Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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Sampson Heating & Air installed a $6,000 heating system for one of its
clients. The client paid 1/3 down and promised to pay the balance in 60 days. The
transaction had the following effects on Sampson's accounting equation:
Total
Assets Total
Liabilities Total Owner's Equity a. | Increase
$6,000 Increase $4,000
Increase $2,000 | b. | Increase $6,000 No
change
Increase $6,000 | c. | Increase $2,000 No
change
Increase $2,000 | d. | Decrease $2,000 Increase
$4,000 Decrease $6,000 | | |
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2.
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Which
of the following has the power and responsibility for setting accounting and reporting standards for
publicly traded companies in the United States? a. | Securities and Exchange Commission | b. | The Emerging
Issues Task Force | c. | The General Accounting Office | d. | The Financial
Accounting Standards Board | | |
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3.
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The
adjusting entry for Prepaid Rent is not made. As a result: a. | liabilities are
overstated. | b. | assets are understated. | c. | liabilities are
understated. | d. | assets are overstated. | | |
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4.
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The
following is taken from the inventory records of the Home Run Co.:
units price
total
Beginning
inventory
25
$10 $250
Purchase
1
5
12 60
Purchase
2
10
15 150
Purchase
3
20
16 320
Ending
inventory
15
?? ???
Number of
units sold
45
If Home Run Co. uses the FIFO method of inventory valuation, what is
the amount of Cost of Goods Sold?
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5.
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The
following is taken from the inventory records of the Home Run Co.
units price
total
Beginning
inventory
25
$10 $250
Purchase
1
5
12
60
Purchase
2
10
15 150
Purchase
3
20
16 320
Ending
inventory
15
?? ???
Number of
units sold 45
If Home Run Co. uses the LIFO method of inventory valuation, what is
the value of ending inventory?
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6.
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The
AICPA Code of Professional Conduct contains a. | a list of violations that would cause the revocation of a
CPA’s license. | b. | Principles, Rules, Interpretations,
Rulings. | c. | a description of the CPA’s procedures for responding to an
inquiry from a State of Accountancy. | d. | a comprehensive list of specific criminal activities are acts
discreditable to the profession. | | |
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7.
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A
defense for the auditor against third party liability is: a. | The CPA must
perform some conduct that links the CPA to the third party. | b. | The CPA knew the
financial statements were to be used by a particular third party or for a
purpose. | c. | The CPA knew that the financial statements would be used by the
client. | d. | The plaintiff knew, at the time of purchase of the securities,
that the statements were false, misleading, or incomplete. | | |
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8.
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Which
of the following is not an element of internal control? a. | control
environment | b. | accounting system | c. | control
procedures | d. | control supervisor | | |
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9.
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Flow
charts and data flow diagrams are used for: a. | system documentation. | b. | personnel
decisions. | c. | forms design. | d. | ethical
problems. | | |
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10.
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Management accounting focuses primarily on providing data for a. | internal uses by
managers. | b. | external uses by stockholders and
creditors. | c. | external uses by the Internal Revenue
Service. | d. | external uses by the Securities and Exchange
Commission. | | |
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11.
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An
employer transferred $6,000 cash to an employee who lost his home in a fire. The employer made
the transfer to help the employee in his time of need. a. | The employee may
exclude $6,000 from gross income if it is used to replace property destroyed by the
fire. | b. | The employer's intent at the time of the transfer will make the
cash either income or a gift. | c. | The employee must include the cash in gross
income. | d. | The employee may exclude $6,000 under the casualty
exclusion. | | |
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12.
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Which
of the following is not deductible? a. | Moving expenses | b. | Alimony
paid. | c. | Business expenses. | d. | Hobby expenses
in excess of hobby income. | | |
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13.
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Acme
Manufacturing Company is considering the purchase of a new factory machine. To finance the
machine, the company would have to sell its investments in corporate bonds. Regarding the purchase
decision, the interest the company would otherwise earn on the investments is: a. | an outlay
cost. | b. | a sunk cost. | c. | a period
cost. | d. | an opportunity cost. | | |
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14.
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Memorex Corp. has 30,000 shares authorized; 25,000 shares issued; 5,000 shares held in
treasury. How many shares are outstanding?
a. | 25,000 | b. | 20,000 | c. | 5,000 | d. | 0 | | |
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15.
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Which
of the following best describes the objective of joint product cost allocation? a. | inventory
valuation | b. | pricing goods for sale | c. | making decisions
about levels of production. | d. | making decisions about raw materials
requirements | | |
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