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.
3) unearned revenues should be classified as other revenues and gains on the income
statement.
4) for information to be useful, it must be both relevant and faithfully representative.
5) uncollectible accounts must be estimated because it is not possible to know which
accounts will not be collected.
6) a corporation acts under its own name rather than in the name of its stockholders.
7) when an invoice is paid within the discount period, the amount of the discount
decreases inventory.
8) when the effective-interest method of amortization is used, the amount of interest
expense for a given period is calculated by multiplying the face rate of interest by the
bonds carrying value at the beginning of the given period.
9) the partnership form of business organization
a.is a separate legal entity
b.is a common form of organization for service-type businesses
c.enjoys an unlimited life
d.has limited liability
10) what is the order in which assets are generally listed on a classified balance sheet?
a.current and long-term
b.current; property, plant and equipment; long-term investments; intangibles
c.current; property, plant and equipment; intangibles; long-term investments
d.current; long-term investments; property, plant and equipment, intangibles
11)
12) an asset was purchased for 150,000. it had an estimated residual value of 30,000
and an estimated useful life of 10 years. after 5 years of use, the estimated residual
value is revised to 24,000 but the estimated useful life is unchanged. assuming
straight-line depreciation, depreciation expense in year 6 would be
a.18,000
b.13,200
c.9,000
d.12,600
13) cey, inc. issued 5,000 shares of stock at a stated value of $10/share. the total issue of
stock sold for $15/share. the journal entry to record this transaction would include a
a.debit to cash for $50,000
b.credit to common stock for $50,000
c.credit to paid-in capital in excess of par value for $25,000
d.credit to common stock for $75,000
14) which of the following would not be considered an internal user of accounting data
for a company?
a.the president of a company
b.the controller of a company
c.creditor of a company
d.salesperson of a company
15) given the following adjusted trial balance, what will be the totals for the debit and
credit columns of the post-closing trial balance?
a.$7,396
b.$7,118
c.$7,344
d.$7,170
16) preferred stock issued in exchange for land would be reported in the statement of
cash flows in
a.the cash flows from financing activities section
b.the cash flows from investing activities section
c.a separate schedule or note to the financial statements
d.the cash flows from operating section
17) janus coat company purchased a delivery truck on june 1 for $24,000, paying
$8,000 cash and signing a 6%, 2-month note for the remaining balance. the truck is
expected to depreciate $4,800 each year. janus coat company prepares monthly
financial statements.
instructions:
(a)prepare the general journal entry to record the acquisition of the delivery truck on
june 1st.
(b)prepare any adjusting journal entries that should be made on june 30th.
(c)show how the delivery truck will be reflected on janus coat company’s balance sheet
on june 30th.
18) the difference between ending inventory using lifo and ending inventory using fifo
is referred to as the
a.fifo reserve
b.inventory reserve
c.lifo reserve
d.periodic reserve
19) dobler company uses a periodic inventory system. details for the inventory account
for the month of january 2012 are as follows:
an end of the month (1/31/2012) inventory showed that 140 units were on hand. if the
company uses fifo, what is the value of the ending inventory?
a.$770
b.$700
c.$762
d.$1,318
20) the officer that is generally responsible for maintaining the cash position of the
corporation is the
a.controller
b.treasurer
c.cashier
d.internal auditor
21) a small company may be able to justify using a cash basis of accounting if they
have:
a.sales under $1,000,000
b.no accountants on staff
c.few receivables and payables
d.all sales and purchases on account
22) all of the following are ways that a company’s current ratio would decrease except
a.purchasing inventory on account
b.adding equal amounts to the numerator and denominator
c.paying off one-third of its accounts payable
d.paying cash for new equipment
23) in recording the acquisition cost of an entire business
a.goodwill is recorded as the excess of cost over the fair value of identifiable net assets
b.assets are recorded at the seller’s book values
c.goodwill, if it exists, is never recorded
d.goodwill is recorded as the excess of cost over the book value of identifiable net
assets
24) a bank statement
a.lets a depositor know the financial position of the bank as of a certain date
b.is a credit reference letter written by the depositor’s bank
c.is a bill from the bank for services rendered
d.shows the activities that increased or decreased the depositor’s account balance
25) to adjust a companys lifo cost of goods sold to fifo cost of goods sold
a.the ending lifo reserve is added to lifo cost of goods sold
b.the ending lifo reserve is subtracted from lifo cost of goods sold
c.an increase in the lifo reserve is subtracted from lifo cost of goods sold
d.a decrease in the lifo reserve is subtracted from lifo cost of goods sold
26) qualitative characteristics associated with relevant accounting information are
a.consistency, faithful representation, and timely
b.predict future events, confirm prior expectations, and timely
c.neutral, predict future events, and verifiable
d.consistency and materiality
27) the liquidity ratio, known as the _______________ ratio, has a disadvantage that it
uses year-end balances for current assets and current liabilities. the ___________ ratio
partially corrects for this problem by using cash provided by operating activities and
average current liabilities rather than point in time numbers.
28) an inexperienced accountant for carey corporation showed the following in careys
2012 income statement: income before income taxes $300,000; extraordinary loss from
tornado (before taxes) $60,000; and net income $132,000. the extraordinary loss and
taxable income are both subject to a 30% tax rate.
instructions
prepare a corrected income statement beginning with income before income taxes.
29) on january 1, 2012, the borth company purchased at face value, a $1,000, 6%, bond
that pays interest on january 1 and july 1. borth company has a calendar year end. the
adjusting entry on december 31, 2012, is
30) the _________________ basis of estimating uncollectibles normally results in the
best approximation of _______________ value.
31) foyle company needs to make adjusting entries for each of the following reconciling
items. identify the account to be debited and the account to be credited in each case.
1> a check for $59 written to the company by j. hammond was returned nsf.
2> the monthly service charge by the bank was $34.
3> the bank collected a $1,000 note plus interest of $60 on the companys
behalf. the company had not accrued the interest.