Dividends paid by a company are shown on the
A.income statement.
B.statement of changes in stockholders’ equity.
C.statement of cash flows.
D.the statement of changes in stockholders’ equity and the statement of cash flows.
Indicate whether each of the following statements is true or false. (Assume a periodic
inventory system)
_____ a) If the balance in ending inventory is overstated, net income will be
understated.
_____ b) If the balance in ending inventory is understated, retained earnings will be
understated.
_____ c) If the balance in ending inventory is overstated, selling and administrative
expenses will not be affected.
_____ d) If the balance in ending inventory is overstated, cost of goods sold will be
overstated.
_____ e) If the balance in ending inventory is overstated, assets will be overstated.
Which of the following is a correct statement of one of the rules for converting net
income to the cash flow from operating activities using the indirect method?
A.All noncash expenses and losses are subtracted from net income.
B.Increases in current liabilities are added to net income.
C.Increases in current assets are added to net income.
D.Decreases in current assets are subtracted from net income.
The following entry is taken from the journal of a merchandising company:
What is the effect of this entry on the accounting equation?
A.Assets and equity will increase.
B.Assets and liabilities will increase.
C.Assets and equity will decrease.
D.Assets will decrease and equity will increase.
Gilligan Corporation was established on February 15, 2014. Gilligan is authorized to
issue 500,000 shares of $6.00 par value common stock. As of December 2016,
Gilligan’s stockholders’ equity accounts report the following balances:
At the end of 2016, Gilligan decides to issue a 5% stock dividend.
At the time of issue, the market price of the stock was $22 per share.
Determine the dollar value of the stock dividend issued by Gilligan Corporation.
A.$60,500
B.$16,500
C.$44,000
D.$108,500
The Platte Corporation issues a 5-year note payable on January 1, 2016 for $5,000. The
interest rate is 5% and the annual payment of $1,156, due each December 31, includes
both interest and principal.
Which of the following correctly shows the effects of the December 31, 2017 payment
(rounded to the nearest whole dollar)?
A.
B.
C.
D.
Indicate whether each of the following statements is true or false.
_____ a) A journal entry includes at least one debit and one credit entry.
_____ b) The double-entry accounting format always records two separate events
simultaneously.
_____ c) The double-entry system requires that total debits equal total credits.
_____ d) When an asset decreases in a double-entry system, an equity account may also
decrease.
_____ e) The double entry system ensures complete accuracy in a company’s
accounting records.
Which of the following reflects the effect of the year-end adjusting entry to record
estimated warranty expense?
A.
B.
C.
D.
The following information for the year 2016 is taken from the accounts of Tuttle
Company. The company uses the periodic inventory method.
Based on this information, the inventory at December 31, 2016 is
A.$55,200.
B.$24,400.
C.$38,800.
D.$40,400.
The following balance sheet information is provided for Frederick Company:
The company’s quick (acid-test) ratio is closest to:
A.0.9
B.1.4
C.1.1
D.2.3
Assume the perpetual inventory method is used.
1) Green Company purchased merchandise inventory that cost $64,000 under terms of
2/10, n/30 and FOB shipping point.
2) The company paid freight cost of $2,400 to have the merchandise delivered.
3) Payment was made to the supplier within 10 days.
4) All of the merchandise was sold to customers for $94,000 cash and delivered under
terms FOB shipping point with freight cost amounting to $1,600.
As a result of the above transactions of Green Company, the net cash flow from
operating activities was
A.$94,000 inflow
B.$27,280 inflow
C.$66,720 outflow
D.$31,280 inflow
Indicate whether each of the following items regarding internal control is true or false.
_____ a) Accounting controls are composed of procedures designed to safeguard assets
and ensure accounting records contain reliable information.
_____ b) Administrative controls concern the reliability of the financial statements and
the accuracy of the general ledger.
_____ c) Whenever possible, the functions of authorization, recording and custody
should be exercised by the same dependable employee.
_____ d) Cash is most susceptible to embezzlement at the points of receipt and
disbursement.
_____ e) Even a well-designed internal control system cannot prevent collusion by
employees.
Which of the following statements is true?
A.Adjusting entries are recorded after the closing entries have been recorded.
B.Equal totals in a trial balance guarantees that no errors were made in the recording
process.
C.Debits are equal to credits only after closing entries have been made.
D.The balance in the retained earnings account in the trial balance will equal the
retained earnings balance on the balance sheet only after closing entries have been
posted to the general ledger.
Which of the following would not be a reason for the market price of Carlyle
Corporation to increase?
A.Carlyle Corp. has had good earnings in the present period.
B.A sustained increase in key interest rates.
C.The general condition and future outlook of the economy is good.
D.Investors believe Carlyle Corp. will do well in the future.
The adjusting entry to recognize work completed on unearned revenue involves which
of the following?
A.An increase in assets and a decrease in liabilities
B.An increase in liabilities and a decrease in equity
C.A decrease in liabilities and an increase in equity
D.A decrease in assets and a decrease in liabilities
Faust Company uses the perpetual inventory method. Faust sold goods that cost $2,300
for $3,600. If the sale was made on account, the net effect of the sale will:
A.increase total assets by $2,300.
B.increase total equity by $3,600.
C.increase total assets by $1,300.
D.increase total assets by $3,600.
In vertical analysis, each item is expressed as a percentage of:
A. Total cash on the balance sheet.
B.Total assets on the balance sheet.
C.Total current assets on the balance sheet.
D. None of these answer choices are correct.
On January 1, 2016, Pierce Corporation issued $25,000 in 8%, 5-year bonds payable at
102. Interest payments are due each December 31. Potter uses the straight-line method
of amortization.
Which of the following answers shows the effect of the bond issuance on 1/1/16?
A.
B.
C.
D.
What is meant by “market” in lower-of-cost-or-market calculations?
A.The amount of gross margin earned by selling merchandise.
B.The amount the goods were sold for during the period.
C.The amount that would have to be paid to replace the merchandise.
D.The amount originally paid for the merchandise.
The entry to replenish a petty cash fund includes:
A.A credit to Cash.
B.A credit to Petty Cash.
C.Credits to expenses.
D.A debit to Cash.
During 2016 the El Paso Company had the following changes in account balances:
1) The Accumulated Depreciation account had a beginning balance of $25,000 and an
ending balance of $35,000. The increase was due to depreciation expense.
2) The Long-Term Notes Payable account had a beginning balance of $40,000 and an
ending balance of $15,000. The decrease was due to repayment of debt.
3) The Equipment Account had a beginning balance of $25,000 and an ending balance
of $92,500. The increase was due to the purchase of other operational assets.
4) The Long Term Investments Account (Marketable Securities) had a beginning
balance of $18,000 and an ending balance of $12,500. The decrease was due to the sale
of investments at cost.
5) The Dividends Payable account had a beginning balance of $12,000 and an ending
balance of $10,000. There were $20,000 of dividends declared during the period.
6) The Interest Payable account had a beginning balance of $2,250 and an ending
balance of $1,250. The difference was due to the payment of interest.
What is the net cash flow from investing activities?
A.$62,000 outflow
B.$62,000 inflow
C.$67,500 outflow
D.$73,000 outflow
Which of the following is false regarding managerial accounting information?
A.It is often used by investors.
B.It is more detailed than financial accounting information.
C.It can include nonfinancial information.
D.It focuses on divisional rather than overall profitability.
The Hoover Company acquired the Burgess Company for $1,200,000 cash. The fair
value of Burgess’s assets was $1,040,000, and the company had liabilities of $60,000.
Which of the following choices would reflect the purchase on Hoover’s financial
statements?
A.
B.
C.
D.
On January 1, 2016, the Niagara Corporation arranges a $6,000 line of credit with the
Centennial Bank. It accepted the bank’s offer of 1% above the prime rate with interest
payments on December 31 of each year. All borrowings and repayments are to take
place on January 1 of each year.
Niagara records the first year’s interest payment on December 31, 2016. Centennial’s
prime rate is 4% for 2016. Which of the following answers shows the effect of this
event on the financial statements?
A.
B.
C.
D.
Indicate whether each of the following statements is true or false assuming use of the
allowance method of accounting for uncollectible accounts.
_____ a) The Allowance for Doubtful Accounts is a contra-asset account.
_____ b) The net realizable value of receivables is the difference between the ending
balance of accounts receivable and the ending balance in the allowance for doubtful
accounts.
_____ c) The recognition of uncollectible accounts expense at the end of an accounting
period does not affect the net realizable value of accounts receivable.
_____ d) The write-off of an uncollectible account reduces the net realizable value of
accounts receivable.
_____ e) The write-off of an uncollectible account does not affect the amount of a
company’s equity.
Baird Manufacturing Company issued $150,000 of 7%, 5-year bonds for $144,000, on
January 1, 2016. Interest is payable on January 1 of each year. Baird uses the
straight-line method of amortization. The first interest payment is to be made on
January 1, 2017.
Required:
a) Show the effects of the following events on the accounting equation.
Event 1) The issuance of the bonds.
Event 2) Accrual of interest at December 31, 2016.
Event 3) Amortization of discount at December 31, 2016.
Event 4) Payment of interest on January 1, 2017.
b) What is the carrying value of the bond on December 31, 2016?
c) What is the amount of interest paid in (1) 2016? (2) 2017?
d) What is the amount of interest expense shown on the income statement in 2016?
Which of the following is an incorrect statement of one of the rules for converting net
income to the cash flow from operating activities using the indirect method?
A.Increases in current assets are subtracted from net income.
B.Decreases in current assets are added to net income.
C.Noncash revenue and gains are added to net income.
D.Increases in current liabilities are added to net income.
Jasper Company accepted a check from Harp Company as payment for services
rendered. Jasper’s bank statement revealed that the Harp check was an NSF check.
What effect will the entry to record the NSF check have on the accounting equation of
Jasper Company?
A.
B.
C.
D.
The Horowitz Corporation recorded a business event using T-accounts as follows:
Which of the following reflects how this event affects the company’s financial
statements?
A.
B.
C.
D.
Which of the following reflects the effect of the year-end adjusting entry to record
estimated uncollectible accounts expense using the allowance method?
A.
B.
C.
D.
List three measures that a business can use to achieve strong internal controls.
Any three of the following:
Why does the recording of a taxable sale increase a company’s liabilities?
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts.
A transaction recorded as a debit to Dividends and a credit to Cash.
If Bowman Company is using LIFO, how would the accountant compute cost of goods
sold when recording a sale under the perpetual inventory system?
Gleason Company and Henry Company are similar and similar-sized companies
operating in the same industry. At the end of the most recent year, Gleason’s
price/earnings ratio was 22.0, and Henry’s price/earnings ratio was 14.2. What
conclusion would you draw based on the difference in price/earnings ratios for the two
companies?
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Use only one letter
for each element. You do not need to enter amounts.
Wheaton Company reissued 100 shares of treasury stock. The treasury stock had been
purchased by Wheaton at $18 per share. The shares were reissued at a price of $20 per
share.
Define the accounting cycle and list the stages of the cycle.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Enter only one
letter for each element. You do not need to enter amounts.
On September 1, 2016, Diaz Company loaned $10,000 to Ace Company. Show the
effect of this transaction on Diaz’s financial statements.
How are interest rates normally set for lines of credit?
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. You do not need to
enter amounts. Enter only one letter for each element.
Belvedere Company recognized $2,500 of depreciation expense on a delivery van.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Enter only one
letter for each element. You do not need to enter amounts.
On September 1, 2016, Ruiz Company loaned $10,000 to Alpha Company. Show the
effect of the December 31, 2016 adjusting entry to accrue interest on Ruiz’s financial
statements.
Are outstanding checks an adjustment to the book balance, the bank balance, or not
used in a bank reconciliation?
Give three examples of asset use transactions.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Use only one letter
for each element. You do not need to enter amounts.
Grover Co. declared a 2-for-1 stock split. Before that announcement, Grover had 40,000
shares of outstanding common stock.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Enter only one
letter for each element. You do not need to enter amounts.
Cole Co. uses the direct write-off method to account for uncollectible accounts in the
amount of $4,000. Show the effect of this write-off.
Indicate how each event affects the elements of financial statements. Use the following
letters to record your answer in the box shown below each element. Use only one letter
for each element. You do not need to enter amounts.
On January 1, 2016, Eagle Co. issued $100,000 of bonds payable at the face value.
When the bonds matured on December 31, 2021, Eagle used cash to repay the bond
principal and the interest for one year, which had not been previously accrued. Indicate
the effects of the 12/31/21 payment.