1) if the historical cost of inventory is less than its current replacement cost, the
business must write down the inventory cost.
2) a corporation is a separate legal entity and is organized independently of its owners.
3) the three sections of the statement of cash flows report only activities that involve
cash.
4) if an analyst wants to see how gross profit of a company has changed from one year
to the next, vertical analysis would be used.
5) amounts owed for products or services, due within one year, are current liabilities.
6) prepaid rent is always classified as a long-term asset.
7) in a multi-step income statement, interest revenue and interest expense are included
in operating income.
8) lawrence, an employee of light inc., has gross salary for march of $4,000. the entire
amount is under the oasdi limit of $110,100, and thus subject to fica. his year-to-date
pay has already exceeded the $7,000 cap for futa and suta. which of the following is a
part of journal entry in the payroll cycle to record the employer’s payroll taxes?
a) credit to payroll tax expense
b) debit to fica tax payable
c) credit to ficamedicare tax payable
d) debit to cash
9) which of the following is considered a fiscal year?
a) six months
b) three months
c) twelve months
d) four months
10) which of the following details is provided in a typical chart of accounts?
a) account balance
b) account number
c) dates of transactions
d) transaction amounts
11) cash and cash equivalents are divided by ________ to determine the cash ratio.
a) total current liabilities
b) fixed assets
c) equity
d) total long-term liabilities
12) which of the following amounts will differ if a company, using the last-in, first-out
(lifo) method, shifts from a periodic inventory system to a perpetual inventory system?
a) ending merchandise inventory
b) sales revenue
c) purchases
d) purchase returns
13) inventory turnover measures ________.
a) the days’ sales in inventory ratio
b) how rapidly merchandise inventory is purchased
c) how rapidly merchandise inventory is sold
d) the time period for inventory to become obsolete
14) which of the following statements accurately describes the statement of cash flows?
a) it shows the relative proportion of debt and assets
b) it shows the link between accrual based income and the cash reported on the balance
sheet
c) it indicates when long-term debt will mature
d) it shows the link between book income and earnings per share
15) which of the following is true of the internal control component “information
system”?
a) internal auditors monitor company controls to safeguard assets, and external auditors
monitor the controls to ensure that the accounting records are accurate
b) control procedures are designed to ensure that the business’s goals are achieved
c) only authorized users have access to various parts of the information system
d) the information system is the “tone at the top” or the culture of the business
16) aurum services inc. acquired 100,000 shares of gamma metals inc. on january 1,
2015. gamma declares a cash dividend of $0.25 per share on february 15, 2015 and
pays the cash dividend on march 2, 2015. with the current investment, aurum services
inc. holds 8% of gamma’s voting stock. which of the following will be the correct
journal entry for the day when the dividend payment is made (march 2, 2015)?
a)
b)
c) no entry
d)
17) refer to the following adjusted trial balance.
what will be the final ending balance in the retained earnings account after posting the
closing entries?
a) $17,800
b) $20,800
c) $24,200
d) $23,800
18) when there is an unrealized loss on trading investments, the ________ will
decrease.
a) total equity
b) cash
c) total liabilities
d) long term investments
19) under the direct write-off method, the entry to write off an uncollectible account
will include ________.
a) a debit to bad debts expense account
b) a debit to the customer’s account receivable
c) a credit to the allowance for bad debts
d) no entry is made to write off uncollectible accounts
20) following is a list of account balances of wilson mowing services as of december 31
of the first year of operation:
calculate the net income.
a) $21,200
b) $11,900
c) $12,200
d) $24,100
21) which of the following inventory valuation methods should be used for unique
items?
a) first-in, first-out
b) last-in, first-out
c) weighted-average
d) specific identification
22) the worksheet helps accountants to ________.
a) make the adjusted trial balance
b) prepare the financial statements
c) prepare the unadjusted trial balance
d) maintain books of accounts without a journal
23) assume all dividends declared during the year were paid.
how much was the net cash flow from financing activities?
a) $2,000
b) $10,000
c) $(6,000)
d) $6,000
24) which of the following is included in the entry to record accrual of warranty
expense?
a) a debit to warranty expense
b) a credit to merchandise inventory
c) a credit to warranty expense
d) a debit to estimated warranty payable
25) refer to the following bank reconciliation:
bankbook
balance, june 30, 2014$11,240.00balance, june 30, 2014$10,200.00
add:add:
deposit in transit3,110.00note collected by bank2,100.00
interest revenue55.00
less:less:
outstanding checks #5061,200.00nsf check85.00
outstanding checks #510900.00bank service charge20.00
__________________
adjusted balance, adjusted balance,
june 30, 2014$12,250.00june 30, 2014$12,250.00
journalize the adjusting entry for the third reconciling item: nsf check.
26) ferro inc. signed a 200-day, 5%, $5,000 note on april 1, 2014, and that this was the
only note payable for the company. calculate the times-interest-earned ratio of ferro inc.
if its operating income for the year ending december 31, 2014, amounts to $4,300.
assume a tax rate of 20%.
27) on january 2, 2014, mahoney sales issued $10,000 in bonds for $9,400. they were
5-year bonds with a stated rate of 4%, and pay semiannual interest. mahoney sales uses
the straight-line method to amortize bond discount. provide the journal entry for the
first interest payment on june 30, 2014.
28) on october 1, 2015, nurix inc. purchased a patent for $100,000 cash. although the
patent gives legal protection for 20 years, it is expected to be used for only eight years.
journalize the purchase of the patent.
29) on march 1, 2014, nortons inc. paid $60,000 for office rent covering the
three-month period ending may 31, 2014. journalize the adjusting entry on march 31 by
using the alternative treatment of prepaid expenses.
30) barkin corporation’s accounting records include the following items, listed in no
particular order, for the year ending december 31, 2015:
other revenues and (expenses)gain on discontinued operations$75,000
gain on sale of equipment$12,000extraordinary loss15,000
loss on disposal of equipment5,000cost of goods sold285,000
net sales650,000operating expenses120,000
the income tax rate for the company is 45%. the company had 15,000 shares of
common stock outstanding during 2015, and no preferred stock. prepare barkin’s
income statement for the year ending december 31, 2015. show how barkin reports eps
data on its 2015 income statement.
31) on december 31, 2014, ferrero inc. borrowed $500,000 by signing a note payable.
the note is for 5 years and bears interest at the rate of 8%. the note is payable in 5 yearly
installments of $100,000 plus interest due at the end of every year beginning on
december 31, 2015. what amount represents the current portion of long-term notes
payable at december 31, 2014?
32) data for atlantis inc. follow:
atlantis inc.
comparative income statement
years ended dec 31, 2015 and 2014
20152014
net sales revenue$550,000$500,000
expenses:
cost of goods sold245,000220,000
selling and administrative expenses100,00096,000
other expenses(interest expense)12,0009,000
income tax expense58,00047,000
total expenses$415,000$372,000
net income$135,000$128,000
prepare a horizontal analysis of the comparative income statement of atlantis inc.
(round percentage changes to one decimal place.) use a multi-step format for the
income statement.
