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Kaplan University ACc499 Auditing Midterm project
Question
1. Question : An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a
Student Answer: proprietorship.
corporation.
partnership.
governmental unit.
2. Question : When a product is sold, this cost is often called
Student Answer: cost of goods sold.
revenue.
products.
retained earnings.
3. Question : Which of the following are business stakeholders?
Student Answer: Stockholders
Suppliers
Customers
All of these
4. Question : The role of accounting in business is best defined as
Student Answer: an information system that provides reports to stakeholders about the economic activities and condition of a business.
a method of forecasting the future profitability of a company.
the policies, procedures, and strategies used in a business.
transaction analysis.
5. Question : The following are examples of internal stakeholders EXCEPT:
Student Answer: managers.
creditors.
employees.
All of these are internal stakeholders.
6. Question : Costs incurred in operating a business are also known as
Student Answer: revenues.
expenses.
liabilities.
dividends.
7. Question : More than 70% of businesses are organized as what type of business?
Student Answer: Community Not-for-profit
Corporation
General Partnership
Sole proprietorship
8. Question : Which of the following must receive IRS permission AND is reportable in the financial records?
Student Answer: The value of goodwill earned through business operations
The value of human resources
Changes in personnel
Changes in inventory costing methods
9. Question : A chart of accounts is a
Student Answer: subsidiary ledger.
listing of all account titles.
general ledger.
general journal.
10. Question : The last step in the accounting cycle is to
Student Answer: prepare a post-closing trial balance.
journalize and post-closing entries.
prepare financial statements.
journalize and post adjusting entries.
11. Question : Under the cash basis of accounting,
Student Answer: revenues are recorded when they are earned.
accounts receivable would appear on the balance sheet.
depreciation of assets having an economic life of more than one year is recognized.
the matching principle is ignored.
12. Question : The basic financial statements are listed below:
(1) Balance sheet
(2) Statement of retained earnings
(3) Income statement
(4) Statement of cash flows
In which of the following sequences does the accountant ordinarily prepare the statements?
Student Answer: 1, 4, 3, 2
2, 1, 3, 4
3, 2, 1, 4
3, 2, 4, 1
13. Question : If an inventory account is understated at year end, the effect will be to overstate the
Student Answer: net purchases.
gross margin.
cost of goods available for sale.
cost of goods sold.
14. Question : An adjusting entry will not take the format of which one of the following entries?
Student Answer: A debit to an expense account and a credit to an asset account
A debit to an expense account and a credit to a revenue account
A debit to an asset account and a credit to a revenue account
A debit to a liability account and a credit to a revenue account
15. Question : Sky Company collected $12,350 in interest during 2013. Sky showed $1,850 in interest receivable on its December 31, 2013, balance sheet and $5,300 on December 31, 2012. The interest revenue on the income statement for 2013 was
Student Answer: $3,450.
$8,900.
$12,350.
$14,200.
16. Question : On August 1 of the current year, Kyle Company borrowed $278,000 from the local bank. The loan was for 12 months at 9 percent interest payable at the maturity date. The adjusting entry at the end of the fiscal year relating to this obligation would include a
Student Answer: debit to interest expense of $25,020.
debit to interest expense of $10,425.
credit to note payable of $10,425.
debit to interest receivable of $10,425.
17. Question : Which of the following criteria must be met before recording an accounting event?
Student Answer: The event must be an arm's-length transaction.
The event must be repeatable in a future period.
The event must be measurable in financial terms.
The event must be disclosed in the reported footnotes.
18. Question : How would proceeds received in advance from the sale of nonrefundable tickets for the Super Bowl be reported in the seller’s financial statements published before the Super Bowl?
Student Answer: Revenue for the entire proceeds.
Revenue less related costs.
Unearned revenue less related costs.
Unearned revenue for the entire proceeds.
19. Question : The Supplies on Hand account balance at the beginning of the period was $6,600. Supplies totaling $12,825 were purchased during the period and debited to Supplies on Hand. A physical count shows $3,825 of Supplies on Hand at the end of the period. The proper journal entry at the end of the period
Student Answer: debits Supplies on Hand and credits Supplies Expense for $9,000.
debits Supplies Expense and credits Supplies on Hand for $12,825.
debits Supplies on Hand and credits Supplies Expense for $15,600.
debits Supplies Expense and credits Supplies on Hand for $15,600.
20. Question : The inventory turnover ratio
Student Answer: measures management’s ability to productively employ all of its resources.
measures the efficient use of assets held for resale.
is a stringent measure of liquidity.
provides a measure of the strength of the sales mix the company currently employs.
21. Question : Statements in which all items are expressed only in relative terms (percentages of a common base) are
Student Answer: horizontal statements.
percentage statements.
vertical statements.
common-size statements.
22. Question : Which of the following ratios does NOT measure efficiency or activity of an entity?
Student Answer: Accounts receivable turnover
Age of accounts receivable
Net cash flow to current liabilities
Times interest earned
23. Question : The percent of fixed assets to total assets is an example of
Student Answer: vertical analysis.
solvency analysis.
profitability analysis.
horizontal analysis.
24. Question : Which of the following is included in the computation of the quick ratio?
Student Answer: Prepaid rent
Accounts receivable
Inventory
Supplies
25. Question : Which of the following ratios would not be affected by the choice of depreciation methods?
Student Answer: Working capital turnover
Earnings per share of common stock
Debt to equity
Price-earnings ratio
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