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1) when a note is written to settle an open account no entry is necessary.
2) the asset turnover ratio is calculated as net sales divided by ending total assets.
3) the information needs and questions of external users vary considerably.
4) the common stock distributable account is classified as a current liability.
5) for available-for-sale securities, the unrealized gain or loss account is carried forward
to future periods.
6) an error in the ending inventory of the current period will have a similar effect on net
income of the next accounting period.
7) two primary external users of accounting information are investors and creditors.
8) the statement of cash flows shows the effects on net income of a companys
operating, investing, and financing activities for an accounting period.
9) in accordance with the cost principle, the cost of debt investments includes brokerage
fees and accrued interest.
10) the following information pertains to benedict company. assume that all balance
sheet amounts represent average balance figures.
what is the return on common stockholders equity ratio for benedict?
a.12.5%
b.10.0%
c.8.8%
d.8.0%
11) mrs. smith has worked for bosco inc. for 20 years without taking a vacation. an
internal control feature that would address this situation would be
a.human resource controls
b.establishment of responsibility
c.physical controls
d.documentation procedures
12) dividends paid
a.increase assets
b.increase expenses
c.decrease revenues
d.decrease retained earnings
13) which one of the following is not necessary in order for a corporation to pay a cash
dividend?
a.adequate cash
b.approval of stockholders
c.declared dividends
d.retained earnings
14) if expenses are paid in cash, then
a.assets will increase.
b.liabilities will decrease.
c.stockholders equity will increase.
d.assets will decrease.
15) during the year, megans pet shops merchandise inventory decreased by $20,000. if
the companys cost of goods sold for the year was $300,000, purchases would have been
a.$320,000
b.$280,000
c.$260,000
d.unable to determine
16) if the cost method is used to account for an investment in common stock, dividends
received should be
a.credited to the stock investments account
b.credited to the dividend revenue account
c.debited to the stock investments account
d.recorded only when 20% or more of the stock is owned
17) all of the following situtations below might indicate a company has a low quality of
earnings except:
a.a lack of disclosure about guaranteed payments that were mentioned in the md&a of
the annual report
b.maintenance costs are capitalized and then depreciated
c.revenue is recognized when earned
d.adoption of a different inventory method for each of the last three years
18) which of the following is a measure of liquidity?
a.working capital
b.profit margin
c.earnings per share
d.debt to equity ratio
19) the indirect and direct methods of preparing the statement of cash flows are
identical except for the
a.significant noncash activity section
b.operating activities section
c.investing activities section
d.financing activities section
20) the following information was taken from the financial statements of bailey
company:
instructions
(a)compute the net sales for each year.
(b)compute the cost of goods sold in dollars and as a percentage of net sales for each
year.
(c)compute operating expenses in dollars and as a percentage of net sales for each year.
(income taxes are not operating expenses).
21) at january 1, 2014, troyer industries reported retained earnings of $280,000. during
2014, troyer had a net loss of $60,000 and paid dividends to the stockholders of
$40,000. at december 31, 2014, the balance in retained earnings is
a.$280,000 debit.
b.$240,000 credit.
c.$220,000 debit.
d.$180,000 credit.
22) american importers reports net income of $40,000 and cost of goods sold of
$360,000. if the companys gross profit rate was 40%, net sales were:
a.$600,000
b.$900,000
c.$940,000
d.$660,000
23) why are expenses increased with a debit?
a.they are always paid by cash, which is credited. thus expenses are debited.
b.they decrease stockholders equity thus they increase with a debit.
c.they have the same rules of debits and credits as the retained earnings account.
d.none of the statements are correct.
24) the future value of 1 factor will always be
a.equal to 1
b.greater than 1
c.less than 1
d.equal to the interest rate
25) indicate whether each of the business practices listed below strengthens (s) or
weakens (w) a companys system of internal control.
a.cashiers are not bonded.
b.all payments are made with checks.
c.discouraging employees from taking paid vacations.
d.two people handle cash sales from the same cash register drawer.
e.using prenumbered sales tickets.
26) which of the following is not part of the recording process?
a.analyzing transactions
b.preparing a trial balance
c.entering transactions in a journal
d.posting journal entries
27) two methods of accounting for uncollectible accounts are the
a.allowance method and the accrual method
b.allowance method and the net realizable method
c.direct write-off method and the accrual method
d.direct write-off method and the allowance method
28) sassy saxophones has the following inventory data:
assuming that a periodic inventory system is used, what is the amount allocated to
ending inventory on a lifo basis.
a.$7,328
b.$7,348
c.$15,392
d.$15,412
29) a revenue account is closed with a credit to the revenue account and a debit to
income summary.
30) _________________ activities involve collecting the necessary funds to start the
business.
31) using these data from the comparative balance sheet of marin company, perform
horizontal analysis.
32) an unrealized loss on trading securities is reported under other
____________________ in the income statement.
33) the tabular analysis of transactions for baxter company is presented below.
instructions
prepare a retained earnings statement for august and a classified balance sheet at august 31,
2014 .
34) if a company has a stock investment that is properly accounted for by the equity
method, what will be the effect on the financial statements when they receive a
dividend from its investee?
35) the difference between the cash in bank balance shown on the company's books and
the cash balance shown on the bank statement may be caused by ______________ and
by ______________ in recording transactions by either party.
