Question 1

All of the following except which are current assets?
A) office equipment
B) cash
C) prepaid insurance
D) accounts receivable
E) marketable securities

Accepted Answer

Office equipment is a fixed asset, not a current asset.

Question 2

The process of spreading the cost of a fixed asset over the asset's useful life is called _____.
A) expensing
B) depreciation
C) apportioning
D) crediting
E) distributing

Accepted Answer

Depreciation is the process of allocating the cost of a fixed asset over its useful life. This is typically done for accounting purposes, as it allows businesses to expense a portion of the asset’s cost each year rather than taking the full expense in the year of purchase. Depreciation is a non-cash expense, meaning it does not involve an actual cash outlay.

Question 3

Extreme Sports, a bicycle, ATV, and motorbike retailer, buys its inventory on credit.Before Extreme pays for this merchandise in 60 days, the money owed is classified on its balance sheet as a(n) _____.
A) current asset
B) intangible asset
C) account payable
D) long-term liability
E) account receivable

Accepted Answer

The money owed to suppliers for merchandise purchased on credit is classified as an accounts payable on the balance sheet until it is paid back. This falls under current liabilities as it is expected to be paid within one year.

Question 4

The value of goods on hand for sale to customers is called _____.
A) sales
B) merchandise inventory
C) cost of goods sold
D) prepaid expenses
E) operating expenses

Accepted Answer

Merchandise inventory refers to the value of goods a business has on hand and available for sale to customers. Choices A, C, D, and E are not correct because they refer to different accounting concepts.

Question 5

The mortgage on Prudential Insurance's local facility will be paid off over the next 30 years.The majority of this mortgage would be classified on Prudential's balance sheet as a(n) _____.
A) current asset
B) current liability
C) long-term asset
D) long-term liability
E) account payable

Accepted Answer

The mortgage on Prudential Insurance's local facility will be paid off over the next 30 years, indicating that it is a long-term liability.

Question 6

The value of a firm's reputation, location, earning capacity, and other intangibles that make the business profitable is called its _____.
A) good character
B) franchise
C) goodwill
D) distinction
E) prestige

Accepted Answer

Goodwill refers to the intangible assets of a business that give it value beyond its physical assets or financial performance. This can include its reputation, customer loyalty, and overall brand recognition. Goodwill is typically considered as part of a company's overall valuation when it is bought or sold.

Question 7

Dr.Ted Walker runs a chiropractic clinic.He typically bills his customers for services he performs and gives them about 30 days to make the payments.These amounts of money that his customers owe are called _____.
A) allowances for doubtful accounts
B) prepaid expenses
C) unearned revenue
D) intangible assets
E) accounts receivable

Accepted Answer

The amounts of money that Dr. Ted Walker's customers owe him are called accounts receivable, which represents the money owed to a business by its customers for goods or services that have been delivered but not yet paid for. Option A, allowances for doubtful accounts, is an estimate of the amount of accounts receivable that may not be collected due to customers not paying or becoming bankrupt. Options B, prepaid expenses, and C, unearned revenue, are both liabilities on a company's balance sheet, but do not relate to accounts receivable. Option D, intangible assets, refer to non-physical assets such as patents, trademarks, and goodwill.

Question 8

Since furniture and store equipment for Rosalind's Boutique will be held or used for a period longer than one year, they are considered _____.
A) fixed assets
B) owners' equity
C) revenue
D) current assets
E) prepaid expenses

Accepted Answer

Furniture and store equipment are considered fixed assets because they will be held for a long period of time and are used to generate revenue for the business.

Question 9

Bonds payable are examples of _____.
A) current liabilities
B) owners' equity
C) fixed assets
D) expenses
E) long-term liabilities

Accepted Answer

Bonds payable are long-term liabilities as they are typically due for payment after one year from the balance sheet date.

Question 10

Debts that need not be repaid for at least one year are referred to as _____.
A) expenses
B) current assets
C) long-term liabilities
D) fixed assets
E) current liabilities

Accepted Answer

Long-term liabilities are debts that are not due for payment within one year. Current assets are expected to be used up or converted into cash within one year. Fixed assets are long-term items such as property, plant, and equipment. Expenses are costs incurred in the normal operations of a business. Current liabilities are debts that are due for payment within one year.

Question 11

Salaries payable, accounts payable, and taxes payable are examples of _____.
A) expenses
B) current liabilities
C) current assets
D) long-term liabilities
E) owners' equity

Accepted Answer

Salaries payable, accounts payable, and taxes payable are all obligations that the company owes to others and are due in the short-term (usually within a year), making them examples of current liabilities. Expenses refer to the costs incurred in generating revenue, while current assets are assets expected to be converted into cash within a year, and long-term liabilities are obligations due beyond the next year. Owners' equity refers to the residual interest in the assets of the company after deducting its liabilities.

Question 12

A firm has $260,000 in assets and $158,000 in stockholders' equity.It owes $55,000 from a long-term loan, and this is its only long-term liability.This firm has ____ in total current liabilities.
A) $55,000
B) $103,000
C) $47,000
D) $102,000
E) $213,000

Accepted Answer

Total liabilities = Long-term liability + Stockholders' equity
Total liabilities = $55,000 + $158,000 = $213,000
Current liabilities = Total liabilities - Long-term liability
Current liabilities = $213,000 - $55,000 = $158,000
Therefore, the firm has $47,000 in total current liabilities.

Question 13

Television sets that Best Buy owns for selling to its customers are classified as _____.
A) equipment
B) machinery
C) receivables
D) merchandise inventory
E) prepaid merchandise

Accepted Answer

The television sets that Best Buy owns for selling to its customers are considered as merchandise inventory, which is a current asset on the balance sheet. Options A and B are not correct as they refer to fixed assets. Option C is not correct as it refers to an amount owed to Best Buy by its customers. Option E is not correct as it refers to the payment made by Best Buy in advance for the merchandise that they will receive later.

Question 14

When Josh sold his Internet auction site to eBay, he received $2,000,000 more than the total value of his assets as listed on his balance sheet.How will eBay classify this $2,000,000?
A) goodwill
B) reputation
C) equipment
D) research and development
E) retained earnings

Accepted Answer

The $2,000,000 represents the amount paid above the fair value of Josh's assets, which would be classified as goodwill on eBay's balance sheet. Goodwill represents the value of intangible assets such as reputation, customer relationships, and brand recognition.

Question 15

The debts of a business that will be paid in one year or less are called its _____.
A) current liabilities
B) expenses
C) prepaid expenses
D) current assets
E) long-term liabilities

Accepted Answer

Current liabilities are debts that are due to be paid within one year or less. These can include accounts payable, short-term loans, and taxes owed. Expenses, prepaid expenses, current assets, and long-term liabilities do not necessarily relate to debts that will be paid within one year.

Question 16

All of the following except which are classified as fixed assets?
A) factory equipment
B) a company car
C) computers held for resale
D) property
E) buildings

Accepted Answer

Fixed assets are long-term tangible assets that a company owns with the intention of using them in the production or supply of goods or services. Items A, D, and E are all typical examples of fixed assets, while choice C, computers held for resale, is not considered a fixed asset. Instead, it would be classified as inventory or stock.

Question 17

Patents and copyrights confer value on a firm but do not exist physically.Thus, they are identified as_____.
A) current assets
B) prepaid expenses
C) fixed assets
D) intangible assets
E) owners' equity

Accepted Answer

Patents and copyrights do not exist physically, hence they are intangible assets of a firm.

Question 18

Jessica has worked for one week but her employer only pays its employees every two weeks.The amount of money her company owes her is classified as _____.
A) accounts notable
B) accounts receivable
C) notes payable
D) prepaid wages
E) salaries payable

Accepted Answer

Salaries payable is the correct term for the amount of money that an employer owes to an employee for work that has been completed but not yet paid. This is a liability for the employer and an asset for the employee.

Question 19

Kim's Copy Shop is in the process of organizing its assets in the appropriate order.They ask you for help in arranging the following assets: equipment, accounts receivable, cash, merchandise inventory, and notes receivable.You list ____ first and ____ last.
A) merchandise inventory; notes receivable
B) accounts receivable; equipment
C) notes receivable; accounts receivable
D) equipment; accounts receivable
E) cash; equipment

Accepted Answer

Cash should be listed first as it is the most liquid asset and can be easily converted into other forms of assets. Equipment should be listed last as it is the least liquid asset and cannot be easily converted into cash. The correct order is: Cash, Accounts Receivable, Notes Receivable, Merchandise Inventory, Equipment.

Question 20

A prepaid expense would be classified as _____.
A) an expense
B) an unearned revenue
C) a liability
D) an asset
E) cost of goods sold

Accepted Answer

A prepaid expense is an expenditure paid for in advance, and therefore it has not yet been used up or consumed. It is an asset because it represents a future benefit that the company will receive. Once the expense is consumed, it will be classified as an expense.

Quiz 15: Using Accounting Information

All of the following except which are current assets?

The process of spreading the cost of a fixed asset over the asset's useful life is called _____.

Extreme Sports, a bicycle, ATV, and motorbike retailer, buys its inventory on credit.Before Extreme pays for this merchandise in 60 days, the money owed is classified on its balance sheet as a(n) _____.

The value of goods on hand for sale to customers is called _____.

The mortgage on Prudential Insurance's local facility will be paid off over the next 30 years.The majority of this mortgage would be classified on Prudential's balance sheet as a(n) _____.

The value of a firm's reputation, location, earning capacity, and other intangibles that make the business profitable is called its _____.

Dr.Ted Walker runs a chiropractic clinic.He typically bills his customers for services he performs and gives them about 30 days to make the payments.These amounts of money that his customers owe are called _____.

Since furniture and store equipment for Rosalind's Boutique will be held or used for a period longer than one year, they are considered _____.

Bonds payable are examples of _____.

Debts that need not be repaid for at least one year are referred to as _____.

Salaries payable, accounts payable, and taxes payable are examples of _____.

A firm has $260,000 in assets and $158,000 in stockholders' equity.It owes $55,000 from a long-term loan, and this is its only long-term liability.This firm has ____ in total current liabilities.

Television sets that Best Buy owns for selling to its customers are classified as _____.

When Josh sold his Internet auction site to eBay, he received $2,000,000 more than the total value of his assets as listed on his balance sheet.How will eBay classify this $2,000,000?

The debts of a business that will be paid in one year or less are called its _____.

All of the following except which are classified as fixed assets?

Patents and copyrights confer value on a firm but do not exist physically.Thus, they are identified as_____.

Jessica has worked for one week but her employer only pays its employees every two weeks.The amount of money her company owes her is classified as _____.

Kim's Copy Shop is in the process of organizing its assets in the appropriate order.They ask you for help in arranging the following assets: equipment, accounts receivable, cash, merchandise inventory, and notes receivable.You list first and last.

A prepaid expense would be classified as _____.