1) Advantages of a corporation include:
A) each stockholder can enter into agreements that legally bind all the stockholders
B) the double taxation of distributed profits
C) limited liability of the stockholders for the corporation’s debts
D) each stockholder can conduct business in the name of the corporation
2) A business received the utility bill for $525, and immediately paid it What journal
entry is prepared?
A) Debit Accounts Payable for $525 and credit Cash for $525
B) Debit Utilities Payable for $525 and credit Cash for $525
C) Debit Utilities Expense for $525 and credit Cash for $525
D) Debit Operating Expense for $525 and credit Accounts Payable for $525
3) Which of the following is NOT used to determine the cost of net purchases?
A) Freight-out
B) Freight-in
C) Purchase returns
D) Purchase discounts
4) Willis Company trades in a printing press for a newer model. The cost of the old
printing press was $60,000, and accumulated depreciation up to the date of the trade-in
amounts to $40,000. The company also pays $40,000 cash for the newer printing press.
The fair market value of the newer printing press is $70,000. The journal entry to
acquire the new printing press will require a debit to Printing Press for:
A) $40,000
B) $60,000
C) $70,000
D) $100,000
5) Stockholders’ equity as reported on the Balance Sheet does NOT include:
A) short-term investments
B) common stock
C) retained earnings
D) additional paid-in capital
6) The financing option that creates no liabilities or interest expense is financing by:
A) issuing notes payable
B) debt
C) issuing stock
D) issuing bonds payable
7) Three key duties must always be separated under a good system of internal controls:
A) asset handling, record keeping and transaction approval
B) asset handling, hiring and safeguarding of assets
C) asset handling, recordkeeping and safeguarding of assets
D) record keeping, transaction analysis and transaction approval
8) On December 31, 2015, Sandy Company has a Note Receivable of $5,000. The note
will be collected in installments. $1,000 is due on December 31, 2016 and $1,000 is due
every year after December 31, 2016. The classification of the note on the balance sheet
at December 31, 2015 is:
A) all $5,000 is a current asset
B) all $5,000 is a long term asset
C) $1,000 is a current asset and $4,000 is a long-term asset
D) $4,000 is a current asset and $1,000 is a long-term asset
9) If adjusting entries are not prepared, which financial statements are misstated?
A) income statement only
B) balance sheet only
C) statement of retained earnings only
D) income statement, balance sheet and statement of retained earnings
10) Cash dividends declared:
A) decrease revenue on the income statement
B) decrease retained earnings on the statement of retained earnings
C) increase expenses on the income statement
D) decrease operating activities on the statement of cash flows
11) The direct write-off method for uncollectible accounts receivable:
A) reports receivables at their net realizable value
B) does not use an Allowance for Uncollectible Accounts
C) is considered to follow Generally Accepted Accounting Principles
D) estimates uncollectible accounts as a percentage of sales
12) To be useful, accounting information must have the fundamental qualitative
characteristics of:
A) comparability and relevance
B) relevance and faithful representation
C) materiality and understandability
D) faithful representation and timeliness
13) When listing the assets in the trial balance, the number for Accounts Receivable
was transposed. The correct balance is $4,100 and the number written is $1,400. Is the
trial balance out of balance?
A) No
B) Yes, by $1,400
C) Yes, by $2,700
D) Yes, by $4,100
14) Which entity requires companies issuing publicly traded stock to have their
financial statements audited by an external auditor?
A) Securities and Exchange Commission
B) Internal Revenue Service
C) Committee of Sponsoring Organizations
D) Financial Accounting Standards Board
15) Given the following data, calculate Cost of Goods Sold using the FIFO costing
method.
A) $525
B) $705
C) $740
D) $920
16) Steve’s Hardware Store uses the perpetual inventory system. The company incurred
the following transactions:
a.On November 1, the owner, Steven Moore, purchased 10 snow blowers on account at
$1,000 each. Credit terms were 2/10, net 30.
b.On November 2, Steven returned two snow blowers due to damage incurred in
shipping.
c.On November 3, the supplier granted Steven an allowance of $100 on the snow
blowers because one of the snow blowers was missing an attachment.
d.On November 10, Steven sold three of the snow blowers on account at $1,500 each.
The credit terms were 2/10, net 30.
e.On November 12, Steven paid for the snow blowers.
f.On November 13, one customer returned a snow blower because it did not start.
g.On November 30, Steven paid wages of $2,000 for his assistant.
Required:
1>Journalize the above transactions for Steve’s Hardware Store. Explanations are not
required.
17) Matthew Company purchases a trading security for $12,000 cash. The journal entry
to record this transaction will include a:
A) debit to the Investment in Trading Securities account and a credit to Cash
B) debit to Cash and a credit to the Investment in Trading Securities account
C) debit to Long-term Investment and credit Cash
D) debit to Dividend Revenue and credit to Cash
18) Tom’s Roadside Burger Stand has a beginning balance in the Accumulated
DepreciationEquipment account of $200,000. The depreciation expense on the
equipment for the year was $50,000. At the end of the year, the balance in the
Accumulated DepreciationEquipment account was $140,000. What was the
accumulated depreciation on the equipment sold during the year?
A) $60,000
B) $90,000
C) $110,000
D) $150,000
19) A company receives an utility bill and immediately pays it With this transaction:
A) stockholders’ equity is decreased
B) expenses are decreased
C) assets are increased
D) liabilities are increased
20) Fraudulent financial reporting:
A) involves employee overstatement of expense reimbursement requests
B) involves bribes and kickbacks
C) involves stealing assets from the company
D) deceives financial statement users
21) Which of the following is reported as Other Losses and Expenses on the income
statement of a major retailer?
A) loss due to sale of a segment of a business
B) loss due to sale of a piece of equipment
C) loss due to takeover of a foreign segment by a foreign government
D) loss due to hurricane in Minnesota that destroyed a plant building
22) When cash-basis accounting is used, and services are provided on account:
A) only the income statement will be incorrect
B) only the balance sheet will be incorrect
C) both the income statement and the balance sheet will be incorrect
D) either the income statement or the balance sheet will be incorrect
23) The cost of capital for a start-up company:
A) is lower for a start-up company since it is untested
B) depends only on the market rate of interest
C) depends only on the state of the economy
D) is higher for a start-up company because it is more risky than an established
company
24) Which statement below is FALSE?
A) Income taxes payable are tax debts owed to the government
B) Accrued liabilities can include liabilities for salaries and utilities
C) Short-term investments include stocks and bonds of other companies
D) Prepaid expenses include accrued interest payable
25) The adjustment for an accrued revenue:
A) is necessary because a business often earns revenue before they receive the cash
B) increases a payable account
C) decreases a receivable account
D) is necessary because a business often receives cash before it performs the service
26) The number of shares of authorized stock of a corporation:
A) changes every time stock is sold
B) is stated in the charter
C) has no limit
D) must be recorded as a journal entry
27) Which one of the following is NOT a stockholder’s right of ownership in a
corporation?
A) the right to participate in management by voting on matters that come before the
stockholders
B) the right to receive a proportionate share of the assets remaining after all liabilities
are paid upon liquidation
C) the right to maintain one’s proportionate share of ownership in the corporation
D) the right to decide if a dividend should be distributed
28) Buetters Company reports the following information at the fiscal year end of
December 31, 2015:
How many shares of common stock were sold?
A) 8.8 million
B) 88 million
C) 788 million
D) 880 million