Which of the following assets does not decline in service potential over the course of its
useful life?
a. Equipment
b. Furnishings
c. Land
d. Fixtures
Answer:
The following financial statement information is available for James Corporation:
The profit margin ratio for 2015 is
a. 15.4%.
b. 47.9%.
c. 32.1%.
d. 13.5%.
Answer:
On June 1, 2015, Portugal Inc. reported a cash balance of $12,000. During June,
Portugal made deposits of $5,000 and made disbursements totalling $14,000. What is
the cash balance at the end of June?
a. $3,000 debit balance
b. $17,000 debit balance
c. $3,000 credit balance
d. $2,000 credit balance
Answer:
On January 15, 2015, Craig Company received a two-month, 9%, $9,000 note from
William Pentel for the settlement of his open account. The entry by Craig Company on
January 15, 2015 would include a:
a. debit of $9,135 to Notes Receivable.
b. debit of $9,000 to Notes Receivable.
c. credit of $9,135 to Accounts Receivable.
d. credit of $9,000 to Notes Receivable.
Answer:
An unrealized loss on available-for-sale securities is
a. reported under Other Expenses and Losses in the income statement.
b. closed-out at the end of the accounting period.
c. reported as a separate component of stockholders’ equity.
d. deducted from the cost of the investment.
Answer:
A sales invoice is a source document that
a. provides support for goods purchased for resale.
b. provides evidence of incurred operating expenses.
c. provides evidence of credit sales.
d. serves only as a customer receipt.
Answer:
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
Answer:
Presented below are the basic assumptions and principles underlying financial
statements.
a. Historical cost principle d. Going concern assumption
b. Economic entity assumption e. Monetary unit assumption
c. Full disclosure principle f. Periodicity assumption
Identify the basic assumption or principle that is described below.
_____ 1> The economic life of a business can be divided into artificial time periods.
_____ 2> The business will continue in operation long enough to carry out its existing
objectives.
_____ 3> Assets should be recorded at their cost.
_____ 4> Economic events can be identified with a particular unit of accountability.
_____ 5> Circumstances and events that make a difference to financial statement users
should be disclosed.
_____ 6> Only transaction data that can be expressed in terms of money should be
included in the accounting records.
Answer:
Income Summary has a credit balance of $17,000 in S. Sufjan Co. after closing
revenues and expenses. The entry to close Income Summary is
a. credit Income Summary $17,000, debit Retained Earnings $17,000.
b. credit Income Summary $17,000, debit Dividends $17,000.
c. debit Income Summary $17,000, credit Dividends $17,000.
d. debit Income Summary $17,000, credit Retained Earnings $17,000.
Answer:
Preparing a worksheet involves
a. two steps.
b. three steps.
c. four steps.
d. five steps.
Answer:
Posting of journal entries should be done in
a. account number order.
b. alphabetical order.
c. chronological order.
d. dollar amount order.
Answer:
A credit sale of $3,600 is made on July 15, terms 2/10, n/30, on which a return of $200
is granted on July 18. What amount is received as payment in full on July 24?
a. $3,332
b. $3,440
c. $3,528
d $3,600
Answer:
Paid-In Capital in Excess of Stated Value
a. is credited when no-par stock does not have a stated value.
b. is reported as part of paid-in capital on the balance sheet.
c. represents the amount of legal capital.
d. normally has a debit balance.
Answer:
Horizontal analysis is also called
a. linear analysis.
b. vertical analysis.
c. trend analysis.
d. common size analysis.
Answer:
Net income does not appear in the numerator of the
a. profit margin.
b. return on assets.
c. return on common stockholders’ equity.
d. payout ratio.
Answer:
Riodan Company sold old equipment for $105,000. The equipment had a cost of
$210,000 and accumulated depreciation of $126,000. The entry to record the sale of the
equipment would include a
a. loss on disposal of $105,000.
b. gain on disposal of $105,000.
c. loss on disposal of $21,000.
d. gain on disposal of $21,000.
Answer:
Dexter Company is considering purchasing equipment. The equipment will produce the
following cash flows:
Dexter requires a minimum rate of return of 10%. What is the maximum price Dexter
should pay for this equipment?
a. $274,381
b. $165,290
c. $320,000
d. $160,000
Answer:
Of the items below, the one that appears first on the statement of cash flows is
a. noncash investing and financing activities.
b. net increase (decrease) in cash.
c. cash at the end of the period.
d. cash at the beginning of the period.
Answer:
The X Company has the following stock outstanding:
Preferred stock dividends are in arrears for 2013 and 2014. If the company declares and
pays $150,000 in dividends in 2015, the amount received by the preferred stockholders
would be
a. $84,000.
b. $42,000.
c. $126,000.
d. $150,000.
Answer:
Blitzen Corporation had net income of $500,000 and paid dividends to common
stockholders of $40,000 in 2014. The weighted average number of shares outstanding in
2014 was 60,000 shares. Blitzen Corporation’s common stock is selling for $50 per
share on the New York Stock Exchange. Blitzen Corporation’s payout ratio for 2014 is
a. $8.33 per share.
b. 8%.
c. 12%.
d. 16%.
Answer:
The basis of estimating expected uncollectible accounts that emphasizes the matching
of expenses with revenues is the
a. percentage-of-receivables basis.
b. percentage-of-sales basis.
c. lower-of-cost-or-market basis.
d. direct write-off method.
Answer:
In preparing closing entries
a. each revenue account will be credited.
b. each expense account will be credited.
c. the retained earnings account will be debited if there is net income for the period.
d. the dividends account will be debited.
Answer:
Which account listed below would be double ruled in the ledger as part of the closing
process?
a. Cash
b. Retained Earnings
c. Dividends
d. Accumulated Depreciation’”Equipment
Answer:
Information that is not generally reported for each class of stock on the balance sheet is
a. the market value.
b. the par value.
c. shares authorized.
d. shares issued.
Answer:
If you are able to earn an 8% rate of return, what amount would you need to invest to
have $30,000 one year from now?
a. $27,747
b. $27,778
c. $27,273
d. $29,700
Answer:
Slotkin Health is considering two alternatives for the financing of some high
technology medical equipment. These two alternatives are:
1> Issue 60,000 shares of $10 par value common stock at $50 per share.
2> Issue $3,000,000, 8%, 10-year bonds at par.
It is estimated that the company will earn $900,000 before interest and taxes as a result
of acquiring the medical equipment. The company has an estimated tax rate of 40% and
has 80,000 shares of common stock outstanding prior to the new financing.
Instructions
Determine the effect on net income and earnings per share for these two methods of
financing.
Answer:
In the first month of operations, Mordica Company made three
purchases of merchandise in the following sequence: (1) 200 units at
$6, (2) 300 units at $7, and (3) 400 units at $9. Assuming there are
300 units on hand, compute the cost of the ending inventory under
(1) the FIFO method and (2) the LIFO method. Mordica uses a periodic
inventory system.
Answer:
The relationship between current liabilities and current assets is important in evaluating
a company’s ability to pay off its long-term debt.
Answer:
Raw materials inventories are the goods that a manufacturer has completed and are
ready to be sold to customers.
Answer:
The amounts appearing on an income statement should agree with the amounts
appearing on the post-closing trial balance.
Answer: