Question 1

The _____ account on the Balance Sheet shows profits that the firm has reinvested in the company.

Accepted Answer

Retained earnings represent the cumulative profits that the company has kept rather than distributing as dividends to shareholders. It is a component of stockholder's equity on the balance sheet.

Question 2

Rent,depreciation,and salaries are examples of:

Accepted Answer

Rent, depreciation, and salaries are all expenses associated with the day-to-day operations of a business, and are therefore considered operating expenses. Current assets are assets that can be converted into cash within one year, current liabilities are debts that must be paid off within one year, and owners' equity represents the residual interest in the assets of a business after liabilities are deducted. None of these definitions fit rent, depreciation, or salaries.

Question 3

Keith will graduate from Southern State University this year.He has accumulated $18,000 in student loans during his four years at college.An accountant would classify the loans as:

Accepted Answer

Student loans are a type of debt/liability. They represent money that has been borrowed and needs to be paid back. Therefore, option B is the correct answer.

Question 4

Debts owed by a business are called __________.

Accepted Answer

Debts owed by a business are called liabilities. Revenues are the income earned by a business, equities are the stockholders' ownership in a company, and assets are the resources or property owned by a business.

Question 5

The balance sheet is set up to reflect the Fundamental Accounting Equation.This equation shows:

Accepted Answer

The Fundamental Accounting Equation is Assets = Liabilities + Owners' equity. The balance sheet is set up to reflect this equation, with assets listed on the left-hand side and liabilities and owners' equity listed on the right-hand side.

Question 6

The "bottom line" of an income statement shows the firm's:

Accepted Answer

The bottom line of an income statement shows the firm's net income or net loss, which is the amount of profit or loss the company has made during the period. Retained earnings and owners' equity are typically shown on a company's balance sheet, while gross profit is calculated as revenue minus cost of goods sold and is shown in a separate line item on the income statement.

Question 7

Depreciation is a systematic write-off of the cost of a tangible asset that is listed on __________.

Accepted Answer

The answer of Depreciation is a systematic write-off of the...

Question 8

As Hector was packing to return to State University after his summer vacation,he realized that he owned many valuable things such as a laptop computer,a stereo system,and a DVD player.An accountant would list all of these as Hector's:

Accepted Answer

Assets refer to any valuable thing that a person or entity possesses. In this case, Hector owns a laptop computer, a stereo system, and a DVD player, which are all valuable possessions. Therefore, these items would be considered as Hector's assets.

Question 9

Revenue,minus cost of goods sold = ____________.

Accepted Answer

Revenue minus cost of goods sold is known as gross profit.

Question 10

The ______________ shows how the capital is structured in the business,including the value of assets and the amount the firm owes at a specific point in time.

Accepted Answer

The balance sheet shows the assets, liabilities, and equity of a business at a specific point in time. It provides a snapshot of the company's financial position and capital structure. The income statement shows the business's revenues and expenses over a period of time, the statement of cash flows shows the inflow and outflow of cash, and a trial balance is a list of all accounts and balances used in the accounting system.

Question 11

The Balance Sheet for Renuvation LLC shows assets totaling $107,000 and liabilities totaling $75,000.Which of the following statements is correct?

Accepted Answer

Owner's Equity = Assets - Liabilities
Owner's Equity = $107,000 - $75,000
Owner's Equity = $32,000

Question 12

The Statement of Cash flows identifies cash receipts and disbursements that result ______________.

Accepted Answer

The Statement of Cash flows identifies cash receipts and disbursements that result from a firm's operations, investment, and financing activities. It provides information on how a company generates and uses cash during a given period. Therefore, option D is the correct answer.

Question 13

The LIFO method of inventory valuation bases the cost of goods sold on the cost of:

Accepted Answer

LIFO method assumes that the most recent inventory purchases are sold first. Therefore, the cost of goods sold is based on the cost of the most recently purchased items, as stated in option B.

Question 14

_________ is the systematic write-off of the value of a tangible asset over its useful life.

Accepted Answer

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. This is done to reflect the gradual wear and tear of the asset, as well as its decreasing value over time. It is a non-cash expense that affects a company's net income and cash flow.

Question 15

Net Profit refers to:

Accepted Answer

Net profit is the amount of earnings left over after all expenses, including taxes and depreciation, have been subtracted from revenues. Option D is the only choice that accurately reflects this definition.

Question 16

Use the fundamental accounting equation to solve the following: Assets minus liabilities equals:

Accepted Answer

The fundamental accounting equation is Assets = Liabilities + Owners' Equity. Therefore, Assets minus liabilities would equal Owners' Equity.

Question 17

Accounting recognizes that assets,such as machinery and buildings,lose value over time.Accountants will record a portion of the cost of an asset as an expense each year through the use of:

Accepted Answer

Depreciation is the process of recognizing the decrease in the value of an asset over time. It allows accountants to spread out the cost of the asset over its useful life, rather than recording the entire cost as an expense in the year of purchase.

Question 18

________ is the monetary value that is received for goods sold,services rendered and money received from other sources.

Accepted Answer

Revenue is the total amount of money received for goods or services sold. It includes all income generated by a business from its primary operations and any other sources. Gross margin is a measure of profitability, net income is the total amount of profit after all expenses and taxes have been paid, and cost of goods sold refers specifically to the direct costs of producing and delivering goods or services.

Question 19

Expenses a firm incurs for insurance,office salaries,and rent are classified as:

Accepted Answer

These expenses are not directly related to the production of goods or services, and are not typically considered selling expenses. They are classified as general expenses on an income statement.

Question 20

FIFO and LIFO are two common:

Accepted Answer

FIFO (First-In, First-Out) and LIFO (Last-In, First-Out) are both inventory valuation methods that determine the cost of goods sold and the ending inventory balance. FIFO assumes that the oldest inventory items are sold first, while LIFO assumes that the newest inventory items are sold first. Both methods have their advantages and disadvantages, and companies must choose which method they will use for financial reporting purposes.

Quiz 17: Understanding Accounting and Financial Information