Which one of the following events involves a liability for a business?
a. Loans to be repaid to banks
b. Inventories purchased for cash
c. Amounts invested by the owners
d. Stock sold to the general public
Which of the following inventory costing methods is prohibited under IFRS?
a. FIFO
b. Weighted-average
c. LIFO
d. Perpetual
A ten-year lease obligation appears on the balance sheet of Generic Products Company.
How would it most likely be classified on the balance sheet?
a. Current asset
b. Long-term liability
c. Long-term asset
d. Contra-liability
Adjusting entries are recorded at the end of each accounting period so that net income is
accurately reflected in the financial statements for the period.
a. True
b. False
MacArthur Company began operations on March 1, 2015. The corporate charter
authorized issuance of 3,000 shares of $2 par value common stock. MacArthur sold all
of the stock on March 1. On May 1, MacArthur repurchased 2,000 of the outstanding
shares. On May 14, MacArthur sold 1,200 of the treasury shares. On June 1, MacArthur
declared a 2-for-1 stock split. As a result of the split, what occurred?
a. Assets declined.
b. Stockholders’ equity increased.
c. Stockholders’ equity decreased.
d. Total stockholders’ equity stayed the same.
Which one of the following items would be added to the balance per bank statement in
a bank reconciliation?
a. Outstanding checks
b. Deposits in transit
c. Service charge
d. Interest on customer note
Which of the following is the correct date format for the financial statement heading?
a. Balance sheet for the year ended June 30, 2015
b. Income statement at December 31, 2015
c. Balance sheet at December 31, 2015
d. Statement of retained earnings at December 31, 2015
Clarion Corp. invested cash in a 6-month certificate of deposit (CD) on November 1,
2015. If Clarion Corp. has an accounting period that ends on December 31, 2015, when
should Clarion recognize interest revenue from the CD?
a. On December 31, 2015 only
b. On May 1, 2016 only
c. Both December 31, 2015 and May 31, 2016
d. On the date when its income tax return is filed
A company began the year with $150,000 in inventory and ended the year with
$170,000 in inventory. Cost of goods sold for the year amounted to $960,000.
Assuming 360 days in a year, how long, on average, does it take the company to sell its
inventory (to the nearest day)?
a. 6 days
b. 60 days
c. 120 days
d. 3 days
For each transaction select the letter of the type of adjustment that would be required.
a. Deferred expense
b. Deferred revenue
c. Accrued liability
d. Accrued asset
The depreciation on office equipment used during the current year is recorded
Which pair of accounts has the same set of rules for debit and credit entries?
a. Service Revenue and Rent Expense
b. Dividends and Retained Earnings
c. Equipment and Salaries Expense
d. Accounts Receivable and Accounts Payable
For each ratio listed, select whether an increase or decrease in the ratio is generally
considered to be better.
a. increase
b. decrease
Current ratio
Winslow Corporation reported the following in the stockholders’ equity section of its
balance sheet at December 31, 2015:
How many shares of stock are issued?
a. 9,000
b. 10,000
c. 10,100
d. Not enough information to determine.
Which of the following is not an investing activity?
a. Purchase of investments for cash.
b. Purchase of equipment for cash.
c. Sale of merchandise for cash.
d. Sale of land for cash.
Which one of the following is a sound internal control procedure for cash
disbursements?
a. Making copies of purchase orders for the receiving department so they know how
many items to be expected upon delivery
b. Using presigned checks to facilitate payment within the cash discount period
c. Comparing purchase requisitions, purchase orders, receiving reports, and invoices
d. Requiring the signature of the purchasing department supervisor on checks
Wolfe Inc. Wolfe Inc. reports these account balances at January 1, 2015:
See the account balances for Wolfe Inc. On January 31, Wolfe collected $12,000 of its
accounts receivable and paid $11,000 on its note payable. On January 31, 2015, the
total liabilities are:
a. $0
b. $56,000
c. $41,000
d. $30,000
Flannery Company uses a worksheet to prepare its statement of cash flows. The
company also uses the indirect method for the Operating Activities section of its
statement. For each of the following changes in the balance sheet, indicate what activity
it affects and whether it is an addition or deduction. a. Deducted from Operating activity
b. Added to Operating activity
c. Deducted from Investing activity
d. Added to Investing activity
e. Deducted from Financing activity
f. Added to Financing activity
Accounts payable decreased