1) which of the following is not a principal type of business activity?
a.operating
b.investing
c.financing
d.delivering
2) the journal entry to record a return of merchandise purchased on account under a
perpetual inventory system would credit
a.accounts payable
b.purchase returns and allowances
c.sales revenue
d.inventory
3) use the following information to calculate for the year ended december 31, 2012 (a)
net income (net loss), (b) ending retained earnings, and (c) total assets.
4) the par value of a stock
a.is legally significant
b.reflects the most recent market price
c.is selected by the sec
d.is indicative of the worth of the stock
5) howard company had a transaction that caused a $5,000 increase in both assets and
total liabilities. this transaction could have been a(n)
a.purchase of office equipment for $12,000, paying $7,000 cash and issuing a note
payable for the balance.
b.investment of $5,000 cash in the business by the stockholders.
c.purchase of office equipment for $5,000 cash.
d.repayment of a $5,000 bank loan.
6) under ifrs, there is no classification for
a. changes in accounting estimates
b. changes in accounting principles
c. discontinued operations
d. extraordinary items
7) the carrying value of bonds will equal the market price
a.at the close of every trading day
b.at the end of the fiscal period
c.on the date of issuance
d.every six months on the date interest is paid
8) the situation that requires a departure from the cost basis of accounting to the lower
of cost or market basis in valuing inventory is necessitated by
a.a decline in the value of the inventory
b.an increase in selling price
c.an increase in the value of the inventory
d.a desire for more profit
9) mitchell corporation bought equipment on january 1, 2012 .the equipment cost
$120,000 and had an expected salvage value of $20,000. the life of the equipment was
estimated to be 6 years. the depreciable cost of the equipment is
a.$120,000
b.$100,000
c.$20,000
d.$16,667
10) which of the following methods will result in the highest depreciation in the first
year?
a.sum-of-years-digits
b.time valuation
c.straight-line
d.declining-balance
11) all of the following may be indicators of channel stuffing except
a.deep discounts to customers
b.customers incentives for buying early
c.an extremely good earnings period followed by several subsequent bad periods
d.inventory levels that reflect seasonal demand levels
12) the following information was taken from niland company cash budget for the
month of
if the company has a policy of maintaining end of the month cash balance of $50,000,
the amount the company would have to borrow is
a.$58,000
b.$14,000
c.$4,000
d.$0
13) liabilities
a.are future economic benefits
b.are debts and obligations
c.possess service potential
d.are things of value owned by a business
14) gonzalez corporation reported net income $48,000; net sales $600,000; and average
assets $800,000 for 2012. what is the 2012 profit margin?
a.6%
b.8%
c.48%
d.60%
15) an accountant has debited an asset account for $1,000 and credited a liability
account for $500. what can be done to complete the recording of the transaction?
a.nothing further must be done.
b.debit a stockholders equity account for $500.
c.debit another asset account for $500.
d.credit a different asset account for $500.
16) a liabilityrevenue account relationship exists with an unearned rent revenue
adjusting entry.
17) susan jones works for trend press, a fairly large book publishing firm. her best
friend and rival, diane nilson, works for lifeline books, a smaller publisher. both
companies issue $100,000 in bonds on july trend’s bonds were issued at a discount,
while lifeline’s were issued at a premium. diane sent susan a fax the next day. she told
susan that it was obvious who the better publisher was and the market had shown its
preference! she reminded susan again of her recent increase in salary as further proof of
the superiority of lifeline books.
draft a short note for susan to send to diane. explain how such a result could occur.
18) the periodicity assumption states that the economic life of a business entity can be
divided into artificial time periods.
19) the _______________ constraint relates to the fact that providing information is
costly.
20) distinguish between cost of goods sold and operating expenses, describe the nature
of these two items and their placement on the income statement.
21) when an investor owns between 20% and 50% of the common stock of a
corporation, it is generally presumed that the investor has _______________ influence
over the investee and therefore, the appropriate method of accounting for this type of
investment is the _______________ method.