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1) the periodicity assumption states that every economic entity can be separately
identified and accounted for.
2) creditors rights to assets supersede owners rights to the assets.
3) an example of segregation of duties is having a check signer recording cash
disbursements.
4) the primary purpose of the statement of cash flows is to provide information about a
companys cash receipts and cash payments during an accounting period.
5) a solvency ratio measures the income or operating success of an enterprise for a
given period of time.
6) if a company has no beginning inventory and the unit price of inventory is increasing
during a period, the cost of goods available for sale during the period will be the same
under the lifo and fifo inventory methods.
7) accountants believe that the write down from cost to market should not be made in
the period in which the price decline occurs.
8) the tax laws can be a significant disadvantage of the corporate form of business.
9) the statement of cash flows classifies cash receipts and payments as operating,
nonoperating, financial, and extraordinary activities.
10) accounts receivable are the result of cash and credit sales.
11) management may choose any inventory costing method it desires as long as the cost
flow assumption chosen is consistent with the physical movement of goods in the
company.
12) in the notes to the financial statements, the depreciation and amortization methods
used should be described.
13) to compute the present value of a bond, both the interest payments and the principal
amount must be discounted using the bonds contractual interest rate.
14) a major criticism of the fifo inventory method is that it magnifies the effects of the
business cycle on business income.
15) if the market value of the assets received and the market value of the stock issued
are both available, then what amount should be used to value the assets?
a.market value of the stock
b.market value of the assets
c.par value of the stock
d.the more clearly determinable market value
16) selected transactions for stockton corporation during its first month in business are
presented below:
stockton's chart of accounts shows: cash, equipment, accounts payable, common stock,
and dividends.
instructions
(a)prepare a tabular analysis of the september transactions. the column headings should
be: cash + equipment = accounts payable + stockholders' equity. for transactions
affecting stockholders' equity, provide explanations in the right margin.
(b)journalize the transactions. do not provide explanations.
(c)post the transactions to t-accounts.
17) an accumulated depreciation account:
a.is a contra liability account
b.increases on the debit side
c.is offset against total assets on the balance sheet
d.has a normal credit balance
18) the proprietorship form of business organization
a.must have at least two owners in most states
b.generally receives favorable tax treatment relative to a corporation
c.combines the records of the business with the personal records of the owner
d.is classified as a separate legal entity
19) indian river groves in central florida lost about 10% of its oranges (or $750,000)
due to frost. based on this information, how will indian river groves most likely report
this loss?
a.as an extraordinary item net of taxes
b.below discontinued operations
c.as a pretax ordinary loss prior to income before income taxes
d.as a discontinued operation net of taxes
20) grayson company sells many products. gizmo is one of its popular items. below is
an analysis of the inventory purchases and sales of gizmo for the month of march.
grayson company uses the perpetual inventory system.
instructions
(a)using the fifo assumption, calculate the amount charged to cost of goods sold for
march. (show computations)
(b)using the fifo assumption, calculate the value of ending inventory for march.
(c)using the moving average cost method, calculate the amount assigned to the
inventory on hand on march 31. (show computations)
(d)using the lifo assumption, calculate the amount assigned to the inventory on hand on
march 31. (show computations)
(e)using the lifo assumption, calculate the amount charged to cost of goods sold for
march. (show computations)
21) wong ho company had the following transactions during 2011:
what is wong hos 2011 net income using accrual accounting?
a.7,750
b.11,750
c.11,250
d.7,250
22) under ifrs, the components of other comprehensive income can be reported in each
of the following ways except
a. the one-statement approach
b. the two-statement approach
c. the statement of stockholders' equity approach
d. all of the above are acceptable
23) internal control measures
a.only apply to publicly traded companies
b.are in place to safeguard assets
c.can eliminate all irregularities in the accounting process
d.all statements are true
24) use the following information regarding black company and red company to answer
the question which of the following is black company's "cost of goods sold" for 2011
(to the closest dollar)?
a.$319,823
b.$281,838
c.$300,830
d.$320,946
25) the account allowance for doubtful accounts is classified as a(n)
a.liability
b.contra account of bad debt expense
c.expense
d.contra account to accounts receivable
26) which pair of the listed accounts follows the rules of debits and credits in relation to
increases and decreases in the opposite manner?
a.salaries and wages expense and notes payable
b.common stock and unearned rent revenue
c.prepaid rent and advertising expense
d.service revenue and notes payable
27) assets normally show
a.credit balances.
b.debit balances.
c.debit and credit balances.
d.debit or credit balances.
28) nance corporations december 31, 2012 balance sheet showed the following:
nances total stockholders equity was
a.$36,760,000
b.$31,240,000
c.$36,340,000
d.$35,920,000
29) using the following balance sheet and income statement data, what is the earnings
per share?
a.$1.20
b.$2.00
c.$0.83
d.$0.44
30) the entry to replenish a petty cash fund includes a credit to
a.petty cash
b.cash
c.freight-in
d.postage expense
31) when an account becomes uncollectible and must be written off
a.allowance for doubtful accounts should be credited
b.accounts receivable should be credited
c.bad debts expense should be credited
d.sales should be debited
32) the following information is available for nichols company for the month of
february: expected cash receipts $40,000; expected cash disbursements $42,000; cash
balance february 1, $11,000. management wishes to maintain a minimum cash balance
of $10,000. prepare a basic cash budget for the month of february.
33) compute the maturity value as indicated for each of the following notes receivable.
1>an $6,000, 6%, 3-month note dated april 20.
maturity value $____________.
2>a $14,000, 9%, 72-day note dated march 5.
maturity value $____________.
3>a $12,000, 5%, 30-day note dated september 10.
maturity value $____________.
4>a $9,000, 7%, 6-month note dated november 15.
maturity value $____________.
34) the _______________ feature of preferred stock gives the preferred stockholders
the right to receive current-year dividends and unpaid prior-year dividends before
common stockholders receive any dividends.
35) during the _______________, cash from operations and net income are
approximately the same.
36) a concentration of ______________ is a threat of nonpayment from a single
customer or class of customers.
37) an inexperienced accountant for teahan corporation made the following entries.
instructions
on the basis of the explanation for each entry, prepare the entry that should have been
made for the transactions. (omit explanations.)
38) cesar ruiz was reviewing his business activities at the end of the year (2012) and
decided to prepare a retained earnings statement. at the beginning of the year his assets
were $550,000, liabilities were $140,000, and common stock was $120,000. the net
income for the year was $250,000. dividends of $220,000 were paid during the year.
prepare a retained earnings statement in good form.
39) the primary purpose of a ________________ is to provide financial information
about the cash receipts and cash payments of a business.
40) customer purchases using credit cards are a significant source of revenue for many
retailers. from the standpoint of a retailer, briefly discuss some advantages and
disadvantages of a retail store having its own credit card as opposed to accepting one of
the national credit cards (e.g., visa or mastercard).
41) the following transactions were made by black company. assume all investments are
temporary.
july1purchased 400 shares of dean corporation common stock for $35 per share.
30received a cash dividend of $2 per share from the dean corporation.
sept.15sold 80 shares of dean corporation stock for $38 per share.
instructions
journalize the transactions.
