ACCOUNTING

1.The fundamental accounting equation is a reflection of the:

                       

Money measurement concept

                       

Conservatism concept

                       

Dual-aspect concept

                       

Historical cost concept

                       

2.The historical cost concept reflects the fact that financial accounting practice favors:

                       

Reliability over relevance

                       

Management’s best guess over historical financial information

                       

Relevance over reliability

                       

Consensus market values over historical financial information

                       

3.Jon Sports’ inventory account increased from $25,000 on December 31, 2003 to $30,000 on December 31, 2004. Which one of the following items would be included in the operating section of its 2004 indirect method statement of cash flows?

                       

Add increase in inventory $5,000

                       

Subtract increase in inventory ($5,000)

                       

Add inventory balance $20,000

                       

Subtract inventory balance ($20,000)

                       

4.Turnkey Systems, Inc. began the month of June, 2004 with a prepaid expenses balance of $240,000. During the month, debits totaling $110,000 and credits totaling $80,000 were made to the prepaid expenses account. What was the June, 2004 ending balance of prepaid expenses?

                       

A debit balance of $210,000

                       

A credit balance of $210,000

                       

A debit balance of $270,000

                       

A credit balance of $270,000

                       

6.When an entity recognizes revenue before it has received cash for the sale, it records an increase in a(n):

                       

                       

5.Pentex and Marbro, small companies in the stationery business, each had a dollar gross margin of $20,000 during September 2004. Pentex’s September sales were twice that of Marbro’s. If Pentex’s gross margin as a percentage of sales for September was 10%, Marbro’s gross margin as a percentage of sales for the same period was:

                       

10%

                       

5%

                       

20%

                       

Cannot be calculated

                       

7.Juan Foods pays off a long-term debt in full. Which one of the following statements describes the effect of the sale on Juan Foods?

                       

Current ratio increases; total debt to equity ratio decreases

                       

Current ratio decreases; total debt to equity ratio decreases

                       

Current ratio decreases; total debt to equity ratio increases

                       

Current ratio increases; total debt to equity ratio increases

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