1) qtopia electric company uses the direct method to prepare its statement of cash flows.
it has reported cost of goods sold of $85,000 on its income statement for the year 2015.
if the balance in accounts payable, for inventory suppliers only, has gone down by
$8,000 during the year, then $8,000 will have to be subtracted from $85,000 as part of
the process to calculate payments to suppliers for inventory purchases.
2) on a bank reconciliation, deposits in transit are added on the bank side of the
reconciliation.
3) nelson corp. uses the indirect method to prepare the statement of cash flows. refer to
the following section of the comparative balance sheet:
nelson corp.
comparative balance sheet
december 31, 2014 and 2013
the change in accounts payable will be shown as a negative cash flow in the
adjustments to net income.
4) a debtor of adams company owes $500,000 but does not have enough cash to repay
the debt. following lengthy negotiations, the parties agreed that the debtor will issue
200,000 shares of common stock to settle the debt. this transaction will be reported in
the investing activities section of the statement of cash flows for adams company.
5) fica tax is a tax which is paid both by the employer and the employee in equal
amounts.
6) the balance in the bonds payable is a credit of $16,500. the balance in the premium
on bonds payable is a credit of $800. the balance sheet will report the bond balance as
$15,700.
7) factoring is one of the options available to a business to reduce the risk of
uncollectible accounts receivable.
8) while counting the date of maturity of a note, the date of issue of the note should be
omitted.
9) under the perpetual inventory system, two journal entries are used to record the sales
of merchandise. one entry records the sales revenue and another entry records the cost
of goods sold.
10) the amount of accounts receivable is generally reported at its gross amount on the
balance sheet.
11) employer fica is a tax expense that is paid out by the employer and recorded as a
payroll tax expense.
12) the debt to equity ratio measures the proportion of total liabilities relative to the
total equity.
13) an overstatement of ending merchandise inventory in the current period results in an
overstatement of net income in the current period.
14) extraordinary items are unusual and infrequent in nature.
15) stated value stock is no-par stock that has been assigned an amount similar to par
value.
16) the balance in the bonds payable account is a credit of $65,500. the balance in the
discount on bonds payable account is a debit of $2,150. how much is the bond’s
carrying amount?
a) $2,150
b) $67,650
c) $65,500
d) $63,350
17) pluto corp. had sold goods with a selling price of $8,421 for cash. the state sales tax
rate is 8%. what amount will be credited to the sales revenue account?
a) $8,421
b) $9,095
c) $674
d) $7,747
18) which of the following assets must be reported at the lower-of-cost-or-market
value?
a) accounts receivable
b) merchandise inventory
c) prepaid insurance
d) notes receivable
19) which of the following financial statements reports an increase or decrease in net
cash during the time period covered?
a) income statement
b) statement of retained earnings
c) statement of cash flows
d) cash budget
20) a company’s inventory account increased $27,900 and its accounts payable account
decreased $19,500 during the year. the accounts payable relates only to the acquisition
of inventory. sales were $795,300 and cost of goods sold was $549,400. what was the
payment made to the suppliers of inventory?
a) $577,300
b) $568,900
c) $596,800
d) $47,400
21) which of the following statements is true of a corporation?
a) the liabilities of a corporation can be paid by the personal assets of the shareholders
b) corporate shares of stock cannot be readily bought and sold by investors on the open
market
c) shareholders are authorized to sign contracts or make business commitments on
behalf of the corporation
d) corporations pay income tax on corporate earnings, and shareholders pay personal
income tax on corporate dividends and gains from sale of stock
22) which of the following is true of freight in?
a) it is an administrative expense
b) it is a selling expense
c) it is the transportation cost on purchases
d) it is the transportation cost on sales
23) henry tax planning service bought production equipment for $9,600 on january 1,
2015. it has an estimated useful life of 5 years and zero residual value. henry uses the
straight-line method to calculate depreciation and records depreciation expense in the
books at the end of every month. as of june 30, 2015, the book value of this equipment
shown on its balance sheet will be ________.
a) $8,640
b) $9,600
c) $10,560
d) $9,760
24) which of the following is the correct formula to calculate the debt ratio?
a) debt ratio = total liabilities total assets
b) debt ratio = total liabilities + total assets
c) debt ratio = total liabilities – total assets
d) debt ratio = total liabilities total assets
25) when a company receives a dividend payment for available-for-sale investments,
________.
a) the total assets will remain unaffected
b) the long-term assets will decrease
c) the total equity will increase
d) the total liabilities will decrease
26) which of the following is an expense resulting from the decline in the utility of a
natural resource?
a) depletion
b) amortization
c) depreciation
d) obsolescence
27) which of the following is included in the internal control procedure documents?
a) mandatory vacations will improve internal control
b) separate the custody of assets from accounting
c) the invoices and orders must be pre-numbered
d) a company should purchase a fireproof vault to protect legal documents
28) the bank made an eft payment of a telephone bill of $5,000. how would this
information be included on the bank reconciliation?
a) an addition on the bank side
b) a deduction on the book side
c) an addition on the book side
d) a deduction on the bank side
29) which of the following sections of the statement of cash flows includes activities
that affect current assets and current liabilities on the balance sheet? (assume the
indirect method is used.)
a) the investing section
b) the financing section
c) the operating section
d) the non-cash investing and financing section
30) in the event of liquidation, preferred stockholders ________.
a) are guaranteed to get their investment back in full
b) have first claim on remaining corporate assets after debts are paid
c) may sell their shares for higher amounts than common stock
d) may retain their proportionate share of voting rights
31) dividends in arrears are ________.
a) a liability on the balance sheet
b) passed dividends on noncumulative preferred stock
c) passed dividends on cumulative preferred stock
d) passed dividends on common stock
32) ________ is a schedule that summarizes the earnings, withholdings, and net pay for
each employee.
a) payroll register
b) bin card
c) cash ledger
d) bank reconciliation statement
33) which of the following sequences states the order in which a trial balance lists
accounts?
a) equity assets liabilities
b) liabilities assets equity
c) assets equity liabilities
d) assets liabilities equity
34) which of the following is an attribute of the internal control component “monitoring
of controls”?
a) internal auditors monitor company controls to safeguard assets, and external auditors
evaluate the controls to ensure that the accounting records are accurate
b) monitoring of controls is the “tone at the top” of the business
c) monitoring of controls is designed to ensure that the business’s goals are achieved
d) monitoring of controls deals with identification and assessment of business risks
35) landess corporation currently has 120,000 shares outstanding of $1 par value
common stock. the stock was originally issued for $12 per share. on march 15, the
board of directors declares and distributes a 10% stock dividend when the stock is
selling for $16 per share. prepare the journal entry to record the stock dividend.
36) people like to think they see themselves in ditka for the same reasons you think you
see yourself in theo epstein.on december 31, 2014, axle services inc. prepared the
following accrual adjustment:
the company paid salaries amounting to $200 on january 07, 2015 for salaries due in
2014. journalize the entries for january 1, 2015 and january 7, 2015, assuming the
company uses reversing entries.
37) statewide sales inc. has gross salaries and wages for march of $45,000. provide the
journal entry to record salaries and wages expense and payroll withholdings. (assume a
ficaoasdi tax of 4.2% and ficamedicare tax of 1.45%.) salaries and wages to date are
under the oasdi limit. assume no federal or state income taxes are due.
38) from the following details provided by trinidad inc. calculate the merchandise
inventory turnover ratio for the year 2015.
20152014
cost of goods sold585,000475,000
merchandise inventory320,000295,000
39) on november 1, 2014, oster inc. declared a dividend of $3.00 per share. oster inc.
has 20,000 shares of common stock outstanding and no preferred stock. please provide
the journal entry for the declaration of dividends.
40) on may 1, 2015, vantage services issued a long-term note payable for $35,000. it is
payable over a 5-year term in $7,000 annual principal payments plus interest, on may 1
of each year beginning on may 1, 2016. provide the initial journal entry for the issuance
of the note.
41) felix sales inc. offers warranties on all its electronic goods. warranty expense is
estimated at 3.5% of sales revenue. in 2015, felix had $333,000 of sales. in the same
year, felix paid out $8,750 of warranty payments. provide the journal entry to record the
disbursement of warranty payments.
42) nobells corporation has acquired a property that included both land and a building
for $500,000. the corporation paid cash. the corporation hired an appraiser who has
determined that the market value of the land is $300,000 and that of the building is
$400,000. journalize the lump-sum purchase.
43) an adjusted trial balance of woods company for the year 2015 is given below.
prepare a single-step income statement for the company.
