1) control over cash disbursements is improved if major expenditures are paid by check.
2) because pro forma earnings are based on specific rules, these amounts are highly
reliable.
3) under the double-entry system, revenues must always equal expenses.
4) if the cost method is used to account for an investment in stock, the stock
investments account is increased by the amount of dividends received during the period.
5) the dividends account is a subdivision of the retained earnings account and appears
as an expense on the income statement.
6) a general ledger should be arranged in financial statement order beginning with the
balance sheet accounts.
7) assets are resources owned by a business and provide future services or benefits to
the business.
8) the investment category on the balance sheet normally includes investments that are
intended to be held for a short period of time (less than one year).
9) profitability ratios are frequently used as a basis for evaluating management’s
operating effectiveness.
10) under the equity method, the receipt of dividends from the investee company results
in a credit to the dividend revenue account.
11) the receipt of dividends from long-term investments in stock is classified as a cash
inflow from investing activities.
12) payroll taxes include the employers share of social security taxes as well as state
and federal unemployment taxes.
13) in preparing a statement of cash flows, an increase in the common stock and
treasury stock accounts during a period would be an investing activity.
14) recording depreciation each period is an application of the matching principle.
15) which one of the following would be classified as an extraordinary item?
a.expropriation of property by a foreign government
b.losses attributed to a labor strike
c.write-down of inventories
d.gains or losses from sales of equipment
16) an intangible asset
a.derives its value from the rights and privileges it provides the owner
b.is worthless because it has no physical substance
c.is converted into a tangible asset during the operating cycle
d.cannot be classified on the balance sheet because it lacks physical substance
17) an assetexpense relationship exists with:
a.liability accounts
b.revenue accounts
c.prepaid expense adjusting entries
d.accrued expense adjusting entries
18) which of the following should not be included in the physical inventory of a
company?
a.goods held on consignment from another company
b.goods in transit from another company shipped fob shipping point
c.goods shipped on consignment to another company
d.all of the above should be included
19) a credit sale of $900 is made on july 15, terms 2/10, net/30, on which a return of
$50 is granted on july 18. what amount is received as payment in full on july 24?
a.$900
b.$833
c.$850
d$882
20) a company sells a plant asset that originally cost $180,000 for $60,000 on december
31, 2012. the accumulated depreciation account had a balance of $90,000 after the
current year’s depreciation of $15,000 had been recorded. the company should
recognize a
a.$30,000 loss on disposal
b.$30,000 gain on disposal
c.$60,000 loss on disposal
d.$60,000 gain on disposal
21) resources owned by a business are referred to as
a.stockholders equity.
b.liabilities
c.assets
d.revenues
22) the present value of a $10,000, 5-year bond, will be less than $10,000 if the
a.contractual rate of interest is less than the market rate of interest
b.contractual rate of interest is greater than the market rate of interest
c.bond is convertible
d.contractual rate of interest is equal to the market rate of interest
23) if a check correctly written and paid by the bank for $626 is incorrectly recorded on
the company’s books for $662, the appropriate treatment on the bank reconciliation
would be to
a.add $36 to the book’s balance
b.subtract $36 from the book’s balance
c.deduct $36 from the bank’s balance
d.deduct $626 from the book’s balance
24) for 2012 kuhlman corporation reported net income of $28,000; net sales $400,000;
and average share outstanding 12,000. there were no preferred stock dividends. what
was the 2012 earnings per share?
a.$2.33
b.$0.43
c.$33.33
d.$7.43
25) on july 1 the fisher shoe store paid $15,000 to acme realty for 6 months rent
beginning july 1. prepaid rent was debited for the full amount. if financial statements
are prepared on july 31, the adjusting entry to be made by the fisher shoe store is:
a.debit rent expense, $15,000; credit prepaid rent, $2,500
b.debit prepaid rent, $2,500; credit rent expense, $2,500
c.debit rent expense, $2,500; credit prepaid rent, $2,500
d.debit rent expense, $15,000; credit prepaid rent, $12,500
26) the collection of a $900 account beyond the 2 percent discount period will result in
a
a.debit to cash for $882
b.debit to accounts receivable for $900
c.debit to cash for $900
d.debit to sales discounts for $18
27) in a study session, a classmate makes this statement dividends are listed as expenses
on the income statement. what is your best response to this statement?
a.ive been struggling with that concept and i feel that dividends should be shown on the
balance sheet as assets
b.you are right. revenues and expenses are shown on the income statement. dividends
are a cost of generating revenues and that makes them an expense. why else would a
corporation pay dividends?
c.dividends represent a portion of corporate profits that are paid to the shareholders.
they belong on the retained earnings statement
d.dividends are deducted from retained earnings on the balance sheet
28) used to record and summarize the economic activities of a business enterprise is
referred to as the accounting equation. state the basic accounting equation and define its
major components. how are business transactions and financial statements related to the
accounting equation?
29) mideast airlines purchased a 747 aircraft on january 1, 2010 at a cost of
$32,000,000. the estimated useful life of the aircraft is 20 years, with an estimated
salvage value of $4,000,000.
instructions
compute the accumulated depreciation and book value at december 31, 2012 using the
straight-line method and the double-declining-balance method.
30) what is the purpose of the preparation of adjusting entries?
31) in the accounting cycle, closing entries are prepared before adjusting entries.
32) a cash register tape shows cash sales of $5,000 and sales taxes of $250. the journal
entry to record this information is
33)
on september 1, 2012, watkins company establishes a petty cash fund by issuing a
check for $250 to mike martz, the custodian of the petty cash fund. on september 30,
2012, mike martz submitted the following paid petty cash vouchers for replenishment
of the petty cash fund when there is $15 cash in the fund:
instructions
prepare the journal entries required to establish the petty cash fund on september 1 and
the
replenishment of the fund on september 30