1) the retained earnings statement is more comprehensive than the statement of
shareholders equity.
2) cash equivalents are highly liquid investments that can be converted into a specific
amount of cash.
3) in computing the maturity date of a note, the date the note is issued is included but
the due date is omitted.
4) when preferred stock is cumulative, preferred dividends not declared in a given
period are called dividends in arrears.
5) when investments in bonds are sold, any difference between the sales price and the
fair value of the bonds is recorded as a gain or loss.
6) cash flow from investing activities is considered the most important category on the
statement of cash flows because it is considered the best measure of expected income.
7) the safeguarding of assets is an objective of a company’s system of internal control.
8) the bookkeeper recorded the following journal entry
which one of the following statements is false?
a.this entry was prepared on the last day of the accounting period
b.there should be written authorization for this transaction from someone who does not
have responsibilities related to recording cash
c.there could be a violation of internal control policies
d.james account was written off because it was determined to be uncollectible
9) all of the following are factors that a company should consider before a write-down
impairment of an asset is recorded except
a.an appraisal of the asset
b.market trends
c.company profits
d.obsolescence of the asset
10) the declining-balance method of depreciation produces a(n)
a.decreasing depreciation expense each period
b.increasing depreciation expense each period
c.declining percentage rate each period
d.constant amount of depreciation expense each period
11) the current ratio is
a.current assets plus current liabilities
b.current assets minus current liabilities
c.current assets divided by current liabilities
d.current assets times current liabilities
12) the principles of internal control activities are used in the
a.u.s. but not globally
b.internationally but not in the u.s
c.in the u.s. and canada but not globally
d.globally
13) debits
a.increase both assets and liabilities.
b.decrease both assets and liabilities.
c.increase assets and decrease liabilities.
d.decrease assets and increase liabilities.
14) de meaning corporation issued a one-year 6% $200,000 note on april 30, 2011.
interest expense for the year ended december 31, 2011 was:
a.$12,000
b.$9,000
c.$8,000
d.$7,000
15) the relationship between current assets and current liabilities is
a.useful in determining income
b.useful in evaluating a company’s liquidity
c.called the matching principle
d.useful in determining the amount of a company’s long-term debt
16) nelson company, organized in 2012, has these transactions related to intangible
assets in that year:
(a)prepare the necessary entries to record these intangibles. all costs incurred were for
cash.
(b)make the entries as of december 31, 2012, recording any necessary amortization.
(c)indicate what the balance should be on december 31, 2012.
17) foster corporation had net income of $160,000 and paid dividends to common
stockholders of $40,000 in 2012. the weighted average number of shares outstanding in
2012 was 50,000 shares. foster corporation’s common stock is selling for $50 per share
on the new york stock exchange. faster corporation’s payout ratio for 2012 is
a.$5 per share
b.25%
c.20%
d.12.5%
18) transactions in a journal are initially recorded in
a.account number order.
b.dollar amount order.
c.alphabetical order.
d.chronological order.
19) a complete journal entry does not show
a.the date of the transaction.
b.the new balance in the accounts affected by the transaction.
c.a brief explanation of the transaction.
d.the accounts and amounts to be debited and credited.
20) match the items below by entering the appropriate code letter in the space provided.
a. compound interest d. present value of a single amount
b. future value of a single amount e. present value of an annuity
c. future value of an annuity
1>the value today of a future amount to be received or paid.
2>the value at a future date of a given amount invested.
3>return on principal for two or more periods.
4>value today of a series of future amounts to be received or paid.
5>the sum of all the payments or receipts plus the accumulated compound interest on
them.
21) expenses are incurred
a.only on rare occasions
b.to produce assets
c.to produce liabilities
d.to generate revenues
22)
23) the book value of an asset is equal to the
a.asset’s fair value less its historical cost
b.blue book value relied on by secondary markets
c.replacement cost of the asset
d.asset’s cost less accumulated depreciation
24) blank checks
a.should be safeguarded
b.should be pre-signed
c.do not need to be safeguarded since they must be signed to be valid
d.should not be pre-numbered
25) dekin company had checks outstanding totaling $8,500 on its may bank
reconciliation. in june, dekin company issued checks totaling $53,200. the july bank
statement shows that $39,600 in checks cleared the bank in july. a check from one of
dekin company’s customers in the amount of $400 was also returned marked “nsf.” the
amount of outstanding checks on dekin company’s july bank reconciliation should be
a.$21,700
b.$13,600
c.$22,100
d.$5,100
26) which one of the following ratios would not likely be used by a short-term creditor
in evaluating whether to sell on credit to a company?
a.current ratio
b.inventory turnover ratio
c.asset turnover ratio
d.receivables turnover ratio
27) salazar company had these transactions pertaining to stock investments:
instructions
journalize the transactions.
28) the two methods used in accounting for uncollectible accounts are the
____________ method and the ______________ method.
29) the ______________ ratio is calculated as cost of goods sold divided by average
inventory.
30) at december 31, 2012, the following information (in thousands) was available for
kitselman inc.: ending inventory $22,600; beginning inventory $21,400; cost of goods
sold $181,000; and sales revenue $430,000. calculate the inventory turnover ratio and
days in inventory for kitselman.
31) at the beginning of the year, gant company had total assets of $690,000 and total
liabilities of $300,000. answer the following questions viewing each situation as being
independent of the others.
(1)if total assets increased $225,000 during the year, and total liabilities decreased
$100,000, what is the amount of stockholders equity at the end of the year?
(2)during the year, total liabilities increased $215,000 and stockholders equity
decreased $130,000. what is the amount of total assets at the end of the year?
32) you are at a company picnic and the company president starts a conversation with
you. the president says since we use the perpetual inventory system, there is no reason
to take a physical count of our inventory. what is your response to the presidents
remarks?
33) on september 1, pennington supply had an inventory of 20 backpacks at a cost of
$25 each. the company uses a perpetual inventory system. during september, the
following transactions and events occurred.
instructions
journalize the september transactions for pennington supply.
34) schmidt company received a letter from deborah stine, a customer. deborah had
purchased $325 worth of clothing from schmidt on credit. she has made two payments
of $50 each. she has missed the last two payments, and has received a collection letter
from schmidt. her total debt presently, with interest and late fees, is $2513.
deborah sent a letter to schmidt in which she asked for her debt to be forgiven. she said
she had heard that companies make allowances for accounts they are doubtful about
collecting, and that schmidt certainly should have been doubtful about herthat as a
college student she had changed her major three times. she also said that she could not
enjoy a high quality of life when making such high payments, but that she didn’t want to
be embarrassed by bill collectors, either. she especially didn’t want her parents to find
out that she had not paid her debts. having schmidt write off her account seemed to her
the best solution in the circumstances. she added that the clothes she bought at schmidt
were among the best she had ever owned, and that she “told everybody” that schmidt
was definitely the best place to get clothes.
you are the accounting manager for schmidt. write a short letter to deborah explaining
why her debt cannot be written off.
35) raphael mendoza, the ceo of mystical products, is a successful entrepreneur and his
focus is his products, not his accounting system. he asks you to explain to him, in a
memo, the bases of comparison for ratio analysis.