1) A patent is an exclusive right granted to its owner to manufacture and sell a patented
device or to use a process for 20 years.
2) When using the equity method for investments in equity securities, the investor
records the receipt of cash dividends as revenue.
3) A company reports basic earnings per share of $3.50, cash dividends per share of
$0.75, and a market price per share of $64.75. The company’s dividend yield equals
21.4%.
4) Since petty cash is concerned with such small amounts of cash, it is not necessary to
document all transactions with a petty cash receipt.
5) Departmental salary expenses are direct expenses of that department.
6) A premium reduces the interest expense of a bond over its life.
7) The first step in accounting for an asset disposal is to calculate the gain or loss on
disposal.
8) A company’s income before interest expense and taxes is $250,000 and its interest
expense is $100,000. Its times interest earned ratio is 2.5.
9) Each employee records the number of withholding allowances claimed on the
withholding allowance certificate that is filed with the employer, which is the form
W-4.
10) A plan that lists the types and amounts of operating expenses expected that are not
included in the selling expenses budget is a:
A.General and administrative expense budget.
B.Sales budget.
C.Cash payments budget.
D.Overhead budget.
E.Selling expense budget.
11) A company had a tractor destroyed by fire. The tractor originally cost $85,000 with
accumulated depreciation of $60,000. The proceeds from the insurance company were
$20,000. The company should recognize:
A.A loss of $5,000.
B.A gain of $5,000.
C.A loss of $20,000.
D.A gain of $65,000.
E.A gain of $20,000.
12) On April 1, Santa Fe, Inc. paid Griffith Publishing Company $1,548 for 36-month
subscriptions to several different magazines. Santa Fe debited the prepayment to a
Prepaid Subscriptions account, and the subscriptions started immediately. What amount
should appear in the Prepaid Subscription account for Santa Fe, Inc. after adjustments
on December 31 of the second year assuming the company is using a calendar reporting
period and the previous year adjustment had been made?
A.$1,548.
B.$387.
C.$516.
D.$645.
E.$0.
13) A company has an investment in 9% bonds with a par value of $100,000 that pay
interest on October 1 and April 1. The amount of interest accrued on December 31 (the
company’s year-end) would be:
A.$750.
B.$1,500.
C.$2,250.
D.$4,500.
E.$9,000.
14) Capital budgeting is the process of analyzing:
A.Cash outflows only.
B.Short-term investments.
C.Long-term investments.
D.Investments with certain outcomes only.
E.Operating revenues.
15) Cameroon Corp. manufactures and sells electric staplers for $16 each. If 10,000
units were sold in December, and management forecasts 4% growth in sales each
month, the dollar amount of electric stapler sales budgeted for February should be:
A.$187,177
B.$166,400
C.$179,978
D.$173,056
E.$160,000
16) A cost that requires a future outlay of cash, and is relevant for current and future
decision making, is a(n):
A.Out-of-pocket cost.
B.Sunk cost.
C.Opportunity cost.
D.Operating cost.
E.Uncontrollable cost.
17) A company purchased property for $100,000. The property included a building, a
parking lot, and land. The building was appraised at $62,000; the land at $35,000, and
the parking lot at $18,000. Land should be recorded in the accounting records with an
allocated cost of:
A.$0.
B.$30,435.
C.$35,000.
D.$46,087.
E.$100,000.
18) The carrying value of a long-term note payable is computed as:
A.The future value of all remaining payments, using the market rate of interest.
B.The face value of the long-term note less the total of all future interest payments.
C.The present value of all remaining payments, discounted using the market rate of
interest at the time of issuance.
D.The present value of all remaining interest payments, discounted using the note’s rate
of interest.
E.The face value of the long-term note plus the total of all future interest payments.
19) Accounting for long-term investments in equity securities with controlling influence
uses the:
A.Controlling method.
B.Equity method with consolidation.
C.Investor method.
D.Investment method.
E.Consolidated method.
20) Trimble Company began business on July 1. They use the perpetual inventory
method. The following transactions involving purchases and cash disbursements
occurred during the first week of July.
a. Use the purchases journal and the cash disbursements journal provided to record
these transactions.
b. Prepare a schedule of accounts payable as of July 31. There was no accounts payable
on July 1.
21) In order to be classified as an extraordinary gain or loss, the item must be both (1)
_______________ and (2) ____________.
22) Define the foreign exchange rate between two currencies. Explain its effect on
business transactions conducted in a foreign currency.
23) A product has a sales price of $20. Based on a 15,000-unit production level, the
variable costs are $12 per unit and the fixed costs are $6 per unit. Using a flexible
budget for an actual production and sales level of 18,000 units, what is the budgeted
operating income?
24) Jay’s Limo Services paid $300 cash to employees for work performed in the current
period. Which of the following general journal entries will Jay’s Limo Services make to
record this transaction?
25) List the three important guidelines that should be followed in the budgeting process.
26) The Stapleton Company uses special journals for sales, purchases, cash receipts,
cash disbursements, and uses a general journal. They operate with a perpetual inventory
system. The following transactions occurred during the current month of September:
Record the above transactions into the appropriate journals that follow.
27) A company has $2,400,000 in stockholders’ equity that includes 500 shares of $50
par value noncallable preferred stock outstanding and 250,000 shares of common stock
outstanding. Calculate the book value per (1) preferred share, and (2) common share.
28) A ________________ is an unincorporated association of two or more people to
pursue a business for profit as co-owners.