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Doug’s Doohickeys sells hardware. His sales have finally reached $1,000,000 annually after years of hard work. Now his accountant has discovered a mistake-Doug misclassified a $2 expense several months ago. His accountant decides to ignore it. What accounting concept does he use to justify this? Mark one answer:

(A)The going concern concept

(B)The materiality concept

(C)The money measurement concept

(D)The matching concept

(E)The time is money concept

The Correct Answer

Cartman's Cats had a total of 100,000 shares of common stock issued. In February, they reacquired 20,000 shares and did not retire them. How many shares of outstanding stock do they currently have? Mark one answer:

(A)100,000 (B)120,000 (C)20,000 (D)60,000 (E)80,000

Correct Answer: E

Jenny's Bakery recently delivered a bad batch of cakes to a local restaurant. Jenny quickly refunded the cost of the cakes to the restaurant. Her accountant made a _____ to her Refunds of Sales account for this transaction:

(A)note (B)debit (C)credit (D)cost adjustment (E)deposit

Correct Answer: B

Bart’s Brewskies has grown beyond its wildest dreams. They are now a corporation and have hired an accountant. Their income statement is now showing a net income. How is this income shown on the Statement of Retained Earnings? (I) It increases retained earnings.(I). It is shown as dividends paid to shareholders.(I)I. It does not impact the Statement of Retained Earnings. Mark one answer:

(A)Only statement I is correct. (B)Only statement II is correct. (C)Only statement III is correct. (D)Both statement I and II could be correct. (E)None of the statements are correct.

Correct Answer: D

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