Hospitality Accounting

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The time period assumption is the basis for:

dividing the activities of a business into a series of time periods for accounting and reporting purposes.

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Financial analysts look to the income statement to determine

whether the company has generated income from operations

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The operating cycle of a business is the best defined as

The time it takes for a company to purchase and pay for goods or services from suppliers, sell those goods or services to customers and collect cash from the customers

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Which of the following businesses would most likely have the shortest operating cycle? A retail chain such as Walmart, jewelry manufacturer such as Balfour, grocery chain such as Albertsons

A jewelry manufacturer such as Balfour

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If total revenues are the same as total expenses, then a company has

neither a profit nor a loss

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Which of the following costs is most likely to be the largest expense item on the income statement of a merchandising chain such as Kmart? Wage, salary and benefits expense, Cost of Sales, Advertising, Income tax expense, None of the above

Cost of Sales

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Which of the following businesses would not report cost of sales on their income statements? A large accounting firm, an automobile dealership, A pizza restaurant chain, A computer chip manufacturer, All of the above

A large accounting firm

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Which of the following expenses is usually listed last on the income statement? Cost of Sales, Salaries and benefits expense, Advertising expense, General administrative expenses, Income tax expense

Income tax expense

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The cash basis of accounting is not appropriate for use by publicly traded corporations because

SEC doesn't allow its use,no assets or liab. other than cash would appear on the bal. sheet,income reported could be distorted if a large customer paid for goods in advance or we postponed paying for goods or services until the next accounting period

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During 20B, New Company earned serice revenues amounting to $200,000, of which $120,000 were collected in cash; the balance will be collected in January 20C. The 20B income statement of the company should report the following amount for service revenues

$200,000

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At the end of Dec., the owner of an apartment complex realized that the Dec. rent had not been collected frm one of the tenants.Dec. 31 was the end of the acct. year;therefore, the owner made the appropriate adj. entry at that time.When the Dec. rent was

credit to Rent revenue receivable

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The owner of an office building should report rent collected in advance as a debit to cash and a credit to

a liability

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Which of the following statements about stockholders' equity is not correct?

Stockholders' equity results only from contributions of the owners

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All assets appear on the

Balance sheet

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If Golden Company owed Eye company $500, Golden Company would reflect this in its

Balance sheet

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The assumption that a business can continue to remain in operation into the future is the

Continuity assumption

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Assets are defines as

Probable future economic benefits owned by an entity as a result of past transactions.

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The principle that requires us to record a transaction when we provide service to a client and bill them is

revenue recognition

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The primary difference between revenues and gains is

Gains are increases in net assets from peripheral activities while revenues are increases from ongoing activities

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We would report changes in stockholders' equity caused by operating activities

in the retained earnings account

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Which of the follwoing events will cause retained earnings to decrease? Dividends declared by the Board of Directors, Net income reported for the period, Net loss reported for the period, None of the above decreases retained earnings.

Dividends declared by the Board of Directors AND Net loss reported for the period

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Which of the following is not a liability; Accounts payable, Retained earnings, Notes payable, Income taxes payable, None

Retained earnings

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Which of the following liability accounts is usually not satisfied by payment of cash? Accounts payable, Unearned revenues, Taxes payable, All of the above

Unearned revenues

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The purchase of supplies on account would: Increase cash, Decrease cash, Increase a liability, Decrease a liability

Increase a liability

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Which of the following trans. will cause both the left and right side of the eq. to increase? We collect cash from a cust. who owed us money, we pay a supp. for inv. we prev. bought on account, we borrow money from the bank, we purchase equip. for cash

We borrow money from the bank

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When a company buys equipment for $60,000 and pays for one third in cash and the other two thirds is financed by a note payable, the following are the effects on the equation.

cash decreases by $20,000, equipment increases by $60,000, liabilities increase by $40,000, total assets increase by $40,000.

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The effect on total assets of the purchase of supplies for cash is

total assets remain unchanged

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Sale of stock to investors for $50,000 cash would

increase cash by a debit

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On Mar. 1, 20A, the premium on a two-year insurance policy on equipment was paid amounting to $1,800. At the end of 20A (end of the accounting period), the financial statements for 20A, would report

Insurance expense, $750; Prepaid insurance $1,050

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Financial statement analysis:

Is the application of analytical tools to general-purpose financial statements and related data for making business decisions.Involves transforming accounting data into useful information for decision-making.Helps to reduce uncertainty in decision-making.

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External users of financial information:

Are not directly involved in operating the company

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Internal users of financial information:

Are those individuals involved in managing and operating the company.

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The building blocks of financial statement analysis includes:

Liquidity and efficiency, Solvency, Profitability, Market prospects

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Financial reporting refers to

The communication of relevant financial information to decision makers.

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The ability to meet short-term obligations and to efficiently generate revenues is called:

Liquidity and efficiency

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The ability to generate future revenues and meet long-term obligations is referred to as:

Solvency

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The ability to provide financial rewards sufficient to attract and retain financing is called:

Profitability

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The ability to generate positive market expectations is called:

Market prospects

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Standards for comparisons in financial statement analysis include:

Intracompany standards. Competitors. Industry standards. Guidelines (Rules-of-Thumb)

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Intracompany standards for financial statement analysis:

Are often based on a company's prior performance

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Three of the most common tools of financial analysis are:

Horizontal analysis, vertical analysis, ratio analysis

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The comparison of a company's financial condition and performance across time is known as:

Horizontal analysis

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The comparison of company's financial condition and performance to a base amount is known as:

Vertical analysis

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Which of the following items is not likely to be an extraordinary item? Loss from an unexpected union strike.Condemnation of prop. by the city government.Loss of use of prop. due to a new and unexpected environmental regulation.Loss to an earthqke in FL.

Loss from an unexpected union strike

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Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as:

Comparative statements

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A company's sales in 2007 were $250,00 and in 2008 were $287,500. Using 2007 as the base year, the sales trend percent for 2008 is:

115%

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Selected comparative income statement amounts for a company are shown below. Using 2007 as the base year for a horizontal analysis, compute the account with the most significant change.

Sales

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The common-size percent is computed by

Dividing the analysis amount by the base amount and multiplying the result by 100.

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Current assets minus current liabilities is

Working capital

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Current assets divided by current liabilities is the

Current ratio

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Quick assets divided by current liabilities is the

Acid-test ratio

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Net sales divided by average accounts receivable is the

Accounts receivable turnover ratio

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Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the

Days' sales in inventory

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Net sales divided by average total assets is the

Total asset turnover

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Net income divided by net sales is the

Profit margin

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Annual cash dividends per share divided by market price per share is the

Dividend yield ratio

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A company had a market price of $37.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio equals:

30.0

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True/False.In the periodic inventory system, purchases of merchandise for resale are debited to the Purchases account.

True

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True/False.Under the periodic inventory system, the cost of goods sold is equal to the beginning merchandise inventory plus the cost of goods purchased plus the ending merchandise inventory.

False

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True/False.In a perpetual inventory system, the Merchandise Inventory account is only used to reflect the beginning inventory.

False

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In a periodic inventory system, the cost of goods purchased includes the cost of transportation-in.

True

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True/False.As we compare a merchandise business to a service business, the financial statement that changes the most is the Balance Sheet.

False

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True/False.The ending merchandise inventory for 2005 is the same as the beginning merchandise inventory for 2006.

True

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True/False.In a multi-step income statement the dollar amount for income from operations is always the same as net income.

False

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True/False.Net sales is equal to sales minus cost of merchandise sold.

False

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True/False.Gross profit minus selling expenses equals net income.

False

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Net income plus operating expenses is equal to:

gross profit

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Generally, the revenue account for a merchandising business is entitled:

Sales

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What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?

gross profit

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A company using the periodic inv. system has the following account balances: Merchandise Inv. at the beginning of the year,$4,000;Trans.-in,$450;Purchases returns and allowances,$2,300;Purchases Discounts,$220.The cost of merchandise purchased is equal to

$9,930

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A company, using the periodic inv. system, has merchandise inv. costing $140 on hand at the beginning of the period.During the period, merchandise costing $400 is purchased.At year-end, merchandise inv. costing $180 is on hand.Cost of merch. sold is:

$360

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Office salaries, depreciation of office equipment, and office supplies are examples of what type of expense?

administrative expense

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Multiple-step income statements show:

both gross profit and income from operations

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When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the:

report form

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Using a perpetual inventory system, the entry to record the sales of merchandise on account includes a:

credit to Merchandise Inventory

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Which of the following accounts has a normal debit balance?

Sales Returns and Allowances

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Merch. is ordered on Nov.12;the merch. is shipped by the seller and the invoice is prepared, dated, and mailed by the seller on Nov.15; the merch. is received by the buyer on Nov.17;the entry is made in the buyer's accts on Nov.18.The credit per. begins

November 15

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Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on account includes a:

debit to Merchandise Inventory

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In credit terms of 1/10, n/30, the "1" represents the:

percent of the cash discount

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Merchandise subject to terms 1/10, n/30, FOB shipping point, is sold on account to a customer for $15,000.The seller paid transportation costs of $1,000 and issued a credit memorandum for $5,000 prior to payment. What is the amount of the cash discount?

$100

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Which of the following accounts has a normal credit balance? Sales Returns and Allowances, Sales, Merchandise Inventory, Transportation Out

Sales

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The entry to record the return of merchandise from a customer would include a:

debit to Sales Returns and Allowances

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Sales to customers who use bank credit cards, such as MasterCard and Visa, are generally treated as:

cash sales

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Using a perpetual inventory system, the entry to record the purchase of $30,000 of merchandise on account would include a :

debit to Merchandise Inventory

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Using a perpetual inventory system, the entry to record the return of merchandise purchased on account includes a:

credit to Merchandise Inventory

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Which of the following accounts usually has a debit balance? Purchase Discounts, Sales tax Payable, Allowance for Doubtful Accounts, Transportation-In

Transportation-In

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Merchandise is sold for cash. The selling price of the merchandise is $2,000 and the sale is subject to a 5% state sales tax. The journal entry to record the sale would include:

A creditto Sales tax Payable for $100

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If the buyer is to pay the transportation costs of delivering merchandise, delivery terms are stated as:

FOB shipping point

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If the seller is to pay the transportation costs of delivering merchandise, the delivery terms are stated as:

FOB destination

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If title to merchandise purchases passes to the buyer when the goods are shipped from the seller, the terms are:

FOB shipping point

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Merchandise with an invoice price of $4,000 is purchased subject to terms of 2/10,n/30, FOB destination.Transportation costs paid by the seller totaled $150. What is the cost of the merchandise, assuming the discount is taken?

$3,920

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When goods are shipped FOB destination and the seller pays the transportation charges, does the buyer make any journal entries?

makes no journal entry for the transportation.

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The term "inventory" indicates:

merchandise held for sale in the normal course of business and materials in the process of production or held for production

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Which of the following items would affect the cost of merchandise inventory acquired during the period? quantity discounts, cash discounts, transportation-in, or all of the above

all of the above

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Taking a physical count of inventory:

is a detective control

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Which of the following items should not be included in the cost of ending merchandise inventory? units on consignment, purchased units in transit, shipped FOB destination, units on hand in the warehouse

purchased units in transit, shipped FOB destination

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If title to merchandise purchases passes to the buyter when the goods are delivered to the buyer, the terms are:

FOB destination

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If a manufacturer ships merchandise to a retailer on consignment, the unsold merchandise should be included in the inventory of the:

Manufacturer

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If the merchandise costs $4,000, insurance in transit costs $200,tariff costs $50, processing the purchase order by the purchasing department costs $35, and the company receiving dock personnel costs $15, what is the total cost charged to the merchandise?

$4,250

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Which of the following inventory cost methods is appropriate for a business who has inventory with a relatively small number of unique items and a high cost per item? FIFO, LIFO, average, specific identification

specific identification

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The inventory method that considers the inventory to be composed of the units of merchandise acquired earliest is called:

last-in, first-out

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When merchandise sold is assumed to be in the order in which the expenditures were made, the inventory method is called:

first-in, first-out

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Under which method of cost flows is the inventory assumed to be composed of the most recent costs?

first-in,first-out

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The inventory method that assigns the most recent costs to cost of good sold is:

LIFO

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In recording the cost of merchandise sold for cash, based on data available from perpetual inventory records, the journal entry is:

debit Cost of Merchandise Sold; credit Merchandise Inventory

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Under the perpetual inventory system, all purchases of merchandise are debited to the account entitled:

Merchandise Inventory

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The inventory system employing accounting records that continuously disclose the amount of inventory is called:

perpetual

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When the perpetual inventory system is used, the inventory sold is debited to:

cost of merchandise sold

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Under a perpetual inventory system

accounting records continuously disclose the amount of inventory

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Under a periodic inventory system

a physical inventory is taken at the end of the period

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During a period of consistently rising prices, the method of inventory that will result in reporting the greatest cost of merchandise sold is:

LIFO

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If merchandise inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is:

FIFO

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During a period of falling prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory

FIFO method

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If the cost of an item of inventory is $60 and the current replacement cost is $65, the amount included in inventory according to the lower of cost or market is:

$60

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The number of days' sales in inventory

measures the length of time it takes to acquire, sell, and replace the inventory.

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