Question 1

A company's operating cycle can be longer than one year.

Accepted Answer

The operating cycle refers to the time it takes for a company to convert its inventory into cash. This process can take longer than one year depending on the industry and the nature of the company's operations.

Question 2

Par value is the value that is printed on the face of the stock certificate.

Accepted Answer

Par value is the value that is printed on the face of the stock certificate.

Question 3

Accounts payable, wages payable, and income taxes payable are all considered to be current liabilities.

Accepted Answer

Current liabilities are those that are expected to be settled within one year or the operating cycle, whichever is longer. Accounts payable, wages payable, and income taxes payable are all short-term obligations that are due within one year, and hence considered to be current liabilities.

Question 4

A statement that reports the cash receipts and cash payments of an organization during a particular period

Accepted Answer

The answer of A statement that reports the cash receipts...

Question 5

Preferred stockholders' potential participation in earnings is unlimited.

Accepted Answer

Preferred stockholders typically have a fixed dividend rate and do not participate in a company's earnings beyond that rate.

Question 6

Separately identifiable additions to a LIFO inventory

Accepted Answer

The answer of Separately identifiable additions to a LIFO inventory...

Question 7

Cash and all other assets that a company reasonably expects to convert to cash or sell or consume within one year or during the normal operating cycle, if longer than a year

Accepted Answer

The answer of Cash and all other assets that a...

Question 8

The account Unearned Revenue is found on the income statement of most United States' companies.

Accepted Answer

Unearned Revenue is a liability account and is found on the balance sheet, not the income statement.

Question 9

During a period of inflation, the LIFO method provides a larger cost of goods amount than does FIFO.

Accepted Answer

LIFO (Last-in-first-out) method assumes that the latest inventory purchased is sold first. During inflation, the latest inventory purchased would have a higher cost, resulting in a higher cost of goods amount under LIFO compared to FIFO (First-in-first-out) method where the oldest inventory is assumed to be sold first.

Question 10

Earnings per share = net income / average number of common and preferred shares outstanding during the year.

Accepted Answer

Earnings per share (EPS) is calculated by dividing net income by the average number of common shares outstanding during the period; it does not include preferred shares in the calculation.

Question 11

Stock that has no predetermined rate of dividends and is the last to obtain a share in the assets when the corporation is dissolved

Accepted Answer

The answer of Stock that has no predetermined rate of...

Question 12

The direct method begins with accrual net income.

Accepted Answer

The direct method of preparing a cash flow statement starts with cash receipts from customers and deducts cash payments to suppliers and employees, not with accrual net income.

Question 13

They contain explanations for the summary figures that appear in the main financial statements

Accepted Answer

The answer of They contain explanations for the summary figures...

Question 14

Treasury stock is a deduction from total stockholders' equity.

Accepted Answer

Treasury stock represents shares of a company's own stock that have been repurchased and are held by the company. Since these shares are no longer outstanding, they are deducted from the total number of shares and the corresponding amount is deducted from total stockholders' equity.

Question 15

An income statement that contains one or more subtotals

Accepted Answer

The answer of An income statement that contains one or...

Question 16

Leasehold improvements are amortized.

Accepted Answer

Leasehold improvements are typically considered a depreciable asset and are therefore amortized over their useful life, rather than being expensed immediately.

Question 17

When using the direct method, depreciation is added to net income.

Accepted Answer

When using the direct method, depreciation is not added to net income. It is shown separately as a deduction from operating activities.

Question 18

An inventory method in which the current market prices of inventory is compared with its cost and the lower of the two is selected as the inventory amount for financial statement reporting

Accepted Answer

The answer of An inventory method in which the current...

Question 19

A creditor claim that is junior to the other creditors in exercising claims against assets

Accepted Answer

The answer of A creditor claim that is junior to...

Question 20

Retained earnings are sometimes called retained income.

Accepted Answer

Retained earnings are also known as retained income or accumulated earnings.

Quiz 16: Basic Accounting Concepts, Techniques, and Conventions

A company's operating cycle can be longer than one year.

Par value is the value that is printed on the face of the stock certificate.

Accounts payable, wages payable, and income taxes payable are all considered to be current liabilities.

A statement that reports the cash receipts and cash payments of an organization during a particular period

Preferred stockholders' potential participation in earnings is unlimited.

Separately identifiable additions to a LIFO inventory

Cash and all other assets that a company reasonably expects to convert to cash or sell or consume within one year or during the normal operating cycle, if longer than a year

The account Unearned Revenue is found on the income statement of most United States' companies.

During a period of inflation, the LIFO method provides a larger cost of goods amount than does FIFO.

Earnings per share = net income / average number of common and preferred shares outstanding during the year.

Stock that has no predetermined rate of dividends and is the last to obtain a share in the assets when the corporation is dissolved

The direct method begins with accrual net income.

They contain explanations for the summary figures that appear in the main financial statements

Treasury stock is a deduction from total stockholders' equity.

An income statement that contains one or more subtotals

Leasehold improvements are amortized.

When using the direct method, depreciation is added to net income.

An inventory method in which the current market prices of inventory is compared with its cost and the lower of the two is selected as the inventory amount for financial statement reporting

A creditor claim that is junior to the other creditors in exercising claims against assets

Retained earnings are sometimes called retained income.