Question 1

Which of the following is the company's ability to expense fixed assets over their useful life?

Accepted Answer

Depreciation is the method of expensing fixed assets over their useful life. A is incorrect as capital budgeting refers to the process of allocating and investing funds in long-term projects. C is incorrect as acceleration refers to the method of increasing the depreciation expense in the early years of an asset's life. D is incorrect as assetization is not a common financial or accounting term.

Question 2

The Jolly Green Giant appears on all packages of frozen and canned vegetables and other dishes sold by the Green Giant Company.Because it does not have a physical existence,what is the Jolly Green Giant?

Accepted Answer

The Jolly Green Giant is a mascot and brand image for the Green Giant Company. As it does not have a physical existence, it is considered an intangible asset.

Question 3

What is a short-term loan from a bank,supplier,or others that must be repaid within a year?

Accepted Answer

A note payable is a short-term loan that must be repaid within a year. An account payable refers to money owed to a supplier or vendor that has not yet been paid, while a note receivable is a loan given out by the business that is expected to be paid back by the borrower. An account receivable refers to money owed to the business by a customer or client.

Question 4

Which of the following is an example of a fixed asset for a manufacturer of road building equipment?

Accepted Answer

A shipping area and receiving area are physical spaces used by the manufacturer for the production and storage of their road building equipment, making them fixed assets. Patents (A), computer cartridges (C), and cans of paint (D) are all examples of assets, but they are not fixed assets specific to the production of road building equipment.

Question 5

Fixed assets are property and buildings that a company expects to use for more than which of the following periods of time?

Accepted Answer

Fixed assets are expected to be used for more than one year. Therefore, options A and B are too short of a time period, and option D is longer than necessary.

Question 6

What are amounts owed to the company by customers who bought goods and services on credit?

Accepted Answer

Amounts owed to the company by customers who bought goods and services on credit are referred to as accounts receivable. Notes payable refers to amounts owed by the company to lenders, owners' equity refers to the residual interest in the assets of the company after liabilities are deducted, and marketable receivables are typically short-term investments that can be easily converted to cash.

Question 7

Which of the following terms equals the total profits of a company minus all dividends (distributions of profits)to shareholders?

Accepted Answer

Retained earnings are the profits of a company that are not distributed to shareholders in the form of dividends. It is calculated as total profits minus all dividends. Therefore, option C is the correct answer. Option A (net earnings) refers to the profit or loss of a company after all expenses are deducted from revenue; option B (net worth) is the total assets minus total liabilities of a company; option D (owners' equity) is the residual interest in the assets of a company after all liabilities are deducted.

Question 8

What is another term for an operating statement or an earnings statement?

Accepted Answer

An earnings statement is also commonly referred to as an income statement, which is used to show a company's revenue and expenses over a specific period of time, with the difference being the net income or loss.

Option A is incorrect because a cash flow statement shows the inflows and outflows of cash over a specific period of time, while option C is incorrect as a balance sheet shows a company's assets, liabilities, and equity at a specific point in time. Option D is incorrect as a transaction ledger is a record of individual financial transactions.

Question 9

What is the dollar amount of sales plus any other income received from sources such as interest and dividends?

Accepted Answer

Revenues are the dollar amount of sales plus any other income received from sources such as interest and dividends. Capital refers to the resources a company has to invest, such as money or property. Intangible assets are non-physical assets such as patents or trademarks. Equities refer to ownership interests in a company, usually in the form of stocks.

Question 10

Trademarks,franchises,patents,and copyrights are carried on the company's books as which of the following?

Accepted Answer

Trademarks, franchises, patents, and copyrights are intangible assets as they lack physical substance but still hold value for the company. They are long-term assets that can contribute to the company's future revenue and profits.

Question 11

For which of the following assets would a wholesale company use depreciation?

Accepted Answer

Depreciation is the decrease in value of an asset over time due to wear and tear, obsolescence, or other factors. So, a wholesale company would use depreciation for assets that have a useful life and lose value over time, like warehouses. Patented equipment, inventory, and gasoline are not assets that lose value over time, so depreciation would not be applicable for those.

Question 12

Gross sales for Alfredo Milling Company was $100,000 for the month of May.Sales discounts amounted to $3,000.There were no returns.The difference,$97,000,represents which of the following for Alfredo Milling Company?

Accepted Answer

The difference between gross sales and sales discounts is known as net sales, which is $97,000 in this case. Therefore, D (net sales) is the correct choice.

Question 13

Bert Yelverton has a 20-year mortgage on the building where his office is located.The mortgage is an example of which of the following?

Accepted Answer

A 20-year mortgage is a long-term liability as it has a maturity period that is greater than one year. It represents the amount of money Bert owes to the lender for a long period of time. Current assets are those that can be converted into cash within one year, owners' equity is the residual interest in the assets of the company after liabilities are paid, and a current liability is a debt that is due within one year.

Question 14

Allatoona Ceramics recently purchased a new kiln for $49,000.Allatoona Ceramics is allowed to charge a portion of the company's cost during its useful life against the profits it generates.What is this practice called?

Accepted Answer

This practice is called depreciation, which allows companies to spread the cost of an asset over its useful life and charge a portion of that cost against the profits it generates.

Question 15

Which of the following is an example of an intangible asset for a manufacturer of padlocks?

Accepted Answer

A patent is an example of an intangible asset for a manufacturer of padlocks as it represents a legal right to an invention, which can provide a competitive advantage and generate revenue through licensing or sales. Money owed to the company (B) is a type of accounts receivable and considered a tangible asset. The machine for forming the locks (C) is a tangible fixed asset, as it can be physically touched and has a useful life. The warehouse (D) is also a tangible fixed asset, used for storage and considered part of the company's property, plant, and equipment.

Question 16

Wehrmann-Longo sells landscape rocks to retailers.It recently purchased a trainload of lava rocks from a mine in Hawaii.Until Wehrmann-Longo pays the bill,the purchase will be carried on the Hawaiian company's books as which of the following?

Accepted Answer

The purchase of lava rocks by Wehrmann-Longo from the Hawaiian mine will be recorded as an account payable on the books of the Hawaiian company until the bill is paid by Wehrmann-Longo.

Question 17

Which of the following are debts that are to be paid within 12 months?

Accepted Answer

Current liabilities are debts that are expected to be paid within 12 months. Current assets are assets that are expected to be converted into cash within 12 months. Fixed assets are long-term assets that are not expected to be converted into cash within 12 months. Fixed liabilities are long-term debts that are not expected to be paid off within 12 months.

Question 18

Which of the following is the process of distributing the original cost of a long-term asset over the years of its useful life?

Accepted Answer

Depreciation is the process of distributing the original cost of a long-term asset over the years of its useful life. This is done to ensure that the cost of the asset is spread out over its useful life rather than all at once when the asset is initially purchased.

Question 19

Which of the following is a summary of what a company has earned and spent over a given period?

Accepted Answer

The income statement (also called the profit and loss statement) summarizes a company's revenues and expenses over a specified period of time, typically quarterly or annually. It shows whether the company has made a profit or a loss during the period. The balance sheet shows a company's assets, liabilities, and equity at a particular point in time. The cash flow statement shows how cash moves into and out of a company over a specified period. The trial balance is a list of all accounts and their balances at a particular point in time, before adjustments and closing entries are made.

Question 20

How soon are current assets,such as marketable securities and inventory,usually expected to be turned into cash?

Accepted Answer

Current assets, such as marketable securities and inventory, are usually expected to be turned into cash within a year. This is because they are considered to be short-term assets that are meant to be used in the normal operating cycle of a business.

Quiz 16: Accounting for Financial Success