1) the investing activities section of the statement of cash flows includes activities that
affect the long-term asset section of the balance sheet.
2) the balance sheet shows whether or not a business is earning profits.
3) grace paper company has a debt ratio of 25%, which means that 75% of the assets
are financed by creditors of the corporation.
4) net income is entered as the balancing amount on the debit side of the income
statement columns and the credit side of the balance sheet columns of the worksheet.
5) gaap requires a public company to prepare a worksheet for financial reporting
purposes.
6) as long as the same person deposits customer checks and records the deposits into the
journal, there will be good internal control over cash receipts.
7) an overstatement of ending merchandise inventory in the current period results in an
overstatement of cost of goods sold in the current period.
8) ordinary repairs to plant assets are referred to as revenue expenditures.
9) freight in is to be recorded in the merchandise inventory account if the purchaser
uses the perpetual inventory system.
10) under the last-in, first-out (lifo) method, the cost of goods sold is based on the
oldest purchases.
11) an invoice is a request by the seller for payment from the purchaser.
12) useful life of a plant asset refers to the period for which it can be used for the
purposes of the business.
13) the balance in the bonds payable account is a credit of $89,000. the balance in the
premium on bonds payable account is a credit of $990. the bond’s carrying amount is
$89,990.
14) which of the following is true of the proper balance sheet treatment of the
allowance for bad debts with a credit balance?
a) it is reported as a current liability
b) it is reported as an operating expense
c) it is reported as a separate, independent line item under current assets
d) it is shown as a contra account related to accounts receivable
15) unearned revenue is classified as a(n) ________ account.
a) liability
b) asset
c) revenue
d) equity
16) the following is summary of information presented on the financial statements of a
company on december 31, 2015.
what would a horizontal analysis report show with respect to long-term liabilities?
a) long-term liabilities decreased by $30,000
b) long-term liabilities decreased by 40%
c) long-term liabilities decreased by 13.33%
d) long-term liabilities decreased by $10,000
17) vista camera services started the year with total assets of $80,000 and total
liabilities of $40,000. the revenues and the expenses for the year amounted to $120,000
and $70,000, respectively. during the year, the company did not issue any common
stock, but it distributed dividends of $60,000. what is the amount of stockholders’
equity at the end of the year?
a) $70,000
b) $120,000
c) $30,000
d) $60,000
18) under which of the following categories would accounts payable appear?
a) long-term assets
b) current assets
c) long-term liabilities
d) current liabilities
19) on january 1, 2015, carter sales issued $15,000 in bonds for $14,700. they were
6-year bonds with a stated rate of 9%, and pay semiannual interest. carter sales uses the
straight-line method to amortize the bond discount. immediately after the issue of the
bonds, the ledger balances appeared as follows:
after the first interest payment on june 30, 2015, what will be the balance in the
discount account?
a) debit of $275
b) debit of $300
c) debit of $325
d) credit of $25
20) accord corporation collected $5,000 from its customer, who owed it since the
previous month. how does this affect the accounting equation of the business?
a) assets increase by $5,000; liabilities decrease by $5,000
b) assets increase by $5,000; assets decrease by $5,000
c) assets increase by $5,000; liabilities increase by $5,000
d) assets increase by $5,000; equity increases by $5,000
21) green services inc. invests its excess cash in creative technologies inc. and acquires
1,300 shares for $22.50 per share. green services inc. owns less than 1% of creative’s
voting stock and plans to hold the stock for two years. which of the following is the
correct journal entry for the transaction?
a)
b)
c)
d)
22) property, plant, and equipment are categorized as ________.
a) current assets
b) fixed assets
c) long-term investments
d) short-term investments
23) a deposit receipt is:
a) retained by the customer as proof of a deposit transaction
b) the same as a signature card
c) used by the bank as an alternative to a remittance advice
d) given by the customer to the bank as a proof of deposit
24) reversing entries are ________.
a) the exact opposite of a prior adjusting entry
b) dated the last day of the new period
c) required according to generally accepted accounting principles (gaap)
d) expensive to record and time consuming
25) which of the following is a permanent account?
a) wages expense
b) salary payable
c) service revenue
d) utilities expense
26) at the beginning of 2015, elixir inc. has the following ledger balances:
during the year, credit sales amounted to $800,000. cash collected on credit sales
amounted to $760,000 and $18,000 has been written off. at the end of the year,
company adjusted for bad debts expense using the percent-of-sales method and applied
a rate, based on past history, of 2.5%. the ending balance in bad debts expense would be
________.
a) $20,000
b) $40,000
c) $28,000
d) $27,000
27) which of the following financial instruments pay dividends?
a) futures contracts
b) real estate securities
c) debt securities
d) equity securities
28) which of the following is included in the entry to record the employer’s payroll
taxes?
a) a debit to state unemployment tax payable
b) a credit to payroll tax expense
c) a credit to ficaoasdi tax payable
d) a credit to salary payable to employees
29) the field of accounting that focuses on providing information for external decision
makers is ________.
a) managerial accounting
b) financial accounting
c) cost accounting
d) nonmonetary accounting
30) on october 1, 2015, nurix inc. purchased a patent for $200,000 cash. although the
patent gives legal protection for 20 years, the patent is expected to be used for only 10
years. what will be the balance in the patent account on september 30, 2016?
a) $180,000
b) $200,000
c) $190,000
d) $100,000
31) which of the following journal entries would be recorded if a business renders
service and receives cash of $900 from the customer?
a)
b)
c)
d)
32) water drops inc. purchased equipment for $200,000. the company recorded total
depreciation of $140,000 on the equipment. on january 1, 2015, the company traded in
the equipment for new equipment, paying $150,000 cash. the fair market value of the
new equipment is $250,000. journalize water drop inc.’s exchange of equipment.
assume the exchange had commercial substance.
33) trimer corp. junks a truck which was originally purchased for $50,000 and had
accumulated depreciation of $30,000. give journal entry for disposal of truck.
34) on september 1, 2013, ferrero inc. borrowed $125,000 by signing a note payable.
the note is for 9 months and bears interest at a rate of 7.2%. provide the journal entry to
accrue interest expense at the end of 2013.
35) avatar company uses the indirect method to prepare its statement of cash flows.
refer to the partially completed worksheet below. complete the worksheet, including the
data showing the net change in cash, plus all control totals.
avatar company
spreadsheet for statement of cash flows
year ended december 31, 2014
36) the following information is available for jade company for the month ending june
30, 2014.
balance as per the bank statement is $11,240.
balance as per books is $10,200.
check #506 for $1,200 and check #510 for $900 were not shown on the june 30, bank
statement.
a deposit in transit of $3,110 had not been received by the bank when the bank
statement was generated.
a bank debit memo indicated an nsf check for $85 written by jane smith to jade
company on june 13.
a bank credit memo indicated a note collected by the bank of $2,100 and interest
revenue of $55 on june 20.
the bank statement indicated service charges of $20.
prepare bank reconciliation for jade company for june 30, 2014.
37) on january 1, 2015, a corporation acquired a truck for $600,000. the residual value
was estimated to be $20,000. the truck can be driven for 50,000 miles over the next 3
years. the actual usage of the truck was 8,640 miles for the first year. calculate the rate
of depreciation to be applied, and depreciation for the first year using the
units-of-production method. (do not round your intermediate calculations).
38) hernandez carpets company buys a building on a plot of land for $115,000, paying
$30,000 cash and signing a 30-year mortgage note for $85,000 at 11%. provide the
journal entry for the purchase.
39) felix skateboards company uses the indirect method to prepare the statement of cash
flows. refer to the following income statement:
felix company
income statement
year ended december 31, 2015
40) on january 1, ajax corp. accepted a one-year note for $5,000 at 4% from one of its
customers. when the note matured on december 31, the customer was unable to pay, and
the company treated it as a dishonored note. provide the journal entry for the dishonor
of the note in the books of the company.
41) on january 1, 2015, zade manufacturing corporation purchased a machine for
$40,000,000. the corporation expects to use the machine for 24,000 hours over the next
6 years. the estimated residual value of the machine at the end of the sixth year is
$40,000. the corporation used the machine for 3,600 hours in 2015 and 5,000 hours in
2016. what is the book value of the machine at the end of year 2016 if the corporation
uses double-declining-balance method of depreciation? (do not round your intermediate
calculations.)