1) You have a goal of having $100,000 five years from today. The return on the
investment is expected to be 10% and will be compounded semi-annually. The amount
that needs to be invested today is closest to:
A.$61,390.
B.$62,090.
C.$78,350.
D.$38,550.
2) KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and
signing a $215,000 note payable. How would this transaction be reported within the
cash flow from investing activities section of the cash flow statement?
A.An outflow of $250,000.
B.An outflow of $215,000.
C.An outflow of $35,000.
D.It would not be reported in the investing activities section of the cash flow statement.
3) Atomic Company did not record a December 2013 purchase of inventory on credit
until January 2014. Assuming that the December 31, 2013 ending inventory was
correctly determined, what is the effect of this error on the financial statements for the
year ended December 31, 2014?
A.Net income is correct.
B.Stockholders’ equity is correct.
C.Net income is overstated.
D. Stockholders’ equity is overstated.
4) Which of the following would not be reported on a statement of stockholders’ equity?
A.Dividend payments.
B.Net income.
C.Beginning retained earnings.
D.Ending retained earnings.
5) Assume the following capital structure:
Preferred stock, 6%, $50 par value, 1,000 shares issued and outstanding with dividends
in arrears for three prior years (2011-2013).
Common stock, $100 par value, 2,000 shares issued and outstanding.
Total dividends declared and paid in 2014 were $50,000. How much of the 2014
dividend will be paid to the common stockholders assuming the preferred stock is
noncumulative?
A.$12,000.
B.$3,000.
C.$47,000.
D.$38,000.
6) Piano Company owns 55% of the voting common stock shares of Keys Corporation.
Which of the following is true?
A.The investment would be accounted for using the equity method.
B.The investment would be accounted for by consolidation.
C.The investment would be accounted for under the fair value method.
7) Which of the following is not true about the audit committee of the board of
directors?
A.They meet with the auditors to discuss management’s compliance with their financial
reporting responsibilities.
B.They ensure the accuracy and completeness of all reports provided to the Securities
& Exchange Commission (SEC).
C.They are responsible for ensuring that are in place for maintaining the integrity of the
financial statement preparation and reporting.
D.They are responsible for hiring the company’s external auditors.
8) Failure to record amortization expense on a patent during the current year will result
in which of the following?
A.Net income will be overstated, but there would be no effect on total assets.
B.Net income for the year and total assets would both be overstated.
C.Assets will be overstated, but there would be no effect on net income for the year.
D.Net income and assets will both be understated.
9) Indicate the effect of each item on the particular ratio of that row of the schedule. In
the last column of the schedule, place the answer of the effect of the item on the ratio.
Use the letter I for increase in the ratio, D for decrease in the ratio, and N for no effect
on the ratio. Each item is independent of the others.
10) Which of the following journal entries is correct when a business entity issues
common stock, above par value, to stockholders in exchange for cash?
A.Option A
B.Option B
C.Option C
D.Option D
11) Morgan Company used supplies in the amount of $2,000. Due to an error in posting
to the general ledger, the supplies account was credited for only $200 while supplies
expense was debited for $2,000. During which phase of the accounting cycle would this
error be first discovered?
A.Analysis of the supplies purchase transaction.
B.Closing the books.
C.Preparation of the adjusted trial balance.
D.Preparation of the income statement.