Finished goods are the equivalent of merchandise inventory for a retailer or wholesaler
in that both represent the inventory of goods held for sale.
a. True
b. False
When a lease is classified as an operating lease, the lease liability should be presented
on the balance sheet of the lessee.
a. True
b. False
Target, Inc., started the year with total assets of $400,000 and total liabilities of
$240,000. Net income for the year is $120,000 and dividends declared and paid during
the year are $90,000. A) What is the amount of Target’s total stockholders’ equity at the
end of the year? B) Could Target have paid additional dividends during the year?
Explain your answer.
An advantage of a strong system of internal control is that less testing of the accounting
system is done by the outside auditors.
a. True
b. False
Which of the following is not a generally recognized internal control procedure?
a. Establishing of clear lines of authority to carry out specific tasks
b. Physically counting inventory in a perpetual inventory system
c. Reducing the cost of hiring seasonal employees
d. Limiting access to computerized accounting records
Which of the following include only current assets?
a. Accounts receivable, cash, inventory, office supplies
b. Cash, accounts payable, inventory, office supplies
c. Cash, land, accounts receivable, inventory
d. Accounts receivable, cash, furniture, office supplies
A balance sheet provides information at one specific point in time, while the other basic
financial statements provide information on activities that occur over a period of time.
a. True
b. False
In 2015, Dickens Company had a beginning balance in its Cash Dividend Payable
account of $5,000 and an ending balance of $4,000. During 2015, the only dividends
Dickens declared were $46,000 in cash to the common stockholders. How much cash
was paid to the common stockholders?
a. $45,000
b. $47,000
c. $46,000
d. $ 1,000
Which of the following statements is true regarding the multiple-step income
statement?
a. The multiple-step income statement is used only by companies that sell products, not
those that provide services.
b. The multiple-step income statement is helpful in determining a company’s working
capital.
c. The multiple-step income statement reports the same net income as the single-step
income statement.
d. The multiple-step income statement is required under generally accepted accounting
principles.
Endeavor Company issued 20-year bonds with a coupon rate of 6% when the market
rate of interest was 9%. This means that the bonds were issued
a. at a premium.
b. at a discount.
c. at the face value.
d. with an additional 3 years of interest.
Which financial statement would you analyze to determine if a company distributed any
of its profits to its shareholders?
a. Balance Sheet
b. Statement of Retained Earnings
c. Income Statement
d. Statement of Public Accounting
Deferred income taxes is a balance sheet item for Iowa Products Company. How would
it most likely be classified on the balance sheet?
a. Owners’ equity
b. Long-term liability
c. Expense
d. Contra liability
Identify whether the following investor questions are associated with (a) primary or sec
ondary financial reporting objectives.
a. primary financial reporting objective
b. secondary financial reporting objective Based on the financial information, should I
sell my shares of Apple next quarter?
Several events are listed below. Indicate whether each event is an external event that
should be recorded as a transaction, an internal event which should be recorded as a
transaction, or an event which should not be recorded. Use the following identification
codes for your answers: E – External event to be recorded as a transaction
I – Internal event to be recorded as a transaction
NR – An event which should NOT be recorded_____ A) An order is placed with a
supplier for merchandise. _____ B) Common stock is issued to investors. _____ C)
Cash sales are made. _____ D) Raw materials are entered into production. _____ E)
Federal income tax returns are prepared by the company’s accountant. _____ F) Bills
are received for utility expenses. _____ G) Payment is received from customers to
whom merchandise had been sold on credit. _____ H) Money collected from cash and
credit customers is deposited in the company’s checking account at a local bank.
Sawaddee Enterprises began the year with total assets of $450,000 and total liabilities
of $230,000. If Sawaddee total liabilities increased by $31,000 and its owners’ equity
decreased by $53,000 during the year, what was the amount of its total assets at the end
of the year?
a. $472,000
b. $242,000
c. $198,000
d. $428,000
provide the evidence needed in an accounting system to record a transaction.
What is the purpose of an income statement?
Refer to the information for Carlton, Inc. How much is net sales for 2015? What other
components that Carlton did not report could be included in this computation?
Sliders Company Sliders Company sells its merchandise only on credit. The following
data is available at December 31, 2014:
Refer to data for Sliders Company. Determine the balance of Accounts Receivable at
December 31, 2014.
What is the purpose of an aging schedule?