1) gross profit represents the merchandising profit of a company.
2) when an entire business is purchased, goodwill is the excess of cost over the book
value of the net assets acquired.
3) if a company changes its inventory valuation method, the effect of the change on net
income should be disclosed in the financial statements.
4) assets are decreased with a credit.
5) to obtain maximum benefit from a bank reconciliation, the reconciliation should be
prepared by the employee authorized to sign checks.
6) a manufacturers inventory consists of raw materials, work in process, and finished
goods.
7) accounting communicates financial information about a business to both internal and
external users.
8) the journal is a chronological record of all transactions.
9) leverage and return on equity are closely related.
10) bonding means insuring a company against theft by employees.
11) if the cash budget showed a projected cash shortage, the company would most
likely
a.make fewer purchases of inventory so they could control costs
b.lay off workers for that period
c.arrange to borrow the necessary cash for that period
d.cut salaries for that period
12) *a petty cash fund should be replenished
a.every day
b.at the end of every accounting period
c.once a year
d.as soon as an expense is paid from the fund
13) sparks company received proceeds of $211,500 on 10-year, 8% bonds issued on
january 1, 2011. the bonds had a face value of $200,000, pay interest annually on
december 31st, and have a call price of 102. sparks uses the straight-line method of
amortization. what is the amount of interest sparks must pay the bondholders in 2011?
a.$16,920
b.$16,000
c.$16,320
d.$1,692
14) jimmys repair shop started the year with total assets of $150,000 and total liabilities
of $120,000. during the year the business recorded $315,000 in revenues, $165,000 in
expenses, and dividends of $30,000. the net income reported by jimmys repair shop for
the year was
a.$120,000
b.$150,000
c.$90,000
d.$285,000
15) which of the following is not a qualitative characteristic associated with faithful
representation?
a.verifiable
b.materiality
c.neutral
d.all of the above are a qualitative characteristic
16) which of the following is not an internal control activity for cash?
a.the number of persons who have access to cash should be limited
b.the functions of record keeping and maintaining custody of cash should be combined
c.surprise audits of cash on hand should be made occasionally
d.all cash receipts should be recorded promptly
17) the board of directors of benson company declared a cash dividend of $1.50 per
share on 42,000 shares of common stock on july 15, 2012. the dividend is to be paid on
august 15, 2012, to stockholders of record on july 31, 2012. the effects of the journal
entry to record the payment of the dividend on august 15, 2012, are to
a.decrease stockholders equity and decrease liabilities
b.decease liabilities and decrease assets
c.increase stockholders equity and increase liabilities
d.increase stockholders equity and decrease assets
18) all of the following statements about free cash flow are false except
a.significant free cash flow indicates less potential to finance new investment
b.free cash flow is most commonly calculated by subtracting capital expenditures from
cash provided by operations and then adding cash dividends
c.free cash flow is not reported on the statement of cash flows
d.significant free cash flow indicates less potential to pay additional dividends
19) in a period of increasing prices, which inventory flow assumption will result in the
lowest amount of income tax expense?
a.fifo
b.lifo
c.average cost method
d.income tax expense for the period will be the same under all assumptions
20) external users of accounting information, like the internal revenue service, are most
commonly known as:
a.taxing authorities
b.labor unions
c.customers
d.regulatory agencies
21) what is the total stockholders equity based on the following account balances?
a.$1,890,000
b.$2,130,000
c.$2,250,000
d.$1,380,000
22) which statement is incorrect?
a.a chart of accounts is a listing of accounts used by a business.
b.new accounts can be added to the chart of accounts.
c.stockholders equity is an account that is included in the chart of accounts.
d.account titles for the chart of accounts are used in general journal entries.
23) dobler company uses a periodic inventory system. details for the inventory account
for the month of january 2012 are as follows:
an end of the month (1/31/2012) inventory showed that 140 units were on hand. if the
company uses lifo, what is the value of the ending inventory?
a.$737
b.$700
c.$762
d.$1,380
24) schwinn company assembled the following information in completing its march
bank reconciliation:
as a result of this reconciliation, schwinn will
a.reduce its cash account by $2,375
b.reduce its cash account by $125
c.increase its cash account by $275
d.reduce its cash account by $525
25) what is the term applied to the excess of sales over the cost of goods sold?
a.net sales
b.income from operations
c.net income
d.gross profit
26) of the following companies, which one would not likely employ the specific
identification method for inventory costing?
a.music store specializing in organ sales
b.farm implement dealership
c.antique shop
d.hardware store
27) nance corporations december 31, 2012 balance sheet showed the following:
nance declared and paid a $50,000 cash dividend on december 15, 2012. if the
companys dividends in arrears prior to that date were $12,000, triads common
stockholders received
a.$38,000
b.$18,000
c.$22,000
d.no dividend
28) using the indirect method, calculate the amount of cash flows from operating
activities from the following data:
29) alston company has income from continuing operations of $490,000 for the year
ended december 31, 2012. it also has the following items (before considering income
taxes):
(1)an extraordinary fire loss of $120,000.
(2)a gain of $60,000 on the discontinuance of a major segment.
(3)a cumulative effect of a change in accounting principle that resulted in an increase in
prior years’ depreciation of $50,000.
assume all items are subject to income taxes at a 30% tax rate.
instructions
prepare an income statement, beginning with income from continuing operations.
30) assets that are expected to be converted to cash or used in the business within a
relatively short period of time are called ______________.
31) in a manufacturing company, there are three categories of inventory: they are
_____________________, _________________, and _________________.
32) on january 1, 2012, dunbar company purchased at face value, a $1,000 5%, bond
that pays interest annually on january 1. dunbar company has a calendar year end. the
entry for the receipt of interest on january 1, 2013 is
33) prepare adjusting entries for the following transactions. omit explanations.
1>unrecorded interest accrued on savings bonds is $410.
2>property taxes incurred but not paid or recorded amount to $800.
3>legal service revenues of $4,000 were collected in advance. by year end $900 was
still unearned.
4>prepaid insurance had a $500 debit balance prior to adjustment. by year end, 60
percent was still unexpired.
5>salaries incurred by year end but not yet paid or recorded amounted to $650.
34) a corporations own stock that has been reacquired by the corporation and held for
future use is called __________________ and is deducted from total
_____________________ on the balance sheet.
35) identify and explain factors that affect quality of earnings.