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1. 3. Which of the following accounting concepts/principles is most significant in the development of a capitalization policy? a. Matching of revenue and expense. b. Materiality. c. Original Cost. d. Consistency. 2. 5. The entry to record depreciation expense: a. increases a contra long-term asset and decreases net income. b. decreases a contra long-term asset and decreases net income. c. decreases working capital and decreases net income. d. decreases a long-term asset and increases a contra long-term asset. 3. 6. A transaction that is likely to cause an increase in a current liability is: a. payment of accrued wages. b. accrual of interest expense. c. depreciation of equipment. d. accrual of bad debts expense. 4. 7. The payment of a current liability will: a. decrease net income. b. decrease working capital. c. increase working capital. d. not affect working capital. 5. 8. A working capital loan will generally: a. not have an interest rate. b. require that interest (if any) be paid monthly. c. not affect working capital. d. be classified as a long-term liability. 6. 9. Computing a borrower's effective interest rate is another application of which of the following concepts? a. Present value concept. b. Current value concept. c. Periodic interest concept. d. None of these. 7. 10. Which of the following is a true statement regarding interest calculation methods? a. Interest is calculated on either a straight basis or a delayed basis. b. Interest is calculated on either a straight basis or an undiscounted basis. c. If a borrower receives a loan on a discount basis, the APR will be less than the simple interest. d. If a borrower receives a loan on a discount basis, the APR will be more than the simple interest rate. 8. 12. Which of the terms is not used to identify owners' equity? a. Partner's capital. b. Proprietor's capital. c. Paid-in-capital and retained earnings. d. Additional-paid-in-retained earnings. 9. 13. Which of the following is not an owner's equity account? a. Common stock. b. Capital stock. c. Retained earnings. d. Noncontrolling interests. e. Paid-in-capital in excess of par. 10. 14. Another term frequently used to describe owners' equity is: a. net assets. b. gross assets c. paid-in capital. d. capital stock. 11. 15. Which of the following is one of the two generally practiced methods for electing corporate directors? a. Democratic voting. b. Representative voting. c. Cumulative voting. d. Census voting. e. None of these. 12. 19. The concept of matching revenue and expense refers to the fact that: a. expenses for a period equal the revenues for the period. b. all costs incurred in the process of earning revenue during a period are recorded as an expense in that period. c. all cash disbursements during a period are subtracted from all cash receipts during the period. d. costs incurred in the process of earning revenue during a period are deferred and expensed in a future period. 13. 20. Most entities satisfy the accounting criteria for recognizing revenue when: a. an order is received from a customer. b. cash is received from a customer. c. an unearned revenue account is credited. d. a product is delivered or a service is provided.

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