There are 117 questions on this topic. Last updated May 03 2024.
51What do you call the relevant risk that reflects the total market returns and cannot be eliminated by diversification?
Answer: Systematic risk
In the capital market theory, all investors want a completely diversified portfolio (combination of risky assets) in order to reduce risk. The unsystematic risk or the unique risk for an individual asset is diversified away. The systematic risk remains and cannot be eliminated because it reflects the market condition through the macroeconomic factors that affect all risky assets. This is why the systematic risk is also called as the market risk.
Goods purchased by us, returned to supplier J Johnson. What is credited?
52What is a firm's payment to a supplier for merchandise inventory recorded in?
Answer: cash disbursements journal
All cash payments are recorded in the cash disbursements journal. This journal is often referred to as the cheque register. All entries in this journal must have a credit to cash.
Answer: Revenue and expenses are recognized as cash comes in or goes out.
The cash basis of accounting is rarely used, however when it is used, it is recorded on an income statement when the owner of a company physically receives a payment for their goods or services or sends out a check for an expense they incurred.
57If Julia Childs is using accrual accounting and she pays $1000.00 to the contracted maid service for the show in February, for work done in January, what entry should she make on her books in January?
Answer: Debit Maid Expense for $1,000, Credit Accrued Maid Expense for $1,000
Since the maid's work was done in January, Julia must record the expense in January even if no payment has been made. The $1,000 in Maid Expense would appear on the income statement and a liability for $1,000 in Accrued Maid Expense would be recorded on the balance sheet.
Answer: in order to transfer net income/loss and owner's drawings to the owner's capital account
Closing entries formally recognize in the ledger the transfer of net income or net loss and the owner's drawings to the owner's capital account, as shown in the statement of owner's equity. ("Accounting Principles, Canadian Edition", Volume 1, by Weygandt, Kieso, and Trenholm, p. 143.)
59Prior to the recording of adjusting entries, revenues exceed expenses by $60,000. Adjusting entries for accrued wages of $5,000 and an amortization expense of $5,000 were made. Net income for the year would be?
Answer: $50,000
Net income is calculated as follows: Revenues - Expenses = Net income. So, $60,000 - $5,000 - $5,000 = $50,000. (Accounting Principles, Canadian Edition, volume 1, by Weygandt, Kieso, and Trenholm, page 16).
62Suppose a company buys supplies from a second company but won't pay for it until later. What type of source document would the first company need?
Answer: memorandum
The appropriate source document would be a memorandum. A memorandum is a brief message describing the business transaction. Since the money hasn't been given to the second company yet, there is no check.
63CAPM formula is used theoretically to compute the risky asset's expected or required rate of return. What does 'P' means in CAPM?
Answer: Pricing
The Capital Asset Pricing Model or CAPM formula is "RFR + (Beta * Expected market risk premium)". The risk-free rate (RFR) is the rate of return paid by the risk-free asset that has zero variance and correlation, that means, low default risk. The Beta is the standardized measure of systematic risk or the market risk.
64Where are amounts owed by customers for credit purchases found?
Answer: accounts receivable subsidiary ledger
Amounts owed to the business by its customers for merchandise purchased on account are accounts receivables of the business. Details of customers' accounts receivables are maintained in the accounts receivable subsidiary ledger.
65If total assets equal 3 times liabilities, and owner's equity is $40,000, what are total assets?
Answer: $60,000
Let "L" stand for liabilities. Given that total assets equals 3L and that owner's equity equals $40,000, then according to the accounting equation: 3L = L + $40,000 Subtract L from both sides of the equation. 2L = $40,000 L = $20,000 Total Assets = $20,000 + $40,000 Total Assets = $60,000
66This can be written either in an account form or a report form.
Answer: Balance Sheet
The account form balance sheet is divided into two columns assets and liabilities and equity. The report form balance sheet has assets, liabilities and equity all down a single column.
67The costing system that tracks costs to a department or work group and assigns the cost to products produced by that department or work group is which kind of costing system?
Answer: Process costing system
Most costing systems today are activity based in that they attempt to assign costs to activities more precisely, rather than simply allocating them across product lines. However, when the system attempts to track costs to a specific department or work group and then assign it to their products, it is a process costing system.
It means you have to lose something to gain another. What is lost is the opportunity cost. This is because we have unlimited wants and limited resources.
73Which government agency has the authority to set acceptable accounting methods in the U.S.?
Answer: SEC
The SEC is the Securities Exchange Commission. The FAA is the Federal Aviation Administration, and the EEOC is the Equal Employment Opportunities Commission.
74A company in North America purchases merchandise on July 1 for $1,600 with terms 1/10, n/30. If it pays for the merchandise on July 8, what should the entry to record the payment look like?
Answer: credit Purchase Discounts $16
The terms 1/10, n/30 mean that a 1% per cent discount is available if payment is made within 10 days of the invoice date, otherwise the net (total) amount of the invoice is due in 30 days. Since payment is made within the ten day discount period, the journal entry to record the payment is: Dr Accounts Payable $1,600 Cr Purchase Discounts $16 Cr Cash/Bank Account $1,584
75A costing system that tracks costs to a specific lot of a product is which kind of costing system?
Answer: Job order costing system
A job order costing system tracks costs for each lot of the product by using "job order" production tickets where all direct inputs are measured for that lot. Indirect costs, unfortunately, still have to be allocated by whatever means makes the most sense to management.
There are 117 questions on this topic. Last updated May 03 2024.
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