The personal assets and liabilities of an owner are not shown on the business’s financial
statements because of the
A. separate entity concept.
B. sole proprietorship concept.
C. financial position concept.
D. objectivity concept.
Use the following information regarding Larson Company to answer the question
below.
1) Established a petty cash fund in the amount of $250.
2) Reimbursed the petty cash fund given the following petty cash fund disbursements:
a. Payment for postage, $20.
b. Payment for supplies, $70.
3) Increased the petty cash fund to $300.
4) Cash over at the end of the first period was $5.
The entry to record the increase in the Petty Cash account would include a
A. debit to the Petty Cash account for $50.
B. credit to the Petty Cash account for $50.
C. memorandum entry only in the ledger.
D. debit to the Cash account for $50.
Which of the following accounts is not considered an asset?
A. Accounts Receivable
B. Inventory
C. Accounts Payable
D. Trademark
Dividends yield equals
A. market price per share divided by dividends per share.
B. net income divided by dividends per share.
C. dividends per share divided by net income.
D. dividends per share divided by market price per share.
Which of the following transactions will not result in an increase in revenues?
A. Sale of goods on credit.
B. Sale of services for cash.
C. Accumulation of interest in bank account.
D. An investment into the business by the owner.
A short-term investment in a U.S. Treasury bill costs $24,200 and will mature in six
months at $25,000. Management intends to hold the investment until it matures. The
entry to record receipt of cash at maturity is: (No prior entries were made to recognize
revenue.)
A. Cash 25,000
Short-Term Investments 24,200
Interest Income 800
B. Cash 25,000
Short-Term Investments 25,000
C. Cash 24,200
Short-Term Investments 24,200
D. Cash 25,000
Available-for-sale debt securities are valued on the balance sheet at
A. cost, adjusted for the effects of interest.
B. maturity value.
C. fair value.
D. original cost.
Greco Co. issued ten-year term bonds on January 1, 20×5, with a face value of
$1,600,000. The face interest rate is 6 percent and interest is payable semi-annually on
June 30 and December 31. The bonds were issued for $1,381,920 to yield an effective
annual rate of 8 percent. The effective interest method of amortization is to be used. The
carrying value of the bonds payable on the December 31, 20×5, balance sheet date
should be
A. $1,392,824.
B. $1,396,472.
C. $1,396,764.
D. $1,381,920.
Use the following information regarding Larson Company to answer the question
below.
1. Established a petty cash fund in the amount of $250.
2. Reimbursed the petty cash fund given the following petty cash fund disbursements:
a. Payment for postage, $20.
b. Payment for supplies, $70.
3. Increased the petty cash fund to $300.
4. Cash over at the end of the first period was $5.
The entry to establish the petty cash fund would include a
A. debit to the Cash account for $250.
B. debit to the Petty Cash account for $250.
C. memorandum entry only in the ledger.
D. credit to the Petty Cash account for $250.
Which of the following is an example of egregious financial reporting fraud as
discussed in the text?
A. Closing the books at the end of the reporting period.
B. Transferring assets to an affiliate at more than their actual value.
C. Recording as expenses expenditures that should have been classfied as expenses.
D. Recording a liability when title to merchandise passes to the purchaser.
A low receivable turnover indicates that
A. few customers are defaulting on their debts.
B. a large proportion of the company’s sales are on credit.
C. the company’s inventory is moving very quickly.
D. customers are making payments slowly.
The purpose of a statement of stockholders’ equity is to
A. disclose the computation of book value per share of stock.
B. budget the transactions expected to occur during the forthcoming period.
C. replace the statement of retained earnings.
D. summarize the changes in the components of stockholders’ equity for a period of
time.
All of the following are stockholders’ equity accounts except
A. Treasury Stock.
B. Preferred Stock.
C. Retained Earnings.
D. Dividends Payable.
Which of the following is the least useful in evaluating a relationship as either
favorable or unfavorable?
A. Past and current performances of the company
B. Industry averages
C. Past performance of the company
D. Rule-of-thumb measures
A company is referred to as a diversified company or a conglomerate if it operates in
A. many related industries.
B. many unrelated industries.
C. many and varied locations throughout the world.
D. one single major industry.
The general ledger account for Accounts Receivable shows a debit balance of $50,000.
Allowance for Uncollectible Accounts has a credit balance of $3,000. Net sales for the
year were $500,000. In the past, 3 percent of sales have proved uncollectible, and an
aging of accounts receivable resulted in an estimate of $20,000 of uncollectible
accounts receivable.
Using the percentage of net sales method, the entry to record the Uncollectible
Accounts Expense would be
A. Uncollectible Accounts Expense 12,000
Allowance for Uncollectible Accounts 12,000
B. Uncollectible Accounts Expense 15,000
Allowance for Uncollectible Accounts 15,000
C. Allowance for Uncollectible Accounts 18,000
Uncollectible Accounts Expense 18,000
D. Allowance for Uncollectible Accounts 20,000
Mozilla Mining Company purchased land containing an estimated 10,000,000 tons of
ore for a cost of $750,000. The land without the ore is estimated to be worth $150,000
(the residual value). Buildings costing $45,000 with an estimated useful life of 20 years
were erected on the site. Because of the remote location, the buildings have no residual
value. The company expects that all the usable ore can be mined in eight years. During
its first year of operation, the company mined 1,000,000 tons of ore and at the end of
the year had an inventory of 200,000 tons. Determine the following amounts for the
first year: (a) depletion charge per ton; (b) depletion expense for year; and (c)
depreciation expense for buildings, using the straight-line method. (Show your work.)
a. $0.06 [($750,000 – $150,000) 10,000,000]
b. $60,000 ($0.06 1,000,000)
c. $5,625 ($45,000 8)
Firehawk Corporation had net income of $560,000 in 20×5 and paid dividends of
$440,000 on 200,000 shares of outstanding common stock. Total stockholders’ equity at
the end of 20×5 was $2,060,000 and the market price for each share of Firehawk’s stock
was $58 throughout 20×5. Additionally, the company paid preferred dividends of $2.40
per share during 20×5. Based on this information, what is the dividend yield on
Firehawk’s stock?
A. 21.36%
B. 78.57%
C. 3.79%
D. 7.93%
Return on equity is measured in terms of
A. days.
B. times.
C. a percentage.
D. dollars.
On January 1, 20×5, Dove Valley Corporation had 100,000 shares of $10 par value
common stock issued and outstanding. All 100,000 shares had been issued in a prior
period at $30 per share. On February 1, 20×5, Dove Valley purchased 4,000 shares of
treasury stock for $36 per share and later sold the treasury shares for $40 per share on
March 2, 20×5. The entry to record the sale of the treasury shares on March 2, 20×5, is :
A. Cash 160,000
Common Stock 144,000
Retained Earnings 16,000
B. Cash 160,000
Treasury Stock-Common 144,000
Paid-in Capital, Treasury Stock 16,000
C. Cash 160,000
Treasury Stock-Common 144,000
Retained Earnings 16,000
D. Cash 160,000
Days’ sales uncollected equals 365 days divided by
A. net sales.
B. average net accounts receivable.
C. net income.
D. the receivable turnover.
On June 3, Addison Company purchased merchandise worth $1,600 on credit, terms
2/10, n/30. The amount paid on June 15. What is the required journal entry to record the
payment under the periodic inventory system?
A. Accounts Payable 1,568
Purchases Discounts 32
Cash 1,600
B. Accounts Payable 1,600
Purchases Discounts 32
Cash 1,568
C. Cash 1,600
Accounts Payable 1,600
D. Accounts Payable 1,600
Which of the following is not an enhancing qualitative characteristic?
A. Verifiability
B. Timeliness
C. Understandability
D. Neutrality
Which of the following is not an advantage of issuing long-term debt?
A. The stockholders do not relinquish any control.
B. The interest is tax-deductible.
C. The risk of becoming bankrupt is reduced.
D. Increased earnings accrue to the stockholders.
Sinoyianis Realty Company had the following balance sheet accounts and balances:
If, $6,000 of Accounts Payable were paid in cash, what would be the total of liabilities and
owner’s equity?
A. $28,000
B. $34,000
C. $46,000
D. $52,000
Yount, Inc. issues $400,000 of 20-year, 9 percent bonds at 95. Interest is paid
semiannually, and the effective interest method is used for amortization. Assume that
the market interest rate for similar investments is 10 percent and that the bonds are
issued on an interest date.
a. What amount was received for the bonds?
b. How much interest is paid each interest period?
c. How much bond interest expense is recorded on the first interest date (after the issue
date)?
d. What is the carrying value of the bonds after the first interest date (after the issue
date)?
On August 1, Phillips Industries purchased $12,000 of merchandise on credit. Terms of
1/10, n/30 are extended, and Phillips makes payment on August 9.
a) In the journal provided, prepare Phillips’s entries, assuming use of the periodic
inventory system.
b) Prepare the entry that would have been made had payment been made on August 17.
On July 1, 20×5, Benchley Corporation issued bonds with a face value of $600,000. The
bonds carry a face interest rate of 8 percent that is payable each June 1 and December 1.
a. Prepare an entry in journal form without explanations to record the issuance
assuming the bonds are issued at 100.
b. Prepare an entry in journal form without explanations to record the issuance
assuming the bonds are issued at 97.
c. Prepare an entry in journal form without explanations to record the issuance
assuming the bonds are issued at 103.
Which of the following ratios uses the market price of a company’s stock in the
denominator?
A. Price/Earnings.
B. Dividend yield
C. Cash flow yield
D. All of these choices.
The process of transferring journal entry information from the journal to the ledger is
called
A. journalizing.
B. posting.
C. footing.
D. analzying.
A. From the simplified balance sheet and income statement of the business below,
compute the following ratios. Assume that the April 30 amounts for total assets and
owner’s equity also represent their average amounts for the period. Round percentages
to the nearest whole percent.
a. Working capital
b. Current ratio
c. Profit margin
d. Return on assets
e. Debt to equity ratio
