B. $1,208.89
    C. $1,306.67
    D. $1,600.00
  3. On June 8, Alton Co. issued an $80,000, 6%, 120-day note payable on an overdue account payable to Seller Co.  Assume that the fiscal year of Alton Co. ends June 30.  Which of the following relationships is true?
    A. Alton is the creditor and credits Accounts Receivable
    B. Seller is the creditor and debits Accounts Receivable
    C. Seller is the borrower and credits Accounts Payable
    D. Alton is the borrower and debits Accounts Payable
  4. A business borrowed $40,000 on March 1 of the current year by signing a 60-day, 9% interest bearing note.  Assuming a 360-day year, when the note is paid on April 30, the entry to record the payment should include a
    A. debit to Interest Payable $600
    B. debit to Interest Expense $600
    C. credit to Cash for $40,000
    D. credit to Cash for $46,300
  5. When a borrower receives the face amount of a discounted note less discount, this amount is  known as:
    A. the note proceeds
    B. the note discount
    C. the note deferred interest
    D. the note principal
  1. Assuming a 360-day year, the interest charged by the bank, at the rate of 9%, on a 90-day, discounted note payable of $100,000 is
    A. $9,000
    B. $2,250
    C. $750
    D. $1,000

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