1) benchmarking is often done by comparing a company against either a key competitor
or against the industry average.
2) the unrealized holding gains and losses on available-for-sale investments are
recorded as an adjustment to the unrealized holding gainavailable-for-sale account or
unrealized holding lossavailable-for-sale account.
3) the worksheet is not a journal, a ledger, or a financial statement.
4) by looking at a statement of retained earnings, the effect of dividends on the ending
balance in retained earnings can be determined.
5) equity securities are represented by a certificate, such as a stock certificate, and are
commonly traded in the stock market.
6) acid-test ratio helps to measure a company’s ability to pay all its current liabilities if
they came due immediately.
7) reversing entries ease the burden of accounting for transactions in a later period.
8) a net loss for the year decreases the balance in retained earnings.
9) as a part of the closing process, revenues and expenses are closed to a temporary
account called the net income (loss) account.
10) a trial balance is a list of all of the accounts of a company with their balances.
11) when a company uses a perpetual inventory system, all merchandise transactions
are updated as and when they occur. as a result, the inventory account will show the
current balance at all times.
12) all available-for-sale investments are reported as long-term assets on the balance
sheet.
13) a liability account is increased by a debit.
14) the accounting process of transferring a transaction from the journal to the ledger is
called ________.
a) journalizing
b) posting
c) compounding
d) sourcing
15) the following information relates to nebula inc.
calculate the net income of nebula.
a) $12,500
b) $22,500
c) $67,500
d) $230,000
16) on january 1, 2015, finch company issued $72,000 of 5-year bonds with a stated
rate of 8%. the market rate at time of issue was 12%, so the bonds were discounted and
sold for $61,401. finch uses the effective-interest method of amortization for bond
discount. semiannual interest payments are made on june 30 and december 31 of each
year. how much interest expense will be recorded when the first interest payment is
made?
a) $2,778
b) $3,684
c) $2,880
d) $4,320
17) which of the following is used by both internal and external users to the company?
a) chart of accounts
b) trial balance
c) balance sheet
d) costing reports
18) the par value of stock is ________.
a) the current selling price of stock
b) the highest price for which a share can sell
c) the price paid if the corporation purchases its own stock back
d) the amount assigned by a company to a share of its stock
19) which of the following is included in comprehensive income?
a) foreign currency translation adjustments
b) owners’ investments
c) purchase of capital assets
d) payment of dividend
20) on october 1, 2015, android inc. made a loan to one of its customers. the customer
signed a 4-month note for $100,000 at 15%. how much interest revenue did the
company record in the year 2016 for this note?
a) $2,150
b) $3,750
c) $1,250
d) $5,000
21) the balances of select accounts of sandra inc. as of december 31, 2015 are given
below:
the insurance has been prepaid for the next half year. determine the amount of total
current assets reported on the balance sheet.
a) $10,500
b) $5,700
c) $8,650
d) $6,150
22) which of the following accounts increases with a credit?
a) cash
b) common stock
c) accounts receivable
d) prepaid expenses
23) an internal document that helps summarize data for the preparation of financial
statements is called a ________.
a) journal
b) ledger
c) worksheet
d) chart of accounts
24) avatar auto parts company uses the indirect method to prepare its statement of cash
flows. refer to the following portion of the comparative balance sheet:
avatar company
comparative balance sheet
december 31, 2015 and 2014
20152014increase/decrease
cash$42,000$36,000$6,000
accounts receivable62,00070,000(8,000)
inventory106,00050,00056,000
pp&e, net240,000180,00060,000
total assets$450,000$336,000$114,000
additional information provided by the company includes the following:
equipment costing $104,000 was purchased for cash.
equipment with a net asset value of $20,000 was sold for $28,000.
depreciation expense of $24,000 was recorded during the year.
prepare the investing activities section of the statement of cash flows.
25) the following is the adjusted trial balance as of december 31, 2015 of martin watch
inc.:
provide the closing entry for expenses.
26) rightz petroleum products owns furniture that was purchased for $20,000.
accumulated depreciation is $16,000. the furniture was sold for $3,800. give journal
entry to record the transaction.
27) jupiter services sells a service plan for commercial computer maintenance. the price
is $1,650 per year, paid in advance. on october 1, 2013, the company sells a service plan
to a new customer for cash. provide the journal entry to record this transaction on
october 1.
28) on july 31, 2015, the archer inc. reported the following information in the equity
section of their balance sheet:
assume that archer carries out a 3-for-1 stock split. please prepare a similar equity
section showing the effects of the stock split. (please round all numbers to the nearest
cent.)
29) the following is the adjusted trial balance from the worksheet for tuttle photography.
tuttle photography
worksheet
for the year ended december 31, 2015
accountsdebitcredit
cash$ 15,000
accounts receivable30,000
prepaid insurance7,500
office supplies3,200
building160,000
accumulated depreciationbuilding$ 12,000
equipment75,000
accumulated depreciationequipment8,500
land40,000
accounts payable12,000
salaries payable2,000
unearned service revenue25,000
mortgage payable100,000
common stock21,290
dividends23,000
service revenue289,000
salaries expense61,000
depreciation expensebuilding and equipment6,150
office supplies expense14,040
insurance expense14,000
utilities expense20,900_______
total$469,790$469,790
using the information provided in the worksheet above, prepare an income statement for
tuttle photography.