{"id":23723,"date":"2022-01-09T10:48:37","date_gmt":"2022-01-09T10:48:37","guid":{"rendered":"https:\/\/assignmenttutors.net\/blog\/1-the-primary-objective-of-financial-accounting-is\/"},"modified":"2022-01-09T10:48:37","modified_gmt":"2022-01-09T10:48:37","slug":"1-the-primary-objective-of-financial-accounting-is","status":"publish","type":"post","link":"https:\/\/assignmenttutors.net\/blog\/1-the-primary-objective-of-financial-accounting-is\/","title":{"rendered":"1. the primary objective of financial accounting is:"},"content":{"rendered":"
\n

1. The primary objective of financial accounting is:<\/p>\n

To serve the decision-making needs of internal users<\/p>\n

To provide financial statements to help external users analyze and interpret an organization’s activities<\/p>\n

To monitor and control company activities<\/p>\n

To provide information on both the costs and benefits of managing products and services<\/p>\n

To know what, when and how much to produce<\/p>\n

\u00a0<\/p>\n

2. Apatha Company has assets of $600,000, liabilities of $250,000 and equity of $350,000. It buys office equipment on credit for $75,000. The effects of this transaction include:\u00a0<\/p>\n

Assets increase by $75,000 and expenses increase by $75,000<\/p>\n

Assets increase by $75,000 and expenses decrease by $75,000<\/p>\n

Liabilities increase by $75,000 and expenses decrease by $75,000<\/p>\n

Assets decrease by $75,000 and expenses decrease by $75,000<\/p>\n

Assets increase by $75,000 and liabilities increase by $75,000<\/p>\n

\u00a0<\/p>\n

3. Source documents include all of the following except:\u00a0<\/p>\n

Sales tickets<\/p>\n

Ledgers<\/p>\n

Checks<\/p>\n

Purchase orders<\/p>\n

Bank statements<\/p>\n

\u00a0<\/p>\n

4. Ethical behavior requires:\u00a0<\/p>\n

That an auditors’ pay not depend on the figures in the client’s reports<\/p>\n

Auditors to invest in businesses they audit<\/p>\n

Analysts to report information favorable to their companies<\/p>\n

Managers to use accounting information to benefit themselves<\/p>\n

That an auditor provides a favorable opinion<\/p>\n

\u00a0<\/p>\n

5. A parcel of land is: offered for sale at $150,000, assessed for tax purposes at $95,000, recognized by its purchasers as being worth $140,000 and purchased for $137,000. The land should be recorded in the purchaser’s books at:\u00a0<\/p>\n

$95,000<\/p>\n

$137,000<\/p>\n

$138,500<\/p>\n

$140,000<\/p>\n

$150,000<\/p>\n

\u00a0<\/p>\n

6. An asset created by prepayment of an expense is:<\/p>\n

Recorded as a debit to an unearned revenue account<\/p>\n

Recorded as a debit to a prepaid expense account<\/p>\n

Recorded as a credit to an unearned revenue account<\/p>\n

Recorded as a credit to a prepaid expense account<\/p>\n

Not recorded in the accounting records until the earnings process is complete<\/p>\n

\u00a0<\/p>\n

7. Which of the following accounting principles dictates when expenses are recognized?\u00a0<\/p>\n

Revenue recognition principle<\/p>\n

Monetary unit principle<\/p>\n

Business entity principle<\/p>\n

Matching principle<\/p>\n

Full disclosure principle<\/p>\n

\u00a0<\/p>\n

8. Risk is:\u00a0<\/p>\n

Net income divided by average total assets<\/p>\n

The reward for investment<\/p>\n

The uncertainty about the expected return that will be earned from an investment<\/p>\n

Unrelated to expected return<\/p>\n

\u00a0<\/p>\n

9. Fast-Forward had cash inflows from operations of $62,500; cash outflows from investing activities of $47,000; and cash inflows from financing of $25,000. The net change in cash was:\u00a0<\/p>\n

$40,500 increase\u00a0<\/p>\n

$40,500 decrease<\/p>\n

$134,500 decrease<\/p>\n

$134,000 increase<\/p>\n

\u00a0<\/p>\n

10. If the liabilities of a business increased $75,000 during a period of time and the equity in the business decreased $30,000 during the same period, the assets of the business must have:\u00a0<\/p>\n

Decreased $105,000<\/p>\n

Decreased $45,000<\/p>\n

Increased $30,000<\/p>\n

Increased $45,000<\/p>\n

\u00a0<\/p>\n

11. Net Income:\u00a0<\/p>\n

Decreases equity<\/p>\n

Represents the amount of assets owners put into a business<\/p>\n

Equals assets minus liabilities<\/p>\n

Is the excess of revenues over expenses<\/p>\n

Represents the owners’ claims against assets<\/p>\n

\u00a0<\/p>\n

12. Assets created by selling goods and services on credit are:\u00a0<\/p>\n

Accounts payable<\/p>\n

Accounts receivable<\/p>\n

Liabilities<\/p>\n

Expenses<\/p>\n

\u00a0<\/p>\n

13. Of the following accounts, the one that normally has a credit balance is:\u00a0<\/p>\n

Cash<\/p>\n

Office Equipment<\/p>\n

Sales Salaries Payable<\/p>\n

Dividends<\/p>\n

Sales Salaries Expense<\/p>\n

\u00a0<\/p>\n

14. Prepaid expenses are:\u00a0<\/p>\n

Payments made for products and services that do not ever expire<\/p>\n

Classified as liabilities on the balance sheet<\/p>\n

Decreases in retained earnings<\/p>\n

Assets that represent prepayments of future expenses<\/p>\n

\u00a0<\/p>\n

15. Generally Accepted Accounting Principles:\u00a0<\/p>\n

Focus on the review of a situation<\/p>\n

Does not require financial statements<\/p>\n

Never change<\/p>\n

Intend to make information on the financial statements relevant, reliable and comparable<\/p>\n

Oversees Security and Exchange Commission<\/p>\n

\u00a0<\/p>\n

16. A company purchased a new truck at a cost of $42,000 on July 1, 2011. The truck is estimated to have a useful life of 6 years and a salvage value of $3,000. How much depreciation expense will be recorded for the truck for the year ended December 31, 2011?\u00a0<\/p>\n

$3,250 \u00a0<\/p>\n

$3,500<\/p>\n

$4,000<\/p>\n

$6,500<\/p>\n

$7,000<\/p>\n

\u00a0<\/p>\n

17. On January 1, Able Company purchased equipment costing $135,000 with an estimated salvage value of $10,500, and an estimated useful life of five years. What is the amount that should be recorded as depreciation on December 31?\u00a0<\/p>\n

$27,000<\/p>\n

$24,900\u00a0<\/p>\n

$29,100<\/p>\n

$135,000<\/p>\n

\u00a0<\/p>\n

18. The Retained Earnings account has a credit balance of $17,000 before closing entries are made. If total revenues for the period are $55,200, total expenses are $39,800 and dividends are $9,000, what is the ending balance in the Retained Earnings account after all closing entries are made?\u00a0<\/p>\n

$8,000<\/p>\n

$15,400<\/p>\n

$23,400\u00a0<\/p>\n

$17,000<\/p>\n

$32,400<\/p>\n

\u00a0<\/p>\n

19. The length of time covered by a set of periodic financial statements is referred to as the:<\/p>\n

Fiscal cycle<\/p>\n

Natural business year<\/p>\n

Accounting period<\/p>\n

Business cycle<\/p>\n

Operating cycle<\/p>\n

\u00a0<\/p>\n

20. A classified balance sheet:<\/p>\n

Measures a company’s ability to pay its bills on time<\/p>\n

Organizes assets and liabilities into important subgroups<\/p>\n

Presents revenues, expenses and net income<\/p>\n

Reports operating, investing and financing activities<\/p>\n

\u00a0<\/p>\n

21. The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:<\/p>\n

Cash basis accounting<\/p>\n

The matching principle<\/p>\n

The time period principle<\/p>\n

Accrual basis accounting<\/p>\n

Revenue basis accounting<\/p>\n

\u00a0<\/p>\n

22. The adjusted trial balance contains information pertaining to:<\/p>\n

Asset accounts only<\/p>\n

Balance sheet accounts only<\/p>\n

Income statement accounts only<\/p>\n

All general ledger accounts<\/p>\n

Revenue accounts only<\/p>\n

\u00a0<\/p>\n

23. A company earned $2,000 in net income for October. Its net sales for October were $10,000. Its profit margin is:\u00a0<\/p>\n

2%<\/p>\n

20%<\/p>\n

200%<\/p>\n

500%<\/p>\n

$8,000<\/p>\n

\u00a0<\/p>\n

24. A company had no office supplies available at the beginning of the year. During the year, the company purchased $250 worth of office supplies. On December 31, $75 worth of office supplies remained. How much should the company report as office supplies expense for the year?\u00a0<\/p>\n

$75<\/p>\n

$125<\/p>\n

$175<\/p>\n

$250<\/p>\n

$325<\/p>\n

\u00a0<\/p>\n

25. Unearned revenue is reported on the financial statements as:\u00a0<\/p>\n

A revenue on the balance sheet<\/p>\n

A liability on the balance sheet<\/p>\n

An unearned revenue on the income statement<\/p>\n

An asset on the balance sheet<\/p>\n

An operating activity on the statement of cash flows<\/p>\n

\u00a0<\/p>\n

26. An account linked with another account that has an opposite normal balance and that is subtracted from the balance of the related account is a(n):\u00a0<\/p>\n

Accrued expense<\/p>\n

Contra account<\/p>\n

Accrued revenue<\/p>\n

Intangible asset<\/p>\n

Adjunct account<\/p>\n

\u00a0<\/p>\n

27. On April 30, 2011, a three-year insurance policy was purchased for $18,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company’s income statement for the year ended December 31, 2011?\u00a0<\/p>\n

$500<\/p>\n

$4,000 \u00a0<\/p>\n

$6,000<\/p>\n

$14,000<\/p>\n

$18,000<\/p>\n

\u00a0<\/p>\n

28. On June 30, 2011, Apricot Co. paid $5,000 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to asset accounts at the time of cash payment. The adjusting entry on December 31, 2011 for Apricot would include:\u00a0<\/p>\n

A debit to an expense for $1,250\u00a0<\/p>\n

A debit to a prepaid expense for $1,250<\/p>\n

A credit to an expense for $3,750<\/p>\n

A debit to a prepaid expense for $3,750<\/p>\n

\u00a0<\/p>\n

29. On April 1, 2011, a company paid the $1,350 premium on a three-year insurance policy with benefits beginning on that date. What will be the insurance expense on the annual income statement for the year ended December 31, 2011?\u00a0<\/p>\n

$1,350<\/p>\n

$450<\/p>\n

$1,012.50<\/p>\n

$337.50\u00a0<\/p>\n

$37.50<\/p>\n

\u00a0<\/p>\n

30. A trial balance prepared after adjustments have been recorded is called a(n):\u00a0<\/p>\n

Balance sheet<\/p>\n

Adjusted trial balance<\/p>\n

Unadjusted trial balance<\/p>\n

Classified balance sheet<\/p>\n

Unclassified balance sheet<\/p>\n

\u00a0<\/p>\n

31. The conservatism principle:\u00a0<\/p>\n

Requires that when there are more than one equally likely estimate of amounts expected to be received or paid in the future, then the less optimistic amount should be used<\/p>\n

Requires that a company use the same accounting methods period after period<\/p>\n

Requires that revenues and expenses be reported in the period in which they are earned or incurred<\/p>\n

Requires that all items of a material nature be included in financial statements<\/p>\n

Requires that all inventory items be reported at full cost<\/p>\n

\u00a0<\/p>\n

32. Merchandise inventory includes:\u00a0<\/p>\n

All goods owned by a company and held for sale<\/p>\n

All goods in transit<\/p>\n

All goods on consignment<\/p>\n

Only damaged goods<\/p>\n

Only items that are on the shelf<\/p>\n

\u00a0<\/p>\n

33. A merchandising company:\u00a0<\/p>\n

Earns net income by buying and selling merchandise<\/p>\n

Receives fees only in exchange for services<\/p>\n

Earns profit from commissions only<\/p>\n

Earns profit from fares only<\/p>\n

Buys products from consumers<\/p>\n

\u00a0<\/p>\n

34. A company has sales of $1,500,000, sales discounts of $102,000, sales returns and allowances of $123,000, shipping charges of $15,000, sales commissions of $34,000,net income totaled $263,500, and cost of goods sold of $420,000. What is the net sales amount for the period?\u00a0<\/p>\n

$1,500,000<\/p>\n

$1,275,000\u00a0<\/p>\n

$1,725,000<\/p>\n

$1,521,000<\/p>\n

$1,479,000<\/p>\n

\u00a0<\/p>\n

35. During a period of steadily rising costs, the inventory valuation method that yields the lowest reported net income is:\u00a0<\/p>\n

Specific identification method<\/p>\n

Average cost method<\/p>\n

Weighted-average method<\/p>\n

FIFO method<\/p>\n

LIFO method<\/p>\n

\u00a0<\/p>\n

36. A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO periodic inventory method, what is the cost of the 12 units that were sold?\u00a0<\/p>\n

$120<\/p>\n

$124\u00a0<\/p>\n

$128<\/p>\n

$130<\/p>\n

$140<\/p>\n

\u00a0<\/p>\n

37. Which of the following is the most serious limitation of internal controls?\u00a0<\/p>\n

Computer error<\/p>\n

Human fraud or human error<\/p>\n

Cost-benefit principle<\/p>\n

Cybercrime<\/p>\n

Management fraud<\/p>\n

\u00a0<\/p>\n

38. The inventory valuation method that tends to smooth out erratic changes in costs is:\u00a0<\/p>\n

FIFO<\/p>\n

Weighted average<\/p>\n

LIFO<\/p>\n

Specific identification<\/p>\n

WIFO<\/p>\n

\u00a0<\/p>\n

39. A company had sales of $375,000 and its gross profit was $157,500. Its cost of goods sold equal:\u00a0<\/p>\n

$(217,000)<\/p>\n

$375,000<\/p>\n

$157,500<\/p>\n

$217,500\u00a0<\/p>\n

\u00a0<\/p>\n

40. The quick assets are defined as:\u00a0<\/p>\n

Cash, short-term investments and inventory<\/p>\n

Cash, short-term investments and current receivables<\/p>\n

Cash, inventory and current receivables<\/p>\n

Cash, noncurrent receivables and prepaid expenses<\/p>\n

Accounts receivable, inventory and prepaid expenses<\/p>\n

\u00a0<\/p>\n

41. Cost of goods sold:\u00a0<\/p>\n

Is another term for merchandise sales<\/p>\n

Is the term used for the cost of buying and preparing merchandise for sale<\/p>\n

Is another term for revenue<\/p>\n

Is also called gross margin<\/p>\n

Is a term only used by service firms<\/p>\n

\u00a0<\/p>\n

42. A company purchased $4,000 worth of merchandise. Transportation costs were an additional $350. The company later returned $275 worth of merchandise and paid the invoice within the 2% cash discount period. The total amount paid for this merchandise is:\u00a0<\/p>\n

$3,725.00<\/p>\n

$3,925.00<\/p>\n

$3,995.00<\/p>\n

$4,000.50<\/p>\n

$4,075.00<\/p>\n

\u00a0<\/p>\n

43. Which of the following procedures would weaken the control over cash receipts that arrive through the mail?\u00a0<\/p>\n

After the mail is opened, a list (in triplicate) of the money received is prepared with a record of the sender’s name, the amount and an explanation of why the money is sent<\/p>\n

The bank reconciliation is prepared by a person who does not handle cash or record cash receipts<\/p>\n

For safety, only one person should open the mail and that person should immediately deposit the cash received in the bank<\/p>\n

The cashier should not also be the record keeper who records the amounts received in the accounting records<\/p>\n

All of the above are good internal control procedures over cash receipts that arrive through the mail<\/p>\n

\u00a0<\/p>\n

44. The full disclosure principle:\u00a0<\/p>\n

Requires that when a change in inventory valuation method is made, the notes to the financial statements report the type of change, why it was made and its effect on net income<\/p>\n

Requires that companies use the same accounting method for inventory valuation period after period<\/p>\n

Is not subject to the materiality principle<\/p>\n

Is only applied to retailers<\/p>\n

Is also called the consistency principle<\/p>\n

\u00a0<\/p>\n

45. J.C. Penny had net sales of $28,496 million, its cost of goods sold was $19,092 million and its net income was $997 million. Its gross margin ratio equals:\u00a0<\/p>\n

3.5%<\/p>\n

5.2%<\/p>\n

33%\u00a0<\/p>\n

67%<\/p>\n

149.3%<\/p>\n

\u00a0<\/p>\n

46. A company normally sells its product for $20 per unit. However, the selling price has fallen to $15 per unit. This company’s current inventory consists of 200 units purchased at $16 per unit. Replacement cost has now fallen to $13 per unit. Calculate the value of this company’s inventory at the lower of cost or market.\u00a0<\/p>\n

$2,550<\/p>\n

$2,600\u00a0<\/p>\n

$2,700<\/p>\n

$3,000<\/p>\n

$3,200<\/p>\n

\u00a0<\/p>\n

47. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that check number 4239 for November’s rent was correctly written and drawn for $7,390, but was erroneously entered in the accounting records as $3,790. When preparing the November bank statement, the company should:<\/p>\n

Deduct $3,600 from the book balance of cash\u00a0<\/p>\n

Add $3,600 to the bank statement balance<\/p>\n

Add $7,390 to the book balance of cash<\/p>\n

Deduct $3,600 from the bank statement balance<\/p>\n

Add $3,600 to the book balance of cash<\/p>\n

\u00a0<\/p>\n

48. Cash equivalents:\u00a0<\/p>\n

Are short-term, highly liquid investments<\/p>\n

Include 6-month CDs<\/p>\n

Include checking accounts<\/p>\n

Are recorded in petty cash<\/p>\n

Include money orders<\/p>\n

\u00a0<\/p>\n

49. A company has inventory of 15 units at a cost of $12 each on August 1. On August 5, they purchased 10 units at $13 per unit. On August 12 they purchased 20 units at $14 per unit. On August 15, they sold 30 units. Using the FIFO periodic inventory method, what is the value of the inventory at August 15 after the sale?\u00a0<\/p>\n

$140<\/p>\n

$160<\/p>\n

$210\u00a0<\/p>\n

$380<\/p>\n

$590<\/p>\n

\u00a0<\/p>\n

50. Given the following information:<\/p>\n

Petty cash balance $ 450.00 Courier receipt $ 82.50<\/p>\n

Postage receipt $ 48.00 Office Supplies receipt $ 56.22<\/p>\n

Business Meal receipt $ 102.34 Cash on hand at the end of the month $ 76.21<\/p>\n

\u00a0<\/p>\n

What is the amount of cash over and short?<\/p>\n

debit $84.73<\/p>\n

credit $84.73<\/p>\n

debit $160.94<\/p>\n

credit $160.94<\/p>\n

no cash over or short would be recorded<\/p>\n

\u00a0<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

1. The primary objective of financial accounting is: To serve the decision-making needs of internal users To provide financial statements to help external users analyze and interpret an organization’s activities To monitor and control company activities To provide information on both the costs and benefits of managing products and services To know what, when and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[],"class_list":["post-23723","post","type-post","status-publish","format-standard","hentry","category-education"],"_links":{"self":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/23723","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/comments?post=23723"}],"version-history":[{"count":0,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/posts\/23723\/revisions"}],"wp:attachment":[{"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/media?parent=23723"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/categories?post=23723"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/assignmenttutors.net\/blog\/wp-json\/wp\/v2\/tags?post=23723"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}