QUESTION Which of the following is NOT an example of a current liability? A) notes payable B) accounts payable C) a six-month bank loan D) bonds payable E) an unpaid electric bill ANSWER Answer: D Explanation: D) Current liabilities are obligations in which payments are due within one year. The most common current liabilities […]
QUESTION Which of the following is NOT true of the statement of cash flows? A) It reveals the firm’s cash receipts. B) It shows disbursement related to the firm’s operating activities. C) It shows disbursement related to the firm’s investing activities. D) It reports over a defined period of time. E) It determines the gross […]
QUESTION What do you subtract from gross sales to arrive at net sales? A) retained earnings B) dividend payments C) owners’ equity D) sales returns and allowances E) notes payable ANSWER Answer: D Explanation: D) To arrive at net sales, sales returns and allowances must be subtracted from gross sales.
QUESTION Which of the following is equal to the cost of goods sold? A) the salaries and commissions paid to salespeople B) the interest paid on debts C) the amount spent to produce a firm’s merchandise D) the amount spent on customer refunds E) total operating expenses ANSWER Answer: C Explanation: C) The cost […]
QUESTION Which of the following is an example of an allowance? A) a dividend paid to a single investor B) a full refund given to a customer who returned his malfunctioning stereo C) a store discount given to a customer who purchased a chipped mirror D) a price paid for producing a certain amount of […]
QUESTION Which of the following tracks incoming and outgoing money and shows how the firm got and used money? A) the balance sheet B) the income statement C) the statement of cash flows D) the retained earnings report E) the owners’ equity statement ANSWER Answer: C Explanation: C) The statement of cash flows indicates […]
QUESTION Procter & Gamble just released its latest income statement. What is the statement most likely to be used for? A) determining what P&G is worth B) determining whether P&G is profitable C) determining P&G’s tax liability D) determining P&G’s owners’ equity E) determining whether P&G should sell assets ANSWER Answer: B Explanation: B) […]
QUESTION Which of the following represents the accounting equation? A) liabilities = assets + owners’ equity B) owners’ equity = assets + liabilities C) assets = liabilities + owners’ equity D) assets = liabilities – owners’ equity E) assets = owners’ equity – liabilities ANSWER Answer: C Explanation: C) The accounting equation is: assets […]
QUESTION Current assets divided by which of the following gives the current ratio? A) current liabilities B) net income C) gross profit D) operating expenses E) fixed assets ANSWER Answer: A Explanation: A) The current ratio is calculated by dividing current assets by current liabilities.
QUESTION What is the accounting equation used to determine? A) whether ledgers are balanced B) tax liability C) a firm’s income D) what a firm is worth E) a firm’s profits ANSWER Answer: D Explanation: D) The accounting equation balances the company’s assets against its liabilities and owners’ equity, showing what the firm is […]
