Which one of the following items would not be considered cash?
a. Coins
b. Money orders
c. Currency
d. Postdated checks
Answer:
At May 1, 2015, Kibbee Company had beginning inventory consisting of 200 units with
a unit cost of $7. During May, the company purchased inventory as follows:
800 units at $7
600 units at $8
The company sold 1,000 units during the month for $12 per unit. Kibbee uses the
average cost method. The average cost per unit for May is
a. $7.000.
b. $7.375.
c. $7.500.
d. $8.000.
Answer:
A company with total stockholders’ equity of $85,000 paid a $10,000 business debt. As
a result of this transaction, total stockholders’ equity
a. did not change.
b. increased by $10,000.
c. decreased by $10,000.
d. increased to $95,000.
Answer:
South Airlines purchased a 747 aircraft on January 1, 2014, at a cost of
$35,000,000. The estimated useful life of the aircraft is 20 years, with an
estimated salvage value of $5,000,000. On January 1, 2017 the airline
revises the total estimated useful life to 15 years with a revised salvage
value of $3,500,000.
Instructions
(a) Compute the depreciation and book value at December 31, 2016 using
the straight-line method and the double-declining-balance method.
(b) Assuming the straight-line method is used, compute the depreciation
expense for the year ended December 31, 2017.
Answer:
Revenue is recognized when cash dividends are received under
a. the controlling interest method.
b. the cost method.
c. the equity method.
d. both the cost and equity methods.
Answer:
Husker Du Supplies Inc. purchased a 12-month insurance policy on March 1, 2015 for
$1,800. At March 31, 2015, the adjusting journal entry to record expiration of this asset
will include a
a. debit to Prepaid Insurance and a credit to Cash for $1,800.
b. debit to Prepaid Insurance and a credit to Insurance Expense for $200.
c. debit to Insurance Expense and a credit to Prepaid Insurance for $150.
d. debit to Insurance Expense and a credit to Cash for $150.
Answer:
On October 4, 2015, JT Corporation had credit sales transactions of $4,000 from
merchandise having cost $2,400. The entries to record the day’s credit transactions
include a
a. debit of $4,000 to Inventory.
b. credit of $4,000 to Sales Revenue.
c. debit of $2,400 to Inventory.
d. credit of $2,400 to Cost of Goods Sold.
Answer:
Blitzen Corporation had net income of $200,000 and paid dividends to common
stockholders of $50,000 in 2014. The weighted average number of shares outstanding in
2014 was 40,000 shares. Blitzen Corporation’s common stock is selling for $35 per
share on the New York Stock Exchange. Blitzen Corporation’s price-earnings ratio is
a. 5.6 times.
b. 7 times.
c. 5 times.
d. 9.3 times.
Answer:
A credit balance in Cash Over and Short is reported as a(n)
a. asset.
b. liability.
c. miscellaneous expense.
d. miscellaneous revenue.
Answer:
Which of the following rules is incorrect?
a. Credits decrease the dividends account.
b. Debits increase the common stock account.
c. Credits increase revenue accounts.
d. Debits decrease liability accounts.
Answer:
In order to compute the present value of an annuity, it is necessary to know the
1> discount rate.
2> number of discount periods and the amount of the periodic payments or receipts.
a. 1
b. 2
c. both 1 and 2
d. something in addition to 1 and 2
Answer:
Physical controls to safeguard assets do not include
a. cashier department supervisors.
b. vaults.
c. employee identification badges.
d. security guards.
Answer:
The assumption that assumes a company will continue in operation long enough to
carry out its existing objectives is the
a. economic entity assumption.
b. going concern assumption.
c. monetary unit assumption.
d. time period assumption.
Answer:
A sales invoice is a source document that
a. provides support for goods purchased for resale.
b. provides evidence of incurred operating expenses.
c. provides evidence of credit sales.
d. serves only as a customer receipt.
Answer:
When a customer returns merchandise purchased on credit, the
a. customer should credit Accounts Payable.
b. seller should credit Sales Returns and Allowances.
c. customer should credit Accounts Receivable.
d. none of these answer choices are correct.
Answer:
An accumulated depreciation account
a. is a contra-liability account.
b. increases on the debit side.
c. is offset against total assets on the balance sheet.
d. has a normal credit balance.
Answer:
Which of the following is incorrect regarding a trial balance?
a. It proves that the debits equal the credits after posting.
b. It proves that the company has recorded all transactions.
c. A trial balance uncovers errors in journalizing and posting.
d. A trial balance is useful in the preparation of financial statements.
Answer:
In ratio analysis, the ratios are never expressed as a
a. rate.
b. negative figure.
c. percentage.
d. simple proportion.
Answer:
The financial statements of Hainz Company appear below:
Additional information:
a. Cash dividends of $23,000 were declared and paid in 2016.
b. Weighted-average number of shares of common stock outstanding during 2016 was
30,000 shares.
c. Market value of common stock on December 31, 2016, was $21 per share.
Instructions
Using the financial statements and additional information, compute the following ratios
for Hainz Company for 2016. Show all computations.
Computations
1> Current ratio _________.
2> Return on common stockholders’ equity _________.
3> Price-earnings ratio _________.
4> Acid-test ratio _________.
5> Accounts receivable turnover _________.
6> Times interest earned _________.
7> Profit margin _________.
8> Days in inventory _________.
9> Payout ratio _________.
10> Return on assets _________.
Ans: N/A
Answer:
An account will have a credit balance if the
a. credits exceed the debits.
b. first transaction entered was a credit.
c. debits exceed the credits.
d. last transaction entered was a credit.
Answer:
The primary purpose of the statement of cash flows is to provide information about the
cash receipts and cash payments of a company during a period.
Answer:
The ratios used in evaluating a company’s liquidity and short-term debt paying ability
that complement each other are the ______________ ratio and the ______________
ratio.
Answer:
The ______________ of a company is the average time that it takes to purchase
inventory, sell it on account, and then collect cash from customers.
Answer:
FIFO and LIFO are the two most common cost flow assumptions made in costing
inventories. The amounts assigned to the same inventory items on hand may be
different under each cost flow assumption. If a company has no beginning inventory,
explain the difference in ending inventory values under the FIFO and LIFO cost bases
when the price of inventory items purchased during the period have been (1) increasing,
(2) decreasing, and (3) remained constant.
Answer:
Prepare a corrected trial balance for Stereolab Company. All accounts should have a
normal balance.
Answer:
Interest is the difference between the amount borrowed and the principal.
Answer:
In the retained earnings statement, revenues are listed first, followed by expenses, and
net income (or net loss).
Answer:
The journal provides a chronological record of transactions.
Answer:
Using the units-of-activity method of depreciating factory equipment will generally
result in more depreciation expense being recorded over the life of the asset than if the
straight-line method had been used.
Answer:
Research and development costs which result in a successful product which is
patentable are charged to the Patent account.
Answer: