1) when using the allowance method year-end adjustments for bad debt expense must
be made.
2) when the market value of inventory is lower than its cost, the inventory is written
down to its market value.
3) in accounting for inventory, the assumed flow of costs must match the physical flow
of goods.
4) gross profit appears on both the single-step and multiple-step forms of an income
statement.
5) use of the lifo inventory valuation method enables a company to report paper or
phantom profits.
6) interest expense is reported under other expenses and losses in the income statement.
7) gross profit is a measure of the overall profit of a company.
8) free cash flow is measured in terms of a percentage.
9) a liability arises when the board of directors declares a stock dividend.
10) net income of a corporation should be closed to retained earnings and net losses
should be closed to paid-in capital accounts.
11) the following information is available for cooke corporation:
what is the cash and equivalents amount at year-end?
a.$1,230
b.$670
c.$1,770
d.$2,670
12) which of the following represents the largest number of common shares?
a.treasury shares
b.issued shares
c.outstanding shares
d.authorized shares
13) the cash records of landis company show the following four situations.
1>the june 30 bank reconciliation indicated that deposits in transit total $1,080. during
july the general ledger account cash shows deposits of $23,620, but the bank statement
indicates that only $23,400 in deposits were received during the month.
2>the june 30 bank reconciliation also reported outstanding checks of $1,020. during
the month of july, landis company books show that $25,800 of checks were issued. the
bank statement showed that $24,600 of checks cleared the bank in july.
3>in september, deposits per the bank statement totaled $40,100, deposits per books
were $38,100, and deposits in transit at september 30 were $3,150.
4>in september, cash disbursements per books were $35,550, checks clearing the bank
were $37,500, and outstanding checks at september 30 were $3,150.
there were no bank debit or credit memoranda. no errors were made by either the bank
or landis company.
instructions
answer the following questions.
(a) in situation (1), what were the deposits in transit at july 31?
(b) in situation (2), what were the outstanding checks at july 31?
(c) in situation (3), what were the deposits in transit at august 31?
(d) in situation (4), what were the outstanding checks at august 31?
14) romero corporation experienced a fire on december 31, 2012, in which its financial
records were partially destroyed. it has been able to salvage some of the records and has
ascertained the following balances.
additional information:
1>the inventory turnover is 4.2 times
2>the return on common stockholders’ equity is 14%. the company had no additional
paid-in-capital.
3>the receivables turnover is 10.2 times.
4>the return on assets is 12.5%.
5>total assets, dec. 31, 2011 = 604,750.
instructions
compute the following values for 2012
(a)cost of goods sold.
(b)net credit sales.
(c)net income.
(d)total assets.
15) which of the following would be considered an other comprehensive income item?
a.net income
b.gain on disposal of discontinued operations
c.extraordinary loss related to flood
d.unrealized loss on available-for-sale securities
16) aber company buys land for $150,000 on 12/31/11. as of 3/31/12, the land has
appreciated in value to $152,000. on 12/31/12, the land has an appraised value of
$155,400. by what amount should the land account be increased in 2012?
a.$0
b.$2,000
c.$3,400
d.$5,400
17) failure to prepare an adjusting entry at the end of a period to record an accrued
revenue would cause:
a.net income to be overstated
b.an understatement of assets and an understatement of revenues
c.an understatement of revenues and an understatement of liabilities
d.an understatement of revenues and an overstatement of liabilities
18) gaap, compared to ifrs, tends to be more
a.simple in accounting requirements
b.rules-based
c.principles-based
d.simple in disclosures requirements
19) if year 1 equals $800, year 2 equals $840, and year 3 equals $896, the percentage to
be assigned for year 2 in a trend analysis, assuming that year 1 is the base year, is
a.100%
b.89%
c.105%
d.112%
20) grove corp. has common stock of $3,000,000, retained earnings of $1,800,000,
unrealized gains on trading securities of $60,000 and unrealized losses on
available-for-sale securities of $120,000. what is the total amount of their stockholders
equity?
a.$4,680,000
b.$4,800,000
c.$4,740,000
d.$4,860,000
21) collins company borrowed $500,000 from banktwo on january 1, 2011 in order to
expand its mining capabilities. the five-year note required annual payments of $130,218
and carried an annual interest rate of 9.5%. what is the balance in the notes payable
account at december 31, 2012?
a.$500,000
b.$326,706
c.$417,282
d.$405,000
22) which of the following accounts is increased with a debit?
a.dividends
b.service revenue
c.interest payable
d.common stock
23) given the following data for the corky company:
how would common stock appear on a common size balance sheet?
a.26%
b.56%
c.30%
d.cannot be determined from the data given
24) in conley company, land decreased $180,000 because of a cash sale for $180,000,
the equipment account increased $60,000 as a result of a cash purchase, and bonds
payable increased $195,000 from issuance for cash at face value. the net cash provided
by investing activities is
a.$180,000
b.$315,000
c.$120,000
d.$135,000
25) this information relates to hanshew real estate agency.
instructions
(a)journalize the transactions. do not provide explanations.
(b)post the transactions to t accounts.
26) interest may be included in the acquisition cost of a plant asset
a.during the construction period of a self-constructed asset
b.if the asset is purchased on credit
c.if the asset acquisition is financed by a long-term note payable
d.if it is a part of a lump-sum purchase
27) m. cornett is a corporation that sells breakfast cereal. based on the accounts listed
below, what are m. cornetts total trade receivables?
a.$6,000
b.$8,000
c.$7,000
d.$8,900
28) if an investment firm underwrites a stock issue, the
a.risk of being unable to sell the shares stays with the issuing corporation
b.corporation obtains cash immediately from the investment firm
c.investment firm has guaranteed profits on the sale of the stock
d.issuance of stock is likely to be directly to creditors
29) operating data for petersen corporation are presented below
instructions
prepare a schedule showing a vertical analysis for 2012 and 2011.
30) for each of the following events affecting the stockholders equity of carney, indicate
whether the event would: increase retained earnings (ire), decrease retained earnings
(dre), increase common stock (ics), or decrease common stock (dcs).
1> declared a cash dividend.
2> issued new shares of common stock.
3> reported net loss of $40,000
4> reported net income of $20,000.
31) vertical analysis (common-size) percentages for hillman companys sales, cost of
goods sold, and expenses are listed here.
did wallace companys net income as a percent of sales increase, decrease, or remain
unchanged over the 3-year period? provide numerical support for your answer.
32) the receivables turnover ratio is calculated by dividing ________________ by
average ___________________.
33) in the first month of operations, dieker company made three purchases of
merchandise in the following sequence: (1) 200 units at $6, (2) 300 units at $7, and (3)
400 units at $8. assuming there are 300 units on hand, compute the cost of the ending
inventory under (1) the fifo method and (2) the lifo method. dieker uses a periodic
inventory system.
