Bank errors
a. occur because of time lags.
b. must be corrected by debits.
c. are infrequent in occurrence.
d. are corrected by making an adjusting entry on the depositor’s books.
Answer:
Which of the following is not a true statement regarding short-term debt investments?
a. The securities usually pay interest.
b. Investments are frequently government or corporate bonds.
c. This type of investment must be currently traded in the securities market.
d. Debt investments are recorded at the price paid less brokerage fees.
Answer:
The name given to entering transaction data in the journal is
a. chronicling.
b. listing.
c. posting.
d. journalizing.
Answer:
Nyland Corporation’s comparative balance sheets are presented below.
Mulder’s 2015 income statement included net sales of $150,000, cost of good sold of
$90,000, and net income of $24,000. Dividends of $10,070 were paid.
Instructions
Compute the following ratios for 2015.
(a) Current ratio.
(b) Acid-test ratio
(c) Accounts Receivable turnover and average collection period.
(d) Inventory turnover and days in inventory.
(e) Profit margin.
(f) Assets turnover.
(g) Return on assets.
(h) Return on common stockholders’ equity.
(i) Earnings per share.
(j) Payout ratio.
(k) Debt to assets.
Answer:
An analysis and aging of the accounts receivable of Hugh Company at December 31
revealed the following data:
The cash realizable value of the accounts receivable at December 31, after adjustment,
is:
a. $794,000.
b. $844,000.
c. $850,000.
d. $894,000.
Answer:
Valuing assets at their fair value rather than at their cost is inconsistent with the:
a. economic entity assumption.
b. historical cost principle.
c. periodicity assumption.
d. full disclosure principles.
Answer:
Closing entries are made
a. in order to terminate the business as an operating entity.
b. so that all assets, liabilities, and stockholders’ equity accounts will have zero balances
when the next accounting period starts.
c. in order to transfer net income (or loss) and dividends to the retained earnings
account.
d. so that financial statements can be prepared.
Answer:
Presented here is a partial amortization schedule for Roseland Company who sold
$3000,000, five year 10% bonds on January 1, 2014 for $318,000 and uses annual
straight-line amortization.
Which of the following amounts should be shown in cell (iii)?
a. $9,000.
b. $18,000.
c. $3,600.
d. $1,800.
Answer:
Interest is usually associated with
a. accounts receivable.
b. notes receivable.
c. doubtful accounts.
d. bad debts.
Answer:
Natural resources are
a. depreciated using the units-of-activity method.
b. physically extracted in operations and are replaceable only by an act of nature.
c. reported at their market value.
d. amortized over a period no longer than 40 years.
Answer:
When using the direct method to compute cash provided by operations,
a. income taxes paid may be ignored.
b. depreciation expense is added to net income.
c. decreases in inventory are added to total operating expenses to compute cash
payments for operating expenses.
d. increases in accounts receivable are subtracted from total sales to compute cash
receipts from customers.
Answer:
A measure that describes the cash remaining from operations after adjustment for
capital expenditures and dividends is
a. adjusted cash from operations.
b. cash provided by operations.
c. free cash flow.
d. net cash provided by operating activities.
Answer:
The interest on a $10,000, 8%, 1-year note receivable is
a. $800.
b. $10,000.
c. $10,080.
d. $10,800.
Answer:
Claims for which formal instruments of credit are issued as proof of the debt are
a. accounts receivable.
b. interest receivable.
c. notes receivable.
d. other receivables.
Answer:
When a worksheet is used, all but one of the following statements is correct. The
incorrect statement is
a. Reconciling items on the worksheet are not journalized or posted.
b. The bottom portion of the worksheet shows the statement of cash flows effects.
c. The balance sheet accounts portion of the worksheet is divided into two parts: assets,
and liabilities and stockholders’ equity.
d. Each line pertaining to a balance sheet account should foot across.
Answer:
The current assets of Myers Company are $250,000. The current liabilities are
$100,000. The current ratio expressed as a proportion is
a. 250%.
b. 2.5 : 1
c. .25 : 1
d. $250,000 ÷ $100,000.
Answer:
Which of the following represents the largest number of common shares?
a. Treasury shares
b. Issued shares
c. Outstanding shares
d. Authorized shares
Answer:
Trent Corp. issued $800,000 of 8%, 5-year bonds at 102 on January 1, 2015. The
straight-line method of amortization is used and the bonds pay interest annually on
January 1. The amount of bond interest expense that Trent should report on its
December 31, 2015, income statement is
a. $64,000.
b. $65,280.
c. $60,800.
d. $67,200.
Answer:
Financial information is presented below:
The amount of net sales on the income statement would be
a. $290,000.
b. $302,000.
c. $308,000.
d. $320,000.
Answer:
Ale Corporation had net income of $240,000 and paid dividends to common
stockholders of $40,000 in 2014. The weighted average number of shares outstanding in
2014 was 60,000 shares. Ale Corporation’s common stock is selling for $76 per share
on the New York Stock Exchange. Ale Corporation’s price-earnings ratio is
a. 3.2 times.
b. 22.8 times.
c. 19 times.
d. 12.7 times.
Answer:
If bonds can be converted into common stock,
a. they will sell at a lower price than comparable bonds without a conversion feature.
b. they will carry a higher interest rate than comparable bonds without the conversion
feature.
c. they will be converted only if the issuer calls them in for conversion.
d. the bondholder may benefit if the market price of the common stock increases
substantially.
Answer:
In a periodic inventory system, a return of defective merchandise to a supplier is
recorded by crediting
a. Accounts Payable.
b. Inventory.
c. Purchases.
d. Purchase Returns and Allowances.
Answer:
The use of special journals often saves time in the _______________ process.
Answer:
A solvency ratio measures the income or operating success of an enterprise for a given
period of time.
Answer:
The cost of demolishing an old building on land that has been acquired so that a new
building can be constructed should be charged to the ______________ account.
Answer:
Alistair Corporation sells 500 shares of common stock being held as a short-term
investment. The shares were acquired six months ago at a cost of $55 a share. Alistair
sold the shares for $40 a share. The entry to record the sale is
Answer:
The basic steps in the recording process are: _______________ each transaction, enter
the transaction in a ________________, and transfer the _______________ information
to appropriate accounts in the ________________.
Answer:
Assume that Swann Company uses a periodic inventory system and has these account
balances: Purchases $525,000; Purchase Returns and Allowances $14,000; Purchase
Discounts $9,000; and Freight-In $15,000. Determine net purchases and cost of goods
purchased.
Answer:
The _____________________ of an annuity is the sum of all the payments plus the
accumulated compound interest on them.
Answer:
Post the following transactions to T-accounts and determine each account’s ending
balance.
Answer:
Current assets are listed in the order of liquidity.
Answer: