Horizontal analysis evaluates a series of financial statement data over a period of time
a. that has been arranged from the highest number to the lowest number.
b. that has been arranged from the lowest number to the highest number.
c. to determine which items are in error.
d. to determine the amount and/or percentage increase or decrease that has taken place.
Answer:
Reconciling the bank statement monthly is an example of
a. segregation of duties.
b. independent internal verification.
c. establishment of responsibility.
d. documentation procedures.
Answer:
Under IFRS, the proceeds from the issuance of convertible debt are reported as
a. debt only.
b. equity only.
c. debt or equity depending on the circumstances.
d. both debt and equity.
Answer:
All of the following statements about free cash flow are false except:
a. Significant free cash flow indicates less potential to finance new investments.
b. Free cash flow is most commonly calculated by subtracting capital expenditures from
cash provided by operations and then adding cash dividends.
c. Free cash flow is not reported on the statement of cash flows.
d. Significant free cash flow indicates less potential to pay additional dividends.
Answer:
When a note is accepted to settle an open account, Notes Receivable is debited for the
note’s
a. net realizable value.
b. maturity value.
c. face value.
d. face value plus interest.
Answer:
Orr Corporation sold equipment for $30,000. The equipment had an original cost of
$90,000 and accumulated depreciation of $45,000. As a result of the sale,
a. net income will increase $30,000.
b. net income will increase $15,000.
c. net income will decrease $15,000.
d. net income will decrease $30,000.
Answer:
Diane Lane earns a salary of $9,500 per month during the year. FICA taxes are 7.65%
on the first $110,100 of gross earnings and 45% in excess of $110,100. Federal
unemployment insurance taxes are 6.2% of the first $7,000; however, a credit is
allowed equal to the state unemployment insurance taxes of 5.4% on the $7,000. During
the year, $32,300 was withheld for federal income taxes and $6,700 was withheld for
state income taxes.
Instructions
(a) Prepare a journal entry summarizing the payment of Lane’s total salary during the
year.
(b) Prepare a journal entry summarizing the employer payroll tax expense on Lane’s
salary for the year.
(c) Determine the cost of employing Lane for the year.
Answer:
Which of the following represents the largest number of common shares?
a. Treasury shares
b. Issued shares
c. Outstanding shares
d. Authorized shares
Answer:
Match each of the following principles of internal control with the appropriate
description below.
A. Establishment of responsibility
B. Segregation of duties
C. Documentation procedures
D. Physical controls
E. Independent internal verification
F. Human resource controls
_____ 1> Involves the review, comparison, and reconciliation of data prepared by other
employees.
_____ 2> Provide evidence that transactions and events have occurred.
_____ 3> Includes the authorization and approval of transactions.
_____ 4> Rotating employees’ duties and requiring employees to take vacations.
_____ 5> Related activities should be assigned to different individuals.
_____ 6> Using garment sensors to deter theft.
Answer:
A debit is not the normal balance for which of the following?
a. Asset account
b. Dividends account
c. Expense account
d. Common stock account
Answer:
Improvements are
a. revenue expenditures.
b. debited to an appropriate asset account when they increase useful life.
c. debited to accumulated depreciation when they do not increase useful life.
d. debited to an appropriate expense account when they do not increase useful life.
Answer:
(a) Identify the three activities that pertain to a petty cash fund, and indicate an internal
control principle that is applicable to each activity. (b) When are journal entries required
in the operation of a petty cash fund?
Answer:
Internal controls are not designed to safeguard assets from
a. natural disasters.
b. employee theft.
c. robbery.
d. unauthorized use.
Answer:
A debit to Sales Returns and Allowances is evidence of a
a. sale for cash received only.
b. return of goods originally purchased on account.
c. return of goods originally sold.
d. purchase of goods on account.
Answer:
Instructions: Complete the requirements specified for each of the following
independent situations.
A. State the missing items identified by ‘?’.
1> Net purchases + ? = Cost of goods purchased
2> Net purchases + ? + ? = Purchases
3> ? + Purchases ‘“ Purchases discounts ‘“ Purchases returns and allowances
+ Freight-in = ?
B. Watts Company uses the lower-of-cost-or-market (LCM) basis for its inventory. The
following information relates to its December 31, 2015 inventory. Determine the
amount of the ending inventory applying LCM to individual items.
Answer:
Classify each of the following as a(n):
A. Operating Activity
B. Investing Activity
C. Financing Activity
_____ 1> Issuance of bonds.
_____ 2> Sale of equipment.
_____ 3> Amortization expense.
_____ 4> Purchase of treasury stock.
_____ 5> Receipt of dividends on investment.
_____ 6> Purchase of land.
Answer:
A segregation of duties among employees eliminates the possibility of collusion.
Answer:
Instructions
Prepare journal entries to record the following events:
Answer:
A change in the estimated salvage value of a plant asset requires a restatement of prior
years’ depreciation.
Answer:
The ultimate effect of incurring an expense is to reduce stockholders’ equity. The
declaration of a cash dividend also reduces stockholders’ equity. Explain the difference
between an expense and a cash dividend and explain why they have the same effect on
stockholders’ equity.
Answer:
The number of common shares outstanding can never be greater than the number of
shares issued.
Answer: