Question 1

Debts that are due and payable in less than a year

Accepted Answer

Wages payable are typically due within a short period of time, usually less than a year. Mortgage payable and long-term liabilities, on the other hand, are debts that are due and payable over a longer period of time, usually more than a year.

Question 2

This ratio is useful in revealing a firm's ability to pay its bills.

Accepted Answer

The current ratio is a liquidity ratio that measures a company's ability to pay off its current liabilities with its current assets. It indicates whether a company has enough short-term assets to cover its short-term debt obligations. A current ratio of 1 or higher is generally considered good, as it means a company has enough assets to cover its short-term debts. A current ratio of less than 1 may mean that the company may have difficulty paying off its debts.

Question 3

What would the current ratio be if a company had the following financial information: Current Assets, $150,000; Current Liabilities, $75,000; Total Assets $350,000. Round to one decimal places?

Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Thus, the current ratio in this case would be ($150,000/$75,000) = 2.

Question 4

Working Capital =

Accepted Answer

Working Capital is defined as the difference between Current Assets and Current Liabilities. Current assets are resources that are expected to be converted into cash within a year whereas current liabilities are obligations that are due within a year. The formula for calculating working capital is thus: Working Capital = Current Assets - Current Liabilities.

Question 5

Which of the following statements is true about a current ratio of 1.5?

Accepted Answer

A current ratio of 1.5 means that there is $1.50 of current assets available to pay every dollar of current debt. This indicates that the company has sufficient current assets to meet its current debt obligations. Option B is incorrect as it refers to owner's equity, which is not related to the current ratio. Option C and D are also incorrect as they do not accurately reflect the meaning of the current ratio.

Question 6

A net loss will occur if revenues are

Accepted Answer

Net loss occurs when expenses are greater than revenues. Therefore, option B is the correct choice.

Question 7

What would be an appropriate account number for Cash?

Accepted Answer

Cash is typically classified as an asset, and in many accounting systems, asset accounts start with the number 1, making 11 an appropriate account number for Cash.

Question 8

What is a weakness of the current ratio?

Accepted Answer

The weakness of the current ratio is that it favors companies with many current assets but doesn't measure the overall company strength. The ratio only considers short-term liquidity and does not provide a complete picture of a company's financial health.

Question 9

What two measures tell management and short-term creditors if the firm has sufficient capital and can pay its debts?

Accepted Answer

The working capital ratio and current ratio both provide information on a company's ability to meet short-term debt obligations. The working capital ratio measures the company's ability to pay off its current liabilities with its current assets, while the current ratio measures the company's ability to pay off its current liabilities with its current assets (excluding inventory). Therefore, by looking at both ratios, management and short-term creditors can determine if the company has sufficient capital and can pay its debts.

Question 10

Young Corporation has Current Assets of $125,000, Current Liabilities of $50,000, Long-Term Liabilities of $25,000 and Total Assets of $300,000. What is the working capital of Young Corporation?

Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets. 
Working Capital = Current Assets - Current Liabilities
= $125,000 - $50,000
= $75,000. 
Therefore, the correct answer is A, $75,000.

Question 11

Which of the following are nominal accounts?

Accepted Answer

Nominal accounts are accounts related to revenue, expenses, gains, and losses. Expenses are nominal accounts, while the other options are not.

Question 12

The account number 430 would indicate what type of account?

Accepted Answer

Account numbers in the 400 range typically represent revenue accounts in accounting systems.

Question 13

What would be an appropriate account number for Unearned Revenues?

Accepted Answer

Unearned Revenues are considered a liability because they represent money received before services are performed or goods are delivered. In accounting, liabilities are typically listed in the 2000 series, making option B (21) the appropriate choice.

Question 14

Which of the following statements is NOT true about closing entries for a merchandising business?

Accepted Answer

Closing entries for a merchandising business follow the same order as a service business, involving closing revenue, expenses, and drawing accounts to the capital account.

Question 15

Assume Net Sales are $225,000, Cost of Goods Sold is $75,000, Selling Expenses are $24,000 and General Expenses are $30,000. Calculate Net Income:

Accepted Answer

The answer of Assume Net Sales are $225,000, Cost of...

Question 16

Which of the following would be an appropriate account number for Selling Expenses?

Accepted Answer

In accounting, selling expenses are typically categorized under operating expenses, often starting with the number 6 in many chart of accounts systems.

Question 17

Which statement is NOT true about the Chart of Accounts?

Accepted Answer

Income statement accounts are typically listed after balance sheet accounts in the chart of accounts. The balance sheet accounts (assets, liabilities, and equity) usually come first, followed by the income statement accounts (revenues and expenses).

Question 18

The ability of an asset to be quickly turned into cash

Accepted Answer

Liquidity refers to the ability of an asset to be quickly turned into cash. Disposal refers to getting rid of an asset, accrual refers to the accumulation of interests or dividends, and profitability refers to the ability of a business to generate profits.

Question 19

Which of the following entries is a general journal entry that is the exact opposite of a previously completed adjusting entry?

Accepted Answer

A reversing entry is an exact opposite of a previously completed adjusting entry. It is made on the first day of the new accounting period to cancel out the effect of the previous adjusting entry. This is done to simplify the accounting process and ensure that the correct balances are carried forward to the new period. The other options (A, B, and D) do not serve this specific purpose.

Question 20

A relatively long-lived asset that is held for use in the production or sale of other assets or services

Accepted Answer

Property and equipment are long-lived assets that are held for use in the production or sale of other assets or services. Current assets such as accounts receivable and note receivable (current) are short-term assets that are expected to be converted into cash within a year.

Quiz 12: Financial Statements, Closing Entries, and Reversing Entries