Which of the following considerations is most important for a stockholder when
evaluating whether to purchase stock in a company?
a. Will earnings per share be distributed to stockholders?
b. Will the company earn a fair return on the amount invested by the stockholders?
c. Will the key ratios be reported on the balance sheet?
d. Will cash flows from operations exceed the amount of net income for the period?
Esquire Industrial plant operates five days per week with a daily payroll of $4,000.
Employees are paid every Saturday for the workweek just completed (Monday through
Friday). The last day of the month is Wednesday, March 31. What is the effect of the
correct adjustment at March 31?
a. Increases stockholders’ equity and Wages Payable by $8,000
b. Increases Wages Payable and decreases Cash by $12,000
c. Decreases stockholders’ equity and increases Wages Payable by $12,000
d. Increases Wages Payable and increases Wages Expense by $8,000
A stock split is similar to a stock dividend in that it results in additional shares of stock
outstanding and is nontaxable.
a. True
b. False
Fairchild Company acquired a building valued at $210,000 for property tax purposes in
exchange for 6,000 shares of its $10 par common stock. The stock is widely traded and
selling for $31 per share. At what amount should the building be recorded by Fairchild
Company?
a. $210,000
b. $60,000
c. $186,000
d. $150,000
Arena, Inc. uses straight-line depreciation for its equipment. Arena purchased
equipment for $300,000 and estimated its useful life at 8 years. The bookkeeper failed
to consider the residual value of $50,000. What is the impact on earnings per share and
operating income of failing to consider the residual value?
a. Earnings per share will be overstated and operating income will be understated.
b. Earnings per share will be understated and operating income will be overstated.
c. Both earnings per share and operating income will be overstated.
d. Both earnings per share and operating income will be understated.
Tracy, Inc.
Tracy, Inc. adjusts its books each month but closes its books at the end of the year. The
trial balance at July 31 before adjustments is as follows:
Refer to the trial balance for Tracy, Inc.On July 31, the amount of supplies on hand is
$520. What amount is reported in the July income statement for supplies expense?
a. $520
b. $1,400
c. $1,920
d. $880
Excursion Corp. increased its dollar amount of working capital over the past several
years. To further evaluate the company’s short-run liquidity, which one of the following
measures should be used?
a. The current ratio
b. An analysis of the company’s longÂterm debt
c. An analysis of the return on stockholders’ equity
d. An analysis of retained earnings
It is not possible for Cash to decrease from Yr. 1 to Yr. 2 if income rises over this
period.
a. True
b. False
Hopper,Inc.
Use the information from Hopper Inc. to answer the following question(s).
Read the information about Hopper, Inc. Which of the following statements is the best
answer regarding the company’s profit margin?
a. The profit margin was 15.8% in 2014.
b. The profit margin was 15.8% in 2013.
c. The profit margin was 31.5% in 2014.
d. The profit margin was 31.5% in 2013.
Match the terms with the descriptions related to merchandise sales and purchases.
a. Transportation-in
b. Perpetual inventory system
c. Net purchases
d. FOB Destination
e. Cost of goods available for sale
f. Periodic inventory system
g. FOB Shipping point
h. Delivery expense
Shipping costs paid to acquire merchandise.
The effect of a misstatement of the year-end inventory is limited to the net income for
that year.
a. True
b. False
Why is the time period assumption required?
a. Inflation exists.
b. External users of financial statements want statements that accurately reflect net
income or earnings for a specific time period.
c. The dollar is the monetary unit in the United States.
d. The federal government requires it.
If a company purchases $3,000 worth of inventory with terms of 1/15, n30 and pays
within 15 days, then the amount paid to the seller would be
a. $2,550
b. $2,970
c. $3,000
d. $3,030
Match the term with the statement that best defines it.
a. Accounting controls
b. Accounting system
c. Administrative controls
d. Audit committee
e. Board of directors
Provides direct contact between the shareholders and the independent auditing firm.
Yellow Dog Transit sold an old truck on December 31, 2013, for $18,400 cash. The
following data was available when the truck sold:
When this transaction is recorded, it should include a(n)
a. Loss on Disposal account for $3,000
b. Decrease of $21,400 to the Truck account
c. Gain on Disposal account for $3,000
d. Gain on Disposal account for $5,000
From the following list, identify whether the change in the account balance during the
year would be reported as an operating (O), an investing (I), or a financing (F) activity
or not separately reported on the statement of cash flows (N). Assume that the indirect
method is used to determine the cash flows from operating activities.
a. O – Operating
b. I – Investing
c. F – Financing
d. N – Not separately reported on the Statement of Cash Flows
Notes payable
Services are provided for customers who are sent bills for the amount they owe. For this
transaction, identify the effect on the accounting equation.
a. Assets increase and liabilities increase.
b. Assets increase and stockholders’ equity increases.
c. Liabilities increase and stockholders’ equity decreases.
d. Liabilities decrease and assets decrease.
On January 1, 2015, Flaggler Company’s balance in retained earnings was $70,000.
During 2015, the company earned net income of $43,000 and paid $15,000 in
dividends. Calculate the retained earnings balance at December 31, 2015.
a. $42,000
b. $90,000
c. $98,000
d. $113,000
From the following list, identify each item as operating (O), investing (I), financing (F),
or not separately reported on the statement of cash flows (N).
a. Operating-O
b. Investing-I
c. Financing-F
d. Not separately reported-N
Repurchase of common stock as treasury stock