If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must...

Question

If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must be:
Answer

a.	$20,000.
b.	$80,000.
c.	$120,000.
d.	$30,000.
e.	$30,000.

If the disposal of a segment meets the criteria of a disposal of a segment, then:
Answer

a.	the loss on disposal is an extraordinary item.
b.	the loss on disposal is categorized as "other expense".
c.	the results of operations of the segment will be reported in conjunction with the gain or loss on disposal.
d.	the disposal qualifies as a change in entity, and prior years' statements presented on comparative purposes must be restated.
e.	the effects of the disposal are shown as part of operations.

Which of the following would be classified as an extraordinary item on the income statement?
Answer

a.	Loss from a strike
b.	Correction of an error related to a prior period
c.	Write-off of obsolete inventory
d.	Loss on disposal of a segment of business
e.	Loss from prohibition of a product

Changes in account balances of Multi-Plus Inc. during 2012 were:
Increase
Assets $420,000
Liabilities 125,000
Capital Stock 100,000
Additional Paid-In Capital 140,000
Retained Earnings ?
Assuming that there were no charges to retained earnings other than dividends of $62,000, the net income for 2010 was:
Answer

a.	($7,000)
b.	$55,000
c.	$117,000
d.	$257,000
e.	none of the answers are correct

Which of these statements is not true?
Answer

a.	Asset, liability, and stockholders' equity accounts are referred to as permanent accounts.
b.	Revenue, expense, and dividend accounts are described as temporary accounts.
c.	Temporary accounts are closed at the end of the period to retained earnings.
d.	The balance sheet will not balance until the temporary accounts are closed to retained earnings.
e.	With double-entry, each transaction is recorded twice.

Which of the following would not be considered a subsequent event to financial statements?
Answer

a.	A major customer declares bankruptcy subsequent to the balance sheet date, but prior to issuing the statements. This event was not considered on the balance sheet date.
b.	A major purchase of a subsidiary to the balance sheet date, but prior to issuing the statements.
c.	Substantial debt incurred subsequent to the balance sheet date, but prior to issuing the statements.
d.	Substantial stock issued subsequent to the balance sheet date, but prior to issuing the statements.
e.	Hiring of employees for a new store, subsequent to the balance sheet date, but prior to issuing the statements.

Which of the following statements is not true?
Answer

a.	A qualified opinion or an adverse opinion may bring into question the reliability of the financial statements.
b.	A disclaimer of opinion indicates that one should not look to the auditor's report as an indication of the reliability of the statements.
c.	In some cases, outside accountants are associated with financial statements when they have performed less than an audit.
d.	A review is substantially less in scope than an examination in accordance with generally accepted auditing statements.
e.	The accountant's report expresses an opinion on reviewed financial statements.

The most significant current source of generally accepted accounting principles is the:
Answer

a.	New York Stock Exchange.
b.	Accounting Principles Board.
c.	Accounting Research Studies.
d.	AICPA committee on Accounting Procedure.
e.	Financial Accounting Standards Board.

Which of the following is not true relating to treasury stock?
Answer

a.	A firm creates treasury stock when it repurchases its own stock and does not retire it.
b.	Treasury stock lowers the stock outstanding.
c.	Treasury stock may be recorded at the cost of the stock.
d.	Treasury stock may be recorded at par or stated value.
e.	Treasury stock is, in essence, an increase in paid-in capital.

Which of the following is not a common characteristic of preferred stock?
Answer

a.	Voting rights
b.	Preference as to dividends
c.	Preference in liquidation
d.	Callability by the corporation
e.	None of the answers are correct.

At the end of the fiscal year, an adjusting entry is made that increases salaries payable and increases salaries expense. This entry is an application of which accounting principle?
Answer

a.	Full disclosure
b.	Materiality
c.	Matching
d.	Realization
e.	Historical cost

Valuing assets at their liquidation values is not consistent with:
Answer

a.	conservatism.
b.	materiality.
c.	going concern.
d.	time period.
e.	None of the answers are correct

An accounting period that ends when operations are at a low ebb is:
Answer

a.	a calendar year.
b.	a fiscal year.
c.	the natural business year.
d.	an operating year.
e.	None of the answers are correct.

At the beginning of the year, Execon Company had total assets of $200,000, total liabilities of $110,000, and shareholders' equity of $90,000. For the year, Execon Company earned net income of $75,000 and declared cash dividends of $30,000. At the end of the year, the company had total assets of $300,000 and its shareholders' equity was at $135,000. At the end of the year, Execon Corporation had total liabilities of:
Answer

a.

$0.

b.

$45,000.

c.

$50,000.

d.

$165,000.

e.

None of the answers are correct.

The following relate to Data Original in 2012. What is the ending inventory?
Purchases $540,000
Beginning Inventory 80,000
Purchase Returns 10,000
Sales 800,000
Cost of Goods Sold 490,000
Answer

a.	$120,000
b.	$140,000
c.	$210,000
d.	$260,000
e.	none of the answers are correct

The current asset section of the balance sheet should include:
Answer

a.	land.
b.	trademarks.
c.	investment in C Company (for purposes of control).
d.	dividends payable.
e.	work in process inventory.

Who is responsible for the preparation and integrity of financial statements?
Answer

a.	A cost accountant
b.	Management
c.	An auditor
d.	A bookkeeper
e.	The FASB

Which of the following is a current liability?
Answer

a.	Prepaid insurance
b.	Retained earnings
c.	Unearned rent revenue
d.	Bonds payable
e.	Common stock

The following data relate to Swift Company for the year ended December 31, 2012. Swift Company uses the accrual basis.
Sales on credit $250,000
Cost of inventory sold on credit 170,000
Collections from customers 220,000
Purchase of inventory on credit 150,000
Payment for purchases 140,000
Selling expenses (accrual basis) 40,000
Payment for selling expenses 45,000
Which of the following amounts represents income for Swift Company for the year ended December 31, 2012?
Answer

a.	$60,000
b.	$50,000
c.	$40,000
d.	$35,000
e.	$30,000

In terms of debits and credits, which of the following accounts have the same normal balances?
Answer

a.	Accounts payable, accounts receivable, notes payable
b.	Dividends, accounts receivable, notes payable
c.	Advertising expense, selling expense, accounts receivable
d.	Land, building, accounts payable
e.	Common stock, notes payable, land

Which of the following would be classified as an extraordinary item on the income statement?
Answer

a.	Loss on disposal of a segment of business
b.	Cumulative effect of a change in accounting principle
c.	A sale of land
d.	An error correction that relates to a prior year
e.	A loss from a flood in a location that would not be expected to flood

Valuing inventory at the lower of cost or market is an application of the:
Answer

a.	time period assumption.
b.	realization principle.
c.	going concern principle.
d.	conservatism principle.
e.	None of the answers are correct

Gross profit is the difference between:
Answer

a.	net income and operating income.
b.	revenues and expenses.
c.	sales and cost of goods sold.
d.	income from continuing operations and discontinued operations.
e.	gross sales and sales discounts.

Tiffin Company had retained earnings of $50,000 at the end of last year. For the current year, income was $20,000 and dividends $15,000. What is the balance in retained earnings at the end of the current year?
Answer

a.	$85,000
b.	$45,000
c.	$55,000
d.	$60,000
e.	none of the answers are correct

005_onmnjk-n20ezz0a.docx

Robert · Accepted Answer

If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must 
be: 
Answer  
 
a. $20,000. 
 
b. $80,000. 
 
c. $120,000. 
 
d. $30,000. 
 
e. $30,000. 
Workings: Total assets = Total liabilities + Total stockholder’s equity 
 $70,000 + $50,000 
 $120,000
If the disposal of a segment meets the criteria of a disposal of a segment, then: 
Answer  
 
a. the loss on disposal is an extraordinary item. 
 
b. the loss on disposal is categorized as "other expense". 
 
c. the results of operations of the segment will be reported in conjunction with the gain or 
loss on disposal. 
 
d. the disposal qualifies as a change in entity, and prior years' statements presented on 
comparative purposes must be restated. 
 
e. the effects of the disposal are shown as part of operations. 
Reasoning: Under the heading “Discontinued operations”, the results of operations of the segment, be it 
gain or loss, usually a loss, will be reported in conjunction with gain or loss incurred in disposing off the 
same segment. It will NOT be categorized as an extra-ordinary item or other expense.
Which of the following would be classified as an extraordinary item on the income 
statement? 
Answer  
 
a. Loss from a strike 
 
b. Correction of an error related to a prior period 
 
c. Write-off of obsolete inventory 
 
d. Loss on disposal of a segment of business 
 
e. Loss from prohibition of a product
Reasoning: An item should be “unusual and infrequent occurring” in nature to be classified as an extra-
ordinary item. Example: Earth-quake losses. Loss from strike, correction of errors, writing off 
inventories, loss on disposal of segments thus cannot be classified as unusual in business, whereas, loss 
from prohibition of a product, can be.
Changes in account balances of Multi-Plus Inc. during 2012 were: 
 
Increase 
Assets                                             $420,000 
Liabilities                                           125,000 
Capital Stock                                    100,000 
Additional Paid-In Capital                 140,000 
Retained Earnings                                   ?  
 
Assuming that there were no charges to retained earnings other than dividends of 
$62,000, the net income for 2010 was: 
Answer  
 
a. ($7,000) 
 
b. $55,000 
 
c. $117,000 
 
d. $257,000 
 
e. none of the answers are correct
Workings: 
Assets = Liabilities + Capital stock + Additional paid in capital + Retained earnings 
420,000 = 125,000 + 100,000 + 140,000 + Retained earnings 
Retained earnings = $55,000 
Increase in retained earnings = Net income – Dividends 
$55,000 = Net income - $62,000 
Net income = $55,000 + $62,000  $117,000
Which of these statements is not true? 
Answer  
 
a. Asset, liability, and stockholders' equity accounts are referred to as permanent accounts. 
 
b. Revenue, expense, and dividend accounts are described as temporary accounts. 
 
c. Temporary accounts are closed at the end of the period to retained earnings. 
 
d. The balance sheet will not balance until the temporary accounts are closed to retained 
earnings. 
 
e. With double-entry, each transaction is recorded twice.
Reasoning: With double-entry system, the dual effect of each transaction is recorded and NOT that each 
transaction is recorded twice.
Which of the following would not be considered a subsequent event to financial 
statements? 
Answer  
 
a. A major customer declares bankruptcy subsequent to the balance sheet date, but prior to 
issuing the statements. This event was not considered on the balance sheet date. 
 
b.

If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must be: Answer a. $20,000. b. $80,000. c. $120,000. d. $30,000. e. $30,000. If the disposal of a segment meets...

Answer To: If liabilities total $70,000 and stockholders' equity totals $50,000, then total assets must be:...

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