1) The amount of cash received on the sale of the company’s stock in excess of par
value is called retained earnings.
2) The straight-line amortization method keeps interest expense at the same dollar
amount for every interest payment over the bond’s life.
3) An investment is a held-to-maturity investment in bonds if it is management’s intent
to sell the investment before the maturity date.
4) Under the periodic inventory system, a physical inventory count is taken to
determine the cost of the inventory on hand and the cost of the merchandise sold.
5) The maturity value of a note is the sum of the principal amount of a note plus the
interest over the term of the note.
6) The term time value of money refers to the fact that money earns interest over time.
7) In accrual adjustments, an adjustment is made for payment of an item in advance of
use.
8) When preparing a journal entry, debits are always listed before credits
9) Ratios are used only by company management, and not investors, to evaluate the
financial health of a company.
10) If a company has sales of $150 in 2015 and $225 in 2016, the percentage change
from 2015 to 2016 is 50%.
11) Under a perpetual inventory system, the journal entry to record the purchase of
inventory on account will include a:
A) debit to Inventory and a credit to Cash
B) debit to Inventory and a credit to Accounts Payable
C) debit to Accounts Payable and a credit to Inventory
D) debit to Purchases and a credit to Accounts Payable
12) Earnings per share figures are NOT computed for:
A) discontinued operations
B) income from continuing operations
C) income from operations
D) net income
13) Land was purchased by issuing common stock. This transaction would be reported
on the statement of cash flows as a(n):
A) operating activity
B) investing activity
C) financing activity
D) noncash investing and financing activity
14) To determine whether a pension plan is over-funded or under-funded, a company
must compare the:
A) fair market value of the pension plan assets to the projected benefit obligation
B) cost of the pension plan assets to the accumulated benefit obligation
C) accumulated benefit obligation to the plan’s anticipated obligations
D) fair market value of the pension plan assets to the accumulated benefit obligation
15) A company has a long-term investment in available-for-sale securities. The
Unrealized Gain on (long-term) Investment in Available-for-Sale Securities is reported
as:
A) Other Comprehensive Income in the Statement of Comprehensive Income
B) Other Gains on the income statement
C) Accumulated Other Comprehensive Income on the balance sheet
D) A and C
16) For a merchandiser, how is Interest Revenue classified on the income statement?
A) Income from Discontinued Operations
B) Extraordinary item
C) Other Revenues and Gains
D) Operating Expenses
17) When a company receives a cash dividend from a trading security, the journal entry
includes:
A) a debit to Investment in Trading Securities and credit to Cash
B) a debit to Dividend Revenue and credit to Cash
C) a debit to Cash and credit to Investment in Trading Securities
D) a debit to Cash and credit to Dividend Revenue
18) Zeman Company uses a cash budget. The budgeted cash balance is $6,000,000. The
company has budgeted cash disbursements of $5,200,000 and budgeted cash receipts of
$10,000,000. The beginning balance of cash is $0. What amount of additional financing
is required?
A) No additional financing is required
B) $400,000
C) $800,000
D) $1,200,000
19) The cost-of-goods sold model is:
A) beginning inventory, plus purchases, plus ending inventory equals cost of goods sold
B) beginning inventory, less purchases, less ending inventory equals cost of goods sold
C) beginning inventory, plus purchases, less ending inventory equals cost of goods sold
D) beginning inventory, less purchases, plus ending inventory equals cost of goods sold
20) A year-end review of Accounts Receivable and estimated uncollectible percentages
revealed the following:
At the end of the year, the credit balance in Allowance for Uncollectible Accounts was
$1,000. Under the aging-of-receivables method, the Uncollectible-Account Expense at
year-end is:
A) $1,200
B) $6,300
C) $7,300
D) $8,300
21) On January 1, 2015, Brooklyn Company purchases $100,000, 6% bonds at a price
of 95 and a maturity date of January 1, 2025. Brooklyn Company intends to hold the
bonds until maturity. Interest is paid semiannually, on January 1 and July 1. Brooklyn
Company has a calendar year end. The adjusting entry to amortize the bond investment
on December 31, 2015 is:
A) debit Interest Receivable $3,000 and credit Interest Revenue $3,000
B) debit Interest Receivable $6,000 and credit Interest Revenue $6,000
C) debit Held-to-Maturity Investment in Bonds $250 and credit Interest Revenue $250
D) debit Held-to-Maturity Investment in Bonds $500 and credit Interest Revenue $500
22) The chairperson of the board of directors often has the title of:
A) Chief Financial Officer (CFO)
B) President
C) Chief Executive Officer (CEO)
D) Chief Operating Officer (COO)
23) All of the following are reported as current liabilities EXCEPT:
A) unearned revenues for services to be provided in 16 months
B) sales tax payable
C) accounts payable
D) bonds payable due in 6 months
24) A typical, unqualified audit report indicates that the audited company’s:
A) financial statements are presented in accordance with GAAP
B) financial statements present fairly the company’s financial condition and operating
performance for a period of time
C) financial statements provide substantial evidence that the company is a safe
investment
D) A and B
25) On January 1, 2015, total assets for Wininger Technologies were $135,000; on
December 31, 2015, total assets were $155,000. On January 1, 2015, total liabilities
were $110,000; on December 31, 2015, total liabilities were $115,000. What is the
amount of the change and the direction of the change in Wininger Technologies’
stockholders’ equity for 2015?
A) Decrease of $15,000
B) Increase of $15,000
C) Increase of $30,000
D) Decrease of $30,000
26) How does the receipt of a stock dividend on long-term Investment in
Available-for-Sale Securities affect the balance sheet?
A) Increases assets and increases paid-in-capital
B) Increases assets and decreases stockholders’ equity
C) Increases assets and increases retained earnings
D) Has no effect on assets or total stockholders’ equity
27) The left side of a T-account is always the:
A) increase side
B) decrease side
C) debit side
D) credit side
28) A company started the year with $400 of supplies. During the year, the company
purchased an additional $1,200 of supplies. There were $700 of supplies on hand at the
end of the year. An adjusting entry prepared at the end of the accounting period includes
a:
A) debit to Supplies for $800
B) debit to Supplies for $700
C) debit to Supplies Expense for $900
D) debit to Supplies Expense for $600
29) The following are examples of items that appear on a bank reconciliation. Classify
each item as (a) an addition to the bank balance, (b) a subtraction from the bank
balance, (c) an addition to the book balance, or (d) a subtraction from the book balance.
1> NSF check
2> Deposits in transit
3> Interest revenue on checking account
4> Bank error – the bank credited the company’s account for a deposit made by another
customer
5> EFT rent collection
6> Service charge
7> Book error – the company credited cash for $100 when the correct amount was
$1,000
8> Outstanding checks
9> Bank collection of a note receivable on behalf of the company
30) A company went to the bank and borrowed $10,000 on a long-term note. In
transaction analysis, how does this transaction affect the accounting equation?
A) Add $10,000 to Cash account and add $10,000 to Accounts Payable account
B) Add $10,000 to Cash account and add $10,000 to Notes Payable account
C) Add $10,000 to Cash account and add $10,000 to Retained Earnings account
D) Add $10,000 to Accounts Receivable account and add $10,000 to Accounts Payable
account
31) The normal balance of the Accounts Receivable account is a ________ because it is
a(n) ________ account
A) credit; liability
B) debit; stockholders’ equity
C) credit; expense
D) debit; asset
32) A business purchased office supplies of $10,000 on account The business would:
A) debit Accounts Receivable for $10,000 and credit Supplies for $10,000
B) debit Supplies for $10,000 and credit Cash for $10,000
C) debit Accounts Payable for $10,000 and credit Supplies for $10,000
D) debit Supplies for $10,000 and credit Accounts Payable for $10,000
33) Which statement is FALSE?
A) Preferred stockholders receive dividends before the common stockholders only if the
preferred stock is cumulative
B) Preferred stockholders receive dividends before the common stockholders
C) Preferred stockholders receive assets before the common stockholders if the
corporation liquidates
D) Preferred stockholders have the same basic four rights as common stockholders,
unless a right is taken away
34) Liabilities are:
A) a form of paid-in capital
B) future economic benefits to which a company is entitled
C) debts payable to outsiders called creditors
D) the outflow of resources that decrease common stock
35) Information for the trial balance is obtained from the:
A) journal
B) ledger
C) balance sheet
D) income statement