1) gross pay is the total amount of compensation earned by an employee, after the
deductions are made.
2) the amount of net cash flow from operating activities will be different in the direct
and indirect methods when preparing the statement of cash flows.
3) transnational company is looking for additional capital in order to purchase a
property to build their headquarters. they found an investor who was willing to sell
them land worth $500,000 in exchange for stock in the company. this transaction would
be shown in the financing activities section of the statement of cash flows.
4) consolidation accounting is the way to combine the financial statements of two or
more companies that have the same owners.
5) the common stock account is a temporary account.
6) paid-in capital is externally generated capital and results from transactions with
outsiders.
7) separating the custody of assets from accounting implies that the accountants must
not handle cash, and the cashier must not have access to the accounting records.
8) in the case of a prepaid expense, the adjusting entry required at the end of a period
will consist of a credit to the prepaid expense account. assume the prepaid expense was
initially recorded as an asset.
9) before any internal control procedure is initiated, which of the following questions
must be primarily addressed by a company?
a) will this put an end to theft?
b) is this the best security, money can buy?
c) how much benefit will be derived from the cost of the procedure?
d) will this prevent accounting errors?
10) charms inc., a merchandising company, has an account receivable for $125 which it
has now deemed uncollectible. the company uses the direct write-off method. which of
the following entries is required to record the write-off?
a)
b)
c)
d)
11) rocco earns $14.5 per hour for straight time (40 hours) and the company pays him
time-and-a-half for overtime. he worked 43 hours at his job during the first week of
march, 2015. what was rocco’s gross pay for the week?
a) $623.50
b) $628.00
c) $645.25
d) $935.25
12) your best advisors, a service company, uses reversing entries. on march 31, 2014,
they prepared the following adjusting entry to accrue utilities expense:
which of the following entries is the correct reversing entry to be prepared on april 1,
2014?
a)
b)
c)
d)
13) jade investments, inc. purchased 40% of the common stock of ivory corporation on
march 1, 2014. ivory corporation reports a net income of $675,000 for the 2015 year.
which of the following is the correct journal entry?
a)
b)
c)
d)
14) the financial statement that reports assets, liabilities, and stockholders’ equity as of
the last day of the period is called the ________.
a) income statement
b) statement of retained earnings
c) balance sheet
d) unadjusted trial balance
15) under which of the following categories would bonds held as an investment for less
than a year appear?
a) long-term assets
b) current assets
c) long-term liabilities
d) current liabilities
16) on november 1, 2015, oster inc. declared a dividend of $3.00 per share. oster inc.
has 20,000 shares of common stock outstanding and no preferred stock. which of the
following is the journal entry needed to record the declaration of dividends?
a) debit dividends payablecommon $60,000 and credit retained earnings $60,000
b) debit retained earnings $60,000 and credit cash $60,000
c) debit retained earnings $60,000 and credit dividends payablecommon $60,000
d) debit cash $60,000 and credit dividends payablecommon $60,000
17) state unemployment compensation tax (suta), is paid by the employer only and is
not deducted from an employee’s gross pay.
18) the rate of return on total assets measures ________.
a) a company’s ability to meet its short-term obligations
b) a company’s ability to repay its long-term debt
c) a company’s success in using assets to earn a profit
d) a company’s investing flexibility
19) on january 1, 2015, carter sales issued $15,000 in bonds for $14,300. they were
8-year bonds with a stated rate of 9%, and pay semiannual interest. carter sales uses the
straight-line method to amortize the bond discount. after the second interest payment on
december 31, 2015, what was the bond carrying amount? round your intermediate
answers to nearest dollar.)
a) $14,388
b) $14,344
c) $15,000
d) $14,300
20) which of the following values is considered the market value when valuing
inventory at lower-of-cost-or-market?
a) sales price less the company’s normal mark-up percentage
b) current replacement cost
c) cost plus the company’s normal mark-up percentage
d) historic cost
21) planned investments and cash dividends are deducted from ________ to arrive at
free cash flow.
a) net cash provided by operating activities
b) net cash provided by investing activities
c) net cash provided by financing activities
d) net income
22) joan steel inc. purchases 10,000 shares of smith metals inc. for $34,000 in exchange
for cash and now holds 3.2% voting stock of smith metals inc. assuming no other
transaction happened during the year, the ________ in the balance sheet will increase.
a) long-term investments
b) cash
c) total assets
d) current assets
23) the bank statement reveals an eft payment made to one of the company’s suppliers
that has not yet been recorded in the ledger. how would this information be included on
the bank reconciliation?
a) an addition on the bank side
b) a deduction on the bank side
c) a deduction on the book side
d) an addition on the book side
24) it is mandatory for both the employer and employee to pay ________.
a) fica
b) suta
c) employee income tax
d) federal unemployment tax
25) the return on assets is calculated by ________.
a) subtracting net income from average total assets
b) adding net income and average total assets
c) dividing net income by average total assets
d) multiplying net income and average total assets
26) a company sold merchandise with a cost of $221 for $350 on account. the seller
uses the perpetual inventory system. the entry to record the cost of merchandise sold
would include ________.
a) a debit to sales and a credit to cash for $350
b) a debit to cash and a credit to sales for $350
c) a debit to cost of goods sold and a credit to merchandise inventory for $221
d) a debit to merchandise inventory for $221 and a credit to cost of goods sold for $221
27) which of the following accounting principles requires businesses to record
depreciation?
a) the revenue recognition principle
b) the matching principle
c) the cost principle
d) the going concern principle
28) barter inc. sold goods for $875,500 on account. the company operates in a state that
imposes a 6% sales tax. which of the following would be the amount of the sales tax
payable to the state?
a) $52,530
b) $50,540
c) $45,300
d) $55,090
29) johnson tires company uses the indirect method to prepare the statement of cash
flows. refer to the following comparative balance sheet for avatar company and
complete the third column for increases or decreases.
johnson company
comparative balance sheet
december 31, 2014 and 2013
increase/
20142013decrease
cash$39,600$19,800
accounts receivable26,40038,500
inventory204,000126,500
total assets270,000184,800
accounts payable4,8006,600
accrued liabilities2,4001,100
long-term notes payable100,80099,000
total liabilities108,000106,700
common stock36,0002,200
retained earnings135,60081,400
treasury stock(9,600)(5,500)
total stockholders’ equity162,00078,100
total liabilities and stockholders’ equity$270,000$184,800
30) the cost of an asset is $10,000,000 and its residual value is $100,000. estimated
useful life of the asset is four years. prepare the schedule of depreciation using the
double-declining-balance method of accounting.
31) karaoke records company uses the indirect method to prepare its statement of cash
flows. refer to the following sections of the comparative balance sheet:
karaoke company
comparative balance sheet
december 31, 2014 and 2013
20142013increase/decrease
accounts payable$ 6,000$ 9,000$(3,000)
accrued liabilities3,0001,5001,500
long-term notes payable126,000135,000(9,000)
total liabilities$ 135,000$ 145,500$(10,500)
common stock45,0003,00042,000
retained earnings169,500111,00058,500
treasury stock(12,000)(7,500)(4,500)
total equity202,500106,50096,000
total liabilities and equity337,500252,00085,500
additional information:
no stock was retired.
no treasury stock was sold.
during 2014, the company repaid $60,000 of long-term notes payable.
during 2014, the company borrowed $51,000 on a new long-term note payable.
net income for the year was $68,000.
prepare the financing section of the statement of cash flows.
32) luminous electrical inc. performed services costing $8,000 on january 24 and
invoiced the customer. it received the $8,000 on january 31. provide the journal entry
on january 24 when services were rendered. (ignore explanation.)
33) server solutions paid $200,000 to acquire tabletz inc., an electronic
gadget-advertising website. at the time of the acquisition, tabletz’s balance sheet
reported total assets of $200,000 and liabilities of $100,000. the fair market value of
tabletz’s assets was $200,000. the fair market value of its liabilities was $100,000.
journalize the acquisition of tabletz in the books of server solutions.
34) on july 1, 2015, ealys jewellers accepted a 3-month, 15% note for $6,000 in
settlement of an overdue account receivable. provide the journal entry to record the
acceptance of the note.
35) data for nobell inc. is as follows:
20152014
net sales$850,000$798,000
cost of goods sold635,000580,000
selling and administrative expenses50,00035,000
other expenses20,00015,000
income tax40,00055,000
prepare a horizontal analysis of the comparative income statement of nobell inc. (round
percentage changes to one decimal place.) use a multi-step income statement.
36) steel rolling corp. purchased a mine in 2015 for $500,000 and it estimated that
30,000 tons of iron ore can be extracted from it. it has no residual value. the corporation
has extracted 2,500 tons of ore in 2015. how will the mine be reported on the balance
sheet at the end of year 2015?
