Arco Corporation declared a cash dividend on June 2 of $6 per common share. The
company has 2,000 shares of common stock authorized, 1,000 shares issued, and 200 in
the treasury. The entry to record the declaration of the cash dividend increases
a. a liability.
b. an asset.
c. an expense.
d. a stockholders’ equity account.
Balance sheet accounts are also known as which of the following?
a. Nominal accounts
b. Real accounts
c. Temporary accounts
d. Closing accounts
a. A liability resulting from the signing of a promissory note.
b. A measure of how long it takes to collect receivables.
c. A written promise to repay a definite sum of money on demand or at a fixed or
determinable date in the future.
d. The length of time a note is outstanding, that is, the period of time between the date it
is issued and the date it matures.
e. The party that will receive the money from a promissory note at some future date.
f. The process of selling a promissory note.
g. The date the promissory note is due.
h. The amount of cash the maker is to pay the payee on the maturity date of the note.
i. The difference between the principal amount of the note and its maturity value.
j. An asset resulting from the acceptance of a promissory note from another company.
k. Securities issued by corporations and governmental bodies as a form of borrowing.
l. Securities issued by corporations as a form of ownership in the business.
m. The party that agrees to repay the money for a promissory note at some future date.
n. The amount of cash received, or the fair value of the products or services received,
by the maker when a promissory note is issued.
Note payable
Which of the following accounts is not closed to Income Summary at the end of the
accounting period?
a. Rent Expense
b. Service Revenue
c. Unearned Revenue
d. Supplies Expense
Which of the following is not a requirement of Sarbanes-Oxley?
a. Annual report must include an internal control report
b. External auditors can no longer provide human resource services
c. External auditors can no longer provide brokerage services
d. Must establish an internal control system that guarantees financial accuracy
When a bank pays interest or collects an amount owed to a company by one of the
bank’s customers, the bank issues a credit memorandum.
a. True
b. False
Which statement is true concerning gains and losses?
a. Gains and losses are reported on the balance sheet in the Assets and Liabilities
sections, respectively.
b. Gains and losses are special types of revenues and expenses that are reported on the
income statement.
c. The amounts of gains and losses are included in the calculation of the current ratio, in
the numerator and denominator, respectively.
d. Gains and losses are reported only on a multi-step income statement.
Marcos Inc. had net income for 2014 of $40,000. It declared and paid a $3,500 cash
dividend in 2014. If the company’s retained earnings for the end of the year was
$38,200, what was the company’s retained earnings balance at the beginning of 2014?
a. $81,700
b. $74,700
c. $5,300
d. $1,700
A financial analyst is comparing two companies. Which of the following would cause
major problems in the evaluation process?
a. One company has a fiscal year that ends on October 31, while the other company has
a fiscal year that ends on August 31.
b. One company reported nonoperating activities, while the other company did not.
c. The companies operate in different industries.
d. Inflation has been low for the past several years.
Maxim Company sells auto parts. The company employs a periodic inventory system.
Identify all the effects on the accounting equation.
a. Increase in assets
b. Decrease in assets
c. Increase in liabilities
d. Decrease in liabilities
e. Increase on owners’ equity
f. Decrease in owners’ equity
g. Increase in assets and increase in owners’ equity
h. Decrease in assets and decrease in owners’ equity
i. Increase in liabilities and decrease in owners’ equity
j. Decrease in liabilities and increase in owners’ equity
Gave a customer a cash refund.
The primary responsibility for the preparation and integrity of the financial statements
in an annual report belongs to the company’s independent accountants (CPAs).
a. True
b. False
What type of interest is calculated on the balance of the principal only?
a. equivalent interest
b. compounded interest
c. future interest
d. simple interest
Match the following business forms with their characteristics below.
a. Sole proprietorship
b. Partnership
c. Corporation
Single owner
Flannery Company uses a worksheet to prepare its statement of cash flows. The
company also uses the indirect method for the Operating Activities section of its
statement. For each of the following changes in the balance sheet, indicate what activity
it affects and whether it is an addition or deduction. a. Deducted from Operating activity
b. Added to Operating activity
c. Deducted from Investing activity
d. Added to Investing activity
e. Deducted from Financing activity
f. Added to Financing activity
Inventory decreased
Profit margin ratio
a. Market price per share
b. Net sales
c. Gross profit
d. Average total assets
e. Interest expense, net of tax
f. Net income
g. Total liabilities
h. Total assets
A note payable that is due in six months is a current liability.
a. True
b. False
A company using the periodic inventory system has the following account balances:
Merchandise Inventory at the beginning of the year, $3,600; Freight-In, $650;
Purchases, $10,700; Purchases Returns and Allowances, $1,950; Purchases Discounts,
$330. The cost of merchandise purchased is equal to
a. $12,670
b. $9,070
c. $8,420
d. $17,230
A company has $200 in cash, $500 in accounts receivable, and $700 in inventory. If
current liabilities are $400, then the quick ratio would be
a. 1.75 to 1
b. 2.25 to 1
c. 3.00 to 1
d. 3.50 to 1
The second step in the ethical decision-making model is to
a. List alternatives and evaluate the impact of each on those affected
b. Select the best alternative
c. Recognize an ethical dilemma
d. Analyze the key elements in the situation
Match the following choices to the listed situation.
a. a deferred expense
b. a deferred revenue
c. an accrued liability
d. an accrued asset
Interest earned on notes receivable, but not yet received is recorded
Temporary accounts are also known asaccounts.
Tentco reported the following amounts in various statements included in its 2014
annual report. (All amounts are stated in millions of dollars.)
(1) Prepare a Statement of retained earnings for the year ended December 31, 2014.
(2) Assume that Tentco presents a statement of stockholders’ equity rather than a
statement of retained earnings in its annual report. Explain how the information differs
between the two statements.
What are at least four important internal control procedures?
Scenic View Foods Corporation The following is the consolidated statements of income
for Scenic View Foods Corporation for the years ending December 31, 2015 and 201
Refer to the consolidated statements of income for Scenic View Foods Corporation.
REQUIRED: Identify three specific accounts of Scenic View Foods that might include
expenses accrued as a result of adjustments. Discuss the ‘effects’ of these on the
accounting equation. Ignore amounts.
is either the bond’s face value minus any unamortized discount or plus any unamortized
premium.
Burke Company The following income statement items are taken from the records of
Burke Company for the year ended December 31, 2014:
Read the information about Burke Company. Required:
Prepare a multiple-step income statement for the year ended December 31, 2014.
