DeVry NY ACCT 301 Week 2 Quiz 2014

1. Question : (TCO 1) Which of the following would not be considered an external user of accounting data for XYZ Company? Internal Revenue Service Agent Management Creditors Customers 2. Question : (TCO 1) The cost of assets consumed or services used is also known as _________. a revenue. an expense. a liability. an asset. 3. Question : (TCO 1) The financial statement that summarizes the changes in retained earnings for a specific period of time is the _________. Student Answer: balance sheet. income statement. statement of cash flows. retained earnings statement. Instructor Explanation: Chapter 1, Page 134. Question : (TCO 1) Pinson Company began the year with retained earnings of $210,000. During the year, the company recorded revenues of $300,000, expenses of $228,000, and paid dividends of $24,000. What was Pinson’s retained earnings at the end of the year? Student Answer: $306,000 $258,000 $486,000 $282,000 Instructor Explanation: Chapter 1, Page 135. Question : (TCO 4) Which of the following statements is not true? Student Answer: Comparability means using the same accounting principles from year to year within a company. Reliability is the quality of information that gives assurance that it is free of error or bias. Relevant accounting information must be capable of making a difference in a decision. The FASB’s overriding criterion is that the accounting rule adopted should be the one that generates the most useful financial information for making a decision. Instructor Explanation: Chapter 2, Page 666. Question : (TCO 4) Using the following balance sheet and income statement data, what is the current ratio?Current assets $7,000 Net income $12,000Current liabilities 4,000 Stockholders’ equity 21,000Total assets 30,000 Total liabilities 9,000Average common shares outstanding was 10,000 Student Answer: 1.75:1 1.6:1 0.57:1 2:1 Instructor Explanation: Chapter 2, Page 597. Question : (TCO 4) Using the following balance sheet and income statement data, what is the total amount of working capital?Current assets $7,000 Net income $12,000Current liabilities 4,000 Stockholders’ equity 21,000Total assets 30,000 Total liabilities 9,000Average common shares outstanding was 10,000 Student Answer: $21,000 $7,000 $2,000 $3,000 Instructor Explanation: Chapter 2, Page 598. Question : (TCO 4) Using the following balance sheet and income statement data, what is the debt to total assets ratio?Current assets $7,000 Net income $12,000Current liabilities 4,000 Stockholders’ equity 21,000Total assets 30,000 Total liabilities 9,000Average common shares outstanding was 10,000 Student Answer: 75% 19% 57% 30% Instructor Explanation: Chapter 2, Page 609. Question : (TCO 2) Powers Company paid its office rent of $1,000 with cash. As a result of this event, _________. Student Answer: assets decreased by $1,000. equity increased by $1,000. equity decreased by $1,000. both assets decreased by $1,000 and equity decreased by $1,000. Instructor Explanation: Chapter 3, Page 10710. Question : (TCO 2) Which accounts normally have debit balances? Student Answer: Assets, expenses, and revenues Assets, expenses, and retained earnings Assets, liabilities, and dividends Assets, expenses, and dividends Instructor Explanation: Chapter 3, Pages 112-11411. Question : (TCO 2) In the first month of operations, the total of the debit entries to the cash account amounted to $700 and the total of the credit entries to the cash account amounted to $300. The cash account has a _________ Student Answer: $400 credit balance. $700 debit balance. $400 debit balance. $300 credit balance. Instructor Explanation: Chapter 3, Page 11112. Question : (TCO 2) A trial balance would only help in detecting which one of the following errors? Student Answer: A transaction that is not journalized A journal entry that is posted twice Offsetting errors made in recording the transaction A transposition error when transferring the debit side of a journal entry to the ledger Instructor Explanation: Chapter 3, Page 12913. Question : (TCO 3) From an internal control standpoint, the asset most susceptible to improper diversion and use is _________ Student Answer: prepaid insurance. cash. buildings. land. Instructor Explanation: Chapter 4, Page 17314. Question : (TCO 3) Ron Jones has been a trusted employee for over 10 years. He is responsible for ordering merchandise inventory, receiving the inventory items, and authorizing the payment for these items. Which internal control principle, if any, is being violated? Student Answer: None, Ron has proven to be trustworthy and has enough experience to do a good job. Documentation procedures Establishment of responsibilities Segregation of duties Instructor Explanation: Chapter 4, Page 16515. Question : (TCO 3) A check written by the company for $167 is incorrectly recorded by a company as $176. On the bank reconciliation, the $9 error should be _________ Student Answer: added to the balance per books. deducted from the balance per books. added to the balance per bank. deducted from the balance per bank.

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