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1) molina corporation issues 3,000, 10-year, 8%, $1,000 bonds dated january 1, 2012, at 103. the journal entry to record the issuance will show a a.debit to cash of $3,000,000 b.debit to premium on bonds payable for $90,000 c.credit to […]

1) which of the following statements is not considered a disadvantage of the corporate form of organization? a.additional taxes b.government regulations c.limited liability of stockholders d.separation of ownership and management 2) the following information is available for bradshaw corporation and […]

1) all of the following bank reconciliation items would result in an adjusting entry on the companys books except a.interest earned b.deposits in transit c.fee for collection of note by bank d.nsf check of customer 2) the cost of land […]

1) a debit balance in the allowance for doubtful accounts a.is the normal balance for that account b.indicates that actual bad debt write-offs have exceeded previous provisions for bad debts c.indicates that actual bad debt write-offs have been less than […]

1) the cost method of accounting for investments in stock should be used when the investment is a.influential and controlling b.influential and noncontrolling c.controlling d.non-influential and noncontrolling 2) working capital is calculated by taking a.current assets plus current liabilities b.current […]

1) corporations purchase investments in debt or equity securities generally for one of two reasons. 2) debit and credit can be interpreted to mean bad and good, respectively. Answer: f 3) unearned revenues should be classified as other revenues and […]

1) the chart of accounts is a special ledger used in accounting systems. 2) when preparing financial statements, the accountant assumes that the business will stay in business for the foreseeable future. Answer: t 3) the monetary unit assumption states […]

1) which of the following is not a principal type of business activity? a.operating b.investing c.financing d.delivering 2) the journal entry to record a return of merchandise purchased on account under a perpetual inventory system would credit a.accounts payable b.purchase […]

1) sales discounts and sales returns and allowances both have normal debit balances. 2) the sales returns and allowances account and the sales discount account are both classified as expense accounts. Answer: f 3) the holder of a note adjusts […]

1) which of the following activities is not a component of the operating cycle? a.sale of merchandise b.payment of employees salaries c.collection of cash from merchandise sales d.purchase of merchandise 2) carryable cds has the following inventory data: a physical […]

1) if net sales are $750,000 and cost of goods sold is $600,000, the gross profit rate is 20%. 2) earnings per share measures the net income earned on each share of common stock. Answer: t 3) the complete effect […]

1) revenues are a subdivision of stockholders equity. 2) the stock investments account is debited at acquisition under both the equity method and cost method of accounting for investments in common stock. Answer: t 3) unearned service revenue is classified […]

1) all of the following are true regarding financial statement analysis ratios associated with liabilities except a.a high times interest earned ratio indicates that a company is more likely to meet interest payments as scheduled b.high liquidity ratios mean that […]

1) an increase in inventory would be added to cost of goods sold to determine net purchases for the period. 2) the liability of a stockholder is usually limited to the stockholders investment in the corporation. Answer: t 3) if […]

1) if a promissory note is dishonored, the payee should not record interest income. 2) when using the direct write-off method year-end adjustments for bad debt expense must be made. Answer: f 3) if a company uses the allowance method […]

1) using the following information, which company appears to be most liquid? a.xu company b.lin company c.ng company d.chen company 2) when preparing an income statement, which of the following is the proper order for income statement components? a.comprehensive income, […]

1) if a plant asset is sold at a gain, the gain on disposal should reduce the cost of goods sold section of the income statement. 2) the valuation of available-for-sale securities is similar to the procedures followed for trading […]

1) the going concern assumption assumes that the business a.will be liquidated in the near future b.will be purchased by another business c.is in a growth industry d.will remain in operation for the foreseeable future 2) a note receivable is […]

1) bettys bunny barn has experienced a $40,000 loss due to tornado damage to their inventory. tornados have never before occurred in this area. assuming that the companys tax rate is 30%, what amount will be reported for this loss […]

1) cash and supplies are both classified as current assets. 2) a liability is classified as a current liability if it is to be paid within the coming year. Answer: t 3) allowance for doubtful accounts is a contra account […]

1) internal users of accounting information include a.the shareholders of royal dutch shell b.the internal revenue service c.the chief financial officer of credit suisse d.the international accounting standards board 2) cash from operations and net income are approximately the same […]

1) gross profit for a merchandising concern is net sales minus a.operating expenses b.cost of goods sold c.sales discounts d.cost of goods available for sale 2) which of the following statements concerning ifrs and u.s. gaap is true? a.ifrs permits […]

1) which table has a factor of 1.00000 for 1 period at every interest rate? a.future value of 1 b.future value of an annuity of 1 c.present value of 1 d.present value of an annuity of 1 2) which of […]

1) if year 1 equals $600, year 2 equals $650, and year 3 equals $780, the percentage to be assigned for year 1 in a trend analysis, assuming that year 1 is the base year, is a.100% b.89% c.105% d.112% […]

1) if pratt company issues 3,000 shares of $5 par value common stock for $210,000, the account a.common stock will be credited for $195,000 b.paid-in capital in excess of par value will be credited for $210,000 c.paid-in capital in excess […]

1) when bonds are retired before maturity, a.only a loss on redemption can be recorded b.only a gain on redemption can be recorded c.either a gain or a loss on redemption can be recorded d.neither a gain nor a loss […]

1) the periodicity assumption states that every economic entity can be separately identified and accounted for. 2) creditors rights to assets supersede owners rights to the assets. Answer: t 3) an example of segregation of duties is having a check […]

1) when the periodic payments are not equal in each period, the future value can be computed by using a future value of an annuity of 1 table. 2) treasury stock is reported as an asset on the balance sheet […]

1) a plant asset cost $96,000 and is estimated to have a $12,000 salvage value at the end of its 8-year useful life. the annual depreciation expense recorded for the third year using the double-declining-balance method would be a.$8,040 b.$13,500 […]

1) receiving payment of a portion of an accounts receivable will a.not affect total assets. b.increase liabilities. c.increase stockholders equity. d.decrease net income. 2) rice company reported the following on its income statement: an analysis of the income statement revealed […]

1) the receipt of cash in advance from a customer a.increases assets and stockholders’ equity. b.increases assets and decreases stockholders’ equity. c.increases assets and liabilities. d.none of these answer choices are correct. 2) from the following list of selected accounts […]

1) on the statement of cash flows using the indirect method, patent amortization expense will a.be added to net income in the operating section b.be deducted from net income in the operating section c.appear as an inflow of cash in […]

1) the per share amount normally assigned by the board of directors to a large stock dividend is a.the market value of the stock on the date of declaration b.the average price paid by stockholders on outstanding shares c.the par […]

1) when calculating interest on a promissory note with the maturity date stated in terms of days, the a.maker pays more interest if 365 days are used instead of 360 b.maker pays the same interest regardless if 365 or 360 […]

1) on a classified balance sheet, companies usually list current assets a.in alphabetical order b.with the largest dollar amounts first c.in the order in which they are expected to be converted into cash d.in the order of acquisition 2) green […]

1) interest on a 6-month, 10 percent, $10,000 note is calculated by multiplying $10,000 0.10 6/12. 2) as an adjustment to operating expenses per the income statement, an increase in accrued liabilities would be deducted from operating expenses to determine […]

1) the effective-interest method produces a constant dollar amount of interest expense to be reported each interest period. 2) under the periodic inventory system, both the sales amount and the cost of goods sold amount are recorded when each item […]

1) a trial balance proves a.the mathematical equality of debits and credits after the posting process. b.the ledger is posted correctly. c.that all transactions have been recorded correctly. d.that all transactions have been posted. 2) which of the following is […]

1) if a company determines cost of goods sold each time a sale occurs, it a.must have a computer accounting system b.uses a combination of the perpetual and periodic inventory systems c.uses a periodic inventory system d.uses a perpetual inventory […]

1) buying assets needed to operate a business is an example of a(n) a.delivering activity b.financing activity c.investing activity d.operating activity 2) which of the following is the least likely consideration that management uses when deciding whether to pay a […]

1) when a note is written to settle an open account no entry is necessary. 2) the asset turnover ratio is calculated as net sales divided by ending total assets. Answer: f 3) the information needs and questions of external […]

1) the retained earnings statement is more comprehensive than the statement of shareholders equity. 2) cash equivalents are highly liquid investments that can be converted into a specific amount of cash. Answer: t 3) in computing the maturity date of […]

1) gross profit represents the merchandising profit of a company. 2) when an entire business is purchased, goodwill is the excess of cost over the book value of the net assets acquired. Answer: f 3) if a company changes its […]

1) which of the following accounts balance will change between the adjusted trial balance and the post-closing trial balance? a.common stock b.prepaid rent c.unearned service revenue d.retained earnings 2) the following information pertains to bell company. assume that all balance […]

1) under an effective system of internal control, errors occur only as a result of fraud or dishonesty. 2) noncash investing and financing activities must be reported in the body of a statement of cash flows. Answer: f 3) the […]

1) an error that overstates the ending inventory will also cause net income for the period to be overstated. 2) the economic entity assumption states that economic events can be identified with a particular unit of accountability. Answer: t 3) […]

1) these t accounts summarize the ledger of garner gardening company inc. at the end of the first month of operations, april 2014 . instructions (a)prepare in the order they occurred the journal entries (including explanations) that resulted in the […]

1) corporations invest in other companies for all of the following reasons except to a.house excess cash until needed b.generate earnings c.meet strategic goals d.increase trading of the other companies stock 2) which statement about an account is true? a.in […]

1) which one of the following events would not require a journal entry on a corporations books? a.2-for-1 stock split b.100% stock dividend c.2% stock dividend d.$1 per share cash dividend 2) the following accounts show balances on the adjusted […]

1) for which of the following errors should the appropriate amount be subtracted from the balance per book on a bank reconciliation? a.check written for $43, but recorded as $34 b.deposit of $500 recorded by bank as $50 c.a returned […]

1) danner corporation reported net sales of $600,000, $680,000, and $800,000 in the years 2011, 2012, and 2013, respectively. if 2011 is the base year, what percentage do 2013 sales represent of the base? a.113% b.133% c.75% d.33% 2) the […]

1) in the month of may, lopat company inc. wrote checks in the amount of $27,750. in june, checks in the amount of $37,974 were written. in may, $25,404 of these checks were presented to the bank for payment, and […]

1) which of the following items will increase inventoriable costs for the buyer of goods? a.purchase returns and allowances granted by the seller b.purchase discounts taken by the purchaser c.freight charges paid by the seller d.freight charges paid by the […]

1) investing activities involve collecting the necessary funds to support the business. 2) an investment in short-term equity securities should be charged to a nominal account since the investment is temporary. Answer: f 3) employees sometimes commit fraud because of […]

1) given the data below for a firm in its first year of operation, determine net income under the cash basis of accounting. a.$18,000 b.$27,000 c.$20,000 d.$11,000 2) adjustments would not be necessary if financial statements were prepared to reflect […]

1) the inventory turnover is calculated by dividing a.cost of goods sold by the ending inventory b.cost of goods sold by the beginning inventory c.cost of goods sold by the average inventory d.average inventory by cost of goods sold 2) […]

1) in computing net cash flow from operating activities using the direct method, each item in the income statement is adjusted from the accrual basis to the cash basis. 2) if a company has a significant concentration of credit risk, […]

1) on january 1, 2012, ermler company, a calendar-year company, issued $800,000 of notes payable, of which $200,000 is due on january 1 for each of the next four years. the proper balance sheet presentation on december 31, 2012, is […]

1) which of the following would not be considered an external user of accounting data for the julian company? a.internal revenue service agent b.management c.creditors d.customers 2) which of the following groups uses accounting information primarily to insure the entity […]

1) a.a patent that was acquired for $600,000 at the beginning of the current year expires in 20 years and is expected to have value for 5 years. present the adjusting entry to amortize the patent for the current year. […]

1) the average cost inventory method relies on a simple average calculation. 2) horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year. Answer: f 3) payments to […]

1) posting is performed by transferring information from the a.source documents to the journal. b.ledger to the journal. c.source documents to the ledger. d.journal to the ledger. 2) employees at biquell corporation are paid $8,000 cash every friday for working […]

1) what is the rationale for the internal control principle, segregation of duties? a.history has shown that employees are generally dishonest and thus cannot be entrusted with performing related duties b.the work of one employee should, without duplication of effort, […]

1) if a company has no beginning inventory and the unit cost of inventory items does not change during the year, the value assigned to the ending inventory will be the same under lifo and average cost flow assumptions. 2) […]

1) when using the allowance method year-end adjustments for bad debt expense must be made. 2) when the market value of inventory is lower than its cost, the inventory is written down to its market value. Answer: t 3) in […]

1) in calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment is a.added to net income b.deducted from net income c.ignored because it does not affect cash d.not reported on a statement […]

1) in the vertical analysis of a balance sheet, the base for current liabilities is total liabilities. 2) the excess of current assets over current liabilities is called working capital. Answer: t 3) allowance for doubtful accounts is debited under […]

1) control over cash disbursements is improved if major expenditures are paid by check. 2) because pro forma earnings are based on specific rules, these amounts are highly reliable. Answer: f 3) under the double-entry system, revenues must always equal […]

1) franchises are classified as a plant asset. 2) if a bond has a stated value of $1,000 and a contractual interest rate of 6 percent, then the interest paid annually will be $60. Answer: t 3) vertical analysis is […]

1) the current market value of a bond is equal to the present value of all future cash payments promised by the bond. 2) the current ratio takes into account the composition of current assets. Answer: f 3) a debit […]

1) when the discount rate is equal to the contractual rate, the present value of the bonds will equal the bonds’ face value. 2) a corporation must be incorporated in each state in which it does business. Answer: f 3) […]

1) freight costs incurred by the seller on outgoing merchandise are an operating expense to the seller. 2) notes payable usually require the borrower to pay interest. Answer: t 3) the computer has increased greatly the use of the periodic […]

1) a high receivables turnover ratio indicates a.customers are making payments quickly b.a large portion of the companys sales are on credit c.many customers are not paying their receivables d.the companys sales have increased 2) posting a.should be performed in […]

1) discount on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the effective-interest method. 2) transactions are entered in the ledger […]

1) an alternative name for bad debts expense is a.deadbeat expense b.uncollectible accounts expense c.collection expense d.credit loss expense 2) cannon company is considering purchasing a machine. the machine will produce the following cash flows: gannon requires a minimum rate […]

1) which of the following phrases is not descriptive of the corporate form of business? a.professional management b.double taxation on distributed earnings c.unlimited liability d.continuous existence 2) under the perpetual inventory system, which of the following accounts would not be […]

1) during the month, a company sells goods for a total of $106,000, which includes sales taxes of $6,000; therefore, the company should recognize $100,000 in sales revenues and $6,000 in sales tax expense. 2) the book value of a […]

1) which of the following is not an advantage of the corporate form of business organization? a.no personal liability b.easy to transfer ownership c.favorable tax treatment d.easy to raise funds 2) outstanding stock of the hall corporation included 30,000 shares […]

1) the par value of common stock must always be equal to its market value on the date the stock is issued. 2) income from operations appears on both the single-step and multiple-step forms of an income statement. Answer: f […]

1) if total assets are increased, there must be a corresponding increase in liabilities or a decrease in stockholders equity. 2) the return on assets ratio indicates how efficiently a company uses its assets. Answer: f 3) notes payable are […]

1) consistency in accounting means that a company uses the same generally accepted accounting principles from one accounting period to the next accounting period. 2) when the due date of a note is stated in months, the time factor in […]

1) the cost of treasury stock is deducted from total paid-in capital and retained earnings in determining total stockholders equity. 2) a change in the estimated useful life of a plant asset may cause a change in the amount of […]

1) the following totals for the month of april were taken from the payroll register of metz company. the entry to record the payment of net payroll would include a a.debit to salaries and wages payable for $12,107 b.debit to […]

1) a material item is one that is likely to affect a users decision. 2) if the fair value of an available-for-sale security exceeds its cost, the security should be written up to fair value and a realized gain should […]

1) russel company assembled the following information in completing its march bank reconciliation: as a result of this reconciliation, perkins will a.reduce its cash account by $475 b.reduce its cash account by $25 c.increase its cash account by $55 d.reduce […]

1) after transaction information has been recorded in the journal, it is transferred to the a.trial balance. b.income statement. c.general journal. d.ledger. 2) harden corporation engaged in the following transaction. assume that the harden corporation uses the indirect method to […]

1) the preparation of a bank reconciliation is an important cash control procedure. if a company deposits cash receipts daily and makes all cash disbursements by check, explain why the cash balance per books might not agree with the cash […]

1) which of the following statements regarding the effective interest method of accounting for bonds characteristics is false? a.gaap requires use of the effective interest method b.the amount of periodic interest expense decreases over the life of a discounted bond […]

1) under a perpetual inventory system, the cost of goods sold is determined each time a sale occurs. 2) cash is another term for stockholders equity. Answer: f 3) ordinary repairs should be recognized when incurred as revenue expenditures. Answer: […]

1) a stockholder who receives a stock dividend would a.expect the market price per share to increase b.own more shares of stock c.expect retained earnings to increase d.expect the par value of the stock to change 2) merchandising companies that […]

1) a new account is opened for each transaction entered into by a business firm. 2) the most generally accepted value used in accounting is market value. Answer: f 3) a major function of management is to provide the accountant […]

1) the jacquers, a semi-professional baseball team, prepare financial statements on a monthly basis. their season begins in april, but in march the team engaged in the following transactions: (a)paid $90,000 to lawrence city as advance rent for use of […]

1) general and administrative expenses are a category of operating expense. 2) a business can shorten its operating cycle by increasing its percentage of cash sales and reducing its percentage of credit sales. Answer: t 3) the carrying value of […]

1) which one of the following is not an objective of a system of internal controls? a.safeguard company assets b.overstate liabilities in order to be conservative c.enhance the accuracy and reliability of accounting records d.reduce the risks of errors 2) […]

1) when the cost method is used to account for an investment in stock, dividends received are accounted for as a reduction in the investment account. 2) sound internal control activities dictate that the amount of cash on hand should […]

1) each bondholder may vote for the board of directors in proportion to the number of bonds held. 2) in general, the fasb indicates that most assets must follow the fair value principle. Answer: f 3) the calculation of interest […]

1) a nsf check should appear in which section of the bank reconciliation? a.addition to the balance per books b.deduction from the balance per bank c.addition to the balance per bank d.deduction from the balance per books 2) herman company […]

1) *the work sheet starts with two columns for the: a.adjustments b.financial statements c.trial balance d.adjusted trial balance 2) on january 1, weatherholt inc. issued $3,000,000, 9% bonds for $2,817,000. the market rate of interest for these bonds is 10%. […]

1) harden corporation engaged in the following transaction. assume that the harden corporation uses the indirect method to depict cash flows. indicate where, if at all, long-term debt retired with cash would be classified on the statement of cash flows. […]

1) preferred stock has contractual preference over common stock in certain areas. 2) the payment of a liability decreases both cash and accounts payable. Answer: t 3) a $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at […]

1) snug-as-a-bug blankets has the following inventory data: assuming that a perpetual inventory system is used, what is the ending inventory on a lifo basis for july? a.$4,122 b.$4,131 c.$4,158 d.$8,694 2) alt corp. issues 2,000 shares of $10 par […]

1) using the following data for stevenson industries, compute the return on assets ratio. a.5.0% b.10.4% c.5.5% d.11.4% 2) the market rate of interest is often called the a.stated rate b.effective rate c.coupon rate d.contractual rate Answer: b 3) the […]

1) goods held on consignment should be included in the consignors ending inventory. 2) stockholders equity is divided into two parts: common stock and retained earnings. Answer: t 3) a plant asset must be fully depreciated before it can be […]

1) the acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash. 2) land improvements are generally charged to the land account. Answer: f 3) under the equity method, the […]

1) the current ratio is a a.liquidity ratio b.profitability ratio c.long-term solvency ratio d.cash flow ratio 2) courtney company purchased equipment for $1,800 cash. as a result of this event, a.equity decreased by $1,800. b.assets increased by $1,800. c.total assets […]

1) the difference between the cost of a depreciable asset and its related accumulated depreciation is referred to as the: a.market value of the asset b.blue book value of the asset c.book value of the asset d.depreciated difference of the […]

1) an event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently. 2) bad debt losses are a cost of selling on credit. Answer: t 3) a stock dividend […]

1) there is only one way to calculate interest correctly. 2) the periodic inventory system provides an up to date amount of inventory on hand. Answer: f 3) under a periodic inventory system, the merchandise on hand at the end […]

1) when the average cost method is applied in a perpetual inventory system, the sale of goods will change the unit cost that remains in inventory. 2) transactions are recorded in alphabetical order in a journal. Answer: f 3) under […]

1) as interest is recorded on an interest-bearing note, the interest expense account is a.increased; the notes payable account is increased b.increased; the notes payable account is decreased c.increased; the interest payable account is increased d.decreased; the interest payable account […]

1) the companys policy toward dividends and growth could best be determined by examining the a.balance sheet b.income statement c.retained earnings statement d.statement of cash flows 2) a high receivables turnover ratio indicates a.the companys sales are increasing b.a large […]

1) the going concern assumption is that the business will continue in operation long enough to carry out its existing objectives and commitments. 2) the extent of internal control features adopted by a company must be evaluated in terms of […]

1) ferman corporation had net income of $200,000 and paid dividends of $50,000 to common stockholders and $20,000 to preferred stockholders in 2012. ferman corporations common stockholders equity at the beginning and end of 2012 was $870,000 and $1,130,000, respectively. […]

1) most companies pay current liabilities a.out of current assets b.by issuing interest-bearing notes payable c.by issuing stock d.by creating long-term liabilities 2) pinson company began the year with retained earnings of $550,000. during the year, the company recorded revenues […]

1) generally, convertible bonds do not pay interest. 2) the sale of land for cash would be classified as a cash inflow from an investing activity. Answer: t 3) the inventory turnover ratio measures the number of times on the […]

1) the receivables turnover and inventory turnover ratios are used to analyze a.long-term solvency b.profitability c.liquidity d.leverage 2) an annual report includes all of the following except a.management discussion and analysis section b.notes to the financial statements c.an auditors report […]

1) an awareness of the normal balances of accounts would help you spot which of the following as an error in recording? a.a debit balance in the dividends account b.a credit balance in an expense account c.a credit balance in […]

1) total interest cost for a bond issued at a premium equals the total of the periodic interest payments minus the premium. 2) it is unlikely that a company would want to bond its employees who handle cash or inventory. […]

1) economic events that require recording in the financial statements are called accounting transactions. 2) the sale of shares in a corporation by one stockholder to another affects the total capital of the corporation. Answer: f 3) most notes are […]

1) net sales minus cost of goods sold is called gross profit. 2) advertising expense appears as a selling expense in the income statement. Answer: t 3) the cost of an intangible asset must be amortized over a 20-year period. […]

1) the following totals for the month of april were taken from the payroll register of metz company. the journal entry to record the monthly payroll on april 30 would include a a.debit to salaries and wages expense for $20,000 […]

1) the recording process becomes more efficient and informative if all transactions are recorded in one account. 2) an investment is readily marketable if it is management’s intent to sell the investment. Answer: f 3) if a building is offered […]

1) gunselman company purchased a machine on january 1, 2012. in addition to the purchase price paid, the following additional costs were incurred: (a)sales tax paid on the purchase price, (b)transportation and insurance costs while the machinery was in transit […]

1) orange-aide company has the following inventory data: a physical count of merchandise inventory on july 30 reveals that there are 30 units on hand. using the average cost method, the value of ending inventory is a.$600 b.$627 c$630 d$660 […]

1) if the retained earnings account increases from the beginning of the year to the end of the year, then a.net income is less than dividends b.a net loss is less than dividends c.additional investments are less than net losses […]

1) accounts receivable arising from sales to customers amounted to $35,000 and $40,000 at the beginning and end of the year, respectively. income reported on the income statement for the year was $120,000. exclusive of the effect of other adjustments, […]

1) the main difference between intangible assets and property, plant and equipment is the length of the assets life. 2) the statement of cash flows explains the difference between net income, as shown on the income statement, and the net […]

1) the inventory turnover ratio is calculated as cost of goods sold divided by ending inventory. 2) a stock dividend will cause an increase in total contributed capital at the date the dividend is declared. Answer: t 3) a credit […]

1) keller, inc. has the following partial balance sheet: what effect will it have on comprehensive income? a.no effect on comprehensive income b.increase of $1,000,000 in comprehensive income c.increase of $9,000,000 in comprehensive income d.decrease of $1,000,000 in comprehensive income […]

1) solvency ratios measure the short-term ability of the company to pay its maturing obligations. 2) owners of business firms are the only people who need accounting information. Answer: f 3) when no-par value stock does not have a stated […]

1) if a company acquires a 40% common stock interest in another company a.the equity method is usually applicable b.all influence is classified as controlling c.the cost method is usually applicable d.the ability to exert significant influence over the activities […]

1) when the allowance method is used, the write-off of an account receivable results in an expense at the time of write-off. 2) a journal is an accounting record in which transactions are initially recorded. Answer: t 3) an effective […]

1) which of the following financial statements is concerned with the company at a point in time? a.balance sheet b.income statement c.retained earnings statement d.statement of cash flows 2) compute the missing amount in each category of the accounting equation. […]

1) from a creditor’s point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations. 2) in accounting for stock investments of less than 20%, […]

1) a corporation purchases 10,000 shares of its own $10 par common stock for $25 per share, recording it at cost. what will be the effect on total stockholders equity? a.increase by $100,000 b.decrease by $250,000 c.increase by $250,000 d.decrease […]

1) crawford company started the year with $30,000 in its common stock account and a credit balance in retained earnings of $22,000. during the year, the company earned net income of $24,000 and declared and paid $10,000 of dividends. in […]

1) if the assets owned by a business total $100,000 and liabilities total $65,000, stockholders equity totals $25,000. 2) additions and improvements to a plant asset that increase the asset’s operating efficiency, productive capacity, or expected useful life are generally […]

1) unearned revenues are received before goods are delivered or services are rendered. 2) for accounting purposes, business transactions should be kept separate from the personal transactions of the stockholders of the business. Answer: t 3) all reconciling items in […]

1) the payout ratio is computed by dividing total cash dividends paid on common stock by retained earnings. 2) an inventory turnover ratio that is too high may indicate that the company is losing sales opportunities because of inventory shortages. […]

1) receivable turnover is useful in assessing the profitability of receivables. 2) alternative accounting methods affect the quality of earnings. Answer: t 3) the primary accounting standard-setting body in the united states is the securities and exchange commission. Answer: f […]

1) the classification and normal balance of the dividends account is a.revenue with a credit balance. b.an expense with a debit balance. c.a liability with a credit balance. d.stockholders equity with a debit balance. 2) butler company reported ending inventory […]

1) during february 2014, its first month of operations, the owner of schwenn enterprises invested cash of $40,000. schwenn had cash sales of $8,000 and paid expenses of $14,000. assuming no other transactions impacted the cash account, what is the […]

1) the account market adjustment-trading appears as a contra account in the income statement. 2) the lifo method is rarely used because most companies do not sell the last goods they purchase first. Answer: f 3) full disclosure of all […]

1) during the year, income tax expense amounted to $25,000 and income taxes payable increased by $3,000; therefore, the cash paid for income taxes was $22,000. 2) declining profitability and liquidity ratios are indications that a company may not survive. […]

1) machinery was purchased for $85,000 on january 1, 2011. freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the machinery. it is estimated that the machinery will have a $15,000 […]

1) shaffer company acquires land for $56,000 cash. additional costs are as follows. shaffer will record the acquisition cost of the land as a.$56,000 b.$57,690 c.$59,610 d.$59,370 2) the two ways that a corporation can be classified by ownership are […]

1) a $200 petty cash fund has cash of $32 and receipts of $172. the journal entry to replenish the account would include a.debit to cash for $172 b.credit to petty cash for $172 c.credit to cash over and short […]

1) a factor buys receivables from businesses for a fee and collects the payment directly from customers. 2) the times interest earned ratio is computed by dividing net income by interest expense. Answer: f 3) under an operating lease, both […]

1) which of the following is not an accounting assumption? a.integrity b.going concern c.periodicity d.economic entity 2) all of the following statements about the useful life factor associated with depreciation are true except a.useful life is also called service life […]

1) those most responsible for the major policy decisions of a corporation are the a.stockholders b.board of directors c.management d.employees 2) compton inc. made a $500 ordinary repair to a piece of equipment. compton’s accountant debited this amount to the […]

1) the convention of consistency pertains to the use of the same accounting principles by firms in the same industry. 2) free cash flow is cash from operations less dividends. Answer: f 3) a corporation is not an entity that […]

1) if a business has received cash in advance of services performed and credits a liability account, the adjusting entry needed after the services are performed will be: a.debit unearned revenue and credit cash b.debit unearned revenue and credit revenue […]

1) assume the following sales data for a company: if 2011 is the base year, what is the percentage increase in sales from 2011 to 2012? a.129% b.112% c.29% d.15% 2) which of the following is a debt security? a.ibm […]

1) adjusting entries can be classified as: a.postponements and advances b.accruals and advances c.deferrals and postponements d.accruals and deferrals 2) restoration company issued bonds that had the following data associated with them: interest to be paid is $40,000. interest expense […]

1) assets purchased for resale are recorded in which of the following accounts? a.supplies b.inventory c.equipment d.more than one of the above is correct 2) which of the following statements concerning financial statement presentation is false? a.intangibles are reported separately […]

1) adjustments for unearned revenue: a.decrease liabilities and increase revenues b.increase liabilities and increase revenues c.increase assets and increase revenues d.decrease revenues and decrease assets 2) a t-account is a.a way of depicting the basic form of an account. b.a […]

1) in reporting discontinued operations, the income statement should show in a special section 1>gains on the disposal of a discontinued component. 2>losses on the disposal of a discontinued component. a.1 only b.2 only c.neither 1 nor 2 d.both 1 […]

1) the principle of establishing responsibility does not include a.one person being responsible for one task b.authorization of transactions c.independent internal verification d.approval of transactions 2) the income statement for mcdonald’s corporation shows cost of goods sold $6,175.6 million and […]

1) use the following data to calculate the current ratio. a.1.81 : 1 b.1.44 : 1 c.3.07 : 1 d.2.69 : 1 2) the amount you must deposit now in your savings account paying 6% interest, in order to accumulate […]

1) what does each type of ratio measure? (a)liquidity ratios. (b)solvency ratios. (c)profitability ratios. 2) the following totals for the month of march were taken from the payroll register of kern company. the entry to record the accrual of federal […]

1) foster corporation had net income of $160,000 and paid dividends to common stockholders of $40,000 in 2012. the weighted average number of shares outstanding in 2012 was 50,000 shares. foster corporation’s common stock is selling for $50 per share […]

1) earnings per share are calculated by dividing a.gross profit by average common shares outstanding b.(net income less preferred stock dividends) by average common shares outstanding c.net income by average common shares outstanding d.net sales by average common shares outstanding […]

1) hogan company has other operating expenses of $260,000. there has been a decrease in prepaid expenses of $16,000 during the year, and accrued liabilities are $24,000 larger than in the prior period. using the direct method of reporting cash […]

1) la more company had the following transactions during 2011. what is la mores 2011 net income using cash basis accounting? a.$5,375 b.$875 c.$5,125 d.$625 2) equipment costing $140,000 was destroyed when it caught on fire. at the date of […]

1) which of the following would be unethical? a.recording accrued salaries and wages expense b.recording accrued interest revenue c.recording backdated revenue d.recording prepaid expense adjustments 2) a computer company has $2,000,000 in research and development costs. before accounting for these […]

1) horizontal analysis of comparative financial statements includes the a.development of common size statements b.calculation of liquidity ratios c.calculation of dollar amount and percentage changes from financial statements over a period of time, as compared to a base year d.evaluation […]

1) secured bonds are bonds that a.are in the possession of a bank b.can be converted into common stock c.have specific assets of the issuer pledged as collateral d.mature in installments 2) in recording accounting transactions, evidence that a transaction […]