1) The total earned wages of an employee for the payroll period is the ________. The
amount of earned wages the employee takes home is _________.
A) gross pay; withholding amount
B) gross pay; net pay
C) net pay; gross pay.
D) net pay; taxes withheld amount
2) Which of the following statements about capital leases is INCORRECT?
A) Under a capital lease, the lessee does not report the leased asset on the financial
statements
B) A capital lease can transfer title of the leased asset to the lessee at the end of the
lease term
C) A capital lease may contain a bargain purchase option
D) Under a capital lease, the lessee records a lease liability at the beginning of the lease
term
3) On January 1, 2014, Benson Corporation paid $800,000 to purchase 40% of the
outstanding stock of Kroger Company. Kroger Company reported net income of
$200,000 for the year ending December 31, 2014 and paid cash dividends of $60,000
during 2014. On January 1, 2015, Benson Corporation sells its entire investment in
Kroger Company for $1,100,000. Benson Corporation will report a(n):
A) realized gain on the sale of $300,000
B) unrealized gain on the sale of $300,000
C) realized gain on the sale of $244,000
D) unrealized gain on the sale of $244,000
4) A noncontrolling interest arises when:
A) a parent company excludes the subsidiary company from the consolidated financial
statements
B) a parent company owns less than 100% of the stock of a subsidiary
C) a subsidiary company is not included in the consolidated financial statements
D) a subsidiary company represents less than 20% of the value of the consolidated
company
5) In a bank reconciliation, a NSF check is:
A) added to the bank balance
B) added to the book balance
C) deducted from the book balance
D) deducted from the bank balance
6) The following data are for Steve’s Candy Store for January:
What is the company’s estimated ending inventory for the month?
A) $281,000
B) $350,000
C) $420,000
D) $521,000
7) When a company retires bonds early, the gain or loss on the retirement is the
difference between the cash paid and the:
A) face value of the bonds
B) original selling price of the bonds
C) maturity value of the bonds
D) carrying value of the bonds
8) Sales of fixed assets for several years is a sign of:
A) a struggling company
B) reinvestment in the company
C) a shortage of cash
D) A and C
9) Which of the following is a CORRECT statement about asset impairment?
A) An asset is impaired if the net book value is less than the estimated future cash flows
B) If an asset is impaired, the future cash flows will exceed the book value
C) Under GAAP, an asset that has been written down because of impairment can be
written back up if it increases in value in the future
D) If an asset is impaired, the impairment loss is the difference between the net book
value and the fair value
10) Which financial statement must be prepared before the others?
A) Statement of cash flows
B) Income statement
C) Balance sheet
D) Statement of retained earnings
11) Which accounts are similar?
A) Interest Expense, Sales Returns and Allowances
B) Credit Card Discount Expense, Purchase Returns and Allowances
C) Financing Expense (from Factoring Accounts Receivable), Sales Returns and
Allowances
D) Credit Card Discount Expense, Financing Expense (from Factoring Accounts
Receivable)
12) Preferred stock that must be paid back or redeemed by a corporation is reported as
a(n) ________ on the balance sheet.
A) component of stockholders’ equity
B) contra account in stockholders’ equity
C) liability
D) asset
13) Which is NOT an objective of an internal control system?
A) Safeguarding of assets
B) Compliance with company policies
C) Compliance with legal requirements
D) Risk assessment
14) Interest Revenue for 2015 is $100,000. Interest Payable increased $40,000 during
the year and Interest Receivable increased $50,000 during the year. No discount or
premium was amortized. What is the cash received for interest revenue?
A) $50,000
B) $60,000
C) $100,000
D) $150,000
15) We have used transaction analysis and the accounting equation to record several
transactions for a company. The transactions are now recorded on a multi-column
spreadsheet of the assets, liabilities and stockholders’ equity of the company. If you
wanted to prepare an income statement with this spreadsheet, which column would you
use?
A) Cash column
B) Accounts Payable column
C) Dividends column
D) Retained Earnings column
16) On a statement of cash flows, which is NOT considered a financing activity?
A) Paid income taxes
B) Proceeds from long-term debt
C) Repayment of long-term debt
D) Paid dividends
17) On July 25, Henry Company’s accountant prepared a check for August’s rent
payment. Henry Company mails the check on July 27 to the landlord. The landlord
receives the check on July 31 and cashes the check on August 2. When should Henry
Company record the rent expense associated with this transaction?
A) July 25
B) July 27
C) August 31
D) August 2
18) Examples of internal control procedures do NOT include:
A) proper segregation of duties
B) adequate records
C) proper approvals
D) risk assessment
19) If a company receives a note receivable on account, what journal entry is prepared?
A) debit Accounts Receivable and credit Notes Payable
B) debit Notes Receivable and credit Sales Revenue
C) debit Cash and credit Accounts Receivable
D) debit Notes Receivable and credit Accounts Receivable
20) The following accounts and balances are taken from Evan Company’s adjusted trial
balance:
In the closing process, which accounts are credited?
A) Accounts Receivable, Prepaid Insurance, Salary Expense
B) Depreciation Expense, Dividends, Insurance Expense, Salary Expense
C) Depreciation Expense, Insurance Expense, Salary Expense, Prepaid Insurance
D) Interest Revenue, Service Revenue
21) Economic value added (EVA) can be computed as net income before taxes minus
interest expense minus capital charge.
22) Acme Company owns 35% of Superior Company. Superior Company paid $35,000
cash dividends for the year. Acme Company’s journal entry to record the dividends
includes a:
A) credit to Equity-Method Investments for $12,250
B) credit to Equity-Method Investments for $35,000
C) credit to Dividend Revenue for $12,250
D) credit to Dividend Revenue for $35,000
23) On the purchase date, long-term available-for-sale equity securities are reported on
the balance sheet at:
A) cost
B) the lower-of-cost-or-market
C) amortized cost
D) fair value
24) The historical cost of Jahn Company’s ending inventory was less than the current
replacement cost. Following U.S. GAAP, which journal entry is required?
A) Debit Cost of Goods Sold and credit Sales
B) Debit Inventory and credit Cost of Goods Sold
C) Debit Cost of Goods Sold and credit Inventory
D) No journal entry is needed.
25) On January 1, 2015, plant assets, net are $200,000 and on December 31, 2015, plant
assets, net are $320,000. Depreciation expense for the year is $100,000. No plant assets
were sold or exchanged during the year. What is the cost of the plant assets acquired
during the year?
A) $0
B) $100,000
C) $120,000
D) $220,000
26) If bonds with a face value of $200,000 are converted into common stock when the
carrying value of the bonds is $155,000, the entry to record the conversion would
include a debit to:
A) Bonds Payable for $155,000
B) Bonds Payable for $200,000
C) Discount on Bonds Payable for $45,000
D) Cash for $45,000
27) Illinois Bank lends Lisle Furniture Company $100,000 on December 1. Lisle
Furniture Company signs a $100,000, 9%, 4-month note. The total cash paid at maturity
of the note is:
A) $100,000
B) $103,000
C) $104,500
D) $109,000
28) You are the CEO of Company A and you are using an industry leader(Leader
Company) for benchmarking. Company A is much smaller than Company B in terms of
total assets and total sales revenue. We should compare the:
A) gross profit of Company A to the gross profit of Leader Company
B) net income of Company A to the net income of Leader Company
C) net sales of Company A to the net sales of Leader Company
D) net income to net sales ratio of Company A to net income to net sales ratio of Leader
Company
29) When plant assets are exchanged, the gain or loss on the exchange equals:
A) the difference between the fair value and the book value of the asset received
B) the difference between the fair value and the book value of the asset given up
C) the fair value of the asset received plus the cash paid
D) the fair value of the asset given up plus the cash paid
30) An adjusting journal entry contains a debit to an expense account and a credit to a
contra account. This is an example of what type of adjusting entry?
A) Accrued revenue
B) Deferred revenue
C) Depreciation expense
D) Accrued expense
31) Seidner Company had the following account balances at the end of the first year of
operations:
What is the amount of net income or net loss for the year?
A) $25,000
B) $35,000
C) $65,000
D) $75,000
32) The Wheelchair Company reports the following for the fiscal year ending
December 31, 2015:
What is comprehensive income for the fiscal year ending December 31, 2015?
A) $680,000
B) $800,000
C) $1,000,000
D) $1,200,000
33) Under the equity method, if the investee company has a net loss, then the investor
company will:
A) debit the Equity-Method Investment account for their share of the net loss
B) credit the Unrealized Loss on Equity-Method Investment account for their share of
the net loss
C) credit the Equity-Method Investment account for their share of the net loss
D) debit the Unrealized Loss on Equity-Method Investment
34) Capital expenditures are not immediately expensed because these items:
A) extend the useful life of a plant asset
B) return a plant asset to its prior condition
C) decrease the plant asset’s capacity
D) maintain a plant asset in working condition