Chapter 09 - Multiple choice quiz

Failure to record a liability will probably

A.	result in a overstated net profit

B.	result in overstated total liabilities and owner's equity

C.	have no effect on net profit

D.	result in overstated total assets

Very often, failure to record a liability means failure to record a(n)

revenue

asset

footnote

expense

Unearned Rental Revenue is

A.	a contra account to Rental Revenue

B.	a revenue account

C.	reported as a current liability

D.	debited when rent is received in advance

The GST collected by a retail store when making sales is

A.	a miscellaneous revenue for the store

B.	a current liability

C.	not recorded because it is a tax paid by the customer

D.	recorded as an operating expense

Two sisters operate a bed and breakfast on the coast of Batemans Bay. As customers make reservations they are required to pay cash in advance equal to one-half of the rate for their stay. How should the sisters account for the cash received as reservations are made?

A.	Dr Cash Cr Unearned revenue

B.	Dr Cash Cr Earned Revenue

C.	Unearned Revenue Cr Earned Revenue

D.	Dr Cash Cr Sales

The relationship between current assets and current liabilities is

A.	useful in determining profit

B.	useful in evaluating a company's liquidity

C.	called the matching principle

D.	useful in determining the amount of a company's non current debt

A measure of a company's immediate short-term liquidity is the

A.	working capital ratio

B.	times interest earned ratio

C.	current ratio

D.	quick ratio

From a manufacturer's viewpoint, an unexpired warranty as at balance date is recorded as a(n)

Expense

Liability

C.	part of COGS

Asset

Liquidity ratios measure

A.	the ability of an entity to survive in the long term

B.	the ability of an entity to generate profits

C.	the speed at which the company collects its accounts receivable

D.	the ability of an entity to pay its obligations as they fall due.

10.

Which of the following is a solvency ratio?

A.	times interest earned

B.	the current ratio

C.	the quick ratio

D.	accounts receivable turnover

11.

Which of the following is not an advantage of leasing?

A.	it provides the lessee with access to a wide variety of non-current assets

B.	lease payments are a tax-deductible expense

C.	lease payments are cheaper than loan payments

D.	the risk of obsolescence on the non-current asset remains with the lessor

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