ACCT 5312 EXAM 1 & 2 (2VERSIONS) 2026
QUESTIONS AND CORRECT VERIFIED ANSWERS
(GRADED A+)
The inventory cost flow assumption describes the flow of product cost: -
VERIFIED ANSWER - from the asset (inventory) account and to the expense
(cost of goods sold) account.
One of the most important reasons for having a system of internal control
is to: - VERIFIED ANSWER - improve the effectiveness and efficiency of the
operations of the organization.
The noncurrent Deferred Tax Liability account arises because: - VERIFIED
ANSWER - some expenses are deducted for tax purposes before they are
deducted for book purposes.
The largest item of the Deferred Tax Liability for most companies is
caused by: - VERIFIED ANSWER - differences in depreciation methods
(accelerated vs. straight-line) for tax versus financial accounting
purposes.
,The adjusting entry to accrue Interest Expense results in: - VERIFIED
ANSWER - an increase in Interest Expense.
Which of the following is not sometimes associated with bonds? - VERIFIED
ANSWER - Cumulative
Financial leverage refers to which of the following? - VERIFIED ANSWER -
The difference between the rate of return earned on assets (ROI) and the
rate of return earned on stockholders' equity (ROE).
Many current liabilities are affected by accrual accounting entries. This
happens because: - VERIFIED ANSWER - accrual accounting involves
recognizing liabilities when expenses have been incurred but not yet paid.
A transaction that is likely to cause an increase in a current liability is: -
VERIFIED ANSWER - accrual of interest expense.
Assume that on November 1, 2019, a 3-month rent payment for $8,000
per month (for a total of $24,000) was made with respect to a lease that
the company entered into on that date as a tenant. The company took
,occupancy of the rented space immediately. The lease term will expire on
January 31, 2020. The $24,000 payment was recorded as a debit to
Prepaid Rent on November 1, 2019. The adjusting entry on December 31,
2019, is as follows: - VERIFIED ANSWER - Dr. Rent Expense 16,000
Cr. Prepaid Rent 16,000
An organization's system of internal control is designed primarily to: -
VERIFIED ANSWER - provide an operating framework for all employees as
they work to achieve the organization's goals.
Which of the following is NOT an example of an inventory account a
manufacturing firm might use? - VERIFIED ANSWER - Merchandise
inventory.
Accounts receivable are reported at: - VERIFIED ANSWER - net realizable
value.
Which of the following is true regarding cost flow assumptions? -
VERIFIED ANSWER - If a firm uses LIFO for tax purposes, then LIFO must be
used for financial reporting purposes.
, Prepaid expenses classified as current assets represent: - VERIFIED
ANSWER - cash payments in the current year that will be recognized as
expenses and matched against revenues of the next year.
The principal reason for converting a customer's account receivable to a
note receivable is: - VERIFIED ANSWER - the note receivable earns interest
and the account receivable does not.
A firm has used LIFO for several years during which costs have trended
higher. The effect on 2020 net income using LIFO, relative to FIFO, will be:
- VERIFIED ANSWER - net income for 2020 will be less under LIFO than
FIFO.
The amount of cash related to a particular bank checking account that is
shown on the balance sheet at December 31 is: - VERIFIED ANSWER - the
cash balance shown in the general ledger account for this checking
account as of the close of business on December 31, after recognizing any
bank service charges and/or interest income from the December 31 bank
account reconciliation.
QUESTIONS AND CORRECT VERIFIED ANSWERS
(GRADED A+)
The inventory cost flow assumption describes the flow of product cost: -
VERIFIED ANSWER - from the asset (inventory) account and to the expense
(cost of goods sold) account.
One of the most important reasons for having a system of internal control
is to: - VERIFIED ANSWER - improve the effectiveness and efficiency of the
operations of the organization.
The noncurrent Deferred Tax Liability account arises because: - VERIFIED
ANSWER - some expenses are deducted for tax purposes before they are
deducted for book purposes.
The largest item of the Deferred Tax Liability for most companies is
caused by: - VERIFIED ANSWER - differences in depreciation methods
(accelerated vs. straight-line) for tax versus financial accounting
purposes.
,The adjusting entry to accrue Interest Expense results in: - VERIFIED
ANSWER - an increase in Interest Expense.
Which of the following is not sometimes associated with bonds? - VERIFIED
ANSWER - Cumulative
Financial leverage refers to which of the following? - VERIFIED ANSWER -
The difference between the rate of return earned on assets (ROI) and the
rate of return earned on stockholders' equity (ROE).
Many current liabilities are affected by accrual accounting entries. This
happens because: - VERIFIED ANSWER - accrual accounting involves
recognizing liabilities when expenses have been incurred but not yet paid.
A transaction that is likely to cause an increase in a current liability is: -
VERIFIED ANSWER - accrual of interest expense.
Assume that on November 1, 2019, a 3-month rent payment for $8,000
per month (for a total of $24,000) was made with respect to a lease that
the company entered into on that date as a tenant. The company took
,occupancy of the rented space immediately. The lease term will expire on
January 31, 2020. The $24,000 payment was recorded as a debit to
Prepaid Rent on November 1, 2019. The adjusting entry on December 31,
2019, is as follows: - VERIFIED ANSWER - Dr. Rent Expense 16,000
Cr. Prepaid Rent 16,000
An organization's system of internal control is designed primarily to: -
VERIFIED ANSWER - provide an operating framework for all employees as
they work to achieve the organization's goals.
Which of the following is NOT an example of an inventory account a
manufacturing firm might use? - VERIFIED ANSWER - Merchandise
inventory.
Accounts receivable are reported at: - VERIFIED ANSWER - net realizable
value.
Which of the following is true regarding cost flow assumptions? -
VERIFIED ANSWER - If a firm uses LIFO for tax purposes, then LIFO must be
used for financial reporting purposes.
, Prepaid expenses classified as current assets represent: - VERIFIED
ANSWER - cash payments in the current year that will be recognized as
expenses and matched against revenues of the next year.
The principal reason for converting a customer's account receivable to a
note receivable is: - VERIFIED ANSWER - the note receivable earns interest
and the account receivable does not.
A firm has used LIFO for several years during which costs have trended
higher. The effect on 2020 net income using LIFO, relative to FIFO, will be:
- VERIFIED ANSWER - net income for 2020 will be less under LIFO than
FIFO.
The amount of cash related to a particular bank checking account that is
shown on the balance sheet at December 31 is: - VERIFIED ANSWER - the
cash balance shown in the general ledger account for this checking
account as of the close of business on December 31, after recognizing any
bank service charges and/or interest income from the December 31 bank
account reconciliation.
