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1) if a company determines cost of goods sold each time a sale occurs, it
a.must have a computer accounting system
b.uses a combination of the perpetual and periodic inventory systems
c.uses a periodic inventory system
d.uses a perpetual inventory system
2) a consequence of separation of duties is that
a.theft by employees becomes impossible
b.operations become extremely inefficient because of constant training of employees
c.more employees will need to be bonded
d.theft is still possible when several employees are involved
3) stockholders of a company may be reluctant to finance expansion through issuing
more equity because
a.leveraging with debt is always a better idea
b.their earnings per share may decrease
c.the price of the stock will automatically decrease
d.dividends must be paid on a periodic basis
4) at the time of acquisition of a debt investment
a.no journal entry is required
b.the cost principle applies
c.the stock investments account is debited when bonds are purchased
d.the investment account is credited for its cost plus brokerage fees
5) in performing a vertical analysis, the base for prepaid expenses is
a.total current assets
b.total assets
c.total liabilities
d.prepaid expenses in a previous year
6) financing activities involve
a.lending money
b.acquiring investments
c.issuing debt
d.acquiring long-lived assets
7) when a company receives an interest-bearing note receivable, it will
a.debit notes receivable for the maturity value of the note
b.credit notes receivable for the maturity value of the note
c.debit notes receivable for the face value of the note
d.credit notes receivable for the face value of the note
8) elston company compiled the following financial information as of december 31,
2012:
elstons stockholders equity on december 31, 2012 is:
a.$315,000
b.$330,000
c.$240,000
d.$360,000
9) when a company performs a service but has not yet received payment, it
a.debits service revenue and credits accounts receivable.
b.debits accounts receivable and credits service revenue.
c.debits service revenue and credits accounts payable.
d.makes no entry until cash is received.
10) which statement regarding negative cash balances is true?
a.the amount is offset against other current assets because users need to know net
current assets
b.the amount is shown as a current liability because a company cannot have a cash
balance below zero
c.the company must obtain a loan to bring the cash balance to zero before financial
statements are prepared
d.the negative cash balance is included as a current asset and discussed in a footnote to
the financial statements
11) plant assets are ordinarily presented in the balance sheet
a.at current market values
b.at replacement costs
c.at cost less accumulated depreciation
d.in a separate section along with intangible assets
12) the unearned service revenue account is classified as a(n)
a.asset.
b.revenue.
c.expense.
d.liability.
13) supplies are recorded as assets when purchased. therefore, the credit to supplies in
the adjusting entry is for the amount of supplies:
a.remaining
b.purchased
c.used
d.either used or remaining
14) the ability of a corporation to obtain capital is
a.enhanced because of limited liability and ease of share transferability
b.less than a partnership
c.restricted because of the limited life of the corporation
d.about the same as a partnership
15) in large companies, the independent internal verification procedure is often assigned
to
a.computer operators
b.management
c.internal auditors
d.outside cpas
16) the board of directors must assign a per share value to a stock dividend declared
that is
a.greater than the par or stated value
b.less than the par or stated value
c.equal to the par or stated value
d.at least equal to the par or stated value
17) which of the following accounts probably would be listed after the others in a chart
of accounts?
a.accumulated depreciation-buildings
b.insurance expense
c.dividends
d.notes payable
18) sophie's dog supplies has income before taxes of $550,000 and an extraordinary
loss of $170,000. if the income tax rate is 34% on all items, the income statement
should show income before irregular items and an extraordinary loss, respectively, of
a.$550,000 and ($170,000)
b.$363,000 and ($57,800)
c.$363,000 and ($112,200)
d.$187,000 and ($57,800)
