1) For legal reasons, it is always a good business practice to accept a note receivable in
exchange for an overdue account receivable.
2) The usual first step in preparing the statement of cash flows is computing the net
increase or net decrease in cash.
3) The Form W-2 must be given to employees before January 31 following the year
covered by the Form W-2.
4) If cost variances are material, they should always be closed directly to Cost of Goods
Sold.
5) Asset and liability balances are transferred from the adjusted trial balance to the
income statement.
6) The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and
a credit to Inventory Shrinkage Expense.
7) 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.
8) The carrying (book) value of a bond at the time when it is issued is always equal to
its par value.
9) A subsidiary ledger is a listing of individual accounts with a common characteristic.
10) A company paid $2.10 in dividends. Its earnings per share is $5.40, and its stock
price is $120 per share. The dividend yield equals 38.9%.
11) Direct costs are incurred for the benefit of more than one cost object.
12) The return on total assets ratio is a profitability measure.
13) The cash basis of accounting recognizes revenues when cash payments from
customers are received.
14) A copyright gives its owner the exclusive right to publish and sell a musical,
literary, or artistic work during the life of the creator plus 17 years.
15) A company is evaluating the purchase of a machine for $900,000 with a six-year
useful life and no salvage value. The company uses straight-line depreciation and it
assumes that the annual net cash flow from using the machine will be received
uniformly throughout each year. In calculating the accounting rate of return, what is the
company’s average investment?
16) Armstrong plans to leave the FAP Partnership. The recorded value of her capital
account is $48,000. The remaining partners Floyd and Peters agree to pay Armstrong
$40,000 cash and Armstrong accepts. The partners share income and loss equally.
Prepare the general journal entry to record the withdrawal from the partnership.
17) Define joint costs and explain how joint costs can be allocated.
18) On January 10, a corporation purchased 5,000 shares of its own common stock at
$17.50 per share. On August 4, a total of 1,000 treasury shares were sold at $19.00 per
share. These are the only treasury stock transactions ever made by the corporation.
Prepare the journal entries required on January 10 and August 4.
19) _______________ is the deliberate misuse of the employer’s assets for the
employee’s personal gain.
20) Whistler Company determined that in the production of their products last period;
they had a favorable price variance and an unfavorable quantity variance for direct
materials. What might be the cause of this pattern of variances?
21) What are the five basic components of accounting information systems
22) A corporation is responsible for its own acts and debts. This is because a
corporation is considered a __________________________________.
23) Describe the format of the statement of cash flows, including the reporting of
significant noncash investing and financing activities.
24) A corporation reports the following year-end stockholders’ equity:
Determine the following:
(1) Par value for the preferred stock.
(2) Book value per share for both preferred stock and common stock assuming a call
price per share of $52 for preferred and no dividends in arrears.