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1) in calculating cash flows from operating activities using the indirect method, a loss
on the sale of equipment is
a.added to net income
b.deducted from net income
c.ignored because it does not affect cash
d.not reported on a statement of cash flows
2) on march 1, 2014, freeze company hires a new employee who will start to work on
march 6. the employee will be paid on the last day of each month. should a journal
entry be made on march 6? why or why not?
a.yes, the company is now obligated to pay the employee, thus that event must be
recorded.
b.no, hiring an employee is an important event; however it is not an economic event
that should be recorded.
c.yes, failure to record the event would cause the financial statements to be misleading.
d.no, the financial position of the company has been changed, however, the dollar
amount of the transaction is not yet known.
3) if the average collection period is 45 days, what is the receivables turnover?
a.8.1 times
b.8.9 times
c.4.5 times
d.none of the above
4) the disposal of a significant segment of a business is called
a.a change in accounting principle
b.an extraordinary item
c.an other expense
d.discontinued operations
5) on june 1, huntley company borrows $40,000 from the bank by signing a 60-day, 6%,
interest-bearing note.
instructions
prepare the necessary entries below associated with the note payable on the books of
huntley company.
(a)prepare the entry on june 1 when the note was issued.
(b)prepare any adjusting entries necessary on june 30 in order to prepare the monthly
financial statements. assume no other interest accrual entries have been made.
6) which of the following is not classified properly as a current asset?
a.supplies
b.marketable securities
c.a fund to be used to purchase a building within the next year
d.a receivable from the sale of an asset to be collected in two years
7) a truck costing $110,000 was destroyed when its engine caught fire. at the date of the
fire, the accumulated depreciation on the truck was $50,000. an insurance check for
$125,000 was received based on the replacement cost of the truck. the entry to record
the insurance proceeds and the disposition of the truck will include a
a.gain on disposal of $15,000
b.credit to the truck account for $60,000
c.credit to the accumulated depreciation account for $50,000
d.gain on disposal of $65,000
8) the following items are taken from the financial statements of tracy company for
2012:
accounts payable$ 15,000
accounts receivable11,000
accumulated depreciationequipment38,000
advertising expense21,000
cash24,000
common stock90,000
depreciation expense12,000
dividends15,000
equipment210,000
insurance expense3,000
note payable (due 2015)70,000
prepaid insurance6,000
rent expense17,000
retained earnings (beginning)12,000
salaries expense34,000
salaries payable3,000
service revenue135,000
supplies4,000
supplies expense6,000
instructions
(a)calculate the net income.
(b)calculate the balance of retained earnings that would appear on a balance sheet at
december 31, 2012
(c)prepare a classified balance sheet for tracy company at december 31, 2012 assuming
the note payable is a long-term liability.
(d)compute the current ratio, debt to total assets ratio, and earnings per share value. the
average number of shares outstanding for 2012 was 10,000.
9) which one of the following items would never appear on a cash budget?
a.office salaries expense
b.interest expense
c.depreciation expense
d.travel expense
10) 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
11) mckinney corporation had beginning retained earnings of $2,292,000 and ending
retained earnings of $2,499,000. during the year they issued common stock totaling
$141,000. what was their net income for the year?
a.$207,000
b.$ 66,000
c.$348,000
d.$273,000
12) all of the following actions would strengthen internal control over a petty cash fund
except
a.surprise counts by a supervisor
b.cancellation of paid vouchers
c.submission of supporting documents
d.multiple petty cash custodians
13) the 2012 financial statements of harper co. contain the following selected data (in
millions).
the debt to total assets ratio is
a.53.1%
b.44.4%
c.1.88%
d.6.2 times
14) benedict company compiled the following financial information as of december 31,
2012:
benedicts retained earnings on december 31, 2012 are:
a.$150,000
b.$180,000
c.$160,000
d.$ 10,000
15) expenditures that maintain the operating efficiency and expected productive life of a
plant asset are generally
a.expensed when incurred
b.capitalized as a part of the cost of the asset
c.debited to the accumulated depreciation account
d.not recorded until they become material in amount
16) wang company had the following transactions during 2011:
what is wangs 2011 net income using accrual accounting?
a.$4,150
b.$6,550
c.$6,250
d.$3,850
17) a business organized as a separate legal entity is a
a.corporation
b.proprietor
c.government unit
d.partnership
18) at the end of its first year, the trading securities portfolio consisted of the following
common stocks.
in the following year, the bolen common stock is sold for cash proceeds of $57,000. the
gain or loss to be recognized on the sale is a
a.gain of $1,200
b.loss of $3,000
c.gain of $2,200
d.loss of $400
19) keller corporation sells 100 shares of common stock being held as an investment.
the shares were acquired six months ago at a cost of $30 a share. keller sold the shares
for $40 a share. the entry to record the sale is
20) madson company typically sells subscriptions on an annual basis, and publishes six
times a year. the magazine sells 90,000 subscriptions in january at $10 each. what entry
is made in january to record the sale of the subscriptions?
21) mintz company issued $300,000, 10%, 10-year bonds on january 1, 2012, at 105.
interest is payable annually. mintz uses the straight-line method of amortization and has
a calendar year end.
instructions
prepare all journal entries made in 2012 related to the bond issue.
22) the terms of a bond issue are set forth in a formal legal document called a bond
________________.
23) for each of the following transactions of woods inc., identify the account to be
debited and the account to be credited.
1)purchased 18-month insurance policy for cash.
2)paid weekly payroll.
3)purchased supplies on account.
4)received utility bill to be paid at later date.
