1) in the vertical analysis of a balance sheet, the base for current liabilities is total
liabilities.
2) the excess of current assets over current liabilities is called working capital.
3) allowance for doubtful accounts is debited under the direct write-off method when an
account is determined to be uncollectible.
4) in a common size income statement, net sales are represented by 100%.
5) the accounting for short-term debt investments and for long-term debt investments is
similar.
6) if a monthly cash budget is prepared properly, there will never be a cash deficiency at
the end of any month.
7) all plant assets (fixed assets) must be depreciated for accounting purposes.
8) the following information pertains to bell company. assume that all balance sheet
amounts represent both average and ending balance figures. assume that all sales were
on credit.
what is the current ratio for this company?
a.1.42
b.0.80
c.1.16
d.0.60
9) an exception to disbursements being made by check is acceptable when cash is paid
a.to an owner
b.to employees as wages
c.from petty cash
d.to employees as loans
10) when a company holds stock of several different corporations, the group of
securities is identified as a(n)
a.affiliated investment
b.consolidated portfolio
c.investment portfolio
d.controlling interest
11) the right side of an account
a.is the correct side.
b.reflects all transactions for the accounting period.
c.shows all the balances of the accounts in the system.
d.is the credit side.
12) classify each of these items as an asset (a), liability (l), or stockholders equity (se).
1>accounts receivable
2>accounts payable
3>common stock
4>supplies
5>retained earnings
6>cash
7>notes payable
8>equipment
13) a sales invoice is used as documentation for a journal entry that requires a
a.debit to cash and a credit to sales revenue
b.debit to sales returns and allowances and a credit to accounts receivable
c.debit to accounts receivable and a credit to sales revenue
d.debit to cash and a credit to sales returns and allowances
14) harden corporation engaged in the following transaction. assume that the harden
corporation uses the indirect method to depict cash flows. indicate where, if at all, land
purchased for cash would be classified on the statement of cash flows.
a.operating activities section
b.investing activities section
c.financing activities section
d.does not represent a cash flow
15) during the year, salaries payable decreased by $12,000. using the direct method of
reporting cash flows from operating activities, if salary expense amounted to $380,000
for the year, the cash paid to employees (including deductions from gross pay) is
a.$392,000
b.$380,000
c.$368,000
d.$404,000
16) which of the following would be subtracted from net income using the indirect
method?
a.depreciation expense
b.an increase in accounts receivable
c.an increase in accounts payable
d.a decrease in prepaid expenses
17) given the following adjusted trial balance:
after closing entries have been posted, the balance in retained earnings will be:
a.$6,340
b.$6,512
c.$6,880
d.$6,708
18) pearson company bought a machine on january 1, 2012. the machine cost $108,000
and had an expected salvage value of $18,000. the life of the machine was estimated to
be 5 years. the book value of the machine at the beginning of the third year would be
a.$108,000
b.$90,000
c.$72,000
d.$36,000
19) which financial statement would best indicate whether the company relies on debt
or stockholders equity to finance its assets?
a.statement of cash flows
b.retained earnings statement
c.income statement
d.balance sheet
20) kilmer corporation began the year with retained earnings of $310,000. during the
year, the company issued $420,000 of common stock, recorded expenses of $1,200,000,
and paid dividends of $80,000. if kilmers ending retained earnings was $330,000, what
was the companys revenue for the year?
a.$1,220,000
b.$1,300,000
c.$1,640,000
d.$1,720,000
21) if goods in transit are shipped fob destination
a.the seller has legal title to the goods until they are delivered
b.the buyer has legal title to the goods until they are delivered
c.the transportation company has legal title to the goods while the goods are in transit
d.no one has legal title to the goods until they are delivered
22) all revenue and expense items are considered ordinary in nature under
a. both ifrs and gaap
b. gaap
c. ifrs
d. neither ifrs or gaap
23) selected accounts from the ledger of mcdaniel corporation appear below. for each
account, indicate the following:
(b) in the second column, indicate the normal balance by inserting dr. or cr.
24)
the adjusted trial balance shown below is for rich company at the end of its fiscal year:
instructions:
prepare the closing entries for the temporary accounts at march 31.
25) the management of morton company estimates that credit sales for august,
september, october, and november will be $180,000, $210,000, $230,000, and
$160,000, respectively. experience has shown that collections are made as follows:
determine the collections from customers in october and november. show all
computations.
26) on september 1, hendricks supply had an inventory of 18 backpacks at a cost of $20
each. the company uses a periodic inventory system. during september, the following
transactions and events occurred.
instructions
journalize the september transactions for hendricks supply.
27) some of the following errors would cause the debit and credit columns of the trial
balance to have unequal totals. for each of the four cases, state whether the error would
cause unequal totals in the trial balance. if the error causes unequal totals, indicate the
amount of difference between the columns and state whether the debit or credit is larger.
each case is to be considered independently of the others.
1)a payment of $700 to a creditor was recorded by a debit to accounts payable of $70
and a credit to cash of $700.
2)a $340 payment for a printer was recorded by a debit to equipment of $34 and a credit
to cash for $34.
3)an account receivable in the amount of $2,000 was collected in full. the collection
was recorded by a debit to cash for $2,000 and a debit to accounts payable for $2,000.
4)an account payable was paid by issuing a check for $800. the payment was recorded
by debiting accounts payable $800 and crediting accounts receivable $800.
28) when preparing a statement of cash flows using the direct method, why must the
sales revenue figure be adjusted to arrive at cash receipts from sales?
29) the dobson company gathered the following condensed data for the year ended
december 31, 2012:
cost of goods sold$ 720,000
net sales1,269,000
administrative expenses239,000
interest expense68,000
dividends paid38,000
selling expenses45,000
instructions
prepare an income statement for the year ended december 31, 2012.
30) the net amount expected to be collected in cash from receivables is the
_____________.
31) a basic principle of cash management is to delay payment of _____________.