1. u05q1 Question 1

Which of the following statements about users of accounting information is incorrect?
a. Management is an internal user.
b. Taxing authorities are external users.
c. Present creditors are external users.
d. Regulatory authorities are internal users.

2. u05q1 Question 2

Net income will result during a time period when:
a. Assets exceed liabilities.
b. Revenues exceed expenses.
c. Assets exceed revenues.
d. Expenses exceed revenues.

3. u05q1 Question 3

Which of the following events is not recorded in the accounting records?
a. Equipment is purchased on account.
b. An employee is terminated.
c. A cash investment is made into the business.
d. The owner withdraws cash for personal use.

4. u05q1 Question 4

Which financial statement reports assets, liabilities, and equities?
a. Statement of cash flows.
b. Income statement.
c. Balance sheet.
d. Owner’s equity statement.

5. u05q1 Question 5


a. Increase both assets and liabilities.
b. Decrease both assets and liabilities.
c. Decrease assets and increase liabilities.
d. Increase assets and decrease liabilities.

6. u05q1 Question 6

The purchase of supplies on account should result in:

a. A debit to Supplies and a credit to Accounts Payable.
b. A debit to Supplies Expense and a credit to Cash.
c. A debit to Supplies Expense and a credit to Accounts Payable.
d. A debit to Supplies and a credit to Accounts Receivable.

7. u05q1 Question 7

The cash flow statement classifies cash receipts and payments by these activities:
a. Operating and non-operating.
b. Investing, financing, and operating.
c. Financing, operating, and non-operating.
d. Investing, financing, and non-operating.

8. u05q1 Question 8

Cash dividends paid to stockholders are classified on the statement of cash flows as:
a. Operating activities.
b. Investing activities.
c. Financing activities.
d. Non-operating activities.

9. u05q1 Question 9

Which of the following is an example of a cash flow from an investing activity?
a. Receipt of cash from the issuance of bonds payable.
b. Payment of cash to repurchase outstanding common stock.
c. Receipt of cash from the sale of unneeded business equipment.
d. Payment of cash to suppliers for inventory.

10. u05q1 Question 10

Which of the following transactions is an example of a cash flow from an operating activity?

a. Payment of cash to lenders for loan interest.
b. Receipt of cash from the sale of common stock.
c. Payment of cash dividends to the company’s stockholders.
d. Issuance of debt for cash.

11. u05q1 Question 11

Which of the following items is an example of a current liability?
a. Bonds payable.
b. Capital leases.
c. Pension obligations.
d. Income tax payable.

12. u05q1 Question 12

Which of the following items is not considered a long-term asset?

a. Patent.

b.Land improvements.
c. Inventory.

d. Goodwill.

13. u05q1 Question 13

All of the following items are examples of temporary accounts except:

a. Interest income.
b. Retained earnings.
c. Cost of goods sold.
d. Sales.

14. u05q1 Question 14

Which of these ratios is used to calculate a firm’s solvency?

a. Return on equity.

b. Quick ratio.
c. Asset turnover.
d. Times interest earned.

15. u05q1 Question 15

What is the term for the ratio of cash dividends divided by net income?
a. Dividend yield.
b. Payout ratio.
c. Book value.
d. Earnings per share.

16. u05q1 Question 16

Which of the following measures is an evaluation of a firm’s ability to pay current liabilities?

a. Current ratio.
b.Profit margin.

c. Return on assets.
d. Accounts receivable turnover.

17. u05q1 Question 17

Which of these ratios measures the profitability of assets before the impact of borrowing?

a. Asset turnover.

b. Debt ratio.
c. Return on assets.
d. Return on equity.

18. u05q1 Question 18

Which of the following actions does not represent an excellent internal control or procedure to ensure integrity?
a. Creating an audit trail.
b. Using a manual accounting system.
c. Using an automated accounting system.
d. Using independent auditors.

19. u05q1 Question 19

What is the term for the accounting convention that specifies that expenses should be recognized to match the time when associated revenues are recognized?

a. Going-concern value.
b. Matching.
c. Conservatism.
d. Full disclosure.

20. u05q1 Question 20

Which of the following items is an example of a deferrable expense?

a. Professional retainer.
b. Depreciation.
c. Lawsuit liability.
d. Salaries and wages.