Financial & Managerial Accounting-Meigs-mcq's

1.
Accounting for Decision Making

Financial statements are prepared:
A)
Only for publicly owned business organizations.
B)
For corporations, but not for sole proprietorships or partnerships.
C)
Primarily for the benefit of persons outside of the business organization.
D)
In either monetary or nonmonetary terms, depending upon the need of the decision maker.
The basic purpose of an accounting system is to:
A)
Develop financial statements in conformity with generally accepted accounting principles.
B)
Provide as much useful information to decision makers as possible, regardless of cost.
C)
Record changes in the financial position of an organization by applying the concepts of double-entry
accounting.
D)
Meet an organization's need for accounting information as efficiently as possible.
Information is cost effective when:
A)
The information aids management in controlling costs.
B)
The information is based upon historical costs, rather than upon estimated market values.
C)
The value of the information exceeds the cost of producing it.
D)
The information is generated by a computer-based accounting system.
Although accounting information is used by a wide variety of external parties, financial reporting is primarily directed
toward the information needs of:
A)
Investors and creditors..
B)
Government agencies such as the Internal Revenue Service.
C)
Customers.
D)
Trade associations and labor unions.
A complete set of financial statements for Hartman Company, at December 31, 1999, would include each of the following,
except:
A)
Balance sheet as of December 31, 1999.
B)
Income statement for the year ended December 31, 1999.
C)
Statement of projected cash flows for 2000.
D)
Notes containing additional information that is useful in interpreting the financial statements.
All of the following are characteristics of managerial accounting, except:
A)
Reports are used primarily by insiders rather than by persons outside of the business entity.
B)
Its purpose is to assist managers in planning and controlling business operations.
C)
Information must be developed in conformity with generally accepted accounting principles or with income
tax regulations.
D)
Information may be tailored to assist in specific managerial decisions.
In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a
managerial accounting report is more likely to:
A)
Be used by decision makers outside of the business organization.
B)
Focus upon the operation results of the most recently completed accounting period.
C)
View the entire organization as the reporting entity.
D)
Be tailored to the specific needs of an individual decision maker.
2. Basic Financial Statements

The nature of an asset is best described as:
A)
Something with physical form that is valued at cost in the accounting records.
B)
An economic resource owned by a business and expected to benefit future operations.
C)
An economic resource representing cash or the right to receive cash in the near future.
D)
Something owned by a business that has a ready market value.
The balance sheet item that represents the resources invested by the owner is:
A)
Accounts receivable.
B)
Cash.
C)
Note payable.
D)
Owner's equity.
The balance sheet of Bock Designs includes the following items:
Accounts Receivable
Diane Bock, Capital
Equipment
Notes Payable
Cach
Accounts Payable
Supplies
Notes Receivable
This list includes:

A)
Accounts Receivable Cash
B)
Diane Bock, Capital Accounts Payable
C)
Equipment Supplies
D)
Notes Payable Notes Receivable
Arguments that the cost principle is not a satisfactory basis for the valuation of assets in financial statements are usually
based on:
A)
The lack of objective evidence to permit verification of cost data.
B)
Increased availability and capacity of computers.
C)
Stronger internal control structures.
D)
Continued inflation.
The amount of owner's equity in a business is not affected by:
A)
The percentage of total assets held in cash.
B)
Investments made in the business by the owner.
C)
The profitability of the business.
D)
The amount of dividends paid to stockholders.
An income statement communicates information regarding revenues and expenses:
A)
For a period of time.
B)
At a given point in time.
C)
For some point of time in the future.
D)
At the beginning of the fiscal year.
3. The Accounting Cycle: Capturing Economics Events

The realization principle indicates that revenue usually should be recognized and recorded in the
accounting records:
A)
When goods are sold or services are rendered to customers.
B)
When cash is collected from customers.
C)
At the end of the accounting period.
D)
Only when the revenue can be matched by an equal dollar amount of expenses.
The matching principle is best demonstrated by:
A)
Using debits to record decreases in owner's equity and credits to record increases.
B)
The equation A = L + OE.
C)
Allocating the cost of an asset to expense over the periods during which benefits
are derived from ownership of the asset.
D)
Offsetting the cash receipts of the period with the cash payments made during the
period.
The matching principle:
A)
Applies only to situations in which a cash payment occurs before an expense is
recognized.
B)
Applies only to situations in which a cash receipt occurs before revenue is
recognized.
C)
Is used in accrual accounting to determine the proper period in which to recognize
revenue.
D)
Is used in accrual accounting to determine the proper period for recognition of
expenses.
The reason that both expenses and dividends are recorded by debit entries is that:
A)
All dividend and expense transactions involve offsetting credit entries to the Cash
account.
B)
Both expenses and dividends are offset against revenue in the income statement.
C)
Both expenses and dividends reduce owner's equity.
D)
The statement is untrue-expenses are recorded by debits, but withdrawals are
recorded by credits to the owner's drawing account.
4. The Accounting Cycle: Accruals and Deferrals

Elite Property Management adjusts its books each month but closes its books at the end of the
year. The trial balance at January 31 before adjustments is as follows:
Refer to Elite's unadjusted trial balance above to answer this question. According to property
management contracts, $2,400 of the Unearned Management Fees has been earned in February.
The amount of Management Fees Earned (revenue) to be reported in the January income
statement is:
A)
$2,400.
B)
$15,100.
C)
$19,900.
D)
$19,000.
Refer to Elite's unadjusted trial balance above to answer this question. On December 1 of last
year, Elite paid in advance for six months' advertising in the local newspaper. The necessary
adjusting entry at January 31 includes which of the following?
A)
A credit to Prepaid Advertising for $360.
B)
A credit to Prepaid Advertising for $1,500.
C)
A debit to Advertising Expense for $300.
D)
A debit to Prepaid Advertising for $1,440.
Refer to Elite's unadjusted trial balance above to answer this question. At January 31, the amount
of supplies on hand is $410. What amount is reported in the January income statement for
supplies expense?
A)
$410.
B)
$1,160.
C)
$750.
D)
$340.
Refer to Elite's unadjusted trial balance above to answer this question. The equipment had an
estimated useful life of six years. Compute the book value of the equipment at January 31, after
the proper January adjustment is recorded.
A)
$9,200.
B)
$14,400.
C)
$14,200.
D)
$7,000.
Refer to Elite's unadjusted trial balance above to answer this question. Employees are owed $350
for services since the last payday in January, to be paid the first week in February. The amount to
be reported in the January income statement for salaries expense is:
A)
$350.
B)
$6,750.
C)
$6,050.
D)
$6,400.
5. The Accounting Cycle: Reporting Financial Results

The concept of adequate disclosure:
A)
Does not apply to information which is immaterial.
B)
Grants users of the financial statements access to a company's accounting records.
C)
Does not apply to events occurring after the balance sheet date.
D)
Specifies which accounting methods must be used in a company's financial
statements.
The concept of adequate disclosure requires a company to inform financial statement users of
each of the following, except:
A)
The accounting methods in use.
B)
The due dates of major liabilities.
C)
Destruction of a large portion of the company's inventory on January 20, three
weeks after the balance sheet date, but prior to issuance of the financial statements.
D)
Income projections for the next five years based upon anticipated market share of a
new product; the new product was introduced a few days before the balance sheet date.
When a business closes its accounts only at year-end:
A)
Financial statements are prepared only at year-end.
B)
Adjusting entries are made only at year-end.
C)
Revenue and expense accounts reflect year-to-date amounts throughout the year.
D)
Monthly and quarterly financial statements cannot be prepared.
When a business adjusts its records monthly, but closes its accounts only at year-end:
A)
Interim financial statements are prepared using the amounts shown in an adjusted
trial balance at the end of the interim period desired.
B)
Only annual financial statements can be prepared.
C)
Interim financial statements are prepared by subtracting prior balances from current
balances for all accounts.
D)
The revenue and expense accounts in an adjusted trial balance reflect year-to-date
amounts.
Which of the following amounts appears in both the Income Statement debit column and the
Balance Sheet credit column of a worksheet?
A)
Net income.
B)
Net loss.
C)
Dividends.
D)
Retained earnings.
Which of the following is not included in an end-of-period worksheet?
A)
Information for adjusting entries.
B)
Financial statement information.
C)
Trial balance.
D)
Closing entries.
Preparation of interim financial statements:
A)
Makes the preparation of year-end financial statements unnecessary.
B)
Requires the journalizing and posting of adjusting entries.
C)
Requires the journalizing and posting of closing entries.
D)
Is done monthly or quarterly-in between the year-end financial statements.
If monthly financial statements are desired by management:
A)
Journalizing and posting adjusting entries must be done each month.
B)
Journalizing and posting closing entries must be done each month.
C)
Monthly financial statements can be prepared from worksheets; adjustments and
closing entries need not be entered in the accounting records.
D)
Adjusting and closing entries must be entered in the accounting records before
preparation of interim financial statements.

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What are the basic financial statements?

What is the accounting cycle and how does it capture economic events?

1.

Accounting for Decision Making

2. Basic Financial Statements

This list includes:

3. The Accounting Cycle: Capturing Economics Events

4. The Accounting Cycle: Accruals and Deferrals

5. The Accounting Cycle: Reporting Financial Results

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