1) franchises are classified as a plant asset.
2) if a bond has a stated value of $1,000 and a contractual interest rate of 6 percent, then
the interest paid annually will be $60.
3) vertical analysis is useful in making comparisons of companies of different sizes.
4) a primary purpose of vertical analysis is to observe trends over a three-year period.
5) noncash investing and financing transactions, such as the exchange of common stock
to purchase assets, represent significant investing and financing activities and are
reflected either in a schedule separate from the statement of cash flows or in a separate
note to the financial statements.
6) a decrease in a liability account is recorded by a debit.
7) ford hardware store had net credit sales of $3,920,000 and cost of goods sold of
$3,000,000 for the year. the accounts receivable balances at the beginning and end of
the year were $650,000 and $750,000, respectively. the receivables turnover ratio was
a.6.5 times
b.6.0 times
c.5.6 times
d.6.2 times
8) which of the following is the appropriate general journal entry to record the
declaration of cash dividends?
a.cash dividends
cash
b.dividends payable
cash
c.paid-in capital
dividends payable
d.cash dividends
dividends payable
9) wolford company borrowed $750,000 from u.s. bank on january 1, 2011 in order to
expand its mining capabilities. the five-year note required annual payments of $195,327
and carried an annual interest rate of 9.5%. what is the balance in the notes payable
account at december 31, 2012?
a.$750,000
b.$490,059
c.$625,923
d.$607,500
10) if a stock investment is sold at a gain, the gain
a.is reported as operating revenue
b.is reported under a special section, “discontinued investments,” on the income
statement
c.is reported in the other revenue and gain section of the income statement
d.contributes to gross profit on the income statement
11) hulse company has just purchased machinery that requires annual payments of
$40,000 to be paid at the end of each of the next 4 years. the appropriate discount rate is
15%. what is the present value of the payments?
a.$114,199
b.$160,000
c.$46,975
d.$150,134
12) on october 1, 2012, mann company places a new asset into service. the cost of the
asset is $60,000 with an estimated 5-year life and $15,000 salvage value at the end of
its useful life. what is the depreciation expense for 2012 if mann company uses the
straight-line method of depreciation?
a.$2,250
b.$12,000
c.$3,000
d.$6,000
13) a practical decision to expense small capital expenditures rather than record them as
property, plant, and equipment and depreciate them probably is made on the basis of the
characteristic of
a.consistency
b.materiality
c.full disclosure
d.relevance
14)
prepare the journal entries to record these transactions in (a) deeres records and (b)
gilberts records. assume use of the periodic inventory system for both companies.
15) the collection of an account that had been previously written off under the
allowance method of accounting for uncollectibles
a.will increase income in the period it is collected
b.will decrease income in the period it is collected
c.requires a correcting entry for the period in which the account was written off
d.does not affect income in the period it is collected
16) the following information pertains to lance company. assume that all balance sheet
amounts represent both average and ending balance figures. assume that all sales were
on credit.
what is the return on common stockholders equity for this company?
a.13.1%
b.15.0%
c.26.3%
d.30.0%
17) james & younger corporation purchased a one-year insurance policy in january
2010 for $36,000. the insurance policy is in effect from march 2010 through february
2010. if the company neglects to make the proper year-end adjustment for the expired
insurance:
a.net income and assets will be understated by $30,000
b.net income and assets will be overstated by $30,000
c.net income and assets will be understated by $6,000
d.net income and assets will be overstated by $6,000
18) hess computer store has credit sales of $450,000 in 2011 and a debit balance of
$600 in the allowance for doubtful accounts at year end. as of december 31, 2011,
$130,000 of accounts receivable remain uncollected. the credit manager of hess
prepared an aging schedule of accounts receivable and estimates that $6,500 will prove
to be uncollectible.
on march 4, 2012 the credit manager authorizes a write-off of the $1,000 balance owed
by a. myers.
(a)prepare the adjusting entry to record the estimated uncollectible accounts expense in
2011.
(b)show the balance sheet presentation of accounts receivable on december 31, 2011.
(c)on march 4, before the write-off, assume the balance of accounts receivable account
is $145,000 and the balance of allowance for doubtful accounts is a credit of $4,000.
make the appropriate entry to record the write off of the myers account. also show the
balance sheet presentation of accounts receivable before and after the write-off.
19) match the items below by entering the appropriate code letter in the space provided.
1>the difference between inventory reported using lifo and inventory using fifo.
2>tracks the actual physical flow for each inventory item available for sale.
3>goods that are only partially completed in a manufacturing company.
4>cost of goods sold consists of the most recent inventory purchases.
5>goods ready for sale to customers by retailers and wholesalers.
6>title to the goods transfers when the public carrier accepts the goods from the
seller.
7>ending inventory valuation consists of the most recent inventory purchases.
8>the same unit cost is used to value ending inventory and cost of goods sold.
9>title to goods transfers when the goods are delivered to the buyer.
10>measures the number of times the inventory sold during the period.
20) glenda carson is studying for the next accounting midterm examination. what
should glenda know about (a) departing from the cost basis of accounting for
inventories and (b) the meaning of “market” in the lower-of-cost-or-market method?
21) sarbanes oxley applies to
a.u.s companies but not international companies
b.international companies but not u.s. companies
c.u.s. and canadian companies but not other international companies
d.u.s and international companies
22) a chart of accounts for a business firm
a.is a graph.
b.indicates the amount of profit or loss for the period.
c.lists the accounts in the ledger.
d.shows the balance of each account in the general ledger.
23) the following information pertains to marsh company. assume that all balance sheet
amounts represent average balance figures.
what is marshs return on common stockholders equity ratio?
a.15%
b.12%
c.10.5%
d.8.6%
24) adjustments for unearned revenue:
a.decrease liabilities and increase revenues
b.increase liabilities and increase revenues
c.increase assets and increase revenues
d.decrease revenues and decrease assets
25) in the annual report, where would a financial statement reader find out if the
companys financial statements give a fair depiction of its financial position and
operating results?
a.notes to the financial statements
b.management discussion and analysis section
c.balance sheet
d.auditors report
26) for each item below, indicate whether a debit or credit applies.
27) on january 1, wilhite company purchased as an investment a $1,000, 6% bond for
$1,020. the bond pays interest on january 1 and july 1. what is the entry to record the
interest accrual on december 31?
28) in addition to updating retained earnings, ______________ entries produce a zero
balance in each ______________ account.
29) retro company is authorized to issue 10,000 shares of 8%, $100 par value preferred
stock and 500,000 shares of no-par common stock with a stated value of $1 per share. if
retro issues 5,000 shares of common stock to pay its recent attorney’s bill of $20,000 for
legal services on a land access dispute, which of the following would be the best journal
entry for retro to record?
30)
31) why is the statement of cash flows useful?