1. The matching principle requires: (Points : 2)        That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user        The use of the direct write-off method for bad debts        The use of the allowance method of accounting for bad debts        That bad debts be disclosed in the financial statements        That bad debts not be written off Question 2. 2. Many companies use accelerated depreciation in computing taxable income because: (Points : 2)        It is required by the tax rules        It is required by financial reporting rules        It postpones tax payments until later years and the company can use the resources now to earn additional income before payment is due        Using it causes a company to use higher income in the early years of the asset's useful life        The results are identical to straight-line depreciation Question 3. 3. A contingent liability: (Points : 2)        Is always of a specific amount        Is a potential obligation that depends on a future event arising out of a past transaction or event        Is an obligation not requiring future payment        Is an obligation arising from the purchase of goods or services on credit        Is an obligation arising from a future event Question 4. 4. Advance ticket sales totaling $6,000,000 cash would be recognized as follows: (Points : 2)        Debit Sales, credit Unearned Revenue        Debit Unearned Revenue, credit Sales        Debit Cash, credit Unearned Revenue        Debit Unearned Revenue, credit Cash Question 5. 5. Revenue expenditures: (Points : 2)        Are additional costs of plant assets that do not materially increase the asset's life or its productive capabilities        Are known as balance sheet expenditures        Extend the asset's useful life        Substantially benefit future periods        Are debited to asset accounts Question 6. 6. A company purchased a tract of land for its natural resources at a cost of $1,500,000. It expects to mine 2,000,000 tons of ore from this land. The salvage value of the land is expected to be $250,000. The depletion expense per ton of ore is: (Points : 2)        $0.75        $0.625        $0.875        $6.00        $8.00 Question 7. 7. Obligations due to be paid within one year or within the company's operating cycle, whichever is longer, are: (Points : 2)        Current assets        Current liabilities        Earned revenues        Operating cycle liabilities        Bills Question 8. 8. The interest accrued on $3,600 at 7% for 60 days is: (Points : 2)        $36        $42        $252        $180        $420 Question 9. 9. A company had a fixed interest expense of $6,000, its income before interest expense and any income taxes was $18,000 and its net income was $8,400. The company's times interest earned ratio is equals to (Points : 2)        0.33        0.71        1.40        3.00        12,000 Question 10. ...

1. 1. The matching principle requires: (Points : 2)
That expenses be ignored if their effect on the financial
statements are less important than revenues to the financial
statement user
The use of the direct write-off method for bad debts
The use of the allowance method of accounting for bad
debts
That bad debts be disclosed in the financial statements
That bad debts not be written off
Question 2. 2. Many companies use accelerated depreciation in
computing taxable income because: (Points : 2)
It is required by the tax rules
It is required by financial reporting rules
It postpones tax payments until later years and the
company can use the resources now to earn additional income
before payment is due
Using it causes a company to use higher income in the
early years of the asset's useful life
The results are identical to straight-line depreciation
Question 3. 3. A contingent liability: (Points : 2)
Is always of a specific amount
Is a potential obligation that depends on a future event
arising out of a past transaction or event
Is an obligation not requiring future payment
Is an obligation arising from the purchase of goods or
services on credit
Is an obligation arising from a future event
Question 4. 4. Advance ticket sales totaling $6,000,000 cash

2. would be recognized as follows: (Points : 2)
Debit Sales, credit Unearned Revenue
Debit Unearned Revenue, credit Sales
Debit Cash, credit Unearned Revenue
Debit Unearned Revenue, credit Cash
Question 5. 5. Revenue expenditures: (Points : 2)
Are additional costs of plant assets that do not materially
increase the asset's life or its productive capabilities
Are known as balance sheet expenditures
Extend the asset's useful life
Substantially benefit future periods
Are debited to asset accounts
Question 6. 6. A company purchased a tract of land for its
natural resources at a cost of $1,500,000. It expects to mine
2,000,000 tons of ore from this land. The salvage value of the
land is expected to be $250,000. The depletion expense per ton
of ore is: (Points : 2)
$0.75
$0.625
$0.875
$6.00
$8.00
Question 7. 7. Obligations due to be paid within one year or
within the company's operating cycle, whichever is longer, are:
(Points : 2)
Current assets
Current liabilities
Earned revenues
Operating cycle liabilities
Bills

3. Question 8. 8. The interest accrued on $3,600 at 7% for 60 days
is: (Points : 2)
$36
$42
$252
$180
$420
Question 9. 9. A company had a fixed interest expense of
$6,000, its income before interest expense and any income taxes
was $18,000 and its net income was $8,400. The company's
times interest earned ratio is equals to (Points : 2)
0.33
0.71
1.40
3.00
12,000
Question 10. 10. In the accounting records of a defendant,
lawsuits: (Points : 2)
Are estimated liabilities
Should always be recorded
Should always be disclosed
Should be recorded if payment for damages is probable and
the amount can be reasonably estimated
Question 11. 11. Depletion: (Points : 2)
Is the process of allocating the cost of natural resources to
periods in which they are consumed
Is also called depreciation
Is also called amortization

4. Is an unrealized expense reported in equity
Is the process of allocating the cost of intangibles to
periods in which they are used
Question 12. 12. A method of estimating bad debts expense that
involves a detailed examination of outstanding accounts and
their length of time past due is the: (Points : 2)
Direct write-off method
Aging of accounts receivable method
Percentage of sales method
Aging of investments method
Percent of accounts receivable method
Question 13. 13. Pepsi's accounts receivable turnover was 9.9
for this year and 11.0 for last year. Coke's turnover was 9.3 for
this year and 9.3 for last year. These results imply that: (Points
: 2)
Coke has the better turnover for both years
Pepsi has the better turnover for both years
Coke's turnover is improving
Coke's credit policies are too loose
Coke is collecting its receivables more quickly than Pepsi
in both years
Question 14. 14. A machine originally had an estimated useful
life of 5 years, but after 3 complete years, it was decided that
the original estimate of useful life should have been 10 years.
At that point the remaining cost to be depreciated should be
allocated over the remaining: (Points : 2)
2 years
5 years
7 years
8 years

5. 10 years
Question 15. 15. FICA taxes include: (Points : 2)
Social Security taxes
Charitable giving
Employee income taxes
Unemployment taxes
Question 16. 16. Which of the following statements is true?
(Points : 2)
Interest on bonds is tax deductible
Interest on bonds is not tax deductible
Dividends to stockholders are tax deductible
Bonds do not have to be repaid
Question 17. 17. The right of common shareholders to protect
their proportionate interest in a corporation by having the first
opportunity to buy additional proportionate shares of common
stock issued by the corporation
is called a: (Points : 2)
Preemptive right
Proxy right
Right to call
Financial leverage
Question 18. 18. A corporation's distribution of additional
shares of its own stock to its stockholders without the receipt of
any payment in return is called a: (Points : 2)
Stock dividend
Stock subscription
Premium on stock
Discount on stock

6. Treasury stock
Question 19. 19. A bond sells at a discount when the: (Points :
2)
Contract rate is above the market rate
Contract rate is equal to the market rate
Contract rate is below the market rate
Bond has a short-term life
Bond pays interest only once a year
Question 20. 20. When a bond sells at a premium: (Points : 2)
The contract rate is above the market rate
The contract rate is equal to the market rate
The contract rate is below the market rate
It means that the bond is a zero coupon bond
The bond pays no interest
Question 21. 21. Secured bonds: (Points : 2)
Are also referred to as debentures
Have specific assets of the issuing company pledged as
collateral
Are backed by the issuer's bank
Are subordinated to those of other unsecured liabilities
Are the same as sinking fund bonds
Question 22. 22. To provide security to creditors and to reduce
interest costs, bonds and notes payable can be secured by:
(Points : 2)
Safe deposit boxes
Mortgages
Equity
The FASB

7. Debentures
Question 23. 23. What is the debt to equity ratio for a company
who has $700,000 in total liabilities and $3,500,000 in total
equity? (Points : 2)
20%
5
$2,100,000
2%
.5
Question 24. 24. Promissory notes that require the issuer to
make a series of payments consisting of both interest and
principal are: (Points : 2)
Debentures
Discounted notes
Installment notes
Indentures
Investment notes
Question 25. 25. A company purchased equipment and signed a
7-year installment loan at 9% annual interest. The annual
payments equal $9,000. The present value factor for an annuity
for 7 years at 9% is 5.0330. The present value of the loan is:
(Points : 2)
$9,000
$5,033
$63,000
$57,330
$45,297
Question 26. 26. A company issues 9%, 20-year bonds with a

8. par value of $750,000. The current market rate is 9%. The
amount of interest owed to the bondholders for each semiannual
interest payment is. (Points : 2)
$0
$33,750
$67,500
$750,000
$1,550,000
Question 27. 27. Bonds that have interest coupons attached to
their certificates, which the bondholders detach during each
interest period and present to a bank for collection, are called:
(Points : 2)
Coupon bonds
Callable bonds
Serial bonds
Convertible bonds
Question 28. 28. A company borrowed $300,000 cash from the
bank by signing a 5-year, 8% installment note. The present
value factor for an annuity at 8% for 5 years is 3.9927. Each
annuity payment equals $75,137. The present value of the note
is: (Points : 2)
$75,137
$94,013
$300,000
$375,685
Question 29. 29. A bondholder that owns a $1,000, 10%, 10-
year bond has: (Points : 2)
Ownership rights
The right to receive $10 per year until maturity
The right to receive $1,000 at maturity

9. The right to receive $10,000 at maturity
Question 30. 30. Preferred stock on which the right to receive
dividends is forfeited for any year that the dividends are not
declared is called: (Points : 2)
Noncumulative preferred stock
Participating preferred stock
Callable preferred stock
Cumulative preferred stock
Convertible preferred stock
Question 31. 31. A company has a profit margin of 12%. If net
income is equal to $450,000 and average total asset is equal to
$600,500, how much are sales? (Points : 2)
$1,050,500
$126,060
$72,060
$54,000
$3,750,000
Question 32. 32. An investment that is readily convertible to a
known amount of cash and that is sufficiently close to its
maturity date so that its market value is relatively insensitive to
interest rate changes is a(n): (Points : 2)
Short-term marketable equity security
Operating activity
Common stock
Cash equivalent
Financing activity
Question 33. 33. The statement of cash flows reports: (Points :
2)

10. Assets, liabilities and equity
Revenues, gains, expenses and losses
Cash inflows and outflows for an accounting period
Equity, net income and dividends
Changes in equity
Question 34. 34. The average number of times a company's
inventory is sold during an accounting period, calculated by
dividing cost of goods sold by the average inventory balance is
equal to the: (Points : 2)
Accounts receivable turnover
Inventory turnover
Days' sales uncollected
Current ratio
Question 35. 35. Wessen Company reports net income of
$180,000 for the year ended December 31, 2010. It also reports
$45,800 depreciation expense, $21,410 amortization expense
and a $15,000 gain on the sale of machinery. Its comparative
balance sheets reveal a $28,300 increase in accounts receivable,
$20,400 decrease in accounts payable, $10,470 increase in
prepaid expenses, and $33,140 decrease in wages payable. What
is the net cash flows provided (used) by operating activities
using the indirect method? (Points : 2)
($140,200)
$133,490
$139,900
($133,490)
$78,300
Question 36. 36. A company's transactions with its creditors to
borrow money and/or to repay the principal amounts of loans
are reported as cash flows from: (Points : 2)

11. Operating activities
Investing activities
Financing activities
Direct activities
Indirect activities
Question 37. 37. One of several ratios that reflects solvency
includes the: (Points : 2)
Acid-test ratio
Current ratio
Times interest earned ratio
Total asset turnover
Days' sales in inventory
Question 38. 38. The ability to provide financial rewards
sufficient to attract and retain financing is called: (Points : 2)
Liquidity and efficiency
Solvency
Profitability
Market prospects
Creditworthiness
Question 39. 39. A component of operating efficiency and
profitability, calculated by expressing net income as a percent
of net sales is equal to the: (Points : 2)
Acid-test ratio
Merchandise turnover
Price earnings ratio
Accounts receivable turnover
Profit margin ratio
Question 40. 40. Activities that involve the production or

12. purchase of merchandise and the sale of goods and services to
customers, including expenditures related to administering the
business, are classified as: (Points : 2)
Financing activities
Investing activities
Operating activities
Direct activities
Indirect activities
Question 41. 41. Net sales divided by average accounts
receivable is equal to the: (Points : 2)
Days' sales uncollected
Average accounts receivable ratio
Current ratio
Profit margin
Accounts receivable turnover ratio
Question 42. 42. Net income divided by net sales is equal to
the: (Points : 2)
Return on total assets
Profit margin
Current ratio
Total asset turnover
Days' sales in inventory
Question 43. 43. A company had a market price of $83.12 per
share, earnings per share of $4.87 and dividends per share of
$5.40. Its price-earnings ratio is equal to: (Points : 2)
.056
.065
8.09
15.39
17.07

13. Question 44. 44. Financial reporting refers to: (Points : 2)
The application of analytical tools to general-purpose
financial statements
The communication of relevant financial information to
decision makers
Financial statements only
Ratio analysis
Profitability
Question 45. 45. Dividing ending inventory by cost of goods
sold and multiplying the result by 365 is equal to the: (Points :
2)
Inventory turnover ratio
Profit margin
Days' sales in inventory
Current ratio
Total asset turnover
Question 46. 46. Selected information from Doodle Company's
for 2010 is below (in millions):
Inventory decreased $6.0
Accounts Payable increased by $7.0
Cost of goods sold $36.50
Salaries Expense $24.0
Salaries Payable decreased $6.0
Accounts Receivable increased by $10.0
Sales $56.4
What is the amount of cash paid for salaries by Doodle during
2010? (Points : 2)
$4.0
$6.0
$24.0

14. $30.0
$18.0
Question 47. 47. Financial statements with data for two or more
successive accounting periods placed in columns side by side,
sometimes with changes shown in dollar amounts and percents,
are referred to as: (Points : 2)
Period-to-period statements
Controlling statements
Successive statements
Comparative statements
Serial statements
Question 48. 48. External users of financial information: (Points
: 2)
Are those individuals involved in managing and operating
the company
Include internal auditors and consultants
Are not directly involved in operating the company
Make strategic decisions for a company
Make operating decisions for a company
Question 49. 49. Trend analysis is also called: (Points : 2)
Financial analysis
Ratio analysis
Index number trend analysis
Industry analysis
Question 50. 50. Which of the following items is not likely to
be considered an extraordinary item? (Points : 2)
Loss from an unexpected union strike
Condemnation of property by the city government

15. Loss of use of property due to a new and unexpected
environmental regulation
Loss due to an earthquake in Florida
Expropriation of property by a foreign government