Question 1

is the major operating activity that increases cash.
A) Sales on account
B) Advances from customers
C) Collections from sales to customers
D) Proceeds received from issuing stock

Accepted Answer

Collections from sales to customers directly increase cash as they represent cash inflows from the company's primary business activities.

Question 2

All of the following are charges against income which do not require cash except:
A) sales discounts
B) amortization of leaseholds
C) depletion
D) depreciation

Accepted Answer

Sales discounts are reductions in the selling price and do not involve a non-cash charge against income, unlike amortization, depletion, and depreciation, which are non-cash expenses.

Question 3

is not a current asset.
A) Accounts Receivable
B) Prepaid Expenses
C) Goodwill
D) None of these answers is correct.

Accepted Answer

Goodwill is an intangible asset that represents the value of a company's brand, customer relationships, and other non-physical assets. It is not considered a current asset, which typically includes cash, accounts receivable, and prepaid expenses.

Question 4

Debentures are:
A) debt secured by a general claim against total assets
B) short- term liabilities arising from income transactions
C) debt secured by a claim against specific assets
D) unearned revenues

Accepted Answer

Debentures are a type of debt instrument that is not secured by physical assets or collateral. Instead, they are backed by the general creditworthiness and reputation of the issuer, which means they have a general claim against the total assets of the issuer.

Question 5

When reconciling net income to net cash provided by operating activities, a(n) _ is an addition to net income.
A) increase in wages payable
B) increase in accounts receivable
C) increase in inventories
D) All of these answers are correct.

Accepted Answer

An increase in wages payable is an addition to net income because it represents expenses that have been incurred but not yet paid, thus increasing cash flow.

Question 6

Which of the following would be considered a tangible asset? 1. leasehold improvements
2) goodwill
3) land
4) mineral deposits
5) patent
A) 1, 3, and 4
B) 2 and 4
C) 2, 3, 4, and 5
D) 2 and 5

Accepted Answer

Tangible assets are physical and can be touched or seen. Leasehold improvements, land, and mineral deposits are tangible, whereas goodwill and patents are intangible.

Question 7

Hollander Company gave a long- term note payable in the amount of $285,000 to acquire a new piece of equipment. This transaction will be reported on the statement of cash flows as a:
A) $285,000 investing inflow and $285,000 financing outflow
B) $285,000 operating outflow and $285,000 financing inflow
C) noncash transaction reported in a separate schedule
D) $285,000 investing outflow and $285,000 financing inflow

Accepted Answer

The transaction involves a noncash exchange of a note payable for equipment, which is reported in a separate schedule or disclosure, not in the main sections of the cash flow statement.

Question 8

The cash paid to long- term creditors is included in the section of the statement of cash flows.
A) net cash
B) operating
C) investing
D) financing

Accepted Answer

Cash paid to long-term creditors is included in the financing section of the statement of cash flows, as it relates to the repayment of debt.

Question 9

is the best definition of goodwill.
A) The excess of the cost of an acquired company over the sum of the fair market value of its identifiable individual assets less the liabilities
B) The charitable contributions, in both time and money, which a corporation contributes to society as a whole
C) The value of a company's reputation for such things as service, quality, and product reliability
D) Actions taken by companies that are for the best interest of society but have a detrimental effect on the company's short- run financial results

Accepted Answer

Goodwill is an intangible asset that arises when a company acquires another company for more than the fair value of its identifiable assets and liabilities.

Question 10

Crosby Company reported sales on account of $250,000, an increase in inventory of $70,000, and a decrease in accounts receivable of $20,000. _ was received from Crosby Company's customers.
A) $230,000
B) $320,000
C) $270,000
D) $180,000

Accepted Answer

The decrease in accounts receivable of $20,000 indicates that more cash was collected than the sales on account. Therefore, cash received = sales on account ($250,000) + decrease in accounts receivable ($20,000) = $270,000.

Question 11

Given below is a list of events: 1. payment of employee wages
2) cash collections from customers
3) sale of capital stock
4) sale of land, at cost
5) payment of a cash dividend
6) borrow cash from creditors
7) purchase of equipment
8) cash sale of inventory
9) purchase inventory on account
Which of the above events are outflows in the financing section of the statement of cash flows?
A) 3 and 6
B) 5 and 7
C) only 5
D) 3 and 5

Accepted Answer

The payment of a cash dividend (event 5) is an outflow in the financing section of the statement of cash flows.

Question 12

Selected items from the financial statements from Nellie Company are listed below: $\begin{array}{ll}
\text { Retained Earnings } & \$ 100,000 \
\text { Net Income } & \$ 50,000 \
\text { Dividends } & \$ 75,000
\end{array}$ Nellie Company has 5,000 shares of common stock outstanding. Nellie's earnings per share are:
A) $15.00
B) $20.00
C) $25.00
D) $10.00

Accepted Answer

Earnings per share (EPS) is calculated as Net Income divided by the number of shares outstanding. EPS = $50,000 / 5,000 = $10.00.

Question 13

At the beginning of the current year Duke Company had the following balances in their stockholders' equity accounts as of December 31, 20X5: Paid- in capital $43,000
Retained earnings 27,000
During the year ended December 31, 20X6, Duke Company generated $35,400 in net income, and declared and paid $12,000 in dividends. The ending balance in the Retained Earnings account at December 31, 20X6 is:
A) $27,000
B) $66,400
C) $23,400
D) $50,400

Accepted Answer

The ending balance in Retained Earnings is calculated by adding the net income and subtracting the dividends from the beginning balance: $27,000 + $35,400 - $12,000 = $50,400.

Question 14

Kidman Company's income statement showed rent expense of $16,000. The beginning and ending balances in the Prepaid Rent account were $5,000 and $3,000, respectively. Cash paid for rent was:
A) $16,000
B) $24,000
C) $19,000
D) $14,000

Accepted Answer

The answer of Kidman Company's income statement showed rent expense...

Question 15

Munster Company requires clients to pay in advance for legal services. One such client made a $4,000 payment on May 1, and Munster Company recorded this transaction in the appropriate liability account. As of May 20, the legal services which the client requested had been completed. The May 20 accounting entry will:
A) decrease assets and decrease liabilities
B) increase revenues and increase liabilities
C) decrease liabilities and increase revenues
D) decrease assets and increase revenues

Accepted Answer

The payment was initially recorded as a liability (unearned revenue). Once the services are completed, the liability decreases and revenue is recognized, increasing revenues.

Question 16

Treasury stock is:
A) unissued shares of a corporation's own stock
B) shares of a corporation's stock which have been issued and subsequently repurchased by the corporation
C) shares of a corporation's stock held by the board of directors
D) ownership rights in other companies held by the corporation for investment purposes

Accepted Answer

Treasury stock refers to shares that were once a part of the outstanding shares of a corporation but were later repurchased by the corporation itself. These shares are held in the company's treasury and can be reissued or retired.

Question 17

Which of the following does not correctly state the nature or purpose of par value?
A) The term "stated value" is conceptually equivalent to par value.
B) Some states permit common stock to be issued without either a par or stated value.
C) Par value is a valuable tool used by both the shareholders and the corporation.
D) Par value is the minimum level of investment by owners required by law in some states.

Accepted Answer

Par value is not a tool used by shareholders or corporations; it is a nominal value assigned to shares, often with no relation to market value.

Question 18

The wages expense of Alias Corporation was $45,000. Beginning wages payable was $5,000. Ending wages payable was $3,000. Cash paid to employees was:
A) $45,000
B) $50,000
C) $47,000
D) $43,000

Accepted Answer

The cash paid to employees is calculated as: Wages Expense + Beginning Wages Payable - Ending Wages Payable = $45,000 + $5,000 - $3,000 = $47,000.

Question 19

would result in an increase in income under the cash basis but not an increase in income under the accrual basis.
A) The return of defective inventory purchased on account to a supplier where a full credit was given
B) The cash sale of inventory at a sales price in excess of the inventory's cost
C) The cash collection from a credit customer
D) The credit sale of inventory at a sales price in excess of the inventory's cost

Accepted Answer

Under the cash basis, income is recognized when cash is received, so collecting cash from a credit customer increases income. Under the accrual basis, income is recognized when earned, so the collection does not affect income as it was already recognized when the sale was made.

Question 20

Bing Company reported sales of $180,000, an increase in accounts receivable of $15,000, and a decrease in cash of $20,000. was received from Bing Company's customers.
A) $200,000
B) $165,000
C) $195,000
D) $160,000

Accepted Answer

The cash received from customers is calculated by subtracting the increase in accounts receivable from the sales: $180,000 - $15,000 = $165,000.

Quiz 16: Basic Accounting Concepts, Techniques, and Conventions

is the major operating activity that increases cash.

All of the following are charges against income which do not require cash except:

is not a current asset.

Debentures are:

When reconciling net income to net cash provided by operating activities, a(n) _ is an addition to net income.

Which of the following would be considered a tangible asset? 1. leasehold improvements 2) goodwill 3) land 4) mineral deposits 5) patent

Hollander Company gave a long- term note payable in the amount of $285,000 to acquire a new piece of equipment. This transaction will be reported on the statement of cash flows as a:

The cash paid to long- term creditors is included in the section of the statement of cash flows.

is the best definition of goodwill.

Crosby Company reported sales on account of $250,000, an increase in inventory of $70,000, and a decrease in accounts receivable of $20,000. _ was received from Crosby Company's customers.

Kidman Company's income statement showed rent expense of $16,000. The beginning and ending balances in the Prepaid Rent account were $5,000 and $3,000, respectively. Cash paid for rent was:

Treasury stock is:

Which of the following does not correctly state the nature or purpose of par value?

The wages expense of Alias Corporation was $45,000. Beginning wages payable was $5,000. Ending wages payable was $3,000. Cash paid to employees was:

would result in an increase in income under the cash basis but not an increase in income under the accrual basis.

Bing Company reported sales of $180,000, an increase in accounts receivable of $15,000, and a decrease in cash of $20,000. was received from Bing Company's customers.