Final Exam free essay sample

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: A. will be greater than $5 B. will also be $5 C. will be less than $5 D. may be either greater or less than $5 2) A firm that is motivated by self interest should: A. always use large amounts of cheap inputs and small amounts of expensive inputs in producing its output B. hire each input so the productivity of each is equal at the margin C. always use large amounts of the most productive inputs and small amounts of the least productive inputs in producing its output employ the combination of resources that will produce the profit-maximizing output at the minimum cost 3) If price is above the equilibrium level, competition among sellers to reduce the resulting: A. shortage will increase quantity demanded and decrease quantity supplied B. surplus will increase quantity demanded and decrease quantity supplied C. c. a special account used instead of a trial balance. d. used for accounts that have both a debit and credit balance. 6. Which of the following correctly identifies normal balances of accounts? a. AssetsDebit LiabilitiesCredit Stockholders EquityCredit RevenuesDebit ExpensesCredit b. AssetsDebit LiabilitiesCredit Stockholders EquityCredit RevenuesCredit ExpensesCredit c. AssetsCredit LiabilitiesDebit Stockholders EquityDebit RevenuesCredit ExpensesDebit d. AssetsDebit LiabilitiesCredit Stockholders EquityCredit RevenuesCredit ExpensesDebit 7. Which of the following statements is true? a. Debits increase assets and increase liabilities. b. Credits decrease assets and decrease liabilities. c. Credits decrease assets and increase liabilities. . Debits decrease liabilities and decrease assets. 8. The revenue recognition principle dictates that revenue should be recognized in the accounting records a. when cash is received. b. when it is earned. c. at the end of the month. d. in the period that income taxes are paid. 9. Under accrual-basis accounting a. cash must be received before revenue is recognized. b. net income is calculated by matching cash outflows against cash inflows. c. events that change a companys financial statements are recognized in the period they occur rather than in the period in which cash is paid or eceived. d. the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles 10. Expenses incurred but not yet paid or recorded are called a. prepaid expenses. b. accrued expenses. c. interim expenses. d. unearned expenses. 11. Accumulated Depreciation is a. an expense account. b. a stockholders equity account. c. a liability account. d. a contra asset account. 12. Sue Smiley has performed $500 of CPA services for a client but has not billed the client as of the end of the accounting period. What adjusting entry must Sue make? a. Debit Cash and credit Unearned Revenue b. Debit Accounts Receivable and credit Unearned Revenue c. Debit Accounts Receivable and credit Service Revenue d. Debit Unearned Revenue and credit Service Revenue 13. After the adjusting entries are journalized and posted to the accounts in the general ledger, the balance of each account should agree with the balance shown on the a. adjusted trial balance. b. post-closing trial balance. c. the general journal. d. adjustments columns of the worksheet. 14. The net income (or loss) for the period . is found by computing the difference between the income statement credit column and the balance sheet credit column on the worksheet. b. cannot be found on the worksheet. c. is found by computing the difference between the income statement columns of the worksheet. d. is found by computing the difference between the trial balance totals and the adjusted trial balance totals. 15. The income statement and balance s heet columns of Pine Companys worksheet reflects the following totals: Income Statement Balance Sheet Dr. Cr. Dr. Cr. Totals$58,000$48,000$34,000$44,000 The net income (or loss) for the period is a. $48,000 income. b. $10,000 income. c. $10,000 loss. d. not determinable. 16. Earnings per share is a. net income divided by the number of common shares outstanding. b. the market price of the stock divided by the number of shares outstanding. c. gross profit divided by the number of common shares outstanding d. reported on the balance sheet. 17. All of the following are measures of profitability except a. working capital. b. profit margin. c. return on common stockholders’ equity. d. return on assets. 18. The principle that requires circumstances and events that make a difference to financial statement users be reported is the a. cost principle. b. full disclosure principle. c. matching principle. d. revenue recognition principle. 19. Companies that are subject to, but fail to comply with, the Sarbanes-Oxley Act of 2002 a. may do so legally by obtaining an exemption. b. will be automatically dissolved. c. may be subject to fines and officer imprisonment. d. may be forced to sell their foreign subsidiaries. 20. An example of poor internal control is a. The accountant should not have physical custody of the asset nor access to it. b. The custodian of an asset should not maintain or have access to the accounting records. c. One person should be responsible for handling related transactions. d. A salesperson makes the sale, and a different person ships the goods 21. Having one person post entries to accounts receivable subsidiary ledger and a different person post to the Accounts Receivable Control account in the general ledger is an example of a. inadequate internal control. b. duplication of effort. c. external verification. d. segregation of duties. 22. Walker Clothing Store had a balance in the Accounts Receivable account of $780,000 at the beginning of the year and a balance of $820,000 at the end of the year. Net credit sales during the year amounted to $8,000,000. The average collection period of the receivables in terms of days was a. 30 days. b. 365 days. c. 10 days. d. 37 days. 23. Ratios are used as tools in financial analysis a. instead of horizontal and vertical analyses. b. because they may provide information that is not apparent from inspection of the individual components of the ratio. c. because even single ratios by themselves are quite meaningful. . because they are prescribed by GAAP. 24. The information provided in the notes that accompany financial statements is required because of the a. cost principle. b. full disclosure principle. c. matching principle. d. revenue recognition principle. 25. Which of the following is a true statement about closing the books of a corporation? a. Expenses are closed to the Expens e Summary account. b. Only revenues are closed to the Income Summary account. c. Revenues and expenses are closed to the Income Summary account. d. Revenues, expenses, and the dividends account are closed to the Income Summary account.