The ending retained earnings amount is shown on
a. the balance sheet only.
b. the retained earnings statement only.
c. both the income statement and the retained earnings statement.
d. both the balance sheet and the retained earnings statement.
Answer:
The corporate charter of Martin Corporation allows the issuance of a maximum of
4,000,000 shares of $1 par value common stock. During its first three years of
operation, Martin issued 3,200,000 shares at $15 per share. It later acquired 30,000 of
these shares as treasury stock for $25 per share.
Instructions
Based on the above information, answer the following questions:
(a) How many shares were authorized?
(b) How many shares were issued?
(c) How many shares are outstanding?
(d) What is the balance of the Common Stock account?
(e) What is the balance of the Treasury Stock account?
Answer:
Barker Company’s records show the following for the month of January:
Expenses for January were
a. $960,000.
b. $1,005,000.
c. $705,000.
d. $660,000.
Answer:
A liquidity ratio measures the
a. income or operating success of an enterprise over a period of time.
b. ability of the enterprise to survive over a long period of time.
c. short-term ability of the enterprise to pay its maturing obligations and to meet
unexpected needs for cash.
d. number of times interest is earned.
Answer:
A company just starting business made the following four inventory purchases in June:
A physical count of merchandise inventory on June 30 reveals that there are 250 units
on hand. Using the LIFO inventory method, the value of the ending inventory on June
30 is
a. $683.
b. $825.
c. $1,290.
d. $1,432.
Answer:
The consolidated worksheet shows Excess of Cost Over Book Value of Subsidiary of
$210,000. Management of the parent company determines that the market values for
subsidiary company plant assets are $90,000 higher than book values. In the
consolidated balance sheet, goodwill will be reported at
a. $210,000.
b. $120,000.
c. $90,000.
d. $0.
Answer:
Previously issued financial statements with errors are required to be restated under
a. GAAP only.
b. IFRS only.
c. Both GAAP and IFRS.
d. Neither GAAP or IFRS.
Answer:
Under the direct write-off method of accounting for uncollectible accounts
a. the allowance account is increased for the actual amount of bad debt at the time of
write-off.
b. a specific account receivable is decreased for the actual amount of bad debt at the
time of write-off.
c. balance sheet relationships are emphasized.
d. bad debt expense is always recorded in the period in which the revenue was recorded.
Answer:
Which of the following statements is correct with respect to inventories?
a. The FIFO method assumes that the costs of the earliest goods acquired are the last to
be sold.
b. It is generally good business management to sell the most recently acquired goods
first.
c. Under FIFO, the ending inventory is based on the latest units purchased.
d. FIFO seldom coincides with the actual physical flow of inventory.
Answer:
A small company may be able to justify using a cash basis of accounting if they have
a. sales under $1,000,000.
b. no accountants on staff.
c. few receivables and payables.
d. all sales and purchases on account.
Answer:
During 2014, Harvey Industries reported cash provided by operations of $670,000, cash
used in investing of $1,039,000, and cash used in financing of $145,000. In addition,
cash spent for fixed assets during the period was $404,000. No dividends were paid.
Based on this information, what was Harvey’s free cash flow?
a. ($369,000)
b. $1,450,000
c. $266,000
d. ($918,000)
Answer:
An income statement
a. summarizes the changes in retained earnings for a specific period of time.
b. reports the changes in assets, liabilities, and stockholders’ equity over a period of
time.
c. reports the assets, liabilities, and stockholders’ equity at a specific date.
d. presents the revenues and expenses for a specific period of time.
Answer:
A plant asset acquired on October 1, 2015, at a cost of $400,000 has an estimated useful
life of 10 years. The salvage value is estimated to be $40,000 at the end of the asset’s
useful life.
Instructions
Determine the depreciation expense for the first two years using:
(a) the straight-line method.
(b) the double-declining-balance method.
Answer:
A trial balance may balance even when each of the following occurs except when
a. a transaction is not journalized.
b. a journal entry is posted twice.
c. incorrect accounts are used in journalizing.
d. a transposition error is made.
Answer:
If a company utilizes reversing entries, they will
a. be made at the beginning of the next accounting period.
b. not actually be posted to the general ledger accounts.
c. be made before the post-closing trial balance.
d. be part of the adjusting entry process.
Answer:
Preparing tax returns and engaging in tax planning is performed by
a. public accountants only.
b. private accountants only.
c. both public and private accountants.
d. IRS accountants only.
Answer:
If a company has overdrawn its bank balance, then
a. its cash account will show a debit balance.
b. its cash account will show a credit balance.
c. the cash account debits will exceed the cash account credits.
d. it cannot be detected by observing the balance of the cash account.
Answer:
A problem with the monetary unit assumption is that
a. the dollar has not been stable over time.
b. the dollar has been stable over time.
c. the dollar is a common medium of exchange.
d. it is impossible to account for international transactions.
Answer:
The income statement for the year 2015 of Fugazi Co. contains the following
information:
The entry to close the revenue account includes a
a. debit to Income Summary for $7,500.
b. credit to Income Summary for $7,500.
c. debit to Revenues for $70,000.
d. credit to Revenues for $70,000.
Answer:
The chart of accounts is a special ledger used in accounting systems.
Answer:
The change in cash is equal to the change in liabilities less the change in equity plus the
change in noncash assets.
Answer:
A single-step income statement reports all revenues, both operating and other revenues
and gains, at the top of the statement.
Answer:
Two federal taxes which are levied against employees’ wages that must be deducted in
arriving at net pay are (1) ________________ taxes and (2) _______________ taxes.
Answer:
Electronic Funds Transfer (EFT) is a disbursement system that uses telephone or
computer to transfer cash from one location to another.
Answer:
The Dividends account is closed to the ______________ account at the end of the
accounting period.
Answer:
Dredd Company has begun a worksheet for preparing a statement of cash flows. The
following additional information is provided:
1> Cash dividends of $8,000 were paid during the year.
2> Land which originally cost $60,000 was sold for $52,000.
3> Common stock was issued at par value for cash.
Instructions
Complete the worksheet for Dredd Company.
Answer:
Compute the maturity value for each of the following notes receivable.
1> A $5,000, 6%, 3-month note dated July 20.
Maturity value $____________.
2> A $12,000, 9%, 150-day note dated August 5.
Maturity value $____________.
Answer: