1) a company purchased machinery by issuing a long-term note payable. this is an
example of a non-cash investing and financing activity for the statement of cash flows.
2) all asset accounts and equity accounts increase with a debit.
3) when a business pledges its accounts receivable, it transfers the right to collect cash
from customers to the bank.
4) free cash flow is calculated by adding cash payments planned for investments in
long-term assets and cash dividends to the amount of net cash provided by operating
activities.
5) in a period of rising costs, the last-in, first-out (lifo) method results in higher cost of
goods sold and lower net income than the first-in, first-out (fifo) method.
6) discount on bonds payable is considered to be an additional interest expense of the
company that issues the bond.
7) the balance in the bonds payable account is a credit of $72,000. the balance in the
discount on bonds payable is a debit of $3,500. the balance sheet will report the bond
balance as $75,500.
8) under the perpetual inventory system, when a purchaser makes payment within the
discount period, the amount of discount will be credited to the merchandise inventory
account.
9) under the retail method, the cost of ending merchandise inventory of a business is
estimated by using its ratio of the ________.
a) goods available for sale at retail to the goods available for sale at higher of cost or
market
b) goods available for sale at cost to the beginning merchandise inventory
c) goods available for sale at retail to the beginning merchandise inventory
d) goods available for sale at cost to the goods available for sale at retail
10) which of the following is a plant asset?
a) equipment
b) patents
c) trademark
d) accounts receivable
11) on october 1, 2015, ealys jewelers accepted a 4-month, 12% note for $6,000 in
settlement of an overdue account receivable. the company closes its accounts at the year
end. calculate and record the accrued interest on the note at december 31, 2015.
a) $180
b) $160
c) $240
d) $140
12) on january 1, 2015, bratios company purchases equipment and signs a 6-year
mortgage note for $80,000 at 15%. the note will be paid in equal annual installments of
$21,139, beginning january 1, 2016. calculate the balance of the mortgage payable
account after the payment of the first installment.
a) $12,000
b) $58,861
c) $70,861
d) $60,351
13) a corporation has 10,000 shares of 10%, $100 par noncumulative preferred stock
outstanding and 20,000 shares of no-par common stock outstanding. at the end of the
current year, the corporation declares a dividend of $120,000. what is the dividend per
share for preferred stock and for common stock?
a) the dividend per share is $10.00 to preferred stock and $1.00 to common stock
b) the dividend per share is $6.67 to preferred stock and $1.00 to common stock
c) the dividend per share is $10.00 to preferred stock and $10 to common stock
d) the dividend per share is $50.00 to preferred stock and $1.00 to common stock
14) cash received from the issuance of notes payable is a(n) ________ on the statement
of cash flows.
a) non-cash activity
b) financing activity
c) operating activity
d) investing activity
15) acer inc. plans to develop a shopping center. in the first quarter, they spent the
following amounts:
what amount should be recorded as the cost of land in the books of the corporation?
a) $16,800
b) $15,800
c) $16,660
d) $16,200
16) under the equity method, the dividend revenue from a long-term investmentwhich
has an ownership of 20% to 50%the dividend is treated as a ________.
a) debit to revenue from investments
b) dividend revenue
c) return of capital
d) credit to current assets
17) which of the following is a reason why many companies require a photo id when
employees pick up their paychecks?
a) to make sure an employee’s work hours have been accurately reported
b) to avoid writing a paycheck to a fictitious person
c) to improve efficiency of the payroll disbursement process
d) to make sure all employees are legal adults
18) an adjusting entry is completed ________.
a) at the beginning of the accounting period
b) at the end of the accounting period
c) when the balance sheet is prepared
d) when accounts need to be balanced in the ledger
19) the following data is available:
using the gross profit method, the estimated ending inventory balance would be
________.
a) $15,000
b) $7,150
c) $10,200
d) $5,850
20) which of the following values remains the same irrespective of the inventory
valuation method used by a company? assume the cost of inventory is rising.
a) purchases
b) cost of goods sold
c) ending merchandise inventory
d) net income
21) beige corporation pays $500,000 to acquire 40% of the equity securities of olive
technologies inc. on may 5, 2015. which of the following will be included in the journal
entry to record this transaction?
a) long-term investmentstrading investments will be debited by $500,000
b) long-term investmentsolive technologies inc. will be debited by $500,000
c) long-term investmentsavailable-for-sale will be debited by $500,000
d) long-term investmentsavailable-for-sale will be credited by $500,000
22) assets that are expected to be converted to cash, sold, or used up during the next 12
months, or within the business’s normal operating cycle if the cycle is longer than a year
are called ________ assets.
a) intangible
b) plant
c) long-term
d) current
23) the accountant for noble jewelry repair services inc. forgot to make an adjusting
entry for depreciation expense for the current year. which of the following is an effect
of this error?
a) total assets are understated
b) revenues are overstated
c) total assets are overstated
d) net income is understated
24) blandings glassware company issues $1,000,000 of 8%, 10-year bonds at 98 on
february 28, 2015. the bond pays interest on february 28 and august 31. on august 31,
2015, how much cash did blandings pay out to bondholders?
a) $41,000
b) $40,000
c) $80,000
d) $39,000
25) on november 1, 2015, ez products borrowed $48,000 on a 5%, 10-year note with
annual installment payments of $4,800 plus interest due on november 1 of each
succeeding year. on november 1, 2016, what will the balance be in the long-term notes
payable account?
a) $38,400
b) $48,000
c) $43,200
d) $4,800
26) avatar auto parts company uses the direct method to prepare its statement of cash
flows. refer to the following financial statement information for the year ending
december 31, 2015:
avatar company
comparative balance sheet
december 31, 2015 and 2014
avatar company
income statement
year ended december 31, 2015
additional information provided by the company includes the following:
equipment costing $60,000 was purchased for cash.
equipment with a net asset value of $10,000 was sold for $16,000
during 2014, the company repaid $43,000 of long-term notes payable.
during 2014, the company borrowed $34,000 on a new note payable
there were no stock retirements during the year.
there were no sales of treasury stock during the year.
prepare a complete statement of cash flows using the direct method.
assume accrued liabilities relate to other operating expense
27) on april 1, 2015, ardos gardening products borrowed $100,000 on a 15%, 10-year
note with annual installment payments of $10,000 plus interest due on april 1 of each
succeeding year. provide the journal entry for the first installment payment made on
april 1, 2016.
28) atlantis inc. provides the following historical data:
201620152014201320122011
net sales$4,970$4,500$3,980$3,270$4,750$4,400
prepare the trend analysis report use 2011 as the base year, and round answers to the
nearest percent.
29) pluto inc. sold 500 units of inventory at $25 per unit for cash. the company uses the
perpetual inventory system. the cost of the units sold was $10 per unit. provide the
journal entries to record the sale.
30) on march 1, 2014, nortons inc. paid $60,000 as office rent covering the three-month
period ending may 31, 2014. journalize the entry on march 1 by using the alternative
treatment of prepaid expenses.
31) donald corp. reported the following revenues and net income amounts.
(in millions)20172016201520142013
revenue$728$675$500$485$452
cost of goods sold650602456403398
calculate donald’s trend analysis for revenues and cost of goods sold. use 2013 as the
base year, and round to the nearest percent.
32) on january 1, 2015, zade manufacturing corporation purchased a machine for
$40,000,000. the corporation expects to use the machine for 24,000 hours over the next
6 years. the estimated residual value of the machine at the end of the sixth year is
$40,000. the corporation used the machine for 3,600 hours in 2015 and 5,000 hours in
2016. calculate depreciation expense for the year 2016 if the company uses the
units-of-production method of depreciation.