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1) At the end of a period (before adjustment), Allowance for Doubtful Accounts has a
debit balance of $2,000. The Accounts Receivable balance is analyzed by aging the
accounts and the amount estimated to be uncollectible is $15,000. The amount to be
recorded in the adjusting entry for the bad debt expense is $15,000.
2) An adjusting entry would adjust an expense account so the expense is reported when
incurred.
3) The maturity value of a note receivable is always the same as its face value.
4) The capital expenditures budget is part of the planned investing activities of a
company.
5) The recording of cash receipts to the cash account will be done by debiting the
account.
6) If a department that applies FIFO process costing starts the reporting period with
50,000 physical units that were 25% complete with respect to direct materials and 40%
complete with respect to conversion, it must add 12,500 equivalent units of direct
materials and 20,000 equivalent units to direct labor to complete them.
7) A corporation often issues callable bonds to protect itself against significant declines
in future interest rates.
8) In a defined benefits plan, the employer bears the investment risks in funding a
future retirement income benefit.
9) The normal balance of the drawing account is a debit.
10) The ratio of fixed assets to long-term liabilities provides a measure of a firms ability
to pay dividends.
11) The adjustment for accrued fees was debited to Accounts Payable instead of
Accounts Receivable. This error will be detected when the Adjusted Trial Balance is
prepared.
12) A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables,
$150,000 and $222,500 of inventories. Current liabilities are $225,000. The current
ratio is 2.5 to 1.
13) Blane Company has the following data:
What will operating income be if units sold double to 100,000 units?
14) A project has estimated annual net cash flows of $50,000. It is estimated to cost
$180,000. Determine the cash payback period.
15) The income statement for Hudson Company reported net income of $345,000 for
the year ended December 31, 2012 before considering the following:
During the year the company purchased trading securities. At year end, the fair value of
the investment portfolio was $23,000 less than cost.
The balance of retained earnings was $823,000 on December 31, 2011. Hudson
Company paid $43,000 in cash dividends in 2012. Calculate the balance of retained
earnings on December 31, 2012.
16) Pepito Company purchased 40% of the outstanding stock of Reyes Company on
January 1, 2012. Reyes reported net income of $75,000 and declared dividends of
$15,000 during 2012. How much would Pepito adjust their investment in Reyes
Company under the equity method?
17) Bob Evans owns a business, Beachside Realty, that rents condominiums and
furnishings. Below is the adjusted trial balance at December 31, 2010.
Prepare the entry required to close the Drawing account at the end of the period.
18) The net income reported on an income statement for the current year was $63,000.
Depreciation recorded on fixed assets for the year was $24,000. Balances of the current
asset and current liability accounts at the end and beginning of the year are listed below.
Prepare the cash flows from operating activities section of a statement of cash flows
using the indirect method.
19) An 6-year project is estimated to cost $350,000 and have no residual value. If the
straight-line depreciation method is used and the average rate of return is 12%,
determine the estimated annual net income.
20) A business using the retail method of inventory costing determines that merchandise
inventory at retail is $2,300,000. If the ratio of cost to retail price is 55%, what is the
amount of inventory to be reported on the financial statements?
21) The Magnolia Company Division A has income from operations of $80,000 and
assets of $400,000. The minimum acceptable rate of return on assets is 12%. What is
the residual income for the division?
22) Complete the following table using the perpetual FIFO method of inventory flow.
