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1) the effective-interest method produces a constant dollar amount of interest expense to
be reported each interest period.
2) under the periodic inventory system, both the sales amount and the cost of goods
sold amount are recorded when each item of merchandise is sold.
3) if bonds sell at a premium, the interest expense recognized each year will be greater
than the bond interest paid.
4) the receivables turnover ratio is computed by dividing total sales by the average net
receivables during the year.
5) the debt to total assets ratio measures the percentage of the total assets provided by
creditors.
6) which of the following is not considered an intangible asset?
a.goodwill
b.an oil well
c.a franchise
d.a patent
7) a small neighborhood barber shop that is operated by its owner would likely be
organized as a
a.joint venture
b.partnership
c.corporation
d.proprietorship
8) raxon company borrowed $30,000 from the bank signing a 6%, 3-month note on
september 1. principal and interest are payable to the bank on december 1. if the
company prepares monthly financial statements, the adjusting entry that the company
should make for interest on september 30, would be:
a.debit interest expense, $1,800; credit interest payable, $1,800
b.debit interest expense, $150; credit interest payable, $150
c.debit note payable, $1,800; credit cash, $1,800
d.debit cash, $450; credit interest payable, $450
9) which of the following financial statements is divided into major categories of
operating, investing, and financing activities?
a.the income statement
b.the balance sheet
c.the retained earnings statement
d.the statement of cash flows
10) which pair of the listed accounts follows the rules of debits and credits in relation to
increases and decreases in the same manner?
a.salaries and wages expense and notes payable
b.common stock and rent expense
c.prepaid rent and advertising expense
d.service revenue and equipment
11) which types of accounts will appear in the post-closing trial balance?
a.permanent accounts
b.temporary accounts
c.accounts shown in the income statement columns of a work sheet
d.none of the above
12) using the allowance method, the uncollectible accounts for the year are estimated to
be $35,000. if the balance for the allowance for doubtful accounts is a $9,000 credit
before adjustment, what is the balance after adjustment?
a.$9,000
b.$26,000
c.$35,000
d.$44,000
13) given the data below for a firm in its first year of operation, determine net income
under the accrual basis of accounting.
a.$6,750
b.$9,000
c.$4,500
d.$7,200
14) (a)identify several alternatives for presenting significant noncash activities in
financial statements.
(b)give three examples of significant noncash activities.
15) accounts receivable arising from sales to customers amounted to $120,000 and
$105,000 at the beginning and end of the year, respectively. income reported on the
income statement for the year was $360,000. exclusive of the effect of other
adjustments, the cash flows from operating activities to be reported on the statement of
cash flows is
a.$360,000
b.$375,000
c.$465,000
d.$345,000
16) if employees are bonded
a.it means that they are not allowed to handle cash
b.they have worked for the company for at least 10 years
c.they have been insured against misappropriation of assets
d.it is impossible for them to steal from the company
17) an assumption about cost flow is necessary
a.because it is required by the income tax regulation
b.even when there is no change in the purchase price on inventory
c.only when the flow of goods cannot be determined
d.because prices usually change, and tracking which units have been sold is difficult
18) the liability created by a business when it purchases coffee beans and coffee cups on
credit from suppliers is termed a(n)
a.account payable
b.account receivable
c.revenue
d.expense.
19) grother company uses the periodic inventory method and had the following
inventory information available:
a physical count of inventory on december 31 revealed that there were 325 units on
hand.
answer the following independent questions and show computations supporting your
answers.
1>assume that the company uses the fifo method. the value of the ending inventory at
december 31 is $__________.
2>assume that the company uses the average cost method. the value of the ending
inventory on december 31 is $__________.
3>assume that the company uses the lifo method. the value of the ending inventory on
december 31 is $__________.
4>determine the difference in the amount of income that the company would have
reported if it had used the fifo method instead of the lifo method. would income have
been greater or less?
20) using the code letters below, indicate how each of the items listed would be handled
in preparing a bank reconciliation. enter the appropriate code letter in the space to the
left of each item.
code
aadd to cash balance per books
bdeduct from cash balance per books
cadd to cash balance per bank
ddeduct from cash balance per bank
edoes not affect the bank reconciliation
items:
1>outstanding checks
2>bank service charge
3>check for $320 correctly written and paid by the bank but incorrectly entered in the
cash payments journal for $230
4>deposit in transit
5>bank returns customer deposited check marked nsf
6>bank collects notes receivable and interest for depositor
7>bank debit memorandum for check printing fees
8>petty cash custodian has $86 in paid petty cash vouchers that have not been
reimbursed.
9>bank charged a check against the company, which should have been charged to
another company.
10>a check for $236 was correctly paid by the bank but was incorrectly entered in the
cash payments journal for $263
21) three thousand bonds with a face value of $1,000 each, are sold at 102. the entry to
record the issuance is
22) a _____________ decline in the market value of an asset is referred to as an
impairment.
23)
