1) freight costs incurred by the seller on outgoing merchandise are an operating expense
to the seller.
2) notes payable usually require the borrower to pay interest.
3) the computer has increased greatly the use of the periodic inventory system.
4) an increase in an asset is recorded by a debit.
5) during a period, cost of goods sold plus an increase in inventory plus an increase in
accounts payable equals cash paid to suppliers.
6) the irs does not require the taxpayer to use the same depreciation method on the tax
return that is used in preparing financial statements.
7) a different set of financial statements usually is prepared for each user.
8) the primary purpose of the statement of cash flows is to provide information about
the cash receipts and cash payments of a company for a specific period of time.
9) the entire group of accounts maintained by a company is referred to collectively as
the journal.
10) the statement of cash flows is a required statement that must be prepared along with
an income statement, balance sheet, and retained earnings statement.
11) the debt to total assets ratio measures the percentage of assets financed by creditors.
12) in a common size balance sheet, total assets are represented by 100%.
13) larson company issued $500,000 of 8%, 5-year bonds at 106. assuming straight-line
amortization and annual interest payments, what is the amount of the amortization at
each interest payment point?
a.$3,000
b.$6,000
c.$40,000
d.$34,000
14) indicate whether the following items would be reported as an ordinary or an
extraordinary item in bentley corporation’s income statement.
(a)loss attributable to labor strike.
(b)gain on sale of fixed assets.
(c)loss from fire. bentley is a chemical company.
(d)loss from sale of marketable securities.
(e)expropriation of property by a foreign government.
(f)loss from tornado damage. bentley corporation is located in the midwest’s tornado
alley.
(g)loss from government condemnation of property through newly enacted law.
15) foster company reported a net loss of $10,000 for the year ended december 31,
2012. during the year, accounts receivable decreased $5,000, merchandise inventory
increased $8,000, accounts payable increased by $10,000, and depreciation expense of
$5,000 was recorded. during 2012, operating activities
a.used net cash of $2,000
b.used net cash of $8,000
c.provided net cash of $2,000
d.provided net cash of $8,000
16) the fraud triangle 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
17) wilmas vegetable market had the following transactions during 2012:
1>issued $25,000 of par value common stock for cash.
2>recorded and paid wages expense of $10,000.
3>acquired land by issuing common stock of par value $50,000.
4>declared and paid a cash dividend of $1,000.
5>sold a long-term investment (cost $3,000) for cash of $3,000.
6>recorded cash sales of $20,000.
7>bought inventory for cash of $2,000.
8>acquired an investment in ibm stock for cash of $6,000.
9>converted bonds payable to common stock in the amount of $10,000.
10>repaid a 6 year note payable in the amount of $11,000.
what is the net cash provided by financing activities?
a.$13,000
b.$25,000
c.$14,000
d.$9,000
18) on july 1, 2012, fleming company sells machinery for $96,000. the machinery
originally cost $240,000, had an estimated 5-year life and an expected salvage value of
$40,000. the accumulated depreciation account had a balance of $140,000 on january 1,
2012, using the straight-line method. the gain or loss on disposal is
a.$16,000 gain
b.$4,000 loss
c.$8,000 loss
d.$4,000 gain
19) equipment that cost $36,000 and on which $20,000 of accumulated depreciation has
been recorded was disposed of for $18,000 cash. the entry to record this event would
include a
a.gain of $2,000
b.loss of $2,000
c.credit to the equipment account for $6,000
d.credit to accumulated depreciation for $20,000
20) financial information is presented below:
the amount of net sales on the income statement would be
a.$128,000
b.$125,000
c.$140,000
d.$137,000
21) which statement concerning lower of cost or market (lcm) is incorrect?
a.lcm is an example of a company choosing the accounting method that will be least
likely to overstate assets and income
b.under the lcm basis, market does not apply because assets are always recorded and
maintained at cost
c.the lcm basis uses current replacement cost because a decline in this cost usually leads
to a decline in the selling price of the inventory item
d.lcm is applied after one of the cost flow assumptions has been applied
22) as prepaid expenses expire with the passage of time, the correct adjusting entry will
be a:
a.debit to an asset account and a credit to an expense account
b.debit to an expense account and a credit to an asset account
c.debit to an asset account and a credit to an asset account
d.debit to an expense account and a credit to an expense account
23) gilkey corporation began the year with retained earnings of $155,000. during the
year, the company issued $210,000 of common stock, recorded expenses of $600,000,
and paid dividends of $40,000. if gilkeys ending retained earnings was $165,000, what
was the companys revenue for the year?
a.$610,000
b.$650,000
c.$820,000
d.$860,000
24) all of the following are characteristics of accounting information except
a.faithful representation
b.comparability
c.relevance
d.flexibility
25) each of the following is an adjustment to convert net income to net cash provided
by operating activities except
a.adding back noncash expenses
b.adding gains and deducting losses
c.analyzing changes to noncash current asset and current liability accounts
d.all of the above are adjustments
26) expenses are recognized when:
a.they contribute to the production of revenue
b.they are paid
c.they are billed by the supplier
d.the invoice is received
27) on the statement of cash flows, the cash flows from operating activities section
would include
a.receipts from the issuance of capital stock
b.receipts from the sale of investments
c.payments for the acquisition of investments
d.cash receipts from sales activities
28) independent internal verification of the physical inventory process occurs when
a.the employee is required to count all items twice for sake of verification
b.the items counted are compared to the inventory account balance
c.a second employee counts the inventory and compares the result to the count made by
the first employee
d.all prenumbered inventory tags are accounted for
29) free cash flow provides an indication of a companys ability to
a.generate cash to invest in new capital expenditures
b.generate net income
c.generate cash to pay dividends
d.both a and c
30) under the allowance method, writing off an uncollectible account
a.affects only balance sheet accounts
b.affects both balance sheet and income statement accounts
c.affects only income statement accounts
d.is not acceptable practice
31) the effect of the declaration of a cash dividend by the board of directors is to
32) financial statements can be prepared from the information provided by an adjusted
trial balance.
33) indicate the respective effects of the declaration of a cash dividend on the following
balance sheet sections:
34) redeker company purchased equipment on january 1, 2011, for $80,000. it is
estimated that the equipment will have a $5,000 salvage value at the end of its 5-year
useful life. it is also estimated that the equipment will produce 100,000 units over its
5-year life.
instructions
answer the following independent questions.
1>compute the amount of depreciation expense for the year ended december 31, 2011,
using the straight-line method of depreciation.
2>if 16,000 units of product are produced in 2011 and 24,000 units are produced in
2012, what is the book value of the equipment at december 31, 2012? the company uses
the units-of-activity depreciation method.
3>if the company uses the double-declining-balance method of depreciation, what is the
balance of the accumulated depreciationequipment account at december 31, 2013?
35) the _______________ is the chief executive officer with direct responsibility for
managing the business.
36) ballester company reported net income of $150,000 for the current year.
depreciation recorded on buildings and equipment amounted to $75,000 for the year.
balances of the current asset and current liability accounts at the beginning and end of
the year are as follows:
instructions
prepare the cash flows from the operating activities section of the statement of cash
flows using the indirect method.