1) revenues are a subdivision of stockholders equity.
2) the stock investments account is debited at acquisition under both the equity method
and cost method of accounting for investments in common stock.
3) unearned service revenue is classified as a liability on the balance sheet.
4) retained earnings that are restricted are unavailable for dividends.
5) in computing the present value of an annuity, it is necessary to know only the
discount rate and the amount of the periodic receipts or payments.
6) the specific identification method of costing inventories tracks the actual physical
flow of the goods available for sale.
7) cash realizable value is determined by subtracting allowance for doubtful accounts
from net sales.
8) if the straight-line method of amortization is used, the amount of unamortized
premium on bonds payable will decrease as the bonds approach maturity.
9) the operating cycle of a merchandising company ordinarily is shorter than that of a
service company.
10) interest expense on a note payable is only recorded at maturity.
11) an unsecured bond is one that is issued against the general credit of the borrower.
12) the issuance of common stock affects both paid-in capital and retained earnings.
13) both investors and creditors have an interest in a companys ability to generate
favorable cash flows.
14) when a business sells an item and collects a state sales tax on it, a current liability
arises.
15) an increase in an asset is recorded by a debit.
16) during the month of march, preston company’s employees earned wages of $60,000.
withholdings related to these wages were $4,590 for social security (fica), $9,500 for
federal income tax, $4,100 for state income tax, and $400 for union dues. the company
incurred no cost related to these earnings for federal unemployment tax, but incurred
$900, for state unemployment tax.
instructions
(a)prepare the necessary march 31 journal entry to record wages expense and wages
payable. assume that wages earned during march will be paid during april.
(b)prepare the entry to record the company’s payroll tax expense.
17) given the data below for a firm in its first year of operation, determine net income
under the cash basis of accounting.
a.$4,500
b.$9,000
c.$2,700
d.$4,950
18) greese company purchased office supplies costing $4,000 and debited office
supplies for the full amount. at the end of the accounting period, a physical count of
office supplies revealed $1,100 still on hand. the appropriate adjusting journal entry to
be made at the end of the period would be:
a.debit office supplies expense, $1,100; credit office supplies, $1,100
b.debit office supplies, $2,900; credit office supplies expense, $2,900
c.debit office supplies expense, $2,900; credit office supplies, $2,900
d.debit office supplies, $1,100; credit office supplies expense, $1,100
19) sampson company’s accounting records show the following at the year ending on
december 31, 2012.
purchase discounts$ 5,600
freight-in7,800
purchases300,010
beginning inventory23,500
ending inventory28,800
purchase returns6,400
using the periodic system, the cost of goods sold is
a.$301,110
b.$298,910
c.$290,510
d.$309,510
20) the income statement is
a.required under gaap but not under ifrs
b.required under ifrs in the same format as under gaap
c.required under ifrs but not under gaap
d.required under ifrs with some differences as compared to gaap
21) under the perpetual inventory system, in addition to making the entry to record a
sale, a company would
a.debit inventory and credit cost of goods sold
b.debit cost of goods sold and credit purchases
c.debit cost of goods sold and credit inventory
d.make no additional entry until the end of the period
22) the adjusted trial balance for helton corporation at the end of 2011 contained the
following accounts:
instructions
(a)prepare the long-term liabilities section of the balance sheet.
(b)indicate the proper balance sheet classification for the accounts listed above that do
not belong in the long-term liabilities section.
23) *the work sheet contains columns for the:
a.statement of retained earnings
b.statement of cash flows
c.post-closing trial balance
d.balance sheet
24) which of the following controls would best help detect the removal of a blank check
by an employee from the back of a company’s checkbook for subsequent
misappropriation of funds?
a.an accounting policies manual
b.tracing any debit memorandums from the bank to the company’s records
c.the use of prenumbered checks
d.a review of the cash budget
25) on january 1, swanson corporation had 60,000 ordinary shares with a 10 par value
outstanding. on march 17, the company declared a 15% share dividend to shareholders
of record on march 20. market value of the shares was 13 on march 17. the shares were
distributed on march 30. the entry to record the transaction of march 30 would include a
a.credit to cash for 90,000
b.debit to ordinary share dividends distributable for 90,000
c.credit to share premiumordinary for 27,000
d.debit to cash dividends for 27,000
26) an accounting record that includes a list of accounts and their balances at a given
time is called a
a.trial balance.
b.general journal.
c.general ledger.
d.chart of accounts.
27) the category that is generally considered to be the best measure of a company’s
ability to continue as a going concern is
a.cash flows from operating activities
b.cash flows from investing activities
c.cash flows from financing activities
d.usually different from year to year
28) a change in the estimated useful life of equipment requires
a.a retroactive change in the amount of periodic depreciation recognized in previous
years
b.that no change be made in the periodic depreciation so that depreciation amounts are
comparable over the life of the asset
c.that the amount of periodic depreciation be changed in the current year and in future
years
d.that income for the current year be increased
29) which of these would cause the inventory turnover ratio to increase the most?
a.increasing the amount of inventory on hand
b.keeping the amount of inventory on hand constant but increasing sales
c.keeping the amount of inventory on hand constant but decreasing sales
d.decreasing the amount of inventory on hand and increasing sales
30) if norben company issues 2,000 shares of $5 par value common stock for $140,000,
the account
a.common stock will be credited for $140,000
b.paid-in capital in excess of par value will be credited for $10,000
c.paid-in capital in excess of par value will be credited for $130,000
d.cash will be debited for $130,000
31) which of the following describes the classification and normal balance of the
retained earnings account?
a.asset, debit
b.stockholders equity, credit
c.revenues, credit
d.expense, debit
32) which type of corporate information is not available to investors?
a.dividend history
b.forecast of cash needs for the upcoming year
c.cash provided by investing activities
d.beginning cash balance
33) a corporation has a separate __________________________ distinct from its
owners.
34) topper company is considering purchasing equipment. the equipment will produce
the following cash flows: year 1, $50,000; year 2, $60,000; year 3, $75,000. topper
requires a minimum rate of return of 10%. what is the maximum price topper should
pay for this equipment?
35) prepare journal entries to record the following transactions entered into by the
merando company:
36) listed below in alphabetical order are the balance sheet items of nolan company at
december 31, 2012. prepare a balance sheet and include a complete heading.
37) the cash effects of selling goods and services appears in the ______________
activities section of a statement of cash flows.
38) if a parent company has two wholly owned subsidiaries, how many legal and
economic entities are there from the viewpoint of the shareholders of the parent
company?
39) on october 1, the kile bicycle store had an inventory of 20 ten speed bicycles at a
cost of $150 each. during the month of october the following transactions occurred.
assume kile uses a perpetual inventory system.
prepare the journal entries to record the transactions assuming the company uses a
perpetual inventory system.
40) steiner sales company has the following selected accounts after posting adjusting
entries:
instructions
prepare the current liability section of steiner sales company’s balance sheet, assuming
$15,000 of the mortgage is payable next year.
41) a list of financial statement items for maloney company includes the following:
prepare the current assets section of the balance sheet listing the items in the proper
sequence.