1) discount on bonds payable may be amortized by the straight-line method if the
results obtained by its use do not materially differ from the results obtained by use of
the effective-interest method.
2) transactions are entered in the ledger accounts and then transferred to journals.
3) treasury stock should not be classified as a current asset.
4) a major disadvantage of the indirect method of reporting cash flows from operating
activities is that the difference between the net amount of cash flows from operating
activities and net income is not emphasized.
5) the treasurer should prepare and sign a check only after authorization to issue a check
has been provided.
6) corporate stockholders generally pay higher taxes but have no personal liability.
7) if the assets owned by a business total $150,000 and liabilities total $105,000,
stockholders equity totals $45,000.
8) the board of directors may authorize more bonds than are issued.
9) a major advantage of national credit cards to retailers is that there is no charge to the
retailer by the credit card companies for their services.
10) both the gross amount of receivables and the allowance for doubtful accounts
should be reported in the balance sheet.
11) under the equity method the investor records a proportionate share of the investees
income in the year when it is earned.
12) net income for the period is determined by subtracting total expenses and dividends
from revenues.
13) capital expenditures are expenditures that increase the company’s investment in
productive facilities.
14) selling expenses relate to general operating activities such as human resources
management.
15) current assets divided by current liabilities is known as the
a.working capital
b.current ratio
c.profit margin
d.capital structure
16) sizemore, inc. has 10,000 shares of 6%, $100 par value, cumulative preferred stock
and 100,000 shares of $1 par value common stock outstanding at december 31, 2012. if
the board of directors declares a $40,000 dividend, the
a.preferred stockholders will receive 1/10th of what the common stockholders will
receive
b.preferred stockholders will receive the entire $40,000
c.$40,000 will be held as restricted retained earnings and paid out at some future date
d.preferred stockholders will receive $20,000 and the common stockholders will
receive $20,000
17) which one of the following is not an objective of a system of internal controls?
a.safeguard company assets
b.enhance the accuracy and reliability of accounting records
c.fairness of the financial statements
d.reduce the risks of errors
18) income from operations is gross profit less
1>operating expenses and other expenses and losses.
2>operating expenses plus other revenues and gains.
3>operating expenses.
a.1
b.2
c.3
d.both 1 and 2
19) a company that is leveraged is one that
a.has a high earnings per share
b.contains debt financing
c.contains equity financing
d.has a high current ratio
20) when expenses exceed revenues, which of the following is true?
a.a net loss results
b.a net income results
c.assets equal liabilities
d.assets are increased
21) return on assets ratio is most closely related to
a.profit margin and debt to total assets ratio
b.profit margin and asset turnover ratio
c.times interest earned and debt to stockholders equity ratio
d.profit margin and free cash flow
22) two individuals at a retail store work the same cash register. you evaluate this
situation as
a.a violation of establishment of responsibility
b.a violation of separation of duties
c.supporting the establishment of responsibility
d.supporting internal independent verification
23) the current carrying value of pierces $600,000 face value bonds is $597,750. if the
bonds are retired at 102, what would be the amount pierce would pay its bondholders?
a.$597,750
b.$600,000
c.$603,000
d.$612,000
24) european companies rely
a.less on historical cost and more on fair values than u.s companies.
b.less on fair values and more on historical cost than u.s companies.
c.completely on fair values for financial reporting.
d.completely on historical cost for financial reporting.
25) the following information is provided for nguyen company and northwest
corporation.
what is northwest’s asset turnover ratio for 2012?
a.1.17 times
b.1.05 times
c.1.52 times
d.1.03 times
26) accrued expenses are:
a.paid and recorded in an asset account before they are used or consumed
b.paid and recorded in an asset account after they are used or consumed
c.incurred but not yet paid or recorded
d.incurred and already paid or recorded
27) the current cash debt coverage ratio is computed by dividing
a.average current liabilities by cash provided by operating activities
b.cash provided by operating activities by average current liabilities
c.ending current liabilities by cash provided by operating activities
d.cash provided by operating activities by ending current liabilities
28) specific identification can be used for inventory valuation under
29) the balances of the depreciation expense and the accumulated depreciation accounts
should always be the same.
30) harrell company reported net income of $320,000 for the current year. depreciation
recorded on buildings and equipment amounted to $65,000 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.
31) match the items below by entering the appropriate code letter in the space provided.
1>distributions of cash from a corporation to its stock holders.
2>consumed assets or services.
3>ownership is limited to one person.
4>officers and others who manage the business.
5>creditor claims against the assets of the business.
6>a separate legal entity under state laws.
7>a report prepared by management that presents financial information.
8>a section of the annual report that presents managements views.
9>future economic benefits.
10>involves acquiring the resources necessary to run the business.
32) a business organized as a separate legal entity owned by stockholders is a
___________.
33) the current sections of bennington inc.’s balance sheets at december 31, 2011 and
2012, are presented here.
bennington’s net income for 2012 was $138,000. depreciation expense was $34,000.
instructions
prepare the net cash provided by operating activities section of the company’s statement
of cash flows for the year ended december 31, 2012, using the indirect method.
34) menke company is a furniture retailer and uses the perpetual inventory system. on
january 14, 2012, menke purchased merchandise inventory at a cost of $30,000. credit
terms were 2/10, n/30. the inventory was sold on account for $40,000 on january 21,
2012. credit terms were 1/10, n/30. the accounts payable was settled on january 23,
2012, and the accounts receivables were settled on january 30, 2012. prepare journal
entries to record each of these transactions.
35) internal control consists of the related methods and measures adopted within a
business to ____________ its assets and enhance the ______________ and
______________ of its accounting records.
36) irwin company has decided to begin accumulating a fund for plant expansion. the
company deposited $20,000 in a fund on january 2, 2008. irwin will also deposit
$10,000 annually at the end of each year, starting in 2008. the fund pays interest at 5%
compounded annually. what is the balance of the fund at the end of 2012 (after the 2012
deposit)?
37) cash is a temporary account.